This aggregated post is a change from the previous style. This one doesn’t contain a Table of Contents. I’ll likely not be doing aggregated posts at least for several months. Perhaps I’ll not return to doing them at all, as they take a great deal of time over non-aggregated posts. Thanks for understanding.
I’m highly impressed by this young lady and support her efforts. High schoolers are the new college kids. They have to be.
Because so many of us invest within cities …
… Green New Deal resolution …. The sheer scope and ambition of the proposal jolted a Washington political establishment that, unlike cities and businesses across the country, has made little effort – not to mention progress – addressing the climate crisis.
The six-page blueprint tackles climate, jobs and social inequity all at once, committing the US to dramatically invest in a clean energy economy along the lines of a 10-year national mobilisation comparable to President Franklin Delano Roosevelt’s New Deal, which lifted the nation out of the Great Depression and set it on course to lead the global economy for a century.
From massive investments in clean transit and sustainable farming practices, to the creation of millions of green jobs, the plan seeks to make America run on 100% renewable energy by 2030.
Polls show that four-fifths of the country’s registered voters support a Green New Deal – including, incredibly, two-thirds of Republican voters ….
Some say the nationwide popularity of the Green New Deal reflects a profound change in the American electorate, which previously failed to recognise the severity of the climate crisis.
I’ve never heard anyone denounce racketeering and promote the public sector so well without calling for heads to roll.
We can land planes safely at crowded airports, yet we can’t manage to make our financial system safe. Why? Stanford University economist Anat Admati talks about what’s needed to get financial regulation that works.
Pavlina Tcherneva, one of the economists behind the idea, explains how it can fight the climate crisis and promote economic stability for American.
Glencore’s move follows “engagement with investor signatories of the Climate Action 100+ initiative,” the company said in a statement Wednesday. “We must invest in assets that will be resilient to regulatory, physical and operational risks related to climate change.”
… death by a thousand cuts.
More shareholders will divest from miners and from their customers who burn the fuel; the group of insurers who refuse to provide coverage for mining projects and thermal generators will expand, further pushing up costs; new supplies will come increasingly from relative minnows like Whitehaven Coal Ltd. and MACH Energy Australia Pty., which will struggle to get access to capital, plus a handful of state-owned giants in China and India.
Building new renewables is cheaper than coal in most major markets, and heading that way in all but a handful of countries.
QE Forever: The Fed’s Dramatic About-face
The Fed is realizing that it cannot bring its balance sheet back to “normal.” It must keep pumping new money into the banking system to avoid a recession. This naturally alarms Fed watchers worried about hyperinflation. But QE need not create unwanted inflation if directed properly. The money spigots just need to be aimed at the debtors rather than the creditor banks. In fact regular injections of new money directly into the economy may be just what the economy needs to escape the boom and bust cycle that has characterized it for two centuries.
Please read the entire linked article, then notice how the most important statement in it is completely ignored:
He [Lerner] argued that the government should be prepared to spend whatever is necessary to sustain full employment without raising taxes or borrowing …
What Lerner put forth there has been put forth over and over and over and before Lerner first said it. It’s what I’ve been putting forth for decades. The government does not have to tax or borrow to spend whatever it takes to have the highest standard of living for every citizen and without price inflation or deflation.
Until that becomes the common understanding and position, we will have poverty, misery, and more.
One place we will never see the term mismanagement, or any equivalent term, applied is in reference to the austerity imposed on the euro zone countries by the European Commission, acting largely at the direction of the German government. In fact, major news outlets, like the New York Times, seem to go out of their way to deny the incredible harm done to euro zone economies and to the lives of tens of millions of people in these countries, as a result of needless austerity.
… The paper has repeatedly told readers that policies that undermined the welfare state and redistributed money upward, were being done for the purpose of revitalizing the economy. This was especially the case with Emanuel Macron in France … In these and other cases, the media took at face value the claims of politicians that the reason for the measures was to help workers, not to reduce their bargaining power, which is their immediate effect.
To be clear, labor market regulations can be excessive and there are certainly contexts in which streamlining them would end up benefiting most of the labor force, even if such streamlining could hurt narrow groups of workers. But the idea that excessive labor market regulation, rather than inept macroeconomic policy, is the main problem limiting growth and reducing employment in France, Spain, and elsewhere in Europe does not have any evidence to support it.
In short, the NYT and other media outlets have been engaged in a great exercise in misdirection. While the blame for Europe’s economic problems over the last decade can very clearly be laid at the doorstep of its leaders who have insisted on austerity, the media consistently ignore evidence that is as clear as day. They instead treat the problems facing Europe’s workers as being mysterious in origin or due primarily to an overly generous welfare state and excessive regulations that protect workers. This is some seriously biased and/or misinformed reporting.
They said confidence that human activities were raising the heat at the Earth’s surface had reached a “five-sigma” level, a statistical gauge meaning there is only a one-in-a-million chance that the signal would appear if there was no warming.
The real truth is that there is absolutely zero chance human activities are not raising the heat at the Earth’s surface.
These guys are at the very heart of MMT; therefore, what they say is MMT, is MMT.
I’m glad this textbook is coming out. It will not only increase awareness of, and knowledge about, MMT but other political-economy schools of thought as well: sorely needed.
A brief introduction to the features of the new MMT textbook – Macroeconomics – published by Macmillan and written by William Mitchell, L Randall Wray and Martin Watts.
On February 27, 2019, we celebrate five years in orbit for the NASA/JAXA Global Precipitation Measurement mission, or GPM. Launched from Japan on February 27, 2014, GPM has changed the way we see precipitation. It has provided unprecedented three-dimensional views of precipitation light rain to intense thunderstorms. To mark its five years, we’re looking back at five big moments in GPM’s history of observing storms. Music provided by Killer Tracks: “Life Defrosts,” “Revolutions Are Infinite,” “Formulas and Equations” Complete transcript available.
The analysis in the linked article is wrong. Trump postponed raising the tariffs (which tariffs have definitely been working, as I predicted they would). He holds all the cards. China is in no position to even score one point. Xi knows it.
I don’t agree with Trump’s economics, but I have to tell it like it is rather than engage in false propaganda.
The “free marketeers” are upset that the tariffs worked because they’ve been saying how awful tariffs are: how they never help, etc. False progressives were saying the same thing simply because it’s Trump.
Primarily used for cooling and refrigeration, HFCs are a type of greenhouse gases known as “super-pollutants” because they are thousands of times more potent than carbon dioxide. If left unchecked, emissions from HFCs will increase to as much as 19 percent of all greenhouse gas emissions by 2050 as global population and demand for air conditioning continues to grow.
“As the rest of the world takes steps to ratify the Kigali Amendment, it is critical that the U.S. step up with a clear and predictable plan for transitioning away from HFCs,” said Anne Kelly, senior director of policy and the BICEP Network at Ceres.
Together, these seven policies would slash greenhouse gas emissions in the United States roughly 29 percent below 2005 levels by 2025, and roughly 50 percent by 2050, according to Energy Innovation’s climate policy modeling.
… could include a much higher carbon price, investing in advanced clean-energy technologies, retrofitting older buildings, tackling sectors like air travel and shipping, deploying carbon capture systems to further reduce steel and cement emissions, as well as strategies to revitalize forests and curb methane and nitrogen pollution from livestock and farming.
… the people who have denied the science and the solutions own a special responsibility that history will judge harshly.
It isn’t just humans that are suffering and will suffer more in the future. The heating of oceans is causing tremendous problems for sea life, particularly coral reefs. If we continue to warm the planet, we can expect to lose much of these reefs. We can also anticipate reductions in fish and sea life populations.
We scientists sound like a broken record. Every year we present the science and plead for action. Not nearly enough is being done. We can still tackle climate change, but we must act immediately. We have the means to make a difference, we lack only the will.
… corporate executives – on both Main Street and Wall Street – have been able to share in the extra booty captured from American workers, who were forced to have the freedom to sell their ability to work for wages that have barely increased in recent decades.
That combination of stagnant wages for most workers and the ability of those at the top to capture a large portion of the extra surplus is therefore at the root of increasing inequality in the United States.
This was all accomplished via deregulation and the strangling of unions. The answer is more direct-democracy over the economy: economic democracy. Re-unionization is not the answer because unions were always part of the problem, as it placated workers.
We have to free ourselves from the loanable funds theory – and scholastic gibbering about ZLB – and start using good old Keynesian fiscal policies.
Ah, my position ever since I learned that banks create loans out of thin air. In the US, the Fed requires a 10% reserve ratio but will increase reserves to meet the demand. In the UK and other places, the central bank doesn’t even require a reserve ratio.
To top it off though, what’s always still missing from all of these pro-commercial banking policies is the fact that the government doesn’t have to borrow a dime to issue more money into the economy.
Stephanie Kelton is a vastly better economist than is Paul Krugman, but she avoids the fact (that the government doesn’t need to borrow) like it’s a hot potato. Ask her why?
Some officials have proposed replacing the 2 percent target with a strategy that seeks to achieve average inflation of 2 percent over time. That would require the Fed to intentionally overshoot 2 percent to make up for periods when inflation ran below the objective.
Toomey responded to Powell’s remarks with a warning.
“I understand the problem that you are wrestling with,” he said. “I would just urge great, great caution on this for many, many reasons, not the least of which for whatever period of time the Fed decided it would exceed the goal so that it averages the goal, first of all during that period of time presumably you don’t have price stability.”
Powell said there were “plenty of questions and concerns” to address in the review, but the central bank “owed it to the public to try to think our way through the best possible way to address that problem so that we can carry out our mandate.”
“… during that period of time presumably you don’t have price stability.” That’s incorrect thinking. What is price stability? Is it when inflation is zero? If that’s the thinking, then 2% inflation is intentional instability. However, averaging around 2% with an overshoot is itself stabilizing with the target as the center rather than always undershooting.
I’m not a monetarist; but, if we’re thinking in such monetary terms, then overshooting to get 2% as the average is absolutely not instability.
I’ve been saying that for quite a few years now. I started shortly after the Great Recession hit and the topic of how to hit the rate started making the news.
I didn’t develop my thinking about it. It was my starting place. So, the Fed has taken all this time to even begin considering what I would have been doing from the outset.
This web-based resource helps local governments and other groups track the progress and quality of post-disaster recovery.
Well, it’s all true, albeit often merely a matter of semantics; however, please note that even while MMT doesn’t rely upon taxes to spend, it does rely upon governmental borrowing, though Bill Mitchell has written that he would move beyond borrowing to the government simply issuing the money, which has always been my position.
Even MMTers will freely admit that there is a limit. China is quickly approaching it. I find it amazing just how blind Xi is about monetary policy.
Limited as GDP measures are, they do not include where the dollars came from that were invested, spent, or blown. Governments play a large role in GDP. Just the federal government alone is a major contributor behind GDP. Everything it spends and invests in the US goes into the GDP formula. What does not go into GDP is where those dollars came from. Much of it came from tax revenues, fees, and other receipts. The remainder came from borrowing.
In the calendar year 2018, the federal government’s debt grew by $1.4 trillion, to end the year at $21.97 trillion. If you exclude the distortive effects of the last debt-ceiling fight, the increase in 2018 comes to around $1.3 trillion.
Most of the additional borrowing of $1.3 trillion was added to GDP and therefore to GDP growth. But GDP growth in current dollars totaled just $1.0 trillion. Without that additional federal borrow-and-spend, GDP growth would have been negative.
So, $300 billion is pure borrowing. If the government had created the money without issuing debt, the $1.3 trillion would be free and clear. It’s that simple. In fact, the multiplier would have seen that 1.3 bumped up perhaps 10% or more depending upon how productive the investments, such as on the Green New Deal (without borrowing, without deficits, without government shutdowns while the government stupidly argues over increasing the debt limit). Makes me want to run for office just to get the message out there.
As expected, lending standards are continually being allowed to go down. It’s the same pattern as before the Great Recession. How far will they go? Will they go low enough that the securitized packages once again contain toxic loans in large enough quantities to sink the market?
What Patrick W. Watson is calling fake capitalism isn’t fake capitalism. Fake capitalism is anti-trust laws. Real capitalism is exactly unregulated monopolies. It’s why we use the term mixed economy. Crony capitalism is the superrich buying the regulations they want in place. It’s the mixture of fake democracy and unbridled greed.
Patrick says, “Let everyone compete on an equal footing, and give consumers and workers freedom to choose what they want.” Why do they get to choose via dollars but not via votes? Why do they only get to vote with their wallets? What about those with less money, why do they have less say over the economy? Patrick is upset with the wealthy buying government, but he doesn’t seem to see the hypocrisy. What if the people don’t want Patrick’s “everyone competing” but rather want cooperation via their government?
Democracy is better than the rich having more say. People don’t merit more say simply because they are more competitive and less cooperative.
What seems to irk millennials most is maintenance. They didn’t factor in the high costs of fixing what breaks. Young buyers may have been renters previously, and not even considered maintenance since it was never a factor financially.
Not long …
These are the same types of people using the same types of tactics and hired by the coal, oil, and gas industries to deny human-driven global warming or that it matters.
“A lot of agents are losing money. The kickbacks help keep their businesses running,” he said.
… Jianguang Shen, chief economist at JD Digits, a Chinese fintech group, said: “Li has always tried to emphasize that he will never do flood-style stimulus. He is expressing the concern of many commentators that if you have such huge lending, some part of it will not go to the real economy.”
True, but a large part will go to the economy, and the problem is that in China, some 300% in debt/GDP notwithstanding…
… absent massive new credit creation, the economy tends to grind to a halt.
They really, really, really do not know what they are doing. Both sides in the debate are completely wrong.
A killer fungus known as Bd has triggered a mass amphibian extinction that has spread across every continent and been described as among the worst infectious diseases ever recorded.
Nearly 6% of all UK greenhouse gas emissions, and up to 8% of the world’s, are now sourced from cement production. If it were a country, the cement industry would be the third largest in the world, its emissions behind only China and the US.
The great bulk of the industry is inherently conservative, ignorant of the alternatives to cement and reluctant to adopt change. Conventional, or Portland, cement is trusted to be safe and strong and developers continue to specify it because it is cheap and the alternatives are not well-known. Without major demonstration projects showing what is possible, and the education of architects and planners, progress will be incremental and possibly too late.
The cement industry has transformed the world and enriched both itself and mankind. But it now threatens to tip the environment into uncontrolled warming. It’s now payback time and the industry must respond urgently to the problem it has helped to create.
“We are seeing a lot of flighty property investors who want to get out before the market falls further but they’re not getting out at any price.”
Could a free fall start?
Claiming that we can continue as we were if only we switch energy sources is so in conflict with the most basic of physics, that is: thermodynamics, that those who claim it are either real thick or, perhaps more likely in politicians and business people, lying through their teeth.
That’s a complete disconnect. Switching the mode of production of energy to that which doesn’t increase greenhouse gases does not violate the laws of thermodynamics at all. Generally, if you decrease greenhouse-gas emissions, you reduce global warming. You can do that while increasing energy output. Thermodynamics in the equation is not inextricable from greenhouse gases.
All of this is possible if fiscal stimulus isn’t employed to stop it, stimulus way beyond the Obama package.
We still aren’t in a 2007-8 bubble, however. Speculation is not rampant. Lenders haven’t quite reached that level of recklessness.
Pretty good overview of MMT …
… there’s a more controversial part to Lerner. Here’s Stephanie again:
The first law of Functional Finance is designed to eliminate a shortfall in total spending, while the second decrees the specific manner in which the deficiency is to be funded. Specifically, the second law calls for the sale of interest-bearing government debt only in the event that private spending would otherwise generate excessive aggregate demand. Under ordinary circumstances, Lerner argued, it is expected that capitalist economies will suffer from insufficient rather than excessive aggregate demand so that it would not be necessary to offer bonds in exchange for money as a means of tempering inflationary pressures. Instead, Lerner believed that bonds should be sold to the central bank or to private banks “on conditions which permit the banks to issue new credit money based on their additional holdings of government securities, [which] must be considered for our purposes as printing money”
Translation: You don’t have to sell Treasury bonds at all. Just print money, credit accounts directly. That’s a pretty controversial view. And I think this is the one that is most pilloried.
Yes, it is. However, it doesn’t even go far enough. This is why the MMTers kicked me out. I said the government never needs to issue anything but money and doesn’t ever have to tax in order to control inflation. My position was, and remains, that there should only be one legal tender (which is the case now) but that all such money should be in government-controlled accounts only: no commercial lending or borrowing either. Monetary inflation/deflation would control price inflation via the US Treasury as central bank (replacing the Federal Reserve) simply increasing/decreasing account levels. The only issue I can think of is people moving everything out of “cash” and into tangible assets. However, barter wouldn’t be legally allowed to replace cash transactions. The money couldn’t hide, and its value would still be set by the government democratically and hopefully via algorithms.
I’m convinced I’ll be vindicated. I think my real “sin” was/is not having an advanced degree in economics. That’s okay. I’ll take political economy over “scientific” economics every time.
BTW, Edward (the post’s author) unfriended me somewhere along the line too. Not sure why.
See what I mean? The only choice is between taxing or borrowing. What nonsense!
Don’t tax or borrow. Just issue the money! End of story.
Maybe their problem is they did get advanced degrees in economics, though I more than suspect it’s all really a bankers’ protection act. In other words, it’s anti-democratic-socialism because in democratic-socialism, the money supply is democratized rather than a private-sector profit point.
To help combat scams in the U.S., FinCEN, an investigative arm of the U.S. Treasury Department, has lowered the threshold for real estate transaction sizes involving shell companies that require title companies to identify the parties behind the shell companies. The threshold is now cash purchases above $300,000 or transactions involving cryptocurrency. The orders apply to all title companies in Boston, Chicago, Dallas-Fort Worth, Honolulu, Las Vegas, Los Angeles, Miami, New York, San Antonio, San Diego, San Francisco, and Seattle.
… she used the term “climate delayer” to call out those dragging their feet on climate change.
Ocasio-Cortez used the term to describe Senator Dianne Feinstein, who was filmed telling a bunch of children that when it comes to the looming apocalypse, she knows better than they do, because she has spent a long time in the Senate not fixing the problem. While they called for immediate action on the Green New Deal, she argued that change wasn’t going to come anytime soon. After all, when it comes to averting a global catastrophe on an unprecedented scale, endangering hundreds of millions and fundamentally altering the human experience, you don’t want to rush into things.
… if financing for Japan’s economy and banking system had been provided by an external central bank bent on enforcing fiscal austerity by threatening to withhold liquidity, then a doom loop of insolvent banks, rising bond yields, and recessionary forces would have been inevitable. Politically toxic populism would not lag far behind, occasioning the same kind of clashing-though-compatible narratives that we now hear from the European Commission and Italy’s government.
… ClimateWise said that increasing catastrophes linked to climate change could triple losses on property investments over the next 30 years.
Cyber crime is so massive it has been described as the largest and fastest transfer of wealth in history.
If output does not adjust sufficiently, the program would prove to be inflationary.
Exactly! It’s what I’ve been saying year after year after year. Plan capacity, and produce what we need and want (decided democratically, not by entrepreneurs) issuing the money to do it as we go. Done correctly, there would be no inflation but huge growth, especially is we bring on AI production.
The worst of the outbreak was in Beauregard in Lee County, Alabama, where the 23 deaths occurred.
“The devastation is incredible,” Lee County Sheriff Jay Jones told WRBL. He detailed that at least 40 people were injured in the storm, and two are in intensive care.
Hao Hong of the Bank of Communications International says the property bubble in China is “quite visible” and discusses the state of the real estate market in the country.
The sooner we recognize that we, the people are the ‘franchisor’ in our finance franchise – that it is our monetized full faith and credit, that of the United States that our financial system disseminates – the sooner we see that we don’t have to placate those ‘bond vigilantes,’ ‘skittish investors,’ and other 19th century mustachioed villains. We can do as we collectively will – as consistent with not over- or under-issuing our collectively issued promissory notes in relation to the stock of resources that those notes summon through investment or command through purchase.
… The whole intermediated scarce private capital picture trades, I suspect, on unclarity or outright equivocation over the word ‘capital.’ Too many seem to take the word somehow to refer both to physical capital and to financial or money-capital at the same time.
As soon as you prise these two things apart and track them both separately, you see at once that we can act collectively to unlock any horde of artificially ‘scarce’ capital simply by issuing more claims upon physical capital in the form of financial or money-capital. That dilutes the ‘holdout’ value of the horde, restores the circulation, and of course results in no ‘general inflation’ unless and until we outstrip our indefinitely extensible productive capacity.
And were that ever happen, we would know what to do. For we know this already. We can always complete the job – the ‘de-distribution’ job – begun by our earlier dilution of the non-investing (merely gambling) rentier by … taxing the non-investing rentier, selling our collectively issued bonds to the non-investing rentier, or, better yet, reasserting our franchisor’s prerogative by tightening up privately issued credit quality through better targeted leverage and liquidity regulation of the non-investing rentier.
I’m not going to translate all of that. I will say, however, that MMTers better learn how to speak and write in plain language if they are ever going to make their points perfectly clear to the masses who’ve not spent their lives building up the needed jargon to otherwise get it.
With proper planning and transparency, the People can issue all the money we want without borrowing a dime from anyone ever and without causing price inflation.
What’s really interesting is that the article is on Forbes, which was about as rentier promoting as it got.
This is just another reason coal is not king and why a war on coal is a good war, a required war.
Always, always, always safety first!
“Right now, oil and gas laws in Colorado tilt heavily toward the industry,” said House Speaker KC Becker, a Democrat, who will be one of the co-sponsors of the bill. “We are going to correct that tilt so that health, safety, and environment are no longer ignored by state agencies.”
That will lower insurance costs among other costs.
Excellent article …
I urge seasoned readers to do their best to muster some openness and goodwill towards the side you think you disagree with. Often the disagreements are smaller than you think.
Oh, very well said. I know firsthand. I kept telling MMTers that they’re getting hung up where they should see that the differences are purely semantical. They still threw me out. Of course, the gold bugs threw me out too but for different reasons, such as that they are simply wrong.
Kenneth Rogoff is only hitting at strawmen, as MMT doesn’t hold to what he claims it does.
BTW, Rogoff totally screwed up his calculations concerning the debt ratio.
Anyway, who needs to issue bonds?
Well, what’s his real concern? An independent central bank meaning banksters welfare. If the Central Bank were the US Treasury, we wouldn’t have bankster bailouts.
Lots of investors are parents of young children. That’s why I’m including this. Little kids are very much more emotional than we are as adults. The parents in this case did exactly the right thing, ask questions. However, if they hadn’t first heard of this Goddamned Momo thing, they’d not have known to ask specifically about it.
… killed at least 23 people, including children.
Traveling straight down a county road, the twister carved a trail of destruction at least half a mile wide and about a mile long ….
What good is sweating it making a fortune in money if you turn around and die from eating poison?
… a diet high in organic foods is linked to a 25 percent reduced risk of developing cancer. Most notable was the correlation between organic food consumption and the risk of non-Hodgkins lymphoma, which the data shows as decreasing by 86 percent for those who most often consumed an increased amount of organic food.
“I think the California produce industry could be 30 percent organic by 2030, and in Washington, 70 percent by 2030 if the government, food industry and retailers openly and honestly explained to consumers the trifecta of benefits that society will enjoy as a result – safer and more nutritious food, a healthier environment, and way fewer farmworker poisonings,” he wrote in an email.
Look at all the benefits. It not only helps you but helps the entire planet.
What good is sweating it making a fortune in money if you turn around and your investments are wiped out due to catastrophic damages from global warming caused by carbon fuels?
Get on board with the Green New Deal. You have nothing to lose but increased losses and higher insurance premiums, if you will even be able to get coverage if we don’t have a Green New Deal.
You know that switching to organic and pasture-based agriculture is what we need to do to feed the world and cool the planet – because healthy soil can both provide abundant food, and also draw down and sequester carbon.
But do your members of Congress know this?
And if they do, are they doing anything to level the playing field for farmers who grow nutrient-rich food in ways that protect, not harm, the environment?
The word democracy wasn’t mentioned once. The Tiananmen Square protests in 1989 was the Democracy Movement protesting. They were [allegedly] slaughtered, and it was completely censored. China was then rewarded by the anti-democratic forces in the West, including the leadership in Washington. Trump will cut a deal that will not include anything for democracy in China. It’s All About The Benjamins. Those who “opened” China knew full well it would NOT lead to the democratization of that one-party dictatorship.
Investing in “C” or lower neighborhoods is overall more work, but it can also generate a higher payday. In these cases, I calculate my estimated cash flow and compare it with how much time and stress I’m willing to dedicate to the property.
If the numbers work out (achieve a desirable hourly rate), I go for it. It has worked out for me thus far, but it definitely hasn’t been worry-free.
Look, if the government doesn’t borrow to issue currency, it doesn’t pay any interest on that money. Larry says that sometimes money financing results in interest payments. He’s dead wrong about that. Secondly, no leading MMTers have ever said that hyperinflation can’t happen by over issuing money into the system. MMTers simply say that deficits can be managed and that a major economic power, such as the US, could bail itself out. It’s understood that the MMTers aren’t saying to ramp up inflation and then ramp it up further via any such bailout. They’re talking about a well-regulated issuing of money so that hyper-inflation won’t happen.
As for creating money to fund the welfare state, it’s completely doable without price inflation becoming a problem. The new-welfare-state aspects would be supply-and-demand matched. It’s really that simple.
One wonders whom Larry is trying to protect from economic democracy.
In the U.S. context, modern monetary theory begins with the observation that the currency itself is a simple public monopoly. From the earliest stages of the project (mid-1990s), MMT held that currency regimes matter. MMTers argued that governments cannot become insolvent when they borrow in their own non-convertible currencies and that the currency issuer never has to accept “market-determined” interest rates.
We explained that Social Security faces no long-term financial crisis and warned that the budget surpluses in the Bill Clinton administration were unsustainable. We warned of the housing bubble before it burst. We explained that quantitative easing wouldn’t be inflationary. We knew Reinhart and Rogoff were wrong about deficits and growth even before the Excel spreadsheet error was discovered.
We warned that the euro was susceptible to a debt crisis. And, once the crisis occurred, we insisted that the U.S. could never end up like Greece.
Krugman calls MMT “a losing game,” and he urges us to remember “all those articles I wrote” over the previous years.
I sampled those articles, and here’s some of what I found.
On Social Security, he asks, “Where is the crisis? Just over the horizon.” And then he warns, “While the present generation of retirees is doing very nicely, the [Social Security] promises that are being made to those now working cannot be honored.”
He called our nation’s finances “a fiscal train wreck” and confessed, “I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.”
He insisted that the U.S. faces, “a looming fiscal crisis,” adding, “the only question now is when foreign investors, who have financed our deficits so far, will decide to pull the plug.”
He mused about the potential for accelerating inflation under quantitative easing, writing that the Fed is, “printing $1 trillion of money, and using those funds to buy bonds. Is this inflationary? We hope so!”
He asked, “couldn’t America still end up like Greece?” answering, “Yes, of course. If investors decide we’re a banana republic whose politicians can’t or won’t come to grips with long-term problems, they will indeed stop buying our debt.”
And he puzzled over the different interest rate environments in Japan and Italy, asking, “Why are the interest rates on Italian and Japanese debt so different?” confessing, “I actually don’t have a firm view. But it seems to be an important puzzle to solve.”
No economist is going to get everything right. But the odds of getting things right improve dramatically when you’re working with a macro framework that doesn’t lead you astray. The IS-LM framework is a gadget that will often align with sensible real-world analysis. It may perform better than a stopped clock, but it is no match for MMT.