Matteo Renzi Puts the Lie to “There is not alternative” (TINA) to Austerity

Posted on July 3, 2014 by | Comments Off on Matteo Renzi Puts the Lie to “There is not alternative” (TINA) to Austerity

By William K. Black

In a recent column I responded to a conservative scholar’s (Victor David Hanson) claim that U.S. “employment rates for college graduates are dismal” by showing that the employment rate for college graduates seeking employment was 96.8% – and rising.

Employment rates for recent college graduates are far worse than “dismal” in the periphery of Europe because the EU troika (the ECB, the EU Commission, and the IMF) have inflicted austerity on these nations.  This produced a gratuitous second Great Recession in the Eurozone as a whole, but it also caused Great Depression levels of unemployment in Spain, Greece, and Italy.  Those three nations have over 100 million in total population – roughly one-third of the eurozone’s total population.  College graduates in these nations have unemployment rates ten times greater than in the U.S.  (Hanson is a big fan of austerity, so he managed to get everything – the facts and the cause – reversed in his fable.)

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DEBT-FREE MONEY: A NON-SEQUITUR IN SEARCH OF A POLICY

Posted on July 1, 2014 by | 68 comments

By L. Randall Wray

While we are on the topic of monetary cranks, I thought it might be useful to quickly address a cranky idea that often comes up in comments to my blogs and also during Q&A after presentations: so-called “debt-free money”.

The first time I heard it, my immediate reaction was “Say what?”, and the second was puzzlement at the non-sequitur.

I am not sure exactly which of the crank approaches explicitly adopt the notion, but it seems common to a lot of them. I’m not going to address any particular approach but instead will address only the idea that we can have a “money” that is not a “debt”.

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Implicitly Assuming that the CEO is Not a Crook Misses the Problem

Posted on June 30, 2014 by | 7 comments

By William K. Black

Gretchen Morgenson has brought a revealing study to the attention of the public in her article entitled “The CEO is My Friend, So Back Off.”  Here’s the bad news – the situation is vastly worse than the authors of the study conclude and the policy advice that experts offered Morgenson in response to the findings would fail where they were most needed.

Morgenson begins her article by describing a recent speech by the head of the SEC to an audience containing many board directors.

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Something is Rotten in the State of Denmark: The Rise of Monetary Cranks and Fixing What Ain’t Broke

Posted on June 30, 2014 by | 32 comments

By L. Randall Wray

Horatio:  He waxes desperate with imagination.

Marcellus:  Let’s follow. ‘Tis not fit thus to obey him.

Horatio:  Have after. To what issue will this come?

Marcellus:  Something is rotten in the state of Denmark.

Horatio:  Heaven will direct it.

Marcellus:  Nay, let’s follow him.

 Hamlet Act 1, scene 4

Marcellus is right, the Fish of Finance is rotting from the head down. It stinks. As Hamlet remarked earlier in the play, Denmark is “an unweeded garden” of “things rank and gross in nature” (Act 1, scene 2).   The ghost of the dead king appears to Hamlet, beckoning him to follow. In scene 5, the ghost tells Hamlet just how rotten things really are.

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More on Consolidating or Not

Posted on June 27, 2014 by | 3 comments

By Scott Fullwiler

As Randy’s recent post on consolidating vs. not explained, a number of critics argue that consolidation doesn’t “really” happen.  Of course, that’s not the point MMT is making, as we’ve noted numerous times, including Randy’s post. Regardless, though, there are real-world governments that do publish consolidated reports.

The UK posted its report here. 

Neil Wilson has reviewed it for those that don’t want to read through the whole thing here.

Hat tips both to Neil Wilson and Economonitor commenter acornus

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To Consolidate or Not To Consolidate, that is the Question (or maybe it isn’t)

Posted on June 26, 2014 by | 23 comments

By L. Randall Wray

This is another short post on MMT, a sort of follow-up to my post from a couple of days ago. There was an interesting response to various comments on my piece, which was posted up on Mike Norman’s website.

We got the typical: “oh you MMTers always want to consolidate the Fed and Treasury, but really the Fed is a private institution that is not a part of government”, and “in reality the Treasury cannot spend unless the Fed will allow it to spend, otherwise it must get tax revenue before it can spend”, and hence “really government spending is constrained by its revenue, just like a household or firm”.

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Democratizing Government Spending in an Era of Climate Change: Decision Criteria and Spending Priority Lists – Pt. 2

Posted on June 26, 2014 by | 3 comments

By Michael Hoexter

General Goals and Decision Criteria for Government Fiscal Policy

In the era of climate change, a worldwide social and economic disaster, the valuation of real resources, especially atmospheric resources and energy resources must change in order for human civilization to survive.  Government fiscal policy is a critical element of that change in valuation, both on the spending and the taxation side.  In addition, in a planning role, government becoming the architect or co-architect of new energy, transportation and land use realities.  As I have written before, making atmospheric resources or the permission to use them, a tradable commodity does not adequately and properly engage our most powerful instrument in addressing climate change and adaptation to climate change, the institutions and fiscal policy of government itself.  However, government leaders are human beings with interests and varying ethical commitments to the common good of their people and humanity in general.  In order to hold them accountable in their spending and taxation decisions it will help to make a part of public political discourse those criteria by which they make spending and taxation decisions.  These public criteria can in turn be modified by political discussion as well as scientific measurement of the results of those policies, which then can either be refined or discarded depending on their outcomes.

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Democratizing Government Spending in an Era of Climate Change: Decision Criteria and Spending Priority Lists – Pt 1

Posted on June 25, 2014 by | 4 comments

By Michael Hoexter

The surprise Republican primary victory of libertarian economic fantasist and teacher of economics Prof. David Brat in Virginia’s conservative 7th District has highlighted a point of agreement between the progressive left and far right/libertarians like Brat: both say they are against “crony capitalism”.  While Brat came across to voters and most of the press as a “true believer” in a religiously-tinged libertarian-style economics that decries subsidies and state involvement in industry, the actual sordid history of libertarianism is that it has functioned as an effective cover for corporate lobbying and government’s regulatory and economic support of the interests of the wealthy and large corporations, i.e. crony capitalism. “Libertarianism,” largely a politicized strain of the social philosophy called Austrian economics, was invented after WWII as a lobbying instrument for the interests of corporations like General Motors, at the time amply boosted by federal government spending during the war yet apparently wanting to, in the public eye, disassociate itself from that help after the war.

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Keeping It Real: Law, Coercion, & The Frontiers of Public Finance

Posted on June 25, 2014 by | 24 comments

By Raúl Carrillo

“Where does money come from?” That’s our question. That’s the trump card Deficit Owls play to explain why the case for austerity is shallow and sadomasochistic, now and forever. When one spreads the true answer—that the Federal Reserve creates dollars with keystrokes, that the U.S. government, unlike like a state or a household, can’t possibly “go broke”, that Uncle Sam has to worry about inflation but doesn’t need to tax or borrow to spend—policy creativity explodes. The false choices of public finance are illuminated. We can decrease taxes AND increase expenditures. We can achieve full employment AND price stability at the same time. Once we align conversation with operational reality, and recognize that we can’t collectively run out of money, we can have an honest—if always antagonistic—conversation about what institutions should do to create, administer, and regulate stocks and flows of resources.

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MODERN MONEY THEORY: THE BASICS

Posted on June 24, 2014 by | 36 comments

By L. Randall Wray

*I’ll return to my series on the role of taxes in MMT later this week. Meanwhile, here’s a short post on MMT.

Modern Money Theory (MMT) seems to confuse two groups of otherwise sympathetic economists. First there are those like Paul Krugman who are generally of the Keynesian persuasion and who like MMT’s “deficit owl” approach. I think Krugman would really like to stop worrying about the deficit so that he could advocate an “as much as it takes” approach to government spending. The problem is that he just cannot quite get a handle on the monetary operations that are required. Won’t government run out? What, is government going to create money “out of thin air”? Where will all the money come from?

He really doesn’t understand that “money” is key stroke records of debits and credits. He still thinks banks take in deposits and then lend them out. He starts to tear his hair out whenever someone tries to correct him on this. He’s wedded to the deposit multiplier idea he got from his Econ 101 textbook.
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