Clint Ballinger — The Myth of the Currency Hierarchy

(response to Coppola’s “The Myth of Monetary Sovereignty” and related discussions)

Clint Ballinger

The Myth of the Currency Hierarchy

Brian Romanchuk — The Myth Of The Myth Of Monetary Sovereignty

Frances Coppola’s concerns about fixed versus floating exchange rates for developing countries is presumably interesting to some, but it tells us little about the validity of MMT... 

Bond Economics
The Myth Of The Myth Of Monetary Sovereignty
Brian Romanchuk

Norbert Häring — George Soros’ INET, the Trojan horse of the financial oligarchy

Four years ago, I framed it as a question: “George Soros‘ INET: An institute to improve the world or a Trojan horse of the financial oligarchy?” Today I would not use a question mark any more.Frances Coppola came to a similiar conclusion after attending the big INET gathering in Edingburgh in October.…

Sleeping with the devil.

Real-World Economics Review Blog
George Soros’ INET, the Trojan horse of the financial oligarchy

Norbert Häring | economics correspondent for Handelsblatt, the German business newspaper, and co-founder and co-director of the World Economics Association and co-editor of the World Economic Review

I'm in a Twitter fight with Frances Coppola

What's with this lady?

After she matter-of-factly says she "schooled" everyone here on this site with respect to "money supply" she says this to me.

@mikenorman You really are feeling inadequate, aren't you? Such low self-esteem, needing to put me down to make yourself feel better.

— Frances Coppola (@Frances_Coppola) March 17, 2016

I called her a "snob." Big deal.

Wow.

Andrew Lainton — Racing to Port – Whilst Draining the Sea – Hawtry & the Global Deflation Spiral

The impossible trinity again.

Decisions, Decisions, Decisions
Racing to Port – Whilst Draining the Sea – Hawtry & the Global Deflation Spiral
Andrew Lainton

See also

Coppola Comment
The problem with words

Frances Coppola

Frances Coppola and Daniel P. Ellsberg on Property Rights

People of libertarian persuasion are often very keen on the idea that Government should "defend property rights". Their view is that the assets they own are theirs by natural right, and it is the Government's job to defend that right....

But Government doesn't "defend" property rights, anyway. It creates them. The natural law is "I'm bigger and stronger than you are, so I'm having that". Government, pressured by people who believe that things they have are theirs by right even if they can't defend them, creates laws that say that what you have, you own, and no-one else can have it however big and strong they are. And it creates the legal infrastructure to enable those laws to be enforced. Well, more or less. Too often those laws are not enforceable in practice, not just because people don't have enough money to enforce them, but because it isn't easy to define what we mean by "ownership" or "property".

The legal infrastructure created by Government to protect individual "rights" incorporates within itself the right for Government to take some of the property of its citizens in order to fund itself. But our libertarian friends are horrified by the idea of taxes, especially capital taxes. Government taking your property from you by force is a betrayal of what they regard as the primary function of Government, namely to "defend property rights". This is illogical. Without taxes, Government could not function and the laws created by Government could not be enforced - including the "property rights" beloved of libertarians. Confiscation of property by Government is necessary if it is to "defend" the right to own property.

I find this view bizarre. As I've noted before, there are no "natural" property rights. The law of the jungle, which is the law that holds when all other laws are unenforceable, says that the only property you "own" is what you can defend....

What our libertarian friends really want is for Government to "defend" the property rights that they would LIKE to have - namely that what they have, they own, and no-one - not even Government - can take it from them. I don't have any problem at all with the idea of Government defining and enforcing an alternative set of property rights that are more "just" than the law of the jungle, if that can be done. But to claim that these are "natural" property rights and Government is merely "defending" them is simply wrong. If property laws are more "just" than the law of the jungle, it is ONLY because Government makes them so. And if Government can impose "just" laws regarding property ownership, why should it not impose "just" laws in other areas too? The problem is, of course, that the "just" property rights beloved of the libertarian right conflict with other "just" laws, such as the right of workers to a living wage, and the right of those who cannot work to the means to live. But why should laws that primarily benefit the rich override laws that primarily benefit the poor?

Coppola Comment
A question of justice
Frances Coppola


Daniel Ellerman has a book entitled Property and Contract in Economics: The Case For Economic Democracy. It is a free download here.

This book presents a modern version of the old Labor (or Natural Rights) Theory of Property and of an Inalienable Rights Theory that descends from the Reformation and Enlightenment. Together these theories re-solve the basic problem of distribution in the sense of giving a basis for the just appropriation of property and a basis for answering the question of who is to be the firm, e.g., the suppliers of share capital as in conventional capital, the government as in socialism, or the people who work in the firm as in the system of economic democracy (or labor-managed market economies). While these theories address old questions in economics, they do so in an entirely different manner than conventional economics which renders the questions as being about value or price theory (instead of about property rights and contracts). This book is now out of print and the rights have reverted to the author.

See also Daniel Ellerman's paper, Rethinking Common vs. Private Property

The purpose of this paper is to suggest a rethinking of the common-versus-private framing of the property rights issue in the Commons Movement. The underlying normative principle we will use is simply the basic juridical principle that people should be legally responsible for the (positive and negative) results of their actions, i.e., that legal or de jure responsibility should be imputed in accordance with de facto responsibility. In the context of property rights, the responsibility principle is the old idea that property should be founded on people getting the (positive or negative) fruits of their labor, which is variously called the labor or natural rights theory of property[Schlatter 1951].[1]

For instance, the responsibility principle is behind the Green Movement’s criticism of the massive pollution and spoliation by corporations that don’t bear the costs or legal responsibility for their activities. Ordinary economics shows that markets do not function efficiently in the presence of these “negative externalities” but the responsibility principle shows that there is injustice (i.e., the misimputation of responsibility) involved as well, not just inefficiency, and that aspect is overlooked by conventional economics.

The current economic system institutionalizes forms of social irresponsibility that go far beyond the topic of negative externalities. Indeed, the forms of socialized irresponsibility embodied in Wall Street capitalism are behind the current economic crisis, although the roots are much older. In recent decades, the American model of Wall Street capitalism has been promoted as an “advanced” model of a market economy to be emulated not only in the industrialized countries but also in the post-socialist and developing worlds. Hence the current crisis provides the opportunity to finally discredit the idea that this “advanced” form of socialized irresponsibility should be emulated by anyone. That is the topic of the next section.

But our main point goes much deeper than just a tamed or reformed version of capitalism; it goes to the form of private property behind the system. The ideology of the current system seems to have convinced those on both the Left and Right that the current system is based on the principles of private property so that anyone who opposes the current system is an “enemy of private property” itself, as the Commons and Green Movements are often portrayed (and as some members of those movements may portray themselves). We will see that practically the opposite is true.

Like the old system of chattel slavery, the current property system is “a” private property system but it is grounded on violating the very responsibility principle upon which property appropriation and other juridical imputations are supposed to rest. And when private property is refounded on the responsibility principle (or the labor theory of property) then a very different system emerges where firms are worker cooperatives (or similar workplace democracies) where people will appropriate the positive and negative fruits of their labor. Moreover this refounding of property on the responsibility principle provides no basis to treat the products of nature as if they were ordinary private property.

The rethinking of private property will take place in two steps: (1) the undoing the “brain-washing” ideology that the usual form of enterprise is based on “private ownership of the means of production” and (2) the application of the responsibility principle to the human activities of the people working in any enterprise where they are inalienablyde facto responsible for both the positive and negative results of their activities. After two sections on those two steps and a section on the notion of inalienability, we show how the corporation can be re-constituted from these first principles. Then we conclude with the negative application of the labor theory of property to the products of nature (natural resources) where some common ownership arrangement is required (rather than ordinary private ownership) so that the equal claims of future generations can be respected.

Frances Coppola — Safe assets and Triffin's dilemma

There has been quite a bit of puzzlement in some quarters as to why I savaged BIS over the whole idea of a limitless supply of government-produced safe assets purely to meet the needs of the financial system. Firstly, let me make it clear that I do not believe that any asset is ever really "safe". Nor do I believe that global investors have any right whatsoever to expect national governments to provide them with what amounts to unconditional backing for their deposits. The first duty of national governments is to their people, not to the needs of a global financial elite. And it is quite wrong of global financial elites to pressure governments into issuing debt that they do not need purely in order to provide them with liquidity. Nor should global financial elites impose austerity measures that are not warranted by the economic situation, purely to reassure themselves that the assets they rely on for liquidity cannot ever become unsafe.

So that is my political stance, if you like. But this post is concerned with the particular effect on the US of producing global safe assets in much the same way as it has hitherto produced the world's reserve currency.

Coppla Comment
Safe assets and Triffin's dilemma
Frances Coppola

Then there is also the interest subsidy.

She argues based on sector balances. Devastating. Note that she uses JKH's S = I + (S-I).

I don't agree with her conclusion, which logically leads to the rejection of government bond issuance based on her initial observation,

There has been quite a bit of puzzlement in some quarters as to why I savaged BIS over the whole idea of a limitless supply of government-produced safe assets purely to meet the needs of the financial system. Firstly, let me make it clear that I do not believe that any asset is ever really "safe". Nor do I believe that global investors have any right whatsoever to expect national governments to provide them with what amounts to unconditional backing for their deposits. The first duty of national governments is to their people, not to the needs of a global financial elite.

There is no operational necessity for currency sovereigns to issue government securities under the currency monetary regime. The interest payments constitute a special interest subsidy that is inefficient and should be eliminated as dead weight in the budget.

MMT would not agree the problem as whole, in that if the country with the trade and fiscal deficits is a currency sovereign like the US, then if the fiscal deficit offsets consolidated nongovernment sector's saving desire, the country can enjoy an advantage in real terms of trade while maintaining output and full employment. There is no operational issue with interest rates, since interest rates are set by the central bank. The practical issue is that powerful forces will demand that the market be allowed to raise rates, as she notes, but there is no reason that a politically independent central bank has to accede to outside pressure.

Adopt Warren Mosler's proposal of setting the overnight rate to zero permanently, issuing no Treasury securities in excess of three months, and run a fiscal deficit equal to the saving desire of consolidated nongovernment.

So while it is a powerful piece and makes many good points, it is not MMT-based, even though she uses the sectoral balance approach. Good shot though.

Izabella Kaminska — On the new purpose of government debt

Izzy picks up on Frances Coppola's post on the purpose of government debt being to provide safe assets rather than finance expenditure.

The Financial Times | FT Alphaville
On the new purpose of government debt
Izabella Kaminska

Frances Coppola — The strange world of negative interest rates

Frances Coppola explains why the thinking behind negative interest rates is so wrong and why such a policy would be counter-productive, as the Fed seems to have recognized by ruling this out.

Coppola Comment
The strange world of negative interest rates

Frances Coppola

(h/t Andy Blatchford via email)