Down with idiocy!

Comments on DownWithTyranny! on ‘The Smartest Economist In America Explains What Deficits Really Mean’

Blog-Reference and Blog-Reference

This is what deficits really mean:

• MMT: Money-making for the one-percenters
• MMT is ALWAYS a bad deal for the 99-percenters
• MMT, money creation, stealth taxation, and redistribution

Egmont Kakarot-Handtke

Related 'Wikipedia and the promotion of economists’ idiotism (I)' and  'Wikipedia and the promotion of economists’ idiotism (II)' and 'Profit' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' and 'The page where Stephanie Kelton gets macroeconomics wrong'.

See also on Twitter #MMT #LearnMMT #DebunkMMT #FailedScience #FakeScience #ScientificIncompetence #MMTers #StupidOrCorruptOrBoth #Profit #ProfitTheory  #SectoralBalances #PrivateSectorSurplus #PublicDeficitIsPrivateProfit #MacroEconomics #MacroFoundations #HowMMTservesTheRich #FreeLunch #Oligarchy #BadScienceBadPolicyBadPeople

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COMMENT on Debtee Dec 30 and MNE on Dec 31

From macroeconomic analysis follows Public Deficit = Private Profit.#1

Either Stephanie Kelton does not understand this, then she is an incompetent scientist. Or, she understands it, then she sells a social bluff package for the benefit of the one-percenters.#2

If Stephanie Kelton is the “Smartest Economist In America” one trembles to contemplate how stupid the rest is.


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 MMT: The one deadly error/fraud of Warren Mosler

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This pivotal MMT sectoral balances equation is false.

Source: Google Images MMT

For the axiomatically correct equation see National Accounting: scientific incompetence or political fraud? and Wikipedia and the promotion of economists’ idiotism and MMT and the magical profit disappearance and The Profit Theory is False Since Adam Smith.

This is the correct equation   (I−S)+(G−T)+(X−M)−(Q_m−Y_D)=0 with Q_m monetary profit and Y_D distributed profit.

Sectoral Balances: False = MMT, True = AXEC

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There are four macroeconomic sectors (household sector, business sector, government sector, and the Rest of the world) but in the following charts one sector is missing, more specifically, the balance of the business sector = profit is nowhere to be seen. Why are two or more sectors lumped together? This obscures the crucial fact that Public Deficit = Private Profit given the balances of the household sector and the Rest of the world.

 Source: Google Images MMT

Exactly here, the rhetorical shell game starts because Domestic Private Balances is household sector's and business sector's balances lumped together. Thus profit becomes invisible.

  

The political fraud of MMT is in the false social solidarity of "We". Because Public Deficit = Private Profit "We" = ninety-nine percenters is actually "They" = one-percenters.

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REPLY to Bill on Jan 2 and Blog-Reference MNE

You say: “Does Kelton understand that Public Deficit = Private Profit? She said as much: “the government’s −$10 is always matched by +$10 in some other part of the economy.”

Kelton’s incompetence is in these four words “in some other part”. The macroeconomic Profit Law says unequivocally Public Deficit = Private Profit and NOT in “in some other part”.#1

Either Stephanie Kelton does not know the Profit Law, which is fundamental to ALL of the economics, or she obscures it for some reason.

There is NO need to speculate about Stephanie Kelton’s ulterior motives. What has been proven is that MMT is materially and formally inconsistent, that is, scientifically worthless.#2 Therefore, ALL economic policy proposals of MMTers, including Stephanie Kelton, have NO sound scientific foundations.

Contrary to the social appearance, MMT is de facto agenda-pushing for the one-percenters. MMTers, including Stephanie Kelton, are either stupid or corrupt or both.#3

#1 For the proof see here

#2 For the full-spectrum refutation of MMT see cross-references MMT

#3 MMT: The one deadly error/fraud of Warren Mosler

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LINK to The Kelton-Fraud and REPLY

Source: Twitter Jun 26, 2018

“THEIR” red ink is not “OUR” black ink but “THEIR” profit

because

Public Deficit (red ink) = Private Profit (black ink).

if the other sectors are taken out of the picture for the moment.

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Twitter 2018 Nov 11, The fraud goes on

Source Twitter Nov 11, 2018

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Twitter 2019 Feb 17

Source: Twitter Feb 17, 2019

Note that "private entities net flow of savings" is composed of the household sector's saving and the business sector's profit. The balance of the household sector is called saving. The balance of the business sector is called profit. Both cannot be lumped together to private entities' savings. This is the Humpty Dumpty Fallacy.


Twitter Jul 26, 2019

Source: Twitter

Twitter Oct 26, 2019

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Link to Econoblog101, Dirk Ehnts, Sectoral balances of the eurozone, 2016 Jul 14

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Twitter Jul 26, 2020

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Twitter Aug5, 2020

Source: Twitter Alexandra Scaggs

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Twitter Nov 9, 2020

Source: Twitter

Twitter Jan 17, 2021

Twitter Jan 29, 2021

Twitter Feb 3, 2021 Profit is the balance of the business sector but it is nowhere to be seen

Twitter Apr 1, 2021 Spain

There is NO “private sector” only the business sector (balance profit/loss) and the household sector (balance saving/dissaving). The 4-sector #ProfitLaw reads Q≡Yd+(I−S)+(G−T)+(X−M).

Twitter June 19, 2022 USA

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Wikimedia AXEC118d

The creation and value of money and near-monies

Comment on Clint Ballinger on ‘Of Bitcoins and balance sheets: the real lesson from Bitcoin’

Blog-Reference

Clint Ballinger argues: “The national government creates the numeraire for the system (the “Dollar” in the US, the “Pound” in the UK, etc.) and in addition to spending directly into the economy in that numeraire, the government allows a public/private system (publicly regulated private banking system) to operate with the same numeraire. This creates a single system for the public but in fact, arises from two separate but linked balance sheet expansions.
But why do the tokens from either of these balance sheet expansions have and maintain value?
The government maintains the value of its balance sheet tokens by demanding that some of its tokens, once a year, must be paid back to the government. This guarantees that everyone in that nation will accept and value the tokens from the national balance-sheet expansion.
The tokens that arise from the public/private bank balance-sheet expansion maintain their value analogously ― by the obligation to repay bank loans.
Together, the obligation to pay taxes and the obligation to repay bank loans maintain the value of a currency. Note that both of these rest on the government/legal system of a nation.”

The claim that the value of money depends ultimately on the taxing power of the state is, of course, plain MMT nonsense.

Time to finally settle the theory of money. Because economics is a failed science it has to be reconstructed from scratch. Walrasian microfoundations and Keynesian macrofoundations have to be scrapped.

As the new analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Y_w=WL wage income Y_w is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Y_w in each period, the price is given by P=W/R (1), i.e. the market-clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation see Figure 1.#1

The price is determined by the wage rate, which takes the role of the nominal numéraire, and productivity. The quantity of money is NOT among the price determinants. This puts the commonplace Quantity Theory to rest.

The real value of money is ultimately given by productivity. From (1) follows W/P=R, i.e. real wage = productivity. The value of money has NOTHING AT ALL to do with the taxing power of the state. In the production-consumption economy with budget balancing and market clearing, the wage income receivers always get the whole output O=RL.

Monetary profit for the economy as a whole is defined as Q_m≡C−Y_wand monetary saving as S_m≡Yw−C. It always holds Q_m≡−S_m, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget balancing, total monetary profit is zero.

What is needed for a start is two things (i) a central bank which creates money on its balance sheet in the form of deposits, and (ii), a legal system which declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Y_w per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e. if C=Y_w.

Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. This time sequence is no problem for the central bank because the temporary overdrafts vanish with wage payments.

For the case of a balanced budget C=Y_w, the idealized transaction sequence of deposits/overdrafts of the household sector at the central bank over the course of one period is shown in Figure 2.#2

The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. The business sector’s transaction pattern is the exact mirror image. Money, that is, deposits at the central bank, is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an ACCOMMODATIVE role and simply supports the AUTONOMOUS market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=κY_w, with κ determined by the transaction pattern. In other words, the average stock of money M is determined by the AUTONOMOUS transactions of the household and business sector and created out of nothing by the central bank. The economy NEVER runs out of money if the central bank makes a good job.

The transaction equation reads M=κY_w=κPX=κPRL in the case of budget balancing and market clearing and this yields the commonplace correlation between the average stock of money M and price P for a given employment level L, except for the fact that M is the DEPENDENT variable.

Money comes into existence on the balance sheet of the central bank as soon as the central bank enters an overdraft for the business sector on the asset side and a deposit of an equal amount on the liability side (step 1). This deposit is then transferred to the household sector as wage payment (step 2) and returns in the form of consumption expenditures (step 3).#3

Now commercial banks are introduced. They can create and destroy ‘money’ technically exactly in the same way as the central bank except for the fact that it is bank money and not central bank money. The crucial condition for the functioning of the two-monies system is that the business sector and household sector accept bank money as practically identical to central bank money.

To be sure, in the strict sense bank deposits is NOT money, only central bank deposits are money. This becomes clear as soon as the households/firms try to exchange huge amounts of bank money for central bank money. This is known as a bank run. In this case, the central bank has to step in and help the banks out with the one and only genuine money. The best way to prevent bank runs from ever happening is the unconditional guarantee of the central bank to exchange bank money anytime and in any amount into central bank money.

So, the private sector = banks can create near-money that works under the appropriate institutional conditions just as central bank money. The real value of near money is the same as central bank money. Acceptance and the real value of money and near-money do NOT depend on the state’s taxing power.

Problems arise if money is not in the right way brought into circulation. Roughly speaking, as long as the central bank or the private banks or whoever else finances the wage bill Yw, and the wage rate W moves exactly with the productivity, the price P remains according to (1) absolutely constant. The real value of money/near money rises and falls ultimately with productivity.

However, if the money is brought into circulation at the demand side such that the household sector takes up credit and spends it on consumption goods things are radically different. The market-clearing price rises and this reduces the real value of wage income. The output is now redistributed between income spenders and credit spenders, i.e. P₁=(C+C_cr)/O > P=C/O with C=Y_w and O=X.#4

Secondly, the business sector now makes a profit, i.e. Q_m=C_cr. It holds: the household sector’s deficit (dissaving) is equal to the business sector’s surplus (profit). If the money is brought into circulation by the government’s deficit spending it holds Public Deficit = Private Profit. Hence, MMTers as champions of state money creation and deficit-spending are ultimately ― knowingly or unknowingly does not matter ― agenda pushers for the one-percenters.#5

With regard to Bitcoin follows that it is not even remote-money, like a traveler’s check for example, because the issuer does not guarantee to exchange it back at any time one-to-one into bank money or central bank money. The value of Bitcoin depends alone on the expectation that another private person will eventually exchange it for money or near-money or a financial or real asset.#6

Egmont Kakarot-Handtke


#1 Wikimedia AXEC31 Elementary production-consumption economy
#2 Wikimedia AXEC98 Idealized transaction pattern, household sector, balanced budget
#3 Basics of monetary theory: the two monies
#4 MMT, money creation, stealth taxation, and redistribution
#5 MMT is ALWAYS a bad deal for the 99-percenters
#6 Primary and Secondary Markets

Related 'The ultimate ― analytical ― origin of money'.

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REPLY to Matt Franko, Tom Hickey Dec 30

In the political realm, there is rhetoric, storytelling, and obfuscation. In the scientific realm, there is axiomatization, consistency/proof, and clarity.

In the political realm, Humpty Dumpty rules: “‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all’.”#1

In the scientific realm, Aristotle rules: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

Economists never got above the level of proto-scientific storytelling and political agenda pushing.#2

Money is clearly defined and measurable with the precision of two decimal places. Money (liability side of the central bank’s balance sheet) is different from bank money, near-money, remote-money, pseudo-money, quasi-money, counterfeit money, crypto money, clay tablets, bullion, IOU, etcetera.

Needless to emphasize that the representative economist in general, and the MMTer in particular, have until this very day NO clear idea of the basic concepts of his subject matter, e.g. profit, income, money, and so on. But he has a lot to blather about democracy, the mob, and liberalism.


#1 Humpty Dumpty is back again
#2 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist

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Specifics of the creation of E-Money/eMoney, cryptocurrency, etc.

Twitter Aug 21, 2021

Twitter Jan 28, 2022 #CryptoIsCrime

Twitter Nov 11, 2022

Twitter Nov 18, 2022

Twitter Nov 19, 2022 Media promotion of crypto and FTX

Twitter Nov 22, 2022

Silly criticism of economics: 11 signs that you are the imbecile

Comment on Chris Auld on ‘18 signs you’re reading bad criticism of economics’*

Blog-Reference

Mainstream economics/Orthodoxy faces a barrage of criticism. Most of the arguments, though, are rather silly and easy to refute by Orthodoxy. Accordingly, this type of criticism is quite welcome because in contrast to the imbecility of the criticism the absurdity of the maximization-and-equilibrium world appears in a better light. In a sense, Orthodoxy is still alive only because of silly criticism: “The enemies, on the other hand, have proved curiously ineffective and they have very often aimed their arrows at the wrong targets.” (Hahn)

The ineffective/false/silly/time-wasting arguments against Orthodoxy are:#1
1. cannot predict the future,#2
2. too much mathematics,#3
3. the assumptions/models are unrealistic,#4
4. not pluralistic,#5
5. not empirical enough,
6. justifies/encourages greed and exploitation,#6
7. should care more for the environment, We-the-People, our grandchildren,
8. should communicate better, especially with laypersons,
9. should take sides with the ninety-nine-percenters, and not with the one-percenters,#7
10. the proponents have unethical/selfish motives,
11. the proponents lack credibility.

Criticism ultimately cements only the status quo: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug) Science is not about signs or second-guessing or interpretation or credibility or authority but alone about knowledge and material/formal proof. The only effective criticism is the Paradigm Shift.

The mission of economics is to figure out how the economic system works. Economics is a systems science and neither a so-called social science nor political agenda-pushing.

Egmont Kakarot-Handtke


#1 See also Failed economics: The losers’ long list of lame excuses
#2 Scientists do NOT predict the future
#3 Mathiness is NOT the problem — scientific incompetence is
#4 Lacking the Midas touch of science
#5 Economics: The pluralism of false theories is over
#6 The economist as moralist
#7 The end of political economics

*
18 signs you’re reading bad criticism of economics
18 signs you are not having a productive conversation about economics
18 Signs Economists Haven’t the Foggiest

Related 'Again and again: economists are incompetent scientists' and 'False models and true incompetence'.

Again and again: economists are incompetent scientists

Comment on Dani Rodrik on ‘The Economics Debate, again and again’

Blog-Reference and Blog-Reference

Economics is a failed science. What we actually have is the pluralism of false theories/ models. The four major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.#1

The current state of economics is indefensible#2 but economists even praise it as something positive. Pluralism, to recall, is NOT the scientific ideal but merely the original state of ignorance and confusion: “There are always many different opinions and conventions concerning any one problem or subject-matter (such as the gods). This shows that they are not all true. For if they conflict, then at best only one of them can be true. Thus it appears that Parmenides ... was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other ...” (Popper)

Science is committed to truth. The rest of human communication is blather, storytelling, propaganda, and disinformation. Economics never rose above the level of an unplausible myth.

So, no surprise, Dani Rodrik’s first two commands for economists are nothing but methodological nonsense: “1. Economics is a collection of models; cherish their diversity. 2. It’s a model, not the model.”

For 200+ years, economists do not really understand what science is all about: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant) Because of this incurable lack of understanding, economics is what Feynman called a cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

Economists lack true theory. And this is rather bad because: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum) A heap of inconsistent models is no substitute for the true theory.

The lethal arguments against Orthodoxy and traditional Heterodoxy are:
• since Adam Smith/Karl Marx economics is political agenda pushing in the bluff package of science,
• the subject matter of economics is the economic system as a whole, economics is a systems science and NOT a behavioral science,
• orthodox microfoundations, as well as Keynesian macrofoundations, are provably false,
• economics has no sound axiomatic foundations, because of this, the whole analytical superstructure is false, and because of this, economic policy guidance NEVER had sound scientific foundations

Economics is a cargo cult science and economists are fake scientists. Criticism of economics is a waste of time, nothing less than a Paradigm Shift will do.

Egmont Kakarot-Handtke


#1 Profit and the collective failure of economists
#2 Economics: Defending the indefensible
#3 For details of the big picture see cross-references Failed/Fake scientists

Related 'Cranks? What cranks? That’s economics!' and 'How the mainstream vanished in the gutter' and 'Dani Rodrik, fake scientist' and 'Silly criticism of economics: 11 signs that you are the imbecile' and 'New Economic Thinking: the 10 crucial points' and 'Economists are NOT scientists but stupid/corrupt storytellers' and 'Your economics is refuted on all counts: here is the real thing'. For details of the big picture see cross-references Paradigm Shift.

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Wikimedia AXEC121i

False models and true incompetence

Comment on Chris Auld on ‘Derek Zoolander, spherical cows, the Guardian, and econophysics’

Blog-Reference and Blog-Reference

Economics is a failed science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.

Quite naturally, there are a lot of explanations/lame excuses swirling around.#1 One of them relates to the use of models: “Pop critics such as John Rapley should at least understand why economists use models with obviously false assumptions, they should understand why such models can be useful even they are wrong, and they should be aware that all sciences, not just economics, routinely use models with false assumptions.” (Chris Auld)

This is true but the argument is nonetheless idiotic.

A chimpanzee can solve problems. For example, he can put chairs and boxes on top of another and use a stick in order to get the bananas that the experimenter has fixed on the ceiling. Other chimpanzees then imitate the problem-solving strategy. This works fine until the problem situation changes such that the hitherto successful strategy fails and a new solution is required.

Let us call the creative problem solver scientist. Economists, unfortunately, are only imitators/epigones/look-alikes: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.” (Feynman)

It is pretty obvious that economists fall into the category of cargo cult scientists, they lack genuine problem-solving capacity. The problem is NOT that they apply models and abstractions and simplifications and ‘unrealistic’ assumptions and mathematics, the problem is that they do not apply these scientific tools properly. They are incompetent imitators and do not really understand what science is all about.#2

One example suffices. Walrasian Orthodoxy is defined by these verbalized axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

The Walrasian hardcore contains three NONENTITIES ― HC2, HC4, HC5. To take equilibrium into the premises and then establish the properties of general equilibrium is a methodological blunder known since antiquity as petitio principii.

The basic question of economics is whether “the existing economic system is, in any significant sense, self-adjusting.” (Keynes) One simply cannot put the unknown answer into the premises. This is a primitive methodological blunder. Because of this, ALL equilibrium models are a priori false.

All this is known for 2300+ years: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle)

But instead, this happened in economics: orthodox microfoundations, as well as Keynesian macrofoundations, are provably false. Economics has no sound axiomatic foundations, because of this, the whole analytical superstructure is false, and because of this, economic policy guidance NEVER has had sound scientific foundations.

Economists are simply scientifically incompetent.#3 Their striking mental deficiency is the Fallacy of Insufficient Abstraction.#4

Egmont Kakarot-Handtke


#1 Failed economics: The losers’ long list of lame excuses
#2 All models are false because all economists are stupid
#3 Throw them out! Orthodox and heterodox economists are unfit for science
#4 “The highest ambition an economist can entertain who believes in the scientific character of economics would be fulfilled as soon as he succeeded in constructing a simple model displaying all the essential features of the economic process by means of a reasonably small number of equations connecting a reasonably small number of variables. (Schumpeter, 1946)

Related 'Economics and the Fallacy of Insufficient Abstraction' and 'Petitio principii — economists’ biggest methodological mistake' and 'Replacing the neoclassical axioms' and 'Economists’ proto-scientific methodology' and 'Cranks? What cranks? That’s economics!' and 'Toolism! A Critique of EconoPhysics' and 'Dilettantes at the end of the coal-pit' and 'Macro for dummies'. For more details of the big picture see cross-references Scientific Incompetence.

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Wikimedia AXEC121i

Mr. Corbyn and the perils of political economics

Comment on Simon Wren-Lewis on ‘Voting Labour isn’t going to turn the UK into Venezuela’

Blog-Reference

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

After 200+ years, economists still do not have the true theory. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.#1

It holds: “If economics cannot aspire to any substantive knowledge of economic relationships, it cannot speak with authority about questions of economic policy.” (Blaug) Without valid scientific foundations, economics reduces to something between educated common sense and brain-dead political blather.

The situation is as follows: “The understandable wish of many heterodox economists to have an influence on Labour policy does mean there is a potential competition for influence. Will Labour policy be based on policies derived from mainstream analysis, or those favoured by some heterodox economists?” (Wren-Lewis)

Because both Orthodoxy and Heterodoxy are proto-scientific garbage there is no real choice. Economics across the full spectrum from DSGE to MMT is provably false.

There is no need to speculate about why it is important for “… economists not to arrive late to these battlefields, …” Since Adam Smith/Karl Marx, economics is political agenda pushing in the bluff package of science.

Granted that economists are subjectively convinced that they help to bring about the Good Society, but due to their scientific incompetence their economic policy guidance, more often than not, makes matters worse.#2

Granted that MMTers are subjectively convinced that they help the ninety-nine percenters, but due to their scientific incompetence they are objectively promoting the cause of the one-percenters.#3

The non-separation of politics and science is the original sin of economics and the ultimate cause of its failure. What the general public needs to realize is that economics is cargo cult science and that political economists are fake scientists.

From Labour’s Economic Advisory Council, Mr. Corbyn gets advice that is backed either by DSGE ≈ Walrasian economics or by MMT ≈ Keynesian economics. Both approaches are axiomatically false and therefore scientifically worthless.

Egmont Kakarot-Handtke


#1 Throw them out! Orthodox and heterodox economists are unfit for science
#2 How economists murdered the economy and got away with it
#3 Keynes, Lerner, MMT, Trump and exploding profit

Related 'The end of political economics' and 'Economists cannot do the simple math of profit — better keep them out of politics' and 'There is NO such thing as an economic expert' and 'Economics, methodology, morals ― a creepy freak-show' and 'This is New Economic Thinking? Give me a break!'. For details of the big picture see cross-references Political economics and cross-references Incompetence.

Keynes, Lerner, MMT, Trump, Biden, and exploding profit

Comment on Lars Syll’s ‘If only Trump had read Abba Lerner!’

Blog-Reference and Blog-Reference Dec 23

Lars Syll quotes Abba Lerner approvingly: “The first financial responsibility of the government (since nobody else can undertake that responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce. If total spending is allowed to go above this there will be inflation, and if it is allowed to go below this there will be unemployment. The government can increase total spending by spending more itself or by reducing taxes so that taxpayers have more money left to spend. It can reduce total spending by spending less itself or by raising taxes so that taxpayers have less money left to spend …”

There are several errors/mistakes/blunders in this argument but the key point is that there is no such thing as the suggested symmetry of budget deficits and surpluses such that both cancel out over a reasonable time span. If this were the case nobody would worry about public deficits. But this, obviously, does not happen, public debt increases incessantly and this, not deficits per se, makes people think that there must be something fundamentally wrong with the economy and with economics. And they are right.

Roughly speaking, the growing public debt has not eliminated unemployment and not increased inflation but has caused the explosion of profits and huge changes in the distribution of income and financial wealth. No surprise, then, that Mr. Trump is an enthusiastic proponent of deficit-spending/money-creation.#1 More surprising is perhaps that the one-percenter Trump and the champions of the ninety-nine-percenters Keynes/Lerner/MMT are on the same page. The explanation for this weird coincidence is that Mr. Trump’s instinctive grasp of profit is better than that of economists.#2

In order to fully appreciate the proto-scientific state of both orthodox and heterodox economics, one needs the axiomatically correct theory. Because economics is a failed science it has to be reconstructed from scratch.

As the new analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Y_w=WL wage income Y_w is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Y_w in each period, the price is given by P=W/R, i.e. the market-clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation see Wikimedia.#3

The price is determined by the wage rate, which takes the role of the nominal numéraire, and productivity.

Monetary profit for the economy as a whole is defined as Q_m≡C−Y_w and monetary saving as S_m≡Y_w−C. It always holds Q_m≡−S_m, in other words, the business sector’s profit (loss) equals the household sector’s dissaving (saving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget balancing, total monetary profit is zero.

So that profit comes into the world, the household sector must run a deficit. This means, first of all, that profit for the economy as a whole has NOTHING to do with productivity, exploitation, risk-taking, innovation, monopoly power, etcetera. The familiar profit theories are nothing but an embarrassing Fallacy of Composition.

The axiomatically correct Profit Law is given for the general case as Q_m≡Y_d+(I−S_m)+(G−T)+(X−M). Legend: Q_m total monetary profit, Y_d distributed profit, I investment expenditures, S_m monetary saving, G government expenditures (consumptive), T taxes, X exports, M imports. Neither Walrasians, Keynesians, Marxians, nor Austrians got profit right until this very day. This is why economics is a failed science.

From the general macroeconomic Profit Law follows Q_m=G−T if Y_d, I, S_m, X, M = 0, that is, Public Deficit = Private Profit.

From false economic theory follows false economic policy. What Keynes,#4 Lerner, MMT,#5, and the other proponents of public (and private) deficit spending have in effect achieved ― whether intentionally or unintentionally does not matter ― is the profit explosion of the last decades. It is absurd that scientifically incompetent economists see themselves, or at least present themselves, as Friends-of-the-People.#6 Nothing could be farther away from fact or truth.

Egmont Kakarot-Handtke


#1 Source

Source: Twitter

#2 Austerity and the idiocy of political economists
#3 Wikimedia AXEC31 Elementary production-consumption economy

#4 Keynesianism as ultimate profit machine
#5 MMT: The one deadly error/fraud of Warren Mosler
#6 MMT is ALWAYS a bad deal for the 99-percenters

Related 'The true nature of economists' confusion' and 'Debt and other unsolved economic problems' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'Links on Austerity' and 'From austerity talk into deficit overdrive' and 'Inequality, wage and profit' and 'The memorable Kelton/Trump victory against WeThePeople' and 'Cross-references Refutation of I=S'.

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REPLY to Matt Franko, Tom Hickey, Kaivey, Greg, Calgacus on Dec 25

Public Deficit = Private Profit. This is what the axiomatically correct Profit Law tells us. It is known that neither Keynes, Lerner, Mosler nor the rest of MMTers ever understood how the profit- and price mechanism works. So, this bunch of retards who call themselves economists and propagate deficit-spending as the cure-all in effect pushes the agenda of the one-percenters and is responsible for the observable skewed distribution of income and wealth.

It is a nice try to obscure this fact with your silly blather about soap-making and Darwinism and Hitler and Mussolini and Venezuela and Zeitgeist and garbage collection and philosophy and spirituality and so on towards the infinite horizon of endless stupidity.

If you really want to do something to promote Good Society or Science take the remote control and never stop again looking at sitcoms.

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REPLY to Kaivey on Dec 25

You say: “Are you able to write in a few paragraphs, either on your site or here, how your system will redistribute wealth to the poor and solve the problem of the One Percent …” and “I’ve looked at your site and I think you need to write a lay man’s explanation and if it takes more than a few paragraphs, that’s fine.”

Either you cannot read or have not looked at my site. See How the 99 percent can bring overall profit of the 1 percent legally down to zero in 2017

Your post convinces me that it would indeed be best for folks like you to take the remote control and never stop again looking at sitcoms.

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REPLY to Kaivey on Dec 26

You ask rhetorically: “Do we really want the most cold scientific economic system for mankind, which would produce the most inhumane working system ever?”

No, for heaven's sake, “we” want Stephanie Kelton’s Job Guarantee Program which is composed of Care for the Environment, Care for the Community, Care for the People.#1

Is Stephanie Kelton a politician who wants our votes? No, she is an economist. That’s excellent because I don’t trust politicians. She certainly has a plan on how to finance the program? Yes, she is an MMT economist and says that the program is paid for by a government deficit financed by central bank money creation.

What kind of economics is this? Has she never heard of the Profit Law, i.e. Public Deficit = Private Profit, or stealth taxation?#2

No, she shows a graphic that proves that a government sector deficit increases the net financial wealth of the non-government sector and assures that we are all better off.#3

Genial.

Yes, except for the fact that the sectoral balances have been tampered with.#4 Government deficits increase the net financial wealth of the business sector and not of We-the-people.#5

This cannot be, Stephanie Kelton cares for the people and not for the one-percenters.

Of course, she does, she is only an abysmally incompetent economist.

Perhaps, but she cares for the environment, the community, and the people, and you care only for science.

This is what an economist is supposed to do: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)

MMTers are not scientists but political agenda pushers.#6


#1Twitter

#2 MMT, money creation, stealth taxation, and redistribution
#3 MMT: The one deadly error/fraud of Warren Mosler
#4 MMT and the magical profit disappearance
#5 The profit effect of a Job Guarantee
#6 MMT and the promotion of Wall Street's idea of social policy

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Twitter Sep 26 and evonomics Keynes Was Really a Conservative

Twitter Oct 26, 2021 Mr. Biden and what "the market" wants

Twitter/X Dec 30, 2023