Kaivey summarizes: “So simply stated, Lerner’s Law would be something like ‘If you try to present your ideas cloaked in the language of you opponents, it will do your cause great damage’. This offers a lesson to Corbyn and his supporters. Corbyn has manfully tried to present policy ideas that currently sit outside what is thought ‘possible’ within the current orthodoxy. He has done so though while trying to present himself as being enthusiastic about balancing the budget, or at least the ‘current’ budget. He has also talked about how he would ‘pay for’ his policies by raising taxes on the rich. Both of these are examples of disguising ‘new doctrine’ as old as Lerner wrote, and leave him open to attacks from those holding on tight to the old.”
Clearly, “Lerner’s Law” is NOT about how the economy works, i.e. an economic law, but a smart advice for effective propaganda.
The core message of MMT is: Almost all economic problems can be solved by deficit-spending/money-creation. Accordingly, budget-balancing is nothing but the false doctrine of the current Orthodoxy a.k.a. Neoliberals. All arguments against a growing public debt are nothing but fear-mongering of the sadistic ruling elite/one-percenters/Oligarchy.
Note that the core message is NOT that temporary deficit-spending/money-creation is a sensible measure in a recession ― almost all economists agree on that ― but that permanent deficit-spending/money-creation is necessary “to advance our wellbeing”.
Radical, progressive, permanent deficit-spenders criticize Corbyn/UK Labour for timid, old-fashioned, cyclical deficit-spending, i.e. long-term budget balancing.
Budget-balancing in any shape or form is anathema to MMT Progressives.#1, #2 MMT Progressives claim to be the true Friends-of-the-People. Nothing could be further from the truth.#3
This is the fact of the matter. The axiomatically correct macroeconomic Profit Law reads Qm≡Yd+(I−Sm)+(G−T)+(X−M). With regard to the government’s budget, it boils down to Public Deficit = Private Profit, i.e. (G−T)=Qm. This piece of pure economic analysis translates into the scientific insight that MMT’s foundational sectoral balances equation is false, and into the political insight that MMT’s policy of deficit-spending/money-creation is nothing but a free lunch for the Oligarchy.#4
Progressive MMTers promote the cause of the ruling elite/one-percenters/Oligarchy and NOT of WeThePeople.#5
An additional sign is that MMTers argue consistently against taxing the rich.
• “Do we need the rich’s money?” “No.” (Bill Mitchell)#6
• “The time for pussy-footing with new taxes to extract a little more from the rich is yesterday’s news. There is no time for that. This is the time to create money for change.” (Richard Murphy)#7
• “He [Corbyn] has also talked about how he would ‘pay for’ his policies by raising taxes on the rich. Both of these are examples of disguising ‘new doctrine’ as old as Lerner wrote, …” (Kaivey, above)
The Profit Law tells one that deficit-spending produces profit for the Oligarchy.#8 Permanent deficit-spending produces permanent profit and permanently increases public debt. WeThePeople have to pay interest on this debt via taxes and have to pay back the debt eventually.
MMTers are NOT Friends-of-the-People, just the opposite, they promote the cause of the Oligarchy and actively subvert the genuine grassroots movements in the UK and US.#9, #10
#1 MMT-Progressives: stupid or corrupt or both?
#2 How Bill Mitchell stalks Jeremy Corbyn
#3 MMTers are NOT Friends-of-the-People
#4 MMT: A free lunch for the Oligarchy
#5 MMT: The fusion of Wall Street and Academia
#6 MMT: Academic snake oil for the people
#7 You are fighting for life? On all fronts? MMT can save you! Or maybe not?
#8 Keynes, Lerner, MMT, Trump and exploding profit
#9 MMT and grassroots movements
#10 The Kelton-Fraud
Related 'Economics: A pointless left-right wrestling show' and 'Everything you know about MMT is wrong' and 'MMT: Time to say goodbye' and 'Thinking about economic policy for future PM Corbyn' and 'MMT: If you’ve got a problem, I don’t care what it is, let me help'. For the full-spectrum refutation of MMT see cross-references MMT.
Immediately following MMT sucks.
You ask: “Do your equations, Egmont, cover the role played by fractional reserve banking in our economy?”
The AXEC equations prove that the MMT equations are false. Therefore, the rest of MMT’s analytical superstructure including fractional reserve banking is also false. To discuss fractional reserve banking at this juncture would be a distraction from the point at issue, i.e. that MMT is (i) a scientific failure and (ii) a political fraud.
Strictly speaking, MMTers do not qualify for a discussion of a monetary theory that satisfies scientific standards. It is a matter of indifference what Mosler, Mitchell, Lerner, or Keynes ever said about money/interest because their macroeconomics is provably false.
For the relationship between the axiomatically correct sectoral balances equation and the stock of central bank money, which has to be determined first, see
► Money and time
► Basics of monetary theory: the two monies
► The creation and value of money and near-monies
► Nick Rowe’s soapbubbling about money
► Money: from silly stories to the true theory
For more details see the label Money at the AXEC blog and the working papers at SSRN.
As long as the relationship between the sectoral balances and the stock of central bank money is not perfectly clear, there is NO use to discuss fractional reserve banking.
MMTers tell the world that 2+2=5. They are patiently shown that 2+2=4. Yet they simply cannot get their heads around the fact that MMT is scientifically refuted, that Academia (Bill Mitchell and others) and Wall Street (Warren Mosler and others) jointly betray WeThePeople, and that the clueless social media foot-soldiers (Kaivey and others) are part of the scam.
The scam consists of propagating deficit-spending/money-creation as a social benefit for WeThePeople while it is first and foremost money-making for the Oligarchy.#1
Stop hallucinating: “No one kicks a dead dog, …, MMT is a serious threat to them because it is viable.” and wake up to the reality that MMTers are more an annoyance than a threat ― just like a heap of dead cockroaches.
You cannot repudiate the proof of the inconsistency of the foundational MMT sectoral balances equation. The rest is shame and silence.
#1 Keynes, Lerner, MMT, Trump and exploding profit
You say: “Egmont Kakarot-Handtke is completely wrong here and has no basis in fact or logic to make this claim: The price is determined by the wage rate, which takes the role of the nominal numéraire, and the productivity. The quantity of money is NOT among the price determinants. This puts the commonplace Quantity Theory to rest.”
In fact, the flawless logic goes thus.#1, #2
Methodological rule No 1: One has to start with the simplest possible economic configuration. 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), 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 numéraire, and productivity. The real value of money is ultimately given by productivity. From (1) follows W/P=R (2), i.e. real wage = productivity.
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. This excludes both inflation and deflation.
In the analytical beginning, there is no state and no central bank. The firm pays the monthly wages with a standardized IOU and declares that this conveniently denominated title will be unconditionally accepted at the firm’s store. The employees accept that the IOUs discharge their wage claim against the firm. Since the household sector’s budget is balanced by the initial condition C=Yw, whatever the firm issues returns until the end of the period under consideration. The firm creates IOUs and destroys them again within a short time span, i.e. a month. No IOUs are carried over to the next period and therefore the IOU is not suited as a store of value. The firm’s IOU is a pure transaction medium.
The firm’s rule for IOU-creation is IOU=kYw, i.e. the nominal volume of IOUs is strictly proportional to the wage bill.
As a result, one has a fiat money economy with absolute price stability. No taxes are needed to force the workers to accept the firm’s privately created money. If all stick to the rules, they get an inflation-free fiat money economy and if the productivity increases over time, the real wage of the workers' increases.
Problems arise, of course, if corruption sneaks in. For example, if the firm issues IOU’s in excess of the wage bill and the money is spent by a third party. This causes a price hike (NO inflation) and the real wage falls below the productivity. The business sector makes a profit that is equal to the excess IOUs. This is what MMT’s policy of deficit-spending/money-creation amounts to when the analysis is stripped down to the bare bones.
Macrofounded economic theory tells one that the Austrian’s constant polemic against fiat money per se is beside the point. This is where MMT is right. However, the Austrian’s critique of the abuse of the fiat money system for the benefit of the Oligarchy is fully justified.
From the scientific standpoint, though, both MMT and Austrianism is scientifically worthless garbage.
#1 The creation and value of money and near-monies
#2 The ultimate ― analytical ― origin of money
You say: “Give us an article of REAL criticism of MMT. There are always details that can be made better in economics. If you think we should not spend more to help the unfortunate, explain why.”
Here it is: MMT is (i) a scientific failure and (ii) a political fraud.#1
Because of Public Deficit = Private Profit, MMT deficit-spending/money-creation does NOT help WeThePeople but the Oligarchy. The lethal effect of MMT is on distribution#2.
The discussion between long-dead Austrianism and recently deceased MMT#3 is nothing more than a groundhog-day troll brawl in the political gutter.
Austrianism is refuted, MMT is refuted, end of palaver.
#1 MMT Progressives: The knife in the back of WeThePeople
#2 Deficits matter for distribution
#3 The final implosion of MMT
Clint Ballinger refers to
- The Levy Economics Institute of Bard College, 2008, Where Profits Come From: Answering the Critical Question That Few Ever Ask
- Bill Mitchell, 2010, Why budget deficits drive private profit
Take notice that I have dealt with the Levy/Kalecki profit equations and refuted them. For details see
- MMT is NOT an alternative to Neoliberalism, Aug 24, 2017
- MMT and grassroots movements, Jan 8, 2018
- Truth by definition? The Profit Theory is axiomatically false for 200+ years
- The magic circuit and how economists got it wrong
- Kalecki and Keynes: The double macroeconomic false start
- MMT: How mathematical incompetence helps the Kelton-Fraud
- Kalecki got it wrong, Allais got it right
- Keynes, Kalecki, MMT and the invention of the perpetual profit machine
- The Common Error of Common Sense: An Essential Rectification of the Accounting Approach, Levy Economics Institute of Bard College Working Paper No. 371
- Why Post Keynesianism Is Not Yet a Science
- Keynes’s Missing Axioms
Conclusion: The whole Keynesian and After-Keynesian and MMT crowd got the Profit Law and the Sectoral Balances Equation wrong.
False (I−S)+(G−T)+(X−M)=0 MMT see Down with idiocy!
True (I−S)+(G−T)+(X−M)−(Qm−Yd)=0 AXEC.
Bill Mitchell quotes: “In this paper ― The Indispensable Federal Deficit ― published June 2010, the author says: There is a wide range of views on the present role of the federal budget deficit in the economy; … In truth, the economy and profits are entirely dependent on the federal budget deficit, without which not only would expansion be impossible, but the economy itself could not for long function at all … The federal budget deficit has usually been a major profit source in modern history … The support to profits from the federal government will remain a requirement for as long as balance sheets in the private economy are shrinking.”
In my words: The ultimate purpose of the MMT policy of deficit-spending/money-creation is to keep the Oligarchy on life-support.
Keynes, Lerner, MMT, Trump and exploding profit
Questions: Why do MMTers deceive the general public and pretend that MMT policy benefits WeThePeople? And why do they actively subvert the genuine social grassroots movements?
MMT Progressives: The knife in the back of WeThePeople
That MMT is NOT science but political agenda pushing is as clear as the day. The one issue that has to be clarified is: Which MMT-academic is sponsored by which billionaire?
(This post has been blocked/deleted/censored.)
As official Contributor of the Mike Norman Economics blog (“We seek the truth, …”) you are supposed to make sure that submitted posts do appear.
I urge you to de-block my answer to Clint Ballinger.
REPLY to Clint Ballinger on Dec 19
You say: “Btw, I am all for no profits, with worker owned co ops.”
I say: “I am all for stopping you to corrupt the Mike Norman Economics blog.”
You say: “Check-back question: When did Egmomt as the heterodox chief proponent of pseudoscience last formulate a testable proposition?”
Here: “When Clint Ballinger’s smokescreen of irrelevant arguments is taken away, the whole issue reduces to the all-decisive question which of the two macroeconomic relations is true/false: (i) (I−S)+(G−T)+(X−M)=0 (MMT) (ii) (I−S)+(G−T)+(X−M)−(Qm−Yd)=0 (AXEC). This question can be empirically decided.”#1
Check-back question: When did Noah Way last formulate a testable proposition?
#1 MMT: Time to say goodbye
REPLY Clint Ballinger on Dec 19
You say: “Egmont, there is nothing original in your work. This two decade old MMT related paper already covers everything you say, and more.”
In fact, the Levy Institute paper ‘Where Profits Come From’ is an update of Levy, S. J., and Levy, D. A. (1983). Profits and the Future of the American Society. Cambridge, Philadelphia, etc.: Harper and Row.
Fact is that the 1983 version has already been refuted together with Keynes’ GT in my working paper of 2011.#1
If I simply parrot the Levy/Kalecki equations (“One of my favourite economists ― Michal Kalecki was one of the early pioneers in developing an understanding of the origins of profits from a macroeconomics perspective.” Bill Mitchell) why, then, does Bill Mitchell block all my contributions since 2016?#2
Let us state the facts that are indeed original in my work: The academic Bill Mitchell continuously violates scientific standards#3, MMT is materially/formally inconsistent,#4 MMT policy is a political fraud, MMTers in general and Clint Ballinger, in particular, are stupid/corrupt agenda pushers.
#1 Keynes’s Missing Axioms
#2 The final implosion of MMT
#3 Cryptoeconomics ― the best of Bill Mitchell’s spam folder
#4 Cross-references MMT
Related 'The Levy/Kalecki Profit Equation is false'
REPLY to Clint Ballinger on Dec 19
You quote Bill Mitchell who, in turn, quotes Kalecki’s profit equation: “Pn = I + (G – T) + NX + Cp – Sw (i)”
In the Wikipedia entry, MMT asserts: “Therefore, budget deficits add net financial assets to the private sector; whereas budget surpluses remove financial assets from the private sector. This concept is widely represented in macroeconomic theory by the national income identity, G − T = S − I − NX (ii) where G is government spending, T is taxes, S is savings, I is investment and NX is net exports.”#1
1. NO way leads from the profit equation (i) to the balances equation (ii). So, MMT is formally inconsistent.
2. Somewhere between (i) and (ii) profit vanished.#2
3. Equation (i) is false, to begin with. Kalecki, too, got macroeconomic profit wrong.#3
4. The axiomatically correct Profit Law is given as Qm≡Yd+(I−Sm)+(G−T)+NX (iii) Legend: Qm monetary profit/loss, Yd distributed profit, I investment expenditure, Sm monetary saving/dissaving, G government expenditures, T taxes, NX=(X−M) X exports, M imports. Total profit Q is the sum of monetary and nonmonetary profit/loss, i.e. Q≡Qm+Qn (iv).#4, #5
5. From the correct Profit Law (iii) follows the correct sectoral balances equation (I−Sm)+(G−T)+NX−(Qm−Yd)=0 (v). This equation contains profit and distributed profit while those magnitudes are missing in (ii).
Conclusion: MMT is materially/formally inconsistent and MMT policy is a political fraud.
#1 Wikipedia, Modern Monetary Theory
#2 MMT and the magical profit disappearance
#3 Cross-references Kalecki
#4 The Emergence of Profit and Interest in the Monetary Circuit
#5 Primary and Secondary Markets, Levy Economics Institute of Bard College Working Paper No. 741
You say: “Maybe a clear statement in common language would be more suitable for explanation and discussion.”
No, if you cannot read a simple equation you are out of economics. An equation is the clearest possible statement.#1
You cite: “budget deficits add net financial assets to the private sector;” and complain about symbolic mumbo-jumbo as proof.
If you do not understand why this statement is false go to AXECorg and google “private sector” and you will get 40 hits.
For example: “There is no such thing as the private sector but there is the business sector and the household sector. Hence, the MMT balances equation is false.”
And now get your dummy and your diaper and go to sleep.
#1 Marshall and the Cambridge School of plain economic gibberish
You say: “… every one of his ‘arguments’ is supported by another one of his arguments.”
This is called deductive reasoning and it secures logical consistency. Consistency, material and logical, is the essence of science: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle)
It is pretty obvious that in your two-digits-IQ world you have never heard of consistency.
Go back to troll school and ask for new slogans. The common-language slogan does not work because everybody knows by now that there is no such thing as a common language of morons and scientists.#1
#1 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist
You say: “Supporting every one of your arguments with another one of your arguments is a logical fallacy known as circular reasoning.”
This is only true for poorly trained trolls. In science, all reasoning starts with clearly stated axioms: “The attempt is made to collect all the assumptions, which are needed, but no more, to form the apex of the system. They are usually called the ‘axioms’ (or ‘postulates’, or ‘primitive propositions’; …). The axioms are chosen in such a way that all the other statements belonging to the theoretical system can be derived from the axioms by purely logical or mathematical transformations.” (Popper)#1
Go back to troll school and ask for a new slogan. The circularity slogan does not work either.
#1 Both mainstream economics and MMT are axiomatically false
Seems that they have run out of slogans at your troll school.
So let us sum up. The formal foundations of MMT are inconsistent and therefore the whole approach is scientifically worthless. MMT policy has no sound scientific foundations. Politically, self-styled MMT Progressives claim to promote the cause of WeThePeople. This claim is false. The ultimate purpose of the MMT policy of deficit-spending/money-creation is to keep the Oligarchy on life-support. MMT is just another political fraud. MMTers are failed/fake scientists and have to be expelled from the sciences.
You are totally off the mark.
To begin with, economics is NOT a social science but a systems science.
You maintain: “Because you don’t find a formal foundation (basis for natural science) in MMT (a social science) you dismiss it.”
I do find a formal foundation, i.e. the Kalecki profit equation and the MMT sectoral balances equation, but both are provably false. So, the rest of MMT is false. You don’t understand this because at the MMT troll school they teach not more than five slogans and not more math than counting to ten.
MMTers don’t get macro right because they are too stupid. However, this is not a disadvantage for political agenda pushing where only useful idiots are needed.
You recount folk-wisdom from the HowToMakeFriends course: “You don’t win arguments by calling people stupid, you win them by making a convincing case.”
It should be quite obvious even to a slow-motion thinker like you that the point of this thread is the refutation of MMT and to make sure that MMTers are thrown out of science. Accordingly, the very idea to convince you or any other MMTer is plainly absurd.
You are beyond hope and you can prove this for yourself by re-reading your stuff.
You say: “Make the case in English”. I have already made the case in English and here it is again: The formal foundations of MMT are inconsistent and therefore the whole approach is scientifically worthless. MMT policy has no sound scientific foundations. Politically, self-styled MMT Progressives claim to promote the cause of WeThePeople. This claim is false. The ultimate purpose of the MMT policy of deficit-spending/money-creation is to keep the Oligarchy on life-support. MMT is just another political fraud. That MMT is NOT science but political agenda-pushing is as clear as the day. The one issue that has to be clarified is: Which MMT-academic is sponsored by which billionaire?
Easy to understand even for the stupid and corrupt folks of MMT La-La-Land.