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Daily government incompetence and worse…

Published by Anonymous (not verified) on Tue, 29/09/2020 - 7:36am in

I recommend all readers take a look at the ‘Russ in Cheshire’ tweet stream – effectively it has already seen comment on ProgresssivePulse here – although the original source is no longer available- but the author is the same. If you are on Twitter it is worth following ‘Russ in Cheshire’. You will probably be... Read more

Basic Income and the Job Guarantee – further clarifications

Published by Anonymous (not verified) on Mon, 28/09/2020 - 5:00pm in

There was a Centre for Innovation and Public Purpose discussion a month or two ago which I’ve been meaning to watch. Here Pavlina Tcherneva – together with a few interventions from Robert Sidelsky – was discussing in some practical detail, on the basis of her recent book, “The Case for a Job Guarantee” its benefits... Read more

Sunak is going to trash our economy and our lives

Published by Anonymous (not verified) on Sat, 26/09/2020 - 10:43pm in

Sunak’s disastrous recently announced ‘Job Retention Scheme’ spoke of his desire to keep ‘viable’ jobs, which even the Telegraph thinks will not deliver, . He has given us no indication of those jobs he considers viable and as we all now know there is no objective viability – only Sunak’s bizarre and cruel political choice... Read more

‘Sheltering’ the Economy…

Published by Anonymous (not verified) on Wed, 23/09/2020 - 5:00pm in

“Save lives, protect the NHS” and “shelter the economy” is, according to Laura Kuenssberg (and I’m sure Progressive Pulse readers will be well aware that I read no-one else) what Johnson now wants to do. It is ‘shelter the economy’ that I find more than usually fantastical. It is as though the economy were not... Read more

Sarah Chayes: Why Meat Matters

Published by Anonymous (not verified) on Wed, 23/09/2020 - 2:24am in


Capitalism, Meat, money

In her new book ON CORRUPTION IN AMERICA, author Sarah Chayes posits a theory about the long development of monetary capitalism from our first meat-eating ancestors. Continue reading

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Corruption at the Core: Bill Moyers talks with Sarah Chayes

Published by Anonymous (not verified) on Wed, 23/09/2020 - 1:17am in

Bill Moyers talks with Sarah Chayes about her new book On Corruption in America. "What I did was go to a variety of different countries and found that corrupt government was driving just about every world crisis you could name, including the environmental crisis, including mass migration, including a lot of civil strife. So, I felt as though focusing on anything else is almost derivative." Continue reading

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A Tribute to David Graeber

Published by Anonymous (not verified) on Mon, 21/09/2020 - 7:00pm in

As many of you know, the anthropologist David Graeber died recently at the age of 59. Many of us are still coming to grips with this loss. Graeber was a rare individual — both a tireless activist and a superb scholar.

In this guest post, teacher and a financial analyst Christophe Petit pays tribute to Graeber, his friend and mentor. Petit works for labour unions in France and is currently doing a PhD in economics that was co-supervised by Graeber. Petit researches how monetary policy could be used to finance a universal basic income. You can find his work in the Revue du MAUSS.

A Tribute to David Graeber

Christophe Petit

For the past ten years, I had the good fortune to know David Graeber as both a friend and mentor. He was (and will remain) an inexhaustible source of inspiration. So I owe it to David to pay him tribute.

When someone dies, we often exaggerate their character. We find qualities that were perhaps not there. But with David, we needn’t do this. He possessed so many redeeming qualities. He was kind, benevolent, humorous, erudite, imaginative, intelligent, energetic, and curious. He was (no exaggeration) the sunniest person I’ve ever known.

David was exceptionally talented. But he possessed something rarer: extraordinary genius. It’s worth reflecting on the difference. Talent is a matter of analytic skill. Genius is a matter of imagination. Talent combines what already exists. Genius creates something new. David moved so many people because he was a genius in this sense. Reading his work made your imagination explode. Every page opened new possibilities. There was something Nietzschean about David’s work. Since his first book, Towards an Anthropological Theory of Value, David encouraged us to think and criticize the values that we take for granted.

David was committed to helping people, something that is evident in his writing. Take, as an example, his book Bullshit Jobs. It spoke to people who were crushed by the modern religion of work — people who were tired of being cogs in a corporate machine. David demolished the idea that work was sacred. Instead, he defended human dignity and the right to creativity. He advocated for a universal basic income, which he argued would vaccinate against the suffocating effects of corporate bureaucracy.

David’s book Debt: The First 5000 Years helped people in a different way. It made plain the nature of money, and how it justifies power. The capture of money by private interests, David argued, is the essence of feudalism. To have democracy, we need democratic money. Sadly, history has tended to move in the opposite direction. We began long ago with the democratic ethos of debt forgiveness, proclaimed by people like Jesus (the Redeemer) and Solon (the creator of democracy). Today, the prevailing ethos has regressed. We herald not debt redemption, but debt repayment.

In The Utopia of Rules, David looked at the stultifying effects of bureaucracy. He showed us that we (in capitalist societies) live in a world even more bureaucratic than the Soviet Union — a regime of ‘managerial feudalism’. It’s a world of rentier bureaucracy that oppresses the majority of humanity.

For the past ten years, David had been writing (together with David Wengrow) a book about human history. He finished it three weeks before his death. Called The Dawn of Everything, it was to be part of a trilogy. Sadly, this masterpiece will go unfinished. Still, we have this single book as a parting gift.

David had many plans for the future. He hoped to integrate the works of Thorstein Veblen, John Commons, Jonathan Nitzan, Shimshon Bichler, Fabian Muniesa and Blair Fix (among others). David and I were planning a book devoted to the philosophy of Roy Bhaskar, which he was to preface. David, like Bhaskar in philosophy or Einstein in physics, insisted on the primary role of imagination in the scientific process. Similar to Einstein’s physical thought experiments, David conducted social thought experiments. The truth, for David, was a mobile army of imaginary metaphors signing a symbolic armistice — both literary and mathematical – with a fixed army of empirical facts. David was also going to write a preface for a forthcoming French anthology of Michael Hudson’s work.1

Together with Véronique Dutraive, David was the co-directer of my PhD thesis. My research focused on the financing of a monthly universal basic income through money creation. It’s a subject that obsessed us (David and I), fuelling many discussions over the past few years. We schemed about how to radically transform money — from an institution that serves financial capitalism to an institution that protects democracy.

The key ideas is a ‘debt jubilee’ like the one proposed by Steve Keen (who builds on the work of Michael Hudson). Rather than cancel debts, Keen proposes that we allow people to pay off debts by giving everyone a payout. David and I thought of this payout as a kind of anarchist currency — money based not debt, but on Marcel Mauss’ concept of The Gift. I will continue to develop these ideas, but David’s death leaves a great hole. He had the ability to make radical ideas (like the debt jubilee) appear obvious.

For those of us who want a better society, David’s death is an immense loss. Although he was the opposite of a guru (he had no use for authority), David was for me (and many others) a kind of North Star. He helped us orient in the constellation of ideas.

Since David’s death, myself and others (I’m thinking of David’s close friends in SPECTRE2) have been waking each morning with a broken heart. To us, Alphonse de Lamartine’s famous phrase suddenly has knew meaning:

Sometimes, when one person is missing, the whole world seems empty.

For David, we are the stuff of human relationships. We are people made of people. With David’s death, a part of me has died. But his memory lives on. David always seemed like a child playing with ideas. Perhaps it is the privilege of geniuses to remain joyous children playing on the beach — the frontier between the land of the known and the ocean of the unknown.

David’s wife Nika is creating a foundation that will work to preserve his inimitable spirit. It’s our duty to keep the light of his genius alive.


  1. My friend Thibault Mirabel and I are the translators.↩
  2. If you’re interested, SPECTRE stands for Secret Political Economic Consortium for the Total Redistribution of Everything.↩

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All for an arbitrary lack of money

Published by Anonymous (not verified) on Tue, 15/09/2020 - 5:00pm in

Having listened to BBC Radio4’s ‘Front Row’ it demonstrates that the arts, whose members are supposedly progressive and original thinkers are, like so many others, completely brainwashed into the idea that they must find ‘other’ commercial sponsorship because government money is so limited. The theatre producer and owner, Nica Burns, has said she will endeavour... Read more

Is the New Chapter for the Monetary Policy Framework Too Old to Succeed?

Published by Anonymous (not verified) on Tue, 15/09/2020 - 5:34am in

Bagehot, “Money does not manage itself.”

By Elham Saeidinezhad – In this year’s Jackson Hole meeting, the Fed announced a formal shift away from previously articulated longer-run inflation objective of 2 percent towards achieving inflation that averages 2 percent over time. The new accord aims at addressing the shortfalls of the low “natural rate” and persistently low inflation. More or less, all academic debates in that meeting were organized as arguments about the appropriate quantitative settings for a Taylor rule. The rule’s underlying idea is that the market tends to set the nominal interest rate equal to the natural rate plus expected inflation. The Fed’s role is to stabilize the long-run inflation by changing the short-term federal funds rate whenever the inflation deviates from the target. The Fed believes that the recent secular decline in natural rates relative to the historical average has constrained the federal funds rate. The expectation is that the Fed’s decision to tolerate a temporary overshooting of the longer-run inflation to keep inflation and inflation expectations centered on 2 percent following periods when inflation has been persistently below 2 percent will address the framework’s constant failure and restore the magic of central banking. However, the enduring problem with the Taylor rule-based monetary policy frameworks, including the recent one, is that they want the Fed to overlook the lasting trends in the credit market, and only focus on the developments in the real economy, such as inflation or past inflation deviations, when setting the short-term interest rates. Rectifying such blind spots is what money view scholars were hoping for when the Fed announced its intention to review the monetary policy framework.

The logic behind the new framework, known as average inflation targeting strategy, is that inflation undershooting makes achieving the target unlikely in the future as it pushes the inflation expectations below the target. This being the case, when there is a long period of inflation undershooting the target, the Fed should act to undo the undershooting by overshooting the target for some time. The Fed sold forecast (or average) targeting to the public as a better way of accomplishing its mandate compared to the alternative strategies as the new framework makes the Fed more “history-dependent.” Translated into the money view language, however, the new inflation-targeting approach only delays the process of imposing excessive discipline in the money market when the consumer price index rises faster than the inflation target and providing excessive elasticity when prices are growing slower than the inflation target.

From the money view perspective, the idea that the interest rate should not consider private credit market trends will undermine central banking’s power in the future, as it has done in the past. The problem we face is not that the Fed failed to follow an appropriate version of Taylor rule. Rather, and most critically, these policies tend to abstract from the plumbing behind the wall, namely the payment system, by disregarding the credit market. Such a bias may have not been significant in the old days when the payment system was mostly a reserve-based system. In the old world, even though it was mostly involuntarily, the Fed used to manage the payment system through its daily interventions in the market for reserves. In the modern financial system, however, the payment system is a credit system, and its quality depends on the level of elasticity and discipline in the private credit market.

The long dominance of economics and finance views imply that modern policymakers have lost sight of the Fed’s historical mission to manage the balance between discipline and elasticity in the payment system. Instead of monitoring the balance between discipline and elasticity in the credit market, the modern Fed attempts to keep the bank rate of interest in line with an ideal “natural rate” of interest, introduced by Knut Wicksell. In Wicksellians’ world, in contrast to the money view, securing the continuous flow of credit in the economy through the payment system is not part of the Fed’s mandate. Instead, the Fed’s primary function is to ensure it does not choose a “money rate” of interest different from the “natural rate” of interest (profit rate capital). If lower, then the differential creates an incentive for new capital investment, and the new spending tends to cause inflation. If prices are rising, then the money rate is too low and should be increased; if prices are falling, then the money rate is too high and should be decreased. To sum up, Wicksellians do not consider private credit to be intrinsically unstable. Inflation, on the other hand, is viewed as the source of inherent instability. Further, they see no systemic relation between the payment system and the credit market as the payment system simply reflects the level of transactions in the real economy.

The clash between the standard economic view and money view is a battle between two different world views. Wicksell’s academic way of looking at the world had clear implications for monetary policy: set the money rate equal to the natural rate and then stand back and let markets work. Unfortunately, the natural rate is not observable, but the missed payments and higher costs of borrowing are. In the money view perspective, the Fed should use its alchemy to strike a balance between elasticity and discipline in the credit market to ensure a continuous payment system. The money view barometer to understand the credit market cycle is asset prices, another observable variable. Since the crash can occur in commodities, financial assets, and even real assets, the money view does not tell us which assets to watch. However, it emphasizes that the assets that are not supported by a dealer system (such as residential housing) are more vulnerable to changes in credit conditions. These assets are most likely to become overvalued on the upside and suffer the most extensive correction on the downside. A central bank that understands its role as setting interest rates to meet inflation targets tends to exacerbate this natural tendency toward instability. These policymakers could create unnaturally excessive discipline when credit condition is already tight or vice versa while looking for a natural rate of interest.

Elham Saeidinezhad is Term Assistant Professor of Economics  at Barnard College, Columbia University. Previously, Elham taught at UCLA, and served as a research economist in International Finance and Macroeconomics research group at Milken Institute, Santa Monica, where she investigated the post-crisis structural changes in the capital market as a result of macroprudential regulations. Before that, she was a postdoctoral fellow at INET, working closely with Prof. Perry Mehrling and studying his “Money View”.  Elham obtained her Ph.D. from the University of Sheffield, UK, in empirical Macroeconomics in 2013. You may contact Elham via the Young Scholars Directory

The post Is the New Chapter for the Monetary Policy Framework Too Old to Succeed? appeared first on Economic Questions.

Frederick Soddy’s Debt Dynamics

Published by Anonymous (not verified) on Sat, 12/09/2020 - 11:39pm in

In the field of ecological economics, Frederick Soddy looms large. Born in 1877, Soddy became a chemist and eventually won a Nobel prize for work on radioactive decay. Then he turned his attention to economics.

Between 1921 and 1934, Soddy wrote four books that looked at how money relates to the physical economy. For his ground-breaking work, Soddy was rewarded with deafening silence. Here’s how ecological economist Eric Zencey puts it:

… Soddy carried on a quixotic campaign for a radical restructuring of global monetary relationships. He was roundly dismissed as a crank.

(Eric Zencey in Mr. Soddy’s Ecological Economy)

Although ignored during his life, Soddy’s work would become a central part of ecological economics. Let’s have a look at Soddy’s thinking.

Wealth vs. virtual wealth

Like a good natural scientist, Soddy insisted that human society is constrained by the laws of physics. Humans survive, he noted, by consuming natural resources. Exhaust these resources and we’re done for.

Think of humans (and our economy), says Soddy, like a machine. We transform energy into physical work. Like all machines, we’re bound by the laws of thermodynamics, which say that you can’t get something for nothing. Energy output requires energy input. That means humans are forever dependent on natural resources.

Now comes the problem. Our biophysical stock of resources — what Soddy called ‘wealth’ — is bound by the laws of thermodynamics. But money — which Soddy called ‘virtual wealth’ — is bound only by the laws of mathematics. Money can grow forever. Natural resource extraction cannot. This mismatch, Soddy claimed, is the root of most economic problems.

Cows and virtual cows

Here’s an example of Soddy’s thinking. Suppose that Alice is a would-be cattle farmer. She inherited some land and wants to use it to farm cattle. The problem is she has no money.

Not to worry. Alice goes to the bank and gets a $100,000 loan. With this money, Alice buys 100 cows. She’s now a cattle farmer — her dream is fulfilled!

Wait, says Soddy. Alice has a problem. She’s invested her ‘virtual wealth’ (money) in ‘real wealth’ (cows). But her ‘virtual wealth’ came from interest-bearing debt. That means the amount she owes the bank grows with time. Let’s have a look at this dynamic.

Banks usually require that you make regular payments on your debt. But to simplify the math, let’s assume Alice’s bank operates differently. It requires no regular payments. Instead, after t years, the bank demands full repayment (with interest). The amount Alice owes depends on three things:

  1. The size of her loan (the principal, P)
  2. The interest rate (r)
  3. The time (t, in years) since her initial loan

Assuming interest accrues annually, here’s the formula for the amount (A) that Alice owes:

A = P(1 + r)^t

Suppose the bank charges 5% interest (r = 0.05). Here’s how much Alice will owe for various call-in times:

Call-in time
Amount owed

5 years

10 years

20 years

30 years

What’s important are the dynamics of Alice’s loan. As the call-in time increases, the amount she owes grows exponentially. This exponential dynamic, says Soddy, is a problem. Here’s why.

Alice used her $100,000 loan to buy 100 cows. If the bank calls in her loan after 10 years, she owes $163,000. That’s the equivalent of 163 cows. If Alice wants to avoid bankruptcy it seems she has only one choice. To repay her loan, Alice must breed more cows.

So here is the problem with interest-bearing debt. It comes with a baked-in need for economic growth. Or so it seems …

Inflating away debt

Repaying interest-bearing debt doesn’t necessarily require economic growth. There’s a second option. Interest-bearing debt can be paid back with inflation.

To see how, let’s return to farmer Alice. With her $100,000 loan, Alice bought 100 cows. After 10 years, the bank calls in her loan at $163,000. If cow prices don’t change, Alice needs to sell 163 cows to pay her debt. At first glance, it seems like her only option is to breed more cows. But there is an alternative. She could raise the price of cows.

Alice bought her cows at $1,000 per head. If she sells them for $1,630 per head, she can repay her loan without breeding more cows. So repaying interest-bearing debt doesn’t necessarily require economic growth. It can also be financed with inflation.

Breadth and depth

Our toy model of debt (based on Soddy’s reasoning) leads to a simple conclusion. If interest-bearing debt is to be repaid (en masse), there are only two options:

  1. The economy must grow
  2. Prices must grow

Jonathan Nitzan and Shimshon Bichler call these two scenarios breadth (economic growth) and depth (inflation). Although it’s theoretically possible to pursue both strategies at once, Nitzan and Bichler find that real-world societies tend to be single minded. They cycle between rapid growth with slow inflation (breadth), and slow growth with rapid inflation (depth). (For details, see Chapters 15 and 16 of Capital as Power.)

Both scenarios allow societies to pay off debt en masse. Yet both have problems. Let’s start with breadth. It’s simply suicidal (and impossible) to pursue economic growth forever. At some point we’ll either exhaust our resources and/or pollute the environment so badly that growth will cease. So paying off debt with perpetual growth is not an option.

What about depth? At first glance, it seems like inflating prices is a sustainable way to deal with debt. After all, the environment doesn’t care if prices grow exponentially. But humans do seem to care. Few people want inflation. Why?

The answer can’t be found on paper. That’s because in theory, inflation is a uniform increase in prices. But in practice, it never works this way. Real-world inflation is always differential. Some people are able to raise prices faster than others. This means that inflation always redistributes income. Unfortunately, the winners tend to be the powerful. (For details, see Jonathan Nitzan’s thesis Inflation As Restructuring.)

So based on Soddy’s reasoning, we find that interest-bearing debt comes with a fundamental problem. There is no fool-proof way to pay it back. Perpetually economic growth isn’t an option. And if we try to inflate away debt, the accompanying income redistribution creates instability. It seems there’s no way out of debt.

Debt default

Actually, there is a way out of debt, and it’s surprisingly simple. We wipe the slate clean. We debt default.

In his book Debt: The First 5,000 Years, David Graeber argues that throughout history, default was the most common way of dealing with debt. Often this happened on a large scale in something called a ‘debt jubilee’. Unpayable debts were wiped off the books, allowing debtors to start fresh. Of course, this wasn’t a long-term solution. Eventually debts would accrue again, requiring another jubilee. But as long as debt loads remained reasonably small, the cycle could repeat without too much trauma.

This debt cycle is a good example of a wider phenomenon found everywhere in nature — stability through fluctuation. Natural systems are stable not through stasis, but through small-scale fluctuations. These fluctuations are a way of mitigating the exponential dynamics that would otherwise be catastrophic.

As an example of such fluctuation, take population growth. If left unchecked, populations (of any organism) tend to grow exponentially. But they never grow forever. Eventually resources are depleted and the population declines. When the population is again small enough that resources are plentiful, exponential growth resumes. The result is a boom-bust cycle — stability through fluctuation.

Of course, if the fluctuations are huge, we can hardly call this ‘stability’. But in most healthy ecosystems, population fluctuations are small. The key to dampening boom-bust cycles appears to be diversity. When there are many species in an ecosystem, each keeps the population of others in check. Prolonged exponential growth never gets a foothold.

Debt monoculture

In nature, the surest way to provoke exponential growth is to destroy diversity. This is something that industrial farmers know well. Here’s their recipe. Cut down a forest, plant a single crop, and wait … for the exponential growth of pests. In nature, monoculture is the enemy of stability. The same is probably true among humans.

Back to Soddy’s debt dynamics. Soddy thought that the exponential dynamics of interest-bearing debt were a problem. Looking at nature, however, and we realize that exponential dynamics are everywhere. So it’s not the dynamics themselves that are the problem. The trouble starts when these dynamics go unchecked. In nature, exponential growth goes unchecked when we plant monoculture crops. In human societies, exponential growth goes unchecked when we have debt monoculture.

The term ‘monoculture’ is especially apt, because debt is literally a culture. Debt is an idea — a convention of quantifying property rights, and then applying exponential dynamics to these rights. The dynamics themselves are not the problem. The trouble starts when the idea of interest-bearing debt becomes a monoculture.

Interestingly, throughout most of human history the use of debt was limited. And when it was used, many people were skeptical that debt should accrue interest. Hence the ban, in many medieval societies, on interest-bearing debt (dubbed usury). Think of this skepticism of debt as a sign of cultural diversity.

Debt, anthropologist David Graeber argues, is just one particular way of solving a fundamental social problem. All societies function by keeping track of a web of social obligations. Throughout most of human history, these obligations were tracked loosely and qualitatively. Alice helps Bob catch a fish. Bob returns the favor by helping Alice cook. Different cultures (and even different sub-cultures) had different ways of conceiving and tracking these obligations. Cultural diversity.

Then came capitalism.

There are many ways that capitalism is different from other forms of culture. But perhaps the most important is the use of quantification. In capitalism, the web of social obligations (that have always existed) suddenly became quantitative. Bob doesn’t owe Alice a favor. He owes Alice $10. And if he doesn’t pay, that amount grows exponentially with time.

The idea of interest-bearing debt is an old one. But it’s only with capitalism that this idea became widespread. In other words, capitalism is the first debt monoculture. Capitalism takes the diverse ways of thinking about social obligations and replaces them with one. Interest-bearing debt.

As with any monoculture, we expect boom-bust dynamics to be amplified. And so they have been. But here’s the terrifying truth. For the last 200 years we’ve been riding one long boom. For two centuries, debt has grown continuously. We’ve achieved this by perpetually consuming more resources and by perpetually raising prices.

Eventually there will be a reckoning. Societies like the United States are now plumbing the depths of income inequality (i.e. income redistribution). And humans are pushing the limits of the Earth’s carrying capacity. So what’s worked for the past 200 years won’t work for the next 200.

It seems clear that debt monoculture is doomed to fail. So in a way, Frederick Soddy was right. The dynamics of interest-bearing debt are a problem. But only because we’ve allowed them to become the dominant human culture.

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[Cover image: Linda Hall Library]

Further reading

Graeber, D. (2010). Debt: The first 5,000 years. New York: Melville House Pub.

Nitzan, J. (1992). Inflation as restructuring. A theoretical and empirical account of the US experience (PhD thesis). McGill University.

Nitzan, J., & Bichler, S. (2009). Capital as power: A study of order and creorder. New York: Routledge.

Soddy, F. (1926). Virtual wealth and debt: The solution of the economic paradox. London: George Allen & Unwin.

Soddy, F. (1934). The role of money: What it should be, contrasted with what it has become. London: George Routledge & Sons.

Zencey, E. (2009). Mr. Soddy’s ecological economy. The New York Times.