Volatility

November 23, 2010

Guns, Butter, and Bonuses (MMT, Money, and Deficits) Part 2

 

In part 1 I discussed some of the core lies of neoliberalism: That money creation is based on deposits; that we need the banks in order to create money; that money creation without risking runaway inflation is constrained by anything other than the capacity utilization of the economy; that under today’s Depression circumstances America faces any “deficit problem” at all other than the political one created by the criminals who are looking for a pretext to steal yet more trillions under the rubric of “austerity”.
 
Modern Monetary Theory (MMT), the latest incarnation of a much older idea once called producerism, greenbackerism, chartalism, and other names, teaches these truths. So in these senses MMT is objectively subversive of the particular status quo which afflicts us today. It means the banks have no legitimacy and shouldn’t exist at all.
 
Money creation is a sovereign power of the people, and a core responsibility of government if we’re to have a government at all. Whether done directly by the government or through the middleman of the banks, money creation is done out of thin air, simply by crediting the account of a loan or payment recipient. The right way to create money is to gauge the money supply to the productive capacity of the real economy. If there’s capacity underutilization, the government should engage in deficit spending to fill the gap, until it has done enough to stimulate the full productive capacity and full employment. This is MMT’s prescription, according to many of the MMTers I’ve read.
 
The most direct, efficient, rational, and productive way to do this is for government to directly issue money, directly credit accounts.
 
Contrary to popular propaganda, the banks don’t create money as a multiple of deposits, but simply create it out of thin air. They do this not for the sake of economic health, but for their privatized rent-seeking. They want nothing but control of money in order to steal as much of every transaction as possible. The banks tax economic activity at least as much as the government does, but bank taxation is far more destructive in principle. Government taxation, although usually excessive and tyrannical in practice*, can in principle be measured and used for the sake of rearranging wealth so that economic well-being and productivity is maximized. But bank taxation is never anything other than purely greedy, purely destructive, and never has any measure other than how much they can get away with stealing. That’s what the financialization of the economy is, the attachment of a permanent financial parasite to the real productive activity of a people. This parasite does nothing but suck ever larger amounts of our life blood, steadily weakening us and even achieving motor control over our actions.
 
[*Today we have terminal kleptocracy, and this government, itself a creature of the banks, will never tax for any purpose other than to help the banks and corporations steal. So I’m certainly not calling for this particular government to tax more. On the contrary I say we must reject and resist all new or extended taxes on the non-rich.
 
In this discussion I only want to establish the principle that, as a matter of reformist philosophy, for the government to resume the full money creation and taxation power from the banks would be a progressive step.
 
But in the end we must get rid of centralized government as well.] 
 
Once the banks have financialized the economy, they believe in and demand rampant deficit spending, but they want it detached from all real production. Under financialization, the currency becomes mere funny money for bankster gambling and speculation, while all losses and destructive effects are socialized on the productive people.
 
Toward this end, the bankster-bought government has alienated its sovereign currency and its sovereign power. Thanks to the government’s corruption and abdication, the banks create money, not for socially and economically productive ends, but for destructive profiteering.
 
But the government could just as easily reclaim its money sovereignty and directly issue the money, and do so toward the goal of a healthy, productive real economy. We wouldn’t need the big banks to exist at all, and could be rid of them. There would be no threat of destructive inflation from this money issuance so long as there’s major capacity overhang and unemployment in the economy, as there is today.
 
Meanwhile the banks encourage unhealthy corporatist deficit spending (A2 = C, in my terminology from part 1, instead of the healthy A1 = B), and neo-austerity-mongers like Krugman embark upon their own bait and switch, wanting to surreptitiously switch in A2 for the A1 they previously advocated, and the C for the B. But they face two prospects of change: The possibility of having to capitulate to deflation at some point; and the possibility that the old greenbacker idea, in today’s MMT form, will get more and more traction.
 
As a contingency plan, they’ve started floating trial balloons for a restored gold standard. This is an old bankster trick. In the short run, it’s standard political misdirection. In the 19th century they used to call it “sound money” and “honest money”, and this does have a surface plausibility.
 
In the long run, any metal standard is always used to artificially constrict the money supply among participants in the real economy, in order to force them into debt. Whether it’s a time of real inflation or real deflation, the gold standard is used the same way, as a depressant and control over the non-finance sectors, and especially the non-rich. In our circumstance, as deflation definitively sets in, a gold standard would be used by the banksters to accelerate it beyond its natural pace, in order to more effectively impose debt indenture and strangulation. A gold standard would simply be austerity by other means.
 
So there’s more evidence that the true reform solution, if we’re to continue with a centralized economy at all, is that:
 
1. The government should directly issue greenbacks;
 
2. toward economically productive goals.
 
No “finance sector” necessary.
 
So the reformist MMT idea is an attempted end run around the criminal hoarding of social wealth on the part of the banks and corporations. The call for direct government issuance, including deficit spending when the economy is depressed, would be an attempt to bring the circulating supply of money in line with the economy’s productive capacity and counteract the intentional withholding of money from the economy by rent-seeking criminals who hoard that money (all stolen), and who do so in order to prop up those same rents.
 
There are various proposals which mean in effect crediting the accounts of the unemployed. Right there we can already see a structural weakness in the concept, since it seems to assume the continuance of bank accounts. Well, maybe it could refer only to local banks, credit unions, state banks. (I’m going to expand on a few of these ideas in an upcoming post on state banking.) The proposals could be called partial refunds of our money the banks stole through the Bailout.
 
While I’m not calling for such a program myself, let me stress that Washington already does “credit the bank accounts” of the unemployed. It’s just that these particular unemployed are the parasites of the FIRE sector, Pentagon sector, Big Ag, and all the rest of the corporate welfare recipients who do no work at all, who only destroy. Meanwhile to give money directly to the nominal unemployed would in fact be giving the money to productive workers who are unemployed only because those same banks intentionally destroyed their jobs.
 
This is in fact what MMTers advocate. Here’s a typical proposal from Marshall Auerback:
 

What we desperately need to do is to increase our deficit by several percentage points of GDP and offer public sector jobs to all those who want one. Government as Employer of Last Resort is one idea I have been pushing (along with Randy Wray, Bill Mitchell and a host of other people). As I said in an earlier post,

The U.S. Government can proceed directly to zero unemployment by hiring all of the labor that cannot find private sector employment. Furthermore, by fixing the wage paid under this ELR program at a level that does not disrupt existing labor markets, i.e., a wage level close to the existing minimum wage, substantive price stability can be expected. Other benefits could be provided, including vacation and sick leave, and contributions to Social Security and, most importantly, health care benefits, providing scope for a bottom up reform of the current patchwork health care system……

At any rate, what we desperately need to do is to increase our deficit by several percentage points of GDP and offer public sector jobs to all those who want one. We thus have to aim to ensure public spending fills the gap left by non-government saving (a consolidated position combining the private domestic and foreign sectors) and keeps aggregate demand growing at such a rate that it provides scope for the private savings desires to be realised without compromising our public purpose goal to ensure there is sustained full employment and inclusive income distribution outcomes.

But by far the majority of the unemployed workers could be offered a minimum wage job to work on community and environmental care projects for as long as they desired. I would suggest we also raise the minimum wage so that everyone has access to decent housing and health care etc. But the ELR scheme would only be offering a wage to workers who have no market bid for their services by definition. It will give them a job, some income security, will add to aggregate demand and help stimulate a broader recovery and, in itself, will not be inflationary.

 
As Auerback says, many of his colleagues support similar ideas. While I reject the specifics*, it’s good that the basic idea is spreading. It’s a cognitive rebellion against the structural bank paradigm itself, and against the deficit terrorist “austerity” propaganda and policy demands.
 
[*What’s wrong with specific MMT-related job creation programs:
 
1. They still want this job creation within the capitalist framework, and explicitly don’t want to create living wage jobs. (Edit: Cf. comments below for more on this. My critique here may not apply to every proposal.)
 
2. Nor are the jobs supposed to compete with the inefficient, uncompetitive private sector. So these proposals want the worst of capitalism in every aspect, the structural inefficiency and incompetence as well as the exploitation of the worker.
 
3. No doubt in practice the disbursement and administration would be corporatized. We saw how Obama’s idea of “job creation” is employer tax credits, i.e. another useless, expensive corporate toll booth. No other job creation program under corporate circumstances is likely to be executed any differently.
 
4. What these proposals really want to do is deliver a modest direct payment, but because they think it would be more politically palatable, they want to launder it through degrading makework. But I don’t think even the politics would work out that way. Nobody seems willing to learn, you can’t appease neoliberalism. Anything you try to do, good or meager, will be equally demonized. So why not demand the good, instead of a program which looks like real-life version of a caricature from a conservative polemic?
 
If you want a job creation program, go for the jugular, and do it with pride. Let it be real work at a real wage. Compete directly with the inefficient private sector, and proclaim that competition as a selling point, not a matter for fear and shame the way these guys seem to think it is. One can never win politically through timidity and appeasement. The best chance is always to seek to compel respect through an honest, frontal assault.]
 
In the end this is will all still be academic if it takes the current political parameters as given. For there to be effective fiscal policy change presupposes a general, radical political transformation. I think MMT can be part of the mix of transformative ideas, but is doomed to be relegated to arcana if its advocates see themselves as mere “reformers within the system”, and maybe not even that.
 
Here’s how I see things. My moral derivation from MMT (which I’m not claiming is part of MMT, but which I do claim morally and rationally follows from it) is that since money in itself has value only on account of government fiat (because government will accept it for tax purposes), therefore it follows that money can never legitimately serve as a “store of value”.
 
It can count as “property” only where it’s actually circulating or fermenting as a truly productive investment. Only then is it participating in the public life of the society which gives it life in the first place.
 
Money being hoarded, antisocial money, money as a store of value, in effect has no right to exist at all, and should be restituted to its proper owner to be put to its proper use. “Store of value” represents unproductive, parasitic hoarding of the public resource. Resources must be used productively in order to confer legitimacy of possession upon the possessor. One is a participant in the economy to the extent he is an agent of the velocity of useful, constructive activity (not mere “velocity of money”). One who’s not such a participant has no valid claim on society’s resources. That includes all rentier parasites. Hoarded “property” is nothing but stagnation, rot.
 
Hoarded wealth is both useless and pathological. Since all wealth is produced by people working together, even if we agreed to channel more of it through some hands than others, this could be fair and efficient only if the intent were to give them greater opportunity to enjoy the wealth only through the act of recirculating it, spending it in the real economy.
 
But for someone so blessed to instead hoard and financialize is a double-cross. It’s breaking the deal which distributed that wealth in the first place. (As for the “investment” justification, history has empirically proven that beyond a modicum, concentrated wealth is not productively invested but is used for unproductive, destructive speculation and gambling. In the same vein, corporations which aren’t producing but merely hoarding, as so many are today, have no right to be “taking profits” at all. By definition any such extractions are just looting. Under today’s post-capitalist conditions, the forms of capitalism are no longer valid. They’re worthless and worse than worthless. Pernicious.)
 
This is the basic critique of idle, useless “property”: Since all value is a cooperative endeavor, and the only rationale for allowing property rights would be to increase the cooperative value and happiness, therefore as individuals and groups we have a legitimate right to useful possession, but none to stagnant hoarded “property”. We should apply this to money, purging the “store of value” concept.
 
So that’s why I say sitting on wealth, relegating it to unproductivity, is useless in any practical sense, and has no moral validity because it abrogates the social contract under which it was unequally distributed in the first place. Only constructive velocity can justify inequality of distribution. (Again, wealth is cooperatively generated in the first place. Even the greatest thinker still stands on the shoulders of his predecessors, and on the education society provided him. And he then depends upon the resources of nature and the work of many others to bring his ideas to fruition.)
 
In all this I’m referring to large wealth concentrations. I’m not referring to attempts at saving on the part of the non-rich under this system, where people are forced by circumstances to try to save for the hardships of the future, since we have no adequate social support system or safety net. The neoliberal barbarians of today want to do away with civilization itself.
 
But in a human community there would never be any need or justification for unproductive hoarding. Useful possession is the measure of legitimate possession. MMT supports this with its proposition that since money is created only by the government, and only as an economic lubricant of the productivity of the people, money as a “store of value”, that is the hoarding of it, has no rational or moral legitimacy.
 
So getting back to MMT’s accounting identity, here’s the course of action to render things morally and rationally valid: The government can run a deficit in order to stimulate the depressed real economy (this depression being accounted for by the “surplus” hoarded by the banks and corporations), so its production recovers from the vandalism inflicted upon it by the banks, and counteracts their depressive criminal assaults which destroy jobs and relegate resources to uselessness. The government could even redeem its sovereignty and smash the criminals, restituting this stolen “private surplus” and restoring it to the productive people who are its true owners. In all this, there would be no practical reason nor moral right for the big banks to exist.
 
In the course of this restitution the economy’s productive potential could be focused on the transformation from the fossil fuel based “growth” economy to the post-oil steady-state economy.
 
Once this was done, there would no longer be a need for a government deficit, or for a centralized government at all. This could be retired as the now fully employed, fully productive steady state economy rationally and prosperously proceeds.
 
These ideas will become more and more apparent as the criminal disease metastasizes. For now the point here is to be aware of these facts:
 
1. Government will spend on anything it wants. (And so long as the economy is depressed, it can spend as much as it wants without fear of triggering inflation.) The elites, whether aware of the real nature of money or not, all implicitly agree that deficits don’t matter. Their actions prove this.
 
2. But the elites tell the lie that spending is constrained in order to justify cutting public interest spending and raising taxes on the non-rich.
 
This conjunction of 1. and 2.  explains the obvious, grotesque contradiction of a government hemorrhaging borrowed money and deficit spending on bailouts, wars, and corporate welfare at the same time it calls for “austerity”. (This juxtaposition is so patently idiotic and obscene that I don’t understand why just by itself it doesn’t trigger a revolution. Is it really possible to be so dense and/or compliant that one can’t see the manifest bad faith, indeed total criminality, of such a government?)
 
3. For now we can’t do much about 1., but we can expose the lie upon which 2. is based. That’s the mission of MMT.
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28 Comments

  1. Thanks for explaining where the various versions of my comments on Part 1 were directed; as an aside, I attempted to submit that comment 4-5 times and performed some revisions along the way. Also, thanks for the links to Scott Fullwiler’s blogs in NC; I had missed those as I tend to limit my regular ‘economics’-related browsing to a half-dozen other blog sites (see prior comment) and only visit NC occasionally.

    My focus on attempting to understand modern money economics (MMT is Bill Mitchell’s acronym for the theory which has never been put in practice in Australia, USA, UK, Canada, or any other nation to my knowledge). In fact, Drs Mitchell and Wray are academics who have attracted interest from other economists and financial practitioners who are familiar with the constraints and conditions which are imposed when attempting to understand how a sovereign nation, which employs a floating exchange when dealing with other nations, and which makes purchases of domestic goods only in that nations fiat currency. Note, when the US purchases imports from other countries, those transactions from non-European countries involve only accounting entries at the Fed Reserve. There many nuances of operational constraints and relationships with Congress and private institutions which I do not fully understand, but which the modern money experts do.

    When I originally called your attention to the FST-ICC in April, I simply wanted to pass along information as to the efforts of the MMT-related enthusiasts to confront the Pete Peterson (Conservative Coalition elite-boys club) effort to initiate an elitist assault on government sponsored programs such as Social Security, Medicare, Health Care a la B Obama, etc.).

    Your link to Warren Mosler’s website or other economists sites omitted background information which is available via links on their sites. Had you decided to enlighten your readers, I would have thought you would do a little more careful investigation. When you conflate ‘greenback-ism’, ‘producer-ism’, and ‘chartalism’, I think the Wikipedia and other definitional tools I found describes ‘greenback-ism’ and ‘producer-ism’ as political ideas; i.e., ideas which economists do not consider fleshed-out descriptions of financial/monetary systems.

    From Wikipedia entry for chartalism, [which needs some updating] there is the following quote:

    ‘Modern proponents

    Warren Mosler, L. Randall Wray and Bill Mitchell are largely responsible for reviving the idea of Chartalism as an explanation of money creation; Wray refers to this revived formulation as Neo-Chartalism.

    Bill Mitchell, from the Centre of Full Employment and Equity (CofFEE)at the University of Newcastle, Australia refers to Modern Chartalism as Modern Monetary Theory in the body of work he has developed in the field.

    Rodger Malcolm Mitchell’s book Free Money(1996) describes the essence of Chartalism in layman’s terms.

    Some, such as Wray and (Febrero 2009), situate Chartalism within Post-Keynesian economics, and Chartalism has been proposed as an alternative or complementary theory to monetary circuit theory, both being forms of endogenous money (money created within the economy, as by government deficit spending or bank lending, rather than from outside, as by gold).

    In the complementary view, Chartalism explains the “vertical” (government to private) interactions, while circuit theory is a model of the “horizontal” (private to private) interactions.[8][9]

    Hyman Minsky seems to favor a Chartalist approach to understanding money creation in his “Stabilizing an Unstable Economy”, while Basil Moore in his book, Horizontalists and Verticalists (1988), delineates the differences between bank money and state money. James K. Galbraith supports chartalism and wrote the foreword for Mosler’s book, Seven Deadly Innocent Frauds of Economic Policy(2010).[10]’

    From your link to Warren Mosler’s blog site description to justify his interest in attempting to political fray and to allay the fears which the ‘deficit terrorists’ (read, Pete Peterson, billionaire and politically powerful) are currently promoting in order to gain political control of the USA. [The fact that an ostensibly liberal Democratic president appointed such a financially elitist group to influence the fate of the American citizenry clearly indicates that word definitions have changed and that the President’s behavior is somewhat reminiscent of that of G W Bush, only, a bit more extreme and polished, whild continuing as a conservative war supporter.]
    In Warren Mosler’s blog, the following quote indicates that theoretically there is no reason to accept the claims of the fear mongers; [remember, the political operatives have no interest in economics other than they are always anxious to acquire wealth and power and they know that the American public are easy marks]:

    from:

    http://moslerforsenate.com/?page_id=22

    …………….

    ‘The Truth about Federal Spending

    I know what you are thinking: ‘What about the lost Federal revenues?’ ‘Won’t that mean cutbacks somewhere else?’ ‘Won’t we have to borrow more from China for our children to pay back?’

    This is why I’m running. I have the right answer to these questions, which is what sets me apart from the field and uniquely qualifies me to support my proposals.

    I know how the payment system works. I grew up on the money desk at Banker’s Trust on Wall Street in the 1970’s, ran my own investment funds and securities dealer for 15 years, currently own a small Florida bank, and visit the Fed (Federal Reserve Bank) regularly to discuss monetary policy and operations.

    I know for a fact, as do all Federal reserve ‘insiders’ as well as economists who understand monetary operations, that the role of taxes for the Federal government, unlike State and local government, is to regulate the economy—not to raise revenue.

    It is an indisputable fact that when the Federal government taxes, it doesn’t actually get anything; it just changes numbers down in our bank accounts. And when the Federal government spends, it just changes numbers up in our banks accounts and doesn’t ‘use up’ anything. This may sound like a wild notion, but it was confirmed by Federal Reserve Chairman Ben Bernanke under oath as recently as May of 2009 in a public interview. When the Chairman was asked where the dollars came from that he was spending, he replied that the Federal Reserve just uses its computer to mark up numbers in bank accounts.

    As a result, there is no such thing as the Federal government running out of money, and Social Security and Medicare cannot go bankrupt. Because the Federal government always makes any payment when it’s due by simply marking up numbers in our bank accounts, just like Chairman Bernanke described.

    Because of this widespread misconception, the politicians in D.C. cannot comprehend the true meaning of taxes. That is why they take too much out of the paychecks of working Americans. That is why so many people are finding it more and more difficult to pay their mortgage or simply buy groceries. Our leaders don’t understand that Federal taxes are like the thermostat. When the economy is too hot, inflation too high, unemployment too low (something I’ve never seen in my 40 years of watching the U.S. economy) a tax increase might be a consideration. Not to raise revenue, but to cool down an economy running ‘too good.’ And when the economy is ice cold, like it is now, a major tax cut is in order to bring it back up to operating temperature. Like the ones I’ve proposed.’

    By the way, in numerous places on ‘the Center of the Universe’ and other blog sites, Warren has related conversations he has held with the likes of Larry Summers, economists and officials at the Dept of Treasury, other bankers, etc. Even after they indicate agreement with his arguments in private, they seem to conveniently forget what their prior agreements were; in other words, they apparently pay no attention to what him or what they have talked about.

    It is all too common that experienced financial ‘experts’ as well as many people with low-level understanding of economics fail to recognize that:
    (A) just because modern money operations may be conducted as the MMT promoters suggest, that does not mean that a nation which adopts some variation of such a set of guide lines would be advised to print money without oversight and/or regulation. In fact, this concern is no different in a theoretical MMT-economy than with the current situation in the US. When crooked politicians and bankers and corporate executives want to/succeed in unsupervised/uncontrolled criminal/ fraudulent behavior as has happened all too obviously over the past 40-50 years, the name which is given to the economic theory is irrelevant.

    (B) in a modern money system, there are postulated to be at least two major forms of currency/money. The ‘vertical’ system involves the determination of the optimal supply of the money created by the government. The ‘horizontal’ system involves money which occurs via bank lending mechanics. [Dr Steve Keen, is a proponent of the ‘circuit’ theory which is in some ways related to the idea of the ‘horizontal’ component of the MMT system and his work is worth following because of his reputation as a clever physicist-turned-economist.] Whether a properly designed system involves circuit-theory of MMT, either system involves the creation of money prior to taxes; in other words, taxes should be used to control for inflation and various other socially-desired purposes even though they have nothing do do with currency/money creation.

    To my knowledge, no perfect economic system is possible; however, the limits of many proposed systems [including precious money-based systems] have been recognized to make them unworkable under real-life conditions.

    Anyone who is unfamiliar with or wishes to learn about the recently deceased Chalmers Johnsons analysis of the American Empire and it’s history may find his 2007 video interview at the following link of interest.

    Published on Monday, November 22, 2010 by Speaking Freely
    Chalmers Johnson on American Hegemony

    Chalmers Johnson, historian and author, passed away on Saturday, November 20th,

    http://www.commondreams.org/video/2010/11/22-0

    In today’s blog over at New Economic Perspectives, L R Wray describes the venal criminal activities which characterize the banksters and their collaborators:

    Tuesday, November 23, 2010
    Support Representative Kaptur’s Bill: Time to Shut Down MERS and to Restore the Rule of Law
    By L. Randall Wray

    http://neweconomicperspectives.blogspot.com/2010/11/support-representative-kapturs-bill.html

    Comment by William Wilson — November 23, 2010 @ 3:37 pm

    • Thanks for these replies, William. I don’t have time to digest it all now, but I’ll respond tomorrow.

      Comment by Russ — November 23, 2010 @ 3:59 pm

    • A big BINGO! for this …

      “(A) just because modern money operations may be conducted as the MMT promoters suggest, that does not mean that a nation which adopts some variation of such a set of guide lines would be advised to print money without oversight and/or regulation. In fact, this concern is no different in a theoretical MMT-economy than with the current situation in the US. When crooked politicians and bankers and corporate executives want to/succeed in unsupervised/uncontrolled criminal/ fraudulent behavior as has happened all too obviously over the past 40-50 years, the name which is given to the economic theory is irrelevant.”

      Some thoughts, and thanks for your efforts …

      I think that at some level most everyone realizes this – that the root problem is corruption and it must be confronted head on – yet they persist in remedial fantasy schemes and endless revelation of the endless hypocrisy. In many ways it is a form of avoidance behavior, a way to swim in the middle of the school.

      These crooked murdering pricks need to be called out forcefully and punished severely. If one wants to work within the system one should call for a Twenty Seventh amendment to the Constitution that would provide for death by hanging of public officials who severely violate the public trust and long terms of imprisonment for less severe violations of the public trust.

      The problem goes well beyond the past 40-50 years, and Aggregate Generational Corruption needs to be addressed in all societal sectors. In the case of usury in finance it has been with us for over a few thousand years, but it is only in the past five hundred years or so that usury has beaten back religious opposition, and, through incessant corruption of various governments and opinion makers over time, has gained ‘respectability’. Usury needs to be put under the microscope. There is nothing wrong with loaning someone something and expecting a return in the future. That is human nature. Credit, a loan, IS a claim on the future. The problem arises when one person has more to loan and is then the sole determinant of what the claim on the future will be. It is the size of the loan and the use that it will be put to, that, when significant, should have societal steering.

      Similarly; corporate person hood (that allows corporations to function as alliance breaking competitive mini nation states with greatly reduced accountability), the state drugs of alcohol and tobacco (that kill over 500,000 thousand scamericans a year). etc. need to be reviewed with an eye to change or elimination.
      A brief story …

      I had a neighbor in New Hampshire in the past who had an apple orchard. Every year he added twenty to thirty acres of new trees. One year he laid out the spacing on the trees wrong for the variety of tree he planted. It was an error that made the trees too close together by some twenty feet. He thought he would be able to make a go of it, left the trees to grow, but learned the hard way he could not make a go of it. The trees grew together and he could not get his equipment in between the rows to spray, fertilize, pick, etc., and in the end he saved only a few rows and cut the rest down. It made great fire wood.

      Aggregate Generational Corruption has had the same effect on planet earth. We need a major ripping out of the old corrupt and unsustainable societal methods and a replanting of a new sustainable society.

      It will not get done without first ripping out the old. That is job one. Planning the new orchard is secondary and the tree chosen “irrelevant”.

      Deception is the strongest political force on the planet.

      Comment by i on the ball patriot — November 23, 2010 @ 9:35 pm

    • William, thanks for all the added detail.

      To put it in a nutshell, my main interest here is to propagate the fact that taxes and government-driven money creation (whether done directly or abdicated to banks; either way the government has acted) aren’t in order to raise revenue, but to regulate the economy.

      Therefore, I want everyone to look at each thing and ask, “who is it for? whom does it assault?”, and fight for or against based on that.

      That’s why I’m trying my hand at a mode of looking at money and taxes which puts the pro-corporate aspect front and center, which highlights how these are currently manipulated for the benefit of the banks and corporations, but how there’s zero structural reason to agree to the “austerity” scam based upon fraudulent problems the pro-corporate deficit system would be responsible for in the first place.

      If the enemy has a machine gun and you have a pistol, you’d never listen to his demand that you unilaterally give up the pistol in the name of an alleged need for disarmament, while he just keeps adding to his arsenal.

      So I’m saying we have to hold onto the pistol, while trying to find a way to get the machine gun away from him.

      From that I derive: Deficits are no problem. No spending cuts for us. (I would say the same even if the economy actually were “heating up”, since it would still be the corporate welfare driving that, not e.g. Medicare.) No new or expanded taxes for us.

      So you’re right when you say that my emphasis is political, and I suppose I don’t do justice to all the intricacies of economic theory.

      i ball – Corruption, criminality, and the ideology exemplified by obscenities like corporate personhood sum up the enemy I want to fight. Just like you said, it needs to be ripped out completely.

      In these posts I wanted to develop the idea that every aspect of economic policy has a class war intent, and that we must look at it and fight that way. There’s no such thing as a particular money generator, conveyance, or tax which has “neutral” qualities. Everything has a class war vector.

      So my basic precept here: Deficits and debt as such don’t matter. If we can win we’re going to restitute the money and structurally adjust the debts anyway. And if we lose it’s going to be total debt enslavement for us. Either way, today’s “political debate” is completely meaningless as far as substance. It’s nothing but total war on the rhetorical plane.

      There’s only: Who’s attacking right now? Who is to be the victim right now? And then fight it out on that line.

      Comment by Russ — November 24, 2010 @ 4:13 am

  2. Interesting stuff. One significant correction. when you wrote, in your critique of specifics of the job guarantee, that we “explicitly don’t want to create living wage jobs,” that is incorrect. We have said many, many times, at least in conferences if not often in published research, that the US and other rich countries can afford (in terms of effects on aggregate price level) to have JG jobs pay a living wage. See, for instance, p. 5 here: http://www.cfeps.org/pubs/wp-pdf/WP43-Tcherneva-Wray.pdf

    Comment by Scott Fullwiler — November 23, 2010 @ 4:35 pm

    • Thanks, Scott. I made a modification above.

      I know everyone knows in principle that we could easily afford a living wage for everyone. (Although that would contradict the whole point of capitalism. Which is why the real goal is to break free of the wage slavery system completely.)

      I was referring to most of the explicit proposals I’ve seen, like the ones I linked. They always call for a minimal wage. They sometimes add, “we’ll try to get the minimum wage raised”, but that looks like an optional appendix, not a vital part of the plan.

      Like I wrote, I tend to assume the reason the proposals are meager isn’t because the advocate doesn’t think we could do vastly more, but because he’s politically intimidated from demanding more.

      But I think that’s a false economy, both substantively and on the level of basic political tactics.

      Comment by Russ — November 24, 2010 @ 4:25 am

      • No worries, Russ. Just wanted to clarify there.

        Best to you.
        Scott

        Comment by Scott Fullwiler — November 24, 2010 @ 8:24 am

      • Same to you. Come back anytime.

        Comment by Russ — November 24, 2010 @ 9:24 am

    • One important thing to note is Bill Mitchell and some other MMTers hail from Australia where the minimum wage is A$15/hour, equivalent to about US$14.50 at the current rate. About twice as high as the U.S. minimum wage. So when Dr Mitchell refers to a JG at minimum wage he’s thinking of a very different standard of living than his US readers might understand.

      The other point is, of course, that advertising a minimum wage jobs program is just that — advertising, intended to quiet private sector fears of government poaching labor. So that may be a strategic choice among MMT adherents trying to get a pilot program instituted.

      Post-WWII, full employment tended to rely on much higher levels of civil service employment at all payscales. Before full employment was subsequently abandoned as a policy goal.

      Comment by reslez — November 27, 2010 @ 5:42 pm

      • LOL, am I perhaps guilty of being the Ugly American?

        I know Mitchell is from Australia, but I guess I assumed his posts would be American-applicable unless otherwise noted.

        Comment by Russ — November 27, 2010 @ 6:31 pm

  3. I need to look into MMT a bit more, but it still feels like yet another tweaking of neoclassical economics. The problem is a rentier class that drives business cycles through debt-financed speculation. What these people do so cavalierly is nothing more than a pathological example of prospect theory, and we should treat it as a form of criminal behavior or insanity. Does MMT propose to do anything about this behavior, or merely to work around it like all other schools of economic thought? What economists do in shielding the economic elite is kind of like what society used to do in forgiving men who rape women who weren’t virgins. The problem is that no matter how unworthy you consider the crime, it is still a crime.

    Comment by Tao Jonesing — November 24, 2010 @ 3:00 am

    • I think MMT can be part of a truly transformative toolkit, and that its advocates realize this even if they sometimes deny it.

      How much their denial is based on yet another tedious wish to “reform capitalism”, as opposed to simply being too timid to draw out the full implications, I don’t know.

      I agree that by now we know as an empirical fact that capitalism is both morally criminal and doesn’t work on a practical level. So to still be a reformist is to intentionally abet crime, regardless of whether one actually supports the crime or is simply too cowed to resist it.

      But what I want to do with this idea is:

      1. Tactically, fight the deficit terrorist propaganda and “austerity” proposals, both spending cuts and taxes.

      2. Strategically, I don’t see any way to “take back” this form of government and put it to work directly issuing money in concurrence with the needs of the real economy, as part of a rationally organized transition toward economic decentralization.

      But if anyone has ideas on that, I’d love to hear them.

      (This is just another version of the classical revolutionary “transition” problem, to which no one has yet come up with cogent answer, so far as I know.)

      Comment by Russ — November 24, 2010 @ 4:36 am

      • Russ, good post good discussion.

        A few “ideas” …

        “1. Tactically, fight the deficit terrorist propaganda and “austerity” proposals, both spending cuts and taxes.”

        Keep pointing out the corruption and hypocrisy and get MMT, or any other more suitable replacement monetary system, down to a one page abstract to refer to and link to as a replacement system in those discussions.

        On that one page abstract emphasize that any system (alliance) will fail without proper oversight and punishment. Be prepared to be shouted down by an army of sell out voo doo ‘economists’ and ‘experts’ who will sidestep and deflect away from the punishment issue.

        “2. Strategically, I don’t see any way to “take back” this form of government and put it to work directly issuing money in concurrence with the needs of the real economy, as part of a rationally organized transition toward economic decentralization.”

        I really believe that bringing up and revising the Twenty Seventh amendment is a viable tactic as “part of a rationally organized transition toward economic decentralization.” I repeat from above, “If one wants to work within the system one should call for a Twenty Seventh amendment to the Constitution that would provide for death by hanging of public officials who severely violate the public trust and long terms of imprisonment for less severe violations of the public trust.” make a one page abstract like the one suggested above and have it available to refer to and link to. Over time it can be ‘ratified’ on the net.

        By making the issue of punishment separate, and all inclusive for any violation of the public trust, it will be difficult to sidestep. The issue of some pigs being more equal than others needs to be explained and emphasized.

        Deception is the strongest political force on the planet.

        Comment by i on the ball patriot — November 24, 2010 @ 8:12 am

      • I’ve had the same idea about the abstracts, or talking points lists as I’ve been calling them.

        Whittle each idea down to a cogent, bare-bones list of facts and propositions, then apply it to each case that comes along, always deriving the same moral, and from there advocating the same course of action.

        I was trying to do something like that with my “bank heuristic”:

        https://attempter.wordpress.com/the-truth-about-the-bailout/

        Comment by Russ — November 24, 2010 @ 9:30 am

  4. Russ:
    In addition to the abstracts approach recommended by “ball patriot” any “talking points lists” should include direct benefits e.g. how the new model will:
    1. put food on the table
    2. put and keep a roof over people’s heads
    3. put clothes on people’s children
    4. help get an education for people’s children
    There has to be basic tangible benefits or it’s just an exercise in abstractness.

    Comment by JM51 — November 25, 2010 @ 1:13 pm

    • Thanks, JM. That’s the goal of everything I’m trying to figure out. The banks and corporations want to rob us of all those things. They are robbing us of all those things. So the preservation and bounty of those things requires us to overthrow these rackets.

      The best way to start directly putting food on the table is to personally grow food and/or become involved in food relocalization.

      The rest also will comprise and follow from economic relocalization (it’s a dialectical process which begins with taking action), breaking free of the corporate system, taking every chance we get to deal it damage, and hasten its inevitable collapse.

      Comment by Russ — November 25, 2010 @ 4:23 pm

  5. I have two problems with MMT.

    First, they claim that the value of a currency should be determined by a floating rate system which will manipulated by elites though “markets.”

    A truly sovereign currency is one determined democratically according to law.

    Second, they claim that trade deficits don’t matter at all. While trade deficits don’t matter in the financial sense Trade deficits do matter in the physical sense.

    MMT is monetarist idea that essentially reductionist. It reduces the economy to simple accounting definitions without examining the method and relevance of the numbers of being used in the GDP and National accounts.

    Bill Mitchell is the most anti-producist economist in the world. I suggest you read his posts about how “you are what you consume” where he attacks the developmental and localist idea of necessity of localized production.

    I’m a old school chartalist follow the doctrine of Henry C. Carey- the original greenbacker. He was Lincoln’s economic advisor and he wouldn’t be a MMTer at all.

    These Neo-chartalist MMTers are intellectual feather weights compared to the original giants of Chartalism, Digirism, and Protectionism. Sadly, those giants are longer remembered let alone taught.

    Comment by Septeus7 — November 27, 2010 @ 4:18 pm

    • What I know of the old greenbackers I mostly know from Goodwyn’s The Populist Moment. That’s a book I find highly topical today.

      What I find most similar in MMT is the call for the government to directly issue money to keep the money supply in line with the productive capacity of the real economy, and ace out the rent-extracting bankster middleman.

      Or I should say, that’s a potential usage of MMT. I do notice how squeamish they usually are about even the suggestion that this can be a transformative idea if weaponized for the struggle.

      I don’t suppose we’ll be seeing any modern version of Macune’s subtreasury plan, for example, unless we formulate it ourselves.

      I haven’t seen the Mitchell anti-relocalization pieces. Can you give a link or two? That would sure put him on my shit list, to say the least.

      Comment by Russ — November 27, 2010 @ 4:44 pm

    • I’m not familiar with any anti-localization posts by Bill Mitchell in the way we would think of (re)localization, though it’s possible I missed them. What I have seen are posts in which he argues that trade deficits should be understood as a net benefit to the importing nation. The importer is, after all, exchanging numbers in a bank account for real goods. Who wouldn’t like that and want to benefit from it as much as possible?

      That argument may be weak to criticisms that local industry might be preferred for employment and competitive reasons, which I have seen discussed. I interpret Dr Mitchell’s emphasis on imports as an attempt to explain they should not be viewed as intrinsically bad — imports bring material benefits, something the traditional framing of “importer = profligate, bootless nation of lazy sloths” and “exporter = morally superior economic titans” usually neglects.

      Comment by reslez — November 27, 2010 @ 5:57 pm

    • Septeus7,

      For someone who calls others intellectual lightweights, you sure seem to have a hard time understanding what you’re actually reading.

      First, the “value of the currency” and the exchange rate are not the same thing. It is absolutely most desirable for MMT’ers to have the former set via policy made by democratic institutions. But, MMT’ers explain, in order to do that, you must have the latter floating, else you surrender sovereign authority over policy to others. Consider Ireland right now, for instance, vs. UK, US, Japan, etc.

      Second, your understanding of trade deficits within MMT is very poor. The MMT point is much like Reslez notes. In other words, MMT’ers point out that, say, developing nations should worry more about developing their abilities to improve their own standard of living, rather than shipping the fruits of their labor overseas. And, from an MMT understanding of the monetary system, it is clear that the exporting nation in a flexible exchange rate regime does not have the “power” given to it in mainstream models. But to suggest that MMT’ers say that trade deficits never matter is quite naive and even where partly true misses a number of nuances.

      Third, Bill Mitchell isn’t a “localist”? You obviously don’t know Bill Mitchell. I do. Perhaps you might want to think about why Mitchell in his academic writings has labeled his approach “spatial Keynesianism.” Here’s a hint–it has to do with local communities, combined with Mitchell’s groundbreaking and exhaustive research on spatial dimensions of macro labor policy.

      Fourth, “anti-producist”? Give me a break. MMT’ers are ALWAYS explaining that the true “constraint” for a nation to concern itself with is its capacity to produce goods and services.

      Comment by Scott Fullwiler — November 28, 2010 @ 8:49 pm

  6. [I]n practice the disbursement and administration would be corporatized

    Well yes, obvious. The government serves the elites, and anything the elites do is for their own benefit. Unfortunate but the reality in which we live. If elites pretended to implement a job guarantee or any other program MMTers favor it would only be to further enrich themselves at our expense. My hope for MMT is not that it will persuade the government to enact programs that benefit its citizens — we know that to be functionally impossible — it’s my hope that understanding MMT will reveal to citizens the great hollow lie on which bailouts for the rich and austerity for everyone else are predicated.

    What these proposals really want to do is deliver a modest direct payment

    Not sure I agree. It’s true that a “job guarantee” makes it easier to frame transfer payments as wage-exchanged-for-work. However, the moral and rational argument against unemployment is far stronger. Unemployment causes serious social and generational ills. Unemployed workers are depressed, unhealthy, stressed out, lowly in status and well aware of it. Their children are more likely to live in poverty, to be held back a grade, and to live in poverty themselves as adults.

    From an employer’s point of view the unemployed worker’s skills degrade with every passing day. Not just technical skills but basic work skills of punctuality, sociability and time management. Of course a large buffer of unemployed workers is highly valuable to corporatists because of the bargaining leverage it gives them against their employees. But once the long-term unemployed start celebrating their 99th week this threat becomes somewhat muted.

    Most importantly, unemployed workers are a tremendous stock of productive human resources going to waste. There are immense personal, moral and psychological benefits to productive labor. There’s plenty of work to be done, everyone knows it. There just aren’t any jobs. If the private sector’s unable to pay a living wage to people for the work that needs to be done, a just government can and must intervene. Categorizing this as “degrading makework” is an arrogance frankly beneath you. The only degrading thing about it would be whatever farcical jobs a corporatist government would endeavor to create should it attempt to implement a jobs guarantee at the behest of corrupt elites.

    More jobs don’t have to mean more use of fossil fuels. We could pay people to plant fruit trees next to highway exits, or windbreaks around fields, or to care for the sick and infirm. We could all sit around and do each others’ hair if we chose, if there were enough productive capacity in the rest of the economy to support it (food, etc.).

    [T]herefore it follows that money can never legitimately serve as a “store of value”.

    Correct, under MMT money is not viewed as a store of value. Money just makes it easier for exchanges to take place. Its purpose is to provide liquidity. MMTers don’t especially fear inflation. (Of course, if inflation excludes wages it’s just a cram-down. If inflation does include wages who really cares, other than bankers who loaned out money at interest? Obviously hyperinflation is a different matter.)

    Comment by reslez — November 27, 2010 @ 6:03 pm

    • When I said “degrading makework”, I was referring to the way Auerback’s proposal in particular made it sound like some kind of chandala work: Not just minimum wage, but it has to be something which doesn’t compete with the private sector. It’s like the thing is meant to sound as disreputable as possible. And it sounds like you sort of understand what I meant anyway in this sentence: “The only degrading thing about it would be whatever farcical jobs a corporatist government would endeavor to create should it attempt to implement a jobs guarantee at the behest of corrupt elites.”

      I wasn’t expressing an opinion of the people who would take such jobs, who might easily be me if just a few breaks went the wrong way. It was more my normal attitude toward the circumstance, not the person in it. I’ve done plenty of what I considered degrading makework, at jobs and in school.

      I take your point above about trying to get the foot in the door, but when are we ever going to see the confidence and aspiration born of having nothing to lose, as far as drawing up policy demands?

      But you’re right about the benefits to workers of worthwhile employment. It just seems to me that since calling for a jobs guarantee (and I am glad that there are others doing it) is such an outlawed idea anyway, we might as well demand a real jobs guarantee, not yet another unilateral self-negotiation down to the measly.

      So why not demand living wage jobs which will make a point of competing directly with the inefficient private sector, like I said above?

      I’m not kidding when I keep saying, as I have for almost three years now, that I think such demands have a better chance of success than picayune ones, because they inspire the best people and intimidate the worst.

      Why does everyone want to keep reliving the Yeats poem, every single time?

      Comment by Russ — November 27, 2010 @ 6:48 pm

  7. […] some negation, what I’m not really advocating.   As I wrote in my MMT posts (parts one and two), I do want the knowledge to spread, that in principle deficit spending is unconstrained and […]

    Pingback by Let’s Take Back Our Money « Volatility — December 4, 2010 @ 3:57 am

  8. […] […]

    Pingback by The Bridge « Volatility — December 6, 2010 @ 5:04 am

  9. One more point about Bill Mitchell: he is a proponent of permaculture. That’s about as “localist” as you can get. He totally “gets it.”

    Comment by Henry — February 21, 2011 @ 6:13 pm

    • I’m glad to hear it. I never did see the alleged links documenting that.

      In theory, though, it’s possible to support some kinds of permaculture deployment but within a capitalist, globalization framework. I don’t know of any examples offhand, but it’s certainly possible for a rich landowner to want “his” land put under permaculture, and use slave wage labor to do it.

      Just like there’s plenty of liberal elitists who buy only organic produce, but couldn’t care less about the work conditions or other economic arrangements.

      But like I said, nobody provided the evidence that Mitchell’s one of them.

      Comment by Russ — February 22, 2011 @ 5:12 am

  10. Re: But like I said, nobody provided the evidence that Mitchell’s one of them.
    —————————-
    If you take the trouble to go to his blog, you will that one of the categories is “permaculture.”

    http://bilbo.economicoutlook.net/blog/?cat=7

    Comment by Henry — March 4, 2011 @ 5:32 pm

    • Yes, I said I believed you. I said Mitchell’s detractor didn’t provide the evidence.

      Comment by Russ — March 5, 2011 @ 5:27 am


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