Potential economic nightmare coming up. Hoping for the best.
Looks like a total failure on my part to get the word out sufficiently to make a difference in policy.
On Tue, Nov 2, 2010 at 9:42 PM, wrote:
Now, we’re about to see the real risks of the legal constraints placed on gov’t spending via the debt ceiling. Can’t wait to see if the newly elected Tea Party/GOP Senator from Kentucky Rand Paul tries to filibuster the move to raise the debt ceiling. What will the wealthy benefactors of these nutjob Tea Party candidates do if they start acting according to their principles?
Sorry Warren. Please don’t go any where maybe just maybe when the stuff hits the fan somebody will wake up and call you. I can dream can’t I.
thanks!
Hey Warren
A heads up to you. Some Austrian theorist over at “Daily Capitalist” is talking about one of their guys challenging Krugman to a debate about Austrian theory for $100,000 dollars that is being raised by Austrians who want to see the debate. I commented to him that HE or his guy (cant remeber his name) ought to debate YOU or Randall or Jamie Galbraith. I’m hoping he might take the bait and challenge you. might be a way to get MMT more out in the national debate. Maybe you can offer 100,000 of your own money to make it a 3 way debate.
So many years of 2 party “educating” the people, it’s like a town with 2 news channels. It’s all they can relate to and those channels want to keep their viewers.
Keep on telling the truth and the people will make the change in policy. If you hadn’t, I would probably have been hanging in the “Govt is going broke” the rest of the saps. So, you’ve made a difference; that’s a lot more than I can say for anybody else that’s on the ticket. My thanks to you and all the other MMT’ers that have helped me shed the propaganda and answered my stupid questions. I ‘spect I’ll be asking a few more…
So, I say: Well done, Warren Mosler!!!
Regards –
U
I say well done too, Warren. You and other MMT folks have worked HARD to get the word out there. It’s really tough to break through that media screen and unless the media is echoing an idea somewhat, it’s hard for any officeholder to openly take it up.
We’ll keep trying. We’ll fight this month and next to beat the Catfood Commission, and next year I’ll try my best to get that Interactive Voter Choice System going to build channels of influence and communication outside of the Party system. MMT’s going to get there yet!
thanks, and i know you’re on it!
LetsGetItDone, that’s a very nice handle, thank you for all your efforts in popularizing the MMT ideas too.
Debt ceiling could be beneficial, if they keep issuing money and stop issuing debt. Very good indeed. I can’t imagine default in any case. Time for a major policy change? 🙂
they can’t do that either. ‘no overdraft’ rule also in place.
I forgot who it was on here, but someone suggested using a loophole in the Coinage act that allows for platinum coins of any denomination to strike off a $1 Trillon coin and deliver it to the Fed for deposit in the Treasury’s account…
Of course, there’s another way Congress’s coinage power could be used to increase Net Financial Assets without increasing the deficit or the government actually having to do anything (well, maybe reimbursing banks for overtime).
Amend the Coinage Act (31 US 5112) to re-denominate existing coins. There’s in circulation roughly (who knows how many are in landfills) 200 billion pennies, 20 billion nickels, 25 billion dimes, 60 billion quarters. Figure out how much NFA you want to add– and which coinage you want to phase out as they come back to banks– then mark up accordingly. Think of it as a reverse helicopter drop. :o)
If the President had any negotiating skills (which I’m doubtful about) he’d agree to the Republican bill extending Bush tax cuts in exchange for a high debt ceiling. It’d be better to eliminate the debt ceiling altogether, but that won’t happen.
Back up plan, coin seigniorage. The President could announce that Tsy will no longer borrow to fund Congressional deficit spending, it will simply use its existing coinage authority to create money (seigniorage is booked as revenue and not debt, so we’d immediately and rather painlessly balance the budget, hooray!). :o)
http://my.firedoglake.com/letsgetitdone/2010/09/27/we-need-a-tax-and-spend-party-again/#comment-254457
In the real world, that won’t happen. Unlike, say, Johnson or Nixon, Obama doesn’t have the heart of a riverboat gambler needed to even try that. He’ll end up caving to the Republicans early… who will back out at the last minute and make him cave even more just for sport.
Ramanan has posted chapter & verse on seignorage here, as has Beowulf’s link. Warren, I believe you are wrong in some respects, as I have said before. Earlier spending authorizations creating government obligations including but not restricted to bonds have constitutional authority and trump any later congressional actions, debt ceilings and no overdraft rules. If they force spending over the debt ceiling under ordinary procedure, so be it. The government would have to do the obligatory spending and then figure out how to obey lower level law as best it could. When it has come up, the administration ignores the obvious interpretation of a congressional act if it repudiates prior obligations. Bond default has zero probability. Seignorage would be one possibility, which might even be legally forced.
What I am saying is basically Obama would have to do absolutely nothing to face down a deficit terrorist Congress. All he would have to do is follow what the courts would inevitably rule (probably within hours if not minutes of an obligated spending/debt ceiling deadline problem) and the DOJ’s advice. But Beowulf is absolutely right, he will cave and cave again.
Well looks like the words out regarding the Saudis…….
“Oil prices rose above $85 a barrel on Tuesday, as traders tested the claim of Saudi Arabia, Opec’s de facto leader, that it was happy with prices as high as $90 a barrel.”
http://www.ft.com/cms/s/0/b4fb4170-e62b-11df-9cdd-00144feabdc0.html?ftcamp=rss
The Fed/government figures if prices of commodities rise in reference to dollar, the American economy will recover through some channel of dissaving by holders of dollar financial assets?
How might the Fed/government engineer a commodity price rise that triggers a spillover? Through purchases of commodity futures? Demanding foreign governments increase the consumption demand of their citizens? Commodity price increases seem to sap spending from consumption, increasing savings by commodity producers rather than increasing dissavings of U.S. financial assets.
How high would prices need to get, given last oil price spike didn’t increase spending last time? Increased prices just shifted money from oil consumers to oil producers who saved.
Will higher commodity prices get savers to dissave this time?
right about the shift. it’s like a tax increase due to the different propensities to spend
Keep going Warren. Bill M and your good self have rescued a few unworthy souls from the precipice. You will find it will be worth it in the long run.
and Bill’s way ahead of me at that- he get’s about 10 times the hits I do and has the patience and talent to spell it all out in detail
I’m sure this was a discouraging day for you Warren, but you’ve done a lot of good already so keep your head up. I can’t claim to be able to be able to follow all the discussions here about MMT, but I’ve learned enough to be outraged that the deficit is used as a reason to cut back spending or raise taxes now of all times. A year ago I would have been rooting for the deficit terrorists, all the while thinking I knew something about economics. I’m just sorry I don’t vote in Connecticut.
I’ve been interjecting MMT into as many political conversations as I can, though I tend to avoid those like the plague so it hasn’t been many. I’ve actually been surprised at how it’s possible to get people to at least change the way they think about government money. Most have trouble getting past the hyperinflation from running the printing press idea, but everyone can at least see that taxes are not connected to spending. It’s a start.
Thank you for all of your efforts!
thanks and good to hear it!!!
Karl, I wish I knew your secret. My friends are college graduates, many with advanced degrees, and I never have been able to explain Monetary Sovereignty to them.
I’ve been writing about this for more than 15 years, and it’s like trying to explain why the world is a sphere to people who insist that if it were, everyone would fall off the bottom.
Rodger Malcolm Mitchell
Rodger, I usually begin by asking where the person thinks money comes from. You get some pretty amazing answers and that tells you where by have to start with them. In general, people are either clueless or misinformed about how money is created. Without clearing this up, it’s pretty hopeless to get anywhere with them.
Good Point Tom. I will use this myself in the future.
Rodger,
Tom’s approach sounds like mine, I think I took it because that’s where my own ‘ah-ha’ moment came from. I just ask people to think about where a dollar comes from, not who they earned it from, but how that dollar was actually created for them to earn. I use simple currency introduction examples like Warren’s hut tax from the 7 frauds book to illustrate that dollars ultimately all had to come from the only place that can actually create them. These seem to really resonate in a way that talking about our huge and complicated modern economy doesn’t.
It’s embarrassing to remember now, but I had always thought that the government somehow was like a big and really powerful company and, through taxation, was unfairly competing for the same dollars (which were somehow just there through some Fed voodoo) as myself, Coke and GE. I think this is what Tom means by an amazing answer. That viewpoint explains how people can think a surplus is an unambiguously good thing, why cutting taxes and spending is always the way to go regardless of the economic situation and why there’s an inherent mistrust of government doing anything from many people.
As Warren and others’ explanations started to sink in, it was the understanding that a government didn’t need to get dollars to spend and in fact needed to spend to provide dollars that changed my thinking. It’s taken me awhile to move on through the many components of MMT, but that was the core fact that made me understand just how wrong I was about the economy and wonder what was right.
Karl, this is correct. Most people have a confused idea of money and therefore think that government is competing in the economy with them by borrowing funds to finance deficits and taking away “their” money with taxes to pay for its “wasteful” spending, “wasteful” meaning all spending that doesn’t affect them directly.
When people get that all money comes either directly from government deficits “free” to them, since government pays interest on tsy’s from currency issuance, or else from bank lending costing them compound interest they change their tune.
Then they see that bank credit is the real problem they face, not government, and that government spending is how they get the money to pay their taxes and have some net financial assets to save. Without government they would be even more in hock to the banks than they arem, effectively condemned to live in debt peonage or accept a lower standard of living.
“Looks like a total failure on my part to get the word out sufficiently to make a difference in policy.”
Courage, mon vieux! Rome was not built in a day.
thanks!
and remember, they laughed at the Yugo?
Reagan ran on cutting taxes and government spending. He cut taxes and increased government spending. That history will repeat itself.
All of warrens supporters should call or write their senators and reps and ask why they haven’t claimed warrens prize money. especially the new repubs,but also the others. It would be interesting to get their response..
“Looks like a total failure on my part to get the word out sufficiently to make a difference in policy.”
Its not your fault in the least Warren. You put your life on hold to run for office because you believe (and most everyone reading this believes) that our elected officials are allowing our fellow citizens to suffer needlessly out of economic ignorance. That our leaders focus on the budget deficit instead of the output deficit, wasting so much human potential and industrial capacity, its like a farmer letting crops rot in the field, its practically a sin.
I admire you for taking action when you recognized this as an injustice that must be corrected instead of seeing it (as most men in your position would have) as simply an arbitrage position to be played. Its never a failure to actually a give a damn about your country and run for office because you believe you can help make it better. Even if you come up short, its no failure.
You’re smart as a whip and you’re a patriot, Warren. Sooner or later, other politicians will go far and do much good by “stealing” your ideas. So take a long vacation, sell some cars and then figure out the best way to bring about this shocking theft of your intellectual property. :o)
Warren,
I think that you raised plenty of awareness at the margin, and that’s where most change starts. Once the Dems, GOP, and Tea Partiers have both failed, people will be looking for alternatives. You’ve done a great job teeing up MMT up for that moment, if there aren’t any inroads before then.
Don’t know if anyone else caught this, but Paul Begala mentioned a payroll tax holiday on CNN last night, without anyone uttering “PAYGO”. There’s a green shoot for you. 🙂
Art
oops, “all failed”
good to hear that!
Art, glad to hear Begala tout the payroll tax holiday. He and his old campaign management partner James Carville aren’t the biggest fans of Obama. So it will be interesting to see if anyone challenges Obama for the nomination.
If Hillary runs or, more likely, Russ Feingold (who ended his concession speech last night with “It’s on to 2012, and it is on to our next adventure.”) runs, I wouldn’t be surprised if old Clinton hands like Begala and Carville help out behind the scenes.
Warren, I wonder how receptive somebody like Chris Martenson would be, at least eventually, if somebody like you were to approach him to discuss MMT.
His stuff regarding “the crash course” in which he concentrates on an apparent convergence of what he calls “the three E’s”, the economy, energy, and the environment, has gone viral, and has really had an impact on a lot of laypeople concerned about these issues. I know it impacted me, mainly because he works so hard to put some of these issues in both lay terms and in a kind of comprehensive framework that at least begins to help people “get a handle” on something of the magnitude it seem may be facing us. And he’s really working hard at getting it out there… and a lot of folks are responding. After all, his economic views go hand-in-hand with what we hear most of the time… It’s just that he works to lay it out in an understandable way… a way that people are responding to.
The reason I think there may be some hope in approaching him and having some influence on how he sees economics is that he doesn’t strike me as a blowhard, ;-); but rather someone who is working hard to help people to come to terms with some matters he sees as urgent to contend with… and he tries very hard to go about doing so in a reasonable, accessible way.
Maybe it wouldn’t help to approach him for discussion regarding something that would so vastly change this framework he’s worked so hard to develop and share with people. Maybe he wouldn’t be able to see beyond that since he’s so invested in it.
But if that were possible, I could see that as helping both to reach someone who already has a mechanism in place for an ever-widening reach to the general public *and* to perhaps turn around the unfortunately terribly erroneous message about the economy that he is so effectively spreading.
Just a thought, for I am coming across references to him a lot these days (among my fellow laypersons out there on the net concerned about one or more of the arena’s he draws together in his “course”), something I used to think was a good sign. But now, I see it as another important hindrance to helping the public to see how off-base the conventional view really is. But if he could be convinced of a different picture regarding the economic aspect of his presentation…
You might have heard of his site and his course, but if not, it can be found at chrismartenson[dot]com .
go ahead and give it a try for me, thanks!
Uh-oh, I think you just suggested I try to broach Martenson to check out MMT… uh… major newbie here, ;-).
Or maybe that was your gentle way to say, hey, I’ve got plenty on my plate these days.
Oh, what the hell, I guess it wouldn’t hurt if I at least were to send him a link to your book and to this blog site and to the recently posted conference from April (a really wonderful introduction for the likes of me – and many other folks brand new to MMT, by the way).
Maybe I could suggest that he contact you through this site if he’d like to further discuss it in person?
Linda
And I’ve now at least done that. I sent an email through his site; couldn’t hurt, ;-). I have a feeling it’s one of several hundred that his staff will be sifting through, but you never know, right? 😉
Linda
Linda, now it’s in God’s hands, as they say. For what it’s worth, I once wrote a letter to Bill Gates at the behest of someone, like you just did for Warren, and although I received no response, not even an acknowledgement of a receipt, Gates did in fact follow through subsequently. I have no way of knowing whether there was any connection, but who knows?
True enough, Tom… true enough.
Linda
Here’s the text of the email I sent through their site (for what it’s worth):
~~~~~~~~
Hi, Linda Grinaker here.
Chris, I’ve long admired your efforts with “The Crash Course,” and I have, in fact, bought the dvd and have shared it with others. I came at your presentation via my interests in “peak oil” and resource depletion in general. But I very much appreciated your attempt to lay out a comprehensive framework – and especially with laypersons in mind – regarding how the economy, energy, and the environment converge as urgent matters we need to really start thinking about. And I appreciate your efforts to be reasonable and calm in your approach.
I’ve also heard from many others like me who have since heard of your course, so I know you’re having a real effect in “getting out” your presentation and helping more and more of the general public seriously consider these issues.
Recently, however, I have begun to shift away from how you present the economy, and I’ll tell you why.
Over the past few months, I’ve slowly, but surely been learning about what Modern Monetary Theory (MMT) has to say about it, both in how its proponents *describe* what they see to be the operational realities of a monetary system like that of the United States and some of their key policy proposals made possible due to that description.
But it’s a very different description than I’ve been used to. Yet, I’ve come to respect it more and more and its proponents more and more.
I’m hoping that at some point in the not too distant future, you might look further into MMT, and, in particular, that you might even meet with one of its more notable proponents, Warren Mosler, who just finished a run as the Independent Candidate for Senate in Conn, with the hope of making MMT more accessible to the general public (but who didn’t win, of course).
You can find a very good introduction to what MMT is about via the videos, etc. available of their daylong conference held this past April at George Mason University. You can also learn more about it from Warren Mosler’s senate site (as well as from some other places, but those will do for now).
Here are the links for those:
The conference (which includes videos of 5 “sessions” of presentations by some of its leading proponents and 5 corresponding Q & As):
http://www.netrootsmass.net/fiscal-sustainability-teach-in-and-counter-conference/
And you can find Warren Mosler’s campaign site here:
http://moslerforsenate.com/
The contact information from his senate site is the following:
info@moslerforsenate.com
Telephone
203-527-6821
If you find anything within any of the above that might pique your interest to have a direct discussion with Warren Mosler, I hope you will do so.
I think you both have some very important things to share, the desire to reach out to the general public, and the thoughtfulness to do so reasonably and well…
Sincerely, a concerned citizen,
Linda Grinaker
both!
🙂
“both!” – gotcha, ;-).
@Linda G
Good luck with Martenson! 🙂
However, my impression from seeing a couple of Crash Course presentations online, is that he thinks that the U. S. dollar is a Ponzi scheme. I was puzzled by his reference to the non-inflation of the dollar, going back to before the U. S. was created. (American colonies had fiat currencies, along with inflation, in the 18th century.) Then I realized that he was probably talking about the Spanish dollar!
Maybe I am wrong, or maybe you can convince him of MMT. 🙂
Yes, I think he thinks of himself as basically in the “Austrian” camp, so… That’s an awfully long way from MMT, but, otherwise, it’s rather disheartening to think about… He’s a good man, it seems to me, as far as what his intent seems to be and as far as his calm and reasonable approach, but the fact that he’s reaching so many folks, making that way of seeing things as accessible as he can… it’s rather discouraging to think about… And yet when I let myself imagine him at some point *getting* what MMT is and what it has the potential to make possibile, if the political will can be generated. Well, that was a bit more heartening to think about.
@LindaG
I think that Martenson’s warnings are important. It is because of him that I started reading The Oil Drum web site. 🙂 Now, if he would get aboard MMT, that would be great!
Good luck!
Yes, that’s basically how I found my way to him, feeling that he might have something pertinent to say to me (and others like me). I knew that he had worked closely with several folks that contribute to The Oil Drum, a site whose contributors I have a lot of respect for. So a lot of folks concerned about resource depletion have found their way to him. I always somewhat put his economic framework to the side because I knew that I just didn’t know enough about it.
But his explanation is sure a lot like what I’ve heard the most from all sorts of sources (which I know must be the case for a lot of others too), so for those of us who come to his presentation as a help to further discuss some of our concerns (in particular about energy and environmental concerns) with others, all of that gets folded into his take on the economy, and that, in turn, goes onto those with whom we share the presentation with (and those his presentation reaches in other ways). So, unfortunately, his economic views are getting very much into the mix of concerns about energy constraints and the environment.
Even if unintentionally harmful (which is how I see it), his presentation of the economy (in basically “Austrian” terms), and its very successful, indeed viral, distribution, has become a rather insidious phenomenon, I’m sorry to say.
But, boy, imagining that same phenomenon taking on an MMT perspective… well… that makes for a very different sense of the potential effects of this phenomenon.
Hmmmm… I see that Martenson, a self-described leaner toward the “Austrian School,” has just published an interview with Steve Keen, who states how unlikely hyperinflation is, among a lot of other things.
This also brings up a question for me as a newbie to all of this…
What do MMTers think of Steve Keen’s work? (I know this is an old thread… but this is where I had brought up Martenson, so… I guess I can ask about Keen elsewhere.)
Here’s the article with Martenson (which makes for quite a departure for him if he were actually to take Keen’s work seriously):
http://www.businessinsider.com/steve-keen-crisis-deflation-2010-11
Hi Warren,
For the first time in my life (48 yrs) I got to vote for a candidate I strongly believed in. Thanks a million.
:)!!!!
FWIW, for the first time in my life, I called the local AM radio station yesterday morning to enlighten the host on the nature of today’s monetary system. He was a stereotypical local “conservative” who was concerned about this country’s “indebtedness” and all the money we “owe” to foreigners. I also hit on a few of the deadly innocent frauds espoused by Warren.
I told him the only reason China is a huge bond-owner is because of the trading relationship we have with them. We send dollars for goods, they park the dollars in a savings account with the Fed, etc…
I also touched on the nature of govt debt in a fiat monetary system, etc…
But at the end of the call, he was receptive to the explanation but still in disbelief. He said “you mean the debt is just mystical?” The call had to end before I could address all his concerns.
Joe, it’s going to happen through people like you who persist at getting the word out. Keep on truckin,’ bro. This battle is long way from over yet. This round just got some of the dead wood out of the way, and it is going to put the GOP in the position of put up or shut up. Should be interesting since their arithmetic doesn’t add up. They have made a number of contradictory promises that are bound to disappoint.
good job!
Warren, don’t be hard on yourself. You educated over 10,000 people in a very short period of time and without a lot of resources. That’s remarkable!
Mike,
Educating open minded people is very simple. When the conversation at my workplace turned to economics or politics, I would throw in the occasional MMT comment. It’s fun to ask the deficit hawks why Treasury Securities are listed on the asset side of a balance sheet or mutual fund prospectus. Or why do they call it a SAVINGS bond if it is debt? After a few months, Warren got some more votes. Getting people to listen is the hard part, teaching MMT to someone listening is easy.
This is why I always say you have a better chance of convincing people by agreeing with them than by arguing. If someone is a flaming conservative, start by strongly agreeing with them that taxes need to be cut. If liberal, agree that Social Security needs to be defended. Define yourself as an ally first, then they’ll at least listen to your crazy ideas about money. Once you’ve defined yourself as an enemy, people stop listening.
“Define yourself as an ally first, then they’ll at least listen to your crazy ideas about money.”
Jim, this is an outstanding point that cannot be overstressed. This Ben Stiller Show skit demonstrates your point elegantly. :o)
The conservatives get that those Democrats in Washington are always looking for an excuse to raise your taxes and take more of your income. And the liberals get that those Republicans in Washington are always looking for an excuse to gut Social Security and other spending needs. That these statements appear contradictory but are not, is sad but true.
Priceless. “I sell dragon insurance, man. Sign here, and the dragons go away!”
thanks! there was a shot it would get into the national debate but didn’t happen. yet. you’re the one well on the way to breaking through!
After more than 15 years of preaching and writing on this subject, I’ve had no difficulty convincing people the government can print unlimited money. But the response always is, “What about Zimbabwe (or pre-war Germany, or Brazil, or Italy or any other country that has had hyper-inflation.)”
So the argument gets muddied. Fear of inflation becomes translated into the debt being “unsustainable,” though sustainability is not the issue at all.
Because the only constraint on federal spending is inflation, MMT needs a good prevention/cure. I thoroughly disagree with the standard MMT appoach: Use tax policy to prevent and cure inflation. Tax policy is too slow, too political, to cumbersome and too difficult to apply in a measured way, to be a good anti-inflation device.
I have suggested interest rate control. Interest rates can be changed quickly, incrementally and without endless Congressional debate. Increasing the reward for owning money increases the value of money, and therefore is anti-inflationary, which is why the dollar grows “stronger” when rates increase.
Standard MMT gospel holds that because high interest rates increase the cost of borrowing, they increase the cost of doing business, and therefore are inflationary. But the Fed effectively has staved off inflation by raising rates. I have seen no data supporting the notion that increasing interest rates causes inflation, and I have seen evidence that higher rates increase the value of money.
Perhaps if MMT focused on inflation cures, it then could segue to the fact that the debt is not a “ticking time bomb,” as so often is claimed.
Just a thought.
Rodger Malcolm Mitchell
Rodger –
Sounds like a viable route to me. Property tax seems like it could easily cause some collateral damage to those who may have taken out a loan based on a snug budget. Interest rate adjustments would make it more expensive to borrow and more profitable to save. Maybe a bit of both, along with getting the “talking heads” to let people know why taxes are going up. People may start regulating themselves if they have a good barometer.
Start with the opposite – ask them what they think would happen if the government stopped “printing” (spending) money.
They need to be careful what they ask for.
I’m convinced this the 21st century equivalent of the Free Silver movement – except we don’t have any free farmers.
I am a new convert to the ideas of MMT.
As a British Mensa member, it is quite embarrassing for me to admit that for the first sixty years of my life I believed every one of Warren’s
Innocent Frauds.
I am trying to spread the word about this. I have sent a link to the Innocent Frauds e-book to all my family and friends. But I think none have read it, although I have had a few comments like “This looks interesting — I’ll read it when I have time.” One problem seems to be that it is 117 pages long.
I note that it is copyrighted. What I would like is Warren’s permission to condense it in order to make it less daunting in length, and then send the condensed version to people, along with a link to the full e-book for those who think they might be convinced.
I also intend to joint Mensa’s Special Interest Group for Economics, and would like permission to publish it in their magazine, to see what reaction it gets from them. Some members of Mensa are quite influential and respected.
Cheers, and keep up the good work!
thanks and good to hear it!
as for the book, first try taking all my biographical information and history out? how long does that make it?
Colin Kendall,
Do you think they would read one page? Try: http://rodgermmitchell.wordpress.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/
Rodger Malcolm Mitchell
People lose their minds collectively, but they come to their senses one at a time.
One mind at a time, Warren!
Some quotes that come to mind:
“The obscure we see eventually, the completely apparent takes longer.” — Edward R. Murrow
“It is not necessary to hope in order to undertake, nor to succeed in order to persevere.” — Charles the Bold
“To see what is in front of one’s nose needs a constant struggle” – George Orwell
Reminds me of Poe’s “Purloined Letter.”
Rodger Malcolm Mitchell
This board hasn’t had a posting since November 4th; I hope people are still reading it.
Thanks to Rodger Malcom Mitchell for his link to a shorter and hence more likely to be read article — I’ll forward that.
In the meantime, I have received a reply from one of my friends, Jon, who has read Seven Deadly Innocent Frauds, but is not convinced. Here are some of his remarks, and my responses. I’m posting these partly in the hope that Warren can address these criticisms, and partly to see if my responses make sense.
Jon:
The dilemma that I see is that I’m not sure in the years since Nixon removed the dollar from the gold standard (1971), do the recessions and the economic upswings coincide with federal spending and taxes? For example, Reagan was the first to cut taxes and spend like a drunken sailor. According to Mosler, this should have primed the economy but when HW Bush got into office after Reagan, we endured a minor recession.
Me:
Unemployment dropped steadily for the last 6 years of Reagan’s administration.
The longest postwar period without a recession was from 1982 to 1990.
The minor recession of 1990-91 followed significant deficit REDUCTIONS in 1987-89, not to mention the Savings and Loan Crisis.
Not that I’m giving any credit to Reagan, you understand. He himself said that the increasing debt was the biggest disappointment of his presidency.
Jon:
HW really borrowed more than Reagan but he also raised taxes which in Mosler’s view is self defeating.
Me:
He raised taxes, but he increased spending even more. 1990 saw the biggest deficit in history, followed in 1991 by an even bigger one, and not much change in 1992. In 1990-92, the government, via deficits, pumped about $1.2 TRILLION into the economy. It’s no wonder Clinton had it easy!
Jon:
However, the early Clinton years were prosperous and the economy really hummed between 1996-2000. In support of Mosler’s arguments, when Clinton paid down the deficit from 1996-1999, we could predict that we will have another recession because the government wasn’t deficit spending or cutting taxes. That turned out to be quite true as the recession that began in 2000 was pretty nasty. Then W comes in, cuts taxes and really splurges on stimulus spending which you would have thought would mean a much stronger economy. However, in 2008, we almost went into a depression.
Me:
Ok. Government fiscal policy (deficit spending) is not the ONLY thing that controls the economy. In 2008, we had a financial crisis due mostly to greedy, unregulated bankers speculating in subprime mortgages and derivatives. Personally, I don’t think they should have been bailed out; or rather, the depositors should have been, but not the shareholders.
Jon:
Obama has no choice and has to spend in unprecedented ways which should mean the next few years should be pretty strong economically.
Me:
Well, it depends on what those ‘unprecedented ways’ are. If he continues to let the Fed proceed with quantitative easing, the money mostly goes to the banks and pension funds, which does not in itself increase aggregate demand or provide jobs; indeed, I expect it will cause speculative bubbles in emerging economies.
The way in which it should be done is,as Mosler suggests, by giving everyone a payroll tax holiday. So that people who are likely to spend it get the money. They can either buy more goods and services, thus increasing employment, or make their mortgage payments, thus helping to ease the foreclosure crisis and helping the banks from needing to be bailed out again, or both.
Jon:
These examples are pretty simplistic and I’m sure Mosler could explain the discrepancies between his theories and the economic realities.
Me:
I’m sure he could explain it much better than I have. I’ll post your questions on his web site and see if I get a response.
Jon:
It was a good read and I wonder how many economists agree with his theories.
Me:
I don’t know exactly how many, but I know that many agree at least somewhat.
Jon:
If they are as valid as they seem, the Tea Party wankers are setting us up for years of anemic growth.
Me:
If they get their way, e.g. with the Balanced Budget Amendment, ‘anemic growth’ would be a miracle. I’d expect ‘Great Depression II’.
Cheers,
Colin Kendall
Tobe convincing to economists, you’d have to work out the numbers in terms of sectoral balances and what they would imply going forward. To understand what this means, here are a few links to Bill Mitchell’s billy blog, where he goes into detail about some of the underlying ideas in 7DIF:
A simple business card economy
Barnaby, better to walk before we run
Some neighbours arrive
A modern monetary theory lullaby
Questions and answers 2
See also Stock-flow consistent macro models
As for this:
” Then W comes in, cuts taxes and really splurges on stimulus spending which you would have thought would mean a much stronger economy. However, in 2008, we almost went into a depression.”
W’s tax cuts removed a lot of the fiscal drag of the Clinton years, but not all – we still had large and growing trade deficits with China, for instance, which called for much bigger deficits. As a result, the growth of the 2000s continued the pattern of the 1990s – a vast increase in consumer debt, both revolving and home equity, fueled it. (check out this chart from Scott Fulwiler for the whole sordid story: http://moslereconomics.com/wp-content/powerpoints/SFB%202010Q3.xlsx)
This was made possible by massive fraud and general poor business practices on the part of banks, and it simply wasn’t sustainable. There are no real limits to how much debt the Federal government can take on, but private sector debt tends to lead to wealth concentration (the many borrow from the few), and undermines itself.
right, and the growth we did have reduced the budget deficit to about 1% of gdp by mid 2006, and financial burdens ratios hit new highs. It was then I wrote in my blog at http://www.mosler.org something like that it looked to me like the deficit had gotten too low and agg demand would wane until the automatic stabilizers got the budget deficit to maybe 5% of gdp or so.
Pretty good answers, Colin!