Author Archives: Mitch Green

MMP Blog #46: The Job Guarantee – Program Manageability

Posted on April 15, 2012 | 25 comments

By L. Randall Wray

As mentioned earlier, critics have argued that the program could become so large that it would be unmanageable. The central government would have difficulty keeping track of all the program participants, ensuring that they are kept busy working on useful projects. Worse, corruption could become a problem, with project managers embezzling funds. We will briefly look at some methods that can be used to enhance manageability.

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The Silver Anniversary of the “Keating Five” Meeting – Citizens United’s Precursor

Posted on April 9, 2012 | 14 comments

By William K. Black

April 9, 2012 is the twenty-fifth anniversary of the most infamous savings and loan fraud, Charles Keating’s, successful use of five U.S. Senators to escape sanction for a massive violation of the law.  The Senators were Alan Cranston (D. CA), Dennis DeConcini (D. AZ), John Glenn (D OH), John McCain (R. AZ), and Donald Riegle (D. MI).  They became infamous as the “Keating Five.”  I was one of four regulators who attended the April 9, 1987 meeting.  I took the notes of the meeting, in transcript format, that were so detailed and accurate that the Senators testified that they were sure I had tape recorded the meeting.  (The reality is that I owe my note taking abilities to Bill Valentine, my high school debate coach, and experience debating for the University of Michigan.)

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MMP Blog #45: The JG and Affordability Issues with Special Considerations for Developing Nations

Posted on April 8, 2012 | 12 comments

By L. Randall Wray

Affordability Issues. As we have seen over the course of the previous 44 blogs, a sovereign nation operating with its own currency in a floating exchange rate regime can always financially afford an JG/ELR program. So long as there are workers who are ready and willing to work at the program wage, the government can “afford” to hire them. It pays wages by crediting bank accounts. If it credits more accounts than it debits through tax payments, a deficit results. This initially takes the form of net credits to the banking system, held as reserves. If the reserve holdings are excessive, banks bid the overnight rate down. The government can then either choose to let the overnight rate fall toward zero (or its support rate if it pays interest on reserves), or it can intervene to sell interest-paying bonds at the desired support rate; this will drain excess reserves. In no sense is the government spending on JG/ELR constrained either by tax revenues or the demand for its bonds.

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Blog # 44 Responses: Job Guarantee and Macro Stability

Posted on April 6, 2012 | 21 comments

By L. Randall Wray

There were a number of questions, but commentators dealt with most of them quite well. I’ll organize the questions and responses and then add a few of my own. I suppose the excellent comments show that we’ve made a lot of progress. I’m dropping the names and combining posts. Sorry this is late.

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Economics, Adjudication, and (Above all,) Politics: Health Care Reform and the Public Good

Posted on April 3, 2012 | 10 comments

By Max J. Skidmore
Curators’ Professor of Political Science
University of Missouri-Kansas City

Before passage of health care reform in 2010, the “Patient Protection and Affordable Care Act” (the infamous “Obamacare” to its opponents), a joke making the rounds involved a recently deceased advocate of universal health care, who, upon being admitted into heaven, was permitted to ask a question of the Almighty. “Will the United States ever have universal health care?” he asked. “Oh Yes,” God replied, “but not in my lifetime.”

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We Were Regulators Once: Ed Gray’s Finest Hour

Posted on April 2, 2012 | 5 comments

By William K. Black
(Cross-posted from Benzinga)

On April 2, 1987, four U.S. Senators met secretly with Federal Home Loan Bank Board (Bank Board) Chairman Edwin J. Gray in the offices of Senator DeConcini (D.AZ).  Senator Donald Riegle (D. MI) was a surprise no-show.  DeConcini was joined by Alan Cranston (D. CA), John Glenn (D. OH), and John McCain (R. AZ).  Keating hired Alan Greenspan as a lobbyist to help recruit the Keating Five.  The Senators held the meeting at the request of Charles Keating, who controlled Lincoln Savings (a California chartered S&L).  Lincoln Savings would become the mostexpensive failure of the S&L debacle due to Keating’s political cronies and Keating became the most infamous S&L fraud.  A week later, on April 9, all five Senators met with four of Lincoln Savings’ senior regulators.  I took the detailed notes of that meeting.  The Senators became infamous as “the Keating Five.”  A quarter-century later, few remember what the meetings involved.

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MMP Blog #44: The Job Guarantee and Macro Stability

Posted on April 1, 2012 | 23 comments

By L. Randall Wray

The JG posts here at MMP have generated a huge number of comments. I have focused my responses at the comments more-or-less directly directed to the actual posted blogs. I can understand the impatience: many questions have not been answered. However many of these questions and comments concerned upcoming topics.

Let us move on to macro stability issues. I have given JG talks all over the world and the two main objections raised always refer to inflationary impacts and exchange rate impacts. It seems to me that those who respond with these fears have not paid attention to the set-up of the program and to the MMT arguments.

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Modern Monetary Theory on Central Standard

Posted on March 31, 2012 | Comments Off on Modern Monetary Theory on Central Standard

Stephanie Kelton and William K. Black discuss MMT with Jubulani Leffall.  Listen here

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Where Did the Federal Reserve Get All that Money?

Posted on March 30, 2012 | 35 comments

By Stephanie Kelton (h/t Matthew Berg)

Federal Reserve Chairman Ben Bernanke gave his fourth lecture at George Washington University yesterday. Buried in the lecture, beginning at about 19:18 in the video, Bernanke explained where the Fed got the money to “pay for” the assets it purchased as part of its Quantitative Easing (QE) policies.

I remember when the Fed announced the first round of QE. Those who don’t understand Fed operations – think most mainstream economists – went nuts. Many worried that the Fed would be unable to “unwind” its positions (i.e. divest itself of the assets – MBS, Treasuries, etc. – it had purchased) because banks would refuse to swap their nice safe cash for riskier instruments when the economy recovered. Others insisted that QE was “stuffing the market full” of too many dollars and that this, inevitably, would result in hyperinflation.

John Carney just wrote a very nice piece, showing that not only was the Fed able to find buyers for its assets but that markets actually bought them back at a premium. Bernanke addresses the second objection in his remarks below – idle balances don’t chase any goods – but it’s the financing of the asset purchases that I want readers to understand, because this is fundamental to understanding Modern Monetary Theory (MMT).

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Responses to Blog #43: Job Guarantee Basic Design

Posted on March 28, 2012 | 22 comments

By L. Randall Wray

Thanks for the comments, many of which get ahead of the story.

I’d like to remind readers that we are ADDING the JG onto the EXISTING system. So the correct comparison is NOT against some UTOPIAN IDEAL in which we all live like Wall Street’s finest in some sort of Ayn Rand blissful Fountainhead. But RATHER to compare the existing system against one in which the JG is added. I realize this is a difficult mental gymnastic. I hope this will be clear as I respond to seven comments (the others concern upcoming topics; indeed, even these really are about topics we have not explored in detail but they are worth discussing).

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