How big does the fire need to be?

Published by Anonymous (not verified) on Mon, 13/08/2018 - 7:11pm in

By J.D. ALT I have written about this before, but it bears repeating now—and perhaps it bears repeating every week until somebody with more leverage than me picks the message up and carries it a step further: America (and the … Continue reading →

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The Explicable Mystery of the National Debt

Published by Anonymous (not verified) on Thu, 02/08/2018 - 9:36am in

By J.D. ALT America’s current “national debt” is tallied to be $21.5 trillion. When politicians and economic pundits talk (worry, fret, wring their hands, gnash their teeth) about this “debt” they implicitly assume—along with their listeners, readers, and potential voters—that … Continue reading →

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How to Draw Unique and Entertaining Comparisons to Express MMT Concepts

Published by Anonymous (not verified) on Sat, 28/07/2018 - 1:25am in



It’s the weekend, so nothing heavy. Well, maybe. I’ve got one or two articles finished and I might post one. Depends on how I feel. Anyway. People always ask me how I come up with interesting and fun analogies to teach MMT. So, I thought it would be fun to address that question. Now then,[...]

The post How to Draw Unique and Entertaining Comparisons to Express MMT Concepts appeared first on Ellis Winningham.

On the Use of the Ubiquitous Term “Printing Money” by MMT Novices – Please Stop Using It

Published by Anonymous (not verified) on Sat, 28/07/2018 - 1:07am in

Try to understand: The public tends to view dollars/pounds in terms of a physical object that travels in an eternal circular flow. I: Introduction – The Errant, Fantasy View of Currency People tend to view “money” as though it were a precious stone. It’s always been here since the beginning of time. It was discovered[...]

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The Case for Income Tax.

Published by Anonymous (not verified) on Fri, 27/07/2018 - 7:23pm in

Claire Connelly is a young journalist specialising in economics and finance. An MMT sympathiser, she has written popular pieces about it.

She wrote “The Case Against Income Tax” about the need (or lack thereof) for income taxes. Although she has “no hard opinions on whether or not to abolish income tax”, as she says towards the end of her piece, it’s evident she finds that possibility attractive, particularly within the Australian context, where tax cuts have been a thing lately.

It’s understandable then that she produces a list of income tax criticisms (going as far back as Henry George, whom she mentions approvingly). A bit more worrisome is that she presents no argument in favour of income taxes.

Ironically, though, she links to an article of a leading MMT proponent, Prof. L. Randall (Randy) Wray, dealing precisely with the need (or lack thereof) for taxes. There Wray explains some misunderstandings about taxes in general and income taxes in particular, and their legitimate uses (because, against a common misunderstanding, taxes do have legitimate uses within MMT, beyond driving the demand for money).

To that end, Wray discusses the work of Beardsley Ruml (whom Connelly also mentions) and asks (my emphasis from here on): “Why, then, does the national government need taxes?”

Ruml -- Wray says -- gave four reasons:

  1. “As an instrument of fiscal policy to help stabilize the purchasing power of the dollar;
  2. “To express public policy in the distribution of wealth and of income as in the case of the progressive income and estate taxes;
  3. “To express public policy in subsidizing or in penalizing various industries and economic groups; and
  4. “To isolate and assess directly the costs of certain national benefits, such as highways and social security.”

And further elaborates: “The second purpose is to use taxes to change the distribution of income and wealth. For example, a progressive tax system would reduce income and wealth at the top, while imposing minimal taxes on the poor.”

Which, one gathers from Connelly’s piece, seems to be what Dr. Steven Hail, apparently a local MMTer, tried to tell her.

Without being an expert, I’ll try my hand at some answers to Connelly’s questions and comments.

Connelly asks: “If income tax were really important, how come those who make the most often pay the least?” The fact that those who earn (not make) the most often pay the least does not prove income taxes are unimportant. It is, instead, an argument for the closing of the loopholes in taxation law allowing that to happen and it’s a demonstration of the influence those who earn the most have on lawmakers and bureaucrats. Wouldn’t the elimination of income taxes only play to their hands?

“[Henry] George argued that a land-value tax” -- writes Connelly -- “should replace all other forms of taxation, ‘leaving labour and capital to flourish freely, and thus ending unemployment, poverty, inflation and inequality’.” If workers and capitalists don’t pay taxes wouldn’t their inducement to demand money be reduced?

Moreover, wouldn’t that increase inequality?

Which lead us to this comment: “In the current climate, with wages stagnating or in some countries even going backwards, it makes little sense to take money away from people already struggling to pay their bills for the sake of an almost permanent deficit.”

That’s all very truth. But there are tax cuts and tax cuts. The one already approved in Oz precisely cuts the taxes the least for people struggling to pay their bills as their wages fall, and the most for those whose salaries have been rising lately. These are tax cuts, the question is: are they good? I fail to see how inequality can fall with that.

That is a misunderstanding that may come back to haunt MMTers: when they say “taxes drive the demand for money” people tend to hear “the only purpose of taxes is to drive the demand for money”. Often -- as I’m sure is the case with Connelly -- it’s an honest mistake which a little thought, hopefully, can correct, thus, this post.

I fear, however, sometimes there’s more than a little equivocation behind it; which may have something to do with its zombie-like resilience.

The Five Stages of Money (and why we’re stuck at stage 4)

Published by Anonymous (not verified) on Tue, 19/06/2018 - 10:24am in

By J.D. ALT Like everything else, money has evolved. It began in a primitive form and morphed into something more sophisticated, more successful. Then, probing and testing for an even better form, it morphed again. A simplified history of money’s … Continue reading →

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Left Forum: Money Matters

Published by Anonymous (not verified) on Fri, 08/06/2018 - 8:56am in


speeches, MMT

One of the highlights of the NY academic calendar is the Left Forum. On this panel I was joined by Stephanie Kelton, alongside Gar Alperovitz, Pavlina Tchernova and Raul Carillo.

On The "Everyone Cannot Run Trades Deficits" Argument

Published by Anonymous (not verified) on Wed, 23/05/2018 - 11:00pm in



Steve Keen has posted "Some Preliminary Questions for MMT," in which he questions the Modern Monetary Theory (MMT) mantra that "exports are a cost, imports are a benefit." He points out: what is to stop everybody from running trade deficits? I discuss why his arguments are not particularly concerning from a policy perspective.

The following quote is what I wish to discuss.

I dispute the premise of this argument—the part that Mitchell said is "undeniable"—but for the sake of argument, I'm going to accept it here. So exports are a cost, imports are a benefit, and for its own good, a country should attempt to run a trade deficit.
MMT advocates take this as an argument in favour of attempting to achieve a trade deficit. 

If this argument were correct—and when I have time later (much later), I'll argue that it is not—then I would take it instead as a reason to set up an international body and policy standards to stop economies deliberately running trade deficits. 

Why? Because unlike government deficits, which all countries in the world can run simultaneously, a trade deficit for one country necessarily means an equivalent trade surplus for the rest of the world. If there are countries deliberately running trade deficits, then they are forcing others to run trade surpluses. Since on this MMT argument, the trade deficit countries are the winners and the trade surplus countries are the losers, the former are behaving parasitically towards the latter. That should not be allowed if we are trying to achieve a harmonious global economy.

There are two problems with the argument.

  1. The "imports are a benefit" idea is usually discussed in the context of developed country macroeconomics. If you are a developing country, export-led growth behind trade barriers is a standard strategy. The U.S. followed this, as did Canada, then a string of countries after World War II (starting with Germany and Japan; China is the current exemplar of the strategy). Having a competitive export sector is viewed as a benefit. However, this advantage disappears once your country has reached a comparable level of development. Until every country on the globe reaches a similar level of development (I am not exactly holding my breath waiting for that event), this "every country wants to run deficits" story does not apply.
  2. If we confine the discussion to intra-developed country trade, there is no mechanism to set the level of the trade balance under current institutional arrangements. Trade is managed by various bilateral and multilateral pacts, and tariffs are generally not supposed to happen (although Republican presidents love slapping around Canada early in their presidencies). The only way to directly create a trade deficit is to deliberately destroy one of your industries that faces international competition. Domestic politicians are too beholden to business interests to pursue that option. Alternatively, you are stuck with indirect means -- loosen fiscal policy, for example. However, what matters for trade would be the relative fiscal stance: if everyone loosens fiscal policy simultaneously, we would just be making a simultaneous run at the dreaded "inflation barrier," and trade balances would remain where they were.* There are arguments that loosening fiscal policy is somewhat of a free lunch, but no body politic in 2018 wants to test that theory to destruction.

Steve Keen is transitioning towards the post-Keynesian economist preference for hoping that we are back in 1945, and re-negotiating Bretton Woods. Let us all throw away our national economic sovereignty and hand it to multi-national institutions! Observers on this side of the Atlantic point out how well that worked out for Greece, whereas Europeans appear to think that situation was just a minor misunderstanding.
In reality, this discussion has very little to do with MMT, rather the world view of post-Keynesians. Despite being told "no thanks" for decades, they appear to believe that just a little bit more lecturing will win everyone else over to the joys of handing over your economic sovereignty to an unelected multi-national bureaucracy.

* If we put aside cases involving large price swings in some goods (key example being oil prices), the usual reason a country has a greater trade deficit versus developed peers is that its domestic demand is growing faster than its competitors. (The total trade balance at present for developed countries is largely determined by how fast Asian exporters are hollowing out a country's manufacturers.) Loosening fiscal policy leads to faster growth, and thus imports grow faster than exports. This is often viewed as a "demand leakage," but it can be viewed as a bit of a free lunch. By drawing in exports, it is taking advantage of excess capacity in the foreign countries. This means that it will face less inflationary pressures. However, this can be cancelled out by the other country also loosening fiscal policy to stimulate its growth, in which case both country's exports and imports grow at the same pace. This is why multi-lateral control of trade imbalances is politically toxic, it would give foreigners veto power over fiscal policy. In a country like Canada -- where fiscal policy is shared at the provincial level, and even the Federal government does not have veto power over provincial policy -- "non-starter" is the most polite description I can give such proposals.

Chapter 6 of An Introduction to SFC Models Using Python discusses such effects using simple stock-flow consistent models. 

(c) Brian Romanchuk 2018

Mean-Spirited Ideas.

Published by Anonymous (not verified) on Tue, 22/05/2018 - 5:51pm in


MMT, Politics

Zach Carter:

“Politicians don’t generally turn to economists for new insight into how the world works. Economists instead serve as a kind of credibility shield - experts who can be trotted out to assure the public that there are very complex and sophisticated reasons political leaders should be doing the things they do. A big part of any Washington economics job is providing a sense of scientific certainty to political judgments that are, by their very nature, uncertain. This is true for big policy changes as well as straightforward tasks like projecting growth rates and government revenue.

“The job, in other words, is to back up your team.”

John Maynard Keynes:

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else.”

Call me cynical, but I think someone was bullshitting us, and that someone isn’t Carter.

Zach Carter’s “Stephanie Kelton has the Biggest Idea in Washington” (Huffington Post, May 20) has caused a bit of a stir in the blogosphere and Twitterverse. Corey Robin’s tweet was a tiny part of that.

Judging by the opening quote above, however, it was most insightful, I’d say.

Carter does his best to portray the Job Guarantee as a non-threatening, respectable, Very Serious, technocratic idea, something even the US Democratic Party can commit itself to. The problem is that he may have been excessively successful. To put it plainly: he doesn’t make it sound good -- to me at any rate. In fact, the absence of a very prominent name in that article is something that caught my attention rather powerfully.

Anyway, Carter shows how and why policies are adopted and, once adopted, why economists stick to them (it also suggests why mainstream economists tend to act like jerks). It turns out -- surprise, surprise -- good ideas are just a small part of the story: they need powerful and influential and wealthy backers happy to back charismatic proponents with the support of the commentariat and media.

You see right there the kind of constraints that places on even the most sincere reformist Left. A very delicate balancing act, yes? As a Commie I can say I don’t envy well-meaning reformists.

I’ll haste to add that this, of course, is not meant as a criticism of Professor Kelton or the other leading MMTers, of whom I, for what it might be worth, have high views. Nor does this imply a judgement on the technical merits of the Job Guarantee and in particular its relative desirability compared to the Universal Basic Income.

One thing I enjoyed enormously in that article:

“Usually, being on the losing end of a lefty Democratic Party presidential run is a career blow. But [Hillary] Clinton’s loss to Donald Trump exploded the existing hierarchy of party experts. Her team of economists, which had expected to be running various government agencies, is instead plugging away at think tanks and universities just like the Sanders crew.”

I can imagine some bona fide geniuses “sulking in their tents like Akhilleus on a bad day”: on whose hands are Fate and the Olympians going to place the “planning department of the human race”? I’d bet my ass to nothing liberal capitalism never looked so crap to them.

As that other Greek demigod used to say: “Ha, Ha!”

Cenk and Young Turks Team: Your Deficit Hawkery is Unrealistic and Stands in the Way of Progressive Change

Published by Anonymous (not verified) on Tue, 08/05/2018 - 10:20am in

By Michael Hoexter, Ph.D. [The Young Turks (TYTNetwork) is an online news network that has a wide reach among mostly progressives and independents in the United States with viewership in the hundreds of thousands of unique visitors per day and over … Continue reading →

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