Blog-Reference and Blog-Reference
Noah Smith summarizes: “Her [Stephanie Kelton’s] reasoning, common in MMT circles, is that government deficits are also private-sector surpluses. That’s simple accounting ― since there are only the government and the private sectors in the world, when the government borrows it’s the private sector that lends. When banks or individuals buy government bonds, they become net lenders, meaning that they’re running a financial surplus with respect to the government.”
That’s NOT simple accounting, that’s false accounting. The fact is that economists get macroeconomic accounting wrong since Keynes.#1 The scientific embarrassment is that accounting is elementary mathematics. Because MMTers are too stupid for elementary math the whole theoretical superstructure falls apart, which, in turn, means practically that MMT policy proposals have NO sound scientific foundation.
Whatever Stephanie Kelton thinks she is doing or claims she is doing for the ninety-nine percenters is a matter of indifference, what she is actually doing is agenda-pushing for the one-percenters.
From correct macroeconomic accounting follows Public Deficit = Private Profit. With the MMT policy, the business sector is always better off. The household sector, on the other hand, always holds the bag. It is taxed in real terms in the period of government deficit spending without realizing it. It is taxed in subsequent periods if the interest on government debt is greater than zero, and it is taxed in nominal terms in the indefinite future, i.e. beyond the time horizon, in order to eventually redeem the accumulated government debt.
The Pavlovian counter-argument against MMT is that it produces inflation. This is nonsense, more precisely, old Quantity Theory nonsense. MMT policy does not cause inflation but massive distributional distortions.#2
MMTers and Post Keynesians and Functional Financers in their utter scientific incompetence simply have no idea how the monetary economy works. The profit and employment theory is provably false since Keynes.#3
With MMT policy, Warren Mosler and his scientifically incompetent academic supporters have found a way to propagandistically endorse full employment, healthcare, and all other popular social agendas and to increase at the same time the business sector’s profit with the help of the sovereign money-issuing state.#4
Egmont Kakarot-Handtke
#1 Rectification of MMT macro accounting
#2 MMT, money creation, stealth taxation, and redistribution
#3 MMT: The one deadly error/fraud of Warren Mosler
#4 MMT and the promotion of Wall Street's idea of social policy
Related 'Selling public debt with Ricardo’s tear gland rhetoric' and 'How MMT enlightens Washington' and 'MMT: Just another political fraud' and 'MMT: Money-making for the one-percenters' and 'From the debt economy to the gift economy: how America is brainwashed to love budget deficits' and 'Links on Austerity'.
For details of the big picture see cross-references MMT.
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REPLY to Matt Franko on Dec 2You say: “Well the MMT people will often readily admit that ‘the only limit to high deficit is inflation’ so your point here is a bit off the mark... iow it is not a counter argument but a disagreement on scale effect of the tax cuts... iow Smith thinks the "inflation" threshold will be breached and apparently the MMT elites do not...”
What the MMT people readily admit is old Quantity Theory nonsense. Deficit spending leads to a one-off price hike and NOT to inflation.#1 The disastrous effect of MMT is NOT on inflation but on DISTRIBUTION.#2
The whole inflation argument is a bit off the mark.
#1 Gov-Deficits do NOT cause inflation
#2 Austerity and the idiocy of political economists
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REPLY to MRW on Dec 3You say: “You’re still peddling this notion that the US federal level macroeconomy is based on your definition of science, terms you insist must be obeyed in order for you to grant the poobahs from your point-of-view the honor of being an economic scientist here.”
The Law of Gravity and 2+2=4 applies always and everywhere. This is the very kick of science that it applies universally. The same holds, of course, for economic laws and the elementary math of accounting.
Warren Mosler argues: “In other words, government deficits equal increased ‘monetary savings’ for the rest of us, to the penny. Simply put, government deficits ADD to our savings (to the penny). This is an accounting fact, not theory or philosophy. There is no dispute. It is basic national income accounting.”#1
No, correct accounting says Public Deficit = Private Profit. Warren Mosler is either stupid or he deliberately deceives his brain-dead followers. His assertion “Simply put, government deficits ADD to our savings (to the penny).” is false. It is NOT “our” savings but “their” profits.
If you do not understand what science is all about, that’s OK. But that academics and people with an economics diploma like Mitchell, Tcherneva, Wray, Kelton, Fullwiler, Forstater, Kaboub, Tymoigne, etc. join Warren Mosler’s sales force is strange, to say the least.
#1 MMT: The one deadly error/fraud of Warren Mosler
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REPLY to MRW on Dec 4You say: “I don’t agree, Public Deficit = Private Profit. Doesn’t make sense.”
National accounting deals with period flows for the economy as a whole. Your airport example shows that you do not understand what aggregated period flows are. The lack of sense is in your head.
Consistent National Accounting results in the formula Public Deficit = Private Profit. Private profit is total monetary profit for the business sector as a whole. The formula is provable and testable to the penny. For the proof see Rectification of MMT macro accounting.
For the MMT accounting mistake/error/fraud see MMT and the magical profit disappearance.
Public deficit spending has always been a profit machine for the one-percenters, see Keynesianism as ultimate profit machine.
That people who call themselves Progressives argue for deficit spending is either stupidity or fraud or both, see Austerity: Who takes the little man for a ride?.
MMT policy does NOT cause inflation but the gigantic distortions of the distribution of income and wealth that so-called Progressives criticize so vehemently. A bit schizo, isn’t it?