Lars P. Syll’s Blog
Balanced budget religion
Lars P. Syll | Professor, Malmo University
An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
There was an article posted by American political analyst Jared Berstein yesterday (January 7, 2018) – Questions for the MMTers – which I thought was a very civilised exercise in engagement from someone who is clearly representative of the more standard Democratic Party view, that the US government has to move towards balancing its fiscal position and reducing government debt in order to meet the social security challenges posed by an ageing population and the accompanying increase in dependency ratios.
He is sympathetic to Modern Monetary Theory (MMT), given that he wrote “there’s no distance between my views and a core principal of MMT: the need for deficit spending when the economy is below full employment”. In other words, he notes that “MMT or whomever else argues on behalf of expansionary fiscal policy is correct”.
But that is a fairly standard ‘progressive’ position when the economic cycle is below full capacity. This position typically alters quite dramatically when so-called longer terms considerations are brought into the picture. Jared Bernstein worries about the inflationary consequences of fiscal policy (so do MMT economists by the way) and thinks central banks should be the primary macroeconomic policy makers (MMT economists reject this).
He also thinks that if the government doesn’t sell bonds to match its deficits then there will be “currency debasing”. MMT economists have pointed out the fallacies of that proposition but he is still in the dark about it.
And he also thin[k]s that fiscal position should be balanced at full employment. MMT economists do not agree with that proposition pointing out that it all depends on the state of saving and spending decisions in the non-government sector. It is likely that continuous deficits will be required even at full employment given the leakages from the income-spending cycle in the non-government sector.
So while his queries are conciliatory and written in an inquiring fashion, the gulf between this typical ‘progressive’ view of macroeconomics and MMT is rather wide. This is Part 1 of a two-part series that responds to the questions that Jared Bernstein raises and hopefully puts the record a bit straighter....[Paragraphing introduced for online readability. This is one paragraph in the original. tjh]
The euphoria around international trade and the general consensus regarding capitalism’s inevitable sustenance among countries of the Global South is at least partly due to the absence of an alternative after the collapse of the Soviet Union. The politics of capitalism, with its expansionary dynamics, has assumed a truly “global” avatar by aggressively pursuing a neoliberal globalization agenda. Thus, we see much hype around the numerous trade treaties that governments around the world sign, claiming they would boost economic growth and create jobs. However, a critical examination of mainstream trade theories reveals several insights as to why there has been a hegemony of thought when it comes to attitudes around globalization.
The idea that “free” trade and globalization imply mutual benefits and prosperity for all the parties involved is simply accepted as common sense. Mainstream trade theories argue that if nations engage in international exchange, then all parties will be better off. Although this seemingly innocuous assumption is based on an unrealistic worldview, it has deep implications when translated into practice. This article provides a basic understanding of some of the areas that theories in mainstream international economics conveniently ignore....The Minskys
A vacuum of information is created which, at a moment of intense international interest, is going to be filled with dubious stories from partisan sources.
A truism about U.S. politics and media is that once a foreign leader or a country has been demonized everything written or said about the subject will be skewed to the negative, a rule reflecting Washington’s groupthink and careerism, as ex-CIA analyst Paul R. Pillar notes about Iran.Consortium News
Sessions has the right idea.Promoting weed (cannabis legalization) is a "left-wing plot," you see. Plus, it is "anti-masculine."
When David Vines asked me to contribute to a OXREP (Oxford Review of Economic Policy) issueon “Rebuilding Macroeconomic Theory”, I think what he hoped I would write on how the core macro model needed to change to reflect macro developments since the crisis with a particular eye to modelling the impact of fiscal policy. That would be an interesting paper to write, but I decided fairly quickly that I wanted to say something that I thought was much more important.
In my view the biggest obstacle to the advance of macroeconomics is the hegemony of microfoundations. I wanted at least one of the papers in the collection to question this hegemony. It turned out that I was not alone, and a few papers did the same. I was particularly encouraged when Olivier Blanchard, in blog posts reflecting his thoughts before writing his contribution, was thinking along the same lines.…
Since the outbreak of mass demonstrations and unrest in Iran last week, US media have mostly busied themselves with the question of not if we should “do something,” but what, exactly, that something should be. As usual, it’s simply taken for granted the United States has a divine right to intervene in the affairs of Iran, under the vague blanket of “human rights” and “democracy promotion.” (The rare exception, such as an op-ed by ex-Obama official Philip Gordon—New York Times, 12/30/17—still accepted the premise of regime change: “I, too, want to see the government in Tehran weakened, moderated or even removed.”) With this axiom firmly established in Very Serious foreign policy circles, the next question becomes the nature, degree and scope of the “something” being done.Propaganda pumps and the echo chamber.
Here is a revealing fact from a World Bank study for 2016:
“The Iranian government has implemented a major reform of its subsidy program on key staples such as petroleum products, water, electricity and bread, which has resulted in a moderate improvement in the efficiency of expenditures and economic activities.” In plain English, “efficiency of expenditures” means the Iranian government is cutting down on how much its social welfare programs actually provide social welfare....
In other words, Iran follows an extreme neoliberal, shock-and-awe kind of capitalism [under President Rouhani].Good economic analysis.
"The serious flaw in monetary policy is that it may have little or no effect on the flow of aggregate demand." https://t.co/lVtSqAtghR
— Pedro da Costa (@pdacosta) January 5, 2018
Money and brains are both quantum phenomena – so it's not surprising that economics is overdue for a quantum revolution...Aeon
Just before Christmas, Donald Trump signed the Republican tax bill which many predict will exacerbate wealth inequality in the country. Analyses project it will add over $1 trillion dollars to the deficit.The Christian Century — Practicing Liberation
For all the talk about the national deficit and why it’s the reason our government can’t afford to improve healthcare or education, these developments reveal profound layers of hypocrisy. They show how deficit-talk has constrained political imagination and reduced the economy to a soulless, amoral balance sheet. Earlier this month, I sat down with one of our nation’s leading economists who’s been sounding the alarm on this precise problem.
Stephanie Kelton is a professor at Stony Brook University and a former chief economist for the Senate Budget Committee Democratic staff. If there is such a thing as a prophetic economist, she might just be it. Kelton is not afraid to rattle the status quo. A former adviser to Bernie Sanders (she recalled her trip to the Vatican with him), she is now also providing economic advising to Rev. Barber’s new Poor People’s Campaign.
Kelton’s public intellectual work has drawn attention to how a bipartisan fear of the deficit has distracted politicians from fixing problems in the real economy. Below is an edited transcript of our conversation....
Dude. https://t.co/zY3gRC30UE— Breitbart News (@BreitbartNews) January 4, 2018
Schumpeter’s theory is interesting for several reasons. It was formulated at the same time as Lenin’s and Luxemburg’s and clearly with the knowledge of the two. It reacts to the exactly the same events as theirs. It is different though and it was held by Schumpeter throughout his life. The key text for Schumpeter’s theory is “The sociology of imperialisms” (note the plural) published in 1918-19. It is a very long essay of some tightly printed 80 pages in its English translation. Schumpeter did not change anything (of substance at least) to the theory as can be seen from its brief reappearance in his “Capitalism, socialism and democracy” (CSD), published in 1942 (and republished many times since).Global Inequality
What Schumpeter says is the following....