Randy Wray — Disagreements Among Reasonable People: Response To MMT For Austrians #3

This post is more conciliatory. Actually, it sort of comes around to where John Carney started out at Net Net, in suggesting that MMTers and Austrians should explore what they share in common, like opposition to collusion of government and business, instead of concentrating on differences, where they will likely never agree. Randy also suggests that there is no contradiction involved in Austrians accepting MMT operational description of the existing monetary system, as Edward Harrison has done and apparently John Carney also.

Randy also deals with who is welcome and who is not. It's a matter of distinguishing those interested in sincere debate from those who are just trolling, some of whom are probably employed to do so while others just want to disrupt activity they don't like. While Randy doesn't say it, the remedy is not to feed the trolls and to ban the ones that persist in being uncivil after being warned. Many of these people claim to be Libertarians, but they seem to want to impinge on others' freedom of expression by flooding a debate with irrelevance, making it difficult to carry on debate on in that kind of environment due to the sheer volume of distraction. Fortunately, we haven't run into that problem here, and we have some Libertarians and Austrians who are welcome and included.

Read it at New Economic Perspectives
Blog #39 Disagreements Among Reasonable People: Response To MMT For Austrians #3
by L. Randall Wray

This picture pretty much resolves the Keynes vs. Austrian debate

Hat tip to Ralph Musgrave for this chart. He had it on his blog, but I cleaned it up.

Anyway, my intent was to show some perspective. I think that's always useful. We hear a lot about how Keynesian economics doesn't work and about how the world was better under the gold standard.

I think the chart below goes a long way toward resolving that debate. It plots annual changes in U.S. real GDP going back to 1860. Take a look at how many deep recessions and depressions the country experienced in the 19th century. Pretty much, every 10 years, a depression! And the swings in GDP were huge!

Compare that to the mid 20th century and especially 1971 forward. What a contrast! Very few recessions and no depressions. And even the recessions have been much milder, current one being an exception.

Remember that the U.S. was on a gold standard until 1933 (domestically) and completely off the gold standard and on a system of floating FX non-convertibility from 1971 on. Rather than get worse, things stabilized immensely.

All the recent troubles can be traced back to Clinton's surpluses, which essentially was the equivalent of putting us on a gold standard. The rebound out of the recent "Lesser Depression" was due to massive deficit spending. Did I hear someone say Keynes??