Monthly Archives: December 2012

Functional Finance and the Debt Ratio—Part II

By Scott Fullwiler

[Part 1] [...] [Part 3] [Part 4] [Part 5]

This five part series will explore at length (warning!) and in detail (another warning—wonk alert!) the MMT perspective on the debt ratio and fiscal sustainability.  While the approach suggests a macroeconomic policy mix and strategies for both fiscal and monetary policies that most neoclassical economists currently believe are unsustainable, ultimately the MMT preference for a significant role for fiscal policy in macroeconomic stabilization is shown to be consistent with traditional neoclassical views on fiscal sustainability.

This second part discusses interest rates on the national debt in the context of a currency issuer operating under flexible exchange rates. Continue reading

Beyond the MSM: the New Wave of Brief Blog Posts on Platinum Coin Seigniorage

By Joe Firestone

Introduction

MSM bloggers and cable hosts weren’t alone in creating the new wave of posts and video segments on Platinum Coin Seigniorage (PCS) at the beginning of December. The blogosphere also produced brief posts from a number of bloggers, as well as a few more substantial ones. I’ll review the brief ones in this post, and the more substantial ones in future posts, but won’t include my own recent posts on PCS during December.

Continue reading

P. J. O’Rourke’s Pizza Boxes Metaphor Explaining the Triumph of Capitalism

By William K. Black
(Cross posted at Benzinga.com)

P.J. O’Rourke’s column:  “Dear Mr. President, Zero-Sum Doesn’t Add Up” claims that the following metaphor explains President Obama’s world view and policy choices: “life [is] like a pizza, where if some people have too many slices, other people have to eat the pizza box.”

A zero-sum interaction occurs when one party’s gain must exactly match the other party’s loss.  Continue reading

America’s Deceptive 2012 Fiscal Cliff – Part 2

By Michael Hudson

[Part 1] [...] [Part 3]

Today’s financial war against the economy at large

Today’s economic warfare is not the kind waged a century ago between labor and its industrial employers. Finance has moved to capture the economy at large, industry and mining, public infrastructure (via privatization) and now even the educational system. (At over $1 trillion, U.S. student loan debt came to exceed credit-card debt in 2012.) The weapon in this financial warfare is no longer military force. The tactic is to load economies (governments, companies and families) with debt, siphon off their income as debt service, and then foreclose when debtors lack the means to pay. Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain. Indebting companies enables creditors to seize employee pension savings. And indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers. Continue reading

Functional Finance and the Debt Ratio—Part I

By Scott Fullwiler

[...] [Part 2] [Part 3] [Part 4] [Part 5]

This five part series will explore at length (warning!) and in detail (another warning—wonk alert!) the MMT perspective on the debt ratio and fiscal sustainability.  While the approach suggests a macroeconomic policy mix and strategies for both fiscal and monetary policies that most neoclassical economists currently believe are unsustainable, ultimately the MMT preference for a significant role for fiscal policy in macroeconomic stabilization is shown to be consistent with traditional neoclassical views on fiscal sustainability.

This first part defines the correct measure of the national debt and then looks at the mathematics of debt service and the debt ratio. Continue reading

Deprogramming Progressives Indoctrinated into Supporting Austerity

By William K. Black

A little bit of economics can be a truly terrible thing, for the introductory classes in micro and macro-economics are the most dogmatic and myth-filled part of the neo-liberal curriculum.  Dogmas that have been falsified for 75 years (such as austerity) are taught as revealed truth.  The poor indoctrinated student is then launched into the world “knowing” that austerity is the answer and that mass unemployment and prolonged recessions are small prices to be paid (by others) to achieve the holy grail of a balanced budget.  Students are taught that national budgets are really just like household budgets.  These dogmas are not simply false, they are self-destructive and cruel.  Neo-liberal economics is so bad and has gone downhill at such a rapid rate that it now worships the economic analog to bleeding patients – austerity – as a response to a Great Recession.  Millions of people are indoctrinated annually into believing this long-falsified nonsense, and that includes people who consider themselves progressives.    Continue reading

Dystopia Friday

By Dan Kervick

Chris Bertram, reflecting on cyborg technologies in a possible robot-human future, points to a potentially dystopian outcome for this technology: employers could make the willingness to undergo human technological enhancement a condition of employment contracts.  Bertram sarcastically quips, “Oh well, I expect someone will be along to explain how such contracts would be win-win.”  Matt Yglesias responds, “It seems pretty obvious how they would be win-win: They’d be agreed to voluntarily by two mentally competent adults.”

Continue reading

America’s Deceptive 2012 Fiscal Cliff – Part 1

By Michael Hudson

[...] [Part 2] [Part 3]

How today’s fiscal austerity is reminiscent of World War I’s economic misunderstandings

When World War I broke out in August 1914, economists on both sides forecast that hostilities could not last more than about six months. Wars had grown so expensive that governments quickly would run out of money. It seemed that if Germany could not defeat France by springtime, the Allied and Central Powers would run out of savings and reach what today is called a fiscal cliff and be forced to negotiate a peace agreement. Continue reading

Obama’s OMB Channels its Inner Tea Party

By William K. Black

The Office of Management and Budget (OMB) is every administration’s heavy artillery on budget issues.  OMB’s staff is dominated by neo-liberal micro-economists under every administration, so it is institutionally conservative.  OMB personnel obtain promotions by killing programs, cutting spending, and either blocking the adoption of regulations or weakening the regulations.  OMB is institutionally predisposed to embrace austerity.  OMB is also expected to be a zealous advocate for the President. Continue reading

Jumping the Abyss: Marriner S. Eccles and the New Deal, 1933-1940

By Mark Nelson

We capitalists have got to decide how much we are going to pay for capitalism.[1]

Marriner S. Eccles: New York Times, May 1935

This is the crowd that wants power rather than recovery- the crowd that for 12 years was in power, that tried the very policies which ended in the greatest smash in our economic history; the crowd that willed this administration a debt of 20 billions and a demoralized, prostrate country; yet they have the sublime audacity to propose that we go back to the very policies which wrecked the country. They have been proved false profits on their own record.[2]

Marriner S. Eccles: memo to FDR, December 1935

Continue reading