The authors are making fools of themselves with this statement:

As a nation, we will have to make a choice, one way or another. If the national debt grows faster than the economy for long enough, investors could lose their appetite for Treasury bonds, making it impossible for the government to borrow money at any price — as almost happened in 1813.

56 Responses

      1. @Kristjan, ‘one should never compromise principles, no matter how much trouble other people have in understanding them’

        7dif p4.

      2. @WARREN MOSLER, A longer book? A meeting with someone like Paul Krugman (you must like at least some of what he says, and he has an influential perch). Dean Baker is an even better choice. He is pretty close to MMT now and get’s on the tube fairly often.

      3. @SteveK9, I agree with Steve here. A full length book aimed at a lay audience is what is needed. Perhaps you could combine forces with Randy Wray, Stephanie Kelton, Marshall Auerbeck(sp?), Bill Mitchell, etc. Next step would be to get one of you on a popular show like The Daily Show. I’m not sure what the process is for that, but I’ve seen far less interesting people on there. For the mean time, keep up the radio interviews you’ve been doing and I’ll keep making people listen to them.

      4. @SteveK9,
        Randy and Bill Mitchell are writing a textbook. Knowing Bill, it will be plenty long. Stay tuned. (Due next year?)

      5. @SteveK9,

        Well, I wrote to Mark Weisbrot (Dean’s junior partner at CEPR) about MMT and he wrote back and asked for some info/links. I sent him some things and promised not to bug him after that.

        What Dean Baker writes is often very close to MMT principles (as I understand them). There are just a few pieces missing. Maybe Mark would be more accessible.

        I do know that Bill Mitchell and Randy Wray are writing a text. Didn’t know it was that long in the making … often seems to be the way.

      6. dean has read my book and i’ve discussed it in depth.

        he believes the progressive agenda is best served by what he’s doing.
        i disagree.
        it’s about lerner’s law

      7. @SteveK9, Well this is kind of a coincidence. Here is Dean Baker criticizing Johnson & Kwak’s book ‘White House Burning’. Not exactly the same critique, but interesting.

  1. I could have been an economist, but I wound up here.
    I just have to sound good, I don’t have to be clear.
    Let me whisper in your ear ’bout US Bankruptcy!

    See the bubbleheaded goldbug coming on at 5
    Talking Bond Vigilantes with a glint in his eye
    It’s interesting when people lie, ’bout US Bankruptcy!

    Trick ’em when they’re up
    Trick ’em when they’re down
    Trick ’em till they vote
    For another clown…

  2. Warren,

    I am one of those you have managed to convince, but I am not ‘convinced’ enough to convince others when they bring up parts I don’t understand. I just read the Johnson & Kwak article. It doesn’t comport with my understanding of history, especially the fight to remove Colonial scrip that started with The Currency Act of 1764. What Hamilton did, as far as I remember, was to ensure British bankers dominion over the US via banking. It was congress’ refusal to renew Hamilton’s bank charter that started the War of 1812, because the Brits went ballistic. We lost. They won.

    Would you write an article taking the Johnson & Kwak article apart?

    1. @MRW,
      Would be interested in learning more about that topic in Colonial/Early American History, does anyone recommend a good read on it?

      Thanks,

      1. @Paul,

        Paul, I poked around. I was doing research for something else and came across Binderup’s 1940 speech and Alain Pilote’s translated 1985 article on the history of US Banking. So I looked into Benjamin Franklin’s papers (Yale, franklinpapers.org). I read “The Nature and Necessity of a Paper-Currency,” available at franklinpapers.org if you use their search function. Franklin wrote this when he was 23 years old around 1727. Then I read “Benjamin Franklin And the Birth of a Paper Money Economy” By Farley Grubb, Professor of Economics, University of Delaware, and National Bureau of Economic Research” published by the Philadelphia Fed at:
        http://www.philadelphiafed.org/publications/economic-education/ben-franklin-and-paper-money-economy.pdf

      2. @MRW,

        Also amazing to read:
        The statement by M S Eccles to the Senate Finance Committee in 1933. Wherein he was urging the government to increase demand by running a larger deficit.

        Eccles became chairman of the Federal Reserve (in fact the building is named after him). Everything old is new again. Here is his take on the cause of the depression:

        … but Eccles has become better known after his death for his having founded Demand Side Economics in 1951, when he wrote in his Beckoning Frontiers: “As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth … to provide men with buying power. … Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. … The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”.

      1. @WARREN MOSLER,

        Warren, Simon Johnson just did a talk on NPR, so if the above is too painful to read, how about a mojito on the boat and you listen to him? Then, using a second recorder, you can stop what he’s saying and interject your POV, then play his next tidbit, and you react, etcetera. (OK, have a few mojitos.) Upload the audio to YouTube and we can make it go viral.

        Here’s the story and audio link.
        http://www.npr.org/2012/04/05/149394336/debt-struggles-as-old-as-america-itself
        Here’s the transcript:
        http://www.npr.org/templates/transcript/transcript.php?storyId=149394336

        (This guy was the Chief Economist for the IMF? Even I, now, know enough to counter this guy.)

  3. I gave up on their blog some time ago because of nonsense like this. OK I read it occasionally to see if they have made any progress, but they have not. See this post for the most recent example.

    And then there’s Johnson’s association with the Peterson Institute. Johnson and Kwak are neo-liberals of the worst sort.

  4. As a nation, we will have to make a choice, one way or another! If we give ourselves too much of the money we manufacture, and promise ourselves too much of that money back, we could lose our appetite for borrowing it from ourselves and paying ourselves back, at which point we will just have to give it to ourselves.

    Then we’ll have to go to war with somebody, or something.

      1. @Ed Rombach,

        Worrying that the US government will lose it’s access to the bond market is like worrying that the Topps company will lose it’s access to neighborhood baseball card swaps.

        What’s going to happen? If it can’t go to the swaps, Topps won’t be able to get it’s hands on any Derek Jeters?

    1. @LetsGetItDone,

      I don’t agree that they are paid to not tell the truth. Both of them have been very level headed though the whole crisis writing about failed policies and corruption within the system.

      Unfortunately, for some unknown reason, when it comes to monetary sovereignty they go off on these tangents.

      I really believe Johnson and Kwak do not compromise their beliefs for ideology or money.

      1. @dan, They don’t force anyone to pay them. Being paid to not tell the truth doesn’t mean they are aware of the arrangement.

  5. John Carney reads this blog. John, please do what you can to cordon off a guest spot for an MMT rep on one of CNBC’s most popular shows.

    Mass communication is imperative. This is why the GOP/Fox News wins.

  6. For more information, look no further than the issues surrounding the first bank of the United States, and its charter.

  7. [brief] Triumph of the Demand Side (so close, yet so far, and in the past)

    p. 74 “… national income accounting, that the state should calculate the purchasing power necessary to produce full employment. Any deficit projected on this basis should be accommodated through direct [National] spending or tax cuts. This kind of active economic management … signaled a sea change in the economic ideas governing the United States.”

    p. 75 “Given that the decline in purchasing power was the root cause of the slump, not only was budget balancing exactly the wrong policy, it actually augered against historical precedent.”

    p. 75 [in a fireside chate] “Roosevelt concluded that, ‘let us unanimously recognize … that the federal debt, whether it be 25Billions or 40Billions can only be paid if the nation obtains a vastly increased citizen income.'”
    http://books.google.com/books?id=sNXT0rpJuDkC&pg=PA74&lpg=PA74&dq=eccles+Demand+Side+Economics&source=bl&ots=pwxALu8j3E&sig=_jzzjU2AmwcWYV7_K-r2NuC1kXs&hl=en&sa=X&ei=QANyT57MAYLY0QHuhNToAQ&sqi=2&ved=0CEkQ6AEwBQ#v=onepage&q=eccles%20Demand%20Side%20Economics&f=false

    1. @roger erickson,

      “Roosevelt concluded that, ‘let us unanimously recognize … that the federal debt, whether it be 25Billions or 40Billions can only be paid if the nation obtains a vastly increased citizen income.’”

      Which sounds very non-MMT, but at the time (under semi-operational gold standards), was true. And expanded private sector incomes required nothing less than raising the nominal price of gold (an analogue to running larger deficits today), which he eventually did.

  8. More review of Marriner Eccles

    ‘Central Bankers are seldom known for their heterodoxy.’

    He had that right!

    ‘… When it came to explaining the Great Depression and what had to be done, Marriner Eccles was quite aware that he had “challenged all that had been said up to that point and [that he] was practically alone in doing so,” (Eccles, 1951, p. 104).’

    https://docs.google.com/a/270tech.net/viewer?a=v&q=cache:uog0m_dyLUYJ:www.econ.utah.edu/~vernengo/papers/eccles.pdf+eccles+Demand+Side+Economics&hl=en&gl=us&pid=bl&srcid=ADGEESgnlFYnK8kzr1SQvJxK7uOVUOmrz7OAB65yw_Oe502cyhPg3Cfbc2xZC75ZEzou1IOSS6J-vO_FY-Q9b9Wvvi0VCWbLLKqjhYqQ6URylokUOOv3mzS2AA7Erw1wXmtERs8dRlAw&sig=AHIEtbQJlB00umFn4fvOblnhS9fwbz-1Dg&pli=1

    http://www.econ.utah.edu/~vernengo/papers/eccles.pdf

  9. @WARREN MOSLER, Every time I see James Kwak’s byline on a post, I think of Aflac. Weird brain connection. l do like some of Kwak’s policy posts, but when the topic shifts to the economic, it is just kwaking.

  10. @Warren Mosler

    Don’t know if you are still reading comments here, but I appreciate you informing me that Dean Baker is at least well aware of your approach. You can only do what you can do…

    At the risk of beating a dead horse, I read another article by Mark Weisbrot today on the new choice for President of the World Bank. Mark again decries ‘neoliberal economics’, etc.

    http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/washingtons-loss-of-control-over-world-bank-is-a-big-historic-change

    I’m only thinking about this, because although I am onboard (to the extent I understand), I matter not at all. So, thinking about people with at least some influence …

    1. @SteveK9,

      “I appreciate you informing me that Dean Baker is at least well aware of your approach.”

      As is Krugman, as are others. May be more a matter of protecting reputations, maintaining current benefactors and readerships, and avoiding textbook rewrites than anything else??

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