Tag Archives: MMT

Our Fiscal Anorexia

By J.D. Alt

Many years ago, I had occasion to spend a long weekend at Ramuda Ranch in Arizona—a rehab facility where young women are helped to learn how to want to eat food again. Anyone who has had a personal encounter with Anorexia Nervosa knows what a mystifying and frightening experience it is. The young women I saw there—all of them well above average intelligence-wise, many of them stunningly beautiful in a physical sense—all suffered from the same delusion: they had convinced themselves that eating, taking nourishment into their bodies, was pathological. The delusion had variations: some of the adolescent girls looked into the mirror and—in spite of the fact they were five feet eight inches tall and weighed only 75 pounds—SAW a body that was grotesquely over-weight and fat. Others seemed to have a disconnected relationship with their bodies, as if they personally were one thing and their body another—and the “other” was something that, for complex, obscure, and compelling reasons, deserved punishment and starvation. For those of us who were visitors, observing this irrational and self-destructing behavior in young women, who otherwise seemed perfectly normal and healthy, was perplexing and painful.

I was reminded of Ramuda Ranch last Friday as I watched our nation’s leaders explain to the American people why America must now impose a new austerity upon itself. By what process, I wondered, have we convinced ourselves that we do not have enough U.S. Dollars to pay ourselves to create the goods and services we need to prosper as a society? What exactly is the “fiscal crisis” that we see when we look in the mirror? How is it that we view our national community with such detachment that we can knowingly impose upon it a painful—and unnecessary—deprivation? How can it be that we view the spending of our OWN sovereign currency to create public goods and services—the essential nourishment of our private economy—as creating a “deficit” that we must somehow repay to someone in the future? How have we bought into this massive delusion? And where is the rehab center, the clinical psychologists and counselors, who will help us overcome it?

Continue reading

“Fixing the Debt Without Breaking America” now available

NEP’s Joe Firestone has just published a kindle book  timed to coincide with the arrival of the sequester deadline. The book, Fixing the Debt without Breaking America: Austerity, the Trillion Dollar Coin, and Ending Debt Ceiling, Sequester, and Budgetary Crises, consists of reorganized content from Joe’s blogs plus three completely new chapters. You can follow this link to get a copy.

Continue reading

Sequestration – Fourth Austerity Shoe Drops

Latest segment from The Black Financial and Fraud Report at theRealNews.com

REAL NEWS NETWORK — “Welcome back to the Real News Network. I’m Paul Jay in Baltimore. And welcome to this week’s edition of The Bill Black Financial and Fraud Report. [Professor] Black now joins us from Kansas City, Missouri. Bill’s an Associate Professor of Economics & Law at the University of Missouri-Kansas City. He’s a white-collar criminologist, a former financial regulator. He is the author of the book, The Best Way to Rob a Bank Is to Own One.

Continue reading

Six “Facts” On Our Debt: Corrections to Robert Solow’s Op-Ed

By L. Randall Wray

In yesterday’s NY Times, Nobel winner Robert Solow tackled the US debt debate, proclaiming that while it is a serious issue, many Americans are not aware of the facts.

Solow is a “neoclassical synthesis” Keynesian, the type of Keynesian economics that used to be taught in the textbooks. He was also on the wrong side of the “Cambridge controversy,” as the main developer of neoclassical growth theory. Still, he’s often on the “right side” when it comes to macro policy questions. And at least part of what he says about the US national debt is on the right track. But he gets enough confused that it is worthwhile to correct the errors.

Continue reading

Real Dollars and Funny Money

By J.D. ALT

I keep trying to unravel the confusion knotted beneath the surface of our public discourse about money.

For example, it seems evident that most people believe that U.S. Dollars are “created” by business entrepreneurs making profits. Until this happens, the understanding seems to be, the number of dollars available for everyone to try to get some share of is like a big lake of money we’re all drinking from, with the biggest drinker of all being the U.S. government.  What we seem to mean by “economic growth” is this lake growing bigger, and we’re constantly measuring it’s depth and volume in terms of something we call “Gross Domestic Product”. The process that makes the money-lake grow is an entrepreneur investing some of the existing dollars in some venture, and then making a profit on that investment thereby creating new dollars that didn’t exist before, which increases the overall size of the lake. Dollars created in this way are “real” dollars because they are created by private business entrepreneurs competing in a free market. The federal government (for some mysterious and perverse reason that we can’t entirely explain) has the authority to “print” dollars any time it sees the need, but dollars created in this fashion are “funny money”—they simply dilute the value of the “real” dollars and enable the federal government to spend money it doesn’t really have. To protect the “soundness” of our lake of money, we should therefore limit at all costs the federal government’s “printing” of dollars, and the most effective way to achieve this goal is to require the federal government to BORROW dollars from the bond market if, in fact, it has to spend more dollars than it collects in taxes. Having imposed this requirement, we must then carefully track the number of dollars the federal government borrows because if that number exceeds a certain percentage of our Gross Domestic Product, we can assume the government will never be able to repay the debt (because the taxes available from GDP are mathematically inadequate) at which point the federal government will be insolvent. When we reach the point that the federal government is borrowing too many dollars (and, therefore, approaching insolvency) we have to either raise taxes or reduce government spending. If we raise taxes—especially on the entrepreneurs and businessmen—that will reduce the incentive to invest and create jobs, and will slow the process by which new “real” money is created, causing economic growth to falter. The best course of action to reduce an overly large federal debt, therefore, is to reduce federal spending. On its surface, this seems a perfectly reasonable narrative, even though it is politically difficult to translate into action (as we are currently observing.)

Continue reading

“Pervasive” Fraud by our “Most Reputable” Banks

By William K. Black

A recent study confirmed that control fraud was endemic among our most elite financial institutions.  Asset Quality Misrepresentation by Financial Intermediaries: Evidence from RMBS Market.  Tomasz Piskorski, Amit Seru & James Witkin (February 2013) (“PSW 2013”).

The key conclusion of the study is that control fraud was “pervasive” (PSW 2013: 31).

“[A]lthough there is substantial heterogeneity across underwriters, a significant degree of misrepresentation exists across all underwriters, which includes the most reputable financial institutions” (PSW 2013: 29).

Continue reading

Job Killers

By Pat Hayes from KC’s JobsNow!

The Sequester Is Awful And Obama Didn’t Even Try To Stop It

NEP’s William Black appears on Daily Ticker with Henry Blodget. With two days to go before “sequestration” chops an indiscriminate $85 billion out of Federal government spending, the blame game has reached a fever pitch. Bill explains it is dumb economics and some of the short term impacts of the sequester.

You can view the episode at this link. (Sorry no embedding Yahoo videos)

[Yahoo was having technical difficulty – if video is not Henry and Bill, click image of House of Representatives to immediate right of Richard Branson beneath video.]

Why Italy’s Election Has Caused Global Markets to Crater

NEP’s William Black appears on Daily Ticker with Henry Blodget. The election in Italy moved markets around the world. Blodget gets an explanation from Bill why Italy has such an impact.

You can view the episode at this link. (Sorry no embedding Yahoo videos).

The Spinning Top Economy

By Matthew Berg

The central insight of the sectoral balances model of the economy is that not all sectors of the economy can net-save at the same time. That means that if all those of us in the private sector in aggregate want to (on net) take in more money than we spend, then some other sector will have to spend more money than it receives. In a simple three sector version, the three sectors are the domestic private sector, the government sector, and the foreign sector.

Continue reading