Blog-Reference and Blog-Reference and Blog-Reference and Blog-Reference
The most curious thing about economics is that most models ― Walrasian, Keynesian, Marxian, Austrian, does not matter ― do NOT contain macroeconomic profit in explicit form. And when it appears occasionally it is misspecified.#1 This is why economics is a failed/fake science. MMT is no exception.
In John Weeks’ post about the mistreatment of public debt as a perennial problem instead of a long-term benefit, the word profit does not appear once. The bottom line of his argument is that the public debt is not as massive as everybody thinks and on closer inspection, not a burden but, on the contrary, has a lot of advantages for WeThePeople. In detail he argues:
- People are told that public debt 1) must be repaid, 2) threatens the country with bankruptcy, and 3) is a burden on future generations. All these arguments are wrong.
- The British government can never default on its debt.
- A good portion of the national debt is held by the public sector, i.e. Bank of England, this is what the public sector owes itself.
- The interest paid on debt held by pension funds is income to retired households.
- At the end of 2016, private corporate and foreign gilts holders owned 41% of the UK’s national debt. Only the £524 billion of gilts held by foreign creditors could be considered a “burden” in that the associated interest payments are from UK taxpayers to non-UK creditors.
- A fair and progressive taxation system could ensure that interest payments to domestic bondholders don’t have negative redistribution effects.
- Sound management of the national debt means more public borrowing for investment and current expenditure, which is justified by the modest size of the effective debt.
- MMT is a macroeconomic theory that is refuted on all counts.#2
- John Weeks does not mention once the profit effect of deficit-spending/money-creation.#3
- From the axiomatically correct Profit Law follows the sectoral balances equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.#4
- MMT economic policy boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.#5
- All the social benefits MMTers promise are paid in real terms by WeThePeople themselves via stealth taxation.#6
- Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon. Public debt is NOT an asset but a time bomb.
#1 For details of the big picture see cross-references Profit
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 Keynes, Lerner, MMT, Trump and exploding profit
#4 Down with idiocy!
#5 MMT: Redistribution as wellness program
#6 MMT, money creation, stealth taxation, and redistribution
#7 MMT: Academic snake oil for the people
You say: “Jammers comment at Naked Capitalism has so far gone unrefuted and that’s a shame since he apparently has a good mind and some inkling of the issues involved. So, since I’m banned at NC, I’ll try to correct him here.”
Then you go on to elaborate on the difference between deficit-spending for investment goods and consumption goods/services.
This distracts from the main point, i.e. the profit effect of public deficit spending. When the axiomatically correct Profit Law, which is given by Qm≡Yd+(I−Sm)+(G−T)+(X−M) for the simple case, is extended for deficit spending on public investment Qm≡Yd+(Ib+Ig−Sm)+(G−T)+(X−M) with Ib indicating business investment expenditures and Ig indicating government investment expenditures and I=Ib+Ig then it becomes obvious that for the profit effect it makes no difference whether the government spending is on investment goods or consumption goods/services.
While in the first case public debt=liability is ‘backed’ by a real asset, in the second case the public debt is ‘backed’ by nothing. In any case, it would be false to follow John Weeks’ suggestion and to treat public debt as an asset. This is a verbal shell game.
The economic fact of the matter is (i) that public debt is a liability, (ii) that this liability may be ‘backed’ by real assets or not, and (iii), that this does not matter for the profit effect of deficit spending. It always holds Public Deficit = Private Profit and MMT is fake science and corrupt politics.