10 Responses

  1. warren,

    have you got four equally short commonsense-sounding (and correct) statements, to counter Merkel’s four commonsense-sounding (but wrong) statements?

    1. @Dan Lynch,
      Merkel born and brought up in East Germany ..career politician
      clueless on economics and addressing a mostly Lutheran/Calvinist voter …what did you expect?

  2. From a comment on this post on Naked Capitalism:


    Anonymous said…
    You might want to take a look at a book by Robert A. Heinlein For Us,The Living written in 1934,not published til 2001..this is a quote

    “Cathcart grinned. “He got the cash money the same way we
    have gotten all cash money since Roosevelt put the gold back in
    the ground-right off the printing presses. But he didn’t have to
    print much of it. The checks were issued at the Bank and the
    merchant and a great many others had accounts at the Bank and
    very little cash money changed hands. The bulk of it was mere
    bookkeeping entries, made by the bank clerks. Holmes had
    implemented what the bankers had known for centuries but
    were barred by LaGuardia from doing-taking money out of an
    inkwell. What’s the matter, son? Still not satisfied?”

    “Well, I don’t know. Everything you have said seems okay,
    but how about this? If you keep pouring money into a country
    indefinitely, you are bound to get inflation, fixed prices or no
    fixed prices.”

    “You don’t pour it in. You add just enough to keep it running.
    Each fiscal period the additional amount is the closest possible
    approximation of the amount necessary to prevent a spread
    between consumption and production, based on the value of the
    nation’s inventories.”

    “But why do you have to keep adding money all the time?”

    “I said I would stay away from theory but I’ll give you this
    hint to chew over: the amount necessary to add each period is
    theoretically equal to the amount of savings invested as capital in
    the preceding period. And one more hint: Doesn’t it take more
    money to run the country’s industry now than it did when
    George Washington was President? “

    1. @Unforgiven,

      You know, putting together what people from John Law to Marriner Eccles to Warren Mosler have said, plus what Robert Heinlein said, plus what Walter Shewhart said, plus what Dan Lynch said, above, we get:

      “Data is meaningless w/o context. Therefore, what’s intuitive is not intuitive w/o the proper context. Therefore, it’s better if you don’t let your marks catch on to actual context.”

      Why is it so hard to get people to examine context first, and data secondarily? It goes back to a saying by an 19th century naturalist: “People will do anything in their power to avoid thinking.” Why? Because it’s actual work. To think you must burn calories, and people have multiple mechanisms for conserving calories unless absolutely necessary.

      Reassessing context before interpreting data is an endless, indirect process learned only by practice. It also requires a more agile – i.e., interconnected – mind to start with. That’s why humans are better at it than most other species. And it’s also why kids are better at starting it than adults … but the habit grows & persists only if practiced.

      Finally, thinking can be a very domain-specific habit. Merkel had years of practice thinking about chemistry & physics, sometimes twice before lunch! Yet she may never have acquired the habit of actually thinking about operations in other areas, such as fiscal & monetary policy

      Bad sign, overall. When it comes to thinking, the best habit of all is to be fiercely independent about when to think, how much, how thoroughly, and how well. The glory really does go to those who find a better way, faster … and there’s currently no fiscal operations glory (and precious little overall) in either Germany or Greece.

      1. @roger erickson,

        “People will do anything in their power to avoid thinking.” Why? Because it’s actual work.

        Roger – That was rather well said! I like to think of work as what it takes on the part of humanity as a whole, to overcome the second law of thermodynamics. It goes hand in hand with socially adaptive traits that propel human evolution.

  3. At it’s core, I actually think the Keynesian analysis/New Deal programs are very understandable and intuitive: “Businesses are not hiring enough people for everyone to have work. People need work. Government must hire these people so they have work.”

    It gets weighed down massively when people overthink it by saying we’ll run out of money, and when economists say it will cause inflation (note that this is only a problem for the economists and people who’ve been trained in inflation fear; inflation fear is not intuitive). I admit that the “we’ll run out of money” thing is extremely intuitive; then orthodox Keynesians get into talk about saving in good times and spending in bad, which is intuitive. But then the Republicans say “You filthy Dems won’t save in the good times, you’ll spend it all!” which unfortunately is also intuitive. Hollande had a nice twist: he said he’d pay for stimulus up front by jacking up taxes on rich people. That proved to be a viable political message and it also would boost demand due to differing propensities to spend, even though it’s not the best approach according to MMT.

    The idea that government can just print up more money is very intuitive to a child, but not to an adult who has learned to fetishize money and be constantly worried about running out of it. So that sucks.

    The job guarantee is also pretty intuitive. “Right now there are tons of unemployed people who are qualified for jobs. And in fact there’s always been a few unlucky unemployed people even in a good economy; there’s just never quite enough jobs. Therefore the government should create jobs so that everyone can have work.” That gets weighed down by spiteful people thinking that poor people/unemployed/black people are lazy trash and that’s why they don’t have jobs. And then there’s the anti-spending clamor. So it is a hard sell even though it’s intuitive.

    But Merkel’s austerity nonsense is ALSO a hard sell because, while it’s intuitive, it doesn’t address the problem of unemployment and stagnant wages at all. She’s able to pull it off for three reasons: a strong, coordinated press from conservative politicians, bankers, and economists; the fact that the German economy is actually doing okay (and better than ten years ago); and racism/resentment again: they just blame everything on the Greeks and Portuguese. However note that in basically every other country the economy’s not as good, and the austerity message is not popular. You can see that in France, Britain, and now the Netherlands. It’s only an effective message when things are going well, whereas stimulus and job creation is more popular when things are going badly.

  4. Debt is good; the alternative is theft. Why public officials have such difficulty with the concept of obligation is a puzzlement. Do they not understand, when they take on a position as steward of public resources and assets, it’s simply not acceptable to argue “you will have to do with less because I have managed poorly?”

    1. @Monica Smith,

      Monica!!! Didn’t you learn ANYTHING from Jamie Dimon? It’s our fault because of all the finger-pointing!!! I’m sure Congress would have ripped him a new one if it was otherwise. But then they would have to cop that they managed poorly.

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