The Economy can't keep on growing forever

There aren't many economists worthy to carry Milton Friedman's shoes. But since Friedman's not here to defend his thinking, we have to consult others.

From Wikipedia:

"Paul Krugman, Kenneth Rogoff, Lawrence Summers and many other economists have rejected MMT. In the IGM Forum survey on the subject, 97 % of economists opposed and 0 % supported the view "Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt", and 92 % opposed and 0 % supported the view "Countries that borrow in their own currency can finance as much real government spending as they want by creating money." The unanimity was exceptionally rare. The opponents included leading economists like Daron Acemoglu, Bengt Holmström, Alberto Alesina, Angus Deaton, Oliver Hart, William Nordhaus and Emmanuel Saez.[21][22]"

https://en.wikipedia.org/wiki/Chartalism

From the Mises Institute:

https://mises.org/library/upside-down-world-mmt

p.s. What's failing globally is socialism, not capitalism. The more capitalistic a country is, the better it's doing. The more socialistic it is, the worse it's doing.

 

The problem with those quotes is they do not represent MMT.

Taking the 2nd quote first (because I can easily deal with it):

<<"Countries that borrow in their own currency can finance as much real government spending as they want by creating money.">>

That misrepresentation omits the real constraint on government spending which is indeed recognised by MMT, namely, the real (non-financial) resources including labour that are for sale in the currency for which the government is the sole issuer. (Obviously such resources are limited).

So that vote is meaningless.

Now to the 2nd quote:

"Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt",

Having pointed out (above) that government spending is limited by the availability of real resources,
it follows that government borrowing must also be limited

So the 2nd vote is also meaningless.

So Friedman's brilliant grasp of macroeconomic reality has been ignored all these years?

Or in fact it's had its innings and has been found wanting?

In any case, judge a system by it's results; your capitalism versus socialism construct is obsolete and failing; its time for a new system based on sound observation and empiricism.

 

I'll give you your ****ing sound observation and empiricism, right here:



Socialism/Communism to the north, CAPITALISM to the south. Korea after dark, shot from the space station.

 

The problem with those quotes is they do not represent MMT.

Taking the 2nd quote first (because I can easily deal with it):

<<"Countries that borrow in their own currency can finance as much real government spending as they want by creating money.">>

That misrepresentation omits the real constraint on government spending which is indeed recognised by MMT, namely, the real (non-financial) resources including labour that are for sale in the currency for which the government is the sole issuer. (Obviously such resources are limited).

So that vote is meaningless.

Now to the 2nd quote:

"Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt",

Having pointed out (above) that government spending is limited by the availability of real resources,
it follows that government borrowing must also be limited

So the 2nd vote is also meaningless.

So Friedman's brilliant grasp of macroeconomic reality has been ignored all these years?

Or in fact it's had its innings and has been found wanting?

Either way, MMT describes a positive way forward; one that eliminates the wastage of underemployment of human capital and its associated poverty and crime.

"You are living in poverty, your neighbourhoods are like war zones, your schools and hospitals are broken, your young men are in prison..." Donald Trump, during the 2016 campaign.

Might pay to look at your own backyard.
eg, AOC has a plan for a universal jobs guarantee, single-payer health care, eliminate the student debt burden, and infrastructure rebuild, all funded by the Fed, because the resources exist to implement these policies.

 

No they ****ing don't. And if you agree with AOC, you are as retarded as she is.

https://freebeacon.com/issues/study-green-new-deal-would-cost-up-to-94-trillion/

As I see it, MMT fails from the very first because it makes a fundamental economic mistake, and that's equating money (currency) with wealth. Money is not wealth, money is a medium of exchange. Wealth is all the goods and services available in an economy. Money is the medium we use to exchange those goods and services with each other in place of barter. If I give you my labor, I don't ask for a basketfull of groceries, I ask for money, then I take my money and go to the store and give them the money in exchange for a basketfull of groceries. If there's $1 trillion of money in the system and $1 trillion of wealth in the system, we have monetary stability. If the government then prints another $1 trillion of money, but the wealth remains the same, we have inflation and a monetary crash, and a $1 bill will now only buy 50¢ worth of wealth. The government cannot create wealth, it cannot print its way out of insolvency, it cannot make money be worth more than its market value. Period. Anyone who thinks that the government cannot go bankrupt because of fiat currency obviously knows nothing of history, because a great many countries have indeed gone bankrupt. Weimar Germany went bankrupt trying to print money to fund its obligations.

 

You tripped up at the very start. MMT does not equate 'money' with wealth

So far so good, you are beginning to sound like an MMTer.!

NOW.... you have completely contradicted you previous (correct) statement that money is not wealth!

The 'monetary stability' (in your sentence quoted above) implies there is a definite circumstance, and only one such circumstance, in which "$1 trillion of money" is worth "$1 trillion of wealth" (ie all the goods and services available in an economy) .

But the quantity of money (merely a medium of exchange) does not determine an economy's wealth - which is determined by the efficiency and extent of resource utilisation/allocation.

MMT shows that under-employment rates typically c.10%, or crippling student debt, or lack of access to affordable healthcare for millions of citizens etc etc are not necessary in a well functioning economy, one that achieves above poverty participation by all.

If the government issues its own currency in order to utilise spare capacity in the economy (eg under-employed labour, plus idle manufacturing capacity as exist everywhere at present*; there will be no inflationary outcomes of consequence, because there will be no excess demand on scarce resources.

* in the US we see Trump's desire to restart those old coal mines and power stations in a misguided attempt to create jobs; but policy choices are important.

Consider public education itself, one of the most significant sources of wealth creation in an economy.

Given a supply of students, and teachers who were once themselves students, a government does not face any real constraints when it comes to educating its citizens, because the time and mental effort required from the participants are mostly available to government without recourse to private sector 'wealth'.

 

This is so much rubbish. Wealth is the value of all the products and services in an economy. It has absolutely nothing to do with unemployment, student debt, or the lack of healthcare, as if missing something could determine wealth. Liquor stores have a great deal of money invested and can be very efficient, but they are poor money makers. Apple is extremely inefficient in that it produces a great many products that end up not selling, but Apple makes a fortune on those products that do sell. Resource utilization has absolutely nothing to do with wealth.

Again, nonsense. Issuing currency isn't going to do anything about "spare capacity". All it is going to do is make more dollars chase the same number of goods, causing inflation. Milton Friedman's Nobel Prize winning tome is precisely on this subject, A Monetary History of the United States. In it, he debunks the old belief that the Great Depression was caused by capitalism failing, but rather it was caused by the faulty and counterproductive belief that the way to fix the economy was by shrinking the money supply. Democrats typically believe that the way to fix the economy these days is by growing the money supply, but that doesn't work, either. All it does is cause inflation.

I'm sure he's creating jobs, just a question of whether or not better jobs could have been created without his meddling.

That's just nuts. Public education is a net loss to the economy. It doesn't produce a damn dime worth of wealth. Without recourse to private sector wealth? What the hell do you call property taxes? Most of the cost of local government goes to the cost of providing public education. No real constraints? Schools face considerable obstacles in getting taxes raised, because people don't want to pay more than they already are. And before you say anything about increasing school funding, it doesn't help.

https://www.educationnews.org/educa...relationship-between-ed-spending-and-results/

Why? Because teachers, books, classrooms, computers, etc., aren't the determining factors in how well students do, IQ and parental involvement are.

 

Lets see if we can discover the basis of our disagreement.

You began with: "Wealth is the value of all the products and services in an economy."

I agree with this statement, but apparently we need to define "products and services", because for me, education is a significant primary enabler of an economy's "products and services".

But leaving this aside for the moment; earlier you provided a link estimating the cost of AOC's policies - at c.$100 trillion, clearly unaffordable under the prevailing orthodox neoliberal conception of the economy.

But here's the thing: MMT, in contrast, shows that the policies are affordable, if the resources do exist to enable the implementation of those policies.

For example, science tells us we need an area of about 150 miles by 150 miles (c. 22500 square miles) covered by solar panels, plus a smaller area for battery storage, to supply the entire US's current electricity consumption.

Now clearly, if the materials and engineering skills to build this infrastructure do exist, then the government can purchase the said necessary skills and materials, by utilising its status as the currency issuer. Moreover, the government can also compensate (and take ownership of, and retrieve the useful assets of) the now redundant fossil industry by using its status as the currency issuer.

Now the question is: would all this extra economic activity necessarily crowd out or compete with investment in other sectors of the economy, thus leading to inflation?

My contention is it would not, in an economy with underemployment c. 8% and massively under-utilised potential manufacturing capacity.

[eg, how much idle manufacturing capacity exists in Detroit alone?]

In addition, the 2nd part of the transition noted above ie, compensation, would release all those usable assets in the redundant fossil industry (other than the fossil fuels themselves), so any inflationary effects overall would likely be minimal.

But guess what: after this once-off infrastructure build, electricity would now be free in the US! (since the 'fuel' - sunshine - is free).

Now can you understand why MMT confirms that the US, with its government as currency issuer, is indeed much "wealthier" than you are led to believe under the current neoliberal orthodoxy?

Indeed its wealth in limited only by effective use of the nation's available resources?

I will stop at this point so that you can respond (if you wish).

 

This is where you fail. (Everything you said after this is wishful thinking. There's no free energy in your future, you can stop dreaming of it.) The government cannot buy anything using its status as the currency issuer because currency in and of itself is WORTHLESS. Its only value is in the amount of real wealth (products and services) people and companies will give in exchange for it. The more currency that is issued, the fewer products and services people and companies will give in exchange for it. That is inflation. The "underemployed", "under-utilized", whatever, has nothing to do with the supply and demand value of currency. In fact, employment and utilization have their own demand curves that are independent of currency, independent of government, etc. Reduce the price of labor and the demand will go up. Increase the cost of utilizing existing infrastructure and the demand will go down. To the extent government interferes in these costs (minimum wage, regulations, subsidies for "clean energy", etc.), it skews supply and demand, but supply and demand still control.

The only real contributors to wealth are the same ones Adam Smith identified 200+ years ago, mining, manufacturing, and agriculture. If $1 of resources are used and $2 of goods are produced, the economy has grown by $1. Everything else is either a waste of resources (government) or a redistribution of existing wealth (services like law, health care, child care, lawn care, etc.).

 

Feel free to demonstrate where my proposal to engender the required resource allocation is flawed, given underemployment as well as availability of labour made redundant as the fossil industry is closed.

One of the insights of MMT is that a currency has value only because the citizens require it in order to pay taxes, (and btw another insight of MMT is that taxes are not required for the government to spend, but for other purposes, eg, cooling an overheated economy, discouraging certain behaviours eg by levying tobacco taxes, and managing sectoral growth if necessary, etc - but I digress).

If the resources are available for purchase, then the government can purchase them using its currency issuing power.

Still basing present day macroeconomics on Smith?

https://www.tandfonline.com/doi/abs/10.1080/00346769700000001

<<Smith is oddly silent on state assistance to the poor but incisive on the health and moral consequences of urban-industrial development for the lower classes>>.

Your post is merely a statement of neoliberal orthodoxy, based on prices which can be obtained in a market place.

But peoples' lives are more than a market economy. For example, a teacher's assistant may add 'value' to the educational success of a classroom, likewise nurses aides, and obviously assistance for the aged who are still living in their own homes, and so on - all roles you say we 'cannot afford', and yet if under-employment exists, then a currency issuing government obviously can afford to employ such labour.

Not to mention the 'price-less' contributions of certain artists and scientists who laboured of their own freewill without recompense.

Conclusion: the resources are at hand, so let's get on with it so we can increase the wealth of the entire globe via an economy based on free energy.

Not wishful thinking, though certainly difficult (if not impossible) to achieve under the current neoliberal orthodoxy.

 

In general, people get what they deserve. The reason wages are decreasing is that many societies refuse to acknowledge the mathmatics of their political positions. Wages decrease as a result of an oversupply of labor. An oversupply of labor is a result of too much immigration. If you support open borders, you must accept that the result will be more people competing for fewer jobs which skews the supply/demand ratio for labor. Everything obeys the laws of supply and demand, the problem is that the majority of people are too stupid to understand that principal.

 

fake news... corporate greed and overuse of foreign outsourcing and foreign imports are the cause of the problem

and in the next ten years artificial intelligence is gonna make it even worse

 

Agreed, unless people wise up quickly, we are in for some very bad times in the future.

 

As a general principle, can we agree people 'deserve' above poverty-level participation level in the economy?

The MMT heterodoxy recognises there is an almost infinite amount of useful/socially-desirable work to be done in any community, which can be funded by government (using its currency issuing power), hence the "excess supply of labour" is not an issue (although I agree immigration ought be sensibly managed; and anyway most people would prefer to live in the country of their birth if conditions are tolerable/positive in their home country).

Addressed above. A study of MMT's concept of a 'Jobs Guarantee' is worthwhile, re 'supply of labour' issues.

BTW, here is a refutation of Rogoff's (orthodox, Neoliberal-based) criticism of MMT, by Prof. James K. Galbraith:

https://www.project-syndicate.org/c...isunderstanding-by-james-k--galbraith-2019-03

"Kenneth Rogoff's criticism of Modern Monetary Theory assumes that MMT advocates don't care about budget deficits or the independence of the US Federal Reserve. But these assumptions are wide of the mark, and Rogoff himself sometimes undermines his own arguments".

 

People deserve whatever the earn, and nothing more. MMT is fantacy. If you are living in a fantacy world you are in for some painful economic lessons.

 

from James Galbraith. Prof of economics at Austin University:

<< Kenneth Rogoff's criticism of Modern Monetary Theory assumes that MMT advocates don't care about budget deficits or the independence of the US Federal Reserve. But these assumptions are wide of the mark, and Rogoff himself sometimes undermines his own arguments".>>

...obviously a mere 'fantacy'....

 

Friedman got his Bachelor's degree from Rutgers and a Masters or "equivalent" study from the University of Chicago. He never pursued a PhD.

I know a guy who got his Bachelors in Economics from Harvard, his Masters in economics from Princeton, and his PhD in economics from Yale, and he says Friedman is full of horse pucky ("horseshit").

 

Let me know when your "guy" gets a Nobel Prize in Economics.

 

Ten years? AI will be exponentially more disruptive to labor markets in 20 years than in ten, and exponentially more disruptive in 30 years than in 20. Etc. At some point we reach the Singularity, beyond which the very concept of a labor market is nonsensical. There is no way out of this but to restore people's liberty rights, which privilege removed, so they have a right to access the economic opportunity AI will create..

 

I agree. We're not going to see any huge disruption within the next 10 years. 20 years might be more of a plausible possibility.

I think most of the job losses that have been seen so far have more to do with reduced consumer spending power and foreign outsourcing than it does with actual automation technology.
There are actually more jobs now than there were 15 years ago (because there are more people), it's just that all that job growth has been lower level jobs.

 

Still, the concerns of AOC and Bernie Sanders can be, and need to be, addressed much sooner.

Here is a link re the latest book from "the godmother of the public banking movement", Ellen Brown, which seems to incorporate a MMT understanding of money creation.

https://ellenbrown.com/2019/05/25/n...eople-democratizing-money-in-the-digital-age/

<<"As our democracy hangs in the balance, I hope this book allows many more people to understand why having control over the money supply is central to the idea of democracy, and what we can do to wrest that control from big private banks and put it squarely in the hands of the people.">>

and

From the back cover:

<<"Today most of our money is created, not by governments, but by banks when they make loans*. This book takes the reader step by step through the sausage factory of modern money creation, explores improvements made possible by advances in digital technology, and proposes upgrades that could transform our outmoded nineteenth century system into one that is democratic, sustainable, and serves the needs of the twenty-first century">>.

*even though government is the sole issuer of the currency, as recognised by MMT.

and a critique:

<<"Banking on the People is a compelling and fast-moving primer on the new monetary revolution by the godmother of the public banking movement now emerging throughout the country. Brown shows how our new understanding of money and its creation, long concealed by bankers and others capturing the benefits for their own purposes, can be turned to support the public in powerful new ways.">>

— Gar Alperovitz, professor emeritus at the University of Maryland, Co-Founder of The Democracy Collaborative and author of America Beyond Capitalism and other books

 

True...........
people could decide to calm down..... spend less....... live more humbly.... and emphasize what really matters more than a larger house, car or yacht!

 

You don't understand. Capitalism requires continuing growth. It needs about 2.5% to 3% or more per year. The buying and spending habits of the population is immaterial. (As it is, 40% of the population say they could not afford a $400 emergency. So they aren't buying new homes, cars, and yachts.)

To see why such growth is not sustainable, if you know how to use a spreadsheet just start with one dollar and show it's compounded growth over a couple of hundred "years". Then tell the spreadsheet to put it in a graph. You'll see that in the last years the graph goes nearly straight up.

 

Which brings us to the option of some variation of:

The Tate Plan for a Basic Minimum Income for all Canadians.

Which could be a step toward something rather like:

https://www.near-death.com/experiences/exceptional/howard-storm.html#a04

 

Yes, and MMT, unlike orthodox Neoliberalism, describes how a monetary system can ensure universal above poverty participation in an economy, whether in an environment of increasing or decreasing population. [Obviously population cannot increase indefinitely (if humans are restricted to this planet)].