Guns, Butter, and Bonuses (Money, Deficits, And MMT) 1 of 2

 

As we sink into economic depression, everywhere we hear the deficit and public debt crisis alarms summoning us to cut spending, raise taxes (on the non-rich, while those for the rich are cut further), “sacrifice”. This sacrifice is never to be undertaken by those who have already monopolized the vast majority of the wealth of the country. The top 1% of the rich hoard one third of America’s wealth. The top 10% has extracted two thirds. Yet all the calls for “austerity” fall on the lower cohorts, and the lower on the wealth and income scale one is, the more onerous the burden. This is as clear as class war and civil war can get short of the actual shooting.

 

The question, as in every other case where then non-rich act against their own interests, is why are so many people going along with this scam that there’s such a thing as a “deficit problem”? It’s manifest that no one among the elites actually believes this. Everyone, without exception, of whatever nominal politics, implicitly agrees that this government, sovereign in its own currency, spending in a Depression economy, can spend as much as it wants, at will.

 

The Bailout, the wars, the Pentagon’s obscene budget, Big Ag subsidies, corporate welfare in general, prove this.

 

So the only question is, will the government spend at will to further enrich and empower the parasites and criminals, or will it spend to help the productive people?

 

The only, indirect way in which deficit spending destroys the real economy is that corporatist government spending further empowers the criminals to steal yet more real wealth from the productive people, and it imposes the opportunity cost of spending foregone which could have benefited the people as we sink into an economic Depression.

 

It’s not really an opportunity cost, though, since that implies a trade-off had to be made. The government could easily spend on guns, bank bonuses, and butter. It could loot on behalf of the corporations at the same time that it spends to restore to the people (“trickles back down”) some of the wealth which was stolen from them. But the spending on guns and bonuses and the refusal to spend on butter are all part of the same class war strategy. As is the whole deficit terrorist line of propaganda.

 

MMT educators stress the accounting identity involved here. In a closed system where the government runs a sovereign currency, a government deficit or surplus has to equal the private sector surplus or deficit. Adding globalization spreads the accounts among many governments and national private sectors, but the globe itself is still closed. (Indeed viewing globalization as a de facto One World Government in terms of MMT can help highlight the class unity of the global elites and the vicious war they wage on all the world’s peoples.)

 

The best MMT resources include Naked Capitalism, Warren Mosler, Corrente, Kansas City, and the Billy Blog.

 

So here’s the right way to look at this identity: If we let the public sector = A, and the private sector equal B, and any surplus on one side must be matched by a deficit on the other side, by accounting identity we have A = B. The real question isn’t the “is A sustainable?” of the deficit alarmists. It’s very clear that every single elite and flack, no exceptions, implicitly claims that deficits in A are no problem at all where A is corporatist spending and B is corporate hoarding and the ratholes of the rich. It’s only to the extent that A still includes any public interest spending whatsoever that they suddenly go into deficit shock mode.

 

So let’s join this battle but make the terms explicit. Everyone agrees deficits are no problem, and only tactically tells lies in a particular situation (where they want to impose “austerity”). So clearly there are actually two kinds of A = B. There’s A2 as corporatist spending, with the surpluses of B made up of corporate hoarding (let’s call that C); and there’s A1 as public interest spending, where the B surplus could eventually become savings on the part of the people.

 

So the question becomes, given that we all act as if A is unlimited, will we let the criminals continue to make the identity be A2 = C, or will we compel the restoration of some legitimacy and rule of law by forcing it back toward A1 = B?

 

So activists can leave aside the “is A sustainable?” question as moot. Instead we say, “for whatever A, and no matter what the posterity of A, the real fight is to smash the A2 = C paradigm, and compel the A1 = B.” That’s given the current political circumstance. As I’ll get to in part 2, the real goal is a healthy economy where the velocity of money would be such that A and B would always be close to equal, with the decentralized money supply always just a little out front of productive capacity, which would always be fully engaged.

 

For this post, I want to discuss further the reformist nature of MMT and its explicit prescriptions. It’s reformist because it’s based on continued large-scale taxation in the sovereign currency administered by a central government. It recognizes that under our status quo the private banks create money out of thin air, at best in anticipation of deposits. They do not lend multiples of existing deposits, the way the popular misconception has it. MMT states the politically incorrect obvious: Governments could do the same exact thing, and do it far more efficiently. The banks produce nothing but merely erect a toll booth and drag a chain across the river. The government could directly produce the same fiat money the banks do, but wipe out all the middlemen, purge all the rents, and render the money creation and distribution far more rational, efficient, and fair.

 

We see how apologists for the banksters have no problem with the most profligate spending out of thin air on every kind of bailout and bonus and boondoggle, as long as the money creation out of thin air is channeled through the banks. But they throw a fiscal conservative fit over any spending which might benefit the people. So here the fact that private banks create money out of thin air is a dirty little secret everyone agrees to keep quiet, and no one sees as dangerous. But it’s a scandal if someone suggests the government sovereign in its own currency can do the same thing based on actual economic production.

 

MMTers just want to do as Alinsky said, “make them live up to their own rules”. The government can freely and openly act according to the exact same principles and practices which it and the banks currently act upon surreptitiously. The difference being that actual stimulus could possibly help reform and restore the productive economy, while bailouts, war, the Pentagon, and all other forms of corporate welfare are purely destructive spending, just cannibalizing what’s left of the principal. The banks don’t manage the money supply toward economic health and a fair distribution. They manage it only toward stealing as much as possible. Pure robbery.

 

The is antithetical to the standard view that the elite parasites create wealth. The fact is that the productive people create ALL wealth, and a legitimate government would create money to reflect that. A legitimate government would do so for the benefit of productivity and prosperity. This means the money supply should always reflect the capacity of the real economy, and should especially be a vector reflecting productive potential.

 

An anti-sovereign rogue government, on the other hand, alienates its money sovereignty to banks and even to globalization cadres. It does so for the benefit of parasites and criminals, to put money creation and management in their hands. In this case the criminals hijack the natural fiat money creation to financialize the economy, and/or to artificially restrict the money supply, as in the case of a gold standard (more on that in Part 2).

 

The truth is:

 

1. Money is created out of thin air. This creation may or may not be based on the productive capacity of the real economy. The money may or may not be deployed for the benefit of the real economy, as opposed to thrown down rent-extraction ratholes while the real economy depresses and dies. So there’s two kinds of accounting identities, the legitimate, benevolent A1 = B, and the hijacked, destructive A2 = C.

 

2. There’s no natural limit on rational, effective A1 deficit spending so long as there’s capacity underutilization and unemployment.

 

3. We do in fact have profligate thin-air money creation and rampant deficit spending, but it’s irrational and ineffective spending. It’s simply the government embezzling from the people and acting as corporate bagman, conveying the loot to private racketeers.

 

The fact that all this spending is taking place with little objection from the “fiscal conservatives” proves that all their fear-mongering about Social Security and other social spending is a lie.

 

4. So the rational, moral, and practical course of action is to end ALL corporate welfare and instead create the money and spend it on a real jobs program and a real infrastructure transition to the post-oil age. That’s MMT-style reformism.

 

The fact that the fiscal terrorists in the media and think tanks get everything exactly backwards proves their malevolent agenda. They’re enemies of the people.

 

In Part 2 I’ll discuss that further, and explore the real possibilities of this reform agenda.