Monthly Archives: December 2012

Note to Italy: Please send us more Saracenos

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

I began writing this article while returning from presenting at a conference on Modern Monetary Theory (MMT) in Reggio di Calabria, Italy arranged by Francesco Toscano and supported by the Regione Calabria and the Provincia di Reggio Calabria.  MMT has sparked considerable interest in Italy because it puts the lie to the constant claim that there is no alternative (TINA) to austerity and deepening recessions in the Eurozone. Continue reading

A Meme For Money, Part 4: The Alternative Tax Meme

By L. Randall Wray

Let us continue to develop an alternative frame for money. As you know, MMT says that “taxes drive money”. Let’s develop that further.

According to the orthodox meme, taxes are bad—the far right views them as outright theft—so the lower they are, the better. Most view taxes as necessary to “pay for” government spending, but again since in the conservative framing, government does next to nothing that is useful this represents a redistribution from productive, private, use to public waste. Hence, again, it is best to keep taxes as low as possible to “starve the beast” and to keep the private sector humming along. Continue reading

Financial Crisis – Class Project

By Todd Drummond & Michael Flanigan

This is one of the projects completed for Dr. Kelton’s graduate macroeconomics course, Fall 2012.

A Meme for Money, Part 3: Framing the Alternative Approach

By L. Randall Wray

In Part 2 we looked at the mainstream framing of discussion about money and about the economy and society more generally. Following Lakoff, my argument is that framing is important and that so far orthodoxy is winning all of the important policy debates because it has the better framing. Policy is always and everywhere a moral issue—not merely an economic issue and certainly not a technical issue. To win policy debates, we must—like orthodoxy—engage the moral issues. We can take the higher moral ground. Continue reading

What I Did Not Get to Say on NPR’s On Point This Morning

By Stephanie Kelton

This morning, I appeared on Tom Ashbrook’s radio show, along with Paul Krugman and Stan Collender.  I wish there had been more time to explore Paul Krugman’s very important point that one sector’s deficit spending becomes another sector’s surplus.  This is a core point that we make all of the time on this blog.  Cutting the deficit cuts the non-government surplus dollar-for-dollar.  So any plan to cut $4 trillion in deficit spending is a plan to reduce the non-government surplus by $4 trillion.  The ordinary American will gleefully support deficit reduction (as polling shows), but I’m confident that you’d get a very different reaction if you asked them whether they support cutting their own surplus by trillions of dollars.  Almost no one recognizes that the former implies the latter.

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A Meme For Money, Part 2: The Conservative Framing

By L. Randall Wray

We all know the usual approach to money, that begins with a fantasized story about barter, the search for an efficient medium of exchange, the role of the goldsmith, and then on to the gold standard, the deposit multiplier, fiat money, and monetary neutrality—at least in the long run.[1] It provides a perspective on the nature of money, on the primary functions of money, and on rules for proper monetary management. It frames all mainstream discussions of money—whether by economists, by policymakers and by the population at large. That framing is also largely consistent with the conventional view of the economy and of society more generally. To put it the way that economists usually do, money “lubricates” the market mechanism—a good thing because the conventional view of the market, itself, is overwhelmingly positive. The market “meme” frames our view of the economy and society, too—the market is the place we go to exercise choice, to assert our individuality, to catch and bring home prey to the adoring family. The king of the market, of course is the highly vaunted, entrepreneurial small businessman (gender specific) who provisions society with useful work as well as consumption goods and services. Each productive member of society is appropriately rewarded with money which preserves the freedom to choose how to apportion his claim on output in a manner consistent with preferences. The biggest potential threat to efficient allocation of scarce resources among competing unlimited wants comes from government’s exercise of control over money—first by replacing natural, intrinsically valuable, commodity money with fiat money, second by taking away people’s hard-earned money through taxes, and third by profligate government’s uncontrollable urge to inflate away money’s value. Continue reading

The Social Dimension of Prosperity

By Dan Kervick

In a recent interview in The Straddler, James K. Galbraith discusses some of the points he developed in his recent book, Inequality and Instability.  One of the most important of those points is that inequality leads to a stop-and-go crisis economy of credit-fueled asset bubbles.  This economy delivers large rewards to a few fortunate predators, but delivers a lot of instability, stagnation and insecurity to the rest of us.

But, Galbraith also makes some striking and important points in the interview about what he sees as mistaken places of emphasis in contemporary progressive political rhetoric.  One problem is the tendency to lose sight of the most vital systemic constituents of postwar American middle class prosperity – and also the expectations and aspirations that constituted the middle class outlook.  Continue reading

The Austerity Campaign Turns Ambivalence about Our Own Nature Against Us

By Michael Hoexter

The success of the austerity campaign in capturing the American and European political process is remarkable considering that it prescribes exactly the opposite of what factually grounded economic analyses would recommend.  Leading politicians and their advisors are pushing governments to curtail spending at a time of economic weakness and doing so in the post gold-standard monetary era where currency-issuing governments have no affordability constraint on spending.   The focus on public debt is leading the political process away from economic growth and full employment, despite the fact that all major actors in this process claim that their preferred policies are the way to lasting growth.  In the current American “fiscal cliff” negotiations, the leadership of both sides of the negotiation are pushing for different forms of austerity, with no effective organized force in government working against this economic madness. Continue reading

A Meme for Money, Part 1: Introduction

By L. Randall Wray

This is the first part of a series on framing money.

I studied with Hyman Minsky in the early 1980s when he was writing his 1986 book (Stabilizing an Unstable Economy). There are two phrases in that book that I remember him saying in class:

“Anyone can create money, the problem lies in getting it accepted”.

Continue reading