New Economic Perspectives

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

Posted on December 4, 2012 by Devin Smith | 40 comments

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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40 Comments

Posted in Stephanie Kelton

Tagged deficit, krugman, npr, on point, sector balances, surplus

A Meme For Money, Part 2: The Conservative Framing

Posted on December 4, 2012 by Devin Smith | 40 comments

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 →

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Posted in L. Randall Wray

Tagged framing, MMT, Modern Monetary Theory, money

The Austerity Campaign Turns Ambivalence about Our Own Nature Against Us

Posted on December 3, 2012 by Devin Smith | 36 comments

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 →

36 Comments

Posted in Michael Hoexter

Tagged austerity, MMT, Modern Monetary Theory, warren buffet

A Meme for Money, Part 1: Introduction

Posted on December 3, 2012 by Devin Smith | 167 comments

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”.

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167 Comments

Posted in L. Randall Wray

Tagged framing, MMT, Modern Monetary Theory, money

Will We Be The Lamest Generation?

Posted on November 30, 2012 by Dan Kervick | 33 comments

By Dan Kervick

Matt Yglesias is now hawking an initial White House budget proposal that is apparently being negotiated by Tim Geithner. Predictably, the two-stage proposal involves entitlement “savings” and cuts in both stage one and stage two, and backs off a bit on higher tax rates on the rich. In exchange, the White House gets some more stimulus spending. Yglesias advises Republicans to tell Obama:

… he can have his stimulus and he can even have higher tax revenue if he really wants it, but that the price is giving up his obsession with higher rates. Is he more interested in soaking the rich or in creating jobs? I don’t think Obama says no to a deal like that, and if he does lots of sensible liberals (like this guy) will call him out on it. Then we can put this sorry episode behind us, proclaim the Grand Bargaining Era done for, and hopefully move on to other things.

It seems strange to endorse a grand bargain in order to move on and proclaim the Grand Bargaining Era over. Maybe next week Democrats should propose the elimination of the minimum wage so we can then declare an end to the Era of the Fight Over the Minimum Wage?

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33 Comments

Posted in Dan Kervick

Tagged Matt Yglesias, MMT, Modern Monetary Theory, Taxes, the Fed, The National Debt

CONFERENCE: The Return of Full Employment Policy

Posted on November 29, 2012 by Devin Smith | 8 comments

Date: December 3, 2012
Venue: Paasitorni, Sirkussali, Helsinki

It is often argued that the era of full employment and Keynesian economic policy is over. Most orthodox economists claim that, in the long run, real full employment cannot be achieved with demand management policies. Active demand management is, thus, deemed to be too costly and inflationary. Continue reading →

8 Comments

Posted in L. Randall Wray

Tagged conference, full employment

2020

Posted on November 28, 2012 by Devin Smith | 40 comments

By J. D. Alt

It was in the year 2020 that a majority of people first began to “see” what money is. For a few months—after the “realization” started hitting the pages, airwaves, blogs, tweets and twits of mainstream media—it became a silly joke: “2020 perfect vision, at last! How could things have been so blurry for so long?” For thousands of years, in fact. Continue reading →

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Posted in J. D. Alt

Tagged money

Neoliberal Mythologies

Posted on November 28, 2012 by Dan Kervick | 43 comments

By Dan Kervick

It’s hard enough for ordinary citizens to keep up with the routine crony rackets the American plutocracy runs with their lackeys in Washington to rob us blind and lock us in the neo-feudal cages they are trying to build out of the bones of what was once the US middle class. But the task of keeping up with the scams becomes even harder when central bankers promulgate myths and hide behind shibboleths designed to prevent the public from grasping just how much power we all still possess to seize control of our own destinies.

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43 Comments

Posted in Dan Kervick, Uncategorized

More Austerity Advice From the Very Rich: Buffett On Deficits!

Posted on November 27, 2012 by Devin Smith | 41 comments

By Joe Firestone

Warren Buffett’s recent op-ed in the New York Times is making a stir because it calls for a minimum tax on high incomes above $One million annually. But I was much more interested in some deficit targeting he proposes which exposes his ignorance about the sectoral financial balances model of macro-economics, and reveals him as a deficit hawk whose advice, if followed would be unsustainable and lead the United States into another deep recession. I’ll comment on a couple of paragraphs in Buffett’s op-ed. Continue reading →