The often repeated argument goes as follows: “While it is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money, allowing governments to increase spending or reduce taxation, without raising the corresponding financing from the private sector, there is a risk that money financing could rapidly undermine the stability of inflation expectations.”
It is true and known since time immemorial that governments can do deficit-spending/ money creation. It is NOT true that this causes inflation.#1 However, it is true that deficit-spending/money creation causes a profit explosion and as a consequence an extremely unequal distribution of income/financial wealth.#2
Because of the Profit Law, which entails Public Deficit = Private Profit, the Magic Money Tree magically benefits the one-percenters but NOT the ninety-nine-percenters. As long as MMT academics use the Magic-Money-Tree-metaphor in their seminars they are doing junk economics just like their Walrasian, Keynesian, Marxian, Austrian colleagues. To the extent that MMTers use the Magic-Money-Tree-metaphor in discussions with the general public they are committing political fraud and scientific suicide.#3, #4. #5, #6
The magic of the Magic Money Tree consists of WeThePeople unintentionally sponsoring the Oligarchy which in turn sponsors WeTheAcademics which in turn communicates the Magic-Money-Tree-story to WeThePeople.
#1 MMT and the inflation-red-herring
#2 Keynes, Lerner, MMT, Trump and exploding profit
#3 MMT is criminal economics
#4 The Kelton-Fraud
#5 Richard Murphy: the MMT fraudster dressed up as realist
#6 For the full-spectrum refutation of MMT see cross-references MMT
Related 'MMTers make capitalism work' and 'MMT: How mathematical incompetence helps the Kelton-Fraud' and 'MMT: A new myth for WeThePeople'.
Switch to Blog-Reference Stalwart Thread
“Empirical/historical data demonstrates that future generations do not suffer higher taxes in order to pay back past deficits.”
A scientist realizes immediately that this statement is self-contradictory. There is no historical data for the future. It holds Public Debt = Deferred Taxes.
The relation between economics and science is roughly the same as between a pit latrine and a cathedral. This holds, of course, for MMT in general and you personally.#1
#1 For the full-spectrum refutation of MMT see cross-references MMT
From Adam Smith/Karl Marx onward, economics claims to be not only science but sciences: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.
How many sciences is economics? Zero! Economics is what Feynman called a cargo cult science.
Science is knowledge about how the universe or some greater or smaller part of it works. Scientific knowledge takes the form of a consistent theory “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) A theory is the best mental representation of reality that is humanly possible. The rest of human communication is opinion, gossip, propaganda, piffle, and cannot be taken seriously.
A theory is NOT about singular historical events but about invariances that apply always and everywhere. Example: The First Defenestration of Prague involved the killing of seven members of the city council by throwing them out of the window on 30 July 1419. The Law of Falling Bodies says d=½gt2 and it applies to the members of the city council of Prague and to the moon and to the cannonballs that Galileo threw off the Leaning Tower of Pisa and to the falling feather in a vacuum and to the apple that hit Newton’s head. Scientists abstract from all historical and practical details which are so dear to the commonsenser.
The subject matter of economics is the monetary economy but economists have to this day not figured out how the price- and profit mechanism works and whether the system is inherently stable/unstable. This holds for Walrasianism, Keynesianism, Marxianism, Austrianism, and also for MMT. All these approaches are materially and formally inconsistent.
Inconsistency has been proven for the MMT balances equation.#1 And this proof is sufficient to refute MMT as a whole. MMTers, of course, do not understand/accept this. To ignore refutation and to simply continue talking BS is the standard operating procedure in economics. Because of this, it is NOT impolite but a statement of fact to summarize that MMTers in general and Matt Franko/Tom Hickey, in particular, are stupid or corrupt or both. That both have a university degree cast a negative light on their respective universities.#2, #3
#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 Cryptoeconomics ― the best of Bill Mitchell’s spam folder
#3 The Kelton-Fraud
Stop blathering about scientific methodology in general and answer one simple/real/ practical/concrete/relevant economic question.
This is the sectoral balances equation the MMT salesforce presents on any occasion (i) (X−M)+(G−T)+(I−S)=0.
This is the axiomatically correct balances equation (ii) (X−M)+(G−T)+(I−S)−(Q−Yd)=0.
Both equations consist of variables that are measurable with the precision of two decimal places.
Question: Which of the two macroeconomic equations is materially/formally consistent? Just answer with (i) or (ii).
REPLY to Andrew Anderson on Aug 4
The Bible says: “But let your ‘Yes’ be ‘Yes,’ and your ‘No,’ ‘No.’ For whatever is more than these is from the evil one.”
So, stop blathering and answer with (i) or (ii) lest the evil one will get you as he has already gotten the blatherers Tom Hickey, jrbarch, and Matt Franko.
You say: “The first [equation] is an accounting identity. The second is an axiom. There’s a difference.”
Indeed, there is a vast difference. Unfortunately, you do not understand it. The often heard sentence ‘This is an accounting identity’ is one of the most idiotic assertions in economics. For the proof see the comment on the Wikipedia entry Accounting Identity Wikipedia and the promotion of economists’ idiotism
The most elementary accounting identity is Qm≡−Sm and from this follows immediately that the MMT balances equation is false and from this follows immediately that the whole of MMT is false and from this follows immediately that all MMTers are either stupid or corrupt or both.
The methodologically relevant quote from Aristotle reads: “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.” (Wikipedia)
The certain, true, and primary economic premises are given with the set of macroeconomic axioms.#1
From these premises formally follows the testable conclusion (X−M)+(G−T)+(I−S)−(Q−Yd)=0.
From this, in turn, follows immediately that the MMT balances equation is false. And from this finally follows that the whole of MMT is scientifically unacceptable.
To copy/paste Aristotle from the Stanford Encyclopedia is neither philosophy nor science. The point is how to apply Aristotle’s methodology to economics. And here the wannabe philosopher Tom Hickey fails badly.
#1 Wikimedia, New Foundations of Economics
Your attempt to avoid the admission that the MMT balances equation has been conclusively proven to be materially/formally inconsistent is silly and futile.
Fact is that MMT is NOT a scientifically valid theory but academic snake oil.#1, #2, #3, #4
By consequence, the actual task is NOT to convince any MMTer of anything but to throw these fake scientists and their social media sales trolls without further ado out of science and the econblogosphere.
#1 MMT: Academic snake oil for the people
#2 The Kelton-Fraud
#3 Richard Murphy: the MMT fraudster dressed up as realist
#4 MMT and grassroots movements
This thread is about the economic implications of public deficits and how the conventional and the MMT view about this important issue differ.
Now, re-read your posts. They are consistently off-topic and entirely vacuous.
The main and direct effect of public deficit spending is, according to the macroeconomic Profit Law, on the business sector’s profit. There can be secondary effects on employment or prices but the primary and absolutely certain effect is on distribution.
So, people who argue for deficit-spending/money-creation argue ― whether they are aware of it or not does NOT matter ― for the agenda of the one-percenters.
To be sure, this is legitimate in the political realm. Free speech means practically also free speech for imbeciles, crooks, madmen, liars, detractors, warmongers, etcetera with the vague hope that in the course of the discussion error and fraud will be successively eliminated and that eventually, truth prevails. In the scientific realm, it is not sufficient to have an opinion, what is expected is a contribution to the growth of certain knowledge with certainty established by rigorous material and formal proof.
The observable unequal distribution of income and financial wealth is the empirical proof (i) of the Profit Law, and (ii), that the deficit-agenda-pushing from Keynes to Lerner to MMT to Trump has been successful beyond the wildest dreams.
What our discussion clearly shows is:
- your political/philosophical/religious blather does NOT contribute anything to the growth of scientific knowledge,
- MMT is refuted according to the criteria of material/formal consistency,
- the MMT sales crowd promotes a falsified theory in the social media and in the econblogosphere,
- MMT academics do NOT promote science but provide a cover for the agenda of the one-percenters,
- MMT academics suppress free speech on their blogs,
- neither universities nor institutions like the American Economic Association enforce well-defined scientific standards among their members as they are supposed to do but uphold the claim that economics is a science which is provably false for 200+ years.
The good thing that can be said about the Mike Norman Economics blog is that it does not directly block/suppress the refutation of MMT but only tries to bury it under a massive heap of philosophical shit. Compared to the rest of the politically corrupted econblogosphere, the Mike Norman Economics blog is a beacon of free speech.
Bob argues: “One argument in favor of welfare is that money given to individuals will end up as increased sales for businesses. Same would apply for a UBI or a JG that results in income for consumers who then distribute it to businesses. The purpose of these schemes is to help individuals; that it increases the business’s sector profit is secondary.”
You folks simply do not get it. Roughly speaking, if welfare is paid for by taxes, then, in the most elementary case, the spending of the taxed goes down and the spending of the welfare recipients goes up by the same amount. The effect on macroeconomic profit is ZERO.
If, on the other hand, the welfare is provided by deficit-spending/money-creation then macroeconomic profit goes UP by exactly the same amount. Because of this, MMT social programs are nothing but a cover for the self-alimentation of the oligarchy.
Bob argues: “The sum of spending on different programs for various purposes has precious little to do with economics, let alone science.”
Again false. There is a second way to increase welfare expenditures, that is, by changing the composition on the expenditure side and keeping the volume of the budget and taxes constant. It is well known that by reducing military spending one can finance any social programs for any number of years. Reducing military spending and increasing welfare spending by the same amount leaves macroeconomic profit unchanged.
So, as a matter of principle, social spending can be increased without increasing macroeconomic profit. But that is NOT MMT policy. MMT social policy, i.e. deficit-spending/money-creation is designed to increase macroeconomic profit. Clearly, MMT's social policy is a fraud.
In fact, things are politically worse. The constant mockery of the simple-minded balanced-budget folks obscures the fact that the main argument against credit financed government spending came from the philosopher Kant. Kant realized that there is a rather obvious connection between deficit-spending/growth of government debt and war. Therefore, in his essay Zum Ewigen Frieden. Ein philosophischer Entwurf = Perpetual Peace: A Philosophical Sketch under #4 Kant ruled out deficit-spending: “National debts shall not be contracted with a view to the external friction of states”.
Needless to emphasize that war/military spending has always been the main driver of public debt: “Adam Smith, when he wrote his Wealth of Nations, and Burke, when he produced his famous speech on economic reform, understood by ‘political economy’ a ‘branch of the science of the statesman or legislator’, a theory of practice, the science of the prudent management of the public finances. The growth of the huge debts which weighed on the great military nations would end in proving their ruin. This was especially true of England, which had become immensely in debt through the conquest of her colonial Empire.” (Halévy)
So, the classical balanced-budget hawks were NOT social sadists hell-bent on torturing the poor in the name of austerity. Kant’s prohibition of deficit-spending was clearly aimed a the war-mongers.
Whether you are aware of it or not does not matter: as promoters of MMT you are pushing the agenda of the oligarchy in general and of the war-mongers among them in particular. MMT is NOT a scientifically valid economy theory but a political bluff package. The philosopher Tom Hickey as MMT chief-ideologue is the living example of how degenerated and corrupt philosophy has become since Kant.
You say: “Yet some fiat creation is needed to keep up with population growth since SOME risk-free savings are legitimate as needed liquidity and initial capital formation. The question then is how fiat shall be created in way that does not deny citizens equal protection under the law …”
Yes, indeed. The correct way for the central bank to inject fiat money into the economy is by financing a growing wage bill. The incorrect way is the counterfeit-money-printer's way.#1, #2
#1 The MMT-Yawner: Government is not a household
#2 MMT is criminal economics