Home » xyzzy » Dungeon » Modern Monetary Theory (or, how I stopped worrying about the natl debt.)
Re: Modern Monetary Theory [message #96268 is a reply to message #96265] Tue, 10 January 2023 17:21 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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The die is cast I know with your beliefs in economic issue Wayne. As is almost anyone well seasoned in life has their's firmly placed. That I well understand. I appreciate you still allowing me to express mine. My hope is the youth of our nation that feel the yoke on their shoulders getting ahead will take on the established ways that aren't working for most of us and work on making realistic change politically. The baby boomers are fast aging and the legacy passed on to the upcoming generations will be a challenge.

The blueprint is there for them with the few renegade economists that can see the severe shortcomings in the way capitalism has been managed over these short few decades it's degraded our way of living. For me, the 2nd largest institutionalized Brothel to the political one, is the academic economic doctrine.

Hopefully in the coming decades the United States will have learned to stop trying to be the worlds military influencer with our belief in our exceptionalism, (national security) and rules based reasoning that is a bit hypocritical.
With that in mind our military budget that absorbes nearly a trillion dollars annually could be tapered down to a defensive rather than the imperialist one to the tune of trillions over the years that could help with our debt load. That and the perpetual enabling of the banking and corporate system's greedy self indulgences. And creating a fair progressive tax code.
One thing's for sure, doing that doesn't require austarity for the bulk of our population to ease the debt. With liberty, justice and Medicare for all.
Re: Modern Monetary Theory [message #96305 is a reply to message #96268] Tue, 24 January 2023 11:10 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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This is a good sketch of contrasting economic thoughts. Austrian vs MMT. Randall Wray again. Being one of the co authors of MMT with Bill Mitchell, shows his prowess with the subject. There's instances where the two economist share similar views. Principally the role of the Federal Reserve system. Randall though as the progressive non orthodox group of economists shares a deep grasp of economic history necessary to bolster their rhetoric. A good clash of styles here. Much too short to encompass either doctrine. A thumb nail sketch it is.

We've lived with the Austrian type of economy for a good enough time to see it not living up to it's free market fantasy. Government has always been integral to business and society. Capitalism gave rise to more choice and prosperity only to stymie it through it's responsibility only to it's self interests. There has to be a balance with both that is sorely missing today. MMT has practical approaches to mitigate this imbalance.

https://www.youtube.com/watch?v=ROuXUr4yg8A&t=2s
Re: Modern Monetary Theory [message #96308 is a reply to message #96305] Fri, 27 January 2023 10:20 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Interesting to read about Japan's inflation rate. Their central bank hasn't done the destructive habit of raising their interest rate to control inflation. They've left it alone. Their inflation rate is now at 4% and expected to drop to 2% in time. The US is at 6.5 now and aiming to drop to 3.2% hopefully. What it shows with monetary policy is that it is unnecessary to put people out of work and make the public have to spend more for goods and services to get inflation under control.

There is a false notion also with western ideology that the bond market can be driven up with speculation which is totally false to reality. Any sovereign government can do this.

Bill Mitchell, lead author of Modern Monetary Theory can see through the Investment cabals propaganda that warps reality.:

Bank of Japan stuns financial markets again!

There was disbelief last week among financial markets over the Bank of Japan's decision to leave their policy settings unchanged.

One Twitter hero who keep pronouncing Modern Monetary Theory (MMT) dead (he seems obsessed with our work) also wrote recently that the major play in financial markets now is pressuring the Bank of Japan to change policy and come into line with the rest of the world.

He seems to think that it is the financial market greed merchants who rule the show and can force the policy makers in Japan to cower in fear and adjust policy so that the speculators walk away with billions in profits irrespective of the policy impacts on the people of Japan.

He is continually wrong about everything including the power of the financial markets.

There is now widespread financial market speculation aiming to profit from a change in the Bank's policy, which the 'clever' financial markets think is inevitable because, after all, mainstream economics says that when inflation is rising interest rates have to rise.

Fools' logic.
Re: Modern Monetary Theory [message #96319 is a reply to message #96308] Mon, 30 January 2023 12:09 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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What causes inflation? The latest revelation I seem to hear is that the government has been spending too much. Sounds very familiar. So the debt limit chicken game is in effect. Give concessions or shut down the government. This charade has been a staple for many years now.
There may be, just maybe, other factors involved that aren't fleshed out... At all. Here's one. Asset inflation. Michael Hudson explains:
What has really been inflated, since 2008, has not been consumer prices, but asset prices -- [that is,] real estate prices, stocks and bond prices, things that the 1% hold. Wealth has been inflated much more than goods and services. [This is especially true] for real estate.

This debt has been inflated not by government debt, not by government deficits, but by the Federal Reserve creating a $9 trillion subsidy to the banks to support real estate prices, and hence the value of bank-held mortgages and stock and bond prices.


What about the big corporations showing tremendous profits during this period?
Hudson:
All across the board in the United States companies have been saying, "We're raising the prices because we think there's going to be inflation, and we're just trying to raise it in advance."

Since the Democrats took power in the 1990s under Clinton, they've stopped the anti-monopoly regulation. They've stopped the antitrust laws from being enforced, and you have a great concentration of monopolies, and they can raise prices for whatever they want, as much as they want. For agricultural goods, the distributors have simply raised the prices without paying the farmers and the dairy farmers any more.

So when you say that inflation is only a monetary phenomenon, what Milton Friedman is saying is, "Don't look at the power structure. Don't look at how markets are structured. Don't look at monopolies. Don't look at how the wealthy corporations are inflating [prices]. Look at something that we can blame on labor."


The meaning of money.
Hudson:
Money is -- most people think of it as an asset: what you have in your pocket. All monetary assets have debt on the other side of the balance sheet. All money is debt. The currency in your pockets is actually, technically, a debt to you.
By far [though], most money is bank credit. And bank credit is debt. And if you look at debt, then you have a whole different perspective, not only on inflation, but on how wealth is created and how the economy is polarizing.

You have to look at the whole economy as an economic system, which you and I have been talking about for years. The purpose of the mainstream media talking about inflation is to prevent you from looking at how the economy is working, to prevent you from looking at how corporations are raising prices, and to prevent you from looking at monopolies and war.


When an economy is financialized, privatized and monopolized, we have thus..
The Hudson Paradox:
More money and credit is used to bid up asset prices for housing, and retirement income, and that puts downward pressure on consumer spending. Because if you have to spend more money on paying a mortgage, on a house that's rising in price, if you have to spend more money on rent, if you have to spend money on monopolized healthcare services, on monopoly goods in general, then you are going to have less and less income to spend on goods and services.

Again, what's deflated is [the] spending of 99% -- well certainly 90% -- of the population on goods and services, because their spending is diverted to pay for access to assets and to monopolized goods, and to goods that are subject to protectionism or warfare.

So the irony is that asset price inflation leads to rising housing prices and consumer income deflation. You have to look at the economy as an economic system, [not simply as] two variables ( consumer prices and money).

You have to look at who owns the wealth, who owes what to whom, how much debt is diverting money away from consumer spending to the upper asset holders (the 1%, the 10%), who owns most of the stocks and bonds and real estate, and who are now buying up private capital investment in medical practices, and almost every kind of consumer goods, and taking them private, and sharply raising the prices.

If you don't look at how the economy is structured, and how the ownership is changing, and the relationship between ownership and non-ownership, and consumption and labor, you're going to miss all of the variables that are really necessary to explain how the economy works. Most discussions of inflation are designed to avoid talking about how the economy works.


So what's wrong with privatization and monopolization?
Hudson:
What's caused this is the privatization of what used to be social infrastructure services. The whole dynamic of industrial capitalism, a century ago, was to lower the cost of basic needs, of retirement income, of healthcare, of education, because if you could provide these basic needs freely, or at subsidized prices, then you wouldn't have to pay labor more wages to buy a high-priced education, or high-priced healthcare. You would make your industry more productive because you [lowered] the cost of living by socializing the cost of education, medicine, transportation, communications.

The prices of these monopolized services have increased not only because of higher debt service, but because of higher dividends, higher managerial payments. None of this would occur under the previous public sector services. So you have a transformation of the organization of industry as a result of privatization that builds huge financial costs to the banks and to the financial sector into the pricing of goods and services. So the whole character of what the prices consist of is transformed and expanded and inflated.

What is capitalism now?
Well, there's obviously two kinds of capitalism. The textbooks like to talk about industrial capitalism, especially industrial capitalism as it seemed to be evolving in the 19th century into socialism.

But what we've had instead is something very different, and that's finance capitalism, that's based on basically rentier income: land rent, monopoly rent, natural resource rent, and financial debt charges. So when you talk about demand, the textbooks think, "Well, workers pay their wages on buying goods and services." But that's not what they do at all. That's not how it works. Before they have any money to spend at all, they have to pay their taxes that are taken off, and their medical care. That's taken off the top of their paycheck, and they are given after-tax income.


So the actual disposable personal income is not simply what they can spend after paying taxes, but what they can spend after paying taxes and rentier services. And [the] increase in these various forms of economic rent has widened so much that it squeezes what's actually available out of the worker's paycheck to spend on goods and services.

And if you don't look at this rentier overhead, then you're not going to understand why finance capitalism today doesn't produce the rosy results that advocates of industrialism talked about. They are 100 years behind the times. They are not looking at the transformation into finance capitalism and how it's transformed the economy.


What's the Federal Reserve's role?
Hudson:
Well, the Federal Reserve was created in 1913 to take monetary policy out of the hands of government. The idea was, actions that the Treasury used to do -- managing the economy -- would be transferred to Wall Street and other centers. The Treasury Secretary was not even allowed to be a member of the Federal Reserve Board.

J.P. Morgan organized the bankers and said, "We're going to take the twelve Treasury districts and we're going to make them into Federal Reserve districts. Basically we're going to shift economic planning away from Washington and put it in the hands of Wall Street in New York, Boston, Philadelphia, Chicago, San Francisco. But we're not going to let the government do the planning. The problem is that people vote for politicians. And you don't vote for who's going to be on the Federal Reserve Board. We've got to take planning away from democracy and put it where it belongs: in the hands of the 1% and the bankers."

That was the purpose of central banks in every country. Central banks were the alternative to socialism. Central banks were to prevent industrial capitalism from developing into socialism, but [rather] to develop into a financialized capitalism that instead of being productive was predatory.


What's wrong with this Federal Reserve policy?
Hudson:
Well, what's wrong with it is that it believes that the way to make an economy grow is to make it poorer.

This is the doctrine that the International Monetary Fund tells all of its borrowers. Latin America, Africa, Asia. [The IMF says to them,] "If you can only prevent labor unionization. If you can only cut social spending. If you can lower wages, you'll be more competitive and you will grow. So yes, we will bail you out of debt so you can pay the bondholders in the United States and other dollar bondholders, and the foreigners who've lent you money, because the World Bank has pushed you into dependency on the creditor nations. If you can pay them by being poorer."

That's the financial philosophy. The financial philosophy in a nutshell, is: Pay labor less, leave the economic surplus for the owners of wealth, the owners of money, and most of all the owners of [monopolies on] creating credit and creating money. That's what makes Western capitalism different from the Chinese system, where it's the central bank of China that creates the credit, not the commercial banks that end up turning all of this rent into interest and economic overhead that is responsible for most of the cost increases.


What are the long term consequences of this policy?
Hudson:
The fact is that the debt that has been run up can't be paid. There is no way that the Federal Reserve can cope with the fact that every recovery since WWII, every recovery since 1945, has started from a higher and higher and higher debt level, until, now, there's so much debt that the economy cannot compete, and cannot avoid homelessness and polarization, unless the debt is wiped out.

And that is what the Federal Reserve doesn't do. The Federal Reserve can't change the financial system and say, "Well, for the last 100 years, actually for centuries, commercial banks, when they make a loan, they make it against collateral. Banks do not make loans in order to create new means of production. The stock market may do that, for seed capital. But banks don't lend for assets that are not already in place. They only lend against assets that are already there that they can foreclose on if the debt can't be paid."


Well, we're now in a mass foreclosure period, and the reason that all this $9 trillion was created when Obama bailed out the banks, was that the banks were insolvent. They had made so many bad loans that, as the FDIC had pointed out, Citibank was bankrupt, all the big banks were broke. We spoke about that in the very first show. And the financial system is still basically insolvent. It's being kept alive -- it's a zombie-bank system, keeping zombie corporations afloat by more and more debt that ultimately is going to have to be written down.

But banks don't do that. And the only solution is beyond the Federal Reserve's policy. Number one, [it has to] write off the bad debts. This is certainly obvious for many Global South countries. But you also have to have a different financial system. You have to make credit a public utility, as it is in China. A public utility that actually is designed to create money and credit, to create new means of production, without adding to the overhead costs and debt service.

This requires de-privatization as well as making credit a public utility. Economic rent should be socialized and used as the basic tax base so you don't have rent being used to pay interest. You have rent to prevent housing prices from being bid up on credit by a financial sector whose job is to inflate asset prices to keep the Ponzi scheme going so the economy doesn't --


So this is the ongoing dilemma that is never addressed, never discussed or made note of. It's sacrilege to challenge the conventional dysfunction. That's all for now folks. See what you think.

Re: Modern Monetary Theory [message #96360 is a reply to message #96319] Sat, 11 February 2023 08:58 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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It never fails to amaze me what it will take for the American public to say enough already! What compels us to pick sides on petty issues bandied back and forth in our legislative bodies? That we can't realize that it's all just a ruse to steer us away from realizing that our monetary system is of economic decrepitude. This one article pinpoints the chronic nature of our financialized system preying upon the public. They're infinite source of revenue they think.
https://www.npr.org/sections/health-shots/2023/02/11/1154962356/ers-hiring-fewer-doctors

Listening to stirring visions for rekindling our once thriving manufacturing and service economy falls flat with the realization that the general public is stressed with so much debt deflation of their income that the idea our economy can thrive again with all the overhead heaped on us is ludicrous.

As long as this type of fleecing of America is allowed, it's wishful thinking at best, or a fraud most likely perpetrated on our society by our banking, finance and bribed political cartel.
Re: Modern Monetary Theory [message #96374 is a reply to message #96360] Tue, 14 February 2023 11:40 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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https://michael-hudson.com/wp-content/uploads/2023/02/arm-wrestling-567950_640.jpg
Money is political

Fascinating reading this transcript. What is money really and how it has manipulated the world over the millennia. Read it and learn.

https://michael-hudson.com/2023/02/since-money-is-political/
Re: Modern Monetary Theory [message #96519 is a reply to message #96374] Wed, 15 March 2023 12:05 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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If anybody want's to get a handle on the latest continuum of financial chaos going on. It's just a part of our existence now right? But the banking failures happening in the news lately get some deserved media treatment and the underlying dysfunction of the Federal Reserve system enabling our Wall Street, corporatized and financialized economy to be the single source of all the chaos. Easy Money. There was a movie with that title. But Rodney Dangerfield had to work for it. These creeps barely lifted a finger. The Fed. did the work for them.

Frontline: The Age Of Easy Money
https://www.pbs.org/wgbh/frontline/
Re: Modern Monetary Theory [message #96535 is a reply to message #96519] Sun, 19 March 2023 13:46 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Even Investment CEO's acknowledge that the role of the Federal Reserve and central banks world wide are the crux of our financial turmoil. Jeremy Grantham expresses his disdain of this institution's chairmen over the decades. How can the publics financial stability and long term optimism occur when unfettered speculation is allowed and indulged with no penalties. Jeremy was featured in the documentary Age of Easy Money insinuating the Fed is the promotor of high finance as a bloodsucker mentality.

https://www.bloomberg.com/news/articles/2023-03-10/podcast-jeremy-grantham-says-fed-has-been-horror-show-since-greenspan?leadSource=uverify%20wall

I wonder if anyone here feels the same? The only time anyone bothers to comment on this thread is to say the national debt has to be lowered. But how does anyone suspect it can be lowered unless it's born on the backs of the wage earners? Do we have to take concessions on our social entitlements? What has to give, further austerity for the majority or not allowing the tiny minority to grab and keep as much for themselves whatever chaos from their gluttony occurs.
Re: Modern Monetary Theory [message #96536 is a reply to message #96535] Sun, 19 March 2023 18:27 Go to previous messageGo to next message
Wayne Parham is currently offline  Wayne Parham
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If I were totally in charge, this is what I would want to do. If someone convinced me my thoughts were wrong - I'd listen - but this is the way I think, and a list of the things I'd do if I could.

1. I would reduce all social programs except those for the truly needy. That means demonstratably incapable of work. All others would perform whatever work they were capable of doing, which would be enforced by law.

We have some voluntary programs like that, usually used for those that have "special needs." But it is voluntary and not mandatory. Many don't participate, and that's a waste - both for the individual and for society. I would make that process mandatory, so for those that didn't voluntarily choose a workplace, assign work appropriate for their skill level. If someone is truly incapable, then they would receive unilateral social services, of course. But of they can be of assistance in some way, then they should.

The work mandate is really more for all the able-bodied folks that have chosen a path that doesn't include work. It's for many of the homeless. It's for the drug addicts. And it's for those that are just down on their luck. I'm not trying to make a judgement call here - not at least a mean-spirited one - but working and interacting with others always helps one's state of mind. And it also helps get 'em off the welfare teat. So work should be mandated rather than allowing welfare to be a way of life.

Consequence of failure to comply would be incarceration, and by that, I don't mean a jail where folks don't do anything productive. They would perform work which would be used for profit and would pay for their room and board. So they would either work voluntarily or through incarceration. This "work jail" wouldn't be as much a jail as it would be an organization that provides room, board and food and hires out the individuals living there to organizations that need their labor.

These kinds of "work programs" are common in recovery circles. They're not quite the same as halfway houses - which require each person in the house to have a job and be responsible - but they're similar. In this case, the work program actually sends out people in a crew to do work that is paid for by contracting individuals and organizations. It is often work like landscaping and construction, but could be anything.

This mandated work wouldn't apply to seniors and wouldn't reduce social security for all the folks that have paid in for a lifetime. That wouldn't be fair to them. But I would have no problem with things that help 'em stay active, maybe offering some kinds of age-appropriate work for those that wanted to participate. I don't think it would be fair to mandate that, but it would be nice to offer work assistance to seniors as perks.

Many seniors have part time jobs to help with that anyway. Maybe offer government or "government-adjacent" service work to gain extra medical benefits, or maybe other types of additional benefits. That would help the social security program stay alive, help seniors stay active and help the younger crowd with funding what is an increasingly lopsided transfer program.

2. I would mandate a path that reduced the national debt. I wouldn't tank the economy to do it, but I would definitely move in that direction. So that would mean reduction of services at least until we achieve budget credits enough to pay down the debt in some period of time, which by now - with our huge debt - would probably take quite some time to do.

3. Industries that were important but losing profits - especially due to things like energy or ecology - would be protected by subsidy. Examples are steel, rare earth mining and working, all energy industries (e.g. oil, gas, nuclear, solar, wind), integrated circuits, aerospace, etc. We cannot allow competing economies to financially undercut these industries and then monopolize on them.

I'd put all financial emphasis on maintaining the strength of our industries. I think our strength in the last 100 years or so was largely from our industrial might, and I think we need to fight to protect it. Dump all the costs for social services and put 'em into protecting our technical strengths and the industries that provided them.

4. I think federal politicians should not be allowed to own any stocks, bonds or any other sort of financial instrument. If one chooses to enter federal politics, they agree to sell all such things and never purchase any others for the rest of their lives.

They also should not be allowed to participate in any private business venture of any sort, nor should their spouses. And any family or friend that owns a business or is an executive in a business should have to endure quarterly inspections from the federal government, looking specifically for any sort of "favor." Penalties for taking advantage of political ties should be strict, rising to the same level as treason.

That may be strict, but it should be part of the requirements for entering politics. Family members of those in politics may have jobs, but they cannot have jobs that could potentially allow a misuse of power.

I think one of our biggest problems is that we allow politicians to profit from "business deals" - which then compromises them - so I think they should not be allowed to have any business entanglements, whatsoever. They get a pension, and that's it. If you want to enter politics, you must be permanently barred from owning any investment at all. If that's not what you want, then don't enter politics.

Right now, it's clear to me there's too much "having cake and eating it too" up in Washington. And I think that's probably our single biggest problem. Take the power grab and the pork party out of the equation.
Re: Modern Monetary Theory [message #96537 is a reply to message #96536] Mon, 20 March 2023 07:46 Go to previous messageGo to previous message
Rusty is currently offline  Rusty
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Great Wayne. Thanks for a dialog with your practical views. I know that a large part of the MMT initiative is to have a national job guarantee program with a livable income to help stabilize the social network from the inevitable downturn in the business cycle. The current unemployment system is a hodge podge variety, ineffective and wasteful.

Interesting your view on financial emphasis on maintaining industry. That was the construct of Industrial oriented economics. Which promoted socialized subsidies as a means to keep the cost of living low for a competitive working class. That has been usurped by rise of finance capitalism. Driving up asset prices and the cost of living. Resulting in a chronic loss of an industrial base in this country. A mixed economy is a healthier economy.

For me one of the most dysfunctional aspect of politics is the rise of quid pro quo lobbying and campaign finance. Eliminating influence access of the elite could go a long way towards an ethical legislative effort benefiting the better portion of the population. Your points on nepotism and insider enrichment politically are right on.

The economists I've been following have some very good ideas to add to a public dialog that do not get the attention they deserve. Our entire new century has been wallowing in crisis mode from a system of economic doctrine that isn't effective to the greater portion of the public. Amongst the few are:

A National job guarantee, worker co-ops, land taxation rather than personal property taxation, public utilities and public banking, limiting the Federal Reserve by putting the purse strings back to the Treasury Dept., bolstering Social Security by raising the income threshold from where it ends now and not the least, a national healthcare system.
All utilized to help average citizens be able to thrive by their own means in a more stable economic system.
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