Home » xyzzy » Dungeon » Modern Monetary Theory (or, how I stopped worrying about the natl debt.)
Re: Modern Monetary Theory [message #94756 is a reply to message #94719] Sun, 07 November 2021 08:57 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Can the United States Government run out of money? NO! How? It is the issuer of the sovereign notes. All taxes MUST be made with the sovereign notes. This is true of any government that has a sovereign money supply. So, France, Germany, Italy do not have that capability like the US, Britain, Russia and China. They are bound by a debt ceiling.
We only do so for political jousting. Unfortunately.

The only constraint our sovereign money supply has is inflation from too much money not being used in our money supply. And of course resources. A minimal infrastructure bill has been passed, though it could be much larger. For the need is much larger. How is it that we can squander 6.4 trillion in 20 years of war in the middle east with no inflation. But spending half that in half as many years for worthwhile domestic improvements is inflationary? Politics of course, and the Neoliberal chokehold on our economy.

Stephany Kelton explains the deficit myth. It really is.

https://www.youtube.com/watch?v=mmuysv17T9M
Re: Modern Monetary Theory [message #94763 is a reply to message #94756] Mon, 08 November 2021 15:18 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Politics. I've been voting donkey all my life. I've admired a few pachyderms. McCain comes to mind, Everett Dirksen going way back. I think it was his unkempt hair and gravely voice. But too many now are diseased. I agree with this assessment. Both party's are out of touch with the public. Unless the lobbyists are neutered and the big money contributors are blockaded. Nothin is gonna change. It's all smoke & mirrors. People just want something better. They won't get it, with either party.

https://michael-hudson.com/2021/11/the-unreformable-democratic-party/
Re: Modern Monetary Theory [message #94843 is a reply to message #94763] Mon, 22 November 2021 10:01 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Let's re-learn from China what they learned from us. A nice article by Richard Wolff.

Article by Richard D. Wolff

"The superiority of the recent Chinese record over that of the United States is persuasive evidence for China to continue its policy. China learned from the United States how to outperform U.S. capitalism."

U.S. capitalism was, in certain ways, the world's most successful capitalism until recently. Better than the capitalist systems of Britain, Germany, and Japan, U.S. capitalism avoided two key traps. First, it found a remarkable way to manage the capitalist-worker class struggle for a long time before it lost that capacity. The United States also found a way to organize its imperial rule without the overt colonialism that provoked rising resistance that eventually became too costly and unmanageable for Britain, Germany, Japan, and other colonial powers. But in recent decades, U.S. capitalism failed to manage its class struggles or to reverse the decline in its informal imperialism.

Chinese leaders have learned, implicitly or explicitly, from how U.S. capitalism lost those capacities. Thus, China organized both its employer-employee relationships and its international linkages differently. By doing so, the Chinese economy is ascending while that of the United States is descending. The process is, of course, uneven; the differences between the United States and China vary. But the general pattern and direction remain the same: China up and the United States down.

From 1820 to the 1970s, U.S. capitalism employed a fast-growing number of workers and paid them a real wage that grew every decade until the 1970s. That remarkable performance enabled, validated, and combined with a culture that emphasized consumption (the positive) as the compensation for labor (the negative). The combination blunted the appeals of dissidents, radicals, socialists, and other critics of capitalism until the 1930s. Productivity grew across the 150 years even faster than real wages and boosted profits rapidly. The United States outperformed other capitalisms in both the profits accruing to the employer class and the real wages flowing to the employee class.

The 1929 stock market crash and the 1930s Great Depression were the exceptions that proved the rule. U.S. capitalism then broke down, as did its promises of prosperity and growth. Fearful of a collapse, the U.S. employer class--via former U.S. President Franklin Delano Roosevelt's Democratic Party--offered a deal, which was an alliance of sorts to the employee class. The deal was brokered by capitalism's leading critics then: the Congress of Industrial Organizations (CIO) plus two socialist and one communist party. Together, employers and employees produced the New Deal, and a political lurch to the left undid a good part of the economic inequalities built up in the United States before 1929. It was a "great reset" that, with World War II, enabled a resumed upward arc of U.S. capitalism. Moreover, that arc took on an added imperial dimension when World War II undermined the old formal colonial empires, allowing the U.S. state to move quickly to replace them informally.

But the U.S. employer class made a huge strategic blunder after the end of the Roosevelt era and World War II. It failed to recognize how the left's strength in the 1930s had inadvertently saved U.S. capitalism via the "great reset." The New Deal was in large part a "trickle-up" Keynesian stimulus, unlike the traditional "trickle-down" economic policies of U.S. governments, past and present. It brought the United States out of the Great Depression while reducing income and wealth inequality unlike the decades before and after. But blinded by the fear of and rage at paying taxes to fund the New Deal and other similar reforms, the rise of a strong U.S. left, and World War II's U.S. alliance with the USSR, the employer class determined to roll all that back after 1945. Chiefly via its Republican Party wing, the employer class set itself the task of undoing the New Deal by destroying the coalition that created it (CIO plus socialists and communists). The employer class successfully wrecked that coalition and each of its components. However, that wreckage also reoriented U.S. capitalism onto a trajectory that ended its 150 years of ascendancy.

By the 1970s, the reset stalled. U.S. employers had so vanquished labor and the left that they indulged opportunities to enhance profits without fear of or even much concern about employee reactions. Many U.S. employers relocated their production abroad where wages were far lower, making the U.S. companies' profits much higher. Many more employers in the United States undertook rapid automation. New immigration policies were waved in. Good proletarian jobs gave way to the precariat that today's younger generations take bitterly for granted. Instead of real wage gains across every decade from 1820 to 1970, the last 50 years saw real wages stagnate alongside deepening household debt.

Thus, the 21st century's cycles have been progressively larger and harsher, rivaling that of the 1930s. Yet no comparable political left shift has occurred, no revival of a movement yet along the lines of the New Deal Coalition. This time, a deep crisis yields no massive "trickle-up" policy component. Income and wealth inequalities continue to worsen. No left-led reset is occurring to save U.S. capitalism from sinking into ever deeper economic, social, and cultural conflicts.

Meanwhile, many policymakers in China have drawn lessons from the U.S. experience: which policies to replicate and which policies to discard. China saw that U.S. capitalists had often worked closely with the U.S. state successfully to undertake major projects by coordinating and mobilizing public and private resources. These included fighting a century of wars to subordinate, evict, or exterminate the Indigenous population, waging wars of independence from Britain in 1776 and 1812, ending a competitive slave economy in the U.S. South via civil war, undertaking infrastructure capitalists needed to grow (such as canals and railroads), advancing U.S. capitalists' interests in and the subsequent recoveries after World Wars I and II, and replacing the old colonialism systems after 1945 and substituting U.S. global military, economic, and political dominance.

In China, economic policymakers also have taken note of when weaknesses and reverses afflicted U.S. capitalism. The relatively unregulated capitalism after World War I eventuated in the 1929 crash. Likewise, the deregulated ("neoliberal" or "globalized") capitalism after the 1970s eventuated in the 2008 crash. Refusing national health insurance enabled a private medical-industrial complex to overcharge and slow U.S. capitalism to benefit from its excess profitability. It also underprepared the United States for the COVID-19 pandemic with catastrophic results.

More generally, China concluded that in the United States, achieving prioritized social goals happened more when public and private resources were coordinated and focused to do so. China also observed that wars and economic crises often produced this coordination and focus in the U.S. The logical inference by economic observers in China was to consider that a continuous program of coordination and focus could more generally outperform what the United States had achieved with its merely occasional program.

That conclusion fit nicely also into China's conception of socialism with Chinese characteristics. In that conception, a strong Communist Party and the state it controls secure the continuous program of coordination and focus of a system that mixes private and public enterprises. China's economic leaders attribute to that continuous program an impressive annual GDP growth rate record. From 1977 to 2020, China's average annual GDP growth rate (9.2 percent) was well over three times higher than the U.S. record (2.6 percent). The average real wage in China has also steeply risen in recent years, which the country points to as another success of its economic system. In contrast, U.S. real wages have stagnated recently. The superiority of the recent Chinese record over that of the United States is persuasive evidence for China to continue its policy. China learned from the United States how to outperform U.S. capitalism.

Karl Marx once wrote that no economic system disappears until it has exhausted all its possible forms. If one understands economic systems, with Marx, as particular ways to organize the human relations of production, then capitalism is that way that juxtaposes employers versus employees. The United Kingdom, but especially the United States, developed that economic system with a strong emphasis on its private enterprise forms. The USSR developed that system with a strong emphasis on its public enterprise forms. China, meanwhile, developed that economic system by mixing private and public enterprise forms (as Scandinavia and Western Europe also did), but with an emphasis on strong central control to coordinate and mobilize both private and public enterprises to achieve prioritized social goals.

China may thus be where the capitalist system reaches the fullest potential of its various forms--exhausts them in that sense--and thus prepares the way for a transition beyond capitalism.
Re: Modern Monetary Theory [message #94875 is a reply to message #94843] Wed, 08 December 2021 19:30 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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I've always liked L. Randall Wray's style of writing. He keeps it on point and pretty short. And layman friendly. He writes here the classic take, including rant, on our national debt. We've always had it since the inception of our country. And it's the govt's. debt that is our private sectors surplus. What it's used for is what is the good, the bad and the outright waste it pays for. But, it gets paid for without a doubt.

https://www.levyinstitute.org/files/download.php?file=op_68.pdf&pubid=2740

To the chronic naysayers he ends thusly:

"So, while there are strongly held beliefs about the negative
impacts of deficits and debt on inflation, interest rates, growth,
and exchange rates, they do not hold up to the light of experience. When faced with the data, the usual defense is: Just wait,
the day of reckoning will come! Two centuries, and counting."

Two centuries and counting. Very clever.
Re: Modern Monetary Theory [message #94880 is a reply to message #94875] Thu, 09 December 2021 09:22 Go to previous messageGo to next message
Wayne Parham is currently offline  Wayne Parham
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Not sure I would agree with that statement. It's clever sounding, but then again, it also sounds like spin. The USA hasn't been in debt like this for two centuries, not even close.

/forum/index.php?t=getfile&id=2917&private=0

The only time we've been in debt like this was during WWII, and we actually appear to have somewhat benefitted from that debt 'cause we used it as loans to other countries for the lend/lease program. And while we had to rebuild our economy after WWII, the rest of the world had much more to rebuild so we were better off by contrast. We can't say that now.

As I've often said in this thread, I hope the MMT proponents are right but my crystal ball doesn't glow as bright. Time will tell. I do definitely hope they're right though, or else I hope we adjust our course. Or maybe a little bit of both.

Re: Modern Monetary Theory [message #94881 is a reply to message #94880] Thu, 09 December 2021 12:01 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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That is not spin. The spin is what the deficit hawks use to inspire paranoia for the future of our children. Consider Japan and their debt to GDP ratio. The highest in the world at 235.54% with a population of 127 million. For decades main stream economists have like end of the world religious kooks, been wagging their fingers at them that the end is near and doom will follow. We're at number 8 per debt to GDP per population.

We haven't been in this kind of debt before because we haven't wasted so much money before with bail outs for financial malfeasance such as the GFC, (global financial crisis) to the tune of 29 trillion caused by the greed of the real estate and banking institutions. 20 year wars in the middle east for over 6 trillion. Military budgets, for this year alone that approach what is allocated for our infrastructure for 10 years.

As pointed out by Mr. Wray in his article:
Since the founding of the nation, the
Treasury has ended most years with a deficit, so the outstanding
stock has grown during just about 200 years (declining in the
remainder). Indeed, it has grown faster than national output, so
the debt-to-GDP ratio has grown at about 1.8 percent per year
since the birth of the nation.
If something trends for over two centuries with barely a
break, one might begin to consider it normal. And yet, strangely
enough, the never-achieved balanced budget is considered to be
normal, the exceedingly rare surplus is celebrated as a noteworthy achievement, and the all-too-common deficit is scorned as
abnormal, unsustainable, and downright immoral.


Apparently we have a belief system in our economic dogma that runs counter to what the data points out and prioritizes a false reality.
I'll put my stock in MMT and ditching the Neoliberal system we have been in since the late 70's. What we have is not working for the majority and needs to be changed.
Re: Modern Monetary Theory [message #94882 is a reply to message #94881] Thu, 09 December 2021 13:38 Go to previous messageGo to next message
Wayne Parham is currently offline  Wayne Parham
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I agree that we've wasted a ton of money in the last 50 years. You and I definitely agree that federal spending has been out of hand since the mid-1970s. And I think that's my point - I'm just not sure that we can increase debt without consequence. I understand that our fiat currency can be adjusted without an external point of reference, and I also understand that our currency has actually been treated as if it were the reference. It's just that I wonder how long we'll be able to maintain that position.

By spin, what I meant was the mention of "two centuries and counting." The writer clearly implicated that we've had debt (just like this) for the last two-hundred years and that's just not so. I don't know whether or not the other concepts are spin, but I do know that we haven't had debt like this for two-hundred years. It's not even accurate to say that we've had a linear increase for two hundred years. It has been up and it has been down. But it has skyrocketed in the most recent decades.

The only other time we've had debt at this level was the years around WWII, and we reduced it rapidly in the two decades that followed. Those post-war years were probably the most economically successful years in America's history.

I'm not sure about the causal relationships though. I don't know if it was the rapidly diminishing debt in our post-war years that caused our success, or if it was our success that funded the rapidly diminishing debt during that time. I'm not even sure there was a causal relationship, and I think that's what the MMT proponents would say. They would probably say there is no causal relationship between national debt and overall economic success. I think that's their basic premise. But I'm not sure I agree with that. It kinda goes against reason.

Maybe it's because I see things from a micro-economic view, or maybe I should say from a "family-checkbook" point of view. National and global economists must see things from a macro-economic point of view. Maybe they're completely different things. Certainly other complex systems are very different from micro to macro perspectives, so maybe economics is too.
Re: Modern Monetary Theory [message #94883 is a reply to message #94882] Thu, 09 December 2021 18:28 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Good to have a discussion with someone Wayne. I seem to windmill all alone in this thread.

It might be worthy to keep in mind that the income tax rate after WW2 and up until the early 60's was over 90 % for upper incomes. And the corporate tax rate over 50% in this period. Which seemingly didn't have detrimental effects with our ability to have a thriving GDP of over 4% in the mid 50's compared to an average rate of 1.8 % in the new century. Which could have some correlation for the surplus of debt reduction in that time period compared to the last 40, 50 years? And banking was prohibited from risky investing in that era. Both personal upper and corporate tax rates since the 70's have tapered down significantly since our golden era. Which seems to be inversely proportional to the perception of low taxes creating prospects of greater GDP.
The author is not saying that our debt has been constant like this decade throughout our countries inception. But he's giving an average over 200 years with the plus and minus of our debt and tax revenues. On average 1.8%. Which is consistent with a typical yearly federal debt and never with a mythical balanced budget. Never obtained, never needed and much ado about nothing.

I think MMT is pointing out the misconception that our mainstream economic theories have with the concept of money, accounting and debt relationship is with our overall economy. Yes, the macro realm. As in physics, Newtonian physics can't account for the big picture taken up by Quantum physics. The realities being presented by mainstream economics run into inconsistencies and unrealistic economic expectations with underwhelming results. MMT doesn't claim that the government can spend unabated without economic repercussions. But it shows there is more room for spending than the mainstream claims is inflationary. And the data points that out.

The usual decree for dealing with the national debt is all too familiarly expressed by administering austerity. Which destroys the publics ability to thrive. Whom it's consistently directed at. Not the upper classes unearned income investing or the corporate stock buyback initiatives.

Overdue is Wall Street and our investor class know what austerity is like. They've been historically this century bailed out enough. Resulting in our bloated national debt. In the mean time, let the public get a dose of investment. What currently is being offered and diminished but for the hysteria of the national debt is inadequate.
Re: Modern Monetary Theory [message #94893 is a reply to message #94883] Fri, 10 December 2021 20:31 Go to previous messageGo to next message
gofar99 is currently offline  gofar99
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Hi,Other thoughts....I agree generally that debt is not desirable, but when we compare it to historical levels are we using the inflated value of the dollar now as compared to back then? Also is the percentage of the GNP vs debt the same or worse?

Good Listening
Bruce
Re: Modern Monetary Theory [message #94897 is a reply to message #94893] Sat, 11 December 2021 08:56 Go to previous messageGo to previous message
Rusty is currently offline  Rusty
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Don't know Bruce. I'm not an economic wonk. I see from a cursory look that GDP is the standard international measure since 1991. I'll give some measure of reliance that the writer of the article being a seasoned economist can take various aspects of data into balance. Just as you would for designing audio gear. I think the author, along with his MMT colleagues stress that the mania whooped up with the national debt is overrated. And obscures the factors in our economy that are prevalent enough that the great middle class once attributed to our economic strength, no longer can be boasted about.
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