Odd posts from Warren Mosler claiming "crowding out."

Investment boom, crowding out consumption.

— Warren B. Mosler (@wbmosler) May 31, 2024

Odd "X" posts from Warren Mosler recently talking about "crowding out." He says business investment is "crowding out" personal consumption. This is an odd claim because crowding out is not a condition that would be claimed under MMT understanding, where money is a function of demand and where there is no theoretical limit to its creation. (Under a free-floating FX regime.)

If business spending rises and personal consumption falls, so what? All that is, is a shift in the cohort doing the net spending. The economy may look a little different (factories getting built rather than expenditure on consumer goods, leisure, etc), but why is that a concern and how does he conclude, necessarily, that this is the reason for an economic slowdown?

It's wrong and it misses the main point which is the fact that the slowdown in the economy is coming from a decline in net government transfers (i.e. the "deficit") because "reverse stabilizers" are kicking in. (Tax deposits are rising faster than Treasury withdrawals.)

He ought to know this. 

MMT Primer: Mosler's White Paper — Brian Romanchuk

Warren Mosler, one of the founders of Modern Monetary Theory (MMT) has a white paper (link) that acts as a summary of MMT. It is brief (1300 words), and does meet the objective of offering an overview of the question "What is MMT?" for more advanced readers. The brief nature of the paper means that not everything is covered, so I would point out that it does not represent all of MMT.

In this article, I will summarise the contents of the white paper, discuss what I see as the main legitimate critiques of MMT that arise, and note some of my reservations about the paper. I will conclude with comments aimed at readers looking for an academic discussion. I expect to cover certain topics in follow up articles, such as a longer discussion of critiques, as well the implications of the discussion of the price level theory.

Another point to note about the white paper is that it is extremely terse. There may be a lot of information hidden under the use of catch phrases. Since I am familiar with the arguments, I can easily follow the logic, but others might be tripped up. All I can really do is add some background information....

Bond Economics
MMT Primer: Mosler's White Paper
Brian Romanchuk

An MMTer Explains MMT In 320 Words — Eric Peters

The MMTer is Warren Mosler in conversation with Eric Peters who reports it.

I perused the comments. Out of dozens, only one person gets it. The rest are moronic.

Zero Hedge
An MMTer Explains MMT In 320 Words
Eric Peters, CIO of One River Asset Management

I'm looking for recession and not finding it.

These are stats from my latest MMT Trader report. Are these recessionary signs? Warren Mosler is bearish as hell.

Auto loans rising at the fastest pace in 8 months.

Residential real estate loans rising at fastest pace in 3 weeks.

Bank "residual" (capital) at record highs and up 3 weeks straight and up 6 of the last 7 weeks. (Implies growing bank earnings.)

Bank assets at record levels.

Gasoline demand at 6-month high.

Distillate demand at 3-month high.

Federal tax deposits have been rising since January and are on track to completely erase the y-o-y negative gap. Going positive.

Corporation taxes rising, too. They bottomed vs last year in early February.

Social Security (largest spending item) growing at fastest pace so far this fiscal year.

"Other Withdrawals" (military and defense) growing at fastest pace since early February and has accelerated 63% since then.

Unemployment benefits down and falling  y-o-y.

Food Stamps down y-o-y. 

These are all coincident or leading statistics. Most of these CREATE the forward conditions of the economy rather than reflect what the economy is already doing like much of the data cited by other economists.

I don't know...I just don't see it.

Warren Mosler — Taxation

Warren Mosler's slide pack for his presentation at the New School on March 25th.

Taxation

Why has Warren Mosler been bearish for so long?

On Warren Mosler's website his economic views have been bearish for something like the last four years. I cannot understand this.

Not only was the deficit (something he talks about all the time) last year the highest in 6 years (both nominally and as a percent of GDP), but this year it will be even higher. In fact, it's already three-fourth's of last year's total and we're not even halfway through the fiscal year. Shouldn't he be bullish?

Moreover, government spending is going to break another record. Government spending is the "flow" in the "stock/flow" discussion (whereas the deficit is the stock) and it's what drives income, profits and overall economic activity. You don't even know what the deficit is going to be until the government spends first. (He even says, "gov't spends first then taxes later." So why not look at flows?)

Finally, when he talks about Fed rate hikes he says they "add to income via the interest channel," which is true. Meanwhile the Fed has been raising rates for the past 3+ years and he's still bearish?

Frankly I don't understand his constant bearishness. It's very odd. It's like he ignores his very own MMT concepts when looking at the economy. Every post on his website is about how this or that metric is slowing and those posts have been going on for years, yet gov't spending continues to rise, the economy continues to expand and the stock market continues to make new highs.

Really, I find it very strange.

Peter May — Parallel currencies can also be powerful

Considering the modern state perhaps we should add that it also needs to have the right to create its own currency....

To many this will seem to exclude Eurozone countries as modern states. But in the video (below) Warren Mosler is surely correct when he suggests that any country unhappy with the Euro should not exit it at all but should simply introduce a parallel currrency (which is entirely legal), and which the national government would accept in taxes. New government spending in the parallel currency would ensure that it entered into the economy quickly.…

Indeed, I consider that with local authorities in the UK facing their worst ever budget cuts, they should be doing something similar – preferably through the Local Government Association so that it has national importance.

Progressive Pulse
Parallel currencies can also be powerful

Peter May

Bill Mitchell — When two original MMT developers get together to discuss their work

Last week, Warren Mosler and I had one of our regular catchups and we discussed at length the state of play in Modern Monetary Theory (MMT). We are quite protective of it. We mused about how we started out on this Project and where it has gone. As old stagers do when they get together. We also reflected and compared notes on what the state of MMT is now, given the increasing visibility of the ideas in the mainstream media all around the world and the proliferation of social media activists who have chosen to identify and promote our ideas. There were aspects of that development that we identified as being of concern for us and other aspects which we considered to be a cause for optimism (celebration is too strong a word). We thought it would be a good idea to take a breath and document what we considered to be the essence of MMT – as a sort of checklist for people who want a fairly precise account of the body of work. I agreed to write this document after input from Warren. So, this is what we mean by MMT. What follows is my account of our conversation expanded to add meaning where required.…

Probably as close to an MMT manifesto as we'll get.

Bill Mitchell – billy blog
When two original MMT developers get together to discuss their work
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Steve Keen — Some Preliminary Questions for MMT

I had an impromptu debate with Warren Mosler, the founder and still one of the leading figures of "Modern Monetary Theory" recently. We disagreed on the role of trade deficits, and this has led another MMT luminary, Bill Mitchell, to write two commentaries critiquing my position (see "Trade and external finance mysteries – Part 1" and "Trade and finance mysteries – Part 2".

This is my partial reply to Mitchell—there are more issues that I want to take up when I have time to do so....

Patreon
Some Preliminary Questions for MMT
Steve Keen | Professor and Head Of School Of Economics, History & Politics, Kingston University, London

John Carney — The Problem with the ‘Job Guarantee’ Is Not That It’s Too Expensive. It’s That the Left Hates Us

John Carney makes interesting points pro and con. Most of the cons are about politicization of the program since the JG as it is being presented and supported is clearly a Democratic program and "leftist" idea. He points out that this needn't be so. A value-neutral JG program can also be designed to appeal cross the political spectrum. JG supporters should listen to this.

A JG is really a populist program that favors people, and firms will oppose it. For, as Carney points out, employers depend on disciplining labor power to control the wage bill.

Breitbart News
Carney: The Problem with the ‘Job Guarantee’ Is Not That It’s Too Expensive. It’s That the Left Hates Us
John Carney

See also

It's complicated....

More pertinent questions.

None of this means we should reject a job guarantee out of hand.

Daily Beast — Opinion
Dems’ Job Guarantee Isn’t Nearly as Easy as It Sounds

Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, D.C

Serban V.C. Enache — Bulgaria and the Euro — How Mosler Bonds could help

MMT-based analysis and policy advice. Short.

Splice Today
Bulgaria and the Euro — How Mosler Bonds could help.
Serban V.C. Enache

Ralph Musgrave — What’s the optimum amount of national debt?

Roger Farmer is out with an argument for the optimal level of public debt being 70% of GDP. Ralph provides the MMT answer. It is nicely succinct.

MMTers have solved this one. Others are still floundering, in particular Roger Farmer in this NIESR article on the subject, is all over the place far as I can see (1). So I’ll run thru this vexed question for the umpteenth time....

Farmer bills himself as a Keynesian. Ralph reminds us of the answer Keynes himself gave to the question of public debt optimality and how to determine it.

So, to return to the original question, i.e. what’s the optimum amount of national debt or more properly, PSNFA? The answer is “whatever brings full employment”. And that very much ties up with Keynes’s dictum: “look after unemployment, and the budget looks after itself”. 

Ralphonomics

What’s the optimum amount of national debt?

Ralph Musgrave

Dirk Ehnts — Structuralist Macroeconomics

I have recently ordered a copy of “Structuralist Macroeconomics – Applicable Models for the Third World” by Lance Taylor. However, I did not read very far into the book. Let me explain why. On p. 12, chapter 2 – titled “Adjustment Mechanisms – the Real Side” – starts with the sentence:

“MACROECONOMICS begins with the notion that the value of saving generated by all participants in the economy must by one means or another come into equality with the value of investment in the short run.”

While most economists will probably nod their heads, I don’t. Informed by a book chapter written by Basil Moore (download) and my own research, let me point out the fundamental problems with this statement. The first is trivial, the second not so....

econoblog 101
Structuralist Macroeconomics
Dirk Ehnts | Lecturer at Bard College Berlin

Warren Mosler Proposes ‘Mosler Bonds’ To GVI As First Step To End Territory’s Financial Crisis

“I have made the proposal to the USVI government that Mosler bonds be issued and sold as a necessary first step to end our financial crisis,” Mr. Mosler said. 

The candidate described the bonds as being identical to the territory’s current tax-free municipal bonds, with one exception: With Mosler bonds, the standard default clause in the bond indenture that begins with “In the event of default”, is replaced with, “In the event of nonpayment this bond becomes a USVI tax credit that is freely transferable and continues to accrue interest, and can be used for payment of any and all taxes due to the USVI.”...

Virgin Island Consortium
Warren Mosler Proposes ‘Mosler Bonds’ To GVI As First Step To End Territory’s Financial Crisis

Ernice Gilbert — Warren Mosler Announces 2018 Bid for Governor of USVI

Warren's headed back into politics.

According to his site, Mr. Mosler is credited for creating what has been dubbed “Mosler’s Law”, which states, “There is no financial crisis so deep that a sufficiently large fiscal adjustment cannot deal with it.”

The Virgin Islands Consortium
Warren Mosler Announces 2018 Bid for Governor of USVI

Ernice Gilbert

Susan Ellis — STX Ferry Hits the Sea Next Week

A new ferry is expected to begin transporting passengers between St. Croix and St. Thomas after a Tuesday lanch and several weeks of sea trials.

The QE IV, a little longer than 100 feet, was designed by St. Croix businessman Warren Mosler, a former candidate for delegate to U.S. Congress. Gold Coast Yachts on St. Croix is building the vessel.…

Go Warren!

St. Thomas Source
STX Ferry Hits the Sea Next Week

Susan Ellis

Gathering with Warren Mosler in the UK in mid April

From Ralph Musgrave:

Warren Mosler will be in the UK in mid April and I'm organising a small gathering where he'll be the star attraction. Details as follows.

It's a small gathering: about 20 people. The purpose is partly so that anyone who wants can come along and have a chat with Warren. He'll also do a short speech.

Venue: Milton Keynes Conference Centre (Strudwick Drive) Discovery Suite 2. It's 13th April, 5-8pm. Ticket price (£27.57) includes tea at around 5pm and a light supper around 7-8pm.

Tickets can be purchased here:

https://www.eventbrite.co.uk/e/audience-with-warren-mosler-tickets-23899462937

Alexander Douglas — MMT is political philosophy, not economics

What puzzles me about Simon Wren-Lewis’s response to MMT is his claim that he finds nothing new or surprising in the theory. I think his claim can be understood in light of the fact that MMT is not a theory of economics. It is a bit of political economy, or, more generally, a bit of political philosophy.…

Origin of Specious
MMT is political philosophy, not economics
Alexander Douglas | Lecturer in Philosophy at Heythrop College, London

Economist Warren Mosler: If the EU Doesn't Loosen Its Deficit Limits, Greece Should Leave the Euro — Michael Nevradakis Interviews Warren Mosler

Six years into Greece's economic crisis and following successive "bailouts," there still seems to be no light at the end of the tunnel. Greece's economy continues to shrink and unemployment remains at record high levels while the Syriza-led government coalition has reneged on its promises of radical change and ending austerity. The troika, in turn, continues to insist that strict austerity measures, including budget cuts and mass privatizations, be enforced in Greece.

In this interview, economist Warren Mosler, a leading figure in the field of modern monetary theory and the cofounder of the Center for Full Employment and Price Stability at the University of Missouri-Kansas City, discusses money, debt and the role of the European Union's deficit limits in perpetuating the crisis, and shares the proposals he believes could help lead Greece out of its crisis.

Truthout
Economist Warren Mosler: If the EU Doesn't Loosen Its Deficit Limits, Greece Should Leave the Euro
Michael Nevradakis Interviews Warren Mosler

Winterspeak — Fed Raising Rates

MMT-consistent analysis.

Wingerspeak.com
Fed Raising Rates

Winterspeak