See here for Rome presentation.

Comments welcome!

(Mario Draghi may be on the panel with me)

113 Responses

  1. given the monopoly price-setter argument, how would you explain the persistent soaring inflation in Greece and other countries pre-euro? What were they doing wrong? I think if you don’t include something on this in your presentation, it might well go down like a lead balloon (if your audience includes central bankers).

  2. Why no word on Target2?

    According to Peter Garber, who is perhaps the top expert on the subject:

    “a euro-zone government could, if it had to, continue to finance itself via the ECB even if it could not sell new bonds to the market because of fears of default. Under this scenario, a government might sell its bonds to a local bank, which draws funds from the ECB
    through its NCB, depositing the new securities as collateral at the NCB. The government could then use the funds to pay private creditors in other countries who are not rolling over existing debt. The ECB then effectively replaces the old creditors of the sovereign and the lender for ongoing deficits — indirectly via the collateral at the NCB”.

    So, even within the euro, governments could deficit-spend if they were bold enough to defy the CW of Europe – especially if they already own a commercial bank, which is precisely the case in eurozone countries that happen to have public sector banks.

    In a sense, it’s unfair to attribute the main responsibility for austerian policies to Germany and the ECB.

    Because the periphery governments (including Italy) could refuse such policies and increase their deficits by simply using a mechanism – Target2 – that exists precisely to guarantee that payments can made smoothly throughout the eurozone.

    1. @Jose Guilherme,

      So people keep saying. Yet there’s a political return path. That’s presumably the threat that keeps euro member govs from – in the eyes of the Euro Parliament & other member governments – misusing their Target2 options?

      The peripheral countries could have also elected or forced appointment of other political leaders. Now THAT would be interesting, if it ever comes about. Iceland has applied to be a peripheral member of the EEU, even if not the euro. Maybe they can start shepherding PIIGS to greener pastures?

      Iceland still legally hunts London whales too. 🙂

      1. @roger erickson,

        You must admit it’s ironic that a theory born with the study of the U.S. payments system hasn’t published a single line – either theoretical or practical recommendations – on TARGET2, the payments system of the world’s largest economy: the eurozone.

      2. you mean you haven’t read a single line of all that.

        it’s all there.

        and it’s just a simple clearing system, much like the US Fed system with it’s regional branches.

        i don’t write much about the fed branch system either for the same reason.

        not much to actually write about that matters.

      3. @Jose Guilherme,

        @ Warren Mosler,

        According to the European authors I quoted (plus Lavoie and others) what you call the “simple clearing system” allows any eurozone government to regain monetary sovereignty via a nationalized commercial bank.

        No small feat.

        And your 3 “policy options” for closing the output gap in Europe are very interesting, but also – and unfortunately – political non-starters in the current political climate, all of them.

        The ECB doesn’t want to close the output gap – it wants to keep it wide open and use unemployment and recession as a means to further a political agenda.

        It saddens me to read your comments because they surely help the case of those who claim that the MMT founders, being U.S. centered, fail to give the proper weight to the key political issue confronting Europe today: the attempt by a self-appointed technocratic elite to impose a Malthusian future on the peoples of the continent, using the EMU as its instrument.

      4. it’s not about the clearing system

        it’s about what the ecb system deems ‘appropriate collateral’ for member banks.

        and it’s about the Maastricht deficit limits for member nations.

        The first step is political- the member nation must have the political will to run larger deficits.

        Yes, they protest specific policies, but not deficit reduction in general.

  3. I might be the only one, but I didn’t like it. Too confusing, especially the point I’ve already mentioned about cash in circulation being a demand leakage.

    Anyway, who is the target audience? What’s the message(s) you want to convey?

  4. I like this Warren. The concepts are explained simply, linearly, and clearly. There are policy recommendations that make sense and help to further elucidate the concepts being explained. For the audience, the language and explanations used will not be over their head. They will get it. It is digestable, highly relevant, and applicable.

    My main suggestion would be to write a conclusion. Something that wraps up all that you’ve said in a paragraph or two and ends on a high note such as next steps for the future, a re-frame of the issues, or a new higher conclusion that can be drawn from the larger thesis of your speech. This is important as will make your speech more lasting and resounding, especially since the conclusion is the last thing they will have rolling in their heads when you walk away from the podium.

    Great job and GREAT OPPORTUNITY here for real change and influence and impact. Let’s hope Mario Draghi is in attendance during your speech and Q&A and maybe that you bump into him in the green room or have lunch or something….heck maybe you’ll go for a steam as that seems to work well at getting the info to really seep into their bones! hah! 😉

    1. @Mario, Could do with a bit more of an introduction, too. How about a reference of the prior meeting to which you refer later in the text? Keep in mind the rule of three — every new bit of information has to be presented to the brain three times, before it registers. I think it’s one of our filtering mechanisms to prevent information over-load — ignore the first two crowings of the cock.

      Perhaps “lagniappe” would be a more elegant term than demand leakage. “A little extra, just in case,” makes for good business. Where the efficiency experts have really done us wrong is in eliminating redundancy and generosity, wherein lies the ability to deal with unknown risks.

  5. Tax credit bonds come to the same thing as a Euro country starting to issue its own currency again. That would certainly have a stimulatory effect in the country concerned, as the draft suggests, but unless the relevant country takes measures to address the basic problem, lack of competitiveness, the slide would continue till those bonds were being used for all major transactions. The country would then effectively be outside the EZ.

    Re the third option, “cash distributions”, I don’t see why “withholding payments to violators” is easier than the current system of withholding loans to naughty countries.

    I’m being negative, but that’s because I can see only four alternatives.

    1. Carry on imposing austerity on the periphery till it becomes competititve (which Ireland is actually doing, I think).
    2. Full political integration (i.e. Germans paying Greeks to sit in the sun). Germans won’t wear that and I don’t blame them.
    3. Countries which are too competitive or nowhere near competitive enough leave the EZ.
    4. Organise a quick devaluation of periphery currencies by enforcing a significant and instant wage and price reduction in relevant countries: difficult and expensive to do, but the current mess is expensive as well.

    1. @Ralph Musgrave,


      I do wish that you would stop making inflammatory statements.

      As you well know, the Southern Europeans are just as hard working as Northern Europeans. Wealth inequality typically has little to do with individual hard work, and almost everything to do with regional and group power inequalities.

      1. the germans have always had an ethic of productivity, hard labour and sacrifice. Rounding people up and putting them to productive work and sacrifice. lots of films and documentaries have been made about it.

      2. @Ralph Musgrave, Y I watched one of those documentaries, it was about this polish mining operation, and Prescott Bush, yes the presidents grandfather – george bush, invested in some Germans to go and manage that mine, and he was certainly aware of the LABOR COSTS in that polish mine, and when his german management told him they needed to “improve” worker productivity, he was all for it, MAXIMIZING PROFIT! Hooray! I am sure the polish slaves didn’t like it though.
        So before you go and castrate all the GERMANS, or even american capitalists, lets recognize the real evils out in this world that hurt human beings. Why some chinese want to go and burn the japanese cars makes no sense to me in their recent riots, Mosler says imports are a benefit, boy have the DARK FORCES got all us suckers snowed, fighting and hating each other.

      3. @Ralph Musgrave,

        But in Greece and Spain, youth and young people unemployment is much higher. So your argument does not hold. One of the ways to reduce unemployment among younger people is to reduce the retirement age. But in Greece, older people are the ones working while young people are unemployed.

        See Greece: Unemployment in Q1 2011 – The situation is much graver now.

        Older people are brought into work when the economy is booming or when one is a mercantalist country, and you cannot afford to retire. The only other reason to raise the retirement age is so that the corporations and insurance companies do not have to pay retirement benefits – whether or not a person is actually working.

        Unemployment is almost always a systemic phenomenon, and not one of laziness or personal choice.

      4. If the germans spent more money instead of hoarding it like mercantilist misers then things might be a bit better for greece. But no, they like to be ‘strong’ so they can tell others off for being naughty.

      5. @Y,

        You really have to look at the graphs in my link to understand the implications of what I am saying.

  6. The economic problem is that deficits are too small, while the political understanding is that deficits are too large.

    This has to be repeated ad infinitum! Maybe with subliminal messages in your slides 🙂

    1. @Tristan Lanfrey,
      Any approach that a European banker/economist/politician can link to increasing inflation ,righlty or wrongly ,will be used discredit the author ..and it works every time in Europe .

      1. @Walid M, In the end you may be right; but then again, nobody invites Warren Mosler to speak about reducing the deficit these days. Someone must be open to his ideas.

    2. @Tristan Lanfrey,

      Is it the size of the deficit that matters or the quality of it? It makes me wonder how Japan’s economy would have performed during these two lost decades if they went for growth inducing tax cuts rather than government spending programs which almost paved over the entire country. Evidently the return on investment (ROI) on all that government spending was not all that good. Tax cuts increase the supply of money in people’s pockets for consumption, saving and/or investment, but not all tax cuts are equal. Some types of tax cuts increase the demand for money because the after tax return on labor and capital goes up. This would seem to offset to some degree or another the potential inflationary consequences of the increase in the supply of money resulting from the tax cuts.

      1. @Ed Rombach,

        Some types of tax cuts increase the demand for money because the after tax return on labor and capital goes up. This would seem to offset to some degree or another the potential inflationary consequences of the increase in the supply of money resulting from the tax cuts.

        interesting Ed. Do you have an example of this to illustrate?

        Once major infrastructure (physical and social) are in place, I tend to agree with you. One of the best things I think about MMT is how it proves we can lower taxes and increase our personal income levels. What a winner that one is!

      2. @Mario,

        Adam Smith and Karl Marx were basically in agreement on the concept that human progress is predicated on the accumulation of capital. This necessarily means that from one production cycle to another over time, the ratio of capital applied to labor must increase. This is the basis for increasing labor productivity and raising living standards for the broader population from one generation to another over time.

        The Marxists might refer to this accumulation of capital as social surplus, whereas capitalists might think of it more in terms of profit and earnings but either way a growing ratio of capital relative to consumption as the economic pie grows larger results in rising absolute living standards. It means that there is progressively more and more investment available not merely to maintain existing plant, machinery, infrastructure and labor skills and corresponding wages but to upgrade it. Moreover, those upgrades to all these categories must expand exponentially to avoid economic stagnation.

        In connection with this, Alan Greenspan often said that the tax on capital gains theoretically should be zero percent. I agree with this conceptually which reflects my Supply Side roots, but politically this probably would not work because it would be too easy to demagogue. In a previous thread I recently posted a tax proposal which I call the 10% solution for Warren to consider as he runs for Congress,

        Here is a summary. All sources of income would be taxed at a flat 10%, including earned income, interest income, dividend income, capital gains, corporate income and social security with 5% paid by employees and 5% paid by employers, while eliminating the income ceiling applicable to the SS tax.

        Most current deductions would be eliminated and replaced by a generous standard deduction such that a U.S. family of four earning $50K would only have to pay the 10% tax on the first dollar earned income over and above the $50K threshold. This means that even though this tax structure appears as a flat 10% rate, it is nevertheless quite progressive especially when taking into account the elimination of the income ceiling on the social security tax for high income earners. Under current law the SS tax is the most regressive tax borne disproportionately by the middle calls and working poor. Liberal progressives should be able to embrace this structure.

        Under this plan, if you do the math you will see that regardless of the source of one’s income the total effective tax rate never exceeds 15%. I can provide anyone who is interested with a simple EXCEL spreadsheet that shows how it works. Moreover, 10% is a simple number to remember and reminiscent of the 10% Biblical Tithe which could make it easy to sell to the religious right.

        This approach overcomes the objection often raised by the left about the Armey/Forbes flat tax which did not tax capital gains, interest income or dividends. Makes sense too, because it doesn’t seem fair that some rich guy who derives all his income from coupon payments on Treasury securities wouldn’t have to pay any tax.

        At the same time, the 1% would probably be salivating over a combined effective tax rate of 15%, which is almost as low as Romney pays, without having to pay an army of tax accountants and lawyers to exploit every available loophole the way Romney does.

        In other words, I believe the 10% solution for tax reduction and reform would garner support from liberal progressives on the left as well as Supply Siders and Austrians on the right who want to cut taxes. I believe in building political coalitions from the Left, the Right and the Middle to the extent that that there are common ground mutual self interests at stake. I believe that a tax reform of this nature would unleash a shock wave of economic growth that would put people back to work and break the current cycle of economic malaise and stagnation.

      3. @Mario,

        I neglected to mention the estate tax a.k.a. “death tax” in my 10% solution proposal. By way of review, before the Bush tax cuts, the estate tax weighed in at a marginal top rate of 55% for taxable estates exceeding a threshold of $1million. In the decade following the Bush tax cuts the top marginal rate had fallen to 45% but the exemption threshold was raised to $3.5 million for individuals and $7 million for couples. In 2010 Congress raised the exemption threshold to $5 million and lowered the marginal rate to 35%. However, the fiscal cliff is looming and unless Congress acts to forestall the automatic tax increases and spending cuts at the end of this year, the estate tax will revert to a top marginal rate of 55% once again and the exemption threshold will drop to $1 million. Seems like a stiff undertaking to me and I reckon the deceased and the accumulated wealth of their life’s work should be left unmolested as they pass on from this world to the next. Therefore, in keeping with the 10% solution I would set the estate tax rate at a flat 10% and set the exemption threshold somewhere in the range of $3.5 to $5 million.

      4. @Mario,

        Warren – FICA goes to 10%, split evenly between 5% paid by employees and 5% paid by employers. Importantly though, the income ceiling that applies to FICA would be eliminated.

      5. so there’s a 20% total tax rate if you add your 10% flat tax?

        If so, why not just use FICA for your flat tax?
        It’s already a flat tax with no deductions, so just drop the cap and raise the rate, and eliminate other ‘income taxes’
        and expand FICA to unearned income, or whatever?

        sorry, I haven’t been following the details.

      6. @Mario,


        Why do you want to tax income? Why not tax consumption? After all, the incentives should be tilted towards production, not consumption. Consumption has its own obvious reward (i.e. consuming).

        Taxing consumption creates a better automatic stabilizer as well, and you don’t get into all of the messy arguments about what constitutes income (as opposed to, say, reimbursement or return of capital).

        If you’re worried that it’s too regressive, you can always rebate the consumption tax on the first $40K of spending per year per household (with adjustments for the size of the household, etc, etc).

      7. @Mario,


        “the incentive for production is consumption”

        No, the incentive for production is making money. You’re conflating one person’s production with a different person’s consumption.

        Throughout human history, production has always been the hard part. Consumption is easy. I think people sometimes lose sight of that when they study economies where aggregate demand is too low.

      8. @Ed Rombach,

        Ed, I knew a guy who was *high up* in the Office of the Comptroller of the Currency. He told me in the late 90s that their office knew that a flat 10% tax on all income, all, above a given threshold I don’t remember (so it didn’t ding the poor) was sufficient and fair. A flat 10% on all income, including drug dealers–no morality test–managed by SSN and TIN.

        I said What’s preventing it? He said H&R Block and tax attorneys, it would put them out of business.

        He said the IRS would need 10-20 guys in one room to run the computers verifying earnings by SSN and TIN. Let’s say your SSN is 123-45-6789. Computer search showed you grossed $370,000 last year with your LLC with TIN xxx-yy-zzzz, and your weekend antiques business with TIN aaa-bb-cccc. The govvie would say you owed $37,000 in tax (10%) unless you filed with deductions for salaries and physical costs of doing business (rent, utilities, office supplies, insurance, wholesale products, etc). Then you pay 10% of whatever that is.

        (Remember this was the late 90s). He said–and I quote–“We know it would eliminate the deficit in four years.” As a joke, he added, “As long as the drug dealers pay up.” He said it would make not paying your taxes a social taboo.

        He also said one of the biggest pushbacks was the IRS itself. It would effectively eliminate them, and the cost of running their buildings, but that the government would have to retrain their employees for work in other parts of the government.

      9. look at the macro
        fica is about 15% of income up to about 110,000

        gov spending is maybe 25% of gdp.

        Figure a deficit of 7%?

        The ‘flat tax’ is the residual?

        Of course that means that if the flat tax is 10%,
        up to 110,000 the rate is more like 25%,
        assuming the consumer is the one paying the business side of fica
        17% if you don’t want to assume that.

        And the rate falls towards 10% as incomes climb.

      10. @MRW,

        “so there’s a 20% total tax rate if you add your 10% flat tax?”

        Yes. I misstated the total tax rate as 15% earlier in this thread because I made an error in the FICA due on interest income, dividends & capital gains.

        “If so, why not just use FICA for your flat tax?
        It’s already a flat tax with no deductions, so just drop the cap and raise the rate, and eliminate other ‘income taxes’
        and expand FICA to unearned income, or whatever?”

        I see your point and I think I agree because It looks like either alternative would produce the same result.

        “sorry, I haven’t been following the details.”

        I am constantly discovering that the devil is always in the details.

      11. @MRW,

        “I said What’s preventing it? He said H&R Block and tax attorneys, it would put them out of business.”

        “He said the IRS would need 10-20 guys in one room to run the computers verifying earnings by SSN and TIN.”

        My heart weeps for the army of tax accountants, lawyers and advisors who would be forced to find some other kind of work. Hopefully… some kind of productive work

  7. I think that your speech can be easily understood by someone who is acquainted with MMT thought, but not by a more general public. I think some of the main points you’re trying to make require more explanation.

    For instance: At the end you state:
    “What this means for the euro zone is that inflation control ultimately comes down to limiting government spending by limiting selected prices member nations are allowed to pay when they spend.”

    I think a general audience (without MMT background) can misinterpret this statement (f.i. to mean that a gov should fix prices of end products), while you (I guess) refer to setting the price of unskilled labor so that it affects the cost input of prices of many end products (and thus controling inflation).

    Same in the beginning: I think it takes people some time to realise these thoughts are based on sectoral balances approach, which I would name more explicitly.

    I think the points about demand leakages due to savings which need to be accommodated by deficit spending, since gov is the only sector that can create NFA “without constraints” , and the fact that a LOLR for govs is a necessity to make that possible, are very important points (especially if Draghi is there ;-). But I think you should spend more time in your speech explaining your reasons, because otherwise it might not be fully understood by your audience and therefore less convincing.

    Just my 2c.

  8. Warren,

    “the price level is necessarily a function of prices paid by the government of issue when it spends, and/or collateral demanded when it lends.”

    The government can pay above current market prices and thereby raise the price level. But the government can’t pay below market prices and thereby lower the price level, can it?

  9. Warren,

    You say “Note that I have made no mention of interest rates or monetary policy in general. My 40 years of experience as an insider in monetary operations tells me they matter very little for growth and employment.”

    I think it is so much contrary to the common knowledge that at this point everybody in the audience will go “whaaaaat? This dude is obviously unhinged, proceed to doze off”

  10. It might be helpful to note that not only the savings desires but also the sharp contraction in private lending also requires increased government debt, but that may be obvious to your audience.

  11. Hi Warren, my first comment after a long following.
    If i may i would recommend a stronger attention graber and more clarifing secong sentence: ” I would like to remind you of meaning of 0 in accounting”
    And i have a question. I am from Croatia which has a peg to euro and is about to enter EU on 7.1.2013. ANd to spice it up even more, most of the private credits are peged to Swiss Frank and with 3% prepayment penalty. There is a lot of tax avoidance which is finaly being taken care of but new VAT of 25% with corporations paying it at the full receipt, not on profits only.
    Since the peg does not allow for monetary policy i was wandering about the means to lower interest rate. Would it be the best option to use the last bank, HPB, still in state hands to offer lower cost credits for private needs and trough it force other banks to offer better interest rate? ANd supply HPB with newly issued currency for distribution and reserves. HPB just recently started doing that but without CB providing new issue.
    I am looking for an effective argument against preveiling opinion that entering EMU will lower interest rates that are realy high right now and causing a big problem to economy.

    1. @J Jordan, J Jordan, I was in croatia last year. Are you aware that one of Bob Mundells top students/research assistant is now working as a tour guide in Dubrovnik? I was in shock, she assured me the euro experiment was going to fail, and that was coming directly from Mundell. I asked her why do you do such lowly paid work compared to your economics Phd and training, she said it was all she could find, and living in Dubrovnik was worth less economic options and job choices.

      She used to work in Italy with him making goverment policy there. Anyways she said everyone was being crushed under those swiss loans, her family too, my friend that worked with Nestle in Opatija was also being crushed by swiss loans. I went to some banks there to help him out and asked why can’t you guys loan your citizens in your own currency? The croation banker looked at me like I was nutzo. I was going to pay off some of his loans for him on various properties in Opatija, but he had a 10% prepayment penalty@! HOLY JEEZUS I asked him why did he indebt himself to such pathetic terms, it was all he could do to save his marriage I later gathered, wife was a real shopping machine wanting nice houses, cars, expensive trips, etc etc They had a few places on Rab too. Sad how the materialism and consumerism had infested them.

      He would wax eternal about how Great TITO was and playing west versus russia to squeeze all he could out of both of them, so why is not having independent currency on the citizens agenda there? Why are you putting in leaders who want to give up control J Jordan? My friend assured me that napolean took over venice, but he got his ass kicked hard when he came down to croatia and the montenegrons, so why are you guys turning over so much power and control? What happened?

      I was in shock at what SHEEPLE all your bankers and “elite” are when it came to larger powers dominating the finance sector, why have you let yourselves become such slaves?

      I went to the tesla museum, he cut off his balls before he was going to let any woman have POWER over him, a real tribtue to the WARRIORS of croatia, where is that “spirit” anymore?

      1. @John Horkin,
        The reason i believe is that we have a hard infatuation with Germany and its economic power. We have an idol fetish after TITO was an benevolent leader and really succesfull at many things not to mention his own propaganda that fueled that. Besides that we had superdemocracy / democracy at work which proved so many benefits over kapitalist system and brought us a time of peacfull inertia but on the other hand we had a boiling rage against individual intelectual chains that lasted under and after TITO directed against Croats and Slovenians. That rage is still used to divide and conquer by political machine serving German demands.
        Basicaly, establishment is still using previous political strategy of mind control and is nothing different then all around the world.
        Many of the intelectuals left the country and are still leaving. Me personaly, i was disapointed in persistant nationalist attitudes of majority of people and left in 1998 but recently decided to go back and stay no matter what in order to educate as many as posible and to unite poor and working class.
        There is a small group, that understands the implications of loss of monetary sovereignity and banking system even without understanding theory of money, whom police state effectively shut them down. But even them are motivated with nationalist/protectionist mentality that practicaly seek to install previous economic system that was overly controling. It is hard to penetrate and present the theory of money to them but still i am debating with them on important issues of sovereignty. Rest of the population is still occupyed with nationalist emotions and really really sttuborn. Divide and coquer is more succesfull in Croatia then in USA, maybe less then in Estonia and Latvia where population is leaving en masse to go to Germany that needs workers.
        Spirit is still there but is turned toward homosexuals and imagined communists and imagined YU sympathisers while people suffer. It is waning slowly and turning to dangerous apathy.

      2. @J Jordan, You have to fight that apathy, watch this:

        USA has become police state of the worst kind, president now has authority to kill us citizens without due process or jury trial. Many military commanders over here are “preparing” thier forces for revolt. This is not unorganized occupy wall street movement, but colonels, generals, etc from westpoint and elsewhere with decades of training and experience organizing active duty and retired military for disobedience. Many judges and state legislators are also on the brink of similar disobedient actions. Is a mass of chaos and a powder keg just needing the right couple of sparks and like George Bush said, this sucker is going down. My friend at Nestle told me they were securing water rights globally at the cost of many local communities. I think you are right to push the ideas of loss of control and soveriegnty, that is more important than “scoring” of the economy. Many people I met over there wanted to look to me and the west for guidance, I told them that was a false hope, they better take matters into their own hands and do for themselves. I also met many of your countrymen that were very racist, nationalistic, sexist, to the point that I held out little hope for much change in the current generation, perhaps as more people like you work for change, in another generation or 2 that can be overcome. My friends always made it a point to say he was from the resort side of the country, not the goatherder side where they YUGO came from, unbelievable such an educated and worldly individual could be so petty in other matters, we are all only human after all.

      3. @J Jordan,


        the main problem of Croatia is it’s monetary system, the local currency pegged with Euro, CA imbalances and the private debt. Unfortunately, very few people understand this. There is a lack of industrial policy and the economy is import oriented. I think now the Croats as a nation are in even more dangerous situation then before in the last war because they are loosing their liberty and a possibility to preserve their culture. My intention is to somehow divulge the importance of monetary sovereignty in Croatia too. Maybe we should be in contact.

        On the other hand, in my opinion, the MMT is unclear regarding the possibility of developing countries to have the full monetary sovereign, the power of a country to issue a non-convertible currency with floating exchange rate that is fully accepted for domestic and foreign payments as it is USA dollar, there is always some kind of peg.

      4. @J Jordan, Zaratino, talking about preserving your culture and liberty, my friend, and many of his peers I met in croatia, said they suffer from what they also see here in the west, the woman have taken total control over everything. My friend was in so much debt and working himself into an early heart attack because he had to support all her whims. They had kids and she was cheating on him and I told him to leave her, he said he couldn’t afford too, she held all the cards (unlike his father, who held all the cards because he was high up in government). What are divorce statistics and divorce court biases in Croatia? How has the family unit and court enforcements (alimony, child supports, fathers/mothers rights, and such changed since the 80s? Here is one southern italians take on how he DOES NOT WANT to be part of EU and also wants to perserve his culture (how easily woman can divorce man in the west and take him for all he is worth – I think our esteemed host Mosler also is divorced).

        In southern Italy, where I am from, if a woman even tried this would be dead within a week. Unless she tried it with Berlusconi or a local mafioso, and even then she’d be exposed to his boss’s judgement of the affair should it be discovered. In fact, she’d perhaps face the most danger from other women, who, in parts of Napoli, will have shootouts in the street over their husbands.

        Sounds like a movie plot, but ’tis truly the way of things. Not Sicily by the way.

        There is a lot of construction in my part of the country, much of it through dirty, “mafia”-controlled contacts; this artificial pace of development eats up land and raises costs, lining the crooks’ pockets. So there is ample opportunity, I would imagine, for women to bump into a sharply dressed type at a café or someplace and have an itch to trade up. Yet they do not because of this native pressure to be loyal … or else. As government increases spending owing to EU membership, they expose the people the rough correlation of government spending and the divorce rate, now ~12% there. The departure of Berlu was really a bad day for Italy in that he was, as Roissy understood, a supreme alpha keeping the country weighted toward its patriarchal history against the matriarchalist tendency of the feminizing or even lesbian European bureaucrats from Netherland, Spain and Belgium, who demand that Italy “wipe out corruption” and “the mafia”.

        In fact they are asking Italy to completely neuter its men, allowing women to engage in this American behavior of marrying up. Actually though it is northern European at root, as one will see from the extremely high divorce rates of those countries — as well as their very high government spending.

        The effect is even more plain in still healthy patriarchal societies like India, Japan, and the Balkan states, where divorce is well under 10%. I’ve actually heard from a Mumbai businessman that there’s a joke in India that a Hindu husband is more likely to kill myself for not being able to escape his wife, which would expose him to severe community opprobrium. And if divorce ever comes into a Hindu wife’s head, she takes great pains to never show it.

        So there you have it, gentlemen — “freedom or cohesion”. True patriarchy is cruel and sometimes ugly, like a strong religion, but it keeps society together not like the pretend lovey-dovey “glue” of European imagination, but like a security guard sporting a 12 gauge outside the door.

        Someone will say, “I prefer it this way; game makes me better and my wife happier.” Very well. I understand that point of view. Woman is the most dangerous plaything, said Nietzsche. Just saying, where I’m from, it doesn’t happen.

      5. @Zaratino
        Croatia still has a lot of culture and since it is scarcely populated it has great chance to preserve it except in the capital city Zagreb. The communist period preserved and created a lot of museums and theatars that are still well subsidized and this year Zagreb was declared as The Culture Capital of Europe. The culture in small provincial villages is what i crave this country for, the small coastal towns with traditional kitchen is the best thing in the world.

        CA is easy to deal with once we remove foreign currency clausule for credits and the CB will allow for depreciation of domestic currency. Last bank in state hands started to offer acceptable credit terms which is a way to deal with high interest rate, how far it will go is the question. It is all about political will or uniting the people to make the government find a will. Not sure if that will ever happen since the politician blindly follow German orders.
        Thank you for your support and i would like to keep in touch with anyone willing to help. criticaltinkerer@gmail

        @John Horkin
        People from Croatia realy, realy like to complain, mostly for the purpose of complaining. I see the divorce justice as very objective in this country. Sometimes it goes woman’s way more but if she’s willing to use tricks and the system which is rare due to still highly traditional mentality that surounds them. SO they weary of doing it.
        But even justice is in the eye of beholder, so traditional man will find it unjust, and complain. Complaining, victim mentality is partly to blame for divisions within the population, which projects to “blame others”.
        Divorces are easy but still within 20%. I divorced in USA with Croatian girl and had no trouble with her, i gave as much as i had to give as she didnt ask for anything. And i am advocate of ; “Game makes me better and she is happier and gives more” Problem is when I don’t have time for games.

        Marrying up shows the signs but there is so many gorgeus girls that do not look down on regular people. Many beutifull girls in Croatia, ain’t so? Many, many more then in USA, and they are not attracted to Green Card carriers anymore, i know 😉

      6. @J Jordan, But even justice is in the eye of beholder, so traditional man will find it unjust, and complain.

        Real JUSTICE is fair to both sexes, and lady justice is blind, perspective shouldn’t enter into it eh?

        I want you to be Cautious thinking this way Jordan, this is how an effective evil took over american politics the past 40 years. We have a court system that is very unfair, I have US military base commanders telling me thier LARGEST problem in not the wars we are fighting in various countries, but the legal system destroying the soldiers families(thereby taking away soldiers focus on fighting war). Females have all the reproductive power (my fiance was able to murder our baby, I had no say in wether unborn child lived or died), our social security system was mostly contributed to by male payroll taxes, but females live on average 8-10 years longer, so even with being MMT paradigm on social security, it is the male getting fewer resources for more work compared to longer living female, more unfairness.

        I can easily see Croatia as a fertile ground for a PERVERSION of justice because you do not protect your men’s rights and let the female surge for equality shoot too far the other way and make slaves out of you. It has happened in the USA, be careful. It was not even the females that did this, but greed seeking lawyers looking for the best return on profit that began eroding our families.

        Divorces are easy but still within 20%. I divorced in USA with Croatian girl and had no trouble with her, i gave as much as i had to give as she didnt ask for anything.

        LOL! I see future croation girl asking for way more 😉 Too funny, you come to USA with your croat lass, and BOOM, like every other marriage, ends busted up! LOL!

        Marrying up shows the signs but there is so many gorgeus girls that do not look down on regular people. Many beutifull girls in Croatia, ain’t so?

        Yes friends wife was very beautiful, and top history professor at college there, (they are closely aligned with women’s studies department) Food was wonderful from the markets I bought in Zagreb, and the seafood was much tastier than the fukushima sushi that glows that I am buying in San Diego, but if Nestle and others have their way, soon you guys gonna be buying GMO endocrine destroying garbage that is killing all the kids in the west.

        Many, many more then in USA, and they are not attracted to Green Card carriers anymore, i know 😉

        I saw many I would have liked to take home, but also they all rubbed me as the wrong way, in USA, they would go for the 50% payout of my lifelong earned assets with some scumbag divorce attorney! Tesla was my hero, cut those nutz! If you visit his museum, he had amazing amount of material on equality of the sexes and women entering the workforce and the destruction of civilization and ruination of the family unit from all these gender dynamics, Tesla was smart guy.

      7. @John Horkin,
        Tesla is my idol, but not concerning women.
        In chats with Croatian girls i find most of them still in the traditional mindset, strongly protecting it. That could be why they rubb you wrong way. ANd missconceptions about USA is a bit waning but still present.
        It is a shame how little knowledge about Tesla is persistant in the USA, Edison realy succeded in kicking his butt, PR wise. WHile i was tin USA i tried to spread the knowledge and idea of sharing this world. Something MMT has to work on in order to succeed. MMT ideas require, especially Job Guarantee, some well off to lower their standards, as at the present, in order for rest of the population to have a decent life.
        Tesla was a pure genius, devoting all his energy to a betterment of the whole society, even going celibate to preserve the energy for that purpose. I think thats a bit too much, but it worked for him most of the time, but i believe it was also part of the cause of his mental breakdown.
        The hero generation (The Fourth Turning) seems ready for such type of sacrifice and is getting to know Tesla far better then older generations, Tesla Motors is probably part of it and there are new movies about Tesla comming out soon.


    Prossimi eventi
    Convegno “Public Debt Management” di Rudiger Dornbusch e Mario Draghi: 26 ottobre 2012, Aula Magna Università La Sapienza.

    Intervengono: Giuseppe Ciccarone, Pablo Gudotti, Richard Portes, Pietro Reichlin, Thomas Woodward, Paolo Savona, Rainer Masera, Giuseppe Bertolussi, Giorgio La Malfa, Guillermo Calvo, Enrica Detragiache, Guido Roberto Vitale, Warren Mosler, Annamaria Furlan, Linda Lanzillotta, Innocenzo Cipolletta, Marcello De Cecco, Giuseppe Mussari, Marcus Miller, Giuseppe Bertola, Paolo Colombo.

    1. @warren mosler,

      Warren, who made your participation at this event happen?
      How they knew about you and invited you?
      Probably the large popularity of the Rimi event and your visit of Italy later were helpful in this regard?

      1. @WARREN MOSLER,

        I would like to see you in Italy, both in Rimini and Rome (Is Rome conference open for public or an invitation is needed ?)

        I hope that the meetings in Rimini and Cagliari will be realized too.

      1. @MamMoTh, Mammoth, can you expand? Why is Paolo Barnard pissed? I am so bored and the MMT DRAMA that I see play out over the years by folks like cullen, erickson, norman, Paolo is much better than watching “days of our lives”, what great entertainment to see such big egos get so emotional about such silly drama.

      1. @Monica Smith,

        That was the first of the series with Randy Wray and Michael Hudson.

        Warren is the second lecture of the series. He is there along with Stephanie Kelton.

        The third series is October 5th with Marshal Auerbach and Yanis Varoufakis.

        The schedule of talks is at Modern Money and Public Purpose. The talks are broadcast live, and then later edited and archived.

  13. From this non-economist’s point of view, it seems as if the closing paragraph demands behavioral control of the decision makers:

    “What this means for the euro zone is that inflation control ultimately comes down to limiting government spending by limiting selected prices member nations are allowed to pay when they spend.”

    All commenters are aware of the unflinching and clever control the banks, military-industrial magnates, and other power players have over the members of Congress and Executive branches of the US government; it seems reasonable to anticipate that such forces prevail in every European state. Yet the above closing remark offers no indication as to just how such conditionality might be facilitated. It sort of defies reason to assume that the ECB decision makers will be unresponsive to bribes, mythological biases, and/or other any of a variety of other possible temtations.

    As Rem123 and RonT mention (above)), it is important to assure the audience that adequate insight/behavioral control is provided to enforce your very logical proposals.

  14. I agree but not agre.

    I agree because in medium term inflation is not a problem with outgap & unemployment, and budget spending (= private gain) could be financed with ECB monetary base.

    But your wrong assumptions is that EU is ONE Federal State like US :

    * EU Nations have different view (e.g. Italians want ECB OMT while Germans don’t want this) ;

    * Inside EU there was Nations that made Moral Hazard like Texas (I remember a your post where speaking about Texas you proposed some limit to avoid this problem) ;

    * Inside some Nations there are Regions (like South Italy that assorbed 2000 billions in 40 years = total Italian public debt)
    with great Moral Hazard problem ;

    * there are Stations/Regions Structural Net Exporter
    and other Structural Net Importer (e.g. form Germany to Spain),
    and it’s hard to explain to the Exporter that if Importer are without money they don’t buy their product => the slow down of GDP in Germany will change Political View also in Exporters





      Piero! Why do the PEOPLE think this acceptable? To concentrate SO MUCH POWER into so few hands? I already see what is coming, watch this Piero :

      It is 1000 years of war, and most of it is concentrated over you europeans.

      I am at a navy base in san dieo right now, lots of bored youth here, aint getting laid, got little prospects for fun or an easy laid back future, most of them really pissed off and itching for you guys to phugg up some more so they can go over there and blow some shit up. Why give them an excuse?

      First its gonna be your catalonians beating up on spaniards, then northern italians beating up on southern italians, then the youth in greece gonna start killing off the old mafia boyz, then as Usual, the brits and americans (and this time china too with her 90 million men surplus) gonna come over and wipe all your azzes clean and take the reamaining women (that should help with that 90 million chinese surplus)

      God you would think you dummies would have had enough of getting blowed up! Thank god for the rest of us though, so bored, can’t wait to get a free military trip to europe to blow some stuff up and screw your ladies! 😉

      Rick Steves says travel is good!

      Piero, why do you think 300 million plus americans give up SO MUCH POWER to our federal system here? We have a couple local sheriffs that are not enforcing federal law, but that is the serious minority, most people in the USA are such happy slaves to remain in one nonoptimal currency area, my DC friends tell me if the dollar loses world reserve status, and we lose petrodollar power, the FORCES that are uniting 50 states will unravel and you will see civil war and sucession in the USA once again! I am going long nanobot spy drones and military manufacturers! War is good for business Piero, kills off all those unneeded human monkeys yes?

      1. @WARREN MOSLER,

        Hi Warren,

        Yes I Know that you did’t say that, but to print its neccessary a global agreement in EU..

        Corrado Passera is our Minister of Economic Development, and he was head of Banca Intesa (the bigget in Italy). Some months ago he made a proposal : State doesen’t pay Commercial Debt with his Supplier (70 billions euro) because he don’t have money and because this debt are not in the balcance of public debt untill they are payd. So he proposed to pay this commercial debit with State Bond (Bot, Btp). But this proposal was rejected by enterpreneur and may be by other lobby that i don’t know. So now he propose only to adobt a Europena Law to limit the extra-large payment delay.

        This proposal was, in little part, similar to your, like a distant cousin ?

      2. yes, a little bit

        it forces the suppliers to accept Italian debt,
        which presumably has a market value, if they went to sell it, at less than the face amount.

        if the market value was the face amount, presumably the govt could itself sell it first and then pay in euro

        so it seems it’s more of a way of paying at a discount?

  15. in that meeting you will know Mussari, the head of Italian Bank Associatio (ABI).

    He was for 10 years the head of Banco Monte dei Paschi (MPS).
    In 10 years he destroid the capital valuations of MPS from 10 billions to 1 0r 2 billions. He bough in 2007 with MPS another bank paing double or triple of the good price.

    Now he is not boss of MPS. But he is reconfermed head of ABI !!!
    This is the quality of our financial management at top level !!!

  16. I say it this way- the price level is necessarily a function of prices paid by the government of issue when it spends, and/or collateral demanded when it lends.

    What this means for the euro zone is that inflation control ultimately comes down to limiting government spending by limiting selected prices member nations are allowed to pay when they spend. Like central banking, it’s about price, and not quantity.

    So what does this mean for the EZ countries? They are not the monopolists of their currency, so they can’t be the price setters.

    1. Price setting is pushed down by the issuer to the member nations, who also compete with each other.

      that’s a radical change from the issuer of the currency doing it himself.

      it’s like the water monopolist having ‘sub stations’ in different districts who set their own prices,
      with some room for ‘arbitrage’ but not a lot in short time frames. And with the sub stations not knowing they
      are price setters but instead thinking markets set their prices.

      I agree it’s a very peculiar arrangement.

      I first went through this back in 1995-96 in the early days of the euro discussions,
      so it’s probably in some paper or presentation I did back then.

  17. Warren, I have criticized you for a decade for being the world’s worst marketer and salesman. You didn’t listen at me during your senate run against schiff and you lost that one, don’t you get tired of losing and wasting your time, life, and money?

    Show them this Video, all 5 minutes, and tell them if they don’t listen to you, the explosions coming over Europe in WW3 is going to make WW2 look very small. Slap them over the head HARD, now is not the time for them to be lulled into sleep with your usual boring monotone delivery and shy uncertain forceless demeanor, show some ballz and aggression and assertiveness and take this constructive criticism with positive feelings.

    1. @John Horkin, History is written not by winners, but by observers who prefer to write and describe, rather than participate. Writing is a hobby for the leisured class and relies on a whole lot of productive enterprise that goes unrecognized. Also, although writing is linear, many of its practitioners seem deficient in the ability to accurately relate cause and effect. So, for example, the neocons were convinced that because Europe was rebuilt better than before it was destroyed, all that was necessary to revitalize the “cradle of civilization” was to bomb it to smithereens. They call it “creative destruction,” never realizing that, unlike the Creator’s, human artifacts are not the product of magic. The intent to create does not justify smashing everything in sight.
      Oh hopes that, in future, electronic media will be enough to sublimate these irrational urges. Perhaps if Dubya had had a game boy………..

      1. @Monica Smith, Monica, our CIA have used gender movements to demotivate the enemy armed forces, do you think what is going on in the middle east with women’s rights is just a matter of CHANCE? LOL! War is hell, and nothing is off limits to win!

        I have sometimes wondered if introducing feminism to an enemy country would be good psychological warfare and tend to reduce morale, at least among the men. The following is interesting:

        “Anna Ardin/Bernardin is a self-described feminist activist who has made accusations before – against her own students – and was thrown out of Cuba for her involvement with a right wing, CIA-supported feminist group.”

  18. According to Marc Lavoie, the main contribution of MMT to economic theory is that it forced economists to dwell into the details of the clearing and settlement system and to take into consideration the role of government in the payment system, whereas before even heterodox economists had focused exclusively on the relationships between commercial banks and the central banks.

    This important step forward in economic theory was mainly due to the path breaking work of Warren Mosler in the 1990s, followed up later by Wray, Bell-Kelton, Fullwiler et alia.

    Their work was naturally targeted on the U.S.system, but some MMTers did enlarge the scope of study to other countries. See for example the excellent paper of Felipe Rezende on the nature of government finance in Brazil.

    Unfortunately, the same curiosity did not extend to the eurozone.

    Indeed, the main studies on the payment system of the EMU – technically very good, btw – have been produced by economists outside the sphere of MMT, such as Peter Garber, John Whittaker, and Karl Whelan – and also Bindseil and Konig, at the ECB.

    I think it’s about time the MMT theorists delve into this key subject. Europe is in turmoil, particularly its southern part, with the situation deteriorating by the hour and MMTers are hard put to come out with specific policy proposals – probably because they basically do not feel much at ease with the way the payments system really works in the eurozone.

    For instance, the European authors mentioned above claim any government inside the eurozone can go on deficit-spending by using Target2.

    If this is so, then austerity could be overcome tomorrow by a government willing to use the rules of Target2 – and this while keeping the euro as the official currency.

    Let’s suppose Spanish demonstrators manage to force the present government’s resignation. A new government could then put Spain back on a growth track by simply deciding to spend more via publicly-owned financial institutions.

    What do MMTers have to say about this specific scenario that could become reality in a very short time frame?

    Basically, not much.

    Perhaps the time has come for Mosler & others to quickly concentrate on the subject “EMU payment mechanism” in order to come out with practical policy recommendations – for otherwise MMT may be unfairly condemned to irrelevance at the exact moment when it will be needed most.

    1. @Jose Guilherme, Indeed, the main studies on the payment system of the EMU – technically very good, btw – have been produced by economists outside the sphere of MMT, such as Peter Garber, John Whittaker, and Karl Whelan – and also Bindseil and Konig, at the ECB.

      Will you please post some of the links Jose?

  19. Think you may need to provide a bit more meat on the monopoly price setting. paragraphs at the end Warren. I read it 4 or 5 times and am still not sure I’ve got it.

  20. Mr. Mosler,

    This isn’t a criticism of your paper, but it is an observation to help you underscore the immense talent and clarity you have on the subject, and hence to help you posit that realization in your audience’s heads. So please excuse me if I rush in with the ‘you shouldas’.

    You should do more of a three-prong approach. Anchor it first with your searing understanding of how your audience see things. Get into their heads. They don’t know MMT from the back of their chairs.

    (1) “This is how the majority of people currently understand [it].” Lay it out. “You think it works this way and that way, therefore you think X and Y are the way to go to create wealth/prosperity/full employment for your people. You have honorable aims and I understand your frustration.” Whatever. Show you know what they know, and that YOU understand that they just want to do the best job they can. Even if they are from the ECB.

    (2) “Here’s why it’s wrong,” or “Here’s where you’re getting tripped up,” or “Here’s what and where that thinking leads to.” Then lay it out. You have a genius ability to make things simple. So, stress the un-benefits of their thinking and approach.

    (3) Then, “Here’s how it really works.” And throw on that trowel of ‘I’ve been in the business for 40 years, I’ve worked with ______, and ________, and ________. I’ve been on the inside of ______ trades, _______ policy decisions, and Federal Reserve __________’s. I know how this sausage is made, and I know the information that is being kept from you. That’s why I’m interrupting an incredibly pleasant lifestyle to inform people, and the lesser among us, who have been lied to.’

    You don’t toot your own horn enough.

    Speech writers call it “Getting to Yes.” Every statement has got to produce a fist-pumped Yes! inside your audience’s heads.

    Hope this might help.

    1. for Warren Mosler:

      marketing say don’t say never : “Here’s why it’s WRONG (=NEGATIVE),” because it’s an accusation to our audience and they close their pride.

      It’s better to say : “Here’s why it’s possible IMPROVE (=POSITIVE) current policy changing view”…

      about your audience :

      * Mussari => see my comment above : he is the worst of all, a politician inside bank able only to manage political alliance and destroy money without pay responsability ;

      * Marcello DeCecco : it’s an old economist, he doeen’t understant tecnicalities of modern finance, but he is clever, he understand the substantial macro point, and he know that with olny austerity the economy will go down

      * Mario Draghi is very very clever, he is over the class, he understand all the tecnicalities, he was head of BankItalia before of BCE, he was the coordinator of the secret plan to remove Berlusconi (in alliance with our Republic President Giorgio Napolitano) and commissioner Italy like in 1992 when we was at risk. You can help Draghi give him some instrument to demonstrate to Merkel/Germany that MMT it’s in the interest also of Germany and not only of Piigs. THIS FOR ME WOULD BE THE REAL AIM OF YOUR PLAN.

      * Paolo Savona is clever, he was a honest banker (a ararity in our enviroment), and now he is counter the Euro, he want exit and return to Lira to gain flexibility with currency&printing ; but hte head of the joike is Draghi&his friend, so for me it’s better if you help Draghi to convince Merkel to print instead of the exit strategy.

      * Cippolletta is head of Center of Study of Confindustria (Associacion of Italian Indistry), he is clever, he don’t understand the tecnicalities of moder finance => inside Confindustria ih this day the ise an hide division => the Majiorirty have understand the power of Draghi&Monti&Company and endorse them, and aim to Strong European Union, and have accepeted that in 2013 we will force to ask aid to BCE and pay more tax&cut (the political price to convince MErkek) in exchange, in practice is the less bad => a little Minority guided from Marcegaglia (the ex Head of Confindustria near to Berlusconi) don’t want Monti in 2013 (in spring there will be political election) because they fear a Tar for Rich People (we call them Patrimoniale), but for me they did’nt have real possibility considering the ratio of power ;

      * Lanzillotta is of Bilderberg like Draghi&MOnti&C.

      * La Malfa is an old politician of the parties of Republican, but the clever men was his father, and he is only the son, about tecnicalities of finance

  21. Re: “marketing say don’t say never : “Here’s why it’s WRONG (=NEGATIVE),” because it’s an accusation to our audience and they close their pride.

    It’s better to say : “Here’s why it’s possible IMPROVE (=POSITIVE) current policy changing view”…
    I think MRW has got it right: “Here’s what and where that thinking leads to.” I think this gets the rhetoric right. Of course there are different ways to express the idea, which is to point out that this way leads to result x, whereas this other way leads to result y, which presumably is the desired one.

    And that’s the rub: the difficulty here is that the greater public weal and the immediate interests of the power-entrenched financial-banking establishment almost certainly do not coincide. Hence the elements of demagoguery and hypocrisy encountered. The way out is to show these interest that their way is ultimately self-destructive; farsightedness and a wider horizon of interest should trump shortsightedness and a narrow horizon.

    The great question: is a successful european union in fact in the interest of the public weal? A fiscal union solves the financial difficulties, assuming an MMT point of view regarding austerity and the like; but does that mean it is a political plus in the long run? Europe’s heterogeneity has always been its weakness. That will not change, however much the uniformization entailed by corporate modernity tends to plaster over the differences. Uniformity is not unity, and it is unstable in nature. The center-key of a true unity cannot lie on the same plane as the differences, but this is just what the Union tries to achieve with its idealeology.

    1. @Jim,

      Hi Jim… simply…

      if telling Improve I get result X with probability A
      and telling Wrong I get result Y with probability B

      and X * A > Y * B (because the Pride of the Audience)

      then I prefer Improve

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