Here's what I have to say to that marine who wrote that disrespectful and disgusting letter to Senator Dianne Feinstein

I don't know how many of you saw this, but this letter, posted by some marine corporal, is going viral on the Internet right now and in it, he shows some incredible disrespect for Senator Dianne Feinstein and, basically, our government and society.

Here ia the letter...

Senator Dianne Feinstein, I will not register my weapons should this bill be passed, as I do not believe it is the government's right to know what I own. Nor do I think it prudent to tell you what I own so that it may be taken from me by a group of people who enjoy armed protection yet decry me having the same a crime. You ma'am have overstepped a line that is not your domain. I am a Marine Corps Veteran of 8 years, and I will not have some woman who proclaims the evil of an inanimate object, yet carries one, tell me I may not have one. I am not your subject. I am the man who keeps you free. I am not your servant. I am the person whom you serve. I am not your peasant. I am the flesh and blood of America. I am the man who fought for my country. I am the man who learned. I am an American. You will not tell me that I must register my semi-automatic AR-15 because of the actions of some evil man. I will not be disarmed to suit the fear that has been established by the media and your misinformation campaign against the American public. We, the people, deserve better than you. Respectfully Submitted, Joshua Boston Cpl, United States Marine Corps 2004-2012

And here is my response to Corporal Boston...

Dear Corporal Boston:

You live in a society where there is a government and there are laws and you are expected to follow and obey those laws or be subject to the consequences. What you "feel" or "believe" is your right matters little as each of us in any civilized society, from time to time, are expected to give up some of our personal desires for the greater good of that society. I may feel it is okay or, my "right" to commit robbery, but society deems that to be unacceptable. That's how it works, Corporal Boston.

Sir, your disrespect for Senator Feinstein is a disgrace to our military and to the United States Marine Corp. Addressing Ms. Feinstein, a senior member of the United States Senate and Chairman of the Sentate Intelligence Committee as "some woman" is beyond disrespectful and an affront to all women.

You claim to be the flesh and blood of America, but there are 300 million other citizens who lay claim to that title as well and their voices deserve to be heard just as yours and they have, overwhelmingly, spoken up in favor of Senator Feinstein's proposed assault weapons ban.

Who do you think you are? Get something straight, you do not protect my freedom, nor do you protect the freedom of Senator Feinstein and her colleagues; it is the Constitution and the respect for the laws of this country that do, because that is the only thing keeping our military force from being turned against our own citizenry.

You, sir, do not deserve the honor of being called a United States Marine. You are an insubordinate low life, who's comments are inciteful and border on treason. It's a sad day for the U.S. military when they've bred a cretin such as you.

Mike Norman

Clint Balinger — MMT can address operational realities or analyze a Chartalist system. But it cannot do both.

MMT can either address operational realities, or analyze a chartalist system. But it cannot do both, because the operational reality is that we do not have a true fiat currency and are not operating in a true chartalist environment.

There may be moves away from this operational reality that lead to full employment, a more just economic system, and greater price stability. There is good evidence that a highly useful move would be to change to a true fiat currency system.

Clint Balinger
MMT can address operational realities or analyze a Chartalist system. But it cannot do both.

Seems that Clint is confused about this. MMT describes the existing fiat system and shows policy makers how to take advantage of the policy space it affords in order to harmonize the trifecta of growth (production and productivity), employment and price stability.

Debt Ceiling Hit

Well, Sec. Geithner wasn't lying, as of Monday's close we are at the ceiling.  Nearly $100B of net new Treasury securities issuance on Monday topped things off.

See Table III-C here at the DTS.

If nothing else, the next 60 days should be revealing in that based on the press reports of the political situation (fiscal morons running amok, etc...) there will be no issuance of $NFA over this period.  Let's see how things economic fare over this time.

The last time we did this was in 2011 when we hit the ceiling in mid-May and didn't get the ceiling raised until the first week in August, a bit over 2 months of operation in this mode.  That year, GDP growth in the April/May/June quarter came in at 0.1% and then recovered in the July/August/Sept quarter and came in at 2.5%.

Let's watch this and perhaps learn something at least.

Observations on the December 2012 month end numbers in the DTS:   We ran a small surplus of about 20B last month on total withdrawals of 947B minus 651B of UST redemptions and 991B of total deposits minus 674B of UST issuance.  The cash account was left with 92B which is what Treasury probably will need to handle large net redemption days that can approach (perhaps sometimes even exceed) this number.

Izabella Kaminska — Why a “free” market changes everything

On the evolution of capitalism beyond capitalism. One of Izzy's best yet.

The Financial Times | FT Alphaville
Why a “free” market changes everything
Izabella Kaminska
(h/t Andy Blatchford via FB)

See also:

OuiShare — Creative Community For The Collaborative Economy
Yes, the collaborative economy is destroying jobs. So what’s next?
Stanislas Jourdan

John Aziz — Why Modern Monetary Theory is Wrong About Government Debt

I’ve taken some criticism — particularly from advocates of modern monetary theory and sectoral balances and all that — for using total debt rather than just private debt in my work....

Governments controlling their own currencies are likely to continue to defy the prescriptions of the modern monetary theorists for years to come. And that means that expansionary increases in government debt relative to the underlying economy will continue to be a prelude to contractionary deleveraging, just as is the case with the private sector. All debt matters.

azizonomics
Why Modern Monetary Theory is Wrong About Government Debt

John Aziz

Basically an Austrian view, but interesting in that John Aziz has taken the time to read up on MMT and sectoral balances. The post doesn't say anything new of note, but it's interesting as a summary of a trader's take on MMT. 

What is interesting is that he admits that governments that are currency sovereigns can fund their debt through the central bank, but he claims they don't lest they undermine the value of the currency. And even if they do, Japan's massive national debt shows it just transfers to the public sector private debt from previous over-leveraging, which only postpones the deleveraging that it will take to get the economy going again.

While John Aziz regularly contributes to Zero Hedge, his criticism is not the usual ranting that appears there. It's thoughtful and worth a read.

Reid Pillifant – Nadler proposes trillion dollar coin trick

Rep. Jerrold Nadler has an admittedly "out of the ordinary" solution to the coming fight over the debt ceiling.

"There is specific statutory authority that says that the Federal Reserve can mint any non-gold or -silver coin in any denomination, so all you do is you tell the Federal Reserve to make a platinum coin for one trillion dollars, and then you deposit it in the Treasury account, and you pay your bills," Nadler said in a telephone interview this afternoon.

I asked whether he was serious.

"I'm being absolutely serious," he said. "It sounds silly but it's absolutely legal. And it would normally not be proper to consider such a thing, except when you're faced with blackmail to destroy the country's economy, you have to consider things."...

Nadler said the trillion-dollar coin was one of two options to avoid the debt ceiling fight; another would be for the president to use his power under the Fourteenth Amendment, which says the validity of the public debt "shall not be questioned." (Nadler tried to press the president toward that option last time, but to no avail.)

"It gets around this artificial debt-ceiling thing which has no economic justification," he said. "And, by the way, by the way, none of this has to be done. All the president would have to say is, 'I would do it if necessary.'" 

CapitalNewYork.com
Nadler proposes trillion dollar coin trick
Reid Pillifant
(h/t Kevin Fathi via email)

Scott Fullwiler — Functional Finance and the Debt Ratio—Part IV

This five part series will explore at length (warning!) and in detail (another warning—wonk alert!) the MMT perspective on the debt ratio and fiscal sustainability. While the approach suggests a macroeconomic policy mix and strategies for both fiscal and monetary policies that most neoclassical economists currently believe are unsustainable, ultimately the MMT preference for a significant role for fiscal policy in macroeconomic stabilization is shown to be consistent with traditional neoclassical views on fiscal sustainability.

This fourth part integrates the content of the first three parts with the functional finance strategy for fiscal policy. Warning again—this part is the longest and most detailed of the four. 

Functional Finance and Fiscal Sustainability

New Economic Perspectives
Functional Finance and the Debt Ratio—Part IV
Scott Fullwiler | James A. Leach Chair in Banking and Monetary Economics and Associate Professor of Economics at Wartburg College

Obama gets debt ceiling "negotiation" right.

"While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up," Obama said in remarks in the White House.

The Huffington Post
Obama Debt Ceiling Statement: Limit Increase Not Up For Debate After Fiscal Cliff Showdown
Reuters

Excellent framing.

Katherine Fung and Jack Mirkinson — Al Jazeera Buys Current TV

Al Jazeera has acquired Current TV, the progressive cable news station co-founded by Al Gore.

The news was reported by the New York Times' Brian Stelter on Wednesday.

Al Jazeera will replace Current's programming with its own network. The Dubai-based channel has long sought to extend the reach of its English-language service in the United States.

The Huffington Post
Al Jazeera Buys Current TV
Katherine Fung and Jack Mirkinson

Al Jazeera confirms:

Al Jazeera buys US channel Current TV

AFP — After Newtown, company makes bullet-proof kid clothes

From the I kid you not department.

Miguel Caballero has been making bullet-proof clothes for politicians and other bigwigs for 20 years, but not for kids. The latest US school massacre has changed that.This year he plans a line for children — T-shirts, vests, and combination backpack-vests — and geared toward the US market.

Caballero has made good money in his 22-year-old business with a factory on the outskirts of Bogota. He sells around 50,000 garments a year that go for about $2,000 a piece, but the US market had been tough to crack.Then, after a lone and deranged gunman killed 20 small children and six staffers at Sandy Hook Elementary School last month in Newtown, Connecticut, he started getting orders from very worried parents.

“We would answer that we do not make clothes for kids. But the emails kept coming,” Caballero said.

So, in just a week, he designed garments and subjected them to ballistic tests. Now his factory is fitted to churn out a first lot of 1,800 bullet-proof garments for children and is waiting for firm orders.

The Raw Story
After Newtown, company makes bullet-proof kid clothes
Agence France-Presse

Bad Juju?

Grasping Reality with Both Invisible Hands
The Obama Tax Cuts: Now It Is Time To Think About Funding Them…
Brad DeLong

The New York Times | The Conscience of a Liberal
Debt in a Time of Zero
Paul Krugman

Economonitor | Great Leap Forward
Why Does Brad DeLong Worry About Paying For Tax Cuts?
L. Randall Wray

New Economic Perspectives
Brad DeLong Has Me Worried
Stephanie Kelton

Total hypocrisy! GOPers, fiscal conservatives, Chris Christie, Michael Grimm, Peter King, cry when they don't get their money from the Fed's government

This trio--N.J. Governor Chris Christie, Representative Peter King (R-NY) and Representative Michael Grimm (R-NY)--take the prize when it comes to hypocrisy.

They're all staunch fiscal conservatives, who run around saying the government is broke, we're out of money and we need to see drastic spending cuts to ensure our national "solvency," yet they cry when they don't get THEIR money from the Federal government.

Christie gutted education, health care, police, fire, unions, I had a conversation with Grimm when I was still at Fox News where he hit all the conservative talking points about out of control spending, national solvency, etc and King as well, but now they're incensed that the government is not bailing out their states and constituents. This is a shameful display of hypocrisy. These guys are the worst of the worst.

GOP Civil War Fomented by their Fiscal Ignorance Continued: Christie calls out Boehner

Breaking story at Business Insider.

Christie calls out Boehner personally over the 66-day (and counting) delay in super-storm Sandy fiscal funding.

Too bad both of these GOPers are fiscal morons.

Dems: Get out the popcorn and enjoy the show!

Cathy O'Neil (mathbabe) — Is mathbabe a terrorist or a lazy hippy? (#OWS)

Read it and decide. The right answer, IMHO, is neither. She is a brave patriot, one of the rising "warriors" from whom will arise the coming Golden Age, according to Prabhat Ranjan Sarkar's theory of history as adapted by Ravi Batra.

Alternative Banking – Just another NYC General Assembly # Occupy Wall Street site
Is mathbabe a terrorist or a lazy hippy? (#OWS)
Cathy O'Neil (mathbabe)

Scott Fullwiler — Functional Finance and the Debt Ratio—Part III

This five part series will explore at length (warning!) and in detail (another warning—wonk alert!) the MMT perspective on the debt ratio and fiscal sustainability. While the approach suggests a macroeconomic policy mix and strategies for both fiscal and monetary policies that most neoclassical economists currently believe are unsustainable, ultimately the MMT preference for a significant role for fiscal policy in macroeconomic stabilization is shown to be consistent with traditional neoclassical views on fiscal sustainability.

This third part discusses the historical behavior of US interest rates on the national debt in the context of fiscal sustainability.

Interest Rates vs. Growth Rates Historically

New Economic Perspectives
Functional Finance and the Debt Ratio—Part III
Scott Fullwiler | James A. Leach Chair in Banking and Monetary Economics and Associate Professor of Economics at Wartburg College

Process Owners All Must Answer to Full-Scale Operations Feedback, Or It Isn't an Adaptive Operation

commentary by Roger Erickson

This extended commentary is relevant to the topic of integrating the MMT "currency operations" community, the Deming Foundation "statistical process control" community, and the military Boyd-&-Beyond "OODA-loop" community - to name just a few - with other, like-minded communities inherently interested in systemic tuning. The integration options are not just geographic.

The original version of this particular comment was posted at an investors board regarding student loans. It's an extended topic, and starts with the observation that students are now taking out non-recusable loans to subject themselves to extensions of an already badly broken process.

Original comment left here: Are Student Loans Destroying Consumption?

The roots of this go deep but can be tracked. While working at the NIH campus in Maryland, I joined for 3 years [circa 1993-1996] a volunteer group of PhD scientists who would visit local elementary school districts when requested.

1) It all started when one county school board approached the NIH, wanting to "reinvent" how they taught science education.

2) Out of ~5500 PhD scientists, they were only able to drum up ~50 volunteers. (Even with formal endorsement by the NIH Director! NIH lab chiefs & bureaucrats ridiculed the idea, and made it known that it would NOT help tenure prospects.)

3) None of the other 25 county school boards in Maryland followed suit! (Go figure.)

4) It was an education for most of the scientists, who hadn't been back to an elementary school in ~30 years. WE learned more from the kids & teachers than they learned from us (can tell those stories another time).

5) The most telling response from teachers was "please don't ask us to do one thing MORE!" [They had their curriculum micro-managed down to 15 minute intervals, and were monitored as to whether they were spending all the appropriate minutes on each mandated subject! Consequently, most of it was all theory, and actual "practice" at handling surprises wasn't in the cards (i.e., in the old system, students were actively prevented from ever having to actually THINK!  At least one county school system SEEMED to recognize the folly of this approach - but read on.)]

6) 2nd most telling response from experienced teachers was "whenever I want to explain some difficult topic, I dig out one of my hoarded old textbooks from the 1950s - they're way more useful than today's textbooks"

7) The drop out rate for new teachers was abysmal, & getting worse! If I recall correctly, the majority quit after their 1st year! Older teachers were mostly appalled at what was happening to curriculum, but felt outvoted & overwhelmed. Like with other policy processes, the whole process had become dominated by the vendor industry (textbooks, supplies, teaching aids, facilities, etc, etc - not so different from the mil-industrial complex; just swap edu contractors for mil contractors).

8) Our group of NIH scientists was recruited by the one school district to help them "reinvent" science education for elementary school curriculum. Yet after ~6 months, most of us in private agreed that they needed to reorganize their entire approach to education & training, from ground zero. When we tried to bring that up with a few teachers, they begged us not to mention their names, and in private said nothing would change unless someone took the battle directly to the teacher-training colleges and especially the CURRICULUM PLANNING departments and "specialists" [who had built academic careers publishing & getting tenure in those departments]. The"curriculum specialists" had become entrenched in all school boards and in "accreditation" services & state education depts. Finally, all county-based school boards had become bureaucracies of their own. [The whole edu logistics chain is rather reminiscent of orthodox economics, S&P et al rating agencies, and politicization of the Fed/Treasury - i.e., purely academic theory increasingly separated from practice, operations & REAL outcomes.]

9) In the process of all this, we became aware of literally thousands of similar TOKEN efforts coast to coast, all sponsored by either universities, associations (chem assoc, math assoc, engineering assoc, etc, etc) or corporations .... ALL blissfully unaware of one another, all totally uncoordinated, and hence nearly all a vast waste of everyone's time. In discussing this last topic, one principal burst out laughing & showed me a huge cabinet (~4'x5'x2'deep). Every fall it would start out empty, and slowly fill up with all the proselytizing material sent by various "education improvement groups" whom he said were all nice people, hard working, well-meaning & totally lacking in any understanding of how an elementary school is actually operated. Hence - it was all totally useless to him. Every spring he would call in a truck, and have all the crap hauled off to a dump. It was an eye-opener to me.  [ps: I've more recently heard a remarkably similar story from a Congressional staffer, except that each Congressperson supposedly has to truck out a semi-truck of unutilizable "reading material" EVERY MONTH!]
10) This whole experience drove home the realization that researchers at public agencies like the NIH were stockpiling more & more information, while in parallel we produce citizens less & less aware of how to actually achieve "recombinant" integration of unpredictably diverse options! (My own son was attending these schools just described, and it was obvious that he wasn't gonna absorb at school the impetus to invent novel "snowmobiles" out of random parts. If anything, the local school curriculum staff were doing their best to drain kids of any remaining imagination. Today, the term INNOCENT FRAUDS comes to mind. Our visiting teams of scientists actually ended up discussing how to protect kids from their school experiences. It became depressing if you dwelled on the statistics instead of focussing on the personal interactions.)

11) What to do about this whole, uncoordinated mess? It would literally take a Constitutional Assembly to quickly reorganize US education top down, so it ain't gonna happen any time soon. Rather, the best hope is far more bottom-up audacity that focuses on protecting students from micro-managers [enforcing arbitrary standards]. The most impressive school principal I met confided that if the school board knew how he ran his (rural, edge of county) school, they'd try to put a stop to his methods (which locals absolutely loved). My conclusion is that Iceland or some other tiny country could again overrun the world someday, simply by producing a small crop of people with a culture10x more innovative than the entire rest of the planet combined. It could easily happen. While all other "interest groups" are perfecting persistence of obsolete methods, some group that embraces change will, by accident, fall into a faster ... ADAPTIVE RATE? Just saying.

12) Conclusion to the NIH experience?
a) A new NIH director took over who immediately closed down the program's NIH endorsement. He wanted researchers to focus on getting tenure, and leave science education to "professional" educators. [Again. Go figure!]
b) The local school board already had what they thought they wanted anyway [a "science-in-a-box" menu list, that allowed any teacher, regardless of experience, to literally open a box of prepared materials & "teach science" in the allotted 15 min time slot :( ] Subsequently, they wanted the visiting scientists out of the schools, due to the "disruption" they caused to students, teachers & the school board. The county school administrator was actually a fan of WalMart logistics, and wanted his county school system to be run the same way! Hence, the commoditized "science-in-a-box" concept. I think they capped all of "science" at 7 standard box versions. [Weepin' Buddha on an incline!]

Outcome? The most notable outcome was that more than one previously dedicated scientist permanently lost interest in research as an industry, and became more interested in "nation-tuning" as an inevitable consequence of full SituationalAwareness.

How to make a difference? You can't tune a system if you don't at least map the moving, interacting parts and produce a rough semblance of a real-time decision-support interface. If that interface is too big & distributed for Central Control, then you have to do what the USMC says - focus on instilling methods that improve the QUALITY [including tempo] OF DISTRIBUTED DECISION-MAKING.

Are we doing that anywhere in our country? Ha ha ha ha ha ha ha ha ... [stop it, you're killing us]. Sorry, gotta catch my breath.

FDL Book Salon to host Randy Wray on Saturday, 1/5

FDL Book Salon: Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems (go t this link on Saturday to participate)
Author: L. Randall Wray
Saturday, January 5, 2013 2:00 pm Pacific time

In a challenge to conventional views on modern monetary and fiscal policy, this book presents a coherent analysis of how money is created, how it functions in global exchange rate regimes, and how the mystification of the nature of money has constrained governments, and prevented states from acting in the public interest.

L. RANDALL WRAY is a professor of Economics at the University of Missouri-Kansas City, USA, as well as Research Director, the Center for Full Employment and Price Stability, and Senior Scholar at the Levy Economics Institute of Bard College, New York. A student of Hyman P. Minsky while at Washington University in St. Louis, Wray has focused on monetary theory and policy, macroeconomics, financial instability, and employment policy. He has published widely in journals and is the author of Understanding Modern Money: The Key to Full Employment and Price Stability (Elgar, 1998) and Money and Credit in Capitalist Economies (Elgar 1990). He is the editor of Credit and State Theories of Money (Edward Elgar 2004) and the co-editor of Contemporary Post Keynesian Analysis (Edward Elgar 2005), Money, Financial Instability and Stabilization Policy (Edward Elgar 2006), and Keynes for the twenty-first century: The Continuing Relevance of The General Theory, Palgrave, 2008. Wray is also the author of numerous scholarly articles in edited books and academic journals, including the Journal of Economic Issues, Cambridge Journal of Economics, Review of Political Economy, Journal of Post Keynesian Economics, Economic and Labour Relations Review, Economie Appliquée, and the Eastern Economic Journal. Wray received a B.A. from the University of the Pacific and an M.A. and Ph.D. from Washington University in St. Louis. He has served as a visiting professor at the University of Rome, the University of Paris, and UNAM (Mexico City). He was the Bernardin-Haskell Professor, UMKC, Fall 1996, and joined the UMKC faculty as Professor of Economics, August 1999. (Palgrave Macmillan)

Rodger Mitchell — Republicans double down on middle class destruction. Dems not far behind.

Rodger pulls out all stops and comes out with guns blazing. Good for him. Tell it like it is.

Monetary Sovereignty
Republicans double down on middle class destruction. Dems not far behind.
Rodger Malcolm Mitchell

Parsing peak oil

So when is crunch time? According to a new report from the New Economics Foundation out last month, the arrival of 'economic peak oil' - when the costs of supply "exceeds the price economies can pay without significantly disrupting economic activity" - will be around 2014-15.

Truthout | Op-Ed
Rosy Forecast of Cheap Oil Abundance, Economic Boom a Myth
Dr. Nafeez Mosaddeq Ahmed | Executive Director of the Institute for Policy Research & Development and Chief Research Officer at Unitas Communications Ltd. His latest book is A User’s Guide to the Crisis of Civilization: And How to Save It (2010), which inspired the award-winning documentary feature film, The Crisis of Civilization (2011).
(h/t Kevin Fathi via email)

Paul Krugman — Perspective on the Deal

So, what are the two sides really fighting about? Surely the answer is, the future of the welfare state. Progressives want to maintain the achievements of the New Deal and the Great Society, and also implement and improve Obamacare so that we become a normal advanced country that guarantees essential health care to all its citizens. The right wants to roll the clock back to 1930, if not to the 19th century.

The New York Times | The Conscience of a Liberal

Perspective on the Deal

Paul Krugman | Professor of Economics, Princeton University

Tom Kington — Il Duce is back: New reverence for fascist dictator Benito Mussolini spreads across Italy

Every year, around this time, Mussolini calendars appear in newspaper kiosks up and down Italy, offering a year’s supply of photos of the fascist leader.

They are often tucked away with the specialist magazines, but according to the manager of one firm that prints them, they are much in demand.

“We are selling more than we did 10 years ago,” said Renato Circi, the head of Rome printer Gamma 3000. “I didn’t think it was still a phenomenon, but young people are now buying them too.”...

Among his adherents today are the masked, neo-fascist youths who mounted raids on Rome schools this autumn to protest against education cuts, lobbing smoke bombs in corridors and yelling “Viva Il Duce”.

The Raw Story
Il Duce is back: New reverence for fascist dictator Benito Mussolini spreads across Italy
Tom Kington | The Guardian

Rick Ungar — Non-Partisan Congressional Tax Report Debunks Core Conservative Economic Theory-GOP Suppresses Study

What do you do when the Congressional Research Service, the completely non-partisan arm of the Library of Congress that has been advising Congress—and only Congress—on matters of policy and law for nearly a century, produces a research study that finds absolutely no correlation between the top tax rates and economic growth, thereby destroying a key tenet of conservative economic theory?

If you are a Republican member of the United States Senate, you do everything in your power to suppress that report—particularly when it comes less than two months before a national election where your candidate is selling this very economic theory as the basis for his candidacy....

This paragraph from the report says it all—

“The reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.”

Forbes | Opinion
Non-Partisan Congressional Tax Report Debunks Core Conservative Economic Theory-GOP Suppresses Study
Rick Ungar | Contributor
(h/t MoveThroughIt in the comments)

Jerry Khachoyan — Worrying About The Deficit is Silly

Good charts and commentary.

The Armo Trader
Worrying About The Deficit is Silly
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science.

Randy Wray — Let’s Leap the Fiscal Cliff: Who’s Afraid of Deficits, Anyhow?

OK, did you leap last night? Aren’t you glad that the President and Congress bargained last night to increase your payroll taxes in order to take away 2% of your income for all of 2013? I guess that at least our “progressive” deficit doves are now happy that with higher payroll taxes, Social Security is on “firmer” ground. Yes, right. Just you wait–more bargains are coming. Spending will be cut next.

Oh, and what did we get in return for the bargain? Some breathing space? Wrong again. We’ve reached the debt limit so the Congress gets to start all over from square one. Remember–the Cliff was created by Congress in order to move foward on the debt limit. And here we are with deja vu all over again.

Anyway, lets take a deeper look in the next few posts at the issue of the US “running out of money”.

Economonitor |Great Leap Forward
Let’s Leap the Fiscal Cliff: Who’s Afraid of Deficits, Anyhow?
L. Randall Wray | Professor of Economics, UMKC

Bill Mitchell — When you’ve got friends like this [Jared Bernstein]

In wishing us all happy new year, Jared Bernstein also pounded his readers with a confused macroeconomic logic, that if applied, would in all likelihood make their new year (collectively) worse. His article (December 29, 2012) – My Views on Spending Cuts and Entitlements – is another one of those cases when friendly fire shoots the progressive movement in the foot.

Bill Mitchell — billy blog
When you’ve got friends like this – Part 10
Bill Mitchell

Bill Mitchell — Modern Monetary Theory and environmental sustainability – Part 1

There is regular commentary here that seeks to argue that Modern Monetary Theory (MMT) is flawed, bereft or worse because apparently it avoids any discussion of the natural environment. This apparently arises from the inherent conclusion in MMT that growth in aggregate demand (and real GDP) is required to maintain high levels of employment, which are considered both economically and socially desirable. This is the first part of a two-part blog on this topic. We will see that MMT is highly sympathetic to the challenges posed by anthropogenic global warming (a catch-all term) and central policy indications that follow from an understanding of MMT (for example, the superiority of employment buffer stocks) lead to an understanding of how MMT is a green paradigm as opposed to mainstream (neo-liberal) economics and much of Post Keynesian thinking, the latter which relies on generalised expansion as the solution to entrenched unemployment. We conclude that those who seek to dismiss MMT because it doesn’t satisfy their particular pet solution to climate change issues have probably not read some of the earlier MMT literature nor understood fully what is required to develop and disseminate a new way of thinking about the economy. Further, MMT is not a theory about everything! What we will see is that when MMT advocates economic growth it does so with a very different view of what that economic growth might be comprised of and driven.

Bill Mitchell — billy blog
Modern Monetary Theory and environmental sustainability – Part 1
Bill Mitchell

Telcos exert monopoly power

Rick Falkvinge, in some recents posts on his site, points to a very important issue that is practically unknown to many of us.

 We can thank the telcos, the ones that power our phones, for the fact that internet connectivity generally sucks. They have every interest to prevent and retard improvements in connectivity of the internet. It would end an era of fantastic profit margins for them …

“A little-noticed report by the OECD sheds light on why the telco industry so forcefully prevents more and better internet connectivity to Europe’s entrepreneurs and households: the telcos are currently overcharging by five orders of magnitude by forcing people to use the telco network rather than the Internet.”

But the report also highlighted something else: the Internet provides a large superset of the services of the telco industry, at a cost five order of magnitudes less for the same service. In other words, the telco industry is currently overcharging for voice service by five orders of magnitude – that is, overcharging by a factor of 100,000 compared to market price for net connectivity. [emphasis added]

P2P
Telcos actively prevent Internet development
Sepp Hasslberger

Lars P. Syll — Robert Lucas and the intellectual collapse of freshwater economics

Robert Lucas is at is again. The invisible hand will return the economy to equilibrium at full employment to the degree that it is allowed to operate by eliminating government interference. And as Lars points out, without a shred of evidence in the face of massive failure of that paradigm to foresee the crisis, which it explains as either resulting from governmental intervention or an unforeseeable shock.

The presumption of equilibrium in neoclassical economics is derived from a 195y century view of physics that contemporary economists have attempted to save using DSGE. That is is say, the assumption is that equilibrium is the guiding principle in analysis of "free" markets and distribution by price discovery.

This is reminiscent of past presumptions that affected thought in the West. The Greeks had that cosmos (order) is imposed on the original chaos (randomness) by logos (rational principle or cause – Greek αἰτία). The Greek term logos is the root of English "logic." The ancient Greeks held that the universe (cosmos) is rational. Logic is the rational structure underlying human cognition of invariant principles that order change iaw law (causality). Mathematics is an aspect of logic. The lintel of Plato's Academy was inscribed with the words, "Let no one ignorant of geometry come under my roof." Given this presupposition the discovery of irrational numbers was an earth-shaking event that initially concealed from the uninitiated lest they lose faith. Subsequently, it led to a bifurcation between arithmetic and geometry that persisted until the beginning of the modern period.

The discovery of irrational numbers caused a break in Greek mathematics between arithmetic and geometry. The Greeks could not accept the fact that some lengths were incommensurable with rational numbers. Therefore, they decided that numbers could not be associated with lengths. Unfortunately, this decision led to a division between arithmetic and geometry that was not reconciled until the time of Descartes. (Math Lair)

Similarly, Aristotle had posited that the motion of heavenly objects must be circular because of the perfect form of the circle. This presupposition was at the root of the resistance to change in astronomy from a Ptolemaic system of epicycles to the simpler heliocentric Copernican system, later explained by Kepler, who was the first to use elliptical orbits.

Modern physics also presents a parallel. Classical physics presents the universe as realistic and deterministic. The discovery of quantum mechanics shook that foundation by suggesting the bedrock on which classical physics is built is probabilistic. Einstein famously objected to this interpretation with "God does not play dice," and engaged in a running debate with Bohr for decades over this. The debate was finally resolved by time, and now a majority of physicists accept that "reality" is probabilistic at ground.

The discipline of economics is affected by a similar presumption — equilibrium. Keynes rejected the neoclassical view, but Keynesians were not able to hold the fort. Samuelson capitulated and "bastardized" Keynesianism with his neoclassical synthesis. Now mainstream economists, who call themselves "orthodox" and everyone else "heterodox," which is a euphemism for "heretical," have largely prevailed and imposed equilibrium as the "normal" paradigm in Kuhn's sense.

Until this lock on the discipline is broken, economics will be theology and lag its sister science in adherence to a dogma that has been widely discredited.

As Robert Vienneau wrote recently:

If you want to argue against mainstream economics, a mainstream economist can dismiss you as ignorant of some model variation and as attacking a strawperson. Furthermore, this dismissal could be "justified" by just checking whether you have a degree from a small number of schools, and, if you do, just mocking you as not having fully learned what they are teaching. Thus, your time can be taken up with argument about whether you know what you are talking about. The mainstream economist never need get to the point of engaging a critique.

The economics profession is broken and it cannot be fixed without replacing those who adhere religiously to discredited dogma, which looks suspiciously like a conservative preference for government as an adjunct to business rather than the ordering mechanism of society as a complex system in which emergence presents challenges that markets alone are not suited to address.

Lars P. Syll's Blog
Robert Lucas and the intellectual collapse of freshwater economics
Lars P. Syll | Professor, Malmo University

Bob Goudzwaard — Christianity and Economics

A Christian view of economics, history of economics, and homo economicus.

The Gospel and Our Culture
Christianity and Economics
Bob Goudzwaard | Professor Emeritus, the Free University in Amsterdam
(h/t WillORNG in the comments)

Scott Fulwiller — Functional Finance and the Debt Ratio—Part II

This five part series will explore at length (warning!) and in detail (another warning—wonk alert!) the MMT perspective on the debt ratio and fiscal sustainability. While the approach suggests a macroeconomic policy mix and strategies for both fiscal and monetary policies that most neoclassical economists currently believe are unsustainable, ultimately the MMT preference for a significant role for fiscal policy in macroeconomic stabilization is shown to be consistent with traditional neoclassical views on fiscal sustainability.

This second part discusses interest rates on the national debt in the context of a currency issuer operating under flexible exchange rates.

Interest Rates and Flexible Exchange Rates

New Economic Perspectives
Functional Finance and the Debt Ratio—Part II
Scott Fulwiller | James A. Leach Chair in Banking and Monetary Economics and Associate Professor of Economics at Wartburg College