Blog-Reference and Blog-Reference
There is microfounded standard economics, the Keynesian macro opposition, and MMT. Standard economics in its actual incarnation as DSGE is at the lowest possible proto-scientific level. Supply-demand-equilibrium is scientifically not more than a 150+ years old running gag. Keynesianism is methodologically not superior but simply replaces the most glaring idiocies of the neoclassical optimization-and-equilibrium world with plain common sense. Politically, Keynesianism relaxes the maxim of public budget balancing and extends it over the business cycle. MMT carries this one step further to permanent deficit spending, albeit with a progressive agenda. Progressive means that MMTers see themselves as trailblazers for the cause of the ninety-nine-percenters.
Accordingly, Bill Mitchell summarizes his critique of his academic peers as follows: “While I would not support the increased US fiscal deficits under current policy proposals from Donald Trump, I would welcome increased deficits if the policy mix was skewed towards introducing a Job Guarantee, improving public infrastructure, expanding the welfare support and improving schools and hospitals.”
MMTers have lobotomized the public for years with the twin slogans deficits are good for you and debt does not matter but now, as they have got what they argued for, they seem to be not so happy about the distributional consequences of the huge deficit blow-up.
This is a political farce. Macroeconomics, more specifically, the axiomatically correct sectoral balances equation tells everyone that Public Deficit = Private Profit and that it does not matter at all whether the deficit is produced by social or military spending or by tax reductions for the one-percenters. MMT claims that its economic policy agenda benefits the ninety-nine-percenters which is simply not the case.#1, #2
The only question is whether MMTers are so stupid that they do not understand how the monetary economy works or whether they deliberately deceive the public.
In his post, Bill Mitchell reproduces the familiar MMT sectoral balances chart#3, #4 and then goes on to explain: “The following graph shows the annual sectoral balances from 1960 to 2017. I then used the CBO’s projections from 2018 to 2028 to extrapolate the balances out to 2028:
1. Blue line – Government fiscal balance as a percent of GDP.
2. Green line – External balance as a percent of GDP.
3. Grey line – Private domestic balance as a percent of GDP.
The facts are obvious.
1. The US has a persistent and fairly stable current account deficit of around 2.5 to 3 percent. CBO does not expect that to change very much.
2. The fiscal retreat in recent years saw the private domestic balance shrink to nearly zero.
3. The projected movement in the fiscal state allows the private domestic sector to save overall and provides the conditions for that sector to start reducing its massive debt exposure, which, after all, was the cause of the GFC.
4. If the fiscal deficit falls below the current account deficit then the private domestic sector starts to dissave overall – spend more than it earns and starts accumulating increased debt.
5. From the graph, there is not much leeway before that private domestic sector overall leveraging starts to occur, given the size of the external balance.
6. The on-going fiscal deficit is thus not only underpinning growth but also allowing the private domestic sector to deleverage its financial position (save overall).”
Note that the “private domestic sector” is the pivotal MMT construct. Its function/effect is to lump the household and the business sector together which makes profit invisible.#5 The business sector’s profit and the household sector’s saving are lumped together under “overall saving of the private domestic sector”. This methodologically inadmissible operation is called the Humpty Dumpty Fallacy.
The fact is that the Trump budget will explode private profit according to the axiomatically correct macroeconomic Profit Law Qm≡Yd+(I−Sm)+(G−T)+(X−M). Whether this profit boost for the one-percenters is really in accordance with their progressive agenda is a question for the MMTers to answer.
What Bill Mitchell seems not to know is this: because Public Deficit = Private Profit the one-percenters and their useful academic/journalistic spokespersons should consistently argue FOR deficit spending and the ninety-nine-percenters and their progressive academic/ journalistic spokespersons should consistently argue AGAINST it. Only fake progressives blaze the trail for Mr. Trump’s Make The Deficit Great Again.#6
#1 MMT, money creation, stealth taxation, and redistribution
#2 MMT is ALWAYS a bad deal for the 99-percenters
#3 US Sectoral Balances
|Source: billy blog
#4 Down with idiocy!
#5 MMT and the magical profit disappearance
#6 Keynes, Lerner, MMT, Trump and exploding profit
Related 'MMT and grassroots movements' and 'Political economics: Who hijacks British Labour?' and 'How MMT fools the ninety-nine-percenters' and 'Selling public debt with Ricardo’s tear gland rhetoric' and 'MMT: The one deadly error/fraud of Warren Mosler'.
Your small talk about non-performing loans cannot distract from the great MMT embarrassment:
• Bill Mitchell deceives the public about the negative distributional effects of MMT policy for the ninety-nine-percenters.
• MMT is scientifically worthless because it is based on the Humpty Dumpty Fallacy which is a disqualifying methodological blunder.
• The self-stylization of MMT academics, Wall Street sponsors, and blogosphere sales-trolls as progressives is plain political fraud.