Fantasy Football, Platinum Futures and the Future of Platinum

By Dale Pierce

For the present, all MMT policy advocacy is fantasy football. Everything we talk about is real, and everything we help to prove or explain or demonstrate or clarify is important – and will be much, much more important in the future. And, of course, there’s nothing wrong with fantasy football – it’s a useful exercise for learning about and interpreting the game. Similarly, the extension of theoretical MMT principles to practical problem-solving is a useful – even a vital – exercise. But nothing we advocate today is really going to happen today – at least not in America. I still keep hoping that some high-up political figure in Latin America, or Latvia, or maybe Iceland will come out with an up-front endorsement, along with an explicitly MMT-informed political platform. And I think that’s a worthwhile goal for us as well – provided that we understand just what it is that we are doing.

It is with these thoughts uppermost in my mind that I have studied two recent posts by J.D. Alt and Joe Firestone, along with the extensive comment threads that followed them.

The first thing that strikes me is how much this community has evolved since I first noticed it a few years back. And how rapidly things are changing for us now. And please don’t get me wrong – I believe in the power and importance of open polemics, including quite sharp ones when appropriate. I thought Joe’s riposte was a little more barbed than it needed to be, especially given the tentative and largely exploratory nature of J.D.’s original offering. But it’s no big deal, and I think we all know that Joe’s passion for the seigniorage issue has been the single biggest factor in what is, by mountains to molehills, the biggest real-world breakout MMT has yet seen. It’s what got Stephanie Kelton on T.V. in the first place.

Go. Joe. 

But I also agree with J.D. that our messaging needs to transcend the first-blush impression that virtually everyone gets of us now – which is that all we are saying is: “Relax! We can print all the money we’ll ever need!” J.D. is correct in believing that this is virtually everyone’s first and most lasting impression of Platinum Coin Seigniorage (PCS), whether small-bore or large, and of every other form of state money creation for that matter. And I think he is also correct in believing that the real locus of peoples’ deep distrust of this message is more to be found in culture and morals and even religion than in politics or any version of economics. The ideology of market fundamentalism is more-or-less deeply interwoven with these other components of most peoples’ world-view. But their aversion to what they conceive of as live-it-up liberalism lies deeper still. I view J.D.’s post as a valuable new angle on these issues, and I am grateful for it.

I also do not think that J.D. went, or intended to go, anywhere near as deep into the weeds of this issue as Joe has gone. Indeed, I think this particular briar patch is where Joe has largely lived for the past few months and more, to all of our great benefit. To sum it up, I think that Joe and J.D. were mostly talking past each other in this case, and I think I can say that I agree with most of what both have said, and still not consider myself a spineless centrist who just wants everyone to get along. 

Turning to the substance of the matter, I think it is instructive that the most notable, widespread impact of the PCS debate was a comically misinformed spike in the price of platinum itself. Like the dumbest dumb-bells on Fox News, and more than a few actual business journalists, the market’s impression was that minting a trillion-dollar coin meant the U.S. Treasury was going to need a trillion dollars’ worth of shiny white metal and a die the size of an ocean liner. When we posit that the public can easily be made to see what we are really talking about, we should remember examples like these.

Joe tirelessly worked his way through every nook and cranny of opinion on the issue. He shined the light of truth into every last corner. He demolished every misconception and non-factual objection that was put forward anywhere. But it is still the case that only a handful of Americans are paying enough attention to even know about this, much less understand it. When the price of platinim returns to normal (if it hasn’t already), it will be because the can has been duly kicked down the road and the pundits are ready for a new toy – not because very many people have gotten beyond the very shallowest layer of PCS.

But it would be a huge mistake to think that this means the PCS issue has ended in failure – just the opposite! For the very first time, the entire national discussion about the economy, from virtually every direction, has been taking place on our turf, utilizing our terminology. If almost everyone is still getting it almost entirely wrong, well, that just tells us how far we still have to go. But this issue, and the way it has played out, represents a true milestone.

Where things go from here doesn’t just depend on us, of course. But moments like this are times for real reflection. Platinum Coin Seigniorage is never actually going to happen in America – not because any part of the idea is invalid, but because by the time we have an administration that is willing to use it, we will no longer need it. What we should ask ourselves now is how we pivot to keep the conversation going our way.

If PCS was ever really going to happen, and if J.D.’s post was, in any substantial way, a practical proposal that we do it wrong, that would be one thing. But it wasn’t. PCS was almost tangential to it. This is now about how we pivot, how we message and how we avoid being pigeon-holed and marginalized in the next round of the debate. This doesn’t mean that we should stop talking about PCS. Others won’t, so why should we? And every exchange will be a teachable moment. But MMT is not a one-trick pony, and PCS is just one element of the much larger discussion we are trying to have. And this is where J.D.’s post and his principal talking point really resonated with me.

The central, fundamental economic problem of our time is that the financial economy of money, banking and credit has become detached from, and even starkly antithetical to, the real economy of production, consumption, invention, employment and growth. The legitimate purposes of the financial sector are to evaluate and price real-world risk, and to efficiently allocate capital to real-world economic activities. Since the 1980s, finance has systematically extricated itself from these wholesome and traditional synergies. It has taken on a sinister life of its own. Instead of serving and assisting the real economy from within, it is now wrapped around the outside of it – like a “vampire squid”. A relationship that was symbiotic has become parasitic, and even predatory. 

How this all happened is a complicated story. But the mere fact that it has happened is scarcely even controversial anymore. Everyone knows how this works. Gordon Gekko (or Ivan Boesky or Mitt Romney) pulls together a hummongus chunk of plutocratic Wall Street dough (whether via junk bonds or hedge funds), and buys himself a (midsize airline, struggling steel mill), and then uses the mere fact of ownership to enrich himself at the company’s expense. Downsize the pension plan. Close the R&D department (the future is this quarter’s bonus!) Lay off the engineers and load up the executive suite with cronies and nephews. Sell the company’s assets and borrow on the company’s credit to pay the salaries, bonuses and fees. And once this company is sucked dry, declare it bankrupt, fire all the workers, walk away from its debts (perfectly legally) and start over. Lather, rinse, repeat. Get filthy rich by destroying other peoples’ livelihoods.

This is not a complicated story. Everyone knows this story, and everyone knows that it stinks. What everyone doesn’t know is the degree to which this kind of bad behavior, and much, much worse behavior, has been condoned, justified and actively enabled by an economics profession which is, itself, rife with corruption, conflicts of interest and outright fraud. Big Economics doesn’t just provide a veneer of academic cover from a distance anymore. It’s not there to give a business-friendly spin to the evening’s economic news. Big Economics now provides both the generals and many of the foot-soldiers for Wall Street’s war on the real economy. 

When Allen Greenspan blesses the business model of Charles Keating for an appropriately hefty fee, what is that? When Larry Summers is getting paid by the Obama campaign and Goldman Sachs at the same time, what is that? When Frederic Mishkin accepts over a hundred thousand dollars in return for a “study” praising the soundness of the *Icelandic banking sector*, what the hell is that? And when he changes the title of the study to make it look like he called it right when he really called it one hundred percent wrong – and gets caught changing it, and then lies about changing it, and then gets caught in the lie – what is all of that?

Maybe it isn’t safe yet to prosecute these lines of argument too openly or too energetically. Maybe the risk of institutional retaliation is still too great. But Paul Krugman came pretty close to calling Glenn Hubbard a liar for some of the shilling he did for the Romney campaign. And when the fight does take place, it will be zero-sum.  

But if these reflections seem to have drifted a bit far from the original point, please let me draw them back to it with this summary: the key to understanding and successfully intervening in the ongoing fight over the economy, the budget and the national debt is to disclose the ways in which the different parties and factions understand the relationship of the financial to the real.

Through thirty-plus years of complicated American history, Big Money has hired Big Smart to confuse, enrage and ultimately empower Big Stupid – for the purpose of disarming and deconstructing Big Government’s democratic supervision of Big Money. Through it all, the real economy has never been anything except a means to these ends – and, more recently, an object of predation.

The big problem in Washington now is that Big Money and Big Smart (the hired intelligentsia) have succeeded too well. Big Stupid (the Tea Party) has slipped the leash. Instead of being an obedient attack dog, it has morphed into a snarling, rabid junkyard dog. It can’t be controlled by the think-tanks or establishmentarian pundits anymore. In the debt ceiling fights, in its deeply propagandized confusion, Big Stupid has rounded upon and attacked vital interests of Big Money – even as it tells itself, *and believes,* that it is only attacking Big Government.

The Tea Party doesn’t (and can’t) even conceive of the distinction between financial and real. They are far too one-dimensional for that. They believe in magic and morality plays. They believe that all the dire warnings emanating from Big Smart only prove that liberalism has corrupted even the Republican Party and its establishment operatives. They believe that if they force default upon the U.S. Treasury, everything will immediately just get better. Everything. Nothing will collapse. The pointy-headed intellectuals in government will be exposed as frauds, the advantages of the gold standard will become apparent to everyone and the private sector will take off like a bottle rocket. No problemo. All they have to do is stand their ground and mean it.

This is, increasingly, the real political divide. Democrat versus Republican is becoming less and less important. The Republican Party and the dominant, corporatized Democratic faction are both, jointly, the Party of Money – the Party of Wall Street, at least at the national level. They are vying to demonstrate their loyalty and effectiveness to the plutocracy, and, for the moment, the Democrats are winning. The political parties and their appendages overlap with, and are parts of, what I am calling “Big Smart” – the vast organizational and intellectual superstructure of neoliberal rule. And Big Smart has problems of its own – not the least of which is that when it comes, specifically, to macroeconomics, it is *not as smart as it used to be*, and is nowhere near as smart as it thinks it is.

The phenomenon universally described as “drinking their own Kool-Aid” has converted most of ‘mainstream’ neoclassical economics from a useful intellectual muscle into a worse-than-useless bundle of uncoordinated ideological jerks and twitches. Housing bubble? Oh no, it’s just a froth. Don’t worry. Systemic risk? What are you, a killjoy Luddite punchbowl-snatcher? Fix the depression I just said couldn’t possibly happen? Uhh, I think I still have a copy of the Hoover Plan lying around here somewhere. Oh! Even better: I have a nice model here that proves you can jump-start growth using a device we Nobel Prize winners call an “electric chair”. Just sit your country’s economy down in it and press the button labeled “austerity”. See? Hmm. Well then why don’t you try pounding on it with this ball-peen hammer?

The insoluble problem with this disconnect lies in the forgotten, totally disregarded, relationship between the financial and the real. In this vital area, Big Smart has morphed into not-so-smart, so the financial crisis has been transmitted to the real economy with only minor, inconsistent buffering (by inadequate and poorly structured stimulus). In Europe, of course, it wasn’t buffered at all, it was reinforced. This has resulted in a hobbled, low-growth recovery – one that barely limps along as it is, and which the geniuses at the Peterson Institute and in the White House are still trying to rig up for a ride in Old Sparky.

We have now reached a point where even the best, most well-intended and moderate “official” economic advice will, to the extent it is acted upon, only hamper the real economy. Throwing away the payroll tax cut was austerity. Ending revenue sharing to the states was a massive dose of austerity. Freezing government workers’ pay is austerity. And everything leaking out of the various organs and institutions of Washington, along with the plain meaning of Obama’s own words, indicates that the appetite for more budget-cutting is still very much a bipartisan buffet. In the wake of Obama’s flowery inauguration speech, base progressives don’t realize that the big speech *was* their bone. When it comes to jobs and the economy, words are all they are going to get. The cuts will keep coming, because Obama believes in them just as much as the Republicans do.

Next comes the transmission of the weakening real economy back to the financial sector – and the resulting next-big-crisis. It may take a year or it may take longer. But the U.S. economy and the world economy can’t return to pre-crisis levels of employment or growth as long as the current, profoundly flawed doctrines of neoclassical economics continue to be followed. The question becomes: at what point does the consistently correct analysis of MMT and the rest of post-Keynesian macroeconomics get a new trial? It has been locked up in Siberia for a generation, where it has patiently continued to work out what went wrong and what needs to be done to fix it. We have those answers. How do we insert them, in a meaningful, effective way, into the broken process, and the incoherent babbling brook of a “debate,” that characterize the world as it currently is?

I like what J.D. suggested – always frame everything is terms of financial-versus-real. PCS benefits from this framing as much as any other plank, or potential plank, of our evolving platform. Why is PCS preferable to either default or austerity? Because it’s easy? Because we can create as much money as we need to? Maybe. But, in the first instance, it’s because of the knowable, demonstrable effects that default or austerity would have on the real economy. And, at that point, the teachability of the moment is proportional to the intellect and open-mindedness of the audience. A few will be so intrigued by the sheer do-ability of PCS, they will dig in and try to learn more. An even smaller group will be motivated to take it all the way to a full-on MMT self-re-education, as most of the regulars here have managed to do. And *if we can keep peoples’ attention,* as the debate moves on to other things, we may get new opportunities to blow their minds and draw them closer.

What’s next, then? Unavoidably, the budget. With default off the table for now, most of the pundit class will pivot away from everything directly linked to it, including PCS. But PCS will remain a hot topic, and continue to receive attention from the crucial demographic of those-who-would-be-smart. Many of the well-educated and intellectually upwardly mobile people who have been reading the PCS commentary Joe has so assiduously inventoried will remember that the next Big-Stupid-Default-Threat is just around the corner. They will want to be ready for it. Some of these people are *almost* in our camp, and all of us should make it a priority to watch for, and encourage them, in the comment threads and elsewhere. But most people – most, even, of the winnable people – will see the next mechanical rabbit take off and move on to the next dog-race on the card – sequestration. 

The alternatives to sequestration, within the existing Washington consensus (small-c), are cuts to the military, cuts to social programs and higher taxes. Naturally, the President is going to insist on a balanced plan. Naturally, Big Stupid will quadruple down on paying for more wars by starving American children and repealing the “job-killing taxes” (along with the rest of) Obamacare. The Republican wing of Big Smart will posture and wink and dog-whistle until the very last minute, and then cut the best deal they can get with the White House. How should we frame our response to this “debate”?

Financial-versus-real. Austerity by any other name is still austerity. Cuts to social programs (especially to the poor, who spend everything) are sure to be contractionary. Cuts to the military, to the extent that they involve money spent domestically, will *also* be contractionary. And regardless of how much any set of tax increases targets the wealthy in relative terms, every dollar and dime of any *absolute* tax increase on the middle class will also be at least dollar-for-dollar contractionary. If Boehner and Obama successfully strike any significantly large austerity deal, it is a virtual certainty that it will land us right back in recession city.

The hinge of the MMT position on this is that if you have to choose between a hypothetical and problematic financial risk (bigger deficit) and a gigantic, disastrous real-economy risk, you take the financial risk and monitor what happens. The teachable moment is that if we do indeed get austerity, and it gives us the recession we predict (highly likely), we gain credibility. No one wants this, of course, but we want what we can get. And if, by some miracle, significant near-term austerity is largely avoided, we get a different kind of bite at the apple.

Absent a huge positive movement in the trade balance, *every* size serving of austerity will be contractionary. But one of the problems with trusting not-so-smart macroeconomists is that they can always be relied upon to predict much better results than their advice can deliver. There will be a budget deal – or else we’re back at the edge of the default-cliff, in which case,  Joe will be ready with the PCS power-point. But if, as all indicators indicate, Big Smart makes peace with itself and delivers some sort of compromise, the only thing it can be, in the short run, is either neutral, contractionary or very contractionary. 

When we call it and calibrate it this  way, with the trade caveat as an additional ex-post-facto teachable moment, we gain credibility again – because every representative of not-so-smart, with the likely and useful exception of Paul Krugman, is going to be calling it the start of a sure-thing bigger global recovery. Much bigger than is really possible when the really likely scenario for a double-dip here, and nested dips (deepening recessions) in Europe.


I fully believe that MMT is teetering on the brink of a major, and permanent breakout. Over the next few years, we are going to clean the clock of Big Economics (with help – we’re not the only ones thus motivated). The profession, clearly, must be reformed. And the worst offenders should pay for their misconduct with their reputations and their careers. There. I said it. If several thousand big-shot bankers and financiers belong in orange jump-suits (and they do), then the big-shot academics who gave them cover belong in a different line of work. I fully believe that this is going to happen. And I fully believe that it will be the start of a process which will *culminate* in an MMT-centric revolution in public policy-making as well.

But this doesn’t mean that any faction within the neoliberal establishment is going to start taking advice from us anytime soon. Again, if we want to influence policy today, we need to learn Spanish or Italian – or, really, put more energy into finding and cultivating overseas colleagues and collaborators. Living in the belly of the beast also has its advantages, of course. But being able to move quickly from radical ideas to radical action is, unfortunately, not one of them. I wish it were. Nothing could possibly make me happier than to be proved wrong. But when I ask myself what I really think, it’s this: I think that Barrack Obama deciding to mint any version of the platinum coin is, if anything, marginally less probable than that he will decide to build a Nimitz-class platinum aircraft carrier.

Our day will come. We *will* prevail. But the wilderness of ignorance and prejudice which we must traverse in order to reach that point is far denser, more tangled and more extensive than any single briar patch might lead one to believe. Clearing it will be the work of years, at least, if not decades. 

And the big MMT breakout, when it comes, will make this work harder, not easier. For it represents only the first transition point in Gandhi’s four-step model of they-ignore-us, they-ridicule-us, they-fight-us, then-we-win. Big Economics will not go gently into that good night. In the polemics of Paul Krugman we can already see the degree to which even quite liberal-minded mainstreamers will be prepared to distort, dismiss and decontextualize MMT whenever it makes them even a little uncomfortable. As their tribe begins to apprehend the truly Khunian shift that we (and others) have in mind, we should expect an avalanche of much harsher, more pointed, and more intellectually sophisticated ridicule. We should expect it, prepare for it, and not be caught off-guard by it when it comes. These guys ain’t dumb. And this ain’t bean-bag.

But *economics*, is our arena – not politics. At least not here and not for now. When we advocate, it is for the sake of educating the audience we will reach – not because we believe that anyone with real power in America today has even the slightest interest in what we’re saying. They don’t. To them it’s like we got three heads. If there is even one single exception, anywhere in American government, I can’t think who it might be. Even Dennis Kucinich, than whom no progressive is stauncher, believes in – wait for it – a return to the gold standard. Even Bernie Sanders, than whom no humanitarian is more great-hearted, spends half of his basic spiel bashing China and demanding that we raise taxes (albeit on the rich) so that our budget will balance and our grandchildren won’t be slaves to the cunning, T-bond-clutching mandarins in Beijing.

We can’t undo thirty years’ worth of effective propaganda and misinformation at a single stroke. No matter how cogently reasoned. No matter how perfectly suited to the moment. No matter how ably argued. And no matter how much determination we may bring to bear. Platinum Coin Seigniorage is one of the very best  issues available to us – for the purpose of winning over seekers and independent thinkers, essentially one-at-a-time. That is, people who sense that there is something profoundly wrong about our Monetary Matrix, but don’t yet suspect how unreal it truly is – or how deep this rabbit-hole goes.

But if we tell these seekers that everything depends on the actual implementation of a PCS policy in Washington, we risk losing them when this, quite inevitably in my opinion, fails to materialize, and when the sky does not then promptly fall. Because it won’t. American capitalism and American government will keep on muddling through. The only thing we accomplish by declaring PCS the sole road to national salvation is to demonstrate just how little political leverage we really have – which is none. Even if we get to the next-big-crisis, under current conditions, it will just lead to the next-big-bailout (regardless of what they call it), followed by the next-big-bailout-brouhaha. Our having been right about systemic risk (again) will matter. But it won’t translate directly into political influence any more than it did the last time around.

Karl Marx (sorry – I won’t make a habit of this), but it was, in fact, Marx who observed that while we make our own history, we don’t make it just as we please. And that is really the only point I am trying to make. As much as anyone else, I wish that Washington and Thirty Rock were overflowing with honest, open-minded, public-spirited people – people with the courage to challenge their own deeply-felt prejudices and conceits. People, in other words, who we could reach. But, instead, Washington and Thirty Rock are full of people with agendas of their own – people who still barely know that we exist. And could care less.

PCS has brought a few of our ideas to their attention, which they grant only very reluctantly, and only for the purpose of dismissing these dangerous ideas out of hand. They don’t want our help. They don’t think they need any help. They’re all about legacy now. And legacy, or rather Legacy, is all about how much Obama can out-Clinton Clinton in the second term. Team Obama is as addicted to the Kool-Aid as anyone else in Washington. There is no appeal or redress for us there. So, yes, we should continue to praise Platinum Coin Seigniorage to the very heavens. But we should make sure everyone knows why hell won’t have it in the end.

29 responses to “Fantasy Football, Platinum Futures and the Future of Platinum

  1. casino implosion

    MMT is indeed teetering on the edge of a breakout. However, it will be fully co-opted by those who stand to profit the most.

  2. I quite like the term “Big Stupid” which provides an apt name for the comments found in any MSM articles on economic matters and this becomes even more readily apparent when an MMTer attempts to correct perceptions of how the economic system works. But having said that the only way to correct the “Big Stupid” is to keep plugging away with the education and certainly economic journalists should be a primary target for such education. It becomes difficult for the public to carry on with the “Big Stupid” when most of what they read contradicts their brain-washing.

  3. This is a good way to continue the discourse at least. If all of this is only about one economic model versus another as argued in an ivy choked institution of ideology, then the sense of praxis also falls short. There was a period in US academic history when the elimination of political economics was a priority, and the sciencism, if not the scientology, of neo-classical econo-theology was well endowed. The reform of academic economics seems to be low fruit if the institution of the academy is not also separated from corporate interests. In part the w3 has established a means of open source thinking and discourse.

    The blogging is at a fairly high level, though the forums seem to be largely ignored.

    As an opportunity to occupy the fiscal debate there is a recent spat over the notion of the US Postal System operating as a losing operation of the government. Part of the smoke and noise was over the US Treasury not paying for postage particularly for Social Security Checks. This clown car performance of the “sound money” theology of fiscal policy calls for a response equal to PCS. PCS then becomes one of series of examples used to educate the public. To suppose that the economy should be managed by people ideologically opposed to the conduct of governance as the basis of commoning is a prior mis-assumption. To suppose that speaking truth to power is enough, seems to ignore the occupation by the acceptably politically correct.

    Delving into economic history from within the post-Keynsian//MMT/FF becomes another level of re-invention, but under the attack of neo-classical rationalizations. If you have seen the hatchet done upon Gresham’s dynamic by the Austrians and Gold standard Libertarians, something similar was done to commons based law in the assertion of the “tragedy of the commons,” and by extension the domination of private capital over commons capital.

    Though I’ve not seen any direct statements by Steve Keen he is currently in major conflict with the University of West Sydney on multiple issues including their intent to close the economics department there. I’d guess that Keen’s taking on Krugman possibility didn’t do much to ingratiate him. West Sydney has served in a limited way as a far outpost held by a culture of out-backers, as were the Irish monasteries in the collapse of the Roman Empire. As Kansas City also stands to the wicked witch folk and Ivyed plutocrats of the East.

  4. Dale, as I was reading through every word, I was preparing to again point out that MMT has, among other things, “the coin” issue all wrong.
    That to focus on printing “the coin” in whatever denomination the Secretary may ascribe is to evade the Constitutional rights of the people “to coin” their own money – as in “to create”, as in “to issue”.
    Then I came across this –
    “” Even Dennis Kucinich, than whom no progressive is stauncher, believes in – wait for it – a return to the gold standard.””
    I mean, WTF, Dale?
    Have a read of his Bill.
    The whole thing. Start to finish.
    Find ANYTHING in there related to a belief in a gold standard – and I will off myself from the entire MMT blogosphere. Forever. (I hope that offer leads to some scholarship here. And I promise to abide.)
    WHERE did you hear that?
    I mean that, Dale. WHERE did you hear that?
    In the meantime, a mere apology to Dennis is in order for his being the only real proposal that gets us back to the sovereign power “to coin” the nation’s money, a proposal that lies waiting an honest critique from any of the MMT scribes.

  5. Following right on the heels of the national PCS discussion came the fourth quarter negative growth caused in large part by huge spending cuts in defense spending. Did you see the stammering and confusion on CNBC about that? They didn’t know how to explain the “need” to cut the “debt” and “deficits” balanced by the “need” to not cut spending for the sake of the economy. Then some conservative economist came on and said he didn’t think we “needed to worry about the debt right now.” If you saw it did you see the dumbfounded look on aria Bartiromo’s face? She didn’t know what to say. So why not worry, she asked. “Because if you look at Japan with much more “debt” than the U.S. and their rates are still low” and “our interest rates are at a historic low – we are very lucky right now.” Because the deficit hawks haven’t attacked!!

    • Ha. CNBC is mostly a joke. Maria B and Santelli, et al are truly on the Big Stupid side of the universe. Then they compliment themselves by inviting really Big Stupid guests to “explain” things to us dumb folk. I pretty much have stopped listening to that tripe. I find Bloomberg just tad less objectionable. But they also play to their Big Stupid guests.

  6. Real nice writing there dale. Thank you.
    But i think you botched a part on raising marginal tax it without explanation on why it would be felt within real economy just after you explained that financial sector is appart from the resl economy and even predatory. If it is predatory it should be taxed to reduce it. If it is separate sector and it is not doing its job of allocating investment into real sector and pricing the risk then why would be damaging to the real world, knowing that highest incomes come from financial sector.
    Higher marginal taxes would not increase unemployment since you explained quite eloquently how it is a sector separated from the real economy.
    Really high marginal income tax would drasticly reduce incentives for vulture capitalism that you described as really damaging.
    High marginal tax would reduce incentives for managers to fight with workers over increase in productivity benfit and allow for income growth of low incomers.

    To me, the high marginal tax is the crucial part of the solution, especially since low marginal tax allowed for too much saving that pushed interest rates down and caused this saving glut/ liquidity trap/ zero lower bound/ crisis.
    This saving glut was what pushed for financial inovation searching for places to invest, bribe the politicians, bribe economists, bribe education.
    High marginal tax would come out of savings, or investment into financial instruments, not from investment into the real economy. I admit, high marginal tax would reduce nominal GDP but it would not reduce employment, and increasing deficits from the fall in GDP does not matter if it doesn’t cause rise in unemployment.

  7. MMTers aren’t derisive enough. It’s time to sneer at the dummies. (Hey, I was one of them two years ago.)

  8. Thanks for this well thought out discussion. You remember the last thing first and just at the moment I am thinking of your last paragraph. Obama is the leader of Big Smart and I surmise he thinks he has the magic touch and knows how to make everything work. He is now working on his legacy — make that Legacy.

    We may all carry the seeds to our own destruction. President Obama’s is his desire for the Grand Bargain, aka Grand Betrayal in Bill Black’s terms. There is no doubt he will get what he wants, since Big Stupid and all the other Big Smarts want the same thing. That will lead to recession. He may not be able to recover his Legacy following that and will wonder what went wrong. There, he will lose out to Clinton’s fairy tale.

    Maybe, I hope, that is wrong, since it means more will suffer. But there is where opportunity lies.

  9. Obama’s Big Smart should really be to re-envision a new Social Contact as per Rousseau. As it is he perpetuates the Big Stupid because that’s what his paymasters want. This want is the right as far as the Banksters are concerned to control by law as much of the money creation power as possible and ensure also that they control and benefit from the government creation power through the Big Stupid myth of the necessity to pre-fund that creation through taxation and government bond issue.

    Here is a long but interesting take on Rousseau’s supposedly deficient “blank slate” argument which is redefined as more of an attempt in the light of modern day neuroscience to argue that human beings consciousness is more developed than any other animal and though our need for dependence upon each other both creates our problems and exacerbates them through the division of labor human consciousness also helps us resolve them through deployment of law. As such the Big Stupid only gets to be dismantled by propagation of a genuine Big Smart that leads to a Social Contract decision to gain control over law making powers to restore money creation powers including control back to The People through a genuine democratic process.

  10. I am sure that advancing the MMT cause will be virtually impossible whilst the main proponents are few in number and really in just a few locations/work places. There is a need to engage the media. Those in the media don’t need to accept MMT yet, they just need to be asking the right questions to show up the so-called experts for what they are. They need to be shown to the general public as being wrong, or at least of not really having an answer to the economic ills that afflict many parts of the world. Once the seeds of doubt have been sown in the minds of all the general public, they should then be far more receptive to ideas from MMT, and hopefully to seeing that MMT is a realistic alternative.
    Those in the media won’t do this for themselves, they need to have it spoon-fed to them. The neoliberals need to be challenged at every opportunity.. There will then be the opportunity for re-education.

  11. It would seem to make sense to e-mail MSM economic journalists and suggest they are prone to inadequate judgement in writing their articles unless they at least make some effort to take an MMT perspective into account. It would not go amiss in such e-mails to offer a mentoring service at least during the initial “de-programing process” which can be conceptually difficult.

  12. “any version of economics”


    Are there “versions” of science?

  13. Here’s a question. Suppose on Monday morning, the entire world of economics is suddenly converted to the MMT perspective on macroeconomics. What would change about the way our world is governed?

  14. As a non-economist who has been following this forum for a year and a half since hearing Stephanie Kelton speak at a local college, a couple of observations:

    1) PCS, while it likely would do what the advocates suggest, is challenged in the “legitimacy” department because the law wasn’t really designed for that purpose, and people notice that. They are and will continue to be suspicious of using the law for that purpose — especially when the purpose holds a story they don’t grasp.

    2) I can’t get out of my mind Ms Kelton’s graph showing the mirror image sectoral balances extending back many years. Whenever I start to question whether MMT is on or off base, I think about how else this graph could be explained. I haven’t heard anyone else attempt to explain it. This is the fundamental story that needs pushing in mainstream forums — how do THEY explain this or do they dispute that it exists or is inaccurate? The data must be shown to be valid. I seem to recall hearing that the numbers aren’t anywhere collected as such, but must be derived from existing numbers. That doesn’t invalidate them. But others (non-MMTers) need to be able to confirm that the derivations are valid. Maybe (hopefully) that is already the case.

    3) If the data is agreed to be valid and there is no other way of explaining this graph and it’s associated sectoral balance story, then work must be done to better explain, not why deficits (as we commonly perceive them) are good, but that they truly represent something quite different — the way net financial assets enter the private sector — and that (correct me if I am wrong in this interpretation) the national debt is really the sum of the accumulated years of contributions of money savings into the private sector. Doesn’t a growing population, for instance, require more financial assets and do these increasing needs actually correlate with the annual deficits and total debt that we have accumulated over our history? Again, more evidence of the validity of the data goes a long way toward building confidence in the explanation of the data.

    In sum, if the data behind the graph is recognized valid, the primary MMT challenge at this point appears to be the need to re-frame two phrases — annual deficit and national debt — in a way that clarifies to the public (and other economists) what they actually represent, in spite of the fact that they are embedded into our laws with their current definitions (and negative connotations) implied. I have read many posts in this forum that have attempted to do just that. That graph is a powerful story. A way must be found to use it effectively to help people understand. Only after grasping this fundamental will the remaining MMT positions of using a sovereign currency to accomplish public good, and other details of how modern money systems work, seem plausible. If the data story is valid and is recognized as so by others, the challenge to the other side is to explain that data. As it is now, MMT is on the defensive because the standard story that a national economy is just a household writ large is what seems plausible to virtually everyone.

    So, there’s one view from someone looking in at the economic trenches trying to make sense of what he sees and hears.

  15. Dan Kervick | February 2, 2013

    “Here’s a question. Suppose on Monday morning, the entire world of economics is suddenly converted to the MMT perspective on macroeconomics. What would change about the way our world is governed?”

    I know what you’re driving at but would remind you as an example that Marxism in the shape of Marxist-Leninism held sway as the “utopianism” of choice in not insignificant areas of the planet for a substantial part of the twentieth century and lingers on in North Korea and a bastard market totalitarianism of sorts in China and Vietnam.

  16. Hi Dale,

    Very nice writing and very good interpretation of the general situation. I’m sure most of us will pivot to a writing about various aspects of MMT and continue on with the education effort. That’s all to the good.

    I, however, will continue to strengthen the case for HVPCS in coming weeks. I figure it can’t hurt to do that and it may help, and it’s also the case that I’ve thought more about the political implications of HVPCS than anyone else, so I’m better positioned to hold up that end of our collective effort. I’m also sure there will be other opportunities to push HVPCS and MMT during the three crises up. Perhaps, as people get more and more tired of crises that end in further austerity the pressure will build on Obama to do what he has the power to do to break the austerity argument. Anyway we’ll see.

    On the debate between J. D. and I, I’ll have no more to say at this point. The posts in the debate speak for themselves and I’m content to let others evaluate them.

  17. It seems to me that MMT needs to talk to those within the environmental movement.

    They would seem to be natural allies.

    • That’s been tried Katie, but so far, the environmental movement seems content with neoliberal views about economics. This is true in Australia. Here, the Green Party may be friendlier, since at least they prioritize jobs and environmental programs above deficit reduction.

  18. @joebhed

    First, thank you for taking the time to comment. I really appreciate it.

    I may be out of date with my statement regarding Dennis Kucinich and the gold standard – if I am, I’m very sorry. I’m sure I saw a news item within the last year or so in which he endorsed a plan that included some sort of gold standard. I may have read it wrong, but my point lies elsewhere in any case. I *love* Dennis Kucinich. But if he is the only national politician who is even curious about the things we work on here, then I think my overall point is made.

    As for his current bill, I have real doubts about it – I think the MMT community has demonstrated that our problems stem from bad economic theories and actions, not bad institutional arrangements. I don’t think fractional reserve banking is our problem – or any part of our problem. I think the commotion over ending it is a false panacea. Banking isn’t really reserve-constrained anyway – so what’s the big deal? I *will* read the whole thing, though. This comes up often enough that we should all be on top of it.

    Thanks again.

    • Thanks, Dale.
      The closest I have seen to any comment like that was from Bill Mitchell’s blog of a couple of years ago where Bill said, as you do here actually, that the call of the Soddy-Simons-Fisher ‘money system’ school for full-reserve banking (which the Kucinich Bill does NOT do, by the way) was somehow a throwback to the gold standard ‘era’, which, in itself means different things to different folks. Again, this is Bill’s error, and he promised another review when time allows.
      Back when the Soddy school work was done for FDR by Simons and Fisher, a call for full-reserves (100 Percent Money) made a lot of sense. Today, quite frankly, it is not as defensible. And the Kucinich Bill advances us to a non-reserve based money and banking system. (ONLY if you take the time to read it.)

      It is the ‘reserves’ for money, and fractional-‘reserve’ banking, that are the throwbacks to the gold standard, history being accurate. Please draw on your understanding of the gold-bullion vaulter-bankers lending out MORE than their gold holdings – where gold ‘receipts’ became the early form of bank-issued non-money money.
      Sorry to all the well-meaning MMTers out there, but fractional-reserve banking (the private privileged creation of national purchasing power, and the issuance of its first-use to the highest return on investment) is the direct cause of many of the socio-economic problems that you all are trying to solve with the evolution of MMT ideas.
      Once understood, fractional reserve banking is unworthy of any defense at all.
      I thought the Wrays and Keltons and the Kregels and the others were ‘Minsky-ites’ in some form.
      Minsky came around in the end, in his search for the solutions to ‘financial instability’, to engage the Fisher 100 Percent Money concepts as a ‘stability-inducing mechanism’. He called for a National Monetary Commission to air alternative money-finance systems and structures. He found that this system, currently defended by MMT, was perhaps ”not consistent with the needs of a progressive democracy.” (See Levy Institute Working Paper No. 127 of Hyman P. Minsky)

      In a sovereign fiat money system, the government has ALL the power to create ALL the nation’s money without issuing any debt.
      Why are we talking about anything else except doing just that?

      • Because the government doesn’t know everything and never will. Because central bankers do not have either the information or the time or the inclination to determine if the money supply in Peoria is sufficient for the level of economic activity going on in Peoria. Local banks do. That’s why private money creation works. Private money creation targets money creation to the sectors and locales where it is needed. And, with a national system, it does so without introducing a plethora of currencies that block trade.

        Of course, without proper regulation private money creation also creates serious overvaluations of assets, which inevitably leads to the need to destroy the private money (credit) that is created when the reality that the value is nonsensical occurs.

        • You’re obviously confusing the supply of money with the supply of credit.
          The latter is what banks should provide.
          It is private ‘credit’ creation that actually targets the sectors and locales where credit is needed.
          That’s how it should be.
          The one single word of reform that is needed is ‘separation’.
          Separate the banking functions – laudably private, from the money-creation function of the national government.

          The government’s role is to ensure an adequate supply of money in the national economy. This becomes the primary vehicle for distributing the national wealth that is created by the labor of the workers. Have a read of Frederick Soddy’s “The Role of Money”.

          The bankers’ role is to accumulate saved capital, from whatever source, into loanable funds and intermediate between borrower and lender.

          There are no absolutes in this imperfect world. The government has no NEED to know every micro-finance factor.
          And we have NEVER had a true free-market economy in money.
          We just NEED a system that is less deeply cyclical than that of endogenous debt-based money. And that is provided by Constitutionally-based, publicly-issued, debt-free money.

          Private money issuance has gotten us where we are today, a debt-saturated national economy, based in part on unworkable attempts at uber-regulation and ineffective government policy initiatives.
          Here’s a hint.
          NOBODY is willing to give any private bankers carte blanche control over a national money system.
          Get used to that.

  19. I was struck how using the words “austerity deal” instead of “budget deal” could subconsciously strike right at the heart of the discussion and turn it on it’s head.

    I also believe you have a very valid point in saying that we need to learn Spanish and/or Italian. I have found there are many on twitter who are from those two countries who follow me just from using the #mmt hashtag. They all speak English, but many more who are talking about this don’t. They have seen what austerity does up close and personal and they are searching for answers. Here in the U.S., those that are experiencing austerity are not really visible, so the general population thinks the status quo is just fine.

  20. @Joe Firestone

    Thank you for your comment, and for all that you do. The way you have taken ownership of this issue is not less awesome for being (in my view) quixotic. You can be sure that as long as you keep developing HVPCS, I will keep wanting to learn about it.


  21. @1whoknu

    Thank you for commenting.

    I’m completely serious about Spanish-language MMT. Latin America has kicked out the IMF and launched a series of very intriguing monetary and inter-governmental initiatives. And there is at least one MMT site operating in Spain itself. I have this fantasy of my own, in which letters sent home with remittances lead to a cross-pollination between the Latino movements in this country and the ferment in all those home countries.

    As for Italian, I only know that Warren Mosler’s book (“The Seven Deadly Innocent Frauds”) has come out in that language as “LE SETTE INNOCENTI FRODI CAPITALI DELLA POLITICA ECONOMICA”. Since this book is among the very best and most accessible introductions to the MMT worldview, I expect great things.