I guess every 3 months was wayyy too optomistic. https://www.politico.com/news/2020/04/01/republicans-pelosi-rescue-package-coronavirus-160044 The bailout/failure Numbers are catastrophic/world changers. IT IS really frustrating to watch irrationality and Lack of Courage lead to exponential disaster.
Oh, man: {Epstein}: It's also a matter of progressive politics, which, as you know, I regard as an extremely dangerous form of political ideology because these people are much more inclined to big government, much more inclined to see things as always being out of the ordinary, always reading small changes as though they’re about to become exponential ones. Once again, a virus doesn't give a shit about you ideological principles. And "progressives" aren't being ideological when they look at how contagious this thing is, and thus how it's spread is likely to be exponential. What's that? {Epstein}: No, you’re getting confused again. It is not more contagious. [Note: Covid-19 is believed to be roughly twice as contagious as the flu.] It is said to be more lethal. Now, there’s a recent piece in, I think it’s the Financial Times, that somebody sent me, which is, if you’re talking about this as being more lethal, right? Say it’s eight times as deadly, how do you factor that into the equation, right? Well, the first thing is though, is, if it’s true, which it probably is not, that number is probably high.
So as regards inflation, I believe the general tenet of most posters here is aligned with MMT: - In order for expansionary government policy to be inflationary it has, as a first condition, have to hit the pockets of people wanting to buy stuff. QE decidedly did not do that, it was, essentially, an asset swap designed to improve bank balance sheet positions, exchanging, in the case of later rounds of QE, CDOs for central bank money. This does not in and of itself put any more money into the hands of the real economy, unless it is successful in incentivizing banks to lend more. As banks are loath to lend when the economy is in the shitter and they just narrowly avoided bankruptcy it should not be surprising that it did not do much if anything inflation wise. - In so far as QE was successful, it was successful in bailing out the higher income share of countries' income distribution. Poor people with their unaffordable mortgages still defaulted. So, in so far as we should see inflation coming out of these policies at all, it should not be surprising that they would be in areas rich people put their money in - asset price inflation, rather than goods inflation. - In order for it to be inflationary when actually entering the real economy, as a second condition it needs to drive up demand so much that the private sector cannot respond to with increasing production. I still see this as relatively unlikely. - Getting inflation out of your system once you have significant inflation can be a quite difficult feat to accomplish. For one thing one should notice though that really disruptive rates of inflation have been fairly rare in most developed countries. Even fairly high inflation rates are a nuisance, but not necessarily a huge economic problem. I've happened to have had several colleagues from Brazil studying at the same time with me at my grad school, and they were fairly unison in saying that you just tend to get used to annualized inflation rates in the low double digits. If you do want to get inflation under control, I think the most efficient and painless way is through some sort of price and wage growth control policies. The main tool at the disposal of the central bank, the interest rate, is just way too indirect a tool to really effectively control inflation. - I would agree with the notion that the problem with discretionary economic policies such as these bailout packages is the question of timing them right. Their effects will always come in with a lag, and if you add additional demand at a time when the economy is already hitting capacity, you might get significant inflation. It is better therefore to have policies in place that automatically stabilize the system without the need for government intervention - a job guarantee providing a wage and income floor below which people cannot fall under (which, in the times of the coronavirus, could easily effectively be a Yang-like income guarantee, essentially giving people money for staying at home) , highly progressive taxes that prevent too fast income growth during an upturn and significant wealth taxes, capital gains taxes etc. to keep wealth from concentrating so much that it would lead to asset price bubbles.
I don't really have an opinion on this, the one thing I will say though is that all economies are in the shitter and all countries are engaging in expansionary economic policy, so it's very difficult to predict what this will do to the currency markets. I want to reiterate as well that it would decidedly not be an issue for the US if China decided to dump all their treasuries - all that would happen is that they essentially exchange a savings account at the FED that does provide interest for a checking account at the FED that does not provide interest. Once again, for the most part, don't think I can contribute much to this. I personally tend to give more credence to the views of epidemiologists on issues of epidemiology than I do to lawyers, especially since the disruptive effects of the interventions can be dealt with with economic policy. The economic parts are just standard 'free market' talking points - arguing that expansionary fiscal policy is bad for wealth and growth when government spending is literally part of GDP, and any increases in it dollar for dollar increases GDP. It should also come as no surprise that I don't buy the 'printing money leads to inflation' part
It isn't so much production I'm concerned with as resources. Those only respond to demand in gross ways, usually increasing by technological advance or luck. Or not increasing at all. The amount of arable land seems to have peaked everywhere but Africa, for example. Money is the means by which energy and materiel flow, but it can't make those things appear when there isn't enough.
In MLS business threads, I've often made the point that MLS isn't a Ponzi scheme, but it's probably an asset bubble waiting to burst. Just like other pro franchises in the US. The LA Clippers going for $2B was the proof, for me, that something weird and external to the sports business was happening.
In those cases, the value of a team is extrinsic, not intrinsic. If you bought the Clippers for 20 million and sold it for 25 million the value isn't 5 million; you still got to see your name in the paper and when you chat with Mark Cuban you have something in common. That's the stuff that gives it real value. It's also a very, very small market. How many professional sports teams are there?
Right, but the number of dollars available to spend on a prestige item like a pro sports team has skyrocketed, while the supply has barely moved in the Big Four. MLS' rapid expansion came at just the right time.
Key MMT point: A sovereign currency issuing nation does not face financial constraints it only has to contend with resource constraints.
@Spassapparat I have a question and I also have a fair idea what the answer is but I just thought I'd get your opinion on it. As per MMT, if sovereign currency issuing governments only face resource constraints and not financial constraints why do so many mainstream economists and politicians constantly go around warning us about debt and deficits?
That's fair. It is true that resource markets are definitely different from manufacturing industries markets in that prices are much more volatile and demand driven (though I would contend a substantial part of it is speculation on financial markets) But even resource extracting industries do not work at capacity and do ramp up production in response to demand increases. MMT's focus on resource constraints makes it a very useful framework for everyone (such as myself) concerned with the environment. I would say, most of the former, because their whole education and professional career they have thought in a very specific way and now they are trapped in this framework. It's very difficult to remain open to new ideas when your life's work is undermined by them. As to the latter, the way i see it, some are ignorant, to some it just suits their agenda. The 'government is just like a household' frame is just such an incredibly powerful one, because it's just so relatable to literally everyone. And you can use it to just completely shut down debate on policy preferences. I have never had a class with Hudson, nor have i ever met him. He's actually kind of a running joke in the department, as he's been listed in the department list of professors for a long time (don't know whether he still is) yet to my knowledge in all the time I've lived in Kansas City he has not been here once. When i first applied to UMKC (I actually was one of the few grad students who did not come to UMKC to study MMT, did not even know what it was) he had a regular newspaper column in a German newspaper that I read and thought was interesting, so I was looking forward to taking a class with him, but yeah, never happened
As i am locked down with my elderly parents, I get treated to them announcing these ideas to their retired friends every day. A related belief is that "printing money" is going to lead to inflation because they read about it in history class in the 1950s In my experience only a tiny % of people understand that the "printed" money ploughed into Repo markets or QE is not borrowed by the government and is secured against assets acquired. It always comes back to the idea that this is "unaffordable", even though obviously NZ can never run out of money as such. Loads of these ideas drove "expansionary austerity"
So there is 3 aspects to your response around motivation for the debt and deficits scare tactic, 1) ignorance, 2) it's politically astute to go with the flow as the "household finances" comparison rings true to most people 3) they have an ulterior motive/agenda. So economists and politicians are either stupid, wilfully ignorant or corrupt. But my question is why 3)? What do they or more accurately their donors stand to gain ( or lose if MMT is widely understood)? Interesting that you didn't go to UMKC for MMT and what you're saying about Michael Hudson doesn't surprise me. But no doubting that he is an important voice, the research he's putting out there at the moment is mind-blowing.
I had an email exchange with a Latvian podcaster awhile back about Hudson. It turns out that Hudson, through no fault of his own, plays a prominent role in contemporary Latvian anti-semitic conspiracy theories about Jews, globalization, and the genocide of native peoples. From what I can tell, Hudson is critical of certain aspects of globalization, but not in the "it's the Jews behind it all" sort of way. I was twmpted to send him a link to the podcast, but then decided that if I were him and I got a link to a Latvian podcast (in English) I would've deleted that mofo pronto and tightened my security.
That is fascinating and I can totally see that, since his work is more on the historical side of MMT, specifically the origins of money as a social concept. As such, his work naturally touches upon moneylending during medieval times when usury laws were enforced and the role of jews in this. (Interesting read regarding this: The Myth of the Jewish Moneylender by Julie Mell; see https://player.fm/series/money-on-the-left/myth-of-the-medieval-jewish-moneylender-w-julie-mell for a podcast) Well, my answer would go back to the issue of shutting down debate. If we get the issue of money as a scarce thing out of the way, people opposed to progressive policy ideals would have to debate them on the merits or demerits of an idea. And this, I contend, is a debate that people opposed to these ideas would lose. Take M4A. It already is supported by a broad section of the American population, and in some polls, even finds majority support among Republicans. Now what's the number one concern of people opposed? Affordability of course! Sure there'll be some that think that the government cannot do anything right and oppose it based on the idea that 'government agencies are inefficient', but the majority just don't want to pay higher taxes. So, my guess is that with the issue of scarce money out of the way, M4A would see another significant bump in popularity. Of course, M4A is opposed by the health care industry, as it exposes their inefficiency (and, quite frankly, their cruelty). So they say that M4A will lead to the bankruptcy of the nation and lead all of us to be in debt peonage to our new overlords from China. Without it, they would need to show why the American system of scattered private health care providers and private health care insurers is better than the M4A system. I cannot possibly see how they could win this argument. The same thing applies to all kind of other ideas. Free college tuition? Impossible! We need to get the students into hundreds of thousands of dollars of debt to finance our higher education system. Of course this has profound effects of the job market choices said students will make. Will I follow my passion and become a human rights lawyer and be in debt for the majority of my life or become a lawyer for some giant multinational and have it paid off in 2 years? What argument could they make to justify the current system if scarce money is out of the way? The Green New Deal legislation has a jobs guarantee in it and already has widespread support, at least among Democrats. Imagine what an effect a jobs guarantee would have on the low end of the private job market. Clearly this is not in the interest of a lot of companies. If affordability is out of the way, they would need to debate on the much less clear-cut issue of inflation. If data from some of the cities where a $15 minimum wage has been instituted is an indication, it does not seem to be a major issue at all. One could go on and on here - my point is, in my opinion it becomes much more difficult to support conservative economic positions once you accept that affordability is not a problem.
had to post this here - Guardian editorial basically acknowledging the MMT position re Coronavirus response. I have seen MMT in the comments sections of major newspapers (just recently Kelton again in the NYT) but an editorial of a major newspaper, I think that's a first. Hopefully not last https://amp.theguardian.com/comment...-it-can-be-paid-for?__twitter_impression=true
Just so I can understand this - it's a way of combining fiscal and monetary stimulus? So the government creates fresh debt by issuing bonds, but then also acquires those securities via its QE programme? So it now holds the securities it issued? How does this work in practice? Does it make bond offerings on the one hand, but then Treasury is also entering into the market to buy up government bonds via QE? How does this actually help?
That is what the Japan central bank has been doing, they own about 50% [ok, 41%] of all Japan government debt. https://www.reuters.com/article/us-japan-economy-boj-idUSKBN1GV06E But they still go with the process of the government issuing debt to the markets, then the BOJ buys debt from the markets. They are still unwilling to skip that step. https://uk.reuters.com/article/uk-h...rwrite-debt-over-virus-stimulus-idUKKCN21S0JA
It's standard practice for central banks to issue $1 in Treasury bonds for every $1 of fiscal spend. The article is not proposing anything radical or novel they're just describing the status quo.
After the disconnection of money ($$) from gold in 1971 money in that "system" is in the Netherlands called "fiduciair geld" or in English "trusted money", meaning trust goods and services can be bought with it. This MMT only functions with the trust people have in the gouvernment acting responsible. The last few years I've seen increasing numbers of economists claiming there's no problem with printing money. A few days ago I saw a respected economist say so on Dutch television in a discussion about the effects of corona on the economy and what to do against the shrinking economic activities. In the Weimar Republic they did that printing to the hilt. It didnot work. If trust is gone, the value of the money is gone.
It has, but it went into stock prices and real estate prices. Those arenot considered inflation, but they in fact are.