Comment on Brian Romanchuk on ‘MMT In The Newsflow Again’
Blog-Reference and Blog-Reference
Brian Romanchuk observes some communicative delirium: “There have been a number of attempts to ‘explain’ MMT by various American conservatives. As one might expect, those attempts have been pathetic; …” and then heads towards a solution: “There are two angles of attack to this debate.
1. Are MMT policy proposals radical?
2. Is it a radical approach to economic theory?”
This, though, means nothing else than a continuation of the communicative delirium. The point is to get out of meta-communication about MMT and to ask the scientifically relevant question: Is MMT true or false? with truth well-defined as material and formal consistency. Who cares about whether MMT is “radical”?
The scientist’s goal is to definitively settle a given question: “That the settlement of opinion is the sole end of inquiry is a very important proposition.” (Peirce) The blatherer’s goal, on the other hand, is simply to blather on in all eternity. After all, professional windbags, journalists, propagandists, soapbox economists, and trolls seek, like anybody else, long-term employment in a decently paid job.
There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda; the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. This also holds for MMT. MMT is refuted on all counts. #1 Scientifically, MMT is dead and buried; however, it still has substantial talk-show qualities. #2
Brian Romanchuk brushes off the shallow pseudo-explanations provided by “various American conservatives”: “Modern Monetary Theory is part of a long line of post-Keynesian economics; if you want to understand the theory, there’s a lot of reading to do.”
True. Indeed, there is not only a lot of reading to do for MMTers but ― even more important ― of thinking. What MMTers do not understand to this day is that post-Keynesian economics is scientifically dead since Keynes. Keynes got macroeconomics wrong, and post-Keynesians, including MMTers, have not spotted the blunder. #3
The blunder is baked into the MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0. This equation proves that MMTers are too stupid for the elementary mathematics that underlies macroeconomic accounting.#4
Brian Romanchuk eventually stumbles upon the crucial point: “… my Twitter feed has been filled with condescending comments from mainstream economists who state that MMT has no empirical aspects to it. Firstly, if one does not read the literature, one will not find empirical work. Secondly, how much empirical work can we expect from theory in the first place?”
Good question. What, first of all, has to be done empirically is to decide between the false MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 and the axiomatically correct equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0. And this will settle the matter once and for all. The MMT equation will be empirically falsified ― after it has already been logically falsified ― and with it the whole verbal superstructure of MMT blather/fraud.
Egmont Kakarot-Handtke
#1 For the full-spectrum refutation of MMT, see cross-references MMT
#2 The economist as stand-up comedian
#3 Why Post Keynesianism Is Not Yet a Science
#4 Wikipedia and the promotion of economists’ idiotism (II)
Related 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'The page where Stephanie Kelton gets macroeconomics wrong'.
January 21, 2019
January 20, 2019
Ontological uncertainty is NOT the problem but economists’ ontological stupidity
Comment on Lars Syll on ‘Paul Krugman ― a methodological critique’
Blog-Reference
When economists are asked why they have achieved little or nothing of scientific value in the last 200+ years, they answer that their subject matter is characterized by idiosyncratic difficulties, i.e. uncertainty and complexity. Here is the classical answer: “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort’.” (Bagehot, 1885) #1
The simple fact of the matter, though, is that economists are scientifically incompetent. One good example is Keynes.#2, #3 Keynes is known as the discoverer of economic uncertainty and its disastrous implications for the sheer possibility of economic theory.
What is uncertainty? “In his 1937 article entitled ‘The General Theory of Employment,’ Keynes, responding to critics of the general theory, offered the following definition of uncertainty: By ‘uncertain’ knowledge, let me explain, I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty. . . . Or . . . the expectation of life is only slightly uncertain. Even the weather is only moderately uncertain. The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence. . . . About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.” (Ferrari-Filho et al.)
Trivially true, indeed, except for the fact that ontological uncertainty is taken as a methodological excuse for the overall failure of economics: “One thing that’s missing from Krugman’s treatment of economics is the explicit recognition of what Keynes and before him Frank Knight, emphasized: the persistent presence of enormous uncertainty in the economy … Why is uncertainty so important? Because the more of it there is in the economy the less scope for successful maximizing and the more unstable are the equilibria the economy exhibits, if it exhibits any at all …” (Rosenberg, see Intro)
What economists overlook is that most of economic uncertainty is produced by the historically evolved bad design of the economy. Since Adam Smith, the economy is supposed to be a self-regulating system that produces optimal outcomes if not interfered with. Fact is, though, that the opposite is provably true. #4 As a result, it can be said that ontological economic uncertainty is, in most cases, the direct product of economists’ ontological stupidity.
Let us give one example.
As the 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) Yw=WL wage income Yw 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=Yw in each period, the price is given by P=W/R. The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R.
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 Yw 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=Yw. Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. For the case of a balanced budget, the idealized transaction sequence of deposits/overdrafts at the central bank over the course of one period is shown under the label of Graphic AXEC98
The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. Money 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. The economy NEVER runs out of money. If employment L is doubled, the average stock of transaction money doubles. In a fiat money economy, growth is not hampered by a lack of a transaction medium.
The price is determined by the wage rate and productivity. Both vary over time unpredictably. Now, if one wants absolute price stability in the elementary production-consumption economy from beginning to eternity, one has to apply the simple rule: change of wage rate = change of productivity. That’s all. Productivity may be influenced by unpredictable weather conditions or external shocks; this uncertainty is compensated for by changes in the wage rate so that the market price P remains absolutely constant. Needless to emphasize that this also eliminates the problem of destabilizing price expectations.
The task of economists is NOT to senselessly repeat Keynes’ silly mantra ‘We simply do not know’, but to figure out how uncertainty can be eliminated from the economic system.
Do not expect that proven imbeciles like Paul Krugman or Lars Syll will ever figure out anything.
Egmont Kakarot-Handtke
#1 Failed economics: The losers’ long list of lame excuses
#2 Forget Keynes
#3 Cross-references Failed/Fake Scientists
#4 Proof of the inherent instability of the market economy
Related 'Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It' and 'Trust in economics as a science?' and 'Is Lars Syll’s stupidity really infinite?' and 'Cryptoeconomics ― the best of Lars Syll’s spam folder' and 'What is dead certain in an uncertain world: economists’ abysmal incompetence' and 'Uncertainty: ‘Whereof one cannot speak, thereof one must be silent’' and 'The scientific self-elimination of Heterodoxy' and 'Econogenics: economists pose a hazard to their fellow citizens'.
Blog-Reference
When economists are asked why they have achieved little or nothing of scientific value in the last 200+ years, they answer that their subject matter is characterized by idiosyncratic difficulties, i.e. uncertainty and complexity. Here is the classical answer: “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort’.” (Bagehot, 1885) #1
The simple fact of the matter, though, is that economists are scientifically incompetent. One good example is Keynes.#2, #3 Keynes is known as the discoverer of economic uncertainty and its disastrous implications for the sheer possibility of economic theory.
What is uncertainty? “In his 1937 article entitled ‘The General Theory of Employment,’ Keynes, responding to critics of the general theory, offered the following definition of uncertainty: By ‘uncertain’ knowledge, let me explain, I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty. . . . Or . . . the expectation of life is only slightly uncertain. Even the weather is only moderately uncertain. The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence. . . . About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.” (Ferrari-Filho et al.)
Trivially true, indeed, except for the fact that ontological uncertainty is taken as a methodological excuse for the overall failure of economics: “One thing that’s missing from Krugman’s treatment of economics is the explicit recognition of what Keynes and before him Frank Knight, emphasized: the persistent presence of enormous uncertainty in the economy … Why is uncertainty so important? Because the more of it there is in the economy the less scope for successful maximizing and the more unstable are the equilibria the economy exhibits, if it exhibits any at all …” (Rosenberg, see Intro)
What economists overlook is that most of economic uncertainty is produced by the historically evolved bad design of the economy. Since Adam Smith, the economy is supposed to be a self-regulating system that produces optimal outcomes if not interfered with. Fact is, though, that the opposite is provably true. #4 As a result, it can be said that ontological economic uncertainty is, in most cases, the direct product of economists’ ontological stupidity.
Let us give one example.
As the 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) Yw=WL wage income Yw 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=Yw in each period, the price is given by P=W/R. The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R.
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 Yw 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=Yw. Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. For the case of a balanced budget, the idealized transaction sequence of deposits/overdrafts at the central bank over the course of one period is shown under the label of Graphic AXEC98
The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. Money 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. The economy NEVER runs out of money. If employment L is doubled, the average stock of transaction money doubles. In a fiat money economy, growth is not hampered by a lack of a transaction medium.
The price is determined by the wage rate and productivity. Both vary over time unpredictably. Now, if one wants absolute price stability in the elementary production-consumption economy from beginning to eternity, one has to apply the simple rule: change of wage rate = change of productivity. That’s all. Productivity may be influenced by unpredictable weather conditions or external shocks; this uncertainty is compensated for by changes in the wage rate so that the market price P remains absolutely constant. Needless to emphasize that this also eliminates the problem of destabilizing price expectations.
The task of economists is NOT to senselessly repeat Keynes’ silly mantra ‘We simply do not know’, but to figure out how uncertainty can be eliminated from the economic system.
Do not expect that proven imbeciles like Paul Krugman or Lars Syll will ever figure out anything.
Egmont Kakarot-Handtke
#1 Failed economics: The losers’ long list of lame excuses
#2 Forget Keynes
#3 Cross-references Failed/Fake Scientists
#4 Proof of the inherent instability of the market economy
Related 'Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It' and 'Trust in economics as a science?' and 'Is Lars Syll’s stupidity really infinite?' and 'Cryptoeconomics ― the best of Lars Syll’s spam folder' and 'What is dead certain in an uncertain world: economists’ abysmal incompetence' and 'Uncertainty: ‘Whereof one cannot speak, thereof one must be silent’' and 'The scientific self-elimination of Heterodoxy' and 'Econogenics: economists pose a hazard to their fellow citizens'.
January 19, 2019
MMT: From science to agenda-pushing to story-telling to fraud
Comment on Ben Hunt on ‘Modern Monetary Theory (Or, How I Learned To Stop Worrying & Love The National Debt)’
Blog-Reference
There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda; the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent, and all got the foundational economic concept ― profit ― wrong. In other words, there is NO such thing as scientifically valid economics.
This also holds for MMT. MMT is refuted on all counts. #1
Scientifically, MMT is dead and buried; however, it still has some use-value in the political Circus Maximus, where nobody ever cared for scientific validity and where useful idiots are in strong demand. #2
Accordingly, Ben Hunt does not waste a split-second on a scientific refutation of MMT but psychoanalyses: ”Modern Monetary Theory ― which is neither modern nor a theory ― is a post hoc rationalization of political expediency and power-expanding action. It makes us feel better about all the bad stuff we’ve done with money and debt for the political efficacy of Team Elite.”
With this, the whole issue is outside of science and in the bottomless swamp of politics. This swamp is the habitat of brain-dead blathers, agenda-pushers, entertainers, storytellers, propagandists, media trolls, and fraudsters.
Ben Hunt’s main arguments against MMT are: “MMT is the theoretical justification for the economic policies of Trump and his Wall Street fellow travelers alike, who want nothing more than to keep the market punchbowl in place and well-spiked with pure grain ZIRP alcohol forever and ever, amen. MMT is the theoretical justification for the economic policies of every potential Democratic presidential candidate in 2020. Because with MMT, you CAN have it all. You can pay for wars without end. You can pay for universal single-payer healthcare. You can pay for everyone to go to college. You can pay for a universal basic income.”
The political sovereign can, as a matter of principle, have any combination of war, healthcare, education, basic income, interest payments for existing debt, and easy money, given the production potential of the country. This is the very definition of sovereignty. The crucial question is: does all this happen (i) with a balanced budget or (ii) with deficit-spending/money-creation?
The pivotal trait of MMTers is that they abhor budget-balancing over any time span and promote permanent deficit-spending/money-creation. This translates into an ever-increasing public debt and the interest thereon.
The lethal negative effect of permanent deficit-spending/money-creation, though, is on distribution.#3 According to the macroeconomic Profit Law [Q≡Yd+(I−S)+(G−T)+(X−M) → Q≡(G−T)], it holds Public Deficit = Private Profit, and this means that MMT policy ultimately benefits the one-percenters and not the ninety-nine-percenters. To pay for social benefits with deficit-spending/money-creation is simply a political fraud.#4 Permanent deficit-spending is a permanent free lunch for the Oligarchy.#5
Ben Hunt, with his silly blather about Dr. Strangelove, Edward III, and Lysenko, obviously misses the full implications of MMT.#6
Economics is not a science, but a political agenda pushing. MMT, too, is NOT a valid theory but a political fraud for the benefit of the one-percenters. #7
Egmont Kakarot-Handtke
#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 The end of political economics
#3 MMT, money creation, stealth taxation, and redistribution
#4 MMT: Not a joke but a fraud
#5 MMT: A free lunch for the Oligarchy
#6 Deficit-spending, public debt, and macroeconomic profit/loss
#7 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
REPLY to Andrew Anderson on Jan 19
You say: “Suppose the population of a country is increasing but the money supply does not grow at least proportionally? Then wages and prices, to the extent they utilize labor, can be expected to fall forever as more and more workers must compete for a fixed money supply.”
That is not correct for a fiat money system.
As the 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) Yw=WL wage income Yw 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=Yw in each period, the price is given by P=W/R (1). The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R.
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 Yw 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=Yw. Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income.
For the case of a balanced budget C=Yw, the idealized transaction sequence of deposits/overdrafts of the household sector at the central bank over the course of one period is shown under the label Graphic. #1
The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. Money 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=κYw, 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.
The transaction equation reads M=κPRL (2) in the case of budget balancing and market clearing. If employment L is doubled, the average stock of transaction money M doubles. In a fiat money economy, growth is NOT hampered by a lack of the transaction medium.
As long as the central bank finances the wage bill Yw=WL with money creation out of nothing, and with wage rate W and productivity R fixed, the price P does not move one iota according to (1). The average quantity of money M increases/decreases according to (2), but there is no inflation/deflation. The creation of fiat money for the payment of wages is the correct way of bringing money into the economy. MMT deficit-spending is the incorrect way.
There is neither government spending nor taxation needed to get the elementary production-consumption economy going and growing.
#1 AXEC98 Idealized transaction pattern
Blog-Reference
There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda; the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent, and all got the foundational economic concept ― profit ― wrong. In other words, there is NO such thing as scientifically valid economics.
This also holds for MMT. MMT is refuted on all counts. #1
Scientifically, MMT is dead and buried; however, it still has some use-value in the political Circus Maximus, where nobody ever cared for scientific validity and where useful idiots are in strong demand. #2
Accordingly, Ben Hunt does not waste a split-second on a scientific refutation of MMT but psychoanalyses: ”Modern Monetary Theory ― which is neither modern nor a theory ― is a post hoc rationalization of political expediency and power-expanding action. It makes us feel better about all the bad stuff we’ve done with money and debt for the political efficacy of Team Elite.”
With this, the whole issue is outside of science and in the bottomless swamp of politics. This swamp is the habitat of brain-dead blathers, agenda-pushers, entertainers, storytellers, propagandists, media trolls, and fraudsters.
Ben Hunt’s main arguments against MMT are: “MMT is the theoretical justification for the economic policies of Trump and his Wall Street fellow travelers alike, who want nothing more than to keep the market punchbowl in place and well-spiked with pure grain ZIRP alcohol forever and ever, amen. MMT is the theoretical justification for the economic policies of every potential Democratic presidential candidate in 2020. Because with MMT, you CAN have it all. You can pay for wars without end. You can pay for universal single-payer healthcare. You can pay for everyone to go to college. You can pay for a universal basic income.”
The political sovereign can, as a matter of principle, have any combination of war, healthcare, education, basic income, interest payments for existing debt, and easy money, given the production potential of the country. This is the very definition of sovereignty. The crucial question is: does all this happen (i) with a balanced budget or (ii) with deficit-spending/money-creation?
The pivotal trait of MMTers is that they abhor budget-balancing over any time span and promote permanent deficit-spending/money-creation. This translates into an ever-increasing public debt and the interest thereon.
The lethal negative effect of permanent deficit-spending/money-creation, though, is on distribution.#3 According to the macroeconomic Profit Law [Q≡Yd+(I−S)+(G−T)+(X−M) → Q≡(G−T)], it holds Public Deficit = Private Profit, and this means that MMT policy ultimately benefits the one-percenters and not the ninety-nine-percenters. To pay for social benefits with deficit-spending/money-creation is simply a political fraud.#4 Permanent deficit-spending is a permanent free lunch for the Oligarchy.#5
Ben Hunt, with his silly blather about Dr. Strangelove, Edward III, and Lysenko, obviously misses the full implications of MMT.#6
Economics is not a science, but a political agenda pushing. MMT, too, is NOT a valid theory but a political fraud for the benefit of the one-percenters. #7
Egmont Kakarot-Handtke
#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 The end of political economics
#3 MMT, money creation, stealth taxation, and redistribution
#4 MMT: Not a joke but a fraud
#5 MMT: A free lunch for the Oligarchy
#6 Deficit-spending, public debt, and macroeconomic profit/loss
#7 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
***
REPLY to Andrew Anderson on Jan 19
You say: “Suppose the population of a country is increasing but the money supply does not grow at least proportionally? Then wages and prices, to the extent they utilize labor, can be expected to fall forever as more and more workers must compete for a fixed money supply.”
That is not correct for a fiat money system.
As the 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) Yw=WL wage income Yw 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=Yw in each period, the price is given by P=W/R (1). The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R.
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 Yw 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=Yw. Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income.
For the case of a balanced budget C=Yw, the idealized transaction sequence of deposits/overdrafts of the household sector at the central bank over the course of one period is shown under the label Graphic. #1
The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. Money 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=κYw, 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.
The transaction equation reads M=κPRL (2) in the case of budget balancing and market clearing. If employment L is doubled, the average stock of transaction money M doubles. In a fiat money economy, growth is NOT hampered by a lack of the transaction medium.
As long as the central bank finances the wage bill Yw=WL with money creation out of nothing, and with wage rate W and productivity R fixed, the price P does not move one iota according to (1). The average quantity of money M increases/decreases according to (2), but there is no inflation/deflation. The creation of fiat money for the payment of wages is the correct way of bringing money into the economy. MMT deficit-spending is the incorrect way.
There is neither government spending nor taxation needed to get the elementary production-consumption economy going and growing.
#1 AXEC98 Idealized transaction pattern
January 18, 2019
MMT: Not a joke but a fraud
Comment on Michael R. Strain on ‘Modern Monetary Theory’ Is a Joke That’s Not Funny’
Blog-Reference and Blog-Reference
Michael R. Strain opens the argument: “First, let’s start with the confusion over what it is. The answer seems to depend on which advocate of MMT is being asked. It is sometimes a theory of money. MMT is also being discussed in the context of a political program to justify huge increases in social spending. Finally, there is its role as a prescription for macroeconomic policy. … Even as just an economic theory, it is not settled or fully developed. … The bedrock observation of MMT is correct: Any government that issues its own currency can always pay its bills.”
What is specific to MMT is the claim that almost all economic/social problems can and should be solved by deficit-spending/money-creation. MMT is advertised as a potent medicine that benefits the ninety-nine-percenters and that has no serious short- or long-term negative side effects. MMT claims further that orthodox economics is provably false and that orthodox policy is counterproductive.
MMT is three things: theory, policy, activism. These three elements are constantly mixed in the public debate and this guarantees inconclusive blather in all eternity which keeps soapbox economists, journalists, agenda pushers, propagandists, social media trolls, and the rest of the Circus Maximus employed and fed.
MMT theory is provably false, i.e. materially/formally inconsistent. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern for consistency, truth, or scientific validity.
The lethal negative effect of permanent deficit-spending/money-creation is NOT on inflation but on distribution.#1 According to the macroeconomic Profit Law [Q=Yd+(I−S)+(G−T)+(X−M) → Q=(G−T)], it holds Public Deficit = Private Profit and this means that MMT policy benefits the one-percenters and not the ninety-nine-percenters.
Expressed as a parable. The MMTer resembles a person who prints counterfeit money, say a million, and distributes it with great fanfare among the poor of the town. The media praise her as a fine example of social responsibility and charity. The economic effect of the matter, though, is that the workers are the real benefactors who unwittingly are made to share their real income with the poor. The redistribution of output is effected by barely noticeable price hikes. In the end, the counterfeit money ends up as profit of the business sector as a whole.
The undeniable charm of MMT policy is that apparently there are only winners. Fact is, though, that MMT is proto-scientific garbage and political fraud#2 and that, at the end of the day, the ninety-nine-percenters hold the bag.#3, #4
As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt of WeThePeople.
Egmont Kakarot-Handtke
#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#3 MMT = proto-scientific garbage + deception of the 99-percenters
#4 Deficit-spending, public debt, and macroeconomic profit/loss
Related 'Warren Mosler: scientific dilettante and political fraudster' and 'How MMT makes everybody happy' and 'MMT is NOT bold policy but spineless fraud'. For the full-spectrum refutation of MMT see cross-references MMT.
REPLY to Bob Roddis on Jan 18
You ask: “Do I have that right?”
No, you don’t get anything right. Bad Austrian karma.
Imagine for a start an elementary production-consumption economy with a balanced household sector budget in the initial period, i.e. C=Yw.#1
Now, if the government runs a deficit in period 1, total expenditures are C+G, the market-clearing price rises (no inflation), and the business sector makes a profit Q=G. Taxes are zero, i.e. T=0.
The banking system consists alone of the central bank. So, profit takes the form of deposits at the CB. The business sector’s deposits are equal to the government’s overdrafts. For a start, there is no interest on deposits/overdrafts.
If the government decides to issue bonds in order to consolidate their overdrafts at the central bank and the business sector buys these bonds then both overdrafts and deposits go again to zero. Money = deposits at the CB vanishes. The business sector now holds interest-bearing bonds. The government has to tax the household sector in order to pay interest to the bondholders.
The government’s debt took first the form of overdrafts and then the form of bonds (liabilities). The business sector’s profit took first the form of deposits and then the form of bonds (assets).
#1 Deficit-spending, public debt, and macroeconomic profit/loss
Blog-Reference and Blog-Reference
Michael R. Strain opens the argument: “First, let’s start with the confusion over what it is. The answer seems to depend on which advocate of MMT is being asked. It is sometimes a theory of money. MMT is also being discussed in the context of a political program to justify huge increases in social spending. Finally, there is its role as a prescription for macroeconomic policy. … Even as just an economic theory, it is not settled or fully developed. … The bedrock observation of MMT is correct: Any government that issues its own currency can always pay its bills.”
What is specific to MMT is the claim that almost all economic/social problems can and should be solved by deficit-spending/money-creation. MMT is advertised as a potent medicine that benefits the ninety-nine-percenters and that has no serious short- or long-term negative side effects. MMT claims further that orthodox economics is provably false and that orthodox policy is counterproductive.
MMT is three things: theory, policy, activism. These three elements are constantly mixed in the public debate and this guarantees inconclusive blather in all eternity which keeps soapbox economists, journalists, agenda pushers, propagandists, social media trolls, and the rest of the Circus Maximus employed and fed.
MMT theory is provably false, i.e. materially/formally inconsistent. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern for consistency, truth, or scientific validity.
The lethal negative effect of permanent deficit-spending/money-creation is NOT on inflation but on distribution.#1 According to the macroeconomic Profit Law [Q=Yd+(I−S)+(G−T)+(X−M) → Q=(G−T)], it holds Public Deficit = Private Profit and this means that MMT policy benefits the one-percenters and not the ninety-nine-percenters.
Expressed as a parable. The MMTer resembles a person who prints counterfeit money, say a million, and distributes it with great fanfare among the poor of the town. The media praise her as a fine example of social responsibility and charity. The economic effect of the matter, though, is that the workers are the real benefactors who unwittingly are made to share their real income with the poor. The redistribution of output is effected by barely noticeable price hikes. In the end, the counterfeit money ends up as profit of the business sector as a whole.
The undeniable charm of MMT policy is that apparently there are only winners. Fact is, though, that MMT is proto-scientific garbage and political fraud#2 and that, at the end of the day, the ninety-nine-percenters hold the bag.#3, #4
As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt of WeThePeople.
Egmont Kakarot-Handtke
#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#3 MMT = proto-scientific garbage + deception of the 99-percenters
#4 Deficit-spending, public debt, and macroeconomic profit/loss
Related 'Warren Mosler: scientific dilettante and political fraudster' and 'How MMT makes everybody happy' and 'MMT is NOT bold policy but spineless fraud'. For the full-spectrum refutation of MMT see cross-references MMT.
***
REPLY to Bob Roddis on Jan 18
You ask: “Do I have that right?”
No, you don’t get anything right. Bad Austrian karma.
Imagine for a start an elementary production-consumption economy with a balanced household sector budget in the initial period, i.e. C=Yw.#1
Now, if the government runs a deficit in period 1, total expenditures are C+G, the market-clearing price rises (no inflation), and the business sector makes a profit Q=G. Taxes are zero, i.e. T=0.
The banking system consists alone of the central bank. So, profit takes the form of deposits at the CB. The business sector’s deposits are equal to the government’s overdrafts. For a start, there is no interest on deposits/overdrafts.
If the government decides to issue bonds in order to consolidate their overdrafts at the central bank and the business sector buys these bonds then both overdrafts and deposits go again to zero. Money = deposits at the CB vanishes. The business sector now holds interest-bearing bonds. The government has to tax the household sector in order to pay interest to the bondholders.
The government’s debt took first the form of overdrafts and then the form of bonds (liabilities). The business sector’s profit took first the form of deposits and then the form of bonds (assets).
#1 Deficit-spending, public debt, and macroeconomic profit/loss
January 17, 2019
Warren Mosler: scientific dilettante and political fraudster
Comment on Tom Hickey on ‘Brendan Greeley ― America has never worried about financing its priorities’
Blog-Reference
Tom Hickey features Stephanie Kelton and Warren Mosler as the two major MMT spokespersons.
Stephanie Kelton has been refuted elsewhere.#1 Here, Tom Hickey’s summary of Warren Mosler’s arguments is taken as a checklist for the detailed final refutation.
“1. The currency itself is a state monopoly.” Half-true. The central bank (in a closed economy) is the institution tasked with the creation/destruction of money according to the needs of the household sector, the business sector, and the government sector. The specifics of the task and the rights/obligations are defined by the Legitimate Sovereign.
“2. The ‘money story’ begins with a state desiring to provision itself.” False. The money story begins with the elementary production-consumption economy with the household sector receiving money wages from the business sector and the households spending their wage income by buying stuff from the business sector. Money is created out of nothing and completely destroyed in the process. There is no such thing as a fixed stock of money.#2, #3
“3. Taxation by design functions to create sellers of goods and services (unemployment) seeking the state’s currency in exchange to avoid tax penalties.” False. A Zero-Tax Economy is feasible.#4
“4. The state (or its agents) is the single supplier of that which it demands as payment of taxes.” False. The definition of central bank money as a general discharge of liabilities includes tax liabilities. As a generalized IOU central bank money discharges, first of all, the wage claims of workers against the firms that comprise the business sector.
“5. Therefore the state, from inception, necessarily spends first, after which tax payments are made …” False. The sequence, i.e. G before T vs T before T is NOT decisive. The crucial point is the balance, i.e. G greater T = deficit vs T greater G = surplus, in a period of a given length. The central bank finances G by money creation and gets T back and destroys the money. If T=G, the budget is balanced, otherwise not. If G is greater than T, the business sector makes a profit, otherwise, it makes a loss. This follows from the macroeconomic Profit Law.#5 It is completely irrelevant for profit/loss in a given period whether the government spends first and taxes later or the other way round.
“6. The public debt is nothing more than the funds spend by the state that have yet to be used for tax payment, …” True. Public debt is a tax liability of the household sector that is rolled over for an indefinite time. This liability generates interest income for the Oligarchy, which is taxed from WeThePeople for an indefinite time. When the accumulated deferred taxes (= public debt) are eventually paid, the economy faces a crisis because profit turns into loss.#5 In sum: The macroeconomic Profit Law Q≡(G−T)+(I−S)+Yd implies Public Deficit = Private Profit. So, private financial wealth grows in lockstep with public debt. WeThePeople owes the public debt, and the Oligarchy owns it.
Note well that Warren Mosler never mentions the word profit and the negative distributional effects of deficit-spending/money-creation on WeThePeople.#6
MMT’s Warren Mosler is a stupid/corrupt political agenda pusher.#7, #8
Egmont Kakarot-Handtke
#1 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#2 The ultimate ― analytical ― origin of money
#3 The creation and value of money and near-monies
#4 The Third Way: Towards the Happy Zero-Tax Economy
#5 Deficit-spending, public debt, and macroeconomic profit/loss
#6 MMT sucks
#7 MMT: The one deadly error/fraud of Warren Mosler
#8 MMT, Warren Mosler, and the little helpers from Wall Street and Academia
Blog-Reference
Tom Hickey features Stephanie Kelton and Warren Mosler as the two major MMT spokespersons.
Stephanie Kelton has been refuted elsewhere.#1 Here, Tom Hickey’s summary of Warren Mosler’s arguments is taken as a checklist for the detailed final refutation.
“1. The currency itself is a state monopoly.” Half-true. The central bank (in a closed economy) is the institution tasked with the creation/destruction of money according to the needs of the household sector, the business sector, and the government sector. The specifics of the task and the rights/obligations are defined by the Legitimate Sovereign.
“2. The ‘money story’ begins with a state desiring to provision itself.” False. The money story begins with the elementary production-consumption economy with the household sector receiving money wages from the business sector and the households spending their wage income by buying stuff from the business sector. Money is created out of nothing and completely destroyed in the process. There is no such thing as a fixed stock of money.#2, #3
“3. Taxation by design functions to create sellers of goods and services (unemployment) seeking the state’s currency in exchange to avoid tax penalties.” False. A Zero-Tax Economy is feasible.#4
“4. The state (or its agents) is the single supplier of that which it demands as payment of taxes.” False. The definition of central bank money as a general discharge of liabilities includes tax liabilities. As a generalized IOU central bank money discharges, first of all, the wage claims of workers against the firms that comprise the business sector.
“5. Therefore the state, from inception, necessarily spends first, after which tax payments are made …” False. The sequence, i.e. G before T vs T before T is NOT decisive. The crucial point is the balance, i.e. G greater T = deficit vs T greater G = surplus, in a period of a given length. The central bank finances G by money creation and gets T back and destroys the money. If T=G, the budget is balanced, otherwise not. If G is greater than T, the business sector makes a profit, otherwise, it makes a loss. This follows from the macroeconomic Profit Law.#5 It is completely irrelevant for profit/loss in a given period whether the government spends first and taxes later or the other way round.
“6. The public debt is nothing more than the funds spend by the state that have yet to be used for tax payment, …” True. Public debt is a tax liability of the household sector that is rolled over for an indefinite time. This liability generates interest income for the Oligarchy, which is taxed from WeThePeople for an indefinite time. When the accumulated deferred taxes (= public debt) are eventually paid, the economy faces a crisis because profit turns into loss.#5 In sum: The macroeconomic Profit Law Q≡(G−T)+(I−S)+Yd implies Public Deficit = Private Profit. So, private financial wealth grows in lockstep with public debt. WeThePeople owes the public debt, and the Oligarchy owns it.
Note well that Warren Mosler never mentions the word profit and the negative distributional effects of deficit-spending/money-creation on WeThePeople.#6
MMT’s Warren Mosler is a stupid/corrupt political agenda pusher.#7, #8
Egmont Kakarot-Handtke
#1 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#2 The ultimate ― analytical ― origin of money
#3 The creation and value of money and near-monies
#4 The Third Way: Towards the Happy Zero-Tax Economy
#5 Deficit-spending, public debt, and macroeconomic profit/loss
#6 MMT sucks
#7 MMT: The one deadly error/fraud of Warren Mosler
#8 MMT, Warren Mosler, and the little helpers from Wall Street and Academia
Related 'Proof of MMT's inconsistency' and 'Criminals and the monetary order' and 'The counterfeiter never runs out of money' and 'Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople' and 'MMT’s true program'.
For more on Warren Mosler see AXECquery.
***
AXEC165b
January 16, 2019
False economic theory makes bad economic policy
Comment on Mish Shedlock on ‘Yet Another Fed Study Concludes Phillip’s Curve is Nonsense’
Blog-Reference and Blog-Reference and Blog-Reference
Mish Shedlock summarizes: “Proponents of the Phillips Curve keep looking for ways in which it works. Yet, another study concludes it doesn’t. The Phillips Curve, an economic model developed by A. W. Phillips, purports that inflation and unemployment have a stable and inverse relationship. This has been a fundamental guiding economic theory used by the Fed for decades to set interest rates. Various studies have proven the theory is bogus, yet proponents keep believing.”
The Phillips Curve (better: bastard Phillips Curve) is the centerpiece of standard employment theory. Economists have gotten employment theory wrong for 200+ years. The Phillips Curve has always been the highly visible landmark of economists’ scientific incompetence.
“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)
The materially/formally inconsistent Phillips Curve has to be replaced by the correct macroeconomic Employment Law. For details see
• NAIRU, wage-led growth, and Samuelson’s Dyscalculia
• Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
• NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
• Full employment, the Phillips Curve, and the end of Gaganomics
Egmont Kakarot-Handtke
REPLY to Stuki on Jan 16
Economists claim to do science from Adam Smith/Karl Marx onward to the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. The fact is, though, that economics is a failed/fake science or what Feynman called a cargo cult science.
The problem does NOT lie in the subject matter but in the fact that economics is a science without scientists. Economics has been hijacked early on by political agenda pushers. These stupid/corrupt folks have produced NOTHING of scientific value in the last 200+ years. They do not understand to this day the elementary mathematics that underlies macroeconomic accounting. #1
Economists can always explain why they are still at the proto-scientific level. You, too, repeat merely worn-out slogans from the long list of lame excuses. #2
The scientific incompetence of economists consists of the fact that it is beyond their means to realize that NO way leads from the understanding of Human Nature/motives/behavior/ action to the understanding of how the economic system works. What makes things worse is that there is NO scientifically valid knowledge of Human Nature/motives/behavior/ action, to begin with.#3
What has to be done is (i) to get rid of all stupid/corrupt agenda pushers, (ii) to execute the Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.
#1 DrainTheScientificSwamp
#2 Failed economics: The losers’ long list of lame excuses
#3 Economics is NOT about Human Nature but the economic system
REPLY to Bob Roddis on Jan 18
You say: “I want money that maintains its value over the years.”
Economic theory can show you the way, but of course, neither Austrianism nor MMT.
Let us start with the simplest possible economic configuration. The elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw 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=Yw 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.
The price is determined by the wage rate, which takes the role of the nominal anchor, and the productivity. From (1) follows W/P=R (2), i.e., the real wage is equal to productivity. Productivity determines the real value of money.
If one wants absolute price stability in the elementary production-consumption economy from beginning to eternity, one has to apply the simple rule: change of wage rate = change of productivity.
Needless to emphasize that things become a bit more complex if investment, saving, government, and foreign trade are added. This, though, does NOT alter the core rule that the wage rate has to move synchronously with the productivity.
A fiat money system with perfect price stability is possible. Austrians have been too stupid to figure this out.
You say: “However, for a particular sale, cost is irrelevant to the subjective valuation of the ultimate buyer. ”
Oh no, the Austrian value theory. Take notice that the derivation of the market-clearing price above relates to the economy as a whole and NOT to a particular sale. The argument is based on objective-systemic macroeconomic axioms and not on silly Austrian individualistic subjectivism.
The macroeconomic profit Q≡C−Yw in the elementary production-consumption is zero because of the condition of budget balancing. This is fully compatible with, for example, the film industry making a huge profit and the rest of the economy making a loss of equal magnitude.
Macroeconomic profit, too, is an objectively given and well-defined magnitude. It does not come of wishful thinking or individual necessity but from dissaving, i.e., C greater Yw. Microeconomics in all variants is known by now as a methodological failure.
Get it, Austrianism is dead since its inception. The fact that it still appeals to brain-dead blatherers has to be taken as supporting evidence.
The Austrian core assertion is that laissez-faire would result in a stable economy with overall optimal outcomes. This assertion has never been proven. The provable fact of the matter is that the market economy is inherently unstable. #1
So, the very premise of Austrian economics is false, and because of this, the whole verbal superstructure is false. Austrian economics is scientifically worthless, and Austrians’ vacuous blather is only good for political agenda pushing.
You say: “There is no such thing as the ‘macro economy’.” You are a casualty of the methodological blunder called the Fallacy of Insufficient Abstraction. Macroeconomic profit, for example, is measurable with the precision of two decimal places. Austrians cannot tell to this day what profit is.
It is macroeconomics that is objective. Microeconomics, on the other hand, has never been anything but psychological/behavioral blather and pointless motive speculation. #2 Austrianism is a case in point.
#1 Proof of the inherent instability of the market economy
#2 The economist as second-guesser, mind reader, and folk psychologist
REPLY to Stuki on Jan 19
You say that economics cannot be a science. This is simply false.
Economics has been hijacked early on by political agenda pushers. These stupid/corrupt folks have produced NOTHING of scientific value in the last 200+ years.
The problem with economics is that it is a science without scientists. For details of the big picture, see cross-references Failed/Fake Scientists.
LINKS on Roger Farmer’s ‘Replacing the Phillips Curve: I showed you my macro model. Now show me your macro model’ on Apr 22 and Blog-Reference EV
► NAIRU, wage-led growth, and Samuelson’s Dyscalculia
► Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
► Full employment, the Phillips Curve, and the end of Gaganomics
► NAIRU: an exhaustive dancing-angels-on-a-pinpoint blather
► The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment
► NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
► False economic theory makes bad economic policy
► The five pathetic blunders of Roger Farmer
► Modern macro moronism
► For more details of the big picture, see cross-references Employment/Phillips Curve
Source: Real-World Economics Review Blog on Apr 27
Blog-Reference and Blog-Reference and Blog-Reference
Mish Shedlock summarizes: “Proponents of the Phillips Curve keep looking for ways in which it works. Yet, another study concludes it doesn’t. The Phillips Curve, an economic model developed by A. W. Phillips, purports that inflation and unemployment have a stable and inverse relationship. This has been a fundamental guiding economic theory used by the Fed for decades to set interest rates. Various studies have proven the theory is bogus, yet proponents keep believing.”
The Phillips Curve (better: bastard Phillips Curve) is the centerpiece of standard employment theory. Economists have gotten employment theory wrong for 200+ years. The Phillips Curve has always been the highly visible landmark of economists’ scientific incompetence.
“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)
The materially/formally inconsistent Phillips Curve has to be replaced by the correct macroeconomic Employment Law. For details see
• NAIRU, wage-led growth, and Samuelson’s Dyscalculia
• Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
• NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
• Full employment, the Phillips Curve, and the end of Gaganomics
Egmont Kakarot-Handtke
***
REPLY to Stuki on Jan 16
Economists claim to do science from Adam Smith/Karl Marx onward to the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. The fact is, though, that economics is a failed/fake science or what Feynman called a cargo cult science.
The problem does NOT lie in the subject matter but in the fact that economics is a science without scientists. Economics has been hijacked early on by political agenda pushers. These stupid/corrupt folks have produced NOTHING of scientific value in the last 200+ years. They do not understand to this day the elementary mathematics that underlies macroeconomic accounting. #1
Economists can always explain why they are still at the proto-scientific level. You, too, repeat merely worn-out slogans from the long list of lame excuses. #2
The scientific incompetence of economists consists of the fact that it is beyond their means to realize that NO way leads from the understanding of Human Nature/motives/behavior/ action to the understanding of how the economic system works. What makes things worse is that there is NO scientifically valid knowledge of Human Nature/motives/behavior/ action, to begin with.#3
What has to be done is (i) to get rid of all stupid/corrupt agenda pushers, (ii) to execute the Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.
#1 DrainTheScientificSwamp
#2 Failed economics: The losers’ long list of lame excuses
#3 Economics is NOT about Human Nature but the economic system
***
You say: “I want money that maintains its value over the years.”
Economic theory can show you the way, but of course, neither Austrianism nor MMT.
Let us start with the simplest possible economic configuration. The elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw 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=Yw 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.
The price is determined by the wage rate, which takes the role of the nominal anchor, and the productivity. From (1) follows W/P=R (2), i.e., the real wage is equal to productivity. Productivity determines the real value of money.
If one wants absolute price stability in the elementary production-consumption economy from beginning to eternity, one has to apply the simple rule: change of wage rate = change of productivity.
Needless to emphasize that things become a bit more complex if investment, saving, government, and foreign trade are added. This, though, does NOT alter the core rule that the wage rate has to move synchronously with the productivity.
A fiat money system with perfect price stability is possible. Austrians have been too stupid to figure this out.
***
REPLY to Bob Roddis on Jan 18You say: “However, for a particular sale, cost is irrelevant to the subjective valuation of the ultimate buyer. ”
Oh no, the Austrian value theory. Take notice that the derivation of the market-clearing price above relates to the economy as a whole and NOT to a particular sale. The argument is based on objective-systemic macroeconomic axioms and not on silly Austrian individualistic subjectivism.
The macroeconomic profit Q≡C−Yw in the elementary production-consumption is zero because of the condition of budget balancing. This is fully compatible with, for example, the film industry making a huge profit and the rest of the economy making a loss of equal magnitude.
Macroeconomic profit, too, is an objectively given and well-defined magnitude. It does not come of wishful thinking or individual necessity but from dissaving, i.e., C greater Yw. Microeconomics in all variants is known by now as a methodological failure.
Get it, Austrianism is dead since its inception. The fact that it still appeals to brain-dead blatherers has to be taken as supporting evidence.
***
REPLY to Bob Roddis on Jan 18The Austrian core assertion is that laissez-faire would result in a stable economy with overall optimal outcomes. This assertion has never been proven. The provable fact of the matter is that the market economy is inherently unstable. #1
So, the very premise of Austrian economics is false, and because of this, the whole verbal superstructure is false. Austrian economics is scientifically worthless, and Austrians’ vacuous blather is only good for political agenda pushing.
You say: “There is no such thing as the ‘macro economy’.” You are a casualty of the methodological blunder called the Fallacy of Insufficient Abstraction. Macroeconomic profit, for example, is measurable with the precision of two decimal places. Austrians cannot tell to this day what profit is.
It is macroeconomics that is objective. Microeconomics, on the other hand, has never been anything but psychological/behavioral blather and pointless motive speculation. #2 Austrianism is a case in point.
#1 Proof of the inherent instability of the market economy
#2 The economist as second-guesser, mind reader, and folk psychologist
***
REPLY to Stuki on Jan 19
You say that economics cannot be a science. This is simply false.
Economics has been hijacked early on by political agenda pushers. These stupid/corrupt folks have produced NOTHING of scientific value in the last 200+ years.
The problem with economics is that it is a science without scientists. For details of the big picture, see cross-references Failed/Fake Scientists.
***
LINKS on Roger Farmer’s ‘Replacing the Phillips Curve: I showed you my macro model. Now show me your macro model’ on Apr 22 and Blog-Reference EV
► NAIRU, wage-led growth, and Samuelson’s Dyscalculia
► Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
► Full employment, the Phillips Curve, and the end of Gaganomics
► NAIRU: an exhaustive dancing-angels-on-a-pinpoint blather
► The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment
► NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
► False economic theory makes bad economic policy
► The five pathetic blunders of Roger Farmer
► Modern macro moronism
► For more details of the big picture, see cross-references Employment/Phillips Curve
***
 |
| Source: Real-World Economics Blog |
January 14, 2019
Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
Comment on Z. Byron Wolf on ‘Debt? What debt? At $22 trillion, here’s the argument the national debt doesn’t matter’*
Blog-Reference
Stephanie Kelton argues: “When the government spends more than it collects in the form of taxes (and other payments), we label it ‘deficit spending.’ But that’s only part of the story. To complete the picture, suppose the government spends $100 into the economy but only taxes $90 back out. The result is a surplus equal to $10 that shows up somewhere in the non-government part of the economy. In other words, the government’s ‘red ink’ becomes our ‘black ink.’ Their deficits are our financial surpluses. So where does the ‘debt’ come into play? Whenever the government runs a deficit, it sells government bonds called U.S. Treasuries. This is usually referred to as ‘borrowing,’ but that’s actually misleading. What’s really happening is that the government is allowing people to trade in their dollars for a bond that pays some interest. A pretty good deal if you happen to be lucky enough to hold some of that $22 trillion.”
Indeed. The government’s ‘red ink’ becomes our ‘black ink.’ We are the lucky ones, WeThePeople, right? Wrong!
Macroeconomics gives one this balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0 which boils down to Q=(G−T) which says that macroeconomic profit Q (= black ink) is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment, i.e. Public Deficit = Private Profit.
Stephanie Kelton’s provably false MMT balances equation reads (X−M)+(G−T)+(I−S)=0, which reduces to S=(G−T) which says “a surplus S shows up somewhere in the non-government part of the economy” (= black ink) which is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment.
Note that the business sector’s profit Q becomes “a surplus somewhere in the non-government part of the economy” S. This is a clear case of obfuscation.
In other words, the government’s ‘red ink’ becomesour their ‘black ink’ i.e. our=WeThePeople has to be corrected to their=the Oligarchy.#1, #2 So, for the most elementary case the correct relationship reads: The government's red ink is the Oligarchy's black ink. From this follows with regard to public debt: WeThePeople owes it, Oligarchy owns it.
MMT’s Stephanie Kelton is a political fraudster who deceives WeThePeople.#3
Egmont Kakarot-Handtke
* CNNpolitics
#1 MMT and the single most stupid physicist
#2 Down with idiocy!
#3 The Kelton-Fraud
Related 'Why the MMT benefactors of humanity never talk about profit' and 'Stephanie and Noah ― economics at the intellectual zero lower bound' and 'Profit, income, and the Humpty Dumpty Fallacy' and 'MMT and the magical profit disappearance' and 'Dear idiots, government deficits do NOT fund private savings' and 'The page where Stephanie Kelton gets macroeconomics wrong' and 'Proof of MMT's inconsistency' and 'Profit' and 'MMT refuted in three easy steps'. For the full-spectrum refutation of MMT see cross-references MMT.
Blog-Reference
Stephanie Kelton argues: “When the government spends more than it collects in the form of taxes (and other payments), we label it ‘deficit spending.’ But that’s only part of the story. To complete the picture, suppose the government spends $100 into the economy but only taxes $90 back out. The result is a surplus equal to $10 that shows up somewhere in the non-government part of the economy. In other words, the government’s ‘red ink’ becomes our ‘black ink.’ Their deficits are our financial surpluses. So where does the ‘debt’ come into play? Whenever the government runs a deficit, it sells government bonds called U.S. Treasuries. This is usually referred to as ‘borrowing,’ but that’s actually misleading. What’s really happening is that the government is allowing people to trade in their dollars for a bond that pays some interest. A pretty good deal if you happen to be lucky enough to hold some of that $22 trillion.”
Indeed. The government’s ‘red ink’ becomes our ‘black ink.’ We are the lucky ones, WeThePeople, right? Wrong!
Macroeconomics gives one this balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0 which boils down to Q=(G−T) which says that macroeconomic profit Q (= black ink) is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment, i.e. Public Deficit = Private Profit.
Stephanie Kelton’s provably false MMT balances equation reads (X−M)+(G−T)+(I−S)=0, which reduces to S=(G−T) which says “a surplus S shows up somewhere in the non-government part of the economy” (= black ink) which is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment.
Note that the business sector’s profit Q becomes “a surplus somewhere in the non-government part of the economy” S. This is a clear case of obfuscation.
In other words, the government’s ‘red ink’ becomes
MMT’s Stephanie Kelton is a political fraudster who deceives WeThePeople.#3
Egmont Kakarot-Handtke
* CNNpolitics
#1 MMT and the single most stupid physicist
#2 Down with idiocy!
#3 The Kelton-Fraud
Related 'Why the MMT benefactors of humanity never talk about profit' and 'Stephanie and Noah ― economics at the intellectual zero lower bound' and 'Profit, income, and the Humpty Dumpty Fallacy' and 'MMT and the magical profit disappearance' and 'Dear idiots, government deficits do NOT fund private savings' and 'The page where Stephanie Kelton gets macroeconomics wrong' and 'Proof of MMT's inconsistency' and 'Profit' and 'MMT refuted in three easy steps'. For the full-spectrum refutation of MMT see cross-references MMT.
For more about sectoral balances see AXECquery.
For more about Public Deficit = Private Profit see AXECquery.
COMMENT on peterc on Ivan Horrocks — Job guarantee programmes: back to the future? on Jan 15
MMT is three things: theory, policy, activism.
The theory is provably false. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern about consistency, truth, or scientific validity.
MMT activists, like all political agenda pushers, give a shit on theory/science/truth but on occasion put on the cloak of science in order to enhance respectability/credibility/ authority. Academic MMTers are not different from the rest of economists who claim to do science since Adam Smith/Karl Marx but only push a political agenda and deceive the general public with a fake Nobel.
In sum, MMT is bad theory, MMT is bad policy, MMTers are bad people. MMT is not much different from Walrasianism, Keynesianism, Marxianism, and Austrianism.
MMT is three things: theory, policy, activism.
The theory is provably false. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern about consistency, truth, or scientific validity.
MMT activists, like all political agenda pushers, give a shit on theory/science/truth but on occasion put on the cloak of science in order to enhance respectability/credibility/ authority. Academic MMTers are not different from the rest of economists who claim to do science since Adam Smith/Karl Marx but only push a political agenda and deceive the general public with a fake Nobel.
In sum, MMT is bad theory, MMT is bad policy, MMTers are bad people. MMT is not much different from Walrasianism, Keynesianism, Marxianism, and Austrianism.
***
Twitter Jun 04, 2021 Continous deliberate deception of WeThePeople by academic economics
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