Yearly Archives: 2013

Why Do the Folks Who Make Booze Care More about their Reputations than the Bankers?

Posted on May 28, 2013 by | 4 comments

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

There are many forms of control fraud.  I have written primarily about accounting control frauds because they drive our recurrent, intensifying financial crises and we are in the midst of the worst such crisis in modern history.  I wrote recently about the intersection of anti-purchaser and anti-employee control fraud in Bangladesh that killed 1,127 employees (and injured roughly twice that number) and made the point that control frauds kill and maim more people than traditional blue collar crimes and cause greater financial losses than all other forms of property crime combined.  Control frauds also cause a greater number of crimes than do traditional blue collar crimes.  Think for example of the number of victims of the Libor scams, measuring in the hundreds of thousands and the foreclosure frauds.

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Taxes, Affordability (and a Little Gambling) on The Attitude

Posted on May 23, 2013 by | 9 comments

By Dan Kervick

I appeared today on The Attitude with Arnie Arnesen to talk about taxes.  The discussion began with the Apple tax avoidance issue, but expanded into some of the broader context for thinking about taxes – some of which I discussed in my recent post, “Money, Taxes and What We Can Afford”.  We also spent a few minutes discussing gambling as a means of raising state revenue, since the New Hampshire House of Representatives defeated a major casino gambling bill yesterday.  Enjoy!

Dan Kervick on The Attitude

The Attitude is broadcast by WNHN 94.7 in Concord, New Hampshire.

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NEP’S Bill Black on RT’s The Truthseeker – Washington Consensus

Posted on May 23, 2013 by | 3 comments

Bill Black appears on the latest episode of RT’s Truthseeker. This episode’s topic is exposing the truth behind the “Washington Consensus”

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Posted in William K. Black

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Reserve Balance Misconceptions

Posted on May 21, 2013 by | 140 comments

By Dan Kervick

Mark Thoma, writing in the Fiscal Times, has called for the Federal Reserve to take “bold, creative moves” to alleviate unemployment.   Thoma’s suggestions contain nothing novel, and I suspect Thoma is fully aware that what our economy really needs is a fiscal expansion from the federal government.  But perhaps these tired calls for additional central bank string-pushing deserve some sympathy.  Many have concluded that the attempt to get Congress and the White House to act to increase government spending are futile, since the elected branches of our government seem unwilling to do what needs to be done out of some combination of incompetence, iniquity, ignorance, ideology and insanity.

But Thoma’s argument contains a few puzzling passages that repeat and reinforce some common misconceptions about the relationships among spending, bank lending and bank reserves; and it is worth spending a few words to challenge these misconceptions once again, because to the extent that they still have wide currency they stand in the way of a clear grasp of the nature and limits of monetary policy options.  Thoma first makes the following claims about bank reserves:

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Posted in Dan Kervick

No, It Looks Like the House Has Not Unintentionally Eliminated the Debt Ceiling After All

Posted on May 17, 2013 by | 12 comments

By Dan Kervick

In my previous post I argued that, in passing H.R. 807 on May 9th, the House of Representatives might have unintentionally eliminated the debt ceiling “as a serious political and operational consideration going forward.”

But upon further reflection, and benefiting from the insightful reactions of several commenters, I now think my reading of the act is incorrect, and that if it were passed by the Senate and signed by the President it would not provide the Secretary of the Treasury with a way around the debt ceiling, other than for the limited, intended purposes of paying off maturing debt and Social Security obligations.

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Posted in Dan Kervick

Did the House of Representatives Just (Unintentionally) Eliminate the Debt Ceiling?

Posted on May 16, 2013 by | 40 comments

By Dan Kervick

My fellow NEP blogger Joe Firestone wrote recently about House Resolution 807, the Full Faith and Credit Act, which was passed on May 9th by the US House of Representatives.  The supposed purpose of the act is to prevent default on the public debt as a result of the debt ceiling.  Many have described the act as a measure that prioritizes the financial obligations of the US government, and authorizes the Secretary of the Treasury to meet only the highest priority obligations when at the debt ceiling.   Indeed, that is how the act is described by its own authors, since the head of the resolution contains the description, “A bill to require that the Government prioritize all obligations on the debt held by the public in the event that the debt limit is reached.”

Now that the bill has been passed, the words “a bill” in that description have been replaced by “an act.”  The act seems to have been designed to provide the Secretary of the Treasury with an alternative mechanism for paying off public debt and meeting Social Security obligations once the government has reached the statutory debt limit.  But the new mechanism cannot be applied directly to other government spending commitments, and so Congress would still apparently have the ability use the debt ceiling as a tool for shutting down other government payments and forcing the executive branch to accept further spending cuts.

Such might have been the authors’ intentions.  But if I am not mistaken, this act would provide the Secretary of the Treasury with the power to meet all US spending obligations, and effectively eliminate the debt ceiling as a serious political and operational consideration going forward.

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Posted in Dan Kervick

Money, Taxes and What We Can Afford

Posted on May 14, 2013 by | 26 comments

By Dan Kervick

People sometimes seem to suggest that the Western democracies are at the end of the road economically.  They claim that these governments are spent, broke, tapped out.  They insinuate that Western nations can no longer afford to carry out ambitious projects of the kind they organized in the past, and must downsize or dismantle many of the governance systems and public enterprises they currently operate.  They insist that these democracies must hand over yet more of their nations’ destinies to the financial and corporate baronies that dominate the private sector, and give the latter a free hand to arrange whatever kind of future they might deign to mash up for us as a by-product of  their voracious struggles for private gain and glory.

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Mr. President, End Debt Ceiling Hostage-taking for Good!

Posted on May 13, 2013 by | 11 comments

On May 9, 2013, The Republican House passed H.R. 807 the Full Faith and Credit Act. The Bill says in part:

(a) In General- In the event that the debt of the United States Government, as defined in section 3101 of title 31, United States Code, reaches the statutory limit, the Secretary of the Treasury shall, in addition to any other authority provided by law, issue obligations under chapter 31 of title 31, United States Code, to pay with legal tender, and solely for the purpose of paying, the principal and interest on obligations of the United States described in subsection (b) after the date of the enactment of this Act.
(b) Obligations Described- For purposes of this subsection, obligations described in this subsection are obligations which are–
(1) held by the public, or
(2) held by the Old-Age and Survivors Insurance Trust Fund and Disability Insurance Trust Fund.

So, in brief, the Bill provides for the Treasury, even when it is about to reach the debt ceiling, to issue additional debt to pay principal and interest on debt instruments issued to the public including foreign nations, and to pay principal and interest on Social Security (SS) “trust fund bonds” in the course of paying SS recipients. Continue reading →

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Posted in Joe Firestone

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Brown-Vitter Will Not and Cannot Work but it is Criminogenic

Posted on May 10, 2013 by | 12 comments

By William K. Black

Introduction

Senators Sherrod Brown (D-OH) and David Vitter (R-LA) have introduced a bill entitled “Terminating Bailouts for Taxpayer Fairness Act of 2013.”  It is a miracle of modern staffing that Vitter, who loves polluters as much as his prostitutes, was able to pull himself away from demanding that President Obama’s nominee to run the EPA answer over 600 questions and join Brown in proposing the bill.  Under Obama, bipartisan bills have a dismal fate because the Democrats negotiate away key elements necessary to create a good bill and add provisions that make parts of the bill harmful – just to pick up a few token co-sponsors – and then the Republicans kill good parts of the bill anyway and try to enact the bad parts. Continue reading →

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Posted in William K. Black

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A Contest: MMT for Eighth Graders

Posted on May 7, 2013 by | 227 comments

What’s the best way to communicate the principles of MMT to an audience who doesn’t know any economics?  Can you draw out the implications of the sector balances or explain the importance of sovereign money without complex jargon?  Can you do it a way that will resonate with the average eighth grader?  Can you do it in 25 words or less?  We’ll collect the best submissions and post them next week.  Give it your best shot!

*UPDATE*  I can see that we are off to a bad start.

Identify a single MMT principle and then explain that principle in 25 words or less.  We are not asking you to explain *all* of MMT in 25 words.

“Without jargon” means that you should not use words like: “fiscal”, “reserves”, “GDP”, “debit”, “credit”, “policy space”, “bonds”, “capital”, “austerity”, “monetary policy”, etc.  You’re communicating with someone who has an eighth grade education, people!   In the USA.  Think about what that means.

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Posted in Stephanie Kelton