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Modern Monetary Theory (MMT) (Read 86883 times)
thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #960 - Aug 25th, 2024 at 11:04am
 
aquascoot wrote on Aug 24th, 2024 at 4:59pm:
are you the treasurer of the failed socialst state of venezuela or the failed socialist state of somalia  Roll Eyes Roll Eyes Roll Eyes Roll Eyes Roll Eyes Roll Eyes Roll Eyes Roll Eyes Roll Eyes Roll Eyes Roll Eyes


No; those countries didn't follow the important point I mentioned in 'summary':

"... when those goods and services are available for purchase" ie, purchase by the currency-issuing government.

Think again.....


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Re: Modern Monetary Theory (MMT)
Reply #961 - Aug 25th, 2024 at 11:41am
 
aquascoot wrote on Aug 24th, 2024 at 4:59pm:
socialism still beguiled leading intellectuals and politicians of the West.


Yes, because frequent market failure, cost of living crises, and periodic recessions badly affect less well-off citizens.   

Quote:
They believed, with John Maynard Keynes, that “the state is wise and the market is stupid.”


Keynes of course developed his economic policies largely in reaction to the Great Depression, which was largely a faiure of finance systems.

The important take from Keynes today is his famous remark: "if the (currency-issuing) nation can build it, the nation can afford it".

Quote:
As soon as the guns of World War II fell silent, Britain’s Labour Party nationalized every major industry and acceded to every socialist demand of the unions.

.....At first, socialism seemed to work in these vastly dissimilar countries.

......GDP growth in Great Britain averaged 3 percent from 1950 to 1965, along with a 40 percent rise in average real wages, enabling Britain to become one of the world’s more affluent countries.

But the government planners were unable to keep pace with increasing population and overseas competition.


A correct analysis, except for "planners couldn't keep pace with increasing population" - which is nonsense, planners can always plan for increasing population.   

Quote:
After decades of ever declining economic growth and ever rising unemployment, all three countries abandoned socialism and turned toward capitalism and the free market.


Wrong on a number of counts; the apparent 'failure' of  the Keynesian welfare state in the West happened quickly in the 70's, (not decades)  due to the Arab oil embargo which caused inflation in the West, and a simultaneous   loss of industry to low wage Asia, cuasing an increase in unemployment (in the West) 

Quote:
The resulting prosperity in Israel, India, and the U.K. vindicated free-marketers who had predicted that socialism would inevitably fail to deliver the goods.


Wrong again: the "prosperity" wasn't evenly shared as many communities sank into '1st world rust belt' status. 

Quote:
As British prime minister Margaret Thatcher observed, “the problem with socialism is that you eventually run out of other people’s money.”


Yet taxes on the rich have been reduced since the introduction of the post-Thatcher neoliberal era, which is why inequality is now soaring, and the West (and the entire globe)  is suffering a cost of living crisis courtesy of your "capitalist" free market dogma.

As for taxes, I'm here to tell you currency-issuing governments don't need your taxes, when the goods and services the government needs are available for purchase by the government.

See the next post re Starmer's lies - he's turning out to be as useless as an ashtray on a motor bike.
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Re: Modern Monetary Theory (MMT)
Reply #962 - Aug 25th, 2024 at 11:57am
 
Daily Mail

Keir Starmer: Things will only get WORSE... before they get better

Sir Keir Starmer will this week warn of more pain to come as he claims that the state of modern Britain is 'worse than we ever imagined'**.

In his first major speech since entering No 10, the Prime Minister will say that 'things will get worse before they get better'.

And he will claim as well as inheriting a £22 billion blackhole from the Tories, Labour had also been left a 'societal blackhole'.

But Sir Keir will vow not to 'shy away from making unpopular decisions' to restore the country, and fix the 'rot' left by the Tories.

Last night Labour sources denied that was code for punishing tax hikes expected in this Autumn's Budget, saying the PM was 'trying to be honest that the change people voted for will take time'.

However, Tory party chairman Richard Fuller accused the Prime Minister of 'fabricating' financial problems 'to con the public into accepting tax increases'. The PM's keynote speech will come one week before Parliament returns after its Summer recess.


See the silly political games?

The Conservatives (who can look after themselves) want low taxes, and hence low government spending to ensure balanced budgets; and indeed everyone wants low taxes - so Starmer is forced into lying that he can bring about the changes the people voted for, without increasing government spending and raisng taxes. 

Deplorable.

The solution to ending those silly political games - beloved of wellpaid politicians on both sides - is revealed in these pages.

** aquascoot thinks things are just dandy.... 

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Re: Modern Monetary Theory (MMT)
Reply #963 - Aug 26th, 2024 at 11:13am
 
The real culprits behind the democratic dysfunction afflicting the entire world: mainstream economists (in this case, Saul Estlake):

AAP 

Labor warns of budget chaos as premier seeks new deal

The chaos of Tasmania's government will lead to "economic destruction" if a new deal cannot be reached with two newly independent MPs before the state budget, Labor has warned.

Braddon MP Miriam Beswick and Bass MP Rebekah Pentland declared on Sunday they will sign a new agreement guaranteeing supply and confidence to the government after they were expelled from the network founded by Tasmanian senator Jacqui Lambie.

The pair are among the crossbenchers Jeremy Rockliff's minority Liberal government relies on to stay in power after the March election.

"We are committed to providing the certainty and stability Tasmania deserves," they said.

But Labor Opposition Leader Dean Winter said the premier needs to get the new agreement sorted as quickly as possible, ahead of the state budget.


"The Liberal-Lambie coalition is already in tatters four months after it was formed and instability like this is very bad for the economy," he told reporters on Sunday.

"Minority governments are bad for the economy...This is what it looks like; it looks like chaos, it looks like economic destruction."

A condition of the Jacqui Lambie Network agreeing to work with the Liberal government, in power since 2014, was a deal for an independent report into the state's finances.

Economist Saul Eslake's analysis painted a bleak picture of the state's budget and found the Liberal government was "entirely to blame" for Tasmania's economic deterioration.

He estimated net debt would rise to more than $16 billion in 2034/35, more than 25 per cent of gross state product, unless tax reform is implemented.


There you have it: a dumb, blind economist urging "tax reform", when everyone knows taxes are anathema to politicians who want to get elected  - which is why the decade-old Henry tax reform proposals have been ignored by successive governments.  Winter of course has no proposals of his own, other than urging the disillusioned electorate to put him into power...

The government is due to respond when the budget is delivered on September 12.

Mr Winter, who replaced Rebecca White as state Labor leader in April, also criticised the broader political instability under Mr Rockliff's government, saying "no one wants an early election".

"Jeremy is a nice guy, but this is getting ridiculous," he said.

"Tasmania is not even due for the (next) election yet and the Premier's Liberal-Lambie coalition has already imploded."


And we still don't know how Winter will fix flat-earth-economist Eslake's $16 billion hole....which the Oz Treasury can eliminate with the stroke of a pen....

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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #964 - Aug 28th, 2024 at 11:02am
 
Evil, sneaky Tory bastards:

(Daily Mail)

Sir Keir Starmer accused of plotting tax raid on the middles classes

Last night Tory leadership contender Kemi Badenoch said: 'Keir Starmer is taking the British public for fools, but his dishonest analysis won't wash. He campaigned on promises he couldn't deliver and now he is being found out.

'They are prioritising the demands of their trade union paymasters over investment in public services. But, like all Labour governments, they will eventually run out of money – paving the way for a tax raid on the middle classes.'


Notice - no mention of a "tax raid" on the wealthy, at a time of inadequate public spending and soaring inequality.

So the "middle classes" have to fight amongst themselves:

Unite general secretary Sharon Graham said: 'We need change. A bleak vision of Britain is not what we need now. It is time to see the change that Labour promised.'

Referencing Labour's unpopular decision to strip ten million pensioners of their winter fuel payments, she warned: 'We should not pit pensioners against workers. That is not a choice that should be on the table.'


Correct, the choice should be increasing taxes on the top 20% of incomes, plus wealth taxes.
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Re: Modern Monetary Theory (MMT)
Reply #965 - Aug 29th, 2024 at 2:57pm
 
So, since politicians don't like raising taxes (because we are all self-interested, and those who can look after themselves don't like paying increased taxes),  how can government adequately fund public education, public hospitals and public housing (to deal with unaffordable private sector housing)?

[Note: the current controversy about caps on overseas students for Oz universities has arisen because the federal government abandoned funding unis 5 decades ago, and allowed the fake education "export industry " to fill the gap. Oz should be educating its own students, not fee-paying overseas students who increase demand on rent and infrastructure in Oz, causing inflation]. 

One method:

The government funds unis with money issued by the Oz Treasury, the legal currency-issuer in Oz.

Then limit uni intake to students who have the ability to succeed at the tertiary level, no fees required; overseas students limited by available places in Oz.

Control housing and rent prices, and other prices of essential utilities to control inflation, obviating  the need for CB interest rate rises (the blunt tool weilded by CBs  aka "monetary policy").   

Fund sufficient schools and hospitals (and teachers and medical staff) via attractive fixed price contracts (aka wages), thereby eliminating inflation relating to public sector activity.

Another method:

The Greens propose raising taxes, despite it being anathema to politicians who have to win government (as noted above).

ie, sufficiently tax big companies and the wealthy; - but both scream the economy will collapse if they have to pay more tax; and being powerful influencers and donators to governments, they win the day.

[Would the population elect enough  Greens in the Senate to force a minority Labor government  to raise sufficient taxes, which is the Greens strategy? 

Or would Labor side with the Coalition's low tax regime in the Senate....]

Method three: the status quo.

Bumble along with widespread community dissatisfaction and disillusionment with politics, caused by  inadequate public housing, public education and public hospitals.



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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #966 - Aug 30th, 2024 at 11:18am
 
Right on cue:

(Daily Mail)

Fury at Keir Starmer's threat of capital gains tax raid

A feared rise in capital gains tax would be 'the final nail in the coffin' for private landlords already struggling with high charges and red tape, industry figures warned today.

Capital gains tax is charged on the profit made from financial investments such as shares or buy to let properties, with rates set at between 10 and 28 per cent.

But with Labour vowing to avoid rises in income tax, national insurance and VAT , there are fears Chancellor Rachel Reeves could bring the levy in line with income tax rates, which would hike the upper band to 45 per cent.

Andy Partoon, who is from Solihull and has 25 years' experience as a landlord, said any rise in capital gains tax would serve yet another blow to the private rented sector.
He told MailOnline: 'Labour has been talking about rent caps and the repealing of Section 21 evictions. On top of stamp duty and all the other red tape, an increase to capital gains tax would be another nail in the coffin for the buy to let market.

'People don't want to become landlords any more, which is bad for renters. Why on earth would you want to when you face so many charges and red tape, and don't even have control over your own property?'


Yeh yeh; rent-seekers bleating about financial hardship when the private housing market, both re prices and rents, are unaffordable for low wage earners.

The outcome of the Thatcher/Reagan "small government" ideology; houses are for living in - a human right -  not for investment vehicles.

But governments abandoned public housing because taxation was spurned  by "small government" ideologues, now the chickens are conmg home to roost.

Parties of the Left need to start reversing soaring inequality, and tax wealth.

Meanwhile the CBA chief says the Greens' proposal to tax massive company profits is "populist", proving both rent seekers and company bosses don't want to pay more tax.

So governments reside over ever-declining public services, as private sector self-interest reigns supreme. 

Deplorable.


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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #967 - Aug 31st, 2024 at 10:24am
 
A classic case of politicians' ignorance of economics aided and abetted by mainstream flat-earth neoclassical economists (plus Trump's 'inimitable' style):

(microsoft news)

Donald Trump shares bizarre reason why people don’t want to eat bacon anymore


Donald Trump shared his bizarre reason why people don’t want to eat bacon anymore.

The former US president said wind power is stopping people from eating bacon after he delivered a campaign speech in Wisconsin on Thursday (29 August).

Trump gave his comments to a young rally-goer asking what his plan is, "to make life more affordable and bring down inflation for someone like me."

Trump launched into what one critic denounced as a "word salad” and said: “You take a look at bacon and some of these products, and some people don’t eat bacon anymore.”

.......

I suppose Donald was trying to say renewables raise the cost of energy - and bacon; so a return to fossils is the way to bring down inflation....stuff the legally-binding international Paris Agreement.


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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #968 - Sep 7th, 2024 at 4:50pm
 
To recap: the ancient authority - to create money - originally claimed by the state, is now reserved for private money lenders (commerical banks) representing the world's financial elites.

It's time for the public sector, via national treasuries,  to reclaim the authority. 

Treasury officials can avoid inflation via continuous monitoring of the nation's available resouces and productive capacity.
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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #969 - Sep 8th, 2024 at 1:04pm
 
https://www.thenewdaily.com.au/finance/2024/04/01/alan-kohler-monetary-theory

Alan Kohler: Modern Monetary Theory has become modern fiscal practice

Apr 01, 2024, updated Mar 31, 2024

A few years ago everybody was talking about Modern Monetary Theory, both ardently for and scornfully against, but nobody was doing it.

Now everybody is doing it but hardly anybody is talking about it, apart from American economist Stephanie Kelton, promoting a film on the subject.

Doing what, exactly? Governments are showing by their deeds that deficits and debt don’t matter.

Global government debt has hit a record high of $US82 trillion, more than double what it was before the GFC, and no sign of slowing since the end of the pandemic.

The world’s governments, in aggregate, haven’t managed a surplus for 20 years, and even then, it was small and brief.

MMT is not mentioned by name, but its prime heresy – that deficits don’t matter – has become gospel.

Australian Treasurer Jim Chalmers will soon announce his second surplus, but the government’s long-term forecasts show a return to deficits that last at least 10 years. If they thought it mattered, politically or economically, they wouldn’t.

In the United States the Congressional Budget Office is also projecting deficits forever, with endlessly rising government debt.

There is no serious objection to this, but there hasn’t been a mass public conversion to MMT, so what’s changed?

The reasons against

Three things: First, the pandemic revealed (again) the power of fiscal policy along with the fact that those particular deficits, at least, not only didn’t matter they were essential; second, Japan has shown that you can go for decades, and counting, with deficits and rising debt, and third, the baby boomer retirement bulge is forcing governments to confront the idea that balanced budgets are impossible, so they have given up trying.

The last of those is the most important. As BlackRock CEO Larry Fink wrote in his annual letter to shareholders last week: “It’s not just that more people are retiring … it’s also that their retirements are increasing in length. Today, if you’re married and both you and your spouse are over the age of 65, there’s a 50-50 chance at least one of you will be receiving a social security cheque until you’re 90.”

On top of that the cost of climate change – trying to prevent it and dealing with its effects – will be enormous and governments know it.

And Australia has added its own extra degree of difficulty with a National Disability Insurance Scheme based on diagnosis rather than need. There’s an attempt now to recover that mistake but it may be too late – disability is being properly supported.

The sort of tax increases required to balance the budget in these circumstances would be somewhat inconsistent with staying in power.

The combination of increased retirement support and health care spending with a shrinking working age population paying taxes means that balanced budgets are now politically too hard – the only way a government can hope to get re-elected is to kick the can down the road and just not talk about it.

Oppositions, especially conservative ones, would love to talk about it, but as soon as they are pressed for actual solutions, they must clam up.

So understandably, the political classes are giving up on it – a balanced budget over the course of the economic cycle, which has long been the Australian refrain, is too hard. It’s not even possible, really.

The solution? **, nobody’s getting voted out because of it, and even the conservatives are only half-hearted in their complaints, because they don’t want to be challenged to nominate which spending to cut, and who to tax.


** the ignorant mainstream press are complaining, of course.

‘Just not true’

But what about the growing burden of interest payments, crowding out other spending?

In her book, The Deficit Myth, Stephanie Kelton lets everyone off that hook; she says it’s a mistake to see interest as a burden.

“Paying interest on government bonds is no more difficult than processing any other payment.”

She wrote that it’s “just not true” that rising interest payments shrink the amount of money left over for other priorities – “there is no fixed pot of money”.

But as Kelton then went on to say, there is a limit – it’s inflation. “There is only so much room in the economy to absorb higher spending. That’s the constraint …”

Rising interest payments act as a form of fiscal stimulus – the more there is, the more stimulus.

The massive fiscal stimulus of the pandemic did produce inflation in 2022, but it was transitory and easily controlled.

Interest on debt is only inflationary to the extent that it’s paid to locals. A lot of the government debt is held offshore; the interest payments on that do not fuel domestic inflation.

Modern Monetary Theory does not represent permission to print money to fund government spending as a lot of people think, it’s just a description of the way government finances work, which is that government spending takes place before tax revenue is collected (from that spending to begin with, and the only constraint on the spending is inflation.

And that, it turns out, is the way things are working.




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Re: Modern Monetary Theory (MMT)
Reply #970 - Sep 9th, 2024 at 11:37am
 
Labor is in danger of minority government after the next election, because the electorate is blaming Albo for the failure to manage the cost of living crisis.

The electorate is also blamimg Labor for high interest rates, despite the independence of the reserve bank, even while the Coalition is accusing Labor of disregarding the "independence of the reserve bank.  

Ironically, the blame for all this economic dysfunction lies with (Labor) Andrew Leigh's profession which is intent on maintaining its 'dismal science' moniker.....

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Re: Modern Monetary Theory (MMT)
Reply #971 - Sep 10th, 2024 at 4:12am
 
Well…. I’m at Tulla airport waiting for my flight… I see these machines don’t like loose change anymore.
Totally cashless and to scan.
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Re: Modern Monetary Theory (MMT)
Reply #972 - Sep 10th, 2024 at 10:35am
 
Steve Keen confirms  Alan Kohler's observations re the idiocy of trying to reduce government debt to achieve balanced budgets:

https://profstevekeen.substack.com/p/watching-two-labour-parties-destroy?utm_sou...

Watching Two Labour Parties Destroy Themselves:
Blame economics textbooks for UK Labour's abolition of the Winter Fuel Payment


Steve Keen
Sep 09, 2024
The Australian Labor Party, which was elected in May 2022 after a decade of conservative rule (by Australia’s misnamed “Liberal” Party), has destroyed its once substantial electoral lead, and now looks likely to lose the 2025 election. Its best outcome will be to hang on as a minority government, since most independents and minor parties regard the “Liberal” Party as even more obnoxious than the Albanese-led Labor Party has been while in office.

Not to be outdone, the UK’s Labour Party, elected in July 2024, has fallen from a 36% share of votes to 30% just 2 months later, while the Conservative Party has risen from 23% to 26%, and its right-wing companion Reform has risen from 15% to 19%. The UK’s bizarre first-past-the post electoral system—not so much satirized as accurately described by Monty Python’s famous Election Night Special skit—makes the outcome a crap shoot, but the odds of Labour coming out on top in 2029 are already vanishingly small.

Both Labo(u)r Parties have chosen to fail by following what they think is the successful strategy for a government: they made their first priority, not to fulfil the social and economic objectives that led voters to elect them, but to reduce government debt. In probably the most dramatic example of economic orthodoxy trumping social democracy, UK Labour Party leader Keir Starmer’s first major policy decision is to let pensioners who can’t afford heating freeze, in order to reduce the gap between government spending and taxation—which he and his Chancellor refer to as the “£22 billion black hole”—by £1.5 billion.

This fetish with reducing government spending is braindead stupid. It persists because it’s a stupidity that is taught by University economics departments, and believed by most of its students—some of whom go on to become Prime Ministers and Chancellors.

If they don’t rebel against this teaching, it comes to be the way they think the real world actually works. Whether politicians are Labour, Liberal, or Tory, whether they do just a bit of undergraduate economics in a PPE (“Philosophy, politics and economics”) degree—as Rachel Reeves did before her Masters degree—or go on to do a full PhD, the way they think as a politician is shaped by what they learnt at university.

This makes economics degrees extremely powerful, as Paul Samuelson, the author of the first post-WWII textbook, which set the mould for all its successors, fully appreciated. In the preface to a teaching guide to his textbook, he wrote that:

"I don't care who writes a nation's laws--or crafts its advanced treaties--if I can write its economic textbooks." The first lick is a privileged one, impinging on the beginner's tabula rasa at its most impressionable state.  (Samuelson 1990, p. ix)

The "first lick" in one of the dominant economics textbooks today—Greg Mankiw’s Macroeconomics {Mankiw, 2016 #6107}—is a model which teaches students that government spending is a bad thing.

After laying out the model in the previous 30 pages, Mankiw explains that, according to the model, an increase in government spending reduces investment:

Consider first the effects of an increase in government purchases …  The immediate impact is to increase the demand for goods and services… But because total output is fixed by the factors of production, the increase in government purchases must be met by a decrease in some other category of demand. Disposable income  … is unchanged, so consumption … is unchanged as well. Therefore, the increase in government purchases must be met by an equal decrease in investment.  (Mankiw 2016, p. 73)

Mankiw cautions that there are some “simplifying assumptions” in this model which are relaxed later—such as output being fixed. But this foundational model plants in students’ heads the idea that government spending—say, on giving pensioners additional money for heating during winter—will come at the expense of the future growth of the economy.

The removal of some assumptions in subsequent models doesn’t change the underlying proposition: government spending in excess of taxation harms the economy. This belief, etched on “the beginner's tabula rasa at its most impressionable state”, as Samuelson put it, is why Starmer and Reeves think that letting pensioners freeze will be good for the economy.

In reality, it won’t—not merely because the simplifying assumptions of this model are wrong, but because its fundamental assumptions about what government spending does, how it is financed, and the impact of government spending on private investment, are also wrong.

I’ll explain why in subsequent posts.




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Re: Modern Monetary Theory (MMT)
Reply #973 - Sep 19th, 2024 at 11:56am
 
The Aggregate Problem
Economic models are built on aggregates of key variables. Those aggregates hide distribution impacts. That makes it easier for central banks to pursue monetary policy without worrying about the cons


by Steve Keen.

The UK’s unemployment rate is 4.1%, the inflation rate is growing at 3.1% and the economy is growing at 0.6% quarter on quarter. That’s how the economy is doing, what more do we need to know?

Well, it would be useful to know whether the unemployed are predominantly in certain income groups, or that income growth was greater in particular parts of the economy Like, more for capitalists and less for workers?

As Steve and Phil discuss this week, economists are building business models built on aggregates.  Breaking down aggregate data into functions in society, or income, will add a lot of extra complexity to models, but they would do a much better job of showing us what’s going on. For example, central bank policy right now aims to restrict spending and wage growth to tame inflation. But, even if that was the cause of inflation, what if those creating inflation by spending more on services, are distinct from those facing the consequences of central bank policy, losing jobs and paying higher mortgages?

Steve points out that as the economy slows – and it has to because of climate change -   knowing the distribution of income and consumption becomes vitally important. Unless we are prepared to see the rich grow richer at the expense of everyone else.
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Re: Modern Monetary Theory (MMT)
Reply #974 - Sep 23rd, 2024 at 11:13am
 
On the news:

"Securing 42.31 per cent of the vote, Leftist lawmaker Anura Kumara Dissanayake has won Sri Lanka's presidential election. His rise to power signals a rejection of the political establishment blamed for the country's economic downfall.
....

He wants to renegotiate the terms of the IMF loan which demanded higher taxation for an already impoverished people.

Such is the dogma of 'the dismal science': force people into poverty to 'save ' the economy.

But the orthodox dogma doesn't work; the IMF 'rescue' of Greece during the GFC demanded higher taxes and privatization.

The result is clear: just before the GFC, Greek gdp per capita was c.$30k, 15 years later its still only c.$20K.

It will be interesting to compare Milei's mainstream policies in Argentina - which have already increased poverty since he was elected, with Kamura's policies in Sri Lanka.

I don't hold out much hope for either of them, given the 'rules' of the 'dismal science' which are destroying democracies  everywhere, regardless of a government's  Left or Right persuasion.

[Chalmers is crowing about his balanced budgets and low taxation - even while Dutton is demanding even lower taxes and less spending -  and yet Labor polling is falling like a stone because of the current cost of living crisis, with Dutton now back in the race....such is the confusion of the electorate sucked in by the dogmas of 'the dismal science'].   

 
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