Category Archives: Stephanie Kelton

The Two-Headed Central Bankista Coin

By Stephanie Kelton

Like all good Central Bankistas, Charles Evans (Chicago Fed) and Dennis Lockhart (Atlanta Fed) insist that if the Fed isn’t achieving its stated (employment and inflation) objectives, then it just isn’t doing monetary policy the right way.  The flip side of the Central Bankista position is that whenever the macro data are more-or-less consistent with Fed targets, it must necessarily mean that central bankers have gotten it right.  Nothing else, least of all fiscal stimulus/austerity, could possibly deserve credit (or blame) for whatever is happening at the macro level.  It’s heads monetary policy succeeded, tails monetary policy failed.  It also explains why Paul Volker’s policies are still widely credited for bringing an end to double-digit inflation, while President Carter’s deregulation of the natural gas industry (which finally brought energy prices down) doesn’t even merit a footnote in the textbooks.

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Is That Harsh? Tough.

In case you missed it, Charles Pierce has some thoughts on this thing we call “representative democracy.”

We are talking about voters who, by and large, vote against their own economic self-interest time and time again and who, quite honestly, are the biggest suckers in the history of representative democracy. They continue to support policies that render their states into third-world sweatshops for corporations headquartered thousands of miles away. They doom their kids to inadequate schools and themselves to the whims of free-market medicine. The problem, of course, is that the rest of us have to live with the consequences and, it should be noted, pay a fkload of the bills for it besides. You’re welcome, idiots.

Read more: Chris Wallace Gross Eric Cantor Over Congress Doing Nothing – Heartless Bastards – Esquire

Some Thoughts on the Dual Mandate: Right Goals, Wrong Agency?

By Stephanie Kelton

The statutory objectives for monetary policy known as the “dual mandate” were imposed by Congress as part of the the Federal Reserve by Act of 1913.  The mandate charges the Federal Reserve with responsibility for achieving two broad macroeconomic goals: “maximum employment and stable prices.” Much has been made (especially by those on the left) of the benefits of having a dual mandate.  In contrast to the European Central Bank, which operates with a single mandate — price stability — the dual mandate is supposed to ensure a more balanced outcome in the public’s interest.

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Reading Between the Lines: A Memo from Fed Chairman Marriner Eccles

By Marriner Eccles (translation by Stephanie Kelton) 

After I shared a few thoughts on the impending decision to replace Ben Bernanke as Chairman of the Federal Reserve, I couldn’t help revisiting the writings of Marriner Eccles.  Eccles was a Republican and a businessman who, by the age of 22, had become a millionaire with an impressive record of restructuring and consolidating balance sheets (including those of financial institutions) to withstand the turmoil of the Great Depression.  In 1934, Franklin D. Roosevelt tapped Eccles to head the Federal Reserve, a position he held until 1948.

The following memo – written May 19, 1938 – gives you a flavor of the way Eccles thought about important issues related to financial stability and macroeconomic policy. What he doesn’t say is at least as important as what he does. For those who struggle with econo-speak, my own plain-speak is interspersed throughout.

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A Plan for All the Detroits Out There

By Marshall Auerback, Stephanie Kelton and L. Randall Wray

Should the federal government bailout Detroit?  That’s the question everyone is debating.  We think the discussion should be expanded well beyond this narrow question.  Detroit is the canary in the coal mine, but it’s symptomatic of a bigger problem, which is the lack of jobs and decent demand in the economy.

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Former Deputy Secretary of the U.S. Treasury Department Endorses Modern Monetary Theory (MMT)

By Stephanie Kelton

Three months ago, Frank Newman sent me a book entitled Freedom From National Debt.  I finally got around to reading it — all 89 pages.  It’s a little book, packed with evidence that America is being held back by incorrect assumptions and misguided fears about the national debt and government finance in general. Here’s the takeaway:

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Some Academic Literature on MMT

By Stephanie Kelton

I presume Alex Little put this together after reading the NY Times piece on Warren Mosler and MMT in which I was (mis)quoted as saying that MMT has no footprint in the academic press.  It’s not an exhaustive list, but you’ll be exhausted by the time you reach the end.

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The Buzz Over MMT

By Stephanie Kelton

The blogosphere and Twittersphere are buzzing over today’s NYT article on Warren Mosler and the proponents of Modern Money (or Monetary) Theory (MMT).  This isn’t the first time MMT has been featured by a high-profile mainstream media outlet (see here, here, here) and, as usual, there are some editorial inaccuracies.

Warren has responded to the mistakes that affect him personally, and Randy Wray followed with some quick thoughts of his own.  I spent close to 30 minutes on the phone with the journalist who wrote the latest NYT piece, so let me offer a further correction of (and for) the record.  I was quoted as saying:

These ideas definitely aren’t disseminated through published academic journals. It’s all on the Internet.

Um, no.  What I said is that we — the academics who helped develop the literature on MMT — started blogging as a way to get our ideas out more quickly than through traditional channels, where it is customary to wait two years or more before an article is finally published.  The notion that MMT has no academic footprint is astonishingly inaccurate, for there are, quite literally, hundreds of publications including: peer-reviewed articles, books, chapters in edited volumes, encyclopedia entries, working papers, policy briefs, etc. in print.  Suggesting otherwise supports the general tenor of the NYT piece — i.e. MMT is an Internet phenomenon that hasn’t been vetted through traditional peer-reviewed channels. That is patently false.

Has the Internet helped to generate a following?  I’d say so.

And it seems to ruffle a lot of feathers.

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Drop It: You Can Call for Helicopter Money but Drop the Call for “Coordination”

By Scott Fullwiler

I suggested more than three years ago that helicopter drops are fiscal operations (printable version here), in contrast to the more traditional view that they were monetary policy operations (e.g., “Helicopter Ben”).  My argument was based almost entirely on accounting and, therefore, on the actual balance sheet effects of a money drop.  True helicopter drops of money raise the net financial assets (via income increases) of the non-government sector, which is exactly what fiscal policy does but not what monetary policy does.

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Morning Reads

Here’s some fiscal insanity from Japan, where they’re trying to juice the economy with Abenomics while simultaneously promising massive austerity ahead.  I’m sure that will prove very reassuring to markets.

Here’s another heart-warmer. Bank of America  has decided it’s been paying U.S. workers too much to review mortgage and other loan documents.  So it’s off shoring those jobs.  Now workers in India will be checking off on those appraisals, etc.  It should help the “struggling” conglomerate.

Finally, The Guardian reports that Ireland has fallen back into recession “despite” its multi-billion euro austerity drive.  The fact that they use the word “despite” shows you just how far we are from collectively figuring out the obvious.

Good luck to us all.