MMT: overcoming the political divide.

Discussion in 'Economics & Trade' started by a better world, Mar 12, 2020.

  1. kazenatsu

    kazenatsu Well-Known Member Donor

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    You realize that the original version of Keynesianism entailed saving money for a rainy day. Something the Left doesn't seem to be too interested in.
    Today it's pretty much just turned into an excuse for spending money we do not have.
     
    Last edited: Mar 23, 2020
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  2. Reiver

    Reiver Well-Known Member

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    You realise that you're not saying anything but attacking right wing austerity stupidity.
     
  3. kazenatsu

    kazenatsu Well-Known Member Donor

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    Reiver, do you support the version of Keynesianism that supports saving money now to spend later when it is needed?

    Or is your version of Keynesianism only focused on spending money?
     
    Last edited: Mar 23, 2020
  4. Reiver

    Reiver Well-Known Member

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    What on earth are you rambling on about? Keynes referred to how austerity should only be used in particular circumstances (i.e. active fiscal policy isn't needed when the economy is booming). If I was asking a coherent question 'what type of Keynesian analysis do you believe is relevant in understanding the economy?' I'd respond with Post-Keynesianism. The understanding of how Keynes, and Marxist analysis, can be used to understand capitalism's tendency towards crisis is relevant stuff. It also derives a much more coherent understanding of pricing policy, in contrast to the neoclassical make-believe world of marginal cost pricing.
     
  5. kazenatsu

    kazenatsu Well-Known Member Donor

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    This sounds like it has nothing necessarily to do with monetary theory.
     
  6. Lil Mike

    Lil Mike Well-Known Member

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    You are still yammering about monetarism, which is not the subject of this thread, and never was. Totally bizarre.
     
  7. kazenatsu

    kazenatsu Well-Known Member Donor

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    Keynes wanted austerity measures to be used during the good times.

    Especially when the economy was overheating and leading up towards a bubble.
     
    Last edited: Mar 23, 2020
  8. a better world

    a better world Well-Known Member

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    An excuse today? You mean literally now?

    So as the economy is forced to contract, to ensure production and distribution of the bare necessities, requiring about a quarter of the workforce, you still are talking about "money we don't have"....

    God help us. You would sit back and acquiesce in mass starvation before you see it's not about money....

    Evasion, at best. ("sounds" and "nothing necessarily"). How about saying why?

    Then you might discover why money is created ex nihilo.
     
  9. kazenatsu

    kazenatsu Well-Known Member Donor

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    I'm okay with you spending money. You just have to take it from somewhere else.

    Great, what is your plan??
    Could you describe a plan to us without talking about money?

    Are you going to "put people to work"?
    What are they going to be doing?
    Are you going to reopen businesses during the pandemic?
     
    Last edited: Mar 23, 2020
  10. a better world

    a better world Well-Known Member

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    That statement says:

    "you (Ie yourself) are OK with the government spending money. The government just has to take it from somewhere else".

    That statement is wrong, wrong, wrong.

    "The Chairman of the Federal Reserve Bank is telling us in plain English that they give out money (spend and lend) simply by changing numbers in bank accounts. There is no such thing as having to “get” taxes (or borrow) to make a spreadsheet entry that we call “government spending.” Computer data doesn’t come from anywhere. Everyone knows that!

    (It's likely you will have some spare time on your hands for a while; so you could actually read the OP.…]

    For the period of the pandemic, the government can (via its consolidated treasury and central bank) simply credit your bank account via its computer, for as long as is required for you to be able to buy the basics while you are confined to your home (except to go to the food/pharmacy store).

    Yes, a totally planned economy, where bureaucrats have all the necessary information on all the citizens. Production and distribution would then be supervised by bureaucrats, without recourse to money.

    Negative. Only essential industry will be maintained, to minimize contact between people.

    The rest of the polulation wil have to learn to deal with being isolated with their family in their own homes.

    [....I can understand why Trump, being concerned with the damage to businesses, is already talking about the cure being worse than the disease; the next couple of weeks will be very interesting..…]
     
    Last edited: Mar 23, 2020
  11. Reiver

    Reiver Well-Known Member

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    You're repeating what I said. Keynes only saw a role for austerity during threat of fiscal overheating. Why bring that up? Naff all relevance to MMT or current economic conditions.

    The only time its mentioned is when you get right wingers trying to abuse the Keynesian perspective. As mentioned, the approach is much more radical than these folk reckon (as shown by how cost plus pricing can lend a blowtorch to the laws of supply and demand). So when folk accept monetarism, despite it ironically resulting from an orthodox corruption of Keynesianism; and then reject MMT as nonsensical, we actually see the vacuum in their economic understanding.
     
  12. Lil Mike

    Lil Mike Well-Known Member

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    Irony!


    :roflol:
     
  13. Reiver

    Reiver Well-Known Member

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    Please stop trolling. Cheers!
     
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  14. kazenatsu

    kazenatsu Well-Known Member Donor

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    Let's take money out of the equation for a moment. How are you going to create wealth?

    But that's not going to add wealth to the economy, is it?
     
    Last edited: Mar 24, 2020
  15. a better world

    a better world Well-Known Member

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    [My goal is to get you to see that 'wealth' is real physical, material and intellectual experience, NOT money which is numbers in a computer, especially as we move to a cashless society!].

    Wealth = resources + knowhow + labour.

    (Wealth being the consequence of productivity in the public AND private sectors).

    No money in that identity at all.

    Looking at my above identity, let's consider the present situation.

    1. Wealth, (at this time, when citizens are not permitted to physically closely associate with one-another), equals food plus basic hygiene products plus internet plus accommodation plus the associated production and distribution industries needed to maintain such....plus the physical/mind experiences available to each of us.

    In fact, even if the nation's GDP falls by a half during the course of this pandemic, true wealth need not contract at all....especially if permitted R&D at tertiary institutions is increased, which might even result in an increase in wealth (in the form of a technological breakthrough etc)

    2. In normal times, a nation can have all hands on deck contributing to the nation's wealth - which includes maintaining quality of the social and environmental fabric.

    Wealth = reources + knowhow + labour.
    ……...

    So don't be confused by orthodox neo-Keynesian economists like Krugman (who are grappling with a heterodox, ascendant MMT)
    who tweeted this garbage today: (my comments are interspersed):

    Kugman:
    1. "I've been getting many questions about whether we can pay for stimulus by minting a trillion-dollar platinum coin (remember that?) Yes, we could, but there's no point".

    [He's wrong there, we can do it, he is lost in his false monetarist/ neoliberal/neo-Keynesian school].

    2. "What was the trillion-dollar coin about? It wasn't about paying for government without borrowing; it was about paying for government without APPEARING to borrow, so as to bypass GOP blackmail over the debt ceiling".

    [Wrong. It WAS about paying for government without borrowing, so long as the necessary resources are available.]

    3. "By minting a coin with a nominal value of $1 trillion and depositing it at the Fed, Treasury could acquire a Fed account that it could draw on to pay expenses. But the Fed wouldn't actually print more money than it would have otherwise".

    [ ??]

    4. "Instead, as Treasury drew down its account, the Fed would (other things equal) offset the monetary impact by selling off some of the bonds it owns. Since interest on Fed assets is rebated to the Treasury, this would for all practical purposes be federal borrowing".

    [the Fed doesn't need to own bonds, they are just corporate welfare.
    So his following point is irrelevent].

    5. "But it wouldn't raise the official size of federal debt, so it wouldn't run up against the debt ceiling. In other words, it would just be an accounting gimmick — and it wouldn't even fool anyone. It would just allow Treasury to bypass GOP blackmail".

    [Well...yes, but everything Krugman is saying after #4 is erroneous anyway.]

    6. "And the key points, of course, are that (a) the US government can borrow as much as it likes, incredibly cheaply (b) Republicans only pretend to care about debt when there's a Dem in the White House. So the whole coin thing is irrelevant for now".

    [Well yes; but it's you - Krugman - who are irrelevant; the US government, unlike you and me, does NOT need to borrow.....so long as the required resources are available].
     
    Last edited: Mar 24, 2020
  16. kazenatsu

    kazenatsu Well-Known Member Donor

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    Good, now how is handing out money going to increase those things?
     
  17. kazenatsu

    kazenatsu Well-Known Member Donor

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    You're not making any sense to me.

    It seems you're saying, print out some new money to give to people so they can buy the things they are allowed to buy during this pandemic, which some people can't afford.
     
    Last edited: Mar 25, 2020
  18. a better world

    a better world Well-Known Member

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    That's exactly what I am saying. Why is that so hard to get your head around?

    You don't seem to be aware that many people live pay-packet to pay-packet, in the low wage, insecure gig economy which has been destroyed overnight by the pandemic.

    And besides that, 60% of the population can't find $1000 from savings in an emergency:

    https://www.cnbc.com/2019/01/23/most-americans-dont-have-the-savings-to-cover-a-1000-emergency.html

    A $1,000 emergency would push many Americans into debt
    Published Wed, Jan 23 20199:41 AM ESTUpdated Wed, Jan 23 201910:23 AM EST

    Annie Nova@AnnieReporter

    Key Points
    • Most people would be in a bind if they missed even one paycheck.
    • Just 40 percent of Americans could pay an unexpected $1,000 expense, such as an emergency room visit or car repair, with their savings, according to a survey from Bankrate.
    Understand?


    So in this pandemic, those not permitted to work, and hence unable to pay their bills/costs, will need to be supported by the government, in order to be able to buy the things that the producers of the essentials are producing....otherwise the producers would also go out of business as well (though this group might be able to feed themselves without an income).
     
    Last edited: Mar 25, 2020
  19. Reiver

    Reiver Well-Known Member

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    I struggle not to agree with you over Krugman. To the right wing he is seen as a dangerous type; a reaction reflecting how any knowledge of economics is threatening to them. However, he demonstrated his orthodoxy with his part in 'new trade theory'. With comparative advantage struggling to understand trade patterns, the new theoretical approaches had the opportunity to tear up orthodoxy (which subsequently was used to enforce the extraordinarily damaging Washington Consensus on the developing world). Krugman's contribution largely involved ensuring consistency between inter and intra trade analysis. It was essentially celebration of business as normal.

    QE is the interesting poster child in this debate As the orthodox celebrate it as genius and embed it within the same neo-Keynesian/monetarist fake perspective, any reference to People's QE is instantly derided. The cliches soon arrive, from 'there ain't no money tree' to 'you cant fight against the MV=PT identity'. They are establishment types who repeat the same inconsistency with Keynesianism. Reaganomics received right wing praise, for example, despite it being a particularly wasteful form of Military Keynesianism. While standard fiscal policy is derided as ineffective, this inefficient form does not threaten the reproduction of capitalist profit. Feeding instead the military industrial complex, it doesn't empower the workers and the wage-productivity gap remains unchallenged.

    While I think MMT's potential is innately exaggerated, it does serve a supplementary advantage of weeding out the orthodox. I praise that!
     
  20. a better world

    a better world Well-Known Member

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    Good news: the senate has passed a $2 trillion rescue package.

    Note: this is NOT a Keynesian stimulus measure, it is a rescue package designed to keep alive an economy that has been forced into 'hibernation' by the corona-virus pandemic.

    (Though Trump doesn't seem to understand.....he wants everyone to go back to work in 3 weeks time....and doctors are horrified).

    Hopefully the public will wake up to the fact that neither the government, nor the citizens, need "pay for" the package.

    The citizens are already paying a high price in terms of loss of ability to engage in wage-earning activity.
     
  21. a better world

    a better world Well-Known Member

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    Good post. Thanks.

    My own view is simple: the starting point in any decent, functional modern economy ought to be real full employment ie, everyone who wants work has - at a minimum - a 38hr/week above poverty job.
    Full stop. No ifs or buts.
    Since everyone needs to participate in, and has something to contribute to, the nation's well being.

    MMT guarantees it, by enabling independent funding of the public sector, as required, alongside private sector market operations.

    Orthodoxy with it's various fantasies - NAIRU, loanable funds theory, IS-LM model etc - never achieves continuous, real, full employment.

    MMT observes taxation is required to control inflation, by destroying excessive private-sector demand, if this exists.
    Taxation (or borrowing) is NOT required by a sovereign currency-issuing government, to fund public sector policy.

    Now, is MMT "innately exaggerated"?

    Well...I like the Job Guarantee, and I expect Bezos can still operate, though his domination of the world retail market might need to be better regulated by governments. (And personal wealth over $1 billion has the potential to be problematic for society, depending on the character of the individual).
     
    Last edited: Mar 25, 2020
  22. Reiver

    Reiver Well-Known Member

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    It certainly, at the very least, needs full employment which also delivers a living wage. Its arguably here where you see the problems associated with macroeconomics. Take Britain. Before the current crisis it wasnt far from full employment. It was also characterised by a low skilled equilibrium and Dickensian inequalities. The only complete integration of micro and macro perspectives has come from the orthodox schools, using that integration to justify such outcomes. Their effort reflect a need to ensure orthodoxy remains unchallenged. It doesn't reflect combination of macro legitimacy with micro knowhow. Take Britain again. Labour's Peoplea QE made perfect sense following the financial crisis. But, with market concentration and rent seeking behaviour fed by market concentration, its really only its shift to partial worker ownership which would be a game changer.
     
  23. a better world

    a better world Well-Known Member

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    Would competition between worker-owned businesses prove problematic to your model, eg by placing downward pressure on wages?

    MMT would transfer that risk to the Job Guarantee (in a temporary buffer pool of jobs, depending on the condition of the private sector business cycle) which is set at a minimum living wage.
    Private sector businesses must then pay a higher wage, or cease to exist.
     
  24. Reiver

    Reiver Well-Known Member

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    Nope. Workers receive compensation according to the value of their labour. We'd expect reduced wage distributions, which are often really artificially engineered (e.g. use of hierarchy and internal labour markets to divide and conquer)

    Without changing the nature of firm ownership, impact will necessarily be limited. For example, we'd expect some falls in productivity and therefore wages (see, for example, shirking analysis where full employment reduces work incentives).
     
  25. a better world

    a better world Well-Known Member

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    OK.


    I think you are downplaying the significance of the currency-issuing capacity of the sovereign government, which is MMT's key insight.

    As to the macro economy's "productivity": in a free market economy I don't think productivity is harmed if full employment exists, in fact I would argue the opposite.

    A free market economy already holds out the prospect - the incentive - of special reward for effort, by self-interested, profit-seeking individuals.

    Some individuals do very well in free markets, while others do not. I don't see why a guarantee of full employment necessarily changes the incentive issue as it applies to different individuals.
     

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