Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
A word may mean one thing to scientists and something completely different to lay people. Consider “theory.” In everyday usage, “theory” means speculation, as in, “That’s just a theory.” But a scientific “theory” is a whole body of facts that leads up to a scientifically acceptable belief. For an idea to be labeled a theory, it must have been researched and tested by many scientists, and based on undeniable facts.
What the layman thinks of as a “theory,” actually is a hypothesis, which is a suggested solution based on limited facts: An educated guess. So for instance when the scientifically ignorant deride Evolution as “just a theory,” they misuse the word, perhaps intentionally.
In economics, “debt” and “deficit” have different meanings and different implications, depending on whether the subject is a Monetarily Sovereign government or a monetarily non-sovereign entity. Among my quibbles with MMT (Modern Monetary Theory) is its name. It’s not a theory. It’s a statement of facts about how our Monetarily Sovereign government works, the same facts Monetary Sovereignty uses — the same facts politicians, media and economists deny or ignore. A few of these facts are:
1. The federal government creates dollars by paying its bills
2. Without federal deficits there would be no dollars; surpluses reduce the money supply
3. Taxes destroy dollars
4. Neither taxes nor borrowing help the federal government pay for its spending.
5. Today’s and future taxpayers will not pay for today’s federal spending.
6. A Monetarily Sovereign nation can pay any bill of any size at any time, and cannot be forced into bankruptcy.
7. No agency of a Monetarily Sovereign can be forced into bankruptcy without the consent of the government
8. Bank lending creates bank reserves that form the basis for further bank lending.
9. The federal debt is the total of outstanding T-securities and not functionally the total of federal deficits.
10. State, county and city governments finances are unlike federal finances.
11. Greece’s and Italy’s finances are unlike U.S. finances in that they can be forced into bankruptcy.
12. The debt/GDP ratio does not measure the federal government’s ability to service its debts.
None of these are theories or even hypotheses. They are undeniable statements of fact, which somehow have been unable to penetrate the mainstream. In this vein, I want to call your attention to a marvelous article in the October 29th edition of NewScientist magazine, titled, “Don’t tell it so straight,” by Peter Alhous.
Today’s post cannot begin to do justice to this excellent article, so I’ll merely quote a few lines, and urge you to buy a copy or read the article at http://www.newscientist.com/article/mg21228361.600-science-in-america-selling-the-truth.html.
. . . a classic example of the “deficit model” of science communication . . . assumes that mistrust of unwelcome scientific findings stems from a lack of knowledge. Ergo, if you provide more facts, scepticism should melt away. This approach appeals to people trained to treat evidence as the ultimate arbiter of truth. The problem is that in many cases, it just doesn’t work.
True. It has not worked for MMT or for Monetary Sovereignty
People aren’t empty vessels waiting to receive information. Instead, we all filter and interpret knowledge through our cultural perspectives, and these perspectives are often more powerful than the facts.
One of the most powerful cultural perspectives is personal experience, which is misleading when applied to federal financing. Another cultural perspective comes from “expert” opinion.
Dan Kahan of Yale University . . .(explained that) we have a strong interest in mirroring the views of our own cultural group. . . In one experiment, . . when presented with balanced arguments for and against giving the HPV vaccine to schoolgirls, 70 per cent of (liberals), and 56 per cent of conservatives, thought it was safe to do so.
Kahan then attributed the arguments to fictional experts described so as to make them appear (appropriately) either liberal or conservative. (This) drove the two camps a little further apart. But, crucially, swapping the messengers around had a dramatic effect: 58 per cent of liberals and 61 per cent of conservatives rated the vaccine as safe.
These findings suggest that one way to change people’s minds is to find someone they identify with to argue the case. Climate scientists have almost certainly been badly served by allowing former Democratic vice-president Al Gore to become the dominant voice on the issue. His advocacy will have convinced liberals, but is bound to have contributed to the rejection of mainstream climate science by many conservatives.
MMT and MS need someone of high stature to present the facts, which alone cannot penetrate. And this may be particularly true with someone from “the other side.” President Nixon was able to open trade with China, because he was known as a hard liner. A “soft” Democrat probably couldn’t have done it.
How a message is framed in relation to the cultural biases of the intended recipients is crucial to its persuasiveness. Opponents of evolution have learned this lesson well. After failing to get biblical creationism taught in science classes, they came back with the “scientific” concept of intelligent design, and two key talking points: “evolution is just a theory” and “teach the controversy”.
Not only were these frames attractive to the religious right, they were also difficult for scientists to counter without seeming to endorse censorship.
For MMT and MS the framing might be love of country and/or love of our children. The nation and our children would have a brighter future if our leaders understood these factual descriptions of economics.
Two different ways of presenting the same information about temperature records (were tested on ) people who identified themselves as “strong Republicans” sceptical about human-caused climate change. One was in the form of a line graph, the other plain text.
The text had little effect, but the graph made the strong Republicans more likely to acknowledge that global warming is both real and a consequence of human activities.
Taken together, studies of communication provide a recipe to allow science to better inform US political debate: find frames that work with broad sections of the population and stick closely to those narratives; seek allies from across the political spectrum who can reach out to diverse audiences; and remember that a graph can be worth a thousand words
MMT and MS should find frames (patriotism and/or love of children??), allies (especially someone who heretofore has been known to be strongly anti-debt) and simple graphs to illustrate facts.
I welcome your suggestions.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings