Asker Voldsgaard Ruge — Master's Thesis: Money and the Fiscal Space of Monetarily Sovereign Governments: The Case of Denmark

Abstract

Since the global financial crisis ten years ago, a mature research programme has developed on the austerity policies imposed, especially in European states, to counter perceived threats from excessive public debt and deficits. While many scholars have criticised austerity for digging the hole deeper, fewer have provided clear alternatives. Yet, the economic school of Modern Money Theory encourages analysis into the operational realities of monetary systems to examine mechanisms, which allow countries with their own currency to spend unhindered. In this paper, the Danish monetary system is analysed to answer to what extent the Danish government is financially constrained and how economic policymaking in Denmark is aligned with the operational realities of the monetary system?

First, the two main theories of money, metallism and chartalism, are reviewed to ground the analysis in a monetary ontology in coherence with historical and social scientific proof. The metallist theory conceives money as a market phenomenon, which emerged spontaneously from a money-less barter economy, while states later intervened and compromised the natural monetary system. However, empirical evidence favours chartalism, which takes money as inherently a political phenomenon devised by central authorities to access real resources by levying taxes to be paid in its own unit of account. However, the advent of independent central banking appears to have subjected governments to ‘market discipline’.

This puzzle is investigated through a case analysis of the Danish monetary system. Six hypotheses derived from Modern Money Theory guides the analysis into the cooperation between Nationalbanken, the Ministry of Finance and the private banks who hold accounts with Nationalbanken. The monetary system is shown to be quite a closed arrangement, tightly controlled by Nationalbanken in its management of the liquidity in the system. Crucially it is argued that the state’s and Nationalbanken’s balance sheets ought to be viewed in consolidation as one, whereby money is a liability of the Danish government, not an asset to be obtained before spending is possible. The government’s fiscal space is determined by what is for sale in its own currency and not its tax revenues. This consolidated view is substantiated by Nationalbanken’s ongoing activity to establish a benevolent financial environment when the government sells bonds. Yet, Denmark may eventually face domestic constraints due to the self-imposed fixed exchange rate policy, if persistent balance of payment deficits return.

Finally, a constructivist case analysis of the ‘Restoration Package’ of 2010 is conducted to highlight how misrepresentation of the government as a currency user, rather than issuer, facilitated the imposition of austerity and fortified a sound finance paradigm. The paradigm was shared by the oppositional coalition and prevented them from later achieving their goal of a strong, equitable recovery.

SSRN
Master's Thesis: Money and the Fiscal Space of Monetarily Sovereign Governments: The Case of Denmark
Asker Voldsgaard Ruge

Ellis Winningham — MMT and Politics: A Brief Explanation

MMT itself is just a description of how the monetary system works in the UK, US, Canada, Australia, the EMU – everywhere there is a monetary economy.

I dislike quibbling, but MMT is prefaced by an operational description of how monetary systems work, paying particular attention to the existing monetary system. This analysis reveals the policy space associated with policy choice regarding the monetary system and monetary operations.

MMT is based on this analysis of policy space.

Secondly, MMT is also an macroeconomic theory based on a specific method for approaching macroeconomics that differs from other method owing to the operational analysis and other factors, such as attention to sectoral balances and stock-flow consistency. MMT is a theory in that there is attribution of causality that goes beyond simply stating accounting identities.

Thirdly, MMT makes policy recommendations within the Keynesian framework of the assumption that full employment is not the equilibrium state of a modern monetary production economy, e.g., owing to the non-neutrality of money not only in the short run but also the long run.

According to MMT economists, MMT is only viable solution on the table for harmoniously reconciling of the trilemma of growth, employment and price stability that most economists view as non-reconcilable, that is, at most two factors can be reconciled while the other factor must function as a tool, e.g., addressing price stability through monetary policy based on NAIRU and a buffer stock of unemployed. The harmonious resolution of this trilemma is considered to be the holy grail of macroeconomics, in particular with respect to policy.

MMT is apolitical in the sense that all economists and policy makers prefer the harmonious reconciliation of growth, employment, and price stability. Politics is about how to accomplish this in terms of ideological assumptions involving favoring some factors over others. 

MMT shows that this tradeoff is not necessary given the deeper understanding that MMT analysis provides and using the potential policy space of currency sovereign under the existing monetary system. And this does involve political choices since it involves fiscal policy.

Ellis Winningham — MMT and Modern Macroeconomics
MMT and Politics: A Brief Explanation
Ellis Winningham

Peter Cooper — Unfulfilled Potential

... a government’s monetary sovereignty creates a potential for meaningful social progress. But it is only a potential, and can only be fulfilled through genuine democracy conducted by an informed citizenry.

Right now, it is perhaps fair to say that an informed citizenry and, as a consequence, genuine democracy, are almost entirely lacking in the specific area of macroeconomics.

At minimum, an informed citizenry would understand that, due to monetary sovereignty:
If we can do it, we can afford it....

heteconomist
Unfulfilled Potential
Peter Cooper

Lars P. Syll — Why governments should run deficits

Lynn Parramore interviews Mario Seccareccia (MMT).

Lars P. Syll’s Blog
Why governments should run deficits
Lars P. Syll | Professor, Malmo University

Bill Mitchell — Ultimately, real resource availability constrains prosperity

There are many misconceptions about what a government who understands the capacity it has as the currency-issuer can do. As Modern Monetary Theory (MMT) becomes more visible in the public arena, it is evident that people still do not fully grasp the constraints facing such a government. At the more popularist end of the MMT blogosphere you will read statements such that if only the government understood that it can run fiscal deficits with impunity then all would be well in the world. In this blog I want to set a few of those misconceptions straight. The discussion follows is a continuation of my recent examination of external constraints on governments who seek to maintain full employment. It specifically focuses on less-developed countries and the options are currency issuing government might face in such a nation, where essentials like food and energy have to be imported. While there are some general statements that can be made with respect to MMT that apply to any nation where the government issues its own currency, floats its exchange rate, and does not incur foreign currency-denominated debt, we also have to acknowledge special cases that need special policy attention. In the latter case, the specific problems facing a nation cannot be easily overcome with the increasing fiscal deficits. That is not to say that these governments should fall prey to the IMF austerity line. In all likelihood they will still have to run fiscal deficits but that will not be enough to sustain the population. We are about to consider the bottom line here – the real resource constraint. I have written about this before but the message still seems to get lost.…

Bill is on a roll.

Bill Mitchell – billy blog
Ultimately, real resource availability constrains prosperity
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Balance of payments constraints

The late Canadian economist Harry Johnson, who came at the subject from the Monetarist persuasion, was correct when he wrote in 1969 (reference below) that “The adoption of flexible exchange rates would have the great advantage of freeing governments to use their instruments of domestic policy for the pursuit of domestic objectives, while at the same time removing the pressures to intervene in international trade and payments for balance-of-payments reasons.” How does this square with those who believe that even currency-issuing governments are constrained in their fiscal flexibility by an alleged balance of payments constraint. So-called progressive economists, particularly, are enamoured with the idea that Modern Monetary Theory (MMT) is flawed because it doesn’t recognise the fiscal limits imposed by the need to maintain a stable external balance. In this blog, we trace the arguments.…

The post everyone has been waiting for.

Bill Mitchell – billy blog
Balance of payments constraints
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Ramanan responded in the comments here at MNE and developed his argument in a separate post. With "free trade" to the fore these days owing to the flurry of new trade agreements, this is a debate worth having.

The Case for Concerted Action
Neochartalism, Balance Of Payments And Mainstream Economics
V. Ramanan

My view is that there is a political dimension to trade as well as an economic one. Economics focuses in efficiencies such as comparative advantage. But from the political point of view, as well as engineering, efficiency about means and effectiveness is about goals. Efficiency serves effectiveness. This means that efficiency must be balanced with resilience.

A balance must be struck between autarchy and dependence, for example. In addition, history testifies that more growth of developed countries is benefitted by so-called free trade, whereas the growth of emerging countries has been enhanced by protecting infant industries. This was the case between Britain and the US in the 19th century, for example.

Bill Mitchell — Currency-issuing governments have unlimited financial resources to fight recession

The elites are gathering for another junket aka the World Economic Forum, in the frosty, but salubrious surrounds of Davos this week (January 20-23, 2016). The Monday morning temperature there is forecast to be -22°C. According to the Forum’s Home Page – Searching for the 21st century dream at Davos – the delegates are going to be reimagining life under the theme “Mastering the Fourth Industrial Revolution”, which is spin for eating a lot of gourmet food, drinking a lot of expensive wine, and, denying the presence of the very large elephant in the conference venue. I suppose it is easy for them to live in denial when the sort of policy regimes they have influenced have categorically failed and will continue to do so with the result that millions remain unemployed and poverty rates are rising. Apparently, the elites have to “‘defetish’ … dialogues about future technologies” and the “onset of a new era of ‘limits’ is a chance we must not miss to imagine and engineer the futures we want”. Here is some gratuitous advice to the elites – forget the robots; forget worrying about the so-called “inflection point … where social, economic and political crises meet rapid technological change, where progress feels like disruption, not promise”; and, instead, more fully understand why this obsession with “a new era of ‘limits'” (by which they mean fiscal limits on governments) has sidetracked any hope of progress and deliberately disrupted people’s lives in a way that dwarf the impacts of technological change.…

Bill Mitchell – billy blog
Currency-issuing governments have unlimited financial resources to fight recession
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — The ‘fiscal space’ charade – IMF becomes Moody’s advertising agency

MMT versus austerians on defining fiscal space.

The IMF define – Fiscal Space – to be the :

… room in a government´s budget that allows it to provide resources for a desired purpose without jeopardizing the sustainability of its financial position or the stability of the economy. The idea is that fiscal space must exist or be created if extra resources are to be made available for worthwhile government spending. A government can create fiscal space by raising taxes, securing outside grants, cutting lower priority expenditure, borrowing resources (from citizens or foreign lenders), or borrowing from the banking system (and thereby expanding the money supply). But it must do this without compromising macroeconomic stability and fiscal sustainability – making sure that it has the capacity in the short term and the longer term to finance its desired expenditure programs as well as to service its debt.

It is always good to work with first principles as they will rarely lead you astray. They cut out all the humbug in the media, the statements by politicians and the ideological ravings of vested interests. 

The above definition is not based on first principles but is an ideological statement. It assumes that the government in question has the same constraints that restricted governments during the gold standard when currencies were convertible and exchange rates were fixed....

On December 20, 2011, the credit rating agency Moody’s released a special report – Fiscal Space. This paper informs Moody’s – fiscal space tracker, which purports to present a “fundamentals-based measure of the risk of sovereign debt default”. 

The analytical framework used by Moody’s comes directly from the 2010 IMF paper. The credit rating agency just mimics the approach outlined in that 2010 Staff Position Note.

Bill contrasts this with MMT analysis of fiscal space in the existing floating rate monetary system in which governments are not obligated to exchange their currencies for anything other than themselves. In a fixed rate convertible system, government is contained by a real good that it must obtain. In a floating rate non-convertible system, this constraint is absent for government that issue their own currencies and do not incur obligations outside it, so their real constraint is availability of resources and their financial constraints are domestic price level and foreign exchange rate.

Policy-wise, understanding fiscal space is perhaps the most important aspect of MMT in that policy hangs on the effective and efficient use of fiscal space for achieving public purpose in accordance with democratic principles and processes. MMT analysis of fiscal space illumines the boundaries of policy space.

Bill Mitchell – billy blog
The ‘fiscal space’ charade – IMF becomes Moody’s advertising agency
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Andrew Black — Exchange Rate Regimes & Modern Monetary Theory

There have been heated discussions concerning the advantages and disadvantages of what is known as “Modern Monetary Theory”. This theory makes a number of claims, some of which appear unreasonable and impractical to Keynesian economists and others with an economic policy focus. The aim of this discussion paper is to throw more light on the nature of exchange rate relationships internationally. The reason for doing this is that MMT protagonists claim that many economic ills would be resolved if a country has its own currency, which can move freely against other currencies. To take a somewhat extreme proposition, MMT protagonists have argued that in the interests of securing full employment, deficit funding can be safely embarked upon through the government simply printing more money.[i] While this may be technically true for domestic savers and consumers, it overlooks the importance of foreign holders of domestic assets and bonds. If a high government deficit then causes difficulties for foreign owners of national assets, this is entirely manageable, they say, through a devaluation of the currency. As Palley put it, 

“All countries face inflation and financial sector stability constraints, but the US is essentially free of a foreign exchange market constraint. However, that constraint is very visible in many other countries, which explains their greater intuitive scepticism about MMT.” (Palley, 2015, p. 20.) 

The main aim of this short discussion paper is to clarify just what the predominate forms of exchange rate regimes are across the world. If the advantages claimed by proponents of MMT are/were so manifest, then it would be reasonable to expect that a free floating exchange rate regime would be the preferred option internationally. As shall be seen, this turns out not to be the case, and the number of countries with their own free floating currencies is a minority, and one that appears to be shrinking....

London Metropolitan Institute — Global Policy Institute
Exchange Rate Regimes & Modern Monetary Theory
Dr Andrew Black, GPI Opinion

ht Kristjan in the comments

Peter Cooper — The Diverse Economy: Part Capitalist, Part Socialist, Part Communist

On using policy space.

heteconomist
The Diverse Economy: Part Capitalist, Part Socialist, Part Communist
Peter Cooper

Policy Agility Games. Join THE MOVEMENT TO RETHINK POLICY SPACE .... FAST ENOUGH TO MATTER

(Commentary posted by Roger Erickson)

Yet another toe has recently been placed in the water (or extended across the gap).

JOIN THE MOVEMENT TO RETHINK ECONOMICS

It's a good start, but heck, that's just a part of our task. It does no good to rethink any part of a whole, if we can't rethink every part, as well as rethinking the whole. That's true simply because - to remain a whole - EVERY part of any whole has to accommodate and adjust to changes in any component part, in real time.

We need far more of these self-organizing efforts, one for every old & emerging discipline ... and across them too.

Until then, too many citizens - and especially lawyers - miss the fact that
AdaptiveRight and CopyRight must be constantly coordinated, to manage the inherent conflict between those two strategies.

When it comes to rethinking exploration of policy space ... there is no half way. If we can't rethink everything fast enough to evolve our nation, then there's no point in rethinking anything.

American policy can't reflect what the growing numbers and diversity of Americans know ... unless we distribute emerging data as fast as the rising demand to explore our emerging options.

Exploring Policy Space requires Policy Agility, which requires Autocatalysis, which means actively driving the TEMPO and BREADTH of new feedback distribution as fast and far as needed.

Every sports team and army knows that. Why isn't the same obvious for all members of every evolving culture? Until it is, we can't achieve an informed electorate, or an agile culture.

When it comes to political-economics, there's a simple point to remember. Our ratio of personal-hoarding to communal-provisioning determines our rate of domestic as well as global nation-building.

Adaptive Rate is neither left nor right ... it's OpenSource!

So how do we OpenSource our own National Adaptive Rate? One piece at a time? Or all of it? After all, recognizing Policy Space does no good, if we haven't already achieved Policy Agility through extensive practice. That's like reading a book and recognizing that you could in theory ride a bike. It still takes practice, to automate all the reflexes that can keep you from falling off. We need a LOT more cultural practice, at all forms of Policy Agility.  Let's go beyond the SuperBowl, and have continuous Policy Agility games.

The saddest part? We knew this 200 years ago.

"A popular government without popular information, or the means of acquiring it, is but a prologue to a farce or a tragedy, or perhaps both. Knowledge will forever govern ignorance, and a people who mean to be their own governors must arm themselves with the power which knowledge gives.”

James Madison in his 1822 letter to W.T. Barry

And of course there's more. Even people armed with knowledge - or other things - aren't saved, until they accumulate enough practice at effectively wielding their assorted "armaments."  In the end, we are what we practice, not what we possess. The importance of our dynamic assets ALWAYS significantly outweigh the value of our static assets.

We've Heard That One Before ... "Japanese Yen Heading For Hyperinflation"

   (Commentary posted by Roger Erickson)


Yet it's still rather breathtaking to realize how many don't grasp that the bad joke is on themselves. And also very sad.  Only thing hyper inflated is the criminally vicious humor shared by both victims and perps.

"Japanese Yen Heading For Hyperinflation"

Is it immoral to take candy from your own babies ... and their lunch (and diapers, and toys, and roof ... and future) too? When is enough too much?


The problem.

(Note that he even helped turn it in.)

Next: one step to understanding how to fix it.





That and an introduction to Ben Franklin, Abe Lincoln and Marriner Eccles.

Is that asking too much?

If more citizens orient to current reality by age 10, maybe then we could start a much needed national discussion about Policy Space and Policy Agility. So far most citizens respond to that request with a blank stare, like a deer in the headlights.  That's not gonna cut it ..... in the struggle to have our Democracy and use it too.

Who's Holding The Reins? Literally, No One! Electorates Are Some Data Late And A Context Short Of National Return-On-Coordination.

   (Commentary posted by Roger Erickson)

When systemic accounts decline, who, in the end, is accountable? Where does the fiat stop?




This matters because Bill Mitchell notes that "National Accounts" are continuing to decline.

And it's not just Australia.

You know, Bill, reading all your useful summaries of already published data ... one can't help recognizing how droll this all is.

The so-called "Business Cycle" - and bubbles/booms/busts/Bull-Mkts & Depressions too - are simply the result of various permutations of old/young buffoons failing to network adequately.

When distributed components of a SYSTEM quit sending/receiving/analyzing and testing collective responses to enough of their own distributed feedback .... well, then their system breaks down.




Then the insane return-on-coordination that we call human culture rapidly declines, as an inevitable result.

That core reason WHY cultural systems get too far from unpredictable Cultural Survival Paths is the same old story throughout the history of planet Earth.

[semi-social amoeba, Dictyostelium discoideum]

The real message is that if WE don't evolve a BETTER WAY - ASAP - to manage our own affairs, then some other system WILL quickly replace us, as sure as permanently multi-cellular species replaced single-cell cultural approaches.

It's all about our NET Policy Agility, in our demanding race to explore Policy Space (aka, perceived or allowable options). Until these phrases are familiar to every citizen, we'll continue to do less than we're capable of doing.

Any combination of young-to-old buffoons can quickly run whole cultures off a cliff, or linger too long in the past, long past when context has changed - IF THE WRONG SPECTRUM OF PEOPLE ARE HANDED THE POLICY REINS!!! If policy attempts proceed without adequate feedback .. the result is random, which is bad ... by simple statistics alone. The bigger the system, the smaller the ratio of adaptive to maladaptive action patterns there are. We have to ramp up our distributed selection efforts as fast as our options accumulate, or else we end up consuming ourselves.

With the proverbial wave of a little pinky, clumsy policy can undo any amount of agile strategy, tactics, technology and distributed brilliance & effort. Democracy works exactly to the extent that NO ONE tries to just do "their" job, and ignores participation in distributed feedback.

A system really does mean a system, and only the most agile systems survive to keep evolving.

An agile system means one that oscillates back and forth between resiliency and efficiency, as frequently as needed, no matter how fast it grows. Switching between resiliency and efficiency means QUICKLY reconnecting all feedback to all feedback, on demand, before just as quickly relaxing to a just-adequate solution to a transient context, before it changes again.

We can talk and argue endlessly about all the details of all the late, expensive repairs to degraded systems (call them various ideologies) ... but the approach that will win in the end is to raise citizens who first gain, early on, an appreciation for their own, evolving cultural system, and then NEVER LOSE IT! That's the only way to have citizens who know how to leverage culture and policy space, not just their personal space.

Every other approach is a losing strategy. No organically growing system can keep up with expensive repair alone. Only cheap, prevention adaptation works. We won't recover or move on until this message results in very systemic overhaul of K-12 education. Until then, we'll keep churning out a majority who are some data late and a context short of national return-on-coordination.

A Group Intelligence is a terrible thing to waste, but we're trying our best to do it.

Randy Wray — MMT And External Constraints

Randy agrees with Brian and Neil.

Economonitor — Great Leap Forward
MMT And External Constraints
L. Randall Wray | Professor of Economics, University of Missouri at Kansas City

Very Useful Historical Analysis of Blunders On Europe's Path To A Shared, Fiat Currency System - By Bill Mitchell

(Commentary posted by Roger Erickson)



Options for Europe – Part 2

Great history review here by Bill. Much of the historical thinking he reviews held equally well for economic policy deliberations in the USA as well, and still does.

That history drives home the point that we should never let theoretical economists anywhere near national policy?

And we should also never let any single lobby, in this case banking, dominate policy?

Policy agility requires consensus? Otherwise, you end up with a constrained policy space. If populations could keep that simple idea in mind when approaching group policy, theoretical economists would be kept in check.

Coordinate narrow factions - ignorant by definition - through appropriate checks and balances? James Madison's anthropomorphic, 1776 summary of system science still awaits application of appropriately adjusted methods, for constantly changing situations.

To explore group options, we need far less discussion of theory, and far faster evaluation of new, more indirect methods?

For every intractable cultural task, there is a solution, and that solution will always involve invention of methods allowing yet another level of indirect, cultural adaptations?

Members of diverse system-science fields have been saying that for decades. Centuries, in some cases. Call it statistical process control, or ecology, or autocatalysis, or evolution. Call it what you want - even political economics - ... just DO something to adapt group methods at the same pace that change occurs? For Desired Outcomes to stay the same, EVERYTHING has to change? Constantly? To adapt to changing situations, we need citizens with situational awareness and the audacity to change anything that needs to change.

Can we please start retaining that simple fact throughout K-12 education? That's how we can damp the frequency of Ayn Rand acolytes (and sanity-lite's) like Paul Ryan, or 99% of our Congresspeople. They reflect our electorate, after all, which reflects the mal-adaptive operation of our K-12 school curriculum.

We as a people are what we let our Congress practice. And our Congress is what our citizens practice during training and education.

Manufacturing In EVERY Country Can Survive ... If Electorates Repurpose Their Own People With Enough Agility

(commentary posted by Roger Erickson)

Bill Mitchell writes: Manufacturing in Australia can survive if it shifts focus

I love and value Bill Mitchell's exhaustive work immensely, so please take the next line as a form of endearment!

As usual, this is incredibly long-winded … yet it eventually circumnavigates a simple concept, one that hit me from day one, the day I found Warren Mosler's website.

Many non-Economists would just put the underlying issue in less banko-morphic terms, like this.

In scaling up from a tribe to a nation, the two hardest things to conserve are:

1) affinity, the knowledge that YOUR people are your greatest value;

2) the REAL return-on-coordination, which comes as a unpredictable benefit to and consequence of nationwide affinity.

Sure, we as a national electorate have lost nation-wide affinity, and hence return-on-coordination. That's true in ALL large economies. It’s largely a problem of system scale outracing old, mostly tribally-developed methods.

***

Further discussion.

A special instance of the dilemma is exemplified by the classic "Fallacy of Scale." If YOU stand up at a sports stadium, YOU will get a better view. However, if EVERYONE at the stadium stands up, the net, collective view of the audience is not likely to change. You just swap the problem unique to one context, for a similar but unpredictably re-distributed problem, unique to the new context now created. In short, the audience extended significant effort, with no statistically significant benefit! That's a net, REAL loss to community.

Inter-person and inter-group affinity is an even more important case. Without affinity, motivation to monitor and manage interdependencies lags, since the gut-level implications aren't maintained by graphic experience. That's when interdependencies not front and center, start to fall through widely distributed cracks in any growing culture.

The only question that matters is this.

“What methods can return us to national affinity, and systemic loyalty?”

(“Over the rampant treason we have now?”)

Note: Perhaps the adaptive solution is not to mindless push all local processes to extremes of efficiency, as in the brain-dead approach of SixSigma. That just creates a brittle system with unwarranted and maladaptive management costs, rather than a resilient system auto-managing itself with agility.

Rather, as physics, chemistry, biology, Shewhart and Deming long noted, "flat, open, constantly re-connected organizations," where extreme disparity is NOT allowed, can easily self regulate to deliver long-term resiliency. Systems scale only to the extent that they develop methods for scaling the affinity and return-on-coordination that allows Policy Agility to be valued above all else, for it's constant expansion of Policy Space.

Industrial and economic evolution tracks manufacturing shifts, which track shifts in policy agility, which enlarge policy space, which tracks policy adjustment methods?  Ya think?

So what are WE, as a supposedly sentient electorate, going to DO about our policy lethargy? Tune in? Get involved? Converse, test, assess? When, pray tell? Cultural advancement is NOT something ANY of us can do on our own - only by ALL of us teaching all others, by SELECTIVE example. (Not just by personal "success." What have you done for your country lately? How would you even know? Maybe the 1st thing we need is a consensus Desired Outcome. You know, the Cultural Vision thing? As a prerequisite, that would require far more distributed Public Discourse than we get from the smattering of talking heads most of us now rely upon. Subsequently, even with a Desired Outcome in hand, we won't know if we're getting closer of farther, without a constantly upgraded set of Assessment Methods.)

Will The ACA - "ObamaCare" - Be A LONG TERM Benefit, Or A LONG TERM Burden To The USA?

(Commentary posted by Roger Erickson)

A popular sentiment among early supporters goes as follows:

"ObamaCare doesn't regulate Your Health Insurance,it regulates Insurance companies that bankrupt you!"

In response, RH writes privately:

"GIVE ME A BREAK ... It was written by the health insurance companies.

Yes ... Obamacare eliminates the denial of insurance on a pre-existing condition.

But that reduces the profits of some private entity, somewhere.

The solution suggested by the Insurance Industry Lobby? Increase insurance plan rates across the board, reduce access to as many treatments as possible, and also cap allowable fees for clinicians of all stripes. [RGE: No income cap for insurance firm CEOs, obviously.]

And if given citizens can't afford the cost, have the public-at-large subsidize the cost.

The only incomes NOT regulated are insurance company incomes. This is a net money maker for the insurance companies as well as the pharma and medical device firms. The key issue is that the ACA does NOT allow the government to use its purchasing power to bring down prices.

Further, the ACA is a net burden for Middle Class citizens (especial healthy young adults) ... for clinicians of all stripes, and - I will call this one - for all retirees, who will see both increased costs and reduced access to services.

***

The ACA "does not allow the government to use its monopoly purchasing power to [set price limits]."

I suspect RH put their finger on it. That seems to be the clearest, killer mistake in the ACA policy approach to public health maintenance. 

Look at it this way. One, universal component of all public organization is to set a floor service level, that all citizens are guaranteed. Life, liberty and the pursuit of happiness are just a start. Every service that an electorate decides it wants universal access to, as a public minimum, is most easily regulated by imposition of a "public option." For a long time, public schools were a good example. Mandatory, free access to minimal public education did wonders for the USA. 

Should mandatory access to the most basic public healthcare be any different? The approach of establishing a "floor" automatically puts a cap on how much private services can charge for presumably enhanced services. A public option never harmed private universities. Nor does it guarantee the demise of private health insurance or services. It only sets, by default, a reference for citizens to refer to, when considering health services. With no public option, that reference is zero. So it's a question of what level of mandatory, minimal health service the public wants to set for itself, at what cost.

How long will it take our country to catch on? Will we love ObamaCare for a year, then loathe it forever? If policies have warts, we can always adjust them, you say. That's true, yet it's also true that when we make adjustments, we can make things better, or worse. Our real need is to always have enough perspective, feedback, analysis, testing and assessment to be agile! Is the entire ACA implementation process agile? Hardly. Show me a single Congressperson who has read the entire act, start to finish? Show me a citizen who grasps the options that insurance companies can explore, going forward?

Given that insurance companies wrote the ACA, surely they had ONLY the best, long term interests of the US Middle Class in mind, every step of the way? :) 

Ok, all laughter aside. Instead of maintaining insurance company profit margins, we need to embrace indirect methods for chasing our enduring goal, ensuring adequate income for the Middle Class? Right now, citizens may want to hope for the best, and prepare for the worst. Basing national policy and election choices on hope hasn't served us very well so far.

We may not survive this.

It's death of the Middle Class by a thousand narrow cuts ... inflicted by our own, "successful" merchants, sprinkled among ourselves? Forgive ourselves? We certainly don't know what we're doing, since we haven't discussed any policy step widely enough to even find out!

This whole process reminds me of a bad cancer-care joke.

"Any chemotherapy will work. The trick is to keep the patient alive long enough (or to see which one works fastest)."

It's just now that we're talking about our own cultural-auto-immune disorders, on a national scale, not just cancerous cells in the body of one person.

All the individuals and lobbies clamoring to sway policy have lost system perspective? The patient usually doesn't survive those situations. The policy staff is not only impossibly slow and clueless, they've become agents of the social-cancers themselves! That's what "cancers" and parasites do in all systems, they hijack the policy apparatus - to narrow rather than systemic benefit.

Loss of policy perspective is possible only when an electorate loses system perspective. Once perspective is lost, policy agility soon declines and policy space goes unused. Then the Control Frauds, aka social cancers, aks system parasites inevitably take over ... for lack of effective resistance and regulation.

Instead of being distracted, confused, divided and conquered by narrow lobby interests, over a succession of single issues like Healthy Insurance of, by and for the Insurance Lobby, we as the Middle Class, need to define our own, Desired Outcome, and then elect OUR own policy representatives, tasked with listening to US well enough to matter.

Parasites Living Inside Our Policy Space

Commentary by Roger Erickson

Chris Cook writes: "Here we go again. Triple A shit is still shit."

Old rentiers never die. They just reincarnate on Wall St.?

Yes. As repulsive parasites living inside our policy space, hijacking our democratic processes and degrading our policy agility.

#26? #Rentierus_Scumbagiosis

Bill Gross Close To Tripping Over The Definition of Fiat ... Let's Hope He Falls On A Dictionary

Commentary by Roger Erickson

Scrooge McDucks ... Say. Isn't that just an alias for Fiat McClucks? If it spends, taxes and lobbies by fiat ... maybe it IS all just fiat? Yet what good is fiat if we practice it on everything except thinking? Cluck, cluck. Poor McDuck. Clever enough to acquire a duck suit, but still no wiser than a chicken.

Bill Gross notes that extreme wealth disparity triggers declines in distributed savings, and declines in distributed investment too. Both are obvious, logical points. However, his ONLY suggestion is to tax the wealthy more?

Why? To get more fiat? For whom? For the issuer of public initiative contracts and public initiative coupons - i.e., fiat currency?

Note to Bill. The US Treasury doesn't need any fiat back. Beardsley Ruml said so, on page 35, 68 years ago!

Here's a hint to Bill. Let's assume the Treasury DID need to get some fiat back, in order to get more fiat to express. You know, in case the sky was falling. I'm just clucking! Bear, er .. duck with me.

1) What would it do with that extra fiat? Spend it on public contracts? :)

2) Who would get to earn and keep some of that extra fiat? Labor? But ONLY if their income increased more than their taxes did?

So, Bill, EVEN IF THE TREASURY DID NEED TO GET YOUR HOARDED FIAT CURRENCY BACK, IN ORDER TO HAVE SOME ... it would have to spend it and tax labor at lower rates to achieve anything with it.

So, count me dense, but ...

3) Why not just encourage the Treasury to spend more on labor NOW, instead of waiting to get your taxes back?

4) Why not just drastically reduce taxes on labor? NOW! Instead of waiting on both clawed-back fiat AND arbitrarily delayed initiation of further fiat?

What on earth is the difference between 1,2 versus 3,4? Only tempo?

And maybe parsimony? And even then, ONLY for this particular context? Yes, a fiat currency regime ALLOWS for an expanded Policy Space and increased Policy Agility. It guarantees neither, however. Only fiat combinations of awareness/initiative/intelligence guarantee faster/better/leaner application of fiscal and monetary policy tools.

What? Bill Gross says 3&4 might further reduce the buying power of his remaining private savings hoard MORE than strategy 1&2 did? Higher inflation than 1&2? Really? Maybe. It depends .. on a LOT of implementation details. Yet isn't increasing inflation just an increased tax on saved capital - i.e., just what Bill wants? And, hasn't Bill already concluded that the timeless purpose of national policy is to increase our real economic options, not just hoard fiat numerals in bank accounts?

Look Bill, mathematically, it hardly matters whether you raise taxes on capital faster than you raise taxes on labor ... OR ... you lower taxes on labor faster than you lower taxes on capital. Right now, please do whichever is bureaucratically simplest in our current situation. That is, use Occam's Razor. In a fiat currency regime, the difference between those two situations is purely a matter of semantics, not reality. Either way, the amount of fiat used to denominate a desired adaptive rate is a dimensionless number, one that scales with the size, adaptive rate, context and arbitrary habits of a given population. What matters is the social computation latency - and policy latency - required to recognize and implement adaptive policy. Reducing that latency across multiple situations STARTS by recognizing that 1,2 and 3,4 are mathematically the same.

You are VERY CLOSE to rediscovering the definition of "fiat." Go for it! Pull a Ruml.*

* What's that Ruml-ing I hear in the distance?

Dynamic Value As Capital - What's Missing From MacroEconomics, And GDP Too

   (Commentary posted by Roger Erickson.)



If any economist wants to hear a description of what's missing from macroeconomics, here's a great example.

Achieving Greatness by Giving Control and Creating Leaders

... the concept of leadership [and group agility, AND policy agility, as real capital] is certainly more complicated than taking and receiving orders. As retired U.S. Navy Captain David Marquet explains in the following video, it’s about creating an environment that empowers the members of an organization to think creatively and take psychological ownership of the mission at hand, whatever it may be. [And, providing them with adequate venues to practice exactly that.]
It’s about “giving control and creating leaders, not taking control and attracting followers,”

Put that in your ISLM and, instead of smoking it, just blow it up? And toss ISLM in the garbage?

What's missing from GDP? It tracks only static assets. Not dynamic assets. As Steve Hansen points out, GDP became increasingly less useful as we transitioned further from a product to more of a service economy.

Leadership?  

Leadership, leadership everywhere, but nary a drop applied to enlarging our policy space. Or to increasing our policy agility.

  Rhyme of the Ancient Marriner Eccles