Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
Mitchell’s laws:
•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money.
•The more federal budgets are cut and taxes increased, the weaker an economy becomes..
•Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
•The single most important problem in economics is the Gap between rich and poor.
•Austerity is the government’s method for widening the Gap between rich and poor.
•Until the 99% understand the need for federal deficits, the upper 1% will rule.
•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..
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Bernie Sanders currently is my favorite Presidential candidate. He’s the most liberal of the bunch, which means he cares more about the lower 99% income/wealth/power folks, and he is less bought-and-paid-for than neo-liberal Hillary Clinton and the conservative side’s, mentally and morally challenged.
We don’t know how he would be as President (we never do), but just being less beholden to the rich could put him in the “great” category.
But, I am bothered by a mystery.
Stephanie Kelton knows the facts. She understands Monetary Sovereignty. She teaches it. She is an MMTer of the first rank.
Last December, Bernie Sanders hired Stephanie to be his chief economist. Presumably, he wanted to learn what Stephanie knows.
And presumably, she has taught Bernie things like:
1. Federal finances are not like personal finances. The federal government cannot run out of its own sovereign currency, the dollar.
2. Federal deficit spending grows the economy.
3. Federal debt is nothing more than deposits in the Federal Reserve Bank, and is not a burden on the federal government.
3. Reductions in federal deficit spending lead to recessions and depressions.
4. Tax cuts are stimulative because they put dollars into the pockets of consumers; similarly tax increases are recessive.
So Bernie knows all this stuff. But even knowing Monetary Sovereignty, here is what Bernie wants to do:
1. Stop corporations from using offshore tax havens to avoid U.S. taxes. Each and every year, the United States loses an estimated $100 billion in tax revenues due to offshore tax abuses by the wealthy and large corporations.
2. Establish a Robin Hood tax on Wall Street speculators. Creating a speculation fee of just 0.03 percent on the sale of credit default swaps, derivatives, options, futures, and large amounts of stock would reduce gambling on Wall Street, encourage the financial sector to invest in the job-creating productive economy, and reduce the deficit by $352 billion over 10 years, according to the Joint Committee on Taxation.
3. End tax breaks and subsidies for big oil, gas and coal companies. If we ended tax breaks and subsidies for big oil, gas, and coal companies, we could reduce the deficit by more than $113 billion over the next ten years.
4. Establish a Progressive Estate Tax. If we established a progressive estate tax on inherited wealth of more than $3.5 million, we could raise more than $300 billion over 10 years.
5. Tax capital gains and dividends the same as work. Taxing capital gains and dividends the same way that we tax work would raise more than $500 billion over the next decade.
6. Repeal all of the 2001 and 2003 Bush tax breaks for the top two percent. Repealing the Bush tax breaks for all of the top two percent would reduce the deficit by about $400 billion over the next decade.
7. Eliminate the cap on taxable income that goes into the Social Security Trust Fund.
8. If we imposed a currency manipulation fee on China and other currency manipulators, the Economic Policy Institute has estimated that we could raise $500 billion over 10 years and create 1 million jobs in the process.
9. Reduce unnecessary and wasteful spending at the Pentagon. We could achieve significant savings of around $100 billion a year at the Pentagon while still ensuring that the United States has the strongest and most powerful military in the world.
10. Require Medicare to negotiate for lower prescription drug prices with the pharmaceutical industry. Requiring Medicare to negotiate drug prices, similarly to what the VA currently does, would save more than $240 billion over 10 years.
Note that every one of these 10 recommendations would take dollars out of American’s pockets, and send the dollars to the federal government, and not one recommendation would stimulate the economy.
They solve the non-existent problem of reducing the federal deficit and debt.
Bernie knows it. Stephanie knows it. So what is going on? It’s a mystery.
My guess: Bernie is a politician. As such, he believes that telling the American public the truth would be a political kiss of death.
So he first wants to get elected, and then, once he’s in power, he will do some of the correct things (See the Ten Steps to Prosperity).
At least, I hope that is what is in his mind. Why else would he hire Stephanie?
Anyway, my belief is this: Bernie Sanders will not receive the nomination unless he does something spectacular. His “Hail Mary pass” would be to tell the truth about Monetary Sovereignty.
Probably, he would not be believed. But, barring Hillary having a heart attack or being caught in bed with a Republican, that would be only the way Bernie could win an unwinnable nomination.
Worth a try?
Rodger Malcolm Mitchell
Monetary Sovereignty
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Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually Click here
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)
10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
The Ten Steps will add dollars to the economy, stimulate the economy, and narrow the income/wealth/power Gap between the rich and the rest.
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10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt
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.
1. A growing economy requires a growing supply of dollars (GDP=Federal Spending + Non-federal Spending + Net Exports)
2. All deficit spending grows the supply of dollars
3. The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
4. The limit to non-federal deficit spending is the ability to borrow.
THE RECESSION CLOCK
Vertical gray bars mark recessions. Recessions come after the blue line drops below zero and when deficit growth declines.
As the federal deficit growth lines drop, we approach recessions, each of which has been cured only when the growth lines rose.
Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.
#MONETARYSOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Yes, definitely worth a try,
He might have hired Stephanie for her politics, not her economics. Might. But I think you’re right.
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Rodger, I have two thoughts about this. First, I think Bernie needs to have someone from outside, like the media, an expert, think tank, or university like UMKC raise the points about MS/MMT for him to pick up on and cite as supporting information. He could endorse the general ideas and leave others to defend the details. I don’t think any candidate would dare to undertake a two-front war of debating both economics and policy issues that would detract from his/her basic themes. For several years, I have urged Stephanie to concentrate on building broad support for what MS/MMT can do, and while she has worked in that direction, I don’t think she was able to mobilize the type of campaign necessary to make a difference.
Second, granting your basic point that none of his proposals are needed to raise money to run the government, I think he is proposing to use them for their second purpose — to change the allocation of resources. Most, if not all of his proposals would shift wealth or income from the 1% to the 99%. MS/MMT do not seem to say how to do this particularly well.
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Tip, I think I accidentally down voted your comment via the fat finger method. Actually you hit exactly what I was going to say. Sanders recognizes that short-term thinking and selfishness of the 1% are ruining not only the economy but also are dangerously subverting democracy itself. Taking away these folks power to do that is his objective: teaching economic theory is not.
Teaching economic theory is the job of people like Rodger and us. The dominant paradigm, which is even bought into by Paul Krugman, by far the most influential liberal economist out there, is easy to understand, appeals to personal experience and common sense, and makes one seem like a politically serious person. In short, it is internalized by Joe Sixpack, and Joe feels comfortable defending that position. MS/MMT has a ways to go before its arguments are lodged in people’s guts the way “deficits will burden our children” is.
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Thanks Creigh,
For me, the most important, and easiest aspect of liberal economics is the sectoral financial balances, seasoned with a bit of history. I try to make the case this way:
Discussions of the what the federal government should do are often based on myths about its deficits, debt, and what it can or can’t afford to do. This is a needless tragedy.
The private sector is called a “sector” because it is one part of the American economy. The two other parts are the public or government sector and the foreign sector. Dollar flows among the three sectors always net out to zero. If one has a surplus, one or both of the others must have a corresponding deficit. If I pay you ten dollars, I am down and you are up by that amount, and the total net change is zero.
The foreign sector is running dollar surpluses because Americans are importing more than they are exporting. The private sector is running corresponding deficits by sending its dollars to other countries to pay for the imports. If too many dollars are drained from the private sector, the economy will slow down and may slip into a recession or depression. The only way to prevent that from happening until the trade deficit is reduced is for the federal government to run budget deficits that offset the private sector payments to other countries.
This reality is missing from all discussions that treat the federal budget as if it were like a state or company budget. No state, local government, or company considers how its budget relates to the flows between the private and foreign sectors, but that should be a basic federal responsibility. Either it must run budget deficits that are at least as large as the trade deficit (ignoring investment flows) or private sector dollars will dwindle. At present, the trade deficit is roughly a half a trillion dollars a year. If this reality were generally understood, responsible discussions of the federal budget would shift from eliminating the deficits to how to use the dollars that the deficits create.
The government ran deficits during 129 of the past 200 years or nearly two thirds of the time. Deficits are the government’s normal mode of operation and they are unsung heroes of the county’s progress. Also during those 200 years, the government ran surpluses to reduce the debt significantly during six periods of five or more years. Each period led to a major depression.
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Here’s a try at really simple:
Argument: “I reject the idea that we have to balance the budget. A growing economy needs a commensurately growing supply of dollars to continue working efficiently, and a federal deficit is the only way the economy’s supply of dollars can grow.”
Explanation: (No dollars are ever created by the private sector. Transactions in the private sector only move dollars from buyers’ pockets to sellers’ pockets. The only mechanism for increasing the economy’s supply of dollars is for the Federal Government to spend more money employing soldiers, bureaucrats, highway builders, Medicare providers, and providing Social Security benefits than it collects in taxes (from soldiers, bureaucrats, etc.))
That should take care of most arguments. Some more sophisticated debaters might counter with the following:
“But it will just burden our children and grandchildren.” (No it won’t. Our children and grandchildren will produce so many houses and cars and TVs and a bunch of stuff we haven’t yet conceived of, and all that stuff will be distributed among people living at the time. None of it will be sent back in time to pay for our deficits. We do need to provide our children and grandchildren with the education and infrastructure they will need to create their own wealth and prosperity.)
or: “Banks create money.” (No they don’t. They create credit, which is different from US money. US dollars create public debt, bank loans create private debt. The effects of those things are completely different.)
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Thanks, Creigh. I think we have to keep plugging away at this until we have something that is truly simple and digestible. Tip
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“will not receive the nomination unless he does something spectacular. His “Hail Mary pass” would be to tell the truth about Monetary Sovereignty.”
Exactly…nothing else really matters…will he expose the BIg Lie? No. I wish otherwise.
If he did, would enough people really get it in the face of the unimaginable but sure response from TPTB? Would Google, e.g., crash the party? Would the MSM give him any attention and then report “fairly”?
My feeling is that he must declare as an independent (timing?) explaining why and talk Warren into being his running mate. (Better yet Bill Black…Michael Hudson?…)…
A major market crash well in advance of the “election” might help…sadly, but what else would grab people’s attention adequately other than this most major of “sport” venues?. There needs to be some sort of very significant wake-up call.
Enjoy your blog, you have an important message…likely the most important of all messages for any kind of less-than-miserable future.
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Canadian Prime minister Justin Trudeau campaigned on running a deficit for most of his mandate and won a majority! It CAN be done!
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The other day someone pointed out that Stephnie is on a senate budget committee and not a direct advisor to Bernie’s presidential campaign. So not sure how much FaceTime she gets with Bernie.
Some influence should still trickle through I hope.
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December, 2014:
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Funnily enough, MMT/MS actually suits the conservatives and not just the Left.
We can agree with the GOP that tax cuts are a good idea to help the economy, since we understand the Fed doesn’t use tax money [said on air by Ben Bernanke]. That might be a wedge but politicians use them all the time.
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“Funnily enough, MMT/MS actually suits the conservatives and not just the Left.”
Unless you think (as I do) that right-wingers and left-wingers both want more austerity, in which case MS is anathema to both.
Left-wingers want more austerity via tax increases. Right-wingers want more austerity via the elimination of social programs that help average Americans. Both demands are justified by the Big Lie. Both demands widen the Gap between the upper, middle, and lower classes.
Right-wingers and left-wingers both reject the facts of MS. The only people who don’t reject the facts are the very rich and the very poor. The super-rich know the truth, but they keep quiet about it, and they pay politicians to lie. The very poor grasp the truth (if you explain it to them) but they are powerless to change anything.
Therefore the real problem (as I see it) is the middle class, which serves as a buffer, and keeps the rich on high by keeping the poor at the bottom. Right-wingers in the middle class think that eliminating social programs will only hurt the bottom class. They are mistaken. Left-wingers in the middle class think that tax increases will only hurt the upper class. They too are mistaken.
Ultimately everything in economics is subject to [1] “Gap dynamics” and [2] denial of “Gap dynamics.”
By the way, I myself do not lump MMT with MS. There are too many things about MMT that I regard as erroneous or insulting. Examples…
The bizarre and fanatical obsession with impractical “jobs guarantee” nonsense. (Why not just give people the money?)
The unfounded assertion that “taxes drive money.” (Taxes are not needed to maintain a nation’s “full faith and credit” in its own currency.)
The insulting assertion that there is “no proof” that politicians lie about U.S. government finances. (This claim is inexcusable.)
The refusal to speak clearly, succinctly, and sincerely as Rodger does. (MMT people never say in five words what they can say in fifty.)
Bottom line: austerity is genocidal. MMT people’s response to it is effete and academic. (Just my opinion.)
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I’m not talking about the criminal and class betrayal side of the economic discourse.
Who are you quoting says those bits you criticise about MMT? They don’t sound like MMT to me. MMT is strictly a recipe as to how money actually functions, not an unproven theory. Show me where so I can see them?
Generally though I agree with you and yes, a more succinct set of explanations would help. Rodger is good at that. On the other hand, Bill Mitchell I think directs his comments to economists who can understand economics, since he is both. My eyes glaze over reading his posts, but they are hugely important contributions as he can best them at their own confusing game. He has all the algebra etc down pat and can cover every angle opponents can muster. We need that level of expertise as much as the simpler ones.
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She is correct. I’ve addressed every one of those issues in this blog. Which issue do you doubt is MMT?
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I asked so I could see for myself. I don’t and can’t follow every single MMT blog. But in theory I agree with you that work has to be taken seriously. There is no shortage of jobs that should pay a living wage, but I think part of the idea was to get the long term unemployed used to the idea of what working entails, such as being on time. Then once that “apprenticeship” is done a full job awaits. Local councils have lists as long as your arm and can use unqualified people better than most other organisations. They can be put to work on maintenance, now often neglected, of the environment and get on the job training if wanted. Lots of options out there, ones machines cannot take over.
It’s only for people who actually want to work but there are plenty of those. Full employment would be 2% unemployment, not the NAIRU figure.
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John, start with this, and after that, if you have questions, I’ll give you other references.
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The Jobs Guarantee, as you said, is utter nonsense, and ironically is based on the right-wing belief that people won’t work if you give them money.
The fact that rich people have money, yet continue to work, is lost on the MMTers, because they (subconsciously, perhaps) seem to believe that poor people are inherently lazy.
I’ve written several posts about this, and they so enraged one MMTer, he wrote to me,“Are you serious, or just yet another crazy, rightwing, Austrian nutjob jacking off in public to get your jollies off?”
“Taxes drive money,” is based on the real fact that taxes do add to the demand for a currency, but the concept is overstated to mean that without taxes, there would be no demand for a currency. Utter nonsense. I’ve discussed this, too.
The “no proof that politicians lie about U.S. government finances is a position only a professor could take. Interestingly, even they refer to the situation as “The Big Lie,” but are afraid to accuse anyone of anything. So they say that all politicians, all their advisers, all economists and all the media — every single one of them — is ignorant of basic economics facts. In academia, one can speak of ignorance, but one daren’t speak of lying.
As for the refusal to speak clearly, that’s an academic’s habit, borne out of the belief that no one will take you seriously if they can understand what you’re saying.
Warren Mosler’s book (especially the opening chapters) is beautifully clear, but Warren. now having said it simply, has drifted into academese. I believe it cost him votes when he ran for office.
The “worst” are Bill Black and Randy Wray, who do not seem to care whether the public understands.
Pity.
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As always Rodger, you have nailed every bullseye…
1. “The Jobs Guarantee, as you said, is utter nonsense, and ironically is based on the right-wing belief that people won’t work if you give them money.” ~ RMM
Yes, everyone has his own notion of the “job guarantee,” most of which conflict with each other. When we look closely at any of them, they dissolve. They become vague and impractical. They answer nothing clearly. The more you seek clarification, the more you are hit with insults.
I say let’s increase federal deficit spending, so that jobs create themselves. Why fixate on a “jobs guarantee” at all? Why not fixate instead on a Basic Income Guarantee (aka Universal Social security)?
Oh that’s right. The average MMT “jobs guarantee” fanatic thinks that if people are given money, people won’t work. This belief is not only selfish and hateful, it is contrary to reality. Prison inmates could lie around all day, but they don’t want to. For prison inmates, work is a privilege that must be earned by good behavior.
As for giving people money, the Mincome experiment in Canada proved that when people are given a basic guaranteed income, they work more, not less. Even today, when rich people get government handouts, they do not stop working. Instead, they work to become even richer.
2. “The fact that rich people have money, yet continue to work, is lost on the MMTers, because they (subconsciously, perhaps) seem to believe that poor people are inherently lazy.” ~ RMM
Exactly. Most MMTers hate the poor, out of fear of joining them. MMTers’ false assumption that poor people are lazy is a product of their desire keep poor people at the bottom, so that MMTers can maintain the Gap between themselves and the bottom.
Ironically, people at the bottom are far more open to the facts of MMT and Monetary Sovereignty than are most people in the middle class, since the poor have no Gap beneath them. The poor are not threatened by the Truth, since the poor have nothing to lose, and everything to gain.
This hatred and hostility among (some) MMTers is the engine of their obsession with the “jobs guarantee.” Their obsession is militant because it is based on a fear of falling. When you ask them to clarify their personal notions of the “jobs guarantee,” they become angry, because their mental safety net dissolves. Their fanaticism, like religious fundamentalism, it is based on fear and hatred.
I say let’s raise the poor by increasing deficit spending, or by Universal Social Security, or by measures such as Rodger’s “Ten Steps To Prosperity.”
MMTers disagree with me. They prefer to keep the poor down, in order to maintain the Gap between themselves and the poor. They do this, in part, by hysterically clinging to their “jobs guarantee,” which – being vague yet “righteous” – is a perfect vehicle for hate and fanaticism.
If half of the citizenry were employed digging holes, and the other half employed filling the same holes, then poor people would be more insulted and despised than ever. Perhaps that is the whole idea behind the “jobs guarantee.”
3. “I’ve written several posts about this, and they so enraged one MMTer, that he wrote to me, ‘Are you serious, or just yet another crazy, rightwing, Austrian nutjob jacking off in public to get your jollies off?’” ~ RMM
Yes, that was in January 2012. You said the commenter was, “One of the most respected MMT people in America. I won’t embarrass him by giving you his name, but if you know MMT, you know of him.”
https://mythfighter.com/2012/01/12/mmts-job-guarantee-jg-another-crazy-rightwing-austrian-nutjob/
This is why I do not use the phrase “MMT / MS.” I am turned off by the hate, self-righteousness, and cement-headedness of most MMT people. Not all MMT people are that way, but there are enough so that my comments at the “New Economic Perspectives” blog get deleted. All of them. Rodger’s comments are allowed to stand, but they are ignored by other readers.
I agree with almost all of what the MMTers say, but there are aspects of MMT that I diverge from.
4. “’Taxes drive money’ is based on the real fact that taxes do add to the demand for a currency, but the concept is overstated to mean that without taxes, there would be no demand for a currency. Utter nonsense. I’ve discussed this, too. ~ RMM
Exactly. If we claim that without taxes, there would be no demand for a currency, then we must aver that if federal taxes fell to zero, no one would want dollars. That is absurd. Many countries have a high internal demand for their currencies, despite having no personal income taxes or capital gains taxes. Some examples are Oman, Qatar, the UAE, Saudi Arabia, the Cayman Islands, Bahrain, Bermuda, the Bahamas, and Brunei Darussalam. (Bermuda is a British Overseas Territory, but it is administratively autonomous.) All these countries have their own currencies (including Bermuda) and all of them have a high cost of living, which means a high internal demand for their currencies.
Sorry MMTers, but federal taxes do not “drive money.” Instead, federal taxes “drive society.” They are a means of social control. Federal taxes sustain federal power over the states. Federal taxes also maintain rich people’s power over the lower classes. U.S. federal taxation can be used to create or destroy. Taxation can be used to widen or narrow the Gap. It can be used to imprison untouchables like Al Capone. U.S. federal taxation is all about POWER.
The MMT chant that “taxes drive money” is camouflage. MMTers fear they will be condemned if they speak too much Truth. They fear being fired or otherwise dismissed if they clearly admit that the U.S. federal government has need or use for tax revenue, and actually destroys tax revenues upon receipt. When MMTers chant that “taxes drive money,” they mean, “We agree with the Big Lie that the U.S. economy needs federal taxes, but we have a more truthful version of the Big Lie.”
5. “The ‘no proof that politicians lie about U.S. government finances’ is a position only a professor could take. Interestingly, even they refer to the situation as ‘The Big Lie,’ but they are afraid to accuse anyone of anything. So they say that all politicians, all their advisers, all economists and all the media — every single one of them — is ignorant of basic economics facts. In academia, one can speak of ignorance, but one daren’t speak of lying.” ~ RMM
Bingo. My complaint was not directed at professors, since I appreciate the hazard of saying the wrong thing in academia. If a professor makes one slip, then he or she will be dismissed, and will be black-balled nationwide. This occurs in most academic topics, including the physical sciences. For example (contrary to most people’s beliefs) Galileo’s enemies were not in the Catholic Church, but in the academic community. Ignaz Semmelweis’ enemies were his fellow doctors, plus the academic community, which threw Semmelweis into an insane asylum and made sure that he was beaten to death inside.
No, my complaint was directed at average people who agree with MMT, but who maintain the “no proof that politicians lie” nonsense, despite facing no risk to their livelihood if they speak the truth. These MMT people fear being dismissed from the online club if they become “uncivil” by ceasing to lie.
I have no patience with such selfishness. The Big Lie kills. Austerity is genocidal. Millions of people are suffering needlessly. Politicians knowingly lie.
6. “As for the refusal to speak clearly, that’s an academic’s habit, borne out of the belief that no one will take you seriously if they can understand what you’re saying. Warren Mosler’s book (especially the opening chapters) is beautifully clear, but Warren, now having said it simply, has drifted into academese. I believe it cost him votes when he ran for office. The ‘worst’ are Bill Black and Randy Wray, who do not seem to care whether the public understands.” ~ RMM
Yes Warren Mosler’s book is clear. I have Warren’s book here, plus two books by Randy Wray. Randy has some good things to say, but Randy’s books badly need condensation. Bill Black in verbal interviews is clear and to-the-point, but his writings are tedious enough to cure any insomniac. No one reads Bill’s lengthy posts, since no one can stay awake beyond the first paragraph. Bill reminds me of a young child who will not eat his food until he first plays with it for half an hour.
Okay, MMT people tend to be poor writers. So what? I mentioned this for two reasons. First, verbose padding conceals the reality that the Big Lie kills.
Second, it is not possible to change anyone’s mind. We can only present the facts for people to accept or reject. People must choose to wake up. No one can choose for them. After people make the choice, we can only facilitate their awakening process. However we deny this reality when we indulge in verbose padding. We foolishly think we will seduce readers by shifting between truths and half-truths. We think we are being “civil” and “sophisticated,” when in fact we are only mumbling to ourselves. That is no way to fight the Big Lie.
Thanks for reading.
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I don’t recognise even one person who supports MMT from your description Elizabeth, not one. I’ve managed to miss every one and I have corresponded with many.
But I think that there IS a sense of timidity. Warren Mosler talked to VP Al Gore just before he was due to speak about the economy. He recognised what Warren said was right but when he went on stage he still spouted the usual tax and deficit nonsense.
I’m sure that’s common.
I think eventually a build up from supporters will create a break in the dam holding back MS/MMT. So don’t give up!
I have written to politicians, but my news is ignored. After all I am not even an economist let alone a well known one. So I know nothing useful to them. I think it’s an advantage to not be an economist since that is just another hurdle to overcome before understanding dawns.
I agree this misinformation is, perhaps not exactly genocidal, but very destructive to our societies today. But there will be no criminal charges for it.
The corporatist world, now just a stone’s throw from complete takeover of our national governments, is hell bent on taking us out, through resource depletion, as fast as possible. We’ll never be ruined by money per se. It’s always available to spend. We’ll be ruined when the resources and the infrastructure fails to keep up with our spendthrift existence. When this hits the wall of our finite planet, all bets will be off! The corporatist world victory will be a phyrric one, short lived.
That’s what genocidal means, not from poor economic management but an inability to understand the exponential function.
90% of the world’s population will die off, will HAVE to die off.
That is our future!
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Thanks for your comment John. If you don’t like the word “genocidal,” then might I suggest “mass murder”?
Each day, 365 days a year, an average of 6,850 people die in the USA. How much of those deaths are caused by gratuitous austerity, which keeps them in poverty, and denies them access to health care?
Suppose that only three percent of deaths are caused by austerity. In that case, austerity kills 75,000 Americans per year. From my perspective that is mass murder. Plus, austerity causes mass suffering for the living.
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I too have wondered what impact Stephannie Keltons’ position and knowledge has not only on Bernie but every Democrat on the committee
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I’ve decided you can lay the facts of MS and MMT out all day long to perfectly normal and intelligent people who would stand to gain from a retreat from austerity, but the sway of government is strong, even among those who claim to despise government. Claims of “Out of control spending”, “Social Security is broke”, “We owe China”, and “Our grandchildren will bear the debt burden” resonate with authority when repeated over and over by the Ron Pauls, Rand Pauls, Ben Carsons, Walter Jones, Hillary Clintons, and Barack Obamas of this country, not to mention the Bill O’Reillys, John Stossels, Rush Limbaughs, and Sean Hannitys of the media. The question I invariably get when pushing MS tenets to my friends is “If what you say is true, wouldn’t the government already be doing it?” That, and the ubiquitous “Well, why not just give everyone a million dollars?” With that much trust in government to do the right thing, I find it ironic that so many of today’s nouveau Minutemen are so anxious to pare their “trusted” govrrnment down.
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@ John Gaddis: Authority is one factor, but I think another factor is what I call “Gap dynamics.” Most people defend and exploit the Big Lie for their own gain.
For example, rich people use the Big Lie in order to maintain their wealth and privileges.
Likewise, middle class people use the Big Lie to maintain the Gap between themselves and the bottom class.
“Bring back welfare? Forget it! I have to toil in a lousy job. Therefore single mothers in inner city ghettoes (where there are no jobs) should also have to toil. Besides, the U.S. government is BROKE!”
The way I see it, the average American tends to live in a mental cave. As such, he falsely assumes that social programs help other people more than him, and that tax increases hurt others more than him. Therefore he votes for more austerity, falsely thinking it will punish others more than him. He votes for austerity out of fear, envy, and resentment, which are are justified by the Big Lie.
“Let them all starve. After all, the U.S. government is BROKE!”
You and I dispel the Big Lie in order to liberate people. However most people regard liberation as a threat. To debunk the Big Lie is to dissolve a cornerstone of most people’s world view. This scares most people, since they have their own little niches in the sewer. They fear that any change will cast them down to a lower level in the sewer. They defend the Big Lie in order to defend their niche, thereby ensuring that they remain in the sewer. Such is the nature of society.
We can only present the facts, and let people choose to wake up or remain enslaved. It’s like trying to tell Neanderthals about manned flight. Since most Neanderthals would reject manned flight as an absurd idea, all we can do is leave them a document explaining how flight works, and let them choose to read it or not. Most Neanderthals will choose not to.
The more I realize all this, the more relief I have from frustration.
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And then there is always this kind of negative response, this one from a friend of mine when I tried to argue in favor of Medicare For All –
“And if I expect the state provide for my catastrophic ‘protection,’ is not additional social engineering inevitable and lurking just ahead? When one abdicates personal responsibility to be replaced by a government program, a slippery slope lies just ahead.”
It’s tough to break through that Minuteman ideology, even with logic and the promise of personal savings. I see of lot of that, not just in the rural South where I live, but across the country, especially among the 65+ middle-class demographic.
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Very good points, very well expressed.
To such people I say, “Give your Medicare and Social Security benefits to me! After all, it is a slippery slope from those programs to social engineering! Give up your postal service, your national parks, your Food Stamps, and all federal spending! Why have any government at all, federal or otherwise? Instead, trust in Wall Street, the big banks, and the mega corporations that regard you as disposable cattle. God bless Paul Ryan and Fox news. Death to Blacks, Latinos, refugees and the poor. See you at the Divine Rapture!”
Tea Party clowns are pathetic. Show me an anti-abortion fanatic, and I’ll show you a child beater. Show me a bible-thumper, and I’ll show you a hate-filled sociopath. Show me a pro-austerity fanatic, and I’ll show you a hypocritical freeloader.
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“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” ― Upton Sinclair, “I, Candidate for Governor: And How I Got Licked”
Sinclair ran unsuccessfully for Congress as a Socialist, and was the Democratic Party nominee for Governor of California in 1934, though his highly progressive campaign was defeated.
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It isn’t a mystery to me. The large majority of the people think the Federal debt is bad and unsustainable. Many think that it is crippling the country and that if it weren’t for low interest rates, the US would be bankrupt, debt passed to our grandchildren, etc. Although those thoughts are false, Sanders cannot say that without proof. It would have to be demonstrated over time. Unfortunately, MS is not logical. That a currency issuer can have an unbalanced budget without inflation is far from intuitive. Sanders would face huge opposition if the national debt increased significantly. He should instead focus on many of the ten steps to prosperity, even if some taxes are raised.
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@ Ian Winograd: With sincere respect, I do not agree that the facts of MS are not logical. On the contrary, it seems to me that the facts are eminently logical, common sensical, and provable.
Here’s a random example…
When you open multiple checking accounts at a bank, you can use your home computer to “move” money from one checking account to the other. This proves that money is not physical, and that creating, destroying, or moving money is just a matter of changing numbers in accounts. It is exactly like creating or destroying points on an electronic scoreboard. A child can understand this, but most adults cannot (or will not). Therefore the U.S. government is not “broke,” and does not have a “debt crisis.”
Perhaps you meant that facts like this only seem illogical to the brainwashed and the entranced. If so, I see your point.
You write, “That a currency issuer can have an unbalanced budget without inflation is far from intuitive.”
It would be intuitive if people stopped to think for a second. If the money supply rises, and the demand for money rises with it, then there is no inflation.
You write, “Sanders would face huge opposition if the national debt increased significantly.”
The (fake) “national debt” is projected to rise to $20 trillion by the time Obama leaves office. Where is the panic? If Sanders was concerned, he could explain that the U.S. Treasury could stop selling T-securities, thereby halting the growth of the (fake) national debt. This would have no effect on the U.S. government’s ability to keep creating money.
You write, “Sanders should instead focus on many of the ten steps to prosperity, even if some taxes are raised.”
At first I balked at this statement because I hate federal taxes, but then I thought, “Good idea. That way people might actually go for it. And Sanders would not actually have to raise taxes.”
Many thanks for your comments.
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If Sanders becomes President, in the middle of his term he should announce that he created an account and put $20T of dollars in it to offset the debt. He then states that the Federal debt is zero. All the skeptics will claim that within days, weeks, months, etc. there will be hyperinflation. Then Sanders says he actually created that account two years ago and announces — “see no hyperinflation”.
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Rodger,
Adair Turner recently gave a lecture at an IMF conference laying out the mechanism for money creation parallel to, more or less, what MS/MMT had had been proposing and Lars Svensson also basically agreeing with him.
http://www.imf.org/external/mmedia/view.aspx?vid=4598431166001
I wonder if you could review his talk and confirm whether I have false or accurate interpretation of it. Thanks.
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@ Zen: Thank you for the link. Yes Adair Turner in his speech admits that…
[a] Central governments cannot “go broke. (Turner refers to nations that have large economies, plus central governments that have Monetary Sovereignty, although Turner does not use that term.)
[b] Austerity is a political choice, not a fiscal necessity.
[c] During recessions, central governments should increase their budget deficits, since that is the only way to increase aggregate demand.
[d] Deficit spending will increase “nominal aggregate demand” more than will “ultra-loose monetary policy” (i.e. near-zero interest rates).
[e] The amount of stimulus created by deficit spending can be controlled so that there is no inflation.
[e] Quantitative easing can only stimulate the economy indirectly. (That is, QE only stimulates Wall Street, not Main Street.)
[f] It is useless to try and “stimulate lending” when consumers are already overloaded with debt.
Turner says that deficit spending carries a political risk. He asks how we can make sure that politicians will only increase deficit spending during specific circumstances (e.g. recessions). His answer is to let an independent central bank create the stimulus money, while the central government determines where the money goes. (Ben Bernanke proposed this same thing in a 2003 speech in Japan.)
I don’t see how that could work, since banks can only create money as loans. Also, Congress and the Treasury oversee fiscal policy. The Federal Reserve oversees monetary policy (i.e. interest rates). If we start giving fiscal powers to the Fed, then the nightmare of gratuitous austerity could triple in severity.
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@Elizabeth
Turner refers to his proposition of monetary financed deficits as non-interest bearing and free from the burden of debt servicing and is thus freed from the anticipated effect of Ricardian equivalence. I interpret that as not much different from what Rodger and MMT had been proposing.
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@ Zen: Yes, but what about Turner’s suggestion that we give fiscal authority to banks? I find his idea terrifying. Banks should remain banks (and they should all be federally owned).
Regarding “Ricardian equivalence,” economists use that term to justify austerity, even though the term has no basis in reality. Economists start with the lie that the U.S. government has a “debt crisis.” Then they use this lie to claim that deficit spending causes consumers and households to become so terrified that their taxes will rise to pay off the (fake) “national debt” that they start saving, and stop spending.
Therefore, economists claim, deficits cause contractions, and austerity causes expansions (the exact opposite of reality). This is “Ricardian equivalence.”
Like all attempts to justify austerity, it is the exact opposite of reality. It is like claiming that bloodletting cures anemia, and blood transfusions worsen anemia.
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Here’s a good lecture from South Australia which addresses some of the employment issues we are discussing here [etc.]
It is a good talk!
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Elizabeth, perhaps a better measure might be life span rather than deaths. Everyone dies.
If these data are correct, they seem to make the argument.
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Good point Rodger. Throughout the world, the Gap keeps widening between the rich and the rest, in terms of both wealth and life expectancy.
Why does this not alarm people? I think it is because average people will accept suffering as long as they know that other people are suffering more. That is, as long as they know there is a Gap between them and a lower class. For example, average Americans become poorer each day, but they submit to this by telling themselves “At least we are not as bad as Africa.”
Therefore they doom themselves to eventually becoming like Africa.
Some right-wingers claim that life expectancy in the “developed” world is higher than ever. That claim is absurd. As austerity keeps making us poorer, and medical costs keep skyrocketing, average life expectancy falls for people who are not rich. This is inevitable.
The U.K. government’s own Dept. of Health has admitted that David Cameron’s ever-increasing austerity and his cuts in the National Health Service (NHS) have reduced the average life expectancy in the U.K.
Here in the USA, the average life expectancy for poor white people has fallen by four years since 1990, and the fall is accelerating, according to the NY Times.
If you Google the words “austerity life expectancy” you will get many articles confirming what we say here about life expectancy.
(Now if only those articles would expose the Big Lie.)
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Rodger, I looked at the link you gave me,to an earlier post of yours. I am not really informed about a JG, but I wonder if you are aware of Bill Mitchell’s CofFEE site? http://e1.newcastle.edu.au/coffee/
It’s worth recalling that it was government policy after WW2 to have full employment, and governments ran budget deficits to pay for that. It worked well but the advent of neo-liberalism put paid to it so we now are in dysfunction. You probably don’t need specific JG, you just need a government devoted to achieving full employment, a return to a working solution!
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Yes, UMKC has a Center for Full Employment, too. I’ve explained in several posts, why focus on full employment is a bad idea. The focus should be on narrowing the Gap, not on providing people with crap jobs.
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Crap jobs are 90% of jobs already! Even worthwhile jobs like teaching are, or can be, crap jobs. [ considering the state of the education sector]. So I don’t think it’s an excuse to not have full employment as a guarantee. It’s guarantee only so as to hold politicians to supporting the notion, which once was policy, and narrowed the gap simply by existing.
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Crap jobs are 90% of jobs already? Really? Where did that 90% figure come from.
As I often have stated, there is no shortage of jobs. Look at your local newspaper. Look at monster.com. Many thousands of jobs.
So why are they not taken? Why do employers have to spend money advertising jobs? Why are people unemployed?
Is it your opinion that the jobless simply are lazy, or is there another factor at work, i.e., the wrong jobs at the wrong place?
Those are the jobs JG would offer.
Who would be the JG employer: The government or private industry? Where would the jobs come from? Who would do the hiring, firing, training and job search?
There are dozens or reasons why JG is a dopey idea that only a professor could love, and if you’d like to see them, I’ll give you the links.
Meanwhile, I’ll bet you can think of the reasons yourself.
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We differ Rodger on the meaning of “crap”. For me any job where one’s integrity and meaning is trapped in a dead end desk job, or stuck behind a shop counter 12 hours a day, earning peanuts and struggling to survive is a shitty job. Maybe 90% is an exaggeration but it’s closer to the mark than 10%. I personally would find book keeping exactly such a job. I friend of mine went to a conference of accountants. He remarked no one was over 50 years old. Anyone that age has moved on.
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John,
And exactly what sort of jobs do you think JG would provide?
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More of the same, Rodger!!! We cannot escape having crap jobs in industrial society,[probably in any economy, truth be told] That’s why your picking on crap jobs doesn’t do your argument any favours. For most, crap jobs are preferable to no job but a JG won’t make the situation any worse. They could even create shitty jobs which smell a bit less pungent?
I realise this is not the important part of your argument but dropping the shitty job stuff won’t derail your main argument, the need to improve the productivity of the economy and close down the gap, etc.
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You are missing the psychological point. Offering crap jobs is a pretend solution that only solidifies the Gap.
It’s like getting a tiny raise that keeps you in a low paying job. That’s the “throw ’em a bone” idea the rich love.
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OK, if that’s all it is, then Yes.
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Oh, it’s far, far worse. See: THIS
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I don’t have an answer. For starters it’s a distraction from the important issue of understanding money comes from a “bottomless pit” in Philip Lawn’s words.
We really have to understand that pre-eminent part of your 10 steps to prosperity. I remember Frank Lloyd Wright saying he wanted the “aristocracy of the people” to be the norm. I always liked that expression, certainly no Gap there!
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The “jobs guarantee” is an entirely religious idea. Its faithful devotees defend it no matter what. When you ask them to clarify exactly what they are defending, they act like you spat on their crucifix.
MMTers, your “jobs guarantee” is as unnecessary as it is unworkable. If you sincerely want more jobs, then you must snap put of your cult-trance. You must attack austerity and the Big lie. You must understand “Gap dynamics.” You must demand increases in deficit spending. If the government money is channeled wisely, it will create jobs, which in turn will create more jobs.
For example, the Federal Aid Highway Act of 1956 launched a national highway project that continued for the next 35 years. Today we could build giant facilities to produce renewable energy. We could build giant desalination plants that use solar energy. We could build anything we liked. Such projects would create jobs, which would create still more jobs. (“A rising tide lifts all boats.”) Stimulate demand, and the jobs will appear. Why is this so hard to understand?
Regarding Bill Mitchell, he was a bit scatterbrained until MMT straightened him out. Unfortunately MMT also trapped him on the “job guarantee” bandwagon, which does nothing to dispel austerity mania or the Big Lie. More recently he seems to have matured past that nonsense, although his Centre of Full Employment and Equity still includes discussions of a “jobs guarantee.”
Unfortunately he is an academic, and must therefore remain “civil.” That is, he can describe austerity mania, but he cannot cite the motive behind the mania (which is to widen the Gap between the rich and the rest, and between Wall Street and Main Street). Therefore he cannot fully expose the scam.
Even worse, Bill Mitchell claims that euro-zone bankers and finance ministers “failed to understand” the nature of the debt-austerity cycle. This is nonsense. As Rodger started explaining years ago, the bankers and finance ministers planned the whole thing as a means to widen the Gap. They knew that countries which surrendered their Monetary Sovereignty, and which had trade deficits (like France and Greece) would go into severe debt. They would fall into a death spiral that would force them to privatize everything, and crush their workers. It was all quite deliberate.
Other than that, Bill Mitchell is mostly on board with us. He correctly notes that politicians have convinced the public that the trivial “national debt” is a crisis, while the private debt crisis is trivial (e.g. student loans).
(He is, however, in error regarding the causes of Zimbabwe’s hyperinflation of 2007 and 2008. He is also in error regarding Japan, not realizing that the Japanese government has indulged in austerity mania since Naoto Kan became Prime Minister in June 2010, the month that austerity mania went global. Naoto Kan began the tradition of crushing Japanese consumers with an ever-rising national sales tax to obtain revenue that the Japanese government does not need or use. It’s all about widening the Gap. Shinzo Abe has taken it to the next logical step, which is QE to juice the markets, and aggressive militarism to enrich the weapons makers who pay bribes and kickbacks. Meanwhile the Fukishima catastrophe remains 100% beyond control. Abe’s solution? Restart all the other reactors. Bonzai!)
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Interesting you know Bill Mitchell so thoroughly, Elizabeth. Even back to before he understood MMT, 1979 he said to me. How come?
I find IMO that widening the gap is a consequence rather than a cause of the current economic malaise. It is a fairly recent phenomenon, taking off after the mid 1970’s. Before that the robber barons were just out for themselves. They weren’t afraid the poor would take over back then. Even today I can’t see that keeping the poor down makes the 1% so fearful. It doesn’t compute. But I have read about conspiracy theories dating back to Cecil Rhodes, now manifest in the TTP and TISA and TTIP so called free trade agreements. Even if they “win” they lose as their rampant destruction of resources will drive our economies to collapse, real soon now!
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Rodger! Why didn’t you simply tele-call your friend and colleague Stephanie Kelton and ask her what she told sanders and how he reacted? Missing link in an otherwise powerful blog!
Best Health, wise man!
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Sworn to secrecy. I respect that.
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Whether it’s MMT, MS or even MMR – all, brilliant folks – at least compared to most in understanding our monetary/economic system.
But politics – not so much.
If you don’t understand why Ben Carson is doing well in the polls, then your contribution to a political discussion is about as useful as an Austrian’s contribution to a discussion on the FED’s quantitative easing.
No politician is going to publically state the need for more deficit spending – in ’08 and ’09, an outgoing Prez and then a fresh new one got away with it because a financial meltdown had everyone’s knees knocking – neither campaigned on it. Do you want to advocate for another round of Lehman or perhaps WW3?
Instead, lets first work to link more and more central govt taxing to inflation. Since it is probable too politically difficult to link the level of central govt spending to the inverse of inflation (the exact opposite of SS’s COLAs), let’s instead work to link more taxing to less spending (or, more importantly, less taxing to more spending); entice both the Right and the Left to set up the “Grand Bargain” – decrease taxing and increase spending, dollar for dollar. Most important, put the inflationists in charge! Set a level of harmful inflation (3.5%) that if reached, the govt reverses and taxes are raised and spending is cut, dollar for dollar. Make the inflationisties technocrats at the FED, with research staffs, to ponder the lack of any emerging harmful inflation and to peddle their dire warnings for gold bug websites to report.
Oh, and be sure to let Congress critters know that while they would no longer set but just be told the level of spending and the level of taxing, they would still get to beat each others’ brains out over what gets bought and whose taxes get cut.
Hedgehogs try to go through the wall and get their brains spatter about; a fox goes around.
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Bob, interesting thought, but of course, some reality checks needed:
Reality check #1: It’s not just inflation that debtists claim they fear, but more importantly, they claim to fear “big” government.
Some refer to the federal government as the Leviathan.” They say small government is more honest, fair, responsive or some other good thing than big government.
(i.e. state and local governments are better?? Not in my home state of Illinois. Not anywhere.)
Reality check #2: Even in the unlikely event the debtists agreed, changes in taxing and spending are far too slow, cumbersome and politically constrained, to be of any value in preventing/curing inflation.
I’ve had this discussion with MMTers many times. (They propose that very method for inflation control.) It simply cannot work.
Imagine Congress trying to agree on which taxes to increase, and by how much, in the event of inflation.
Reality check #3: The entire question is moot, because debtists really don’t care about taxes or spending or inflation or big government or even the debt itself.
There is an underlying motive that takes precedence: They want to widen the Gap.
Anything that threatens to narrow the Gap (for example reduced FICA, increased Social Security benefits) will be voted against, regardless of inflation.
That is why logic and facts don’t seem to work. The debt is not the real problem for either side.
The problem is the Gap.
It would be like arguing with Stalin about the economic merits of sending people to Siberia. He didn’t care about economic merits; he cared about power and control.
For him, the problem was the Gap.
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All true, but here’s the thing – there is not one small govt advocate that doesn’t eventually falls back to the refuge of the debt/deficit fear mongering; they hid behind it. They don’t have the gonads to be clear that their ‘small govt’ is grandma needing to eat cat food or kids needing to go without shelter; no need for an educated workforce or infrastructure or research or development. They don’t lay that out there because they know they would get the political if not actual crap beat out of them if that became clear.
And if they don’t have the gonads to make clear their small govt desire, they certainly are not going to be upfront about their gap motivations.
Stripping away the ruse is THE big step. With that, I’m certain the enraged masses will respond appropriately.
As for taxing taking too long (note – Obama’s payroll tax holiday (good) and later reinstatement (bad), both worked pretty fast), but that could be just a legislative issue. If the Congressional critters can’t make it happen fast enough, the default is more spending which they are always good at making happening as fast as possible. Yes, spending on what will still be hot and heavy, with a lot of risk for bad things to happen (e.g., more bombs) – tying that to trying to avoid the “harmful inflation” constraint might be somewhat moderating. However, I’d be happy to cross that bridge later if we could kill the debt/deficit boogeyman once and for all.
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