By William K. Black
To prepare myself for a guest lecture to a class at the University of Kansas I did some research about the House Financial Services Committee, now chaired by Jeb Hensarling (R. TX). I was pleased to learn that the Committee’s home page emphasizes the key role that accounting control fraud played at Fannie and Freddie. The home page has a “spotlight” section designed to draw the reader’s eye to a short series of documents designed to support passage of the Protecting American Taxpayers and Homeowners (PATH) Act, which focuses on eliminating Fannie and Freddie. The documents largely stress that Fannie and Freddie were accounting control frauds.
By Dan Kervick
Everybody is very excited about Thomas Piketty’s new book Capital in the Twenty-First Century, whose English translation is due out on March 10th from Harvard University Press. The book studies long term trends in the accumulation and concentration of wealth, and in the evolution of inequality. The argument of the book is intensely data-driven, and has been billed as a game changer since it first appeared in French earlier this year.
Matt Yglesias reproduces a chart from the book, and calls it “the chart the debt alarmists don’t want you to see”. However, if I were a debt alarmist, I don’t think I would be very much moved by the chart, and wouldn’t worry so much about others seeing it. Let me explain. Here is Piketty’s original version of the chart, and here is Yglesias’s colorized reproduction :
By Stephanie Kelton
It’s been a long time, but I finally carved out enough time to record a new podcast. Although they’re my colleagues, Bill Black, Randy Wray and I see surprisingly little of one another these days. I did manage to catch up with Bill in Minneapolis last week, where I happened to be giving a talk (more on that in the coming days), but for the most part we’re all just trying to keep up with requests, which is a good problem to have when you think about it.
It was nice to slow down and talk with Randy this afternoon. We promised one another we’d do it more often. Anyway, here is today’s podcast. We hope you enjoy it.
By J.D. Alt
The Ebook DIAGRAMS & DOLLARS (in top 10 best-sellers on Amazon/ category money & monetary policy!) paints an optimistic picture of what “Sovereign Spending” could achieve for our collective benefit. The video made from it (approaching 3,000 views on YouTube—thank you Haiku Charlatan!) ends with cheering calisthenics around the final diagram of our national prosperity. Unfortunately, the “real world” of our Congressional leaders and media spin-machine is painting a very different picture—a dire vision of out-of-control government spending and national insolvency. Understanding why that is, and what we can do about it, is the real challenge we have before us.
By Michael Hoexter
The climate crisis is an event with such profound personal and broadly social moral implications that many shy away from discussing the crisis itself let alone its ethical aspects. Via our society’s use of fossil fuels we are, if our combustion of these fuels remains unchecked and in addition we further destroy the carbon fixing capacity of natural systems, destroying almost all wealth, the likelihood of their being future civilizations, and even the possibility for existence for future generations. To continue ignoring climate change and effective climate action is definitely an après moi le deluge stance, an expression of callousness and self-absorption unsupportable by moral justification. Morality and ethics is here not an exotic preoccupation of a select group but a basic reality-check: does what we are doing make sense and promote the general ends to which these activities are devoted? How do we assess our own agency and role and those of others, in events that are occurring around us and will with very high likelihood exacerbate in the future?
By Joe Firestone
A lot of Americans have the feeling that those who have and supply big money to candidates, office holders, lobby groups, think tanks, and media have bought politics. That it is they who are determining the agendas that office holders act upon and even the specific decisions they make in passing laws and rendering executive and even judicial decisions. This short post won’t debate the extent to which big money has perverted democratic processes in the United States. Instead it will offer a simple, perhaps an oversimple, solution to the problem that will really work. Here it is. Continue reading
By L. Randall Wray
To Fix or To Float, that is the question.
MMT argues that a sovereign government that issues its own “nonconvertible” currency cannot become insolvent in terms of its own currency. It cannot be forced into involuntary default on its obligations denominated in its own currency. It can “afford” to buy anything for sale that is priced in its own currency. It might be able to buy things for sale in foreign currency by offering up its own currency in exchange—but that is not certain.
If, instead, it promises to convert its currency at a fixed price to something else (gold, foreign currency) then it might not be able to keep that promise. Insolvency and involuntary default become possible.
By William K. Black
(Cross posted at Benzinga.com)
The New York Times Incompetence in Macroeconomic Reporting (IMR) Award
I have written repeatedly about the New York Times’ needs to create a prize in incompetence in macroeconomic reporting (IMR) and suggested that the paper award the IMR prize to its reporters. I suggested that the prize consist of a two hour lunch with Paul Krugman in which he will provide them with a remedial lecture on why austerity is an economically illiterate response to a recession.
NYT columns discussing austerity, particularly in the eurozone, demonstrate that its reporters religiously avoid reading Krugman’s scores of columns on austerity. As always on this subject, I want to make express that I don’t insist that the reporters agree with economics. It is fine for reporters to state that economics has known for 75 years that austerity is a self-destructive response to a recession but that some economists disagree. It is fine for the reporter to explain why he agrees with the austerian economists. It is not acceptable journalism to ignore the dominant economic view, 75 years of supporting events, and the empirical studies by austerians (the IMF) finding that fiscal changes have more powerful effects on the economy consistent with the dominant theory. It is not acceptable journalism to ignore unemployment and inequality and the role of austerity in increasing both. I end by expanding on Krugman’s column about a tragic financial media meme by discussing three related memes that are causing great harm.