There is a Paradigm Shift Now in Progress

Even NOW with that garbage??

 

I offered you the solution, but your mind was closed.

http://bilbo.economicoutlook.net/blog/?p=44507

The coronavirus will redefine what currency-issuing governments can do – finally

And, more significantly, the ideologues are giving way to the pragmatists in the policy space. Almost (see below). The sudden realisation that even Germany will now spend large amounts to protect their economy exposes all the lies that have been used in the past (up until about yesterday) to stop governments doing what they should always do – maintain spending levels in the economy to sustain full employment and ensure no-one falls through the cracks and misses out on the material benefits of growth.

In the early days of the GFC, I thought that the neoliberal era, supported by the mainstream macroeconomists, might be coming to an end. Maybe I was a decade out in my prediction. Perhaps this crisis, induced by a human sickness, will end the madness that has redistributed massive volumes of income to the top-end-of-town, sustained elevated levels of labour underutilisation and seen the traditional progressive political voices become mouthpieces and even agents for the neoliberal economic lies.

I was wrong in 2008 on this score. I hope something good like this comes out of the current disaster. The coronavirus comes on top of already growing dissent over the failure of mainstream economic policy. It will redefine what governments can do with their obvious fiscal capacity and will demonstrate once-and-for-all the lies that the mainstream economists tell about deficits, inflation, interest rates, etc. It will categorically demonstrate the capacity of the currency-issuer. All that will lay the foundation for a better future, if we get beyond this current malaise.

So you are still asking questions, as if there is no answer....

 

Dodge of balanced budget, debt moratorium, term limits, massive shrinkage of federal size and power, public unions, crooked gov contracting, crooked foreign and domestic grant culture... NOTED, making your, OP's and all the other shills' mewling about excess spending HOT AIR as usual.

Not surprised given the source.

 

If you would stop making silly accusations - and projecting your mental closure onto others - you might find that we have many areas of agreement with respect to how should be constructed - but you are too hung up on this "Money Grows on Trees" idea.

I even grant that this is partially true - but not in the way you have described - as if there are no consequences to printing money in an amount less than "All Goods and services in society" - which is the same as saying "money grows on trees".

Don't assume that everyone is a newbie .. there are things that you have not considered perhaps !?

Further - there is noting stated in the above post that I disagree with outright.

"to stop governments doing what they should always do – maintain spending levels in the economy to sustain full employment and ensure no-one falls through the cracks and misses out on the material benefits of growth."

The above comment needs more meat - I would agree in some instances and disagree in others with respect to the former "sustain full employment" . I would agree in all cases on the latter - "no one falls through the cracks" - and by golly I am quite certain that I can provide a far better justification for the latter than you

 

I will explain your confusion re "printing money", aka "money grows on trees"

The general public still holds to the belief that government budgets are like household budgets, because that is their own lived experience.

It's a hangover from classical economics which did not consider a role for the public sector.

Money does not grow on trees, but it is created in banks. ​

A paradigm shift from the current arrangements re (semi) independent central banks, to a new paradigm consisting of combined central bank and treasury operations incorporated into a 'consolidated government sector' are required. (The government ought to be able to have its own bank, for God's sake!).

Indeed you and I (private sector actors) must earn an income and repay our loans/debts to private sector banks and others; in contrast the government - as the currency issuer - is NOT constrained in this manner.

Kelton: "So what that means is that a country like the U.S. doesn’t need to tax or borrow in order to get the currency in order to spend. So it’s never about whether you (the government) can afford a program in financial terms. You (the government) always can. It’s about whether spending to fund your program will cause an inflation problem".*

I have not seen anything from you yet to suggest you are not on board with such orthodoxy as held by Krugman, Rogoff, and Summers....who are all handily refuted here by professor Harvey:

https://www.forbes.com/sites/johntharvey/2019/03/05/mmt-sense-or-nonsense/#611c3d8b5852

OK......

1. RE: "maintain spending levels in the economy to sustain full employment" (prof. Mitchell)

The Job Guarantee is a central tenet of MMT.

Briefly, labour not employed by the private sector is guaranteed employment in a temporary JG variable 'buffer pool' of workers, the size of which depends on employment conditions as determined by the private sector business cycle.

The JG offers work to anyone who wants it, funded by the currency issuing government*, but designed according to needs at the local level, paid at above poverty level...the wage being an inflation anchor. (Private sector wages will be higher the JG wage, so workers will want to return to the private sector, if/when conditions allow).

*RE Kelton's remark: "ensuring spending to fund your program will NOT cause an inflation problem";
the huge productive capacity of modern economies is such that a JG program can always be funded without causing inflation, because the necessities for above poverty living, at a minimum, can always be provided (including public housing/transport if required)

So ...no one falls through the cracks.....nor is morale and incentive destroying welfare required.

Note: already the question is appearing everywhere around the world: " How will we pay for this (corona related) government-funded, employment-rescue package.. eg $1 trillion in the US.....

Any helpful suggestions, other than leaving people to fend with their own resources?

 

I don't know if you are an academic - I hope not - because that would mean our schools have done a poor job. You bounce around - quoting stuff - some of which is fine - but you never get around to explaining why money doesn't grow on trees.

You start out assuming - "Most idiots think Gov't is like a household budget" - as if this has anything to do with me .. then you give a poor description of the difference - and give no examples of similarities.

We already covered "the Gov't can print money" - and some of the ways in which the Gov't can inject liquidity into the system.

So why are you pretending we have not had this conversation ? You then interject with "Inflation" - yup - discussed .. got it - we even discussed a limit - .. you setting the bar at the inane standard - "the sum total of all goods and services" -

This is fantasyland - dressed up as theoretical rubbish ... you quote one guys opinion .. great ! but I have yet to disagree with this fellow - and you certainly have not posted some info from this fellow that refutes my claim - that

your bar is the equivalent of "money grows on trees".

 

What you are saying is nonsensical because it is OUT OF CONTEXT!

You calculate a mortality rate based upon those INFECTED, not the entire population!

Furthermore the Covid-19 will kill anyone of any age who has certain medical conditions. While the mortality rate for children is LESS than it is for the elderly it is NOT zero either. People of ALL ages have died because of it already.

https://www.cdc.gov/mmwr/volumes/69/wr/mm6912e2.htm

 

It may not happen, but a "shift" would be for the better if it is away from materialism and toward what makes humans such a miracle; their creativity.

 

Comprehension problems?

Kelton: "So what that means is that a country like the U.S. doesn’t need to tax or borrow in order to get the currency in order to spend. So it’s never about whether you (the government) can afford a program in financial terms. You (the government) always can. It’s about whether spending to fund your program will cause an inflation problem".

Meaning not only "the sum total of all goods and services", but also increasing the productive capacity of the economy which can be increased if unemployed resources and labour exist, and certainly if education and research replaces wasteful and harmful junk consumerism in mindless profit-driven free markets.

Obviously a wealthy and productive 1st world economy can employ ALL its available labour, since the resources to house, clothe, feed, connect to the internet, and transport (public/private) everyone at above poverty level exist.

After that,

www.bilbo.economicoutlook.net/blog/?p=34315

Bill Mitchell: "No-one ……... would continue expanding nominal spending via ever-growing deficits once an economy had reached full capacity and full employment. It is obvious that if such a strategy was pursued then ever-increasing inflation would be the result.

This is because firms cannot squeeze any more real output out of the resources in use.

Alternatively, when there are idle resources (such as unemployed labour and machines), an expansion of nominal spending will likely be mostly absorbed by higher production (real output) and firms will be highly reluctant to try to increase prices for fear of losing market share to other firms in the sector.

Most importantly, growth in nominal spending (via central bank crediting bank accounts) can continue even when the economy is operating at full capacity as long as it matches the growth in that productive capacity and doesn’t strain the capacity of the economy to respond to the extra spending with output growth.

 

cancelled

 

You could simply be forthright and say no. I wouldn't expect anything less.

 

We covered this - Gov't can print money, so it does not need to tax and borrow in order to get currency to spend.

however, if the Gov't did not tax and/or borrow - the currency that it printed would be worthless due to hyper inflation.

You are living in a fantasy world.

 

I did not mention mortality rate because I know the "mortality rate based upon those INFECTED."

Base your comments on what I said -- which you failed to do -- not what you think I said.

Of course, if a 40 year old person has lung cancer, that person could die from covid-19 or the common cold.

You failed to support that statement with U.S. figures. We do not know the conditions in China, Italy, or Iran. I am basing my comments on the U.S. because we do know the conditions and it is where we live. That said, from your source ...

80% of deaths associated with COVID-19 were among adults aged ≥65 years with the highest percentage of severe outcomes among persons aged ≥85 years. In contrast, no ICU admissions or deaths were reported among persons aged ≤19 years.

Which is exactly what I have been saying. Thanks for the assist.

 

The pandemic is serious in America, and we don't want it to get like Italy.

So ask yourself, dear reader, why someone would say it is only similar to the common cold.

 

I'm not living in a fantasy wold - and I'm very much aware of the present reality, as described by Sandy Shanks, above:

"The politicians are shutting down our economy, millions have lost their jobs, and millions more have lost a substantial portion of their retirement savings and investments. The stock market is back to where it was three years ago, and the money lost is gone, irretrievable. It is just gone. As he waits to sign a trillion dollar bailout, Trump has told us the governors are doing a fantastic job".

To your point: a fiat currency gains it value from the productive capacity of the economy, combined with the fact that citizens need the currency in their economic relations with one another as well as in payment of fees etc to the government.

Whether money is created in private or central banks is irrelevant.

You keep missing the point:

"Most importantly, growth in nominal spending (via central bank crediting bank accounts) can continue even when the economy is operating at full capacity as long as it matches the growth in that productive capacity and doesn’t strain the capacity of the economy to respond to the extra spending with output growth".

 

Dude -you keep avoiding the central point - repeating the same stuff - most of which I have agreed with.

Go back - figure out the point - and respond accordingly.

 

So, be a good chap, and try elucidating the central point - which I keep avoiding....

 

Undoubtedly.

In what way?

Now, hang on!

First of all, it is already coventional mainstream "knowledge" that we are one single race. And if anything, this virus will prove to us why borders are meaningful since it is open borders and the view that borders are "meaningless lines on a map" that has caused the virus to spread.

Borders do stop viruses from spreading. This is just a fact. If you let your friend with a cold in your house you are more likely to catch than cold than if you do not let them in. If you lick the seat of a public toilet seat, you are more likely to catch some nasty bacteria than if you would not lick it.

We have always dependended upon each other. It is called a "chain of production" and with this whole pandemic certain links of that chain will fall off and we will be left in a very difficult situation.

Uuunleees........ Borders are closed.

Sounds rather Christian to me.

Such as seeing broders as "meaningless lines on a map"?

Ah, that sweet, sweet echo from the corridors of the public school system.

I think you are wrong.

 

This may not be just one paradigm shift, but many paradigm shifts. You pointed out a very relevant one. Especially to those Americans who think that our country can isolate itself from the rest of the world. And there are isolationists on the right and on the left. Those on the right who believe that just screaming "America First" and "we don't care about the rest of the world" is even an option. And those on the left who don't visualize the concept of trade agreements.

Social paradigms are likely to shift: How we interact with each other, public gatherings, crowds.... And, at the same time, the hygiene. Even how we greet each other..

Another is how we look at healthcare. No country can go through this again without universal healthcare.

Business paradigms are also shifting. As a business owner I'm seeing this in real time. Work from home is skyrocketing. And small business owners are quickly learning how they can network B2B remotely.

I'm sure I'm missing others...

 

Agreed!

Our approach to things that we formerly took for granted is going to be transformed. Just take work from home. Back in the early 1980's I had my senior programmer on a major project tell me that her doctor had confined her to home because she would otherwise miscarry. Although PC's were in their infancy they could be used as mainframe terminals and so with a pair of modems we set her up to work from home instead. A couple of years later we had 5 of our programmers all working from home as they raised their small children.

Bizarrely enough it was only a year or so prior to retiring that I heard a manager complaining about working from home because he could not be sure that people were actually working. I asked him why he mattered if the work was being completed on time? Did it matter if the work was being done at 2 pm or 2 am after giving a newborn a night feeding? Did it matter if someone did the work after putting their kids to bed first?

Old habits are sometimes ingrained without people realizing why they are there. Does everyone have to commute at the same times every day? Does everyone need to be in the same place just to have a status meeting? Can a meeting take place virtually instead of flying across country?

And yes, small businesses are finding other ways to achieve things. For instance in rural areas were wireless internet is prevalent there are regulations to installing repeater stations. One local entrepreneur opted to offer free internet to homeowners who allowed him to install repeater stations on their homes. Win-win.

Something else I am noticing is how local businesses are adapting to social distancing. If you need your car serviced they will come and fetch it and return it afterwards. Customers are offering to pay forward to hairdressers so as to have a "credit" when things get back to normal. This means that they can stay in business and reopen and then use the "credit" to offset the costs of having their hair done later.

People are adapting and adaptable. We will be questioning a lot of our previous assumptions after this is over.

 

Alarmingly, the Trump administration is reconstructing our legal system piece by piece by judicial fiat abolishing our constitutional human rights and legal protections. Disaster capitalism is in full swing in this pandemic as it sees a golden opportunity to institute by force what they cannot install by deception, and secrecy alone. In other words, we are seeing the re-emergence of Nazi legal theory.

After fleeing Nazi Germany the Marxist, Herbert Marcuse, wrote in 1934 a critique of German fascist society and attempted to identify those beliefs and philosophical themes found within German fascist ideology.

Marcuse later worked for the US Office of War Information (OWI) on anti-Nazi propaganda projects. In 1943, he moved to the Research and Analysis Branch of the Office of Strategic Services (OSS), the precursor to the Central Intelligence Agency. The US intelligence Service, OSS, hired Marcuse to write an analysis on the Soviet Union’s economy and ideology published the 400 page report as Soviet Marxism: A Critical Analysis (1958 ). Marcuse concluded that the USSR was a third rate welfare state and would collapse in 40 years. The OSS didn’t like Marcuse’s conclusion since it would discourage the ongoing military buildup to the Cold War and buried the report.

Marcuse believed that the seeds of fascism could be found in the capitalist democratic liberal state, which over time mutate as monopoly capitalism gain control of the State as in the case of Germany. The evolution of capitalism is also the concealed dialectic of fascism. Those mutated liberal democratic ideas and values are betrayed by a totalitarianism based on action and force. Using Germany as his example of a fascist society Marcuse writes:

From what social idea in Capitalistic Liberalism did this decisionism evolve? It is none other than the economic hero, the free independent entrepreneur of industrial capitalism.

The total-authoritarian state is born out of the Liberal state and the former concept of the economic leader is transformed into a Fuhrer.

We can see this mutation of the concept of the “born” executive into the leader-state (Fuhrerstaat). Americans have merged the CEO with that of the State Leader. Regardless of Trump’s actions he is seen as a “strong” president otherwise he would not be a born executive or a born leader. He is a doer and not a thinker, and his followers are proud of this persona. His opponents and members of the “reality based community,” are viewed as “feminine.”

Carl Schmitt, a Nazi Law constitutional jurist in Hitler’s Third Reich, wrote a similar justification of power for the State Leader using the concept of the “exception” in his work “Political Theology,”

The Trump administration will gradually depend exclusively on the Nazi legal theory of the "exception" and "decision making" to work in a "trans-legal space" which will become the new norm.

The theologian and philosopher of the Age of Reason, Immanuel Kant, wrote the Critique of Pure Reason (1781) in part to preserve the dignity of human beings over the power of politics by leaving room for faith, the good, and humanity.

 

Not for, as you are set on your ways. But for the younger generation, they see things quite differently. It is what I don’t understand about Republicans, that they think they have to force a system that will surely die on the vine as the majority of y’all die off in the next twenty years or so. You must know that today’s young people are better educated and more worldly looking than the older generation ever was.

 

So let's explore this question in detail (since what's obvious to me is apparently not obvious to you).

MMT proposition: A sovereign government (with consolidated treasury and central bank, aka the public sector) has a sovereign - and exclusive - currency-issuing capacity (for the specific currency of the given nation).

Note: citizens (aka the private sector) are users of the currency; unlike the government, they must indeed earn, beg, steal, or borrow the currency, to engage in the nation's economic life.

I think we both agree on that.

Now it is apparent that, in your mind, this currency-issuing capacity, if employed by government, is equivalent to "money growing on trees".

But you are wrong.

One way to understand this is to consider the role of money in an economy; but let's first consider an economy operating without money at all:

wealth = resources + knowhow + labour.

Note: no mention of money, in that identity at all. So how necessary is money?

In fact, it would be theoretically possible to run an entirely centrally-planned economy (with complete access to details about all the citizens) with an entirely centrally planned and organised production and distribution system, without resort to money at all. [Refer again to the above identity].

However, in a monetary system (without central planning of production and distribution) a central bank might deposit, via treasury and central bank, money created ex nihilo, into citizens' bank accounts without causing inflation provided the resources exist on which to spend the money.

Perhaps the current situation in which governments are being forced to rescue their economies - while economies are forced into 'hibernation' - will make the point clear.

It's possible governments around the world will soon be in 'debt' to the tune of, say, $60 trillion or more in total (given the US alone has just passed a $3 trillion rescue package). This burden would severely hamper future growth prospects....and Bill Gates has said we should expect more pandemics in the future...so governments could end up entirely spending all their tax income on interest repayments to bond holders. .

The point is economies have been forced onto life support while people, other than those in employed in essential industries required to maintain life, have been told to stay at home.

Now obviously, the government can use its currency issuing capacity at this time to pay for the essential costs of workers who have lost their jobs (and wages), because there is a massive under-utilisation of the nation's productive capacity and resources at this time, so inflation will not be an issue.

btw, Trump obviously has his eye on the growing massive debt load...….and so is thinking of completely re-opening the US economy in time for Easter Sunday services - praise the Lord! But did he not learn from the congregation-related, corona-virus catastrophe in S. Korea? Imagine that; he might be about to set the US on a similar catastrophic course, when in fact he can direct the treasury to simply issue the necessary money, without adding one cent to the US debt.

In short, in such a time as this, money can "be grown on trees"...…(counter-intuitively.....)

And even in normal circumstances, MMT shows there is nearly always some slack in a market economy, which can be utilised via the government's currency issuing capacity to maintain REAL full employment (not the micky mouse 3.5% figure bandied about in the official figures: U6 + those no longer registered as seeking work is actually > 10%, ie recession level).

http://www.politicalforum.com/index.php?threads/mmt-overcoming-the-political-divide.569365/

----------

Conclusion: given certain conditions - 'money CAN "grow on trees".....

Are you with me yet?

 

What is wrong is your claim that I stated or inferred ... paraphrased or other - what you are claiming

So here we are ... still trying to find the bar - which you desperately need to find .. musically .. alcohol .. what ever your pleasure - but all in moderation ... which is the conversation we have been having...

My claim was that the CIC - was not unlimited - and that at a certain point there would be impacts - for trying to fk with the invisible hand - and it is him that maintains that money does not grow on trees and you who is trying to claim otherwise.

I have never claimed that Gov't spending was like money growing on trees. .. I have always maintained that money does not grow on trees.

You are the one claiming that Gov't can run "near" unlimited deficits - as if money grows on trees - that they can just print money till the cows come home.

Well hey ... your theory is going to be tested .. cause we spending some serious cash this year .. My guess is above 3.5 Trillion.

 

We will nail this down eventually.

1. Adam Smith - and classical economists in general - did not consider a role for the public sector in wealth creation.
MMT considers a role for BOTH the invisible hand market and the treasury/central bank.

2. I cannot recall ever saying the CIC was unlimited (other than in a theoretical sense); I have always said government - unlike the private sector which is constrained by money - is constrained by resources, not money.

Now it seems you interpret this as "unlimited CIC". I hope this is not the case, and we can move along.

You haven't claimed that, because you think government must tax or borrow in order to spend (even though we agree the government's CIC is real).

Am I correct in this?

Indeed I'm telling you - using your own mainstream neoliberal terminology which is used to ridicule MMT - that in limited cases, money can "grow on trees".

And here is the explanation, which you omitted in your reply, and which it is time for you to consider:

…….

One way to understand this is to consider the role of money in an economy; but let's first consider an economy operating without money at all:

wealth = resources + knowhow + labour.

Note: no mention of money, in that identity at all. So how necessary is money?

In fact, it would be theoretically possible to run an entirely centrally-planned economy (with complete access to details about all the citizens) with an entirely centrally planned and organised production and distribution system, without resort to money at all. [Refer again to the above identity].

However, in a monetary system (without central planning of production and distribution) a central bank might deposit, via treasury and central bank, money created ex nihilo, into citizens' bank accounts without causing inflation provided the resources exist on which to spend the money.

Perhaps the current situation in which governments are being forced to rescue their economies - while economies are forced into 'hibernation' - will make the point clear.

It's possible governments around the world will soon be in 'debt' to the tune of, say, $60 trillion or more in total (given the US alone has just passed a $3 trillion rescue package). This burden would severely hamper future growth prospects....and Bill Gates has said we should expect more pandemics in the future...so governments could end up entirely spending all their tax income on interest repayments to bond holders. .

The point is economies have been forced onto life support while people, other than those in employed in essential industries required to maintain life, have been told to stay at home.

Now obviously, the government can use its currency issuing capacity at this time to pay for the essential costs of workers who have lost their jobs (and wages), because there is a massive under-utilisation of the nation's productive capacity and resources at this time, so inflation will not be an issue.

btw, Trump obviously has his eye on the growing massive debt load...….and so is thinking of completely re-opening the US economy in time for Easter Sunday services - praise the Lord! But did he not learn from the congregation-related, corona-virus catastrophe in S. Korea? Imagine that; he might be about to set the US on a similar catastrophic course, when in fact he can direct the treasury to simply issue the necessary money, without adding one cent to the US debt.

In short, in such a time as this, money can "be grown on trees"...…(counter-intuitively.....)

And even in normal circumstances, MMT shows there is nearly always some slack in a market economy, which can be utilised via the government's currency issuing capacity to maintain REAL full employment (not the micky mouse 3.5% figure bandied about in the official figures: U6 + those no longer registered as seeking work is actually > 10%, ie recession level).

http://www.politicalforum.com/index.php?threads/mmt-overcoming-the-political-divide.569365/


Conclusion: given certain conditions - 'money CAN "grow on trees".....