tag:blogger.com,1999:blog-6948982521501107752.post9181030802829157818..comments2023-10-21T09:03:15.270-04:00Comments on Rogue Economist Rants: What hobbles the economy todayRogue Economisthttp://www.blogger.com/profile/03439817966760459091noreply@blogger.comBlogger20125tag:blogger.com,1999:blog-6948982521501107752.post-4368999340987279732011-08-24T21:30:43.408-04:002011-08-24T21:30:43.408-04:00Yeah Rogue, I can't imagine what the Fed was t...Yeah Rogue, I can't imagine what the Fed was thinking!<br /><br />I wish I had the stamina and skill to read a lot of those old Monthly Review reports and get a better feel for the targets they set.The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-1028175094646888052011-08-24T19:47:50.180-04:002011-08-24T19:47:50.180-04:00Arthurian, I read your piece. I was most surprised...Arthurian, I read your piece. I was most surprised that in 1970 the fed was targeting bank lending growth level. No consideration whatsoever about what the market needs or its credit worth. We can get really surprised at the kinds of control the fed will try to get away with without thinking of the consequences.Rogue Economisthttps://www.blogger.com/profile/03439817966760459091noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-9623677177480316992011-08-23T17:53:57.245-04:002011-08-23T17:53:57.245-04:00yes.
I'd love to hear your proposals too!
t...yes. <br /><br />I'd love to hear your proposals too!<br /><br />the blogs over at Warren Mosler's and Mike Norman Economics would be the places to check out. Tons of great discussions of all types of ideas and perspectives economic, political, etc. go on there. Check it out if you ever have the time. I'm sure people would gladly consider and respond to your ideas and questions for and against MMT and anything else economic. <br /><br />It's always best for a man to hear another's pov.Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-27501265766149703872011-08-23T17:24:36.313-04:002011-08-23T17:24:36.313-04:00"It only goes to show even more that MMT pres..."It only goes to show even more that MMT prescriptions are more than overdue..."<br /><br />Well I don't know about that, Mario. But I do not hesitate to adopt ideas that make sense to me, whether from MMT or anywhere. If MMT wants to adopt some Arthurian ideas, well, I'd see that as an improvement of MMT.The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-65960252065021635652011-08-23T16:39:00.690-04:002011-08-23T16:39:00.690-04:00interesting points for sure.
It only goes to sho...interesting points for sure. <br /><br />It only goes to show even more that MMT prescriptions are more than overdue in the USA. That is a full FICA tax cut and proper fiscal expenditure. B/c otherwise without that private debt accumulation AND no further federal deficits, then the standard of living in our nation is going to drop (as will GDP, employment, etc., etc.). <br /><br />great stuff Art. Thanks!Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-58097077980574103142011-08-23T15:06:17.923-04:002011-08-23T15:06:17.923-04:00"people's indebtedness is a policy error ..."people's indebtedness is a policy error of 65 years?"<br /><br />Excellent question, Mario.<br /><br />Yes.<br /><br />http://newarthurianeconomics.blogspot.com/2010/09/its-in-percentages.html<br /><br />ArtThe Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-67068549437927518542011-08-23T10:57:34.147-04:002011-08-23T10:57:34.147-04:00people's indebtedness is a policy error of 65 ...people's indebtedness is a policy error of 65 years? <br /><br />"By definition" I simply mean that any action that brings an economy closer to closing its own output gap and provides more private sector wealth is "inflationary." I don't think it's accurate to say it's a bookkeeping entry when individuals choose to put their own money wherever they want. <br /><br />The QE 1 purchases seem to me to be more akin to a bookkeeping entry since they bought them at "mark to book" rates or what have you. <br /><br />I agree with you though overall.Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-54536846182730725832011-08-23T02:50:07.147-04:002011-08-23T02:50:07.147-04:00A lot of words there, Mario.
It is not inflation ...A lot of words there, Mario.<br /><br />It is not inflation by any definition, if the money ceases to exist before it ever goes into circulation. It is a bookkeeping adjustment. It is the correction of a policy error 65 years in the making.The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-24202845190918858162011-08-22T21:09:56.826-04:002011-08-22T21:09:56.826-04:00great post Rogue as usual.
It's also importa...great post Rogue as usual. <br /><br />It's also important for people to distinguish the difference between a more effective/efficient government and a nominally smaller government. The two are not the same. In fact a smaller government could very possibly be LESS efficient just as much as a larger government could be. It's about finding the "sweet spot." The Tea Party cannot comprehend such a concept. And we are closer to that sweet spot today than most realize. The biggest areas our government is over-extended is in the financial sector, the energy sector, and the campaign contributions department. Get those three alone in proper order and all the rest can really be tweaked on a more minimal basis. Those 3 are the big rocks to move. <br /><br />@Arthur<br /><br />"Again, I do not propose printing money to create inflation, as others do. I propose printing money to prevent the deflation that arises from the ordinary method of debt repayment. I propose doing this until debt is sufficiently reduced that the economy recovers."<br /><br />yes exactly. Totally agree. Although printing money in and of itself does by definition create inflation. It's just that we need that now. <br /><br />Your completely correct that if we were to slash FICA taxes for example (aka new money in the economy) then we'd likely see that money at least in part going to pay off debts, so theoretically consumption would not be altered. Except that is just not true. ;) <br /><br />As more debts are properly paid off, trust comes back as does confidence and as does credit scores and economic metrics. Everyone in the world objectively starts to see a real recovery take place...that is HUGE and has a gigantic multiplier beyond measurement probably. Plus not all of that money would go to debts alone. Spending would greatly increase to be sure. <br /><br />A balance sheet recession just takes time to process itself out for this very reason. That's why we better get started asap! There's only one way out of a hole and that's up. So getting out of our household debts is (in a sense) directly contributing to aggregate demand in a very healthy way. People actually being responsible with their finances is a good thing to be sure. And just imagine how the economy would be once the de-leveraging was completed and the FICA cuts and jobs program was still in place? Things would just move like gangbusters and then it's a matter of scaling back at some point to cool things down (however considering how indebted America is, how depressed housing is, and how wide our output gap is...I could see the cooling down phase not coming for years down the road). However it is something we all haven't exactly talked too much about...raising taxes is rather unlikely politically, so we would need to cut spending and that likely would work best b/c it's easier to do politically and it has higher multiples than tax cuts so that really works well at those times. ;) <br /><br />The frustratingly funny thing about our current affairs is that our government is actually being VERY <i>IRRESPONSIBLE</i> when they all talk about the need for a "responsible" and balanced budget where the government "spends within its means." Wolves in sheep clothing to the nines!!!!Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-38868055490462877192011-08-22T00:19:54.068-04:002011-08-22T00:19:54.068-04:00Arthurian, ok, I see that your scenario causes the...Arthurian, ok, I see that your scenario causes the newly-printed money to be destroyed. It proves that there should be an element of debt writedown in solving the current mess.<br /><br />But there should also be a rule that says people forgiven their debt should not turn around, and use their now increased net equity to again speculate on more assets. With their debt erased, they can now sell their assets and bid up on new assets, especially if NGDP proponents are listened to, and money is thrown to people to BORROW again. (If people don't borrow, how does NGDP grow constantly?) If this happens, we now have inflation, and we're right back to people with heavy debt.<br /><br />TC, agreed on your points.Rogue Economisthttps://www.blogger.com/profile/03439817966760459091noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-56874221066527434012011-08-21T12:03:34.719-04:002011-08-21T12:03:34.719-04:00Mosler's plan contains a specific causal, tran...Mosler's plan contains a specific causal, transmission mechanism that increases effective demand directly. <br /><br />The proponents of the NGDP proposal don't, and when queried about it, they have not come up with a convincing answer.<br /><br />Yep. <br />1. Monetary policy sucks even if it works at all. <br />2. Fiscal policy is way more direct even assuming the best case scenario for monetary policy. <br /><br />Tom, it's weird that you have to be the one saying this. <br /><br />Rogue, <br /><br />The ELR, the TC rule, and Orszag's payroll tax are two ways to address effective demand. <br /><br />The ELR sidesteps inflation by creating a buffer stock of employed people. The TC rule uses inflation and unemployment as inputs along with population growth. <br /><br /><br />To me MMT is more about the level of deficit spending rather than the absolute size of the economy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-66088185236155345712011-08-21T10:42:54.729-04:002011-08-21T10:42:54.729-04:00Hi, Rogue. Let me discuss just one of your three p...Hi, Rogue. Let me discuss just one of your three points: inflation. You write:<br /><br /><b>"Printing money to extinguish debt seems like a good plan at first, but it doesn't take into consideration that a lot of the debt was incurred to finance non-productive endeavors, such as asset speculation. In other words, this plan would be like printing money without increasing productive capacity. This would likely lead to inflation."</b><br /><br />And let me focus on just this part of that remark:<br /><br /><b>"In other words, this plan would be like printing money without increasing productive capacity. This would likely lead to inflation."</b><br /><br />Printing money causes inflation. I get it. However, that principle does not apply to my plan. Bear with me a moment.<br /><br />The threat that arises from deleverage is deflation, because the quantity of money falls as debt is repaid. I want to prevent this fall in the quantity of money that comes from deleverage. I do not want to print money and put it into circulation. I want to print money and DESTROY IT by using it to pay off debt.<br /><br />There can be no threat of inflation from this newly-created money. <i>The new money never goes into circulation.</i><br /><br />It is true that repayment of debt does reduce the quantity of credit-in-use, and it increases the quantity of credit available for lending. If available credit is again put to use (in the form of new loans) this will increase the risk of inflation. But this is a different matter entirely, and I would point out that Fed policy of the last three years has been an *attempt* to have more credit put to use.<br /><br />Again, I do not propose printing money to create inflation, as others do. I propose printing money to prevent the deflation that arises from the ordinary method of debt repayment. I propose doing this until debt is sufficiently reduced that the economy recovers.The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-40879265567996263602011-08-19T16:27:18.999-04:002011-08-19T16:27:18.999-04:00Thanks, Rogue! Now I have something to think about...Thanks, Rogue! Now I have something to think about.<br />1. good debt vs bad debt.<br />2. money relative to output (more or less)<br />3. moral hazard.<br />Thanks again.The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-29838689296143534802011-08-19T14:58:41.463-04:002011-08-19T14:58:41.463-04:00Arthurian, it's not so much that I believe in ...Arthurian, it's not so much that I believe in a valueless dollar, but if nobody is spending, and nobody is earning, all the money in the world will not do anything for anyone. <br /><br />Printing money to extinguish debt seems like a good plan at first, but it doesn't take into consideration that a lot of the debt was incurred to finance non-productive endeavors, such as asset speculation. <br /><br />In other words, this plan would be like printing money without increasing productive capacity. This would likely lead to inflation. It's so much better to print money in exchange for work which leads to productive capacity.<br /><br />Plus, paying people for their debts is unfair. What would that tell people going forward? That it pays to get into debt? And what if people in the future get into debt in order to get ahead, i.e, bid up asset prices while trying to corner everything in the economy. In the end, you have people with assets and no debt, and people who never went into debt and don't have any assets.<br /><br />This unfairness is what Hans is talking about in other comment threads.Rogue Economisthttps://www.blogger.com/profile/03439817966760459091noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-22220659982552794452011-08-19T11:29:01.627-04:002011-08-19T11:29:01.627-04:00I believe that Warren and the other MMT economists...I believe that Warren and the other MMT economists are substantially in agreement with you about debt as the underlying cause, Arthurian. What Mosler's plan does for the US, and his immediate proposals for Europe also, is treat the hemorrhaging. It's not meant as a fix for the underlying causes. See his proposals for financial reform for an approach to that. <br /><br />Bill Black and Randy Wray claim that control fraud was and continues to be the actual cause, and the solution for that is enforcement of existing law and regulation. This has been difficult to impossible to carry out so far, due to the political clout of the financial sector, aka corruption and state capture. Bill Black has been documenting this for years, now, well before the beginning of crisis; yet, no meaningful action has been taken to date.<br /><br />There is no doubt that until the overhang of private debt clears, the US will remains in the doldrums — if it avoids a debt-deflationary depression, the odds of which are increasing according to MMT economists like Wray.<br /><br />Similar situation in Europe and UK, and Canada and Australia also have high levels of private debt due to RE. Same with China. So there is increasing risk of contagion resulting in global depression if there is a "Credit Anstalt" moment.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-31408498915677716232011-08-19T07:13:22.947-04:002011-08-19T07:13:22.947-04:00Rogue, I agree with much of what you write, but no...Rogue, I agree with much of what you write, but not this: <b>"There should be a default spender of last resort, otherwise, when we all do this saving simultaneously, we all stop earning income from one another."</b><br /><br />What you describe sounds to me like a rapid exponential curve to a valueless dollar. How about eliminating some of the tax advantages for saving, if you think excessive saving is creating problems? Or a wealth tax?<br /><br /><b>"Mosler's plan would really get the newly-created money directly to the users to spend."</b><br /><br />But Mosler's plan does nothing to reduce excessive debt, which is the true root of the problem.<br /><br />If the Federal Reserve printed money and used it specifically to pay off private debt created by fractional-reserve banking, the debt and the new money would both cease to exist. And people would recover their normal incomes. *This* is "a specific causal, transmission mechanism that increases effective demand directly."<br /><br />The problem is debt, not taxes.The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-19715969844696009552011-08-18T20:37:57.458-04:002011-08-18T20:37:57.458-04:00Mosler's plan contains a specific causal, tran...Mosler's plan contains a specific causal, transmission mechanism that increases effective demand directly. <br /><br />The proponents of the NGDP proposal don't, and when queried about it, they have not come up with a convincing answer.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-10117839088023014282011-08-18T20:02:52.359-04:002011-08-18T20:02:52.359-04:00Mosler's plan would really get the newly-creat...Mosler's plan would really get the newly-created money directly to the users to spend. Makes you wonder why there are still other economists who insist monetary easing is what will do the trick. <br /><br />It's not convincing, both conceptually and fact-wise, their conviction that increasing the nominal value of treasuries translates to more spending. Already tried that, and it failed. <br /><br />I wonder why they don't just join their voices in pushing for his plan. It's as if the survival of their pet theory is more important than solving the problem.Rogue Economisthttps://www.blogger.com/profile/03439817966760459091noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-83985848427704234332011-08-18T13:28:17.029-04:002011-08-18T13:28:17.029-04:00Warren Mosler recommends an immediate suspension o...Warren Mosler recommends an immediate suspension of FICA, federally funded per capita block grants to states as long as needed, and an $8 hr/benefits federally funded ELR for anyone willing and able to work.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-89115573610234140882011-08-18T03:27:35.558-04:002011-08-18T03:27:35.558-04:00Right on, Rogue.Right on, Rogue.Tarasnoreply@blogger.com