By J.D. ALT
With the essential collapse of the U.N. Framework Convention on Climate Change in Madrid (“Climate meeting goals go unmet” Washington Post, 12-16-19) we now approach the first day of 2020 with much less to celebrate, much more to fear, and much more to accomplish. Here’s a little parable for the coming New Decade: Continue reading
William K. Black
December 16, 2019 Bloomington, MN
On December 5, 2019, Lawrence O’Donnell made an impassioned attack on Pete Buttigieg on his “The Last Word” program on MSNBC. Buttigieg’s statements criticizing the Democratic Party as historically soft on deficits enraged O’Donnell. The context was Buttigieg’s effort to signal to New Hampshire voters that he was the most conservative Democratic candidate for the presidential nomination. Nothing signals ‘responsible’ so well to ‘New Democrats’ and the media as a candidate screaming ‘deficits’ in a crowded meeting room in a small New Hampshire town.
O’Donnell correctly pointed out that Buttigieg’s claims about Democrats and deficits are ‘Republican lies.’ The truth is that New Democrats have been the only group in America dedicated to inflicting austerity on our Nation. Republicans only pretend to care about deficits when Democrats have power. Buttigieg knows this, but his political interests in portraying himself as a stalwart emerging leader of the New Democrats caused him to position himself (falsely) as unique among New Democrats in his dedication to inflict austerity.
Posted in William K. Black
White-collar crime prosecutions are at a 33-year low. Corporate leaders can cause environmental disasters, economic crashes, and the deaths of thousands and still walk free. But there’s a way out. NEP’s Bill Black talks with The Real News Network about this. You can view with a transcript here.
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Inflation & Consumption
By J.D. ALT
Let’s quickly recap: I outlined, in PART 3, an argument that modern society has evolved in ways that necessitates a dramatic increase in public enterprise—yet, at the same time, we’ve doubled down on an old-world narrative about “money” that makes it mathematically impossible to meet that need. In PARTS 1 & 2 we reconfirmed a “modern money” perspective by simply observing the actual operations of the Federal Reserve—and reconfirmed, as well, how this new perspective holds out the opportunity to actually confront, through the efforts of public enterprise, the new challenges modern society faces.
It was my intention, at this point, to focus on the unfolding reality that climate change will soon prove to be the most dramatic challenge modern society is facing—and will be the challenge that necessitates, by far, the greatest need for goods and services produced by public enterprise. More to the point, climate change will generate the greatest need—by far—for implementing and managing a “modern money” perspective in America’s economy. While I still intend to pursue this argument, comments addressed to PART 3 have led me to change sequence: I realize now it will be ineffective (and perhaps futile) to discuss the extraordinary level of public spending that climate-change will necessitate without, first, attempting to address two related issues: (1) the stridently insistent warnings about “inflation,” and (2) the conundrum of the necessity for increased “consumption.”
So says NEP’s former federal investigator Bill Black, who defines with fine detail what will likely be emerging from the impeachment hearings in this appearance on The Real News Network. You can view with transcript here.
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L. Randall Wray will be providing testimony for Congress on November 20 at 10 am. The topic is the government debt and deficits. His full statement will be available at 10:30AM at the Levy Institute. His goal is to explain a) why we needn’t fear sovereign government deficits and debt; b) why in some important sense, deficits and rising debt are “normal”; c) the deficit is in any case largely outside the control of Congress; d) deficits and rising debt ratios will not lead to government insolvency or bankruptcy; e) all government payments can be made on time, unless f) Congress forces a default (due to the debt ceiling it imposes). The statement will provide a lot of new data related to these topics.
The link to the webcast is: https://budget.house.gov/legislation/hearings/reexamining-economic-costs-debt
An Explanation of the Federal Reserve Money system and what it means for the potential accomplishments of American Democracy
By J.D. ALT
The big surprise of our tour of the Federal Reserve system (please see PARTS 1 & 2) is that the FED (America’s central bank)—as it is presently authorized to operate—can create “money,” as necessary, to support not only the undertakings of private enterprise, but the undertakings of public enterprise as well. Please recall that public enterprise produces needed goods and services which private enterprise cannot produce at a profit or, to make its profit, must set prices higher than what most citizens can afford to pay. To accomplish what private enterprise cannot, therefore, the U.S. Treasury, as directed by Congress, pays U.S. citizens and businesses directly to produce the goods and services of public enterprise.
The fact that the Federal Reserve system is able to create the “money” required for this spending is a surprise because we, the American voters, have always been led to believe that public enterprise is “financed” by a different method: namely, some combination of taxing private profits/income and borrowing from the investment capital of private enterprise. What we discovered, instead, is that, yes, taxes do fund some portion of the Treasury’s spending—but the remainder of the funding is derived from operations that have nothing to do with “borrowing” in any meaningful sense of the term.
Regulatory agencies taking on Savings & Loan fraud may not be everyone’s idea of a swashbuckling tale, but for the nerdy types at Macro N Cheese it’s pure gold. NEP’s Bill Black appears on their latest podcast. You can listen here.
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An Explanation of the Federal Reserve Money system and what it means for the potential accomplishments of American Democracy
By J.D. ALT
Let’s begin by restating what I think was the main insight of PART 1: The overarching purpose of the Federal Reserve Act was to enable “money” to be created, as necessary, to support the scale of commerce that American Enterprise decides to undertake and accomplish. If the labor, materials, energy, technology, and ingenuity exist to do something—and it is desirable that it should be done—it is illogical to say it can’t be done because there isn’t enough “money” in the system to pay for the doing of it.
The only questions to be asked, then, are two: (1) Who will create the “money” when it’s needed, and (2) Who will decide when the creation of additional “money” is justified?
By L. RANDALL WRAY
In this part, I’ll resume with comments on the critical contributions to the special issue of rwer. We finished Part 2 with a discussion of the shocking lack of citations to MMT literature in the critiques—especially the dearth of citations to the more academic contributions (as opposed to the summaries of MMT written for undergrads and the general public). Let me return to the oversight of contributions made by scholars such as Fullwiler and Tymoigne—who have mostly written academic pieces.
Sawyer does cite Fullwiler (although with the name misspelled! If he was my undergrad student, I would chew him out—at least get the damned names spelled correctly!). In his piece, which is largely an exposition that parallels MMT but is disguised as a critique, he wants to argue that MMT doesn’t properly distinguish between what circuitistes call initial versus final finance (Davidson has a similar distinction). But in reality, I have long used the circuit approach in my exposition—including in my own contribution to the rwer issue. The initial finance of government spending is created when the spending occurs, and today takes the form of two balance sheet credits: the deposit account of the recipient and the reserve account of the recipient’s bank. Sawyer seems to mostly agree with that. But according to Sawyer, MMT ignores the point that because bond sales and tax revenues logically follow government spending and can be seen as the funding stage. However, Eric Tymoigne made exactly this point in a 2014 article, arguing: “Put in terms of the circuit approach, taxes and bond offerings are part of final finance (funding).” So Sawyer is just wrong about this.
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