Bill Mitchell — Bottom up reform in the EMU requires the abandonment of the Treaties

Regular readers will know that I have written a lot about the topic of European integration. My 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – was a detailed study of the evolution of the Economic and Monetary Union (EMU) from the origins of the ‘European Project’, as peace came in the late 1940s. I have argued that the creation of the EMU, after several failed attempts in the 1960s and 1970s, was only possible because of the emergence of Monetarism in the academy and its related socio-political manifestations which we call, generally, neoliberalism or market liberalism. If France had not succumbed to the neoliberal myths and believed it could dominate the currency union with a ‘franc fort’ then its traditional rivalry with Germany would have continued to prevent the adoption of the common currency. What I have been arguing since the ECB introduced the Securities Market Program (in May 2010) is that despite the success by the EMU architects (Delors and his gang) in embedding neoliberal principles into the legal structure of the European Union and its institutions the reality has overtaken them and a dysfunctional dystopia is only maintained by the ECB and other institutions defying the ‘rules’ established. We are now starting to see other researchers take up that angle, which is progress....

Bill Mitchell – billy blog
Bottom up reform in the EMU requires the abandonment of the Treaties
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
http://bilbo.economicoutlook.net/blog/?p=48980

Fed moonwalk

 

Fed maybe already walking back the “hawkish” (to them) tone of their December minutes release with this new WSJ leak late yesterday here:

Heard on the Street: Stocks sold off Wednesday on somewhat hawkish Fed minutes from a December meeting when the Covid-19 variant was less of a factor https://t.co/7hcj3mYQBH

— WSJ Markets (@WSJmarkets) January 5, 2022

Stresses that the current state of the CCP virus pandemic has worsened considerably since the mid December meeting… which they have been consistently wary about in their comms…

More Fed hijinks

 

Not unfair from Liesman here:

I can't let the historic absurdity of current monetary policy pass w/out remark: the fed is talking about aggressively reducing its balance sheet while at the same time adding assets to that balance sheet. I think that's the monetary policy equivalent of a dog chasing its tail.

— Steve Liesman (@steveliesman) January 5, 2022

This reminds me of the Fed REDUCING system reserve balances back in 2019 by 50b per month then all of a sudden out if left field just came out one day and said they stopped that…. So here they are today adding 100b per month (they were just in the Tsy market on Tuesday BUYING) then all of sudden they are talking about reversing that?…. In 2019 they were ready to under run their own 10% system RRR requirement and destroy the FF market and (unsuccessfully)  tried to stop that…. 

What is the problem now?

Maybe they think RRP will fail if they raise rates without reducing system reserve balances first?

Everyone will just take their USD savings and go into higher yielding short term USTs instead of RRP at the Fed?

$1.5T of Reserve Assets get instantaneously transferred into Depositories and creates another September 2008 and March 2020 style crash of the whole thing?

SCARY!!!!

Bill Mitchell — Australia is becoming an Orwellian dystopia

Nineteen Eighty-Four – was one of those essential reading books as one ventured into adult life.

It is starting to feel like that in modern Australia.….

Bill Mitchell – billy blog
Australia is becoming an Orwellian dystopia
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

http://bilbo.economicoutlook.net/blog/?p=48950

How Oil & Gas Companies Can Profitably Create Carbon-Negative Energy | OilPrice.com

A major opportunity has emerged to generate reliable power while capturing and sequestering carbon dioxide (CO2) from the atmosphere and can be implemented on a global scale. This is now possible due to advances in four key technology areas that can be combined into one larger system. Fossil fuel power generation with carbon capture, direct air capture (DAC), energy storage, and renewable energy can be combined to provide reliable power to the electrical grid and generate substantial negative carbon emissions at the same time. In addition to scaling up renewable energy, this will help the oil and gas sector transition to and participate in a low-carbon economy. If implemented around the world, this approach could reduce carbon emissions by billions of tonnes per year, while creating major economic opportunities....

Oilprice
How Oil & Gas Companies Can Profitably Create Carbon-Negative Energy | OilPrice.com

Paul Stevers, Canadian engineer and inventor, and cleantech and social entrepreneur

China’s Excellent, Very Good Year: 2021 was China’s best year. Ever — Godfree Roberts

 Some impressive numbers in this summary of Godfree Roberts' China newsletter.

The Vineyard of the Saker
China’s Excellent, Very Good Year: 2021 was China’s best year. Ever.
Godfree Roberts

Fed considering reduction of USD system reserve balance

 

WSJ people were out reporting this yesterday…  how could inflationista morons complain about this?  “UNprinting money!”….  “Quantitative Tightening!”….

Maybe they just leave the policy rate alone for now and reduce USD system reserve balance to try to preserve any technical credibility… QTM/monetarist abstraction reification morons should applaud this… “less money!”…

Fed governor Christopher Waller, who last month described inflation as “alarmingly high,” said shrinking the asset portfolio faster would offer a way to tighten policy without requiring even more aggressive interest-rate increases. “I don’t see any reason to delay,” he added.

 

✉️ Newsletter: Fed Officials Consider Reducing Asset Portfolio as Tightening Tool https://t.co/QHEcHqrOY6

— WSJ Central Banks (@WSJCentralBanks) January 4, 2022

Optimistic look ahead to 2020

:p

“There’s a lot of reason to be hopeful in 2020” -Joe Biden pic.twitter.com/WErntD6Ss1

— Daily Wire (@realDailyWire) January 4, 2022

Australia's Magical Balance of Payments — Philip Pilkington

Everything you wanted to know about Australia's external position.

Macrocosm
Australia's Magical Balance of Payments
Philip Pilkington

https://macrocosm.substack.com/p/australias-magical-balance-of-payments

Sputnik — UK, US Media Fear Russia May ‘Outsmart’ EU With New Gas Mega Pipeline to China

What happens when you don't think things through and ask, what could go wrong? What is wrong with these people? What did they think was going to happen.

Sputnik International

You Snooze, You Lose: UK, US Media Fear Russia May ‘Outsmart’ EU With New Gas Mega Pipeline to China

https://sputniknews.com/20220104/you-snooze-you-lose-uk-us-media-fear-russia-may-outsmart-eu-with-new-gas-mega-pipeline-to-china-1092014841.html

See also

TASS
Ukraine may have to siphon off Russian gas from transit pipelines - former Naftogaz chief

https://tass.com/economy/1383745

RT
‘Artificial Sun’ hits record temperature

https://www.rt.com/news/545120-china-sun-nuclear-energy

Counterpunch
Another Nuclear Fusion Folly: Billions Already Spent on ‘Energy Pipedream’
David Blackburn, chair of the Nuclear Free Local Authorities Steering Committee

https://www.counterpunch.org/2022/01/04/another-nuclear-fusion-folly-billions-already-spent-on-energy-pipedream/

Oilprice
China Slashes Fuel Export Quotas By 56%
Tsvetana Paraskova
https://oilprice.com/Latest-Energy-News/World-News/China-Slashes-Fuel-Export-Quotas-By-56.html

Coal Price Set To Surge As Major Producer Indonesia Bans Exports

Irina Slav

https://oilprice.com/Energy/Coal/Coal-Price-Set-To-Surge-As-Major-Producer-Indonesia-Bans-Exports.html

Al Jazeera
US becomes world’s top LNG exporter for first time ever

Stephen Stapczynski and Sergio Chapa, Bloomberg

https://www.aljazeera.com/economy/2022/1/4/us-becomes-worlds-top-lng-exporter-for-first-time-ever

Brazil Stocks Sink 12% in Year

 

Interest rate increases….

Brazil Stocks Sink 12% in Year for First Annual Drop Since 2015#politics #brazil #BrazilianPolitics #economy https://t.co/FH6iDjidYU by @andradevini3 via @Bloomberg

— All The Brazilian Politics (@AllBrPolitics) December 31, 2021

Schumpeter’s two theories of imperialism — Branko Milanovic

Imperialism as atavistic and imperialism as "normal capitalism"

Global Inequality
Schumpeter’s two theories of imperialism
Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Stone Center on Socio-economic Inequality, senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace
https://branko2f7.substack.com/p/schumpeters-two-theories-of-imperialism

Bill Mitchell —The Japanese denial story – Part 2

Here is Part 2 of my analysis of the claim that Japan is not a good demonstration of what happens when macroeconomic policies are pushed beyond their usual limits. I have long argued that trying to apply a mainstream macroeconomics (New Keynesian) framework to the Japanese situation yields nonsensical predictions about rising interest rates, accelerating inflation, rising bond yields and government insolvency. Nothing like that scenario has emerged since Japan has introduced economic policies that ran counter to the mainstream consensus since the 1990s. Japan demonstrates key Modern Monetary Theory (MMT) principles and those that seek to deny that are really forced to invent a parallel-universe version of MMT to make their case. That version is meaningless. In Part 2, we extend that analysis to consider trade transactions, the fear of inflation, and the argument that the current generation are selfishly leaving their children higher tax burdens while we party on....

Bill Mitchell – billy blog
The Japanese denial story – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

http://bilbo.economicoutlook.net/blog/?p=48956

Why does the West think China wants global hegemony? — David P. Goldman

Projection.

China do not seek world hegemony since the Chinese are aware that their civilization is not exportable. It is uniquely Chinese.

In a sense, China’s strategic use of infrastructure, physical as well as digital, bespeaks a certain continuity from the Qin era. Massive investment in flood control, river transport and irrigation created China, and the export of Chinese infrastructure well may hard-wire a great deal of the world into China’s economy.

But China is indifferent to how we barbarians govern ourselves. Elsewhere Professor Wen has compared the character of the Chinese, a settled people for thousands of years, to that of Westerners, who (as he put it) only recently walked out of the jungle.…

Asia Times
Why does the West think China wants global hegemony?

David P. Goldman

 

Should some countries cease to exist? Globalization, migration & the fate of nations — Branko Milanovic

Convergence economics.

Global Inequality
Should some countries cease to exist? Globalization, migration & the fate of nations
Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Stone Center on Socio-economic Inequality, senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace
Branko Milanovic

https://branko2f7.substack.com/p/should-some-countries-cease-to-exist

Democracy? Surely Not! — Peter Radford

Let’s stir things up for the New Year by continuing with one of my recent themes. A quote from an opinion piece in the NYT this morning [January 3rd]: “James Madison boasted that the Constitution achieved “the total exclusion of the people, in their collective capacity....

This post shows what MMT is up against as an institutionalist macroeconomic theory that is embedded in political economy, that is, the approach to economics as a policy science. As a policy science, MMT assumes a democratic use of government finance as a public good. The purpose of MMT as a policy science is to show the capacity and limits of economic policy beginning with legal institutions that are the outcome of governance. 

Since most practical discussions of MMT are in the context of Western nations this implies representative government that is billed as "democracy." Peter Radford argues that not only is it not democracy in the US and that this is so by design, as those responsible for the system of governance were well aware when they designed it.

Note, however, that Peter Radford is wrong in about debt monetization if he means monetary operations. Monetary operations do not affect fiscal, as "debt monetization" assumes. Monetary operations simply exchange securities and reserves without affecting the amount of non-government net financial assets in aggregate. That is, they do not have a fiscal effect. 

Monetary operations simply affect the amount of reserve balances for interbank settlement and influence the interest rate when the central bank is not setting the overnight rate ("the interest rate") by paying interest on excess reserves in the settlement system. There is a huge amount of confusion about this and those that understand MMT seem to be the only ones that get it right. 

Bank reserves are for settlement purposes and they are neither spent or lent into the economy the way many people erroneously think. Their effect on interest rates and bank lending is not as most people think either, including central bankers still under the influence of monetarism. 

In fact, from the MMT pov, central bank policy and operations often has an effect opposite to that which was intended, e.g, raising interest rates in response to inflationary pressure is a price rise that increases inflation unless the rate is jacked up so much that it stifles borrowing, contracting the economy, increasing unemployment and potentially leading to recession. Fine-tuning? Not.

While central bank independence is anti-democratic to be sure, it assumes that the central bank is in a position to command the economy, which is a wrong assumption of monetarism. The problem is with the institutional arrangements being anti-democratic. 

Moreover, monetary policy based on NAIRU, which assumes a natural rate of interest and a natural rate of unemployment, is also anti-democratic in that it seeks to reduce full employment to limit labor bargaining power, which is assumed to drive up wages and therefore prices. MMT economists have dealt with such issues in detail.

The Radford Free Press
Democracy? Surely Not!
Peter Radford
http://www.radfordfreepress.com/?p=3352

Joseph Schumpeter and the Economics of Imperialism — John E. King

The Austrian economist Joseph Schumpeter believed that the triumph of socialism was inevitable, but he rejected the Marxist view of how capitalism works. His ideas are a stimulating challenge for those seeking an alternative to capitalism today....

Schumpeter was Austrian by birth and associated with members of what became the Austrian School as a student of Eugen von Böhm-Bawerk at the University of Vienna, but he did not identify himself with any school of economics and considered himself independent. Incidentally, Hyman Minsky was a student of Schumpeter and Randy Wray was a student of Minsky, so there is a link between the development of MMT and Schumpeter.

Jacobin
Joseph Schumpeter and the Economics of Imperialism

John E. King | professor emeritus at La Trobe University, Australia
https://jacobinmag.com/2022/01/joseph-schumpeter-economics-imperialism-marxism

For background on imperialism as policy, see also

It's short and a quick read. This is important to be aware of in light of the condition of the world system at this moment of the historical dialectic that is now unfolding precariously. Economics plays a key role in it, but economics alone does not provide a comprehensive account of imperialism as a historical phenomenon.

Theories of Imperialism
Vincent Ferraro | Ruth C. Lawson Professor of International Politics, Mount Holyoke College

https://www.mtholyoke.edu/acad/intrel/pol116/imperial.htm

Modern Monetary Theory: Economics for the 21st Century - free course

New course coming up Feb 8-Mar 8. Free registration.

Modern Monetary Theory: Economics for the 21st Century

Demystify macroeconomic principles and terminology and discover how Modern Monetary Theory (MMT) provides explanations for some of the world's most troubling financial concerns.

https://www.edx.org/course/modern-monetary-theory-economics-for-the-21st-century

China and Russia team up to establish joint moon base — Gabriel Honrada

Russia-China technology-sharing. The West's worst nightmare.

Asia Times
China and Russia team up to establish joint moon base
Gabriel Honrada

https://asiatimes.com/2022/01/china-and-russia-team-up-to-establish-joint-moon-base/

Bill Mitchell — The Japanese denial story – Part 1

Well, its 2022 already and we enter the 18th year of this blog. Regular readers will know that I have studied the Japanese economy in considerable detail over the course of my career and when it experienced one of the largest commercial asset price bubble busts in history in early 1992, the questions I was asking and the data I was looking out were important in framing the way I have done macroeconomics since. I consider Japan to be one of the nations that was early to embrace the madness of neoliberalism – credit binge, wild property speculation then crash – and the first nation to abandon it in favour of more responsible fiscal policy – which given the circumstances required on-going fiscal deficits exceeding 10 per cent of GDP at times. Its policy approach – including the relatively high deficits, the zero interest rate policy of the Bank of Japan, and then the massive bond-buying program by the same, became the target for various New Keynesian macroeconomists (including Krugman) to prophesise doom. Their textbook models predicted the worst – rising interest rates, accelerating inflation, rising bond yields and then government insolvency as bond markets bailed out and the currency plummetted. Nothing like that scenario emerged. Japan was playing out policies that ran counter to the mainstream consensus in the 1990s and beyond and I learned so much from understanding why things happened there as a consequence. This is Part 1 of a two-part discussion about why Japan demonstrates key MMT principles and how those who wish to deny that reality have to invent a parallel-universe version of MMT to make their case.…

Bill Mitchell – billy blog
The Japanese denial story – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

http://bilbo.economicoutlook.net/blog/?p=48952

NASCAR walks back LGBcoin sponsorship approval

Hmmm… let’s see how this works out for NASCAR now… Trump thing still not operational....

NASCAR walks back 'Let's Go Brandon' sponsorship approval, Brandon Brown spokesperson says https://t.co/d0eRi05EJN #FoxBusiness

— Son of Liberty (@flyby2474) January 3, 2022

Joe Rogan already has 8 million followers on GETTR

 

Let’s see how high this follower count goes….

Joe Rogan already has 8 million followers on GETTR.

— Matthew Kolken (@mkolken) January 2, 2022

NFL star goes uncensored

 

Rumble promoting the “uncensored” aspect of  Rodger’s analysis of the current NFL covid policy…

Eviction ban rollback didn't result in 'vast wave' of filings, says Larry Summers

 

Fox Business editorially congruent with Larry Summers view on government policy of throwing people out of their housing during unprecedented COVID chaos…

And Summers has Biden’s ear on administration economic policy…

Prediction 2022: The left is going to have to increasingly go over to the Trump+ thing to get their views published…

Eviction ban rollback didn't result in 'vast wave' of filings, says Larry Summers https://t.co/aNC22BQMno

— FOX Business (@FoxBusiness) January 1, 2022

Zero Hedge — "Journalism Is Not Sedition"

 After Assaange, Snowden, Manning and others, the US has zero moral authority or credibility to lecture anyone about press freedom. It's farcical. America should walk its talk.

Zero Hedge
"Journalism Is Not Sedition": US & Taiwan Blast China's Crackdown On Hong Kong Free Media
Tyler Durden

Vladimir Putin and Joseph Biden: Telephone conversation, December 30, 2021 — The Saker

The Russian and American (very different) official statements.

The Vineyard of the Saker
Vladimir Putin and Joseph Biden: Telephone conversation, December 30, 2021
The Saker

http://thesaker.is/telephone-conversations-with-us-president-joseph-biden/

A Free Market is Always Full of Cheap Ideas — Sandwichman

Econospeak

A Free Market is Always Full of Cheap Ideas

Sandwichman

http://econospeak.blogspot.com/2021/12/a-free-market-is-always-full-of-cheap.html

Mental Models for What Government Does With Our Money | Mind Matters — Jonathan Bartlett

Nice try from the angle of mental models, but totally wrong about the MMT mental model. No indication that the author has read Stephanie Kelton's The Deficit Myth, aand if he did, he missed the point — it's about availability of real resources and the rest is accounting. The accounting, or failure to understand it, can obscure where currency comes from (issuance, which he realizes), how it is produced and distributed through the central bank, and how fiscal operations including taxation and securities issuance operate. 

While Jonathan Bartlett does not go into it, there is a also huge amount of confusion over the monetary and fiscal aspects of government finance. Many if not most financial professionals misunderstand this.

 Where Bartlett is correct is in viewing the popular MMT mental models as somewhat simplistic for pedagogical purposes. And as he points out, even the hard sciences do this since many don't have the background to understand the sophistication of the actual models. It would be a distraction for beginning students and the general public. So the models are dumbed down. 

But criticizing a dumbed down model when the professional literature clarifies it is attacking a straw man. Of course, it is fair game to criticize the dumbed-down model as a teaching tool, especially when something more suitable is available. This improves teaching.

The important matter regarding the article lies in taking the angle of mental models. Most people outside the sciences do not understand this concept, let alone how conceptual models work. This is a huge gap in critical thinking that leads to many false ideas. This is clear regarding MMT judging from much of the criticism. Most popular criticism of MMT takes a popular model of MMT to be "MMT," when the professional literature shows otherwise. 

Mind Matters
Mental Models for What Government Does With Our Money | Mind Matters
Jonathan Bartlett | Senior Fellow, Walter Bradley Center For Natural & Artificial Intelligence
https://mindmatters.ai/2021/12/mental-models-for-what-government-does-with-our-money/

Links — 29 Dec 2021

Consortium News
PATRICK LAWRENCE: Putin Speaks

https://consortiumnews.com/2021/12/28/patrick-lawrence-putin-speaks/

TASS
First S-550 air defense systems enter service in Russia — [anonymous] source

https://tass.com/defense/1382133

Reminiscence of the Future
OK, This Is An Official WOW!!
Andrei Martyanov, former USSR naval officer and expert on Russian military and naval issues.

http://smoothiex12.blogspot.com/2021/12/ok-this-is-official-wow.html

War On The Rocks
STRATEGIC AMBIGUITY AND THE RISK OF WAR WITH RUSSIA OVER UKRAINE
RALPH CLEM AND RAY FINCH

https://warontherocks.com/2021/12/strategic-ambiguity-and-the-risk-of-war-with-russia-over-ukraine/

Sputnik International (Duh)

Russia Conducts Tests of S-500 Anti-Missile Defence Systems in Arctic Region, Source Says

https://sputniknews.com/20211229/russia-conducts-tests-of-s-500-anti-missile-defense-systems-in-arctic-region-source-says-1091889174.html

Ex-UN Expert: Stop Lying, Pentagon's War Budget Has Nothing to Do With US 'Defence'
https://sputniknews.com/20211229/ex-un-expert-stop-lying-pentagons-war-budget-has-nothing-to-do-with-us-defence-1091892229.html

CaitlinJohnstone.com
Refusing To Oppose US Tyranny Is Siding With It: Notes From The Edge Of The Narrative Matrix
Caitlin Johnstone

https://caitlinjohnstone.com/2021/12/29/refusing-to-oppose-us-tyranny-is-siding-with-it-notes-from-the-edge-of-the-narrative-matrix/

The Cradle

Putin and Xi plot their SWIFT escape

Pepe Escobar

https://thecradle.co/Article/columns/4857

First-Ever Fully-Autonomous Semi-Truck With No-Human On Board Traverses Arizona Highway — Tyler Durden

More potential leisure.

Zero Hedge
First-Ever Fully-Autonomous Semi-Truck With No-Human On Board Traverses Arizona Highway
Tyler Durden