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PostPosted: Sun May 20, 2018 2:36 pm 
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Wow! I've said this for some time - the right has no new ideas, the newest ideas they have come from Ayn Rand.

But here's something truly new. Didn't exactly come from the left, it came from economist Stephanie Kelton, and it has been embraced by many on the left, including Bernie Sanders.

The interesting thing is that the strongest proponents are not from the left, but from titans on Wall Street. But it is a truly new idea, worthy of discussion. I will have to look into it more before I take a stand. Trouble is, economics isn't a science, it's completely made up. Money is a fiction. But Kelton certainly makes a good case.

Since Bernie Sanders is using her theories, glen and Joe and aragorn will certainly be against it. Here she is:

As a result, politically relevant economists fetishize orthodoxy. Nobody with political experience really welcomes a new idea that explains why previous economic policies were wrong. And if Kelton’s MMT doctrine is right, then the way nearly every politician talks about government debt, deficits and even money itself is mostly wrong.

“The basic idea is that the government can’t run out of money,” Kelton said. “It creates money just by spending.”

When people talk about government profligacy bankrupting their grandchildren or triggering a cataclysmic debt crisis, Kelton argues, they’re conflating the experience of a typical family, which has to get money from somewhere outside the household to meet expenses, with that of a sovereign government, which creates money as part of its basic operation.

In one of her most important academic papers, published in 2000, Kelton maintains that government doesn’t actually finance its activity by levying taxes or issuing bonds. Instead, it creates money by spending it into existence. If a government wants to build a road, it calls some contractors and puts money in their bank accounts to pay for it. Where does this money come from? The same place all money comes from: thin air.

This means, among other things, that the government can always pay for whatever it wants ― housing, health care, tanks, whatever. But it doesn’t mean governments can just spend infinite amounts without any consequences, she emphasized. Eventually inflation becomes an issue when the amount of money in circulation gets ahead of the productive capacity of the workforce.

But even inflation doesn’t impose a hard limit on policy options. The Federal Reserve can raise interest rates to deal with it, Congress can raise taxes to pull money out of circulation or even impose price controls. All those have their drawbacks, but depending on circumstances, any of them might be preferable to reducing government spending. It all depends on what a society needs. Those needs, Kelton thinks, should be the primary focus of study ― not the immediate impact on the federal budget deficit, a metric that dominates policy discourse in Washington.


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PostPosted: Sun May 20, 2018 2:44 pm 
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I'll have to think about that one. In the past, governments have stimulated the economy by increasing the money supply, printing more if necessary. Budgets, though, are pretty well thrashed out by the legislative process.

It comes down to what the national debt really is. We are told that it is a burden that future generations will have to bear when all the paper or whatever comes due. Thing is, they've been saying that since WWII.

Agreed that big deficits are inflationary, but so far they have not created all the havoc that fiscal hawks say they will. I'm not convinced that trumpeting the deficit every year at budget time is economics as much as it's a Republican political tactic. The primary reason I'm not convinced is that every time the GOP gets control of the process, they raise the deficit usually two or threefold.

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PostPosted: Sun May 20, 2018 3:45 pm 
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Seems to me to be some some salient critiques of this theory here:
http://www.businessinsider.com/weekende ... mmt-2011-1

Dunno. Have to ask my brother the economist about some of these details.

However, instinctively, this theory seems to be yet another version of the "deficits and debts don't matter" theory.

I tend to go with the Keynesians, like Krugman, whose position is (gov') debt doesn't matter as much as people think in the short term, especially during recessions, but it does matter in the long term, and cannot be accumulated indefinitely, as if the government had an infinite repository ATM..

Yes, the government can print an infinite amount of money, it owns and operates the printing press. However ... not without inflation. Something MMT doesn't seem to properly address.

The MMT folks claim government doesn't even need to tax anybody, just keep spending without bringing in revenue. Like the guy up above, says, that seems both crazy and counterintuitive. :roll: Essentially, it makes governments fifth-dimensional elephants unlike anything else in existence ... and that doesn't seem right. Governments cannot be exempt from being based on the productivity of the actual physical economy of goods and services.

Krugman appears to be a critic of MMT, and I trust his judgement. He does have a Nobel Prize. :D

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PostPosted: Sun May 20, 2018 3:54 pm 
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I think some are missing an important point, Prof. Money is a fiction. You can't say this enough! It is NOT a science. There ARE NO LAWS GOVERNING ECONOMICS.

Though I respect Krugman, a Nobel in Economics is the same as a Nobel in World of Warcraft. It's an award in a fantasy game.

As long as the banking system and the population have confidence in the monetary system, it works great. It only runs into trouble when confidence is lost. Then come the selloffs and the crashes.


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PostPosted: Sun May 20, 2018 4:01 pm 
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Money is a fiction of one kind, but the finitude of available resources, labor power, and this planet's environment/ecology/biosphere, are not. Economists are absolutely right about one thing: there are limits to everything we want. (I think Ike points this out from time to time). Aka "there is no free lunch".

Piece of evidence one: you might want to examine government treasuries and societal economies that have collapsed. This has happened through history. Clearly, at some point, governments.do.run.out.of.money.

Margaret Thatcher also said society was a fiction. I mean, possibly in one sense (it's not real in the sense a physical table or chair is), but I think in the Philip K. Dick sense, this proposition inevitably fails. You can act like other people on this planet are not affected by your decisions and choices (I mean outside of your own kin, the one thing even hardcore individualists acknowledge), or that you truly pulled yourself up by your own mystical bootstraps and are not in any way dependent on other people around you for your survival or prosperity ... I just think reality will collide with you inevitably. And prove you wrong. :D

Finally, if economics has nothing to do with reality and has no empirical basis, therefore there is no reason to suggest MMT has any more validity than any other economic theory, now is there?

To be clear, my brother and I have this argument plenty. Economists seem to think they are doing physics because they have lots of equations. He doesn't like my field because we don't use very many at all. A lot of qualitative data. I think economists ARE overconfident over how "scientific" their discipline is, and I really think they should go suck balls when people like Mr. Freakonomics start claiming they have the answers for all other problems in the social sciences by applying economic theories. :roll: The model of homo economicus, the self-interested rationalist uber alles, is I think, disproved by behavioral data, bird often mentions it. :D And when folks at the Federal Reserve notice this, they start referencing "animal spirits" and other voodoo rituals.

That said, even I wouldn't say economics is just a fantasy game, or that the math doesn't prove anything. But ... Marx was an economist, so is Wolff (often cited on this board), so is Kelton ... if all economics is garbage, then it follows that so are the economists you agree with. :D You can't have it both ways.

If we're willing to agree that some economic theories are right and some are wrong, you have to have a method of deciding which are which. I don't accept so-called supply side/"trickle down"/"voodoo" economics for the same reason I reject the idea that climate change has no anthropogenic component: the evidence is not supportive of the model.

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PostPosted: Sun May 20, 2018 4:17 pm 
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Money is a fiction of one kind, but the finitude of available resources, labor power, and this planet's environment/ecology/biosphere, are not. Economists are absolutely right about one thing: there are limits to everything we want. (I think Ike points this out from time to time). Aka "there is no free lunch".

Margaret Thatcher also said society was a fiction. I mean, possibly in one sense (it's not real in the sense a physical table or chair is), but I think in the Philip K. Dick sense, this proposition inevitably fails. You can act like other people on this planet are not affected by your decisions and choices (I mean outside of your own kin, the one thing even hardcore individualists acknowledge), or that you truly pulled yourself up by your own mystical bootstraps and are not in any way dependent on other people around you for your survival or prosperity ... I just think reality will collide with you inevitably. And prove you wrong. :D

Once again, it simply comes down to confidence in the system - that, when you get to the bottom, it's a confidence game.

You have to believe that the pieces of paper you are handed actually have worth. If you look at the past, when the dollar was tied to gold, supposedly you could go into a bank and trade the notes for gold. There was a time when banks put out their own notes. But, of course, they put more notes out than they had in gold, so when people lost confidence and ran to the banks and demanded THEIR gold, the banks folded, leaving those who hadn't gotten their first with worthless paper.

Of course, the gold standard was ultimately a failure, because there isn't enough gold to be tender for an expanding economy, where, for instance, craftsmen make things of real wealth - cars, for instance.

So, we did away with the gold standard, and paper is just paper now, and the system works fairly well as long as people have confidence in that paper. And it works right now because the dollar is the world standard.

Here's what Kelton has going for her. Right now, we give our debt to the rich. Big tax cuts, government money going to corporations. The working guy and middle class pay the taxes, and get nothing in return.

If we instead invested in jobs, health care and education, then the government and the people would get a REAL return.

I'd say such a system would engender a LOT of confidence among the populace.


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PostPosted: Sun May 20, 2018 4:22 pm 
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Yah, but essentially you are making an argument about fiscal policy, rather than monetary policy. MMT is a monetary policy theory.

I agree with you on your fiscal policy, i.e. what the government should invest in.

Of course, also on the principle of progressive taxation for revenue generation.

The thing is, neo-Keynesians like Krugman pretty much agree with you. Just not on the idea that governments are exempt, forever, from the consequences of debt.

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PostPosted: Sun May 20, 2018 4:41 pm 
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Yah, but essentially you are making an argument about fiscal policy, rather than monetary policy. MMT is a monetary policy theory.

I agree with you on your fiscal policy, i.e. what the government should invest in.

Of course, also on the principle of progressive taxation for revenue generation.

The thing is, neo-Keynesians like Krugman pretty much agree with you. Just not on the idea that governments are exempt, forever, from the consequences of debt.

To be fair, Prof, she does NOT make the assertion that governments are exempt, forever, from the consequences of debt. That is a misstatement of her position.


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PostPosted: Sun May 20, 2018 8:57 pm 
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Wow! I've said this for some time - the right has no new ideas, the newest ideas they have come from Ayn Rand.

But here's something truly new. Didn't exactly come from the left, it came from economist Stephanie Kelton, and it has been embraced by many on the left, including Bernie Sanders.

The interesting thing is that the strongest proponents are not from the left, but from titans on Wall Street. But it is a truly new idea, worthy of discussion. I will have to look into it more before I take a stand. Trouble is, economics isn't a science, it's completely made up. Money is a fiction. But Kelton certainly makes a good case.

Since Bernie Sanders is using her theories, glen and Joe and aragorn will certainly be against it. Here she is:

As a result, politically relevant economists fetishize orthodoxy. Nobody with political experience really welcomes a new idea that explains why previous economic policies were wrong. And if Kelton’s MMT doctrine is right, then the way nearly every politician talks about government debt, deficits and even money itself is mostly wrong.

“The basic idea is that the government can’t run out of money,” Kelton said. “It creates money just by spending.”

When people talk about government profligacy bankrupting their grandchildren or triggering a cataclysmic debt crisis, Kelton argues, they’re conflating the experience of a typical family, which has to get money from somewhere outside the household to meet expenses, with that of a sovereign government, which creates money as part of its basic operation.

In one of her most important academic papers, published in 2000, Kelton maintains that government doesn’t actually finance its activity by levying taxes or issuing bonds. Instead, it creates money by spending it into existence. If a government wants to build a road, it calls some contractors and puts money in their bank accounts to pay for it. Where does this money come from? The same place all money comes from: thin air.

This means, among other things, that the government can always pay for whatever it wants ― housing, health care, tanks, whatever. But it doesn’t mean governments can just spend infinite amounts without any consequences, she emphasized. Eventually inflation becomes an issue when the amount of money in circulation gets ahead of the productive capacity of the workforce.

But even inflation doesn’t impose a hard limit on policy options. The Federal Reserve can raise interest rates to deal with it, Congress can raise taxes to pull money out of circulation or even impose price controls. All those have their drawbacks, but depending on circumstances, any of them might be preferable to reducing government spending. It all depends on what a society needs. Those needs, Kelton thinks, should be the primary focus of study ― not the immediate impact on the federal budget deficit, a metric that dominates policy discourse in Washington.


Go Union this theory may seem new to you but it's not new to economists, nor is it new to me. Before I was born my father went to CU in Boulder Colorado where he earned a degree in business. His favorite economics Professor had a theory about money creation which just about mirrors this theory Kelton is is expressing.

Anyway I grew up hearing about this theory. There are limits and a balance which must be maintained between goods and services, and thw supply of money.

X is doing a good job dealing with that. :)

This economics professors name was George W. Zinke. You may have heard of him because he wrote about unions as well. He's the author of History of labor-management relations in the United States, 1948


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PostPosted: Sun May 20, 2018 9:13 pm 
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MMT isn't "new"; it appears to be based on Chartalism, an economic theory first proposed by George Knapp in 1905.
https://en.wikipedia.org/wiki/Chartalism

Going back to the OP--
“The basic idea is that the government can’t run out of money,” Kelton said.

I'm just repeating what GoU posted from the article above. This statement appears to be false.

The Spanish government was forced to declare bankruptcy in 1607.
https://www.historytoday.com/richard-ca ... bankruptcy

They ran out of money.

Now, maybe Kelton is arguing this is only true of governments using fiat currency instead of metallic standards. Spain's treasury collapsed, in part, due to an influx of colonial gold.

Even still ... this proposition seems wrong.

Every thing else on the planet is finite. Government issued currency cannot be exempt from this rule. :D

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PostPosted: Sun May 20, 2018 9:17 pm 
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Go Union this theory may seem new to you but it's not new to economists, nor is it new to me. Before I was born my father went to CU in Boulder Colorado where he earned a degree in business. His favorite economics Professor had a theory about money creation which just about mirrors this theory Kelton is is expressing.

Anyway I grew up hearing about this theory. There are limits and a balance which must be maintained between goods and services, and thw supply of money.

X is doing a good job dealing with that. :)

This economics professors name was George W. Zinke. You may have heard of him because he wrote about unions as well. He's the author of History of labor-management relations in the United States, 1948

No, I hadn't heard it before, and it's obviously "new" in that it has recent converts and has gotten into the mainstream.

As for all these schools of economics, I'm sure there's a lot of them, but to me, it's like talking about the differences between the Draenei and Tauren in World of Warcraft. It's all made up.


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PostPosted: Sun May 20, 2018 9:19 pm 
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MMT isn't "new"; it appears to be based on Chartalism, an economic theory first proposed by George Knapp in 1905.
https://en.wikipedia.org/wiki/Chartalism

Going back to the OP--
“The basic idea is that the government can’t run out of money,” Kelton said.

I'm just repeating what GoU posted from the article above. This statement appears to be false.

The Spanish government was forced to declare bankruptcy in 1607.
https://www.historytoday.com/richard-ca ... bankruptcy

They ran out of money.

Now, maybe Kelton is arguing this is only true of governments using fiat currency instead of metallic standards. Spain's treasury collapsed, in part, due to an influx of colonial gold.

Even still ... this proposition seems wrong.

Every thing else on the planet is finite. Government issued currency cannot be exempt from this rule. :D

No, you hit on it. Their system was based upon the amount of gold available.

Fait money is made-up money. Since, today you don't even have to have a printing press to print money, the government obviously can't run out of money that's a fiction to start with.


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PostPosted: Sun May 20, 2018 9:38 pm 
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As for all these schools of economics, I'm sure there's a lot of them, but to me, it's like talking about the differences between the Draenei and Tauren in World of Warcraft. It's all made up.


In the sense you are using the word, governments, societies, nation states, and ethnic groups are "made up" also (i.e. social constructs).

I mean, you say elsewhere you care about the U.S. of A. I don't fault you for doing so, so do I. But as a nation state, it is also something Benedict Anderson called An Imagined Community. In some ways, some of it exists only in both your and my imagination. Kinda like Tauren, or Draenei, or my favorite ... Gnomes.

A labor union is also "made up" in the way you are describing. Does it have any objective physical reality?

One other thing I'll point out -- as you may know, WoW has an entirely virtual economy. Or it did, until they introduced tokens that could be purchased for real money. Before those tokens existed, there was a massive gold farming issue in WoW, where virtual game gold was sold for real money. Probably still is, the tokens were an effort to beat the Chinese gold farmers at their own game, but it hasn't completely.

Steve Bannon rose to power by running a company that tried to profit from Chinese WoW gold farming. So, there you go, virtual goods, real consequences. In a way, you could almost say WoW gold farming gave us President Trump. It's only a slight stretch. :D

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PostPosted: Sun May 20, 2018 9:55 pm 
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In the sense you are using the word, governments, societies, nation states, and ethnic groups are "made up" also (i.e. social constructs).

I mean, you say elsewhere you care about the U.S. of A. I don't fault you for doing so, so do I. But as a nation state, it is also something Benedict Anderson called An Imagined Community. In some ways, some of it exists only in both your and my imagination. Kinda like Tauren, or Draenei, or my favorite ... Gnomes.

A labor union is also "made up" in the way you are describing. Does it have any objective physical reality?

One other thing I'll point out -- as you may know, WoW has an entirely virtual economy. Or it did, until they introduced tokens that could be purchased for real money. Before those tokens existed, there was a massive gold farming issue in WoW, where virtual game gold was sold for real money. Probably still is, the tokens were an effort to beat the Chinese gold farmers at their own game, but it hasn't completely.

Steve Bannon rose to power by running a company that tried to profit from Chinese WoW gold farming. So, there you go, virtual goods, real consequences. In a way, you could almost say WoW gold farming gave us President Trump. It's only a slight stretch. :D

Correct. All these things are constructs of the human mind. A corporation is a construction of a government. Without a government to give the corporation structure, it doesn't exist.

But let me make one last point before I turn in - I posted the thread for discussion and ideas - not because I am endorsing the theory. I'm not. One thing I thought about was when Clinton raised taxes in the nineties, which ultimately meant for once, there was no yearly deficit. And that helped give people more confidence in the economy, and lowered interest rates, which caused the economic boom of the nineties. And, GW Bush's tax cuts were a disaster for our economy.

So, just because money is a fiction, doesn't mean there aren't real-world consequences. But we MUST remember that it's confidence in our money that's at the heart of all this - we have to keep clapping to keep Tinker Bell alive. It's that simple. FDR ran big deficits, which saved our nation and kept people from starvation, food riots and probably revolution. But it didn't fix the economy. The Depression lasted until WW2 and even more deficit spending put the economy into overdrive.

But if we're going to deficit spend, then we need to do it for the working class, not the oligarchs.


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PostPosted: Sun May 20, 2018 9:57 pm 
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www.youtube.com Video from : www.youtube.com

Interview begins 12:15 in

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PostPosted: Mon May 21, 2018 1:30 pm 
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The gold standard didn't work. A global industrial economy functions poorly with the amount of some shiny stuff in government vaults determining the money supply. The US was always going on and off bimetallism, and other economic fun things, to stay solvent. William Jennings Bryan, and all that. The biggest problem was that it didn't provide for sudden large mobilizations such in wars. This was always a problem.

Now we've gone to the other extreme, where the currency is legal tender because the government says it is. While it may be theoretically possible for governments simply to make more of it forever, that's kind of the nuclear solution to monetary policy. At some point, it's too inflationary to work right.

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