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| Re: Modern Monetary Theory [message #96076 is a reply to message #96066] |
Fri, 14 October 2022 12:05   |
Rusty
Messages: 1205
Registered: May 2018
Location: Kansas City Missouri
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Illuminati (3rd Degree) |
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It's been pointed out that when it comes to finance and the intricate products it creates to make a profit. To the point of bending the law. Peoples eyes glaze over. And it's newsworthy lack of print is probably justified because of this tendency. What I've put out in this thread usually gets no response, unless it's about the national debt and how that makes for the worry of some impending catastrophe.
The way this is usually handled politically is to demand reckless spending be curtailed and sensible fiscal expenditures be adopted. Corporate profits though are at an all time high. But what is that fiscal thing? It's austerity. For who? The public at large and the lower to middle classes specifically.
Now with the mid-term elections almost upon us, the deluge of ads point this out. Inflation is due to reckless spending and workers demanding more pay. We must rein this in with higher interest rates, unemployment, (to temper workers demand for higher wages), and of course austerity for those ever eroding entitlements, (a name that is an affront to working people).
It would be an interesting dialog to capture the publics attention for all this hardship foisted upon them to be aware of the role that the big banks of wall st. have had in perpetuating this mess. And how they perpetually escape the attention of even the institutions and laws enacted to regulate them. But our ingrained economic doctrine is a hands off attitude with "the markets" by government. That's big government subverting the marketplace.
Finance capitalism is the ruination of this countries, Europe's and elsewhere economies where neoliberalism has pushed banking to the head of the marketplace. It leads to de-industrialization, monopolization and parasitism by the FIRE, (finance, insurance and real estate) sectors.
Here's a series of articles to glaze ones eyes with. What we should be screaming out about. Fiscal and personal responsibility is all we get.
https://wallstreetonparade.com/2022/10/new-study-wall-street-banks-are-doubling-down-on-risk-by-selling-credit-default-swaps-on-their-risky-derivatives-counterparties/
https://wallstreetonparade.com/2022/10/shhh-dont-tell-the-fed-or-mainstream-media-that-systemic-contagion-at-wall-street-banks-is-already-here/
https://wallstreetonparade.com/2022/10/nomi-prins-new-book-no-one-wanted-to-call-the-feds-qe-a-ponzi-scheme-but-it-was/
https://wallstreetonparade.com/2022/10/casino-banking-wall-street-mega-banks-traded-more-in-their-federally-insured-bank-than-the-total-for-their-bank-holding-company/
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| Re: Modern Monetary Theory [message #96264 is a reply to message #96263] |
Tue, 10 January 2023 10:19 |
Rusty
Messages: 1205
Registered: May 2018
Location: Kansas City Missouri
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Illuminati (3rd Degree) |
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Randall Wray. Co author of The Modern Monetary Theory Workbook, gives clarity to the always fuzzy logic of economics. One of his "One Pagers" PDF's. The Causes Of Pandemic Inflation.
December 6, 2022
OnePager | N o.70
The Covid pandemic caused a recession when the supply side of the
economy collapsed because of workplace shutdowns and safety concerns. This then created a demand-side problem, as wages and other
incomes fell due to rising unemployment and furloughs. Long and
complex supply chains compounded the problem, and China's "zeroCovid" policy continues to delay full recovery. Pandemic relief in the
United States and some other countries helped to restore demand,
although spending patterns were unusual--more goods, fewer services (as consumers avoided contact).
The Covid recession was thus very unusual--brought on by a
collapse of the supply side that produced a drop in demand. While
demand has largely recovered, supply has not. The continuing inflation pressures still come mostly from the supply side--which is typical, at least for the United States. All of our high inflation periods
since 1970 have been due to supply-side pressures produced by three
components of the consumer basket: oil, food, and shelter (mostly
rents and imputed rents of owner-occupied housing). So while the
trigger for the recession was unusual, the inflation we face is not at all
unusual--the same three culprits are driving US inflation today.
Beyond pandemic-related disruptions, the Ukrainian war also affects
energy and food supplies, and thus prices. Also important, although
less so, are weather-related impacts on production (especially of food)
related to global climate change.
The evidence in the United States now is that inflation is not
accelerating and is likely to gradually fall. Wages are not keeping up
with inflation, so the danger of a wage-price spiral does not seem
great. Federal government spending had already declined substantially before the Fed started raising interest rates, allowing the deficit
to drop precipitously. Indeed, the budget was heading toward a surplus. In other words, we faced strong fiscal headwinds that were sucking demand out of the economy. I think we were already heading for
a recession before the Fed raised rates. Rate hikes now make recession
even more likely. The housing market has collapsed and financial
markets are rattled both by higher interest rates and by debt and liquidity problems--as evidenced by the crypto meltdown. However, it
will take more time for inflation to come down to the Fed's 2 percent
target. I expect we will (again) suffer stagflation (rising unemployment with inflation), as we did when Chairman Volcker sharply
increased rates in the early 1980s.
Europe is in a somewhat different situation because of the severe
disruptions of the Ukraine war. Inflation pressures could be higher in
Europe than in the United States. It is likely to be a cold winter with energy in short supply, and production will also suffer--meaning
continuing supply-side problems. Much of the world looks poised for
recession as Fed rate hikes caused currencies to fall against the dollar. Central banks around the world have had to raise their own interest rates to protect exchange rates. Nations indebted in dollars have
been hit by debt problems--which will only become increasingly
severe as debt burdens climb. The UK has already experienced troubles in its financial sector as markets price in higher interest rates.
Complex and even strange linkages are exposed as problems in one
asset class generate a sell-off and price collapse of another asset class.
Another global financial crisis like that of 200709 is possible as overleveraged financial institutions try to unwind risky positions.
Some falsely claim that Modern Money Theory (MMT) policy
guided the Covid relief spending in the US and elsewhere--and that
this is what has caused high inflation. It is true that Congress responded
with two spending packages that totaled $5 trillion, without "payfors"--that is, without increasing taxes. Much of it took the form of
mailing checks to every household. This was said to be MMT policy. In
truth, MMT proponents argued against such policies, proposing
instead targeted spending--spending to be directed to support those
who lost their jobs, to those who were behind in their bills (rent, utilities), and to tackle the problems created by the Covid pandemic.
The important point is that relief should have been focused on
restoring and improving the supply side of the economy rather than
on restoring demand in the face of supply-side shortages. This could
have mitigated inflation pressures and eliminated the pressure on the
Fed to raise interest rate targets, thereby reducing the probability of
entering a period of stagflation with the looming possibility of
another global financial crisis.
We still face substantial supply constraints, in part due to Covid
but also due to decades of underinvestment in infrastructure. This, in
turn, has been due largely to misunderstanding of the true constraints
and the nature of the inflation pressures that came from the supply
side. Belief that the problem was excess demand led to the adoption
of austere fiscal policy. If we abandon misguided austerity and replace
it with well-designed investment and targeted social spending, we
can not only reduce inflation pressures and restore growth, but will
also be able to transition our economy to make it environmentally,
socially, and financially sustainable.
Senior Scholar L. RANDALL WRAY is a professor of economics at
Bard College.
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