February 27, 2019

A battle for hearts and minds ― economics redefined

Comment on Tom Hickey on ‘Fed Chair Powell gets it wrong, just as did Bill Dudley’

Blog-Reference

Tom Hickey declares war: “The battle line is drawn, with the ruling elite and neoclassical economists at the center and the flanks occupied by Austrians and Libertarians on the right and clueless progressives on the left, with corporate media in the background, facing off with the MMT economists at the center flanked by MMT advocates, backed by a public that agrees with genuine progressive goals. Now it is a battle for hearts and minds.”

The opioid crisis obviously takes a heavy toll on economists. MMTers like Tom Hickey are currently losing the rest of their lamentable capacity to differentiate between polit-blather and reality.

Whatever the Fed chairman says is self-promotion as competent and responsible representative of an institution that claims to be committed to the well-being of WeThePeople. No sober person takes this speech-writer stuff literally.

The Fed’s task is to keep the economy going. This is a political mandate. Accordingly, the performance of Wall Street is engineered by the Fed and the performance of the real economy is engineered by Fed/Treasury. This team will do “Whatever it takes” to keep the system going and this includes running deficits up to the stratosphere.

MMTers are simply intoxicated by their own rhetoric when they believe that they tell Fed/Treasury something new by pointing out that there is no operational restriction to deficit-spending/money-creation. Wake up MMTers, the governments all over the world know this and practice it since time immemorial. The proof is in the public debt of globally $184 trillion and $22 trillion alone in the USA.

And, mind you, this amount is the official number. How can MMTers be sure that Fed/Treasury is not doing MMT deficit-spending/money-creation all along without showing it on the official accounts? After all, the Pentagon is on record of losing sight of trillions every year.

There are two worlds: the communicative world and the real world. Political agenda pushers deal with the world of make-belief only scientists deal with reality. Economists are NOT scientists.

The reality is that the free-market economy is on the life-support of the state. The macroeconomic Profit Law implies Public Deficit = Private Profit and this means that permanent deficit-spending is necessary to prevent the monetary economy from collapsing. This holds for Capitalism and Socialism alike.

Of course, neither the government nor the Fed nor the Treasury can tell WeThePeople that they are riding the tiger and cannot dismount.

But, luckily, there are the useful idiots of MMT who tell WeThePeople that deficit-spending/money-creation is needed for worthy social purposes and for the survival of humanity and the planet. Nobody can argue against rescuing humanity.

Deficit-spending/money-creation, of course, make of one problem today two problems in the future. However, this can go on for a long time. Best of all, when things go wrong, the responsible politician steps before the cameras and tells WeThePeople that it was the fault of these MMTers with their reckless social/environmental deficit-spending.

There is NO war between misguided right-wing Fed hardliners and progressive left-wing MMTers. The battle for hearts and minds is just a communicative clown show in the political Circus Maximus.#2

Note that neither Fed nor MMT arguments have sound scientific foundations. Economics is a failed/fake/cargo cult science Both, mainstream economics and MMT is proto-scientific garbage. What economics needs is to flush Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and the pluralism of provably false theories down the drain.

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT
# 2 The economist as stand-up comedian

Related 'Economists: Trolls with a mortarboard'. For details of the big picture see cross-references Failed/Fake Scientists.

***
LINK NOTE on Feb 28

On Twitter,#1 Warren Mosler cites approvingly Macrotourist#2: “Nice to see MMT articles like this: Trump is the most MMT-like-President ever elected.”

Actually, this is long known
► MMT = Trumponomics
► MMT: So-called Progressives as trailblazers for Trumponomics


#1 Twitter
#2 Macrotourist
***

REPLY to Noah Way on Feb 28

You say: “According to MMT, taxes regulate economic activity. Thus inflation ― where there is too much money in circulation, and its value decreases ― is corrected by taxation, which removes money from circulation, thereby increasing the value of what remains.”

Your inflation theory is roughly the old Quantity Theory, i.e. too much money chasing too few goods. So, to begin with, your inflation theory is false.#1, #2

Furthermore, the “value of money” depends on productivity and not on taxation or on the quantity of money.#3


#1 Economics as tireless production of proto-scientific garbage: inflation theory as an example
#2 Dear idiots, government deficits do NOT cause inflation
#3 The creation and value of money and near-monies

February 26, 2019

Links on Lars Syll’s ‘What’s wrong with MMT? Nothing!’

Everything! (i) #MMTisBadTheory (ii) #MMTisBadPolicy (iii) #MMTersAreBadPeople

Blog-Reference and Blog-Reference adapted to context and Blog-Reference

ad (i) The foundational sectoral balances equation is false. For proof see
Rectification of MMT macro accounting plus Sticker

ad (ii) Permanent deficit-spending/money-creation is a permanent free lunch for the Oligarchy. For proof see
How counterfeiters save America with an extra profit and make WeThePeople pay for it

ad (iii) MMTers deceive the general public and violate scientific standards on a daily basis. For proofs see
cross-reference MMT (search for keyword “fraud”)

Egmont Kakarot-Handtke

February 25, 2019

How counterfeiters save America with an extra profit and make WeThePeople pay for it

Comment on Bruce Currie on ‘How can America pay for things the people want? With ease.’

Blog-Reference

It is a bit silly to ask a counterfeiter How are you going to pay for stuff? ― he will simply point to his brand-new xD-printer. As MMTers are wont to say, governments are not households, i.e. the sovereign money issuer is different from the money user. This, of course, is true but does not go very far. The economic fact of the matter is this.

1. The macroeconomic Profit Law entails Public Deficit = Private Profit.

2. Therefore, the MMT policy of permanent deficit-spending/money-creation is a permanent free lunch for the Oligarchy.

3. The lethal effect of MMT policy is NOT on inflation but on distribution.

4. Fabulous financial wealth is the mirror image of fabulous public debt ($22 trillion and counting).

5. Deficit-spending/money-creation causes a tiny price hike (NO inflation) and thereby current output is redistributed between wage-earners and deficit-spenders. The real wage is reduced depending on the volume of deficit-spending relative to total wage income.

6. In real terms, the wage-earners pay for the stuff the counterfeiters buy. Deficit-spending/money-creation merely substitutes stealth-taxation via the price-mechanism for open taxation via the IRS.

7. Deficit-spending/money-creation reduces the real wage income of the household sector and increases the overall profit of the business sector.

8. Deficit-spending induces interest payments on the public debt. This amounts to income redistribution from WeThePeople to the Oligarchy as long as the debt is rolled over.

9. The MMT policy of permanent deficit-spending/money-creation is ultimately NOT for the benefit of WeThePeople.

10. MMT is political agenda pushing for the Oligarchy in a scientific/social bluff package.#1

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT

Related 'MMT Progressives: The knife in the back of WeThePeople' and 'MMT: If you’ve got a problem, I don’t care what it is, let me help' and 'Fraud comes always in the cloak of charity, salvation, or threat of doom'.

***
REPLY to Calgacus on Feb 27

You say: “Money causes unemployment. Unemployment is unjust, cruel and insane. The JG eliminates this insanely cruel injustice and nothing else can.” and “You claim to be a Christian, but do you listen to MMT advocate Jesus fighting tooth and nail for a JG and insisting on its necessity?”

You are clearly out of economics (understood as science) and in the preacher business. The First Commandment of Science is: Do not moralize!#1, #2

Your assertion: “Money causes unemployment” is provably false. Your Money Theory is just as crappy as your Employment Theory.#3

To invoke Jesus in an economic argument is the unassailable proof that you are either stupid or corrupt or both.


#1 The moralizing economist is not a good guy but a fake scientist
#2 Economics for believers
#3 Full employment through the price mechanism

February 24, 2019

Economists: Trolls with a mortarboard

Comment on Tom Hickey on ‘Jeffrey Sachs ― Green New Deal is feasible and affordable’

Blog-Reference

The axiomatically correct Profit Law for the economy as a whole is given by Q≡Yd+(I−S)+(G−T)+(X−M) and reduces to Q≡(G−T) if Yd, I, S, X, M is taken out of the picture for a moment. The reduced Profit Law says that the monetary profit of the business sector Q is equal to the deficit (G−T>0) of the public sector, in a nutshell: Public Deficit = Private Profit.

So, from the standpoint of plain self-interest, the one-percenters and their useful academic spokespersons should consistently argue FOR deficit spending, and the ninety-nine-percenters and their academic spokespersons should consistently argue AGAINST it. Reality is different.#1, #2, #3, #4, #5

The communicative problem is this: the Oligarchy cannot argue, folks we need permanent public deficits for our economic well-being and growth of our cash-backed political power, so they let their academic trolls argue, folks YOU need public deficits for YOUR social well-being and YOUR survival in view of rapidly increasing environmental hazards.#6 *

It was MMTers like Warren Mosler who took it upon them to actively promote deficit-spending/money-creation and a continuously growing public debt as a benefit for WeThePeople. This is a fraud because just the opposite is actually the case, that is, MMT benefits the Oligarchy. What can be currently observed, is that not only a growing number of economists is jumping on the MMT bandwagon but also opinion leaders of the Oligarchy like Warren Buffet.#7

It seems that virtually all economic schools are now for socially/environmentally enlightened capitalism with state-generated profits for the Oligarchy. The remaining tiny problem being those pesky rent-seekers who simply take their public-deficit free lunch without pretending that they work hard for the best of humanity: “… the GND [Green New Deal] entails using true price based on true costs, which eliminates the extraction of economic rent through socializing negative externality, the bill for which is now coming due on global society and the global economy. The system is becoming increasingly dysfunctional, while the fat cats become fatter on rent extraction. Take away the rents and ‘capitalism’ works all by itself through actual market price by preempting rent-seeking and rent extraction (as many Austrian, economists have been saying from the right and Marxist and Marxian economists from the left.” A great coalition of economic trolls is currently in the making.

Tom Hickey fails to realize or to mention that nothing has ever produced more profit = rent than the MMT policy of deficit-spending/money-creation. Fabulous financial wealth is the mirror image of fabulous public debt ($22 trillion and counting).#8

Since Adam Smith’s Wealth of Nations, economists fail to tell WeThePeople where profit and financial wealth really come from. MMTers are only the last in a long series of storytelling academic trolls.

Egmont Kakarot-Handtke


#1 Austerity and the political games Progressives play
#2 MMT Progressives: stupid or corrupt or both?
#3 MMT: Academic snake oil for the people
#4 Economics as a cover for agenda pushing
#5 Stephanie Kelton and the self-destructive stupidity of the super-rich
#6 MMT: If you’ve got a problem, I don’t care what it is, let me help
#7 MMT for beginners
#8 Stephanie Kelton on how to become fabulously wealthy

Related 'The MMT propaganda runs hot' and 'Very busy, those Wall Street propaganda folks' and 'Look, how they jump on the deficit/profit bandwagon'.

***
*  Twitter Mar 1

Twitter Mar 6

February 23, 2019

Dear idiots, time to get saving and investment straight (I)

Comment on Charlie Price on ‘Would Attempts to Increase Saving Damage Recovery?’

Blog-Reference (Twitter link)

Murray Rothbard argued: “In short, what can help a depression is not more consumption, but, on the contrary, less consumption and more savings (and, concomitantly, more investment).”

Charlie Price argues: “… you can’t create investment by saving. In fact, attempts at saving will reduce investment.”

Keynes argued: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63).

Here is the short proof that economists are to this day too stupid to put 2 and 2 together.

(i) The elementary production-consumption economy is given by three macroeconomic axioms: (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.

(ii) The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. X=O.

(iii) The monetary profit of the business sector is defined as Q≡C−Yw,

(iv) The monetary saving of the household sector is defined as S≡Yw−C.

(v) Ergo Q≡−S.

The balances add up to zero. The counterpart of household sector saving S is business sector loss −Q. The counterpart of household sector dissaving (-S) is business sector profit Q. Both Q and S are measurable with the precision of two decimal places.

From (v) follows immediately that saving is NEVER equal to investment.#1, #2

For the elementary investment economy holds Q≡I−S. From this follows that (1) saving and investment are causally independent and NEVER equal, (2) all I=S/IS-LM models are false, (3) Keynesianism, Post-Keynesianism, New Keynesianism are scientifically worthless (4) Murray Rothbard and Charlie Price, too, are brain dead blatherers.

Egmont Kakarot-Handtke


#1 Settling the Theory of Saving
#2 Squaring the Investment Cycle

Related '“But economics is not pure mathematics or logic” No, it is pure blather' and 'Why is 0!=1? And why is I≠S? And why economics teaching is rotten' and 'Dear idiots, time to get saving and investment straight (II)' and Ch. 13, The indelible scientific disgrace of economics, in SovereignEconomics. For details of the big picture see cross-references Refutation of I=S.

February 22, 2019

Economics as a cover for agenda-pushing

Comment on Simon Wren-Lewis on ‘The new party: lessons the Labour leadership and its supporters failed to learn’

Blog-Reference

“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)

We know since the Ancient Greeks what the criteria of scientific truth are “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)

Economists lack the true theory to this day. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.

Because they lack the true theory, economists have nothing to offer but educated common sense and their personal opinion. Economic policy guidance NEVER had sound scientific foundations.#1

However, those who are not fit for science may still find employment in the political Circus Maximus as op-eder, propagandist, entertainer, agenda pusher, and useful idiot. This would not be a problem at all, of course, if economists would not claim to do science. They don’t, they just put their square academic cap on and sell their right- or left-wing stuff in the bluff package of science. Fact is that political economics has zero scientific content.#2

Simon Wren-Lewis is a case in point. He has not realized to this day that both orthodox and heterodox economics is proto-scientific garbage but exhausts himself (i) with telling his audience that the BBC and the mainstream press deceive the people about Brexit, and (ii), with undermining the current Labour leadership.

These are Simon Wren-Lewis’ lessons
  • “With its Brexit policy the leadership, and more particularly the cabal around Corbyn himself, failed to do this job.”
  • “For Corbyn to pledge that members will make party policy, and then ignore the view of the overwhelming majority on the most critical issue of the day, just reeks of hypocrisy.”
  • “Corbyn is not a natural manager of a large team, and that makes it all the more important that Labour policies keep the majority of MPs and members on board.”
  • “It is almost certainly Corbyn’s biggest mistake since he became Labour leader.”

Obviously, the lessons Simon Wren-Lewis teaches have zero scientific content. But then, had Oxford economics ever any? The fact is that economists have messed up Profit Theory for 200+ years, Microfoundations for 150+ years, Macrofoundations for 80+ years, and the application of elementary logic/mathematics since the founding fathers.

Egmont Kakarot-Handtke


#1 Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems
#2 For details of the big picture see cross-references Political Economics/Stupidity/Corruption.

Related 'Thinking about economic policy for future PM Corbyn' and 'How Bill Mitchell stalks Jeremy Corbyn' and 'MMT and grassroots movements' and 'Oxford economics — still at the proto-scientific level' and 'Economists ― medics or barber-surgeons?' and 'Educating economists? Yes, but where is the scientific stuff?' and 'The apocalypse of stupidity' and 'Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion' and 'The economist as stand-up comedian' and 'Legitimacy lost' and 'The GDP-death-blow for the economics profession'.

MMT for beginners

Comment on Bradford DeLong on ‘I would not have called MMT “nonsense economics”’

Blog-Reference and Blog-Reference and Blog-Reference and Blog-Reference

For beginners, the 10 essential points are:
  1. MMT is fake science.
  2. The foundational MMT sectoral balances equation is provably false.
  3. MMTers are too stupid for the elementary math that underlies macroeconomics.
  4. Because the foundations are false, one can safely forget the rest.
  5. The axiomatically correct macroeconomic Profit Law entails Public Deficit = Private Profit.
  6. Therefore, the MMT policy of permanent deficit-spending/money-creation is a permanent free lunch for the Oligarchy.
  7. The lethal effect of MMT policy is NOT on inflation but on distribution.
  8. Fabulous financial wealth is the mirror image of fabulous public debt ($22 trillion and counting).
  9. MMT policy is ultimately NOT for the benefit of WeThePeople.
  10. MMT is political agenda pushing for the Oligarchy in a scientific/social bluff package.#1
Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT

Related 'MMT = proto-scientific garbage + deception of the 99-percenters' and 'MMT: So-called Progressives as trailblazers for Trumponomics' and 'Very busy these days: Wall Street’s agents' and 'MMT, Warren Mosler, and the little helpers from Wall Street and Academia' and 'MMT and the promotion of Wall Street socialism' and 'How MMT enlightens Washington' and 'Austerity and the political games Progressives play' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'Austerity and the utter scientific ignorance of economists' and 'Note on “Era of Austerity coming to an end...”' and 'Economists: Trolls with a mortarboard' and 'Macroeconomics: Economists are too stupid for science'.

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Wikimedia AXEC152

February 21, 2019

What it takes to become a great economist

Links on Lars Syll’s ‘What it takes to become a great economist’

Blog-Reference

Economics is a failed/fake science. There are NO great economists only stupid or corrupt political agenda pushers.

Egmont Kakarot-Handtke


See also the Twitter hashtags: #Economics #Econ #FailedScience #FakeScience #CargoCultScience #ScientificIncompetence #Economists #StupidOrCorruptOrBoth #Orthodoxy #Heterodoxy #Pluralism #PoliticalEconomics #DebunkingEconomics #EconBlockers #EconomistsServeTheRich #BadScienceBadPolicyBadPeople #DefundEconomics #FireEconomists #ScrapTheLot #MicroFoundations #MacroEconomics #Profit #ProfitTheory #ProfitLaw #Deficit #Debt #WeThePeopleOwesIt #OligarchyOwnsIt #PublicDeficitIsPrivateProfit #OrthodoxEconomics #HeterodoxEconomics #JustAnotherFraud #DrainTheScientificSwamp  #NoFalseHeroMemorials #HallOfScientificShame #NobelPrize #EconNobel #ScrapTheNobel #Reset #DeleteEconomics  #ParadigmShift #NewParadigm #Science #MacroFoundations #Axiomatization #SovereignEconomics

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Wikimedia AXEC144b

February 20, 2019

Dear idiots, Marx got profit and exploitation wrong

Comment on Peter May on ‘A communist manifesto for money?’

Blog-Reference and Blog-Reference and Blog-Reference

Peter May recaps: “Marx is saying that money ― a monetary production economy ― is the basis for capitalism since capitalists use money to produce goods for sale for more money ― investment is for return, that is, profit. The profit comes from the wage being less than the market price of commodities produced by wage labor. The end-in-view is not to provide a rationale for abolishing money but rather for terminating the extraction of economic rent in the form of ‘surplus value,’ profit accruing from unpaid labor time.”

Marx’s definition of profit is ultimately based on the Labour Theory of Value which does not relate to the economy as a whole.#1 But Marx applied also macroeconomic reasoning: “How can they continually draw 600 p. st. out of circulation, when they continually throw only 500 p. st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.”

This, indeed, is the crux of Profit Theory. To come to the point, Marx got the answer wrong.#2 Here is the short proof.#3

(i) The objectively given and most elementary systemic configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm.

(ii) The elementary production-consumption economy is defined by three macroeconomic axioms: (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.

(iii) The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. X=O.

(iv) The monetary profit of the business sector is defined as Q≡C−Yw,

(v) The monetary saving of the household sector is defined as S≡Yw−C.

(vi) Ergo Q≡−S.

The balances add up to zero. The counterpart of household sector saving S is business sector loss −Q. The counterpart of household sector dissaving (−S) is business sector profit Q.

For a start, the household sector’s budget is balanced, i.e. C=Yw. From this follows that macroeconomic profit is zero. The market-clearing price is given by P=W/R and from this follows W/P=R, i.e. the real wage is equal to the productivity. The workers get the whole product.

Now, the owner of the single macroeconomics firm can do what he wants, i.e. lengthen the labor time or cut wages, nothing happens to profit and the real wage.#4 In Marx’s impeccable logic: “From nothing comes nothing. The capitalist class cannot draw more out of circulation than they throw into it.” They throw Yw in and get C out and because of C=Yw macroeconomic profit is zero.

The business sector can only get more out of the circulation if the household sector throws more in, that is, if the household sector deficit-spends/dissaves. This is what the most elementary version of the Profit Law says, i.e. Q≡−S. The logical minimum condition of deficit spending is a banking system that creates money and lends it to households.

So, profit does NOT come from exploitation but, in the most elementary case, from the growth of the household sector’s debt. And this, in turn, means that Capitalism does not end with a revolution of the exploited workers but as soon as the growth of private and public debt ends.#5

Egmont Kakarot-Handtke


#1 Basics of Value Theory
#2 Profit for Marxists
#3 Profit Theory in less than 5 minutes
#4 Capitalism, poverty, exploitation, and cross-over exploitation
#5 MMTers make capitalism work

Related 'Karl Marx, fake scientist' and 'MMT and Marxism ― blather as immunizing stratagem' and 'Marx’s bicentennial ― nothing to discuss, nothing to celebrate' and 'Here is the long overdue scientific death certificate for Marx and Marxists' and 'Marx and the curious coexistence of provably false economic theories' and 'Confounding sociology and economics' and 'Marxism is one of four instances of proto-scientific garbage' and 'Links on Karl Marx' and 'Ricardo, too, got profit theory wrong'.

February 18, 2019

Misrepresenting MMT

Comment on Dirk Ehnts on ‘The Economist misrepresents MMT’

Blog-Reference and Blog-Reference

Dirk Ehnts complains about The Economist: “I am not happy with the reporting, which includes false statements in general and also misrepresentations of what MMT is.” and then continues: “In my own book on ‘Modern Monetary Theory and European Macroeconomics’, which was published by Routledge in 2017, I discuss the balance sheet approach to macroeconomics that MMT truly is.”

On page 151 under the heading Sectoral balances one reads (Sp−I)+(T−G)+(IM−EX)=0. This sectoral balances equation is false because it lacks the most important balance of the market economy, i.e. the profit of the business sector.#1, #2, #3

The false MMT balances equation can be traced back to Keynes. Keynes NEVER understood the foundational magnitude of economics, i.e. profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

The correct balances equation reads (S−I)+(T−G)+(IM−EX)−(Yd−Q)=0 with Q as monetary profit and Yd as distributed profit income.

Neither Post-Keynesians nor Anti-Keynesians nor MMTers, though, have realized/rectified Keynes’ foundational blunder to this day.#4 Economists are simply too stupid for the elementary mathematics that underlies macroeconomics.

In his self-delusion, Dirk Ehnts cites John Maynard Keynes approvingly: “I give you the toast of the Royal Economic Society, of economics and economists, who are the trustees not of civilization, but of the possibility of civilization”.

This contrasts with historical reality as summarized by Napoleon: “Late in life … he claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” (Viner)

In their utter scientific incompetence, economists are the demolition men of civilization.#5

Egmont Kakarot-Handtke


#1 Rectification of MMT macro accounting
#2 Wikipedia and the promotion of economists’ idiotism (II)
#3 MMT and the magical profit disappearance
#4 Keynesians ― terminally stupid or worse?
#5 Econogenics in action

Related 'Free the academy from economics' and 'Trust in economics as a science?' and 'MMT: The fusion of Wall Street and Academia' and 'MMT: A free lunch for the Oligarchy' and 'Refuting MMT’s  Macroeconomics Textbook' and 'Trump and MMT: Make profits great again'. For the full-spectrum refutation of MMT see cross-references MMT.

Some nasty MMT surprises behind the time horizon

Comment on Eric Tymoigne on ‘“What You Need To Know About The $22 Trillion National Debt”: The Alternative Interview’*

Blog-Reference and Blog-Reference

To the question, how are you going to pay for it? MMTers have a simple answer: deficit-spending/money-creation.

To the question, how are you going to repay the public debt? MMTers have a simple answer: “In terms of tax rates, the public debt will never be repaid. We have not been burdened with higher tax rates to repay the public debt created at the time of our grandparents; our children and grandchildren won’t be burdened by higher tax rates to repay the public debt created today. We may raise tax rates in the future but not with the goal of repaying the public debt. There is no reason to do so, and doing so would be harmful to the finances of households, banks, firms and other for the reasons I just provided. The public debt will keep piling up to accommodate the needs of our growing economy and the US government will keep paying it on time. The US government does not, has never, and ought not to, manage the public debt in the same way you and I manage our private debts.”

MMTers simply shove the answer beyond the time horizon. The public-debt rabbit is put into the cylinder and then is gone out of sight. Everybody is well aware that this is a trick. The question is how does it work?

The process goes schematically as follows:#1, #2

(i) The initial economic configuration is the elementary production-consumption economy. The initial state is characterized by budget-balancing of the household sector C=Yw, i.e. consumption expenditures C are equal to wage income Yw, and zero profit of the business sector Q≡C−Yw=0.

(ii) The government deficit spends. Deficit D is defined as public spending G minus taxes T, i.e. D≡G−T. T is set to 0. Deficit-spending on current production causes a one-off price hike (NO inflation) and the business sector ends up with macroeconomic profit Q=G.†

(iii) The business sector fully distributes profit. The distributed profit Yd goes to the Oligarchy and takes initially the form of deposits at the Central Bank. The CB’s balance sheet shows government overdrafts on the asset side and the Oligarchy’s deposits on the liability side. Both sides are equal to the penny.

(iv) The government normally consolidates overdrafts by selling interest-bearing bonds. The bonds are bought by the Oligarchy and paid for with the deposits. The CB’s balance sheet shrinks again. The Oligarchy’s portfolio consists of bonds and money = deposits at the CB.

(v) Here, we ignore step (iv) and assume that zero-interest deposits/overdrafts are simply accumulated. Suffice it to note that interest on public debt has redistributive effects.

(vi) Steps (i) to (iii) are repeated for an indefinite time. Accordingly, public debt in the form of overdrafts grows. On the other side of the CB’s balance sheet, the Oligarchy’s deposits grow in lockstep.

(vii) As a matter of pure logic, this process can go on to infinity. Thus far, MMTers are right.

(viii) The concept of debt, though, logically entails repayment in finite time. So, in some period t the question arises of how to reverse the process of debt build-up. Simple answer: the stock of deposits is revalued to zero uno actu with the government’s debt. Subsequently, things go on with a new currency.

(ix) Step (viii) is a bad surprise for the Oligarchy’s grandchildren. The alternative is taxing away the deposits. In this case, there is tax T but no government spending G, i.e. a budget surplus, and both sides of the CB’s balance sheet go to zero.

(x) Step (ix) is also a bad surprise for the Oligarchy’s grandchildren. So, let us tax WeThePeople instead. Accordingly, consumption expenditures are reduced to C=Yw−T. Government spending G is zero, so there is a budget surplus and the government’s overdrafts are reduced. However, the business sector now makes a loss Q=−T and its overdrafts increase by the same amount. On the CB’s balance sheet only the composition of overdrafts on the asset side changes.

(xi) The logical end of (x) is a complete replacement of public debt by business sector’s debt. However, before this happens the economy breaks down because of the continuous losses of the business sector. Step (x) is a bad surprise for ALL grandchildren.

MMTers tell everyone that all is fine for “our” grandchildren because, after all, they owe the public debt to themselves. True, all is fine for someone who falls from a skyscraper until they pass the first floor.

MMTers are fraudsters. They deceive WeThePeople first about the profit-effect of deficit-spending/money-creation#3, then about the redistributive effect of interest on public debt, and finally about the nasty surprises behind the time horizon. The rest of the economists either understands nothing or is complicit.#4

Egmont Kakarot-Handtke


* New Economic Perspectives
#1 The new macroeconomic Paradigm
#2 From MMT misunderstandings to the true Theory of Money
#3 Why the MMT benefactors of humanity never talk about profit
#4 There is NO such thing as “smart, honest, honorable economists”

† Deficit-spending on current output and deficit-spending on long-lived investment goods are different things. The latter has been dealt with elsewhere.

Related 'MMT is ALWAYS a bad deal for the 99-percenters' and  'Austerity and the political games Progressives play' and 'Links on Austerity' and 'On the saying “We owe the debt to ourselves”' and 'Stephanie Kelton sells children into debt slavery' and 'Just one more day: How deficit-spending delays the breakdown of Capitalism' and 'Q: How are you going to pay for it? MMT: By stealth taxation!' and 'How to pay for the war and to be bamboozled by economists' and 'MMT: The art of shooting oneself in the head'.

***


***

Worthwhile Canadian Initiative Dec 26, Mathematical idiocy at work: Nick Rowe and infinity

Source: Worthwhile Canadian Initiative

February 17, 2019

Still beyond the reach of economists: The Holy Grail of Science

Comment on Lars Syll on ‘The vain search for The Holy Grail of Science’

Blog-Reference and Blog-Reference

Forget the Holy Grail of Science, economists are too stupid for the elementary mathematics that underlies macroeconomics.

“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)

Economists lack the true theory to this day. Take Keynes as an example.

“Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63)

“His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Keynes, like his academic colleagues, NEVER understood what profit is and thus ended with I=S ― one of the worst blunders in the history of modern science. After-Keynesians, though, have NOT realized anything in the last 80+ years.#1, #2

Just for the record: the axiomatically correct macroeconomic relations are given by Q≡−S for the elementary production-consumption economy and Q≡I−S for the elementary investment economy with Q business sector’s monetary profit, S household sector’s monetary saving, business sector’s I investment expenditures. From this follows that all I=S/IS-LM models and their derivatives are scientifically worthless.

Economists are still in the proto-scientific gutter#3 with the Holy Grail of Science, i.e. material/formal consistency, far beyond their reach. However, from the fact that neither orthodox nor heterodox economists could reach the Grail does not follow that it does not exist. It follows only that economists are scientifically incompetent.

Egmont Kakarot-Handtke


#1 How Keynes got macro wrong and Allais got it right
#2 Krugman vs MMT ― like the blind talking about colors
#3 Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems

Related 'Krugman vs MMT ― like the blind talking about colors' and 'MMT and the single most stupid physicist' and 'What it takes to become a great economist'.

***

REPLY to Robert Locke, Frank Salter on Feb 19

Short proof that you, like Lars Syll and the rest of Heterodoxy, are too stupid to put 2 and 2 together.

(i) The elementary production-consumption economy is given by three macroeconomic axioms: (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.

(ii) The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. X=O.

(iii) The monetary profit of the business sector is defined as Q≡C−Yw,

(iv) The monetary saving of the household sector is defined as S≡Yw−C.

(v) Ergo Q≡−S.

The balances add up to zero. The counterpart of household sector saving S is business sector loss −Q. The counterpart of household sector dissaving -S is business sector profit Q. Both Q and S are measurable with the precision of two decimal places.

From (v) follows that saving is NEVER equal to investment, that is, Keynes’ I=S is false.#1 By consequence, the rest of Keynesianism, Post-Keynesianism, New Keynesianism etcetera is false.

End of proof.

You, like Lars Syll and the rest of Heterodoxy, are too stupid for the elementary mathematics that underlies macroeconomics. This is why the Holy Grail of Science is forever beyond your reach.


#1 “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63). The blunder is in the premise Income = value of output. Loss/profit is NOT income.

February 15, 2019

Who is really a scientist?

Comment on Barkley Rosser on ‘Who Is Really A Socialist?’

Blog-Reference

Forget the whole Capitalism/Socialism thing. Neither left-wing nor right-wing economists know how the economy works.

Because economists have to this day NO scientifically valid Profit-, Money-, Distribution- or Employment Theory, economic policy guidance from left-wing to right-wing has NEVER been more than brain-dead agenda pushing.

Economics is a failed science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent, and all got the foundational concept of the subject matter ― profit ― wrong.

As a result, since Adam Smith/Karl Marx economic policy guidance NEVER has had sound scientific foundations.#1 This, of course, holds also for Marxism and its derivatives.
  • Marx’s profit theory is provably false.#2
  • By consequence, the concepts of exploitation and classes are false.
  • Marx lacks the concept of cross-over exploitation.#3, #4
  • Because the foundational concepts are false, Marx’s whole analytical superstructure is false.
  • Because the theory is defective, Marxian economic policy guidance was bound to fail from the very beginning.
  • After-Marxians have not spotted Marx’s foundational blunder to this day.#5

Marxians are scientifically incompetent just like non-Marxians and all together are only employable as clowns and useful idiots in the political Circus Maximus.

Forget the whole Capitalism/Socialism thing. Economists’ contributions to the development of the Good Society were just as helpful as those of Flat-Earthers.#6 All real progress in the last 200+ years has come from genuine scientists, not from political soapbox blatherers.

Egmont Kakarot-Handtke


#1 Karl Marx, fake scientist
#2 Profit for Marxists
#3 Capitalism, poverty, exploitation, and cross-over exploitation
#4 If we only had classes
#5 Economists simply don’t get it
#6 Econogenics in action

For the concept of cross-over exploitation see AXECquery.

***
REPLY to Barkley Rosser on Feb 19

The so-called Russian Revolution was neither Russian nor a Revolution. It was a quite ordinary coup d’état engineered by foreign powers. It is well known that Lenin was sent with some starting capital in a sealed train from Zurich to Sweden/Russia courtesy of the Generalstab. The plan worked fine until the Peace of Brest-Litovsk.#1

All this had NOTHING AT ALL to do with Marx’s economic theory. This theory is proto-scientific garbage. However, it provides a justification for taking over the “commanding heights” of the state. Clearly, Marxism was used by Lenin as a pretext much like religion was used in the old days as a pretext for conquest.

Since Smith/Marx, the whole Capitalism/Socialism debate has NOTHING to do with science, that is, with the materially/formally consistent theory about how the economy works, but with brain-dead agenda pushing.

So, your question Who is really a Socialist? has as much economic/scientific content as Who murdered Mr. Khashoggi?


#1 "The Treaty of Brest-Litovsk was a peace treaty signed on March 3, 1918, between the new Bolshevik government of Russia and the Central Powers (German Empire, Austria-Hungary, Bulgaria, and the Ottoman Empire), that ended Russia’s participation in World War I.” (Wikipedia)

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REPLY to Barkley Rosser on Feb 20

You say: “… most economists think it is a big deal whether or not an economy is run as a command socialist system or a market capitalist system. They tend to behave very differently in well known ways.”

Capitalism and Socialism are (i) political belief systems (ii) economic theories. As political belief systems, they are on the same level as religious belief systems, that is, they are literary fabrications and storytelling or, as Marx called it, ideologies. The subject matter of ideologies are NONENTITIES (God, paradise, classes, supply-demand-equilibrium, world spirit, etcetera) but despite the fact that ideologies have no reality content, they are a big deal for most people.

Ideologies are the subject matter of Psychology, Sociology, Political Science, History etcetera. The well-known problem with History is that it is for the greater part literary fiction.

Economics, on the other hand, is a systems science and deals with how the actual economy works. Science materializes itself as true theory, with truth well-defined as material and formal consistency. Theory is different from storytelling. Theory has ninety-nine percent reality content, storytelling one percent.

Capitalism and Socialism are allegedly underpinned by true theory. This, though, is a bad joke. General Equilibrium Theory and Marxianism is proto-scientific garbage. So Capitalism and Socialism are ultimately vacuous belief systems.

The fact of the matter is that the monetary economy can be described by economic laws, the Profit Law for example. It is given as Q≡Yd+(X−M)+(G−T)+(I−S) and it holds for the USA, for Russia, and China and it is absolutely independent of the ownership of the firms or from the self-identification as capitalistic or socialistic, or from the agenda pushers that occupy the political commanding heights.

For the past 200+ years, economists were so much occupied with political propaganda and agenda-pushing that they had no time for genuine scientific work. This is why Walrasianism, Keynesianism, Marxianism, Austrianism are mutually contradictory, axiomatically false, and materially/formally inconsistent. Economics is a failed science, economists are not scientists but storytellers and useful political idiots.

***

REPLY to Barkley Rosser on Feb 21, Cross-posting

Dear idiots, Marx got profit and exploitation wrong
Comment on Peter May on ‘A communist manifesto for money?’

Peter May recaps: “Marx is saying that money ― a monetary production economy ― is the basis for capitalism since capitalists use money to produce goods for sale for more money ― investment is for return, that is, profit. The profit comes from the wage being less than the market price of commodities produced by wage labor. The end-in-view is not to provide a rationale for abolishing money but rather for terminating the extraction of economic rent in the form of ‘surplus value,’ profit accruing from unpaid labor time.”

Marx’s definition of profit is ultimately based on the Labour Theory of Value which does not relate to the economy as a whole.#1 But Marx applied also macroeconomic reasoning: “How can they continually draw 600 p. st. out of circulation, when they continually throw only 500 p. st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.”

This, indeed, is the crux of Profit Theory. To come to the point, Marx got the answer wrong.#2 Here is the short proof.#3

(i) The objectively given and most elementary systemic configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm.

(ii) The elementary production-consumption economy is defined by three macroeconomic axioms: (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.

(iii) The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. X=O.

(iv) The monetary profit of the business sector is defined as Q≡C−Yw,

(v) The monetary saving of the household sector is defined as S≡Yw−C.

(vi) Ergo Q≡−S.

The balances add up to zero. The counterpart of household sector saving S is business sector loss −Q. The counterpart of household sector dissaving −S is business sector profit Q.

For a start, the household sector’s budget is balanced, i.e. C=Yw. From this follows that macroeconomic profit is zero. The market-clearing price is given by P=W/R and from this follows W/P=R, i.e. the real wage is equal to the productivity. The workers get the whole product.

Now, the owner of the single macroeconomics firm can do what he wants, i.e. lengthen the labor time or cut wages, nothing happens to profit and the real wage.#4 In Marx’s impeccable logic: “From nothing comes nothing. The capitalist class cannot draw more out of circulation than they throw into it.” They throw Yw in and get C out and because of C=Yw macroeconomic profit is zero.

The business sector can only get more out of the circulation if the household sector throws more in, that is, if the household sector deficit-spends/dissaves. This is what the most elementary version of the Profit Law says, i.e. Q≡−S. The logical minimum condition of deficit spending is a banking system that lends money to the households.

So, profit does NOT come from exploitation but, in the most elementary case, from the growth of the household sector’s debt. And this, in turn, means that Capitalism does not end with a revolution of the exploited workers but as soon as the growth of private and public debt ends.#5


#1 Basics of Value Theory
#2 Profit for Marxists
#3 Profit Theory in less than 5 minutes
#4 Capitalism, poverty, exploitation, and cross-over exploitation
#5 MMTers make capitalism work

***

REPLY to Barkley Rosser, Calgacus on Feb 23 and Blog-Reference MNE

For monetary economies like the USA, USEu, Russia, China, the macroeconomic Profit Law reads Q≡Yd+(X−M)+(G−T)+(I−S) and it holds independently of whether these countries describe themselves as capitalistic/socialistic/mixed and independently of how the commanding heights of the economy are staffed.

The fact of the matter is that in most countries the deficit-spending of the government has become the major source of macroeconomic profit. This means that so-called free market economies like the USA are on full life-support of the state.

The all-decisive political decision in all monetary economies is between breakdown now or growing public/private debt with breakdown later and NOT between private or public ownership.

The composition of the government’s budget is of secondary importance. The economic minimum condition for the continuation of the political status quo is that the deficit is sufficient to produce an overall profit Q given the other sectoral balances. This is the implicit rationale of full employment policy since Keynes.#1, #2 Implicit because it is obvious that politicians/economists do not really understand how the monetary economy works. In the old days, deficit spending has been justified by the urgency of defense against hostile neighbors/Communism/Terrorism now it is justified by the urgency of the avoidance of human extinction.

For the survival of the so-called free-market economy, the allocation of the government’s budget between military or environmental/social spending is a matter of indifference. Politically, though, a Green New Deal sells better than a Space Force or tax reductions for the rich. Thus, the allocation problem boils down to a marketing pitch between the “good” environmental/social guys and the “bad” military/Oligarchy guys.

Independently of the allocation of the government’s budget, it is WeThePeople who is going to pay for it in real terms through either open or stealth taxation. Stealth taxation via the price mechanism is the Invisible-Hand outcome of deficit-spending/money-creation.

No matter under what cloak deficit-spending/money-creation appears it is NEVER for the benefit of WeThePeople as a whole but ― because of the Profit Law Public Deficit = Private Profit ― a free lunch for the Oligarchy. The macroeconomic Laws apply to all monetary economies no matter what stupid/corrupt economists blather about Capitalism/Socialism.


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 MMTers make Capitalism work

***
REPLY to Barkley Rosser on Feb 24

You say: “… during the final years of the Bill Cllinton presidency at the end of the last century, the US government was rnning budget surpluses. But, guess what? Businesses were also enjoying high profits …”

You cannot even read a simple equation. The macroeconomic Profit Law is given by Q=Yd+(X−M)+(G−T)+(I−S) and it boils down to Public Deficit (G>T) = Private Profit Q if the other factors are taken out of the picture for a moment.#1

From the full-length equation follows that a government budget surplus is perfectly compatible with a high macroeconomic profit depending on the other components of the equation.

A refutation requires the test of the full-length equation. This is obvious to any remotely intelligent economics freshman.

How can you talk about capitalism and socialism without any idea about what profit is and how the monetary economy works?


#1 Wikimedia, Profit Law

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REPLY to Barkley Rosser on Feb 25

Your simpleminded distinction between Capitalism and Socialism is long outdated. Since the 1960s, the sub-sectors of the economy where the commanding heights are traditionally staffed with criminal/corrupt/unethical actors (weapons, drugs, money laundering, tax evasion, human trafficking, land theft, waste dumping, etcetera) have grown above-average. So, an updated classification of socio-economic systems should at least include Capitalism, Gangsterism, Socialism.

***
REPLY Barkley Rosser on Feb 26

My idiosyncratic macroeconomic profit Law Q≡Yd+(X−M)+(G−T)+(I−S) holds for Capitalism, Gangsterism, Socialism just like Newton’s idiosyncratic Law of Gravity. Only the DISTRIBUTION of overall profit Q between the firms that compose the business sector is different in different national economies.

To the extent that firms of the legal economy are ultimately controlled by the mob, which is NOT visible to the naked eye, the superficial distinction between Capitalism and Socialism becomes progressively meaningless.

Lenin’s take-over of power is better characterized as the implementation of mob rule than of socialism. I leave it to your historical erudition to figure out whether something similar has happened to countries that identify themselves as capitalistic or socialistic.

***

NOTE on Barkley Rosser’s ‘Is Russia Becoming A Neo-Socialist NEP Economy?’ on Mar 16

The distinction between Capitalism/Socialism is obsolete. The updated distinction is Capitalism/Gangsterism/Socialism.

What does the Neo-Capitalist economy look like? The answer is not in the supply-demand-equilibrium textbooks but on the Internet: “When we look at western countries, especially the USA, we see what some call ‘crony capitalism’ with absolutely fantastic levels of corruptions, huge mega-corporations in control of entire segments of the economy, exports imposed by sanctions and threat of sanctions rather than competitive advantages, feudal labor laws, a ruthless imperialist/colonial policy of systematically robbing those who dare to live above resources the Empire needs or wants.”#1

Accordingly, the commanding heights of the economy are no longer occupied by capitalists/entrepreneurs but by actors/entertainers like Elon Musk.

Whether there is long-range central planning in Neo-Capitalism is unclear. However, the fact that the crucial qualification of presidents like Reagan or Trump or business leaders like Musk is media-suitability lets one guess that at least the casting is centralized in Hollywood.

Unfortunately, Barkley Rosser is stuck with the NEP in interwar Russia and somehow missed that there has been a NEP in the United States in the 1960s. As a result, the economy no longer resembles the classical description of free-market Capitalism.

***
REPLY to Barkley Rosser on Mar 17

The economist as a scientist cannot say anything about the political system but he can say something about the economic system. The most important insight is that all monetary economies are governed by the same economic laws. For example, the macroeconomic Profit Law, i.e. Q≡Yd+(I−S)+(G−T)+(X−M), holds independently of whether an economy is capitalist or socialist. More specifically, this Law holds for the USA, Russia, China, the EU, etcetera.

The Law boils down to Q=(G−T), i.e. the profit of the business sector is equal to the deficit of the public sector.

For the USA, this means (i) the profitability of the so-called free market economy is maintained by the state’s permanent deficit spending, (ii) financial wealth grows in lockstep with public debt, (iii) the positive performance of the stock-market is maintained by the operations of the Central Bank.

In sum, the wealth-creation of the so-called free market economy depends on the joint operations of the Treasury/Central Bank. The state produces macroeconomic profit and this money is, in turn, partly used to control the state. The power-infighting between the different factions (military, CIA, FBI, organized crime, media, agriculture/industry/ banking, states, churches/religious groups/sects, political parties, domestic/foreign lobbies, wealthy individuals, etcetera) is NOT the subject matter of economics.

It is characteristic of economists from Paul Krugman to Barkley Rosser that they blather a lot about the ongoing political infighting but have no idea how the monetary economy works. With these unqualified personages, it is no wonder that economics is to this day a failed science.

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REPLY to Barkley Rosser on Mar 18

You say: “The US government ran a budget surplus during the last several years of the Clinton presidency, but, guess what? Corporate profits were at a record high.”

Have you never heard of vector addition?

The macroeconomic Profit Law, i.e. Q≡Yd+(I−S)+(G−T)+(X−M), consists of 4 vectors. The government vector reads Qg=(G−T), i.e. the deficit of the public sector adds to the profit of the business sector and the surplus of the public sector adds to the loss of the business sector, in short, Public Deficit = Private Profit. The negative gov vector, though, can be overcompensated by the other vectors, such that the vector sum is positive.

Your Clinton era example is proof that you cannot even read a simple equation.

You talk about Capitalism/Socialism and do not understand the Profit Law. What about doing some scientific homework first?

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REPLY to Barkley Rosser on Mar 19

You say: “Your comment shows that you do not know what a fact is, much less broader empirical data.”

The macroeconomic Profit Law consists of measurable variables and is testable in the USA, Russia, China, the EU, etcetera with the precision of two decimal places. That makes it scientifically superior to your political blather about interwar Russia.

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REPLY to Barkley Rosser on Mar 20

You say: “Yes, the variables are measurable, and they are measured all the time, and your claims about what those measurements should show are blatantly false. Corporate profits were very high in the US in the late 1990s at the same time that the budget was running a surplus. Since you claim that that corporate profits equal budget deficit, you are wrong. Period.”

I said: “… the macroeconomic Profit Law, i.e. Q≡Yd+(I−S)+(G−T)+(X−M), holds independently of whether an economy is capitalist or socialist. ... The Law boils down to Q=(G−T), i.e. the profit of the business sector is equal to the deficit of the public sector. For the USA, this means (i) the profitability of the so-called free-market economy is maintained by the state’s permanent deficit spending, …”

For the record: you are wrong, I am right.

***
Source Twitter Bloomberg Businessweek Mar 22

Source: Twitter

Dear idiots, government deficits do NOT cause inflation

Comment on Michael Lebowitz on ‘Modern Monetary Theory and its Fictional Discipline’*

Blog-Reference and Blog-Reference

It’s a Pavlovian Reflex among economists and laypersons alike: when they hear an MMTer talking about deficit-spending/money-creation, some cretin shouts Weimar or Zimbabwe. This reflex is as old as the Quantity Theory of Money.#1

The problem is, of course, that economists and laypersons alike have no idea how the monetary economy works. This is excusable for laypersons but not for economists. The fact is, in methodological terms, economists lack the true theory. The fact is that economists do not know after 200+ years what profit is.

Because the Profit Theory is false, the whole analytical superstructure is false including, of course, Money Theory, Distribution Theory, and Employment Theory. This prevents to this day the understanding of the effects of public deficit-spending/money-creation.

The process goes schematically as follows#2, #3

(i) The initial economic configuration is the elementary production-consumption economy. The initial state is characterized by market clearing and budget-balancing of the household sector C=Yw, i.e. the households fully spend their wage income Yw on consumption goods, and zero profit of the business sector Q≡C−Yw=0.

(ii) Now, the government deficit spends. Deficit D is defined as public spending G minus taxes T, i.e. D≡G−T. T is set to 0. Deficit spending on current output causes a price hike and the business sector ends up with macroeconomic profit Q=G. Note well, a one-off price hike is NOT inflation.

(iii) The business sector fully distributes profit. The distributed profit Yd goes to the Oligarchy and takes initially the form of deposits at the central bank. The CB’s balance sheet shows government overdrafts on the asset side and the Oligarchy’s deposits on the liability side. Both sides are equal to the penny. In a fiat money regime, deposits at the CB are money. Government deficit-spending increases the quantity of money.

(iv) The government consolidates overdrafts by selling interest-bearing bonds. The bonds are bought by the Oligarchy and paid for with deposits. The CB’s balance sheet shrinks. The Oligarchy’s portfolio consists of bonds and money. In the limiting case, both overdrafts and deposits reduce to zero, that is, the quantity of money is back at its initial level.

(v) This process can be identically repeated again and again. There is no further price hike and NO inflation. What happens is that the financial wealth of the Oligarchy grows in lockstep with the public debt ($22 trillion and counting) with the quantity of money remaining roughly at the same level. And this is an observable fact.* All relevant economic magnitudes are measurable with the precision of two decimal places.

Dear Quantity Theory retards, get it: The lethal effect of MMT deficit-spending/money-creation policy is NOT on inflation but on distribution.

Egmont Kakarot-Handtke


* SEE IT market
#1 Wikipedia Quantity theory of money
#2 From MMT misunderstandings to the true Theory of Money
#3 Deficit-spending, public debt, and macroeconomic profit/loss

Related 'MMT: Distribution is the drawback NOT Inflation' and 'Economics as tireless production of proto-scientific garbage: inflation theory as an example' and 'Links on Inflation' and 'Money and time' and 'MMT was right all along: Gov-Deficits do NOT cause inflation' and 'Settling the MMT―Inflation issue for good'.

***
*  Twitter Mar2

Source: Twitter

***
REPLY to Noah Way on Feb 16

You say: “Sectoral balances assume that money is a limited physical resource and as such are complexity irrelevent.”

Sectoral balances “assume” nothing about money. Q+S=0, for instance, says that the balance of the business sector Q and the balance of the household sector S always add up to zero. This simple fact, though, is beyond the comprehension of people who call themselves economists.

You can assume that I have demonstrated the relationship between balances and money somewhere and I assume that you know how to google it.

February 14, 2019

Krugman vs MMT ― like the blind talking about colors

Comment on Brian Romanchuk on ‘Functional Finance Versus New Keynesian Economics, Krugman Edition’*

Blog-Reference and Blog-Reference and Blog-Reference on Feb 16 adapted to context and Blog-Reference on Feb 18

The characteristic of economic debates is to talk about everything except the point at issue.

Krugman starts the talk show with: “Well, it looks as if policy debates over the next couple of years will be at least somewhat affected by the doctrine of Modern Monetary Theory, …” Then he realizes that he is not up-to-date but this does not matter because: “The good news is that MMT seems to be pretty much the same thing as Abba Lerner’s ‘functional finance’ doctrine from 1943.” And off he goes parroting the worn-out stuff about inflation and crowding-out with the finale: “The bottom line is that while functional finance has a lot going for it, it’s not the kind of axiomatically true doctrine that Lerner ― and, I think, modern MMTers ― imagined it to be.”

No word about that MMT is just proto-scientific garbage. And, of course, no state-of-art refutation of the MMT approach, no proof of material/formal inconsistency.

Brian Romanchuk’s answer remains on the same low level and consists of pointing out that Krugman himself clings to a rather crappy approach: “The fundamental problem with the New Keynesian approach of Paul Krugman, Brad DeLong, Simon Wren-Lewis, etc., is that the model is fundamentally neoclassical rather than Keynesian., only departing somewhat in assumptions but not methodology. This methodology falls into the class formal (mathematical) rather than empirically based and it ignores the role of institutions and operations.”

Both parties are spot on in their critique of the other approach. The irony is that both approaches share a common blunder. Krugman refers via the IS-LM model back to Keynes and MMT via the sectoral balances equation, i.e. via (I−S)+(G−T)+(X−M)=0 which boils down to I=S when the public sector and the foreign sector are taken out of the picture for a moment.

The common blunder can be exactly located in the GT: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

“His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Keynes, like his academic colleagues, NEVER understood what profit is and thus ended with I=S ― one of the greatest blunders in the history of modern science. Neither New Keynesians nor MMTers, though, have realized anything for 80+ years.#1 Both are too stupid for the elementary mathematics that underlies macroeconomics.

The correct macroeconomic relations are given by Q≡−S for the elementary production-consumption economy and Q≡I−S for the elementary investment economy with Q business sector’s monetary profit, S household sector’s monetary saving, business sector’s I investment expenditures. From this follows that all I=S/IS-LM models and their derivatives are scientifically worthless.#2

Both New Keynesianism and MMT are provably false.#3 By consequence, the economic policy arguments of both sides have NO scientifically valid foundations. What Krugman advertises as wonkish is just the usual brain-dead blather of failed/fake scientists.

Egmont Kakarot-Handtke


* NYT, Paul Krugman, What’s Wrong With Functional Finance? (Wonkish)
#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#2 For details of the big picture see cross-references Refutation of I=S
#3 See cross-references Keynesianism and cross-references MMT

Related '#DrainTheScientificSwamp' and 'Macroeconomics: Drain the scientific swamp'.

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REPLY to Brian Romanchuk on Feb 15

You say: “You’re defining profits wrong.”

Macroeconomic profit is defined for the most elementary case as Q≡C−Yw.

Stop waffling, just write down your definition with 6 or 7 characters. This is what a real mathematician would do.

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REPLY to Brian Romanchuk on Feb 15

Just write down YOUR definition with 6 or 7 characters.

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REPLY to Brian Romanchuk on Feb 16 and Blog-Reference

You say: “The cost of goods sold is itself complicated, since it depends on the valuation of inventory. … Depreciation is also based on the historical cost of capital. In summary, way more complex than the junk you blather on about.”

The alleged complexity is merely a projection of your own confusion.

(i) Total macroeconomic profit Q is composed of monetary profit Qm and nonmonetary profit Qn.

(ii) Nonmonetary profit Qn is the sum of all positive/negative changes of valuation including depreciation.

(iii) Qn has been dealt with elsewhere and is taken out of the picture for a moment.

(iv) Monetary profit Qm for the one-fully-integrated-macroeconomic firm is defined as Qm≡C−Yw. In your words: Qm is “sales revenue” C minus “cost of goods sold” Yw in the most elementary production-consumption economy with market-clearing, i.e. X=O. Changes of inventory, i.e. X≠O, have been dealt with elsewhere.

(v) The investment economy has been dealt with elsewhere.

(vi) Monetary saving of the household sector is defined as Sm≡Yw−C. Total saving S is the sum of monetary Sm and nonmonetary saving Sn. The latter has been dealt with elsewhere.

(vii) Monetary profit Qm and monetary saving Sm are measurable with the precision of two decimal places. There is NOT the slightest ambiguity here. Qm and Sm are as real as cash in the box or as money in the bank.

(viii) From this follows: the macroeconomic Profit Law for the most elementary case of a production-consumption economy with market-clearing reads Qm≡−Sm. This is the irreducible hardcore of the macroeconomic Profit Law.

For the more complex cases see the overview on Wikimedia.#1 From this overview follows that the MMT sectoral balances equation is provably false.

That you have not realized anything to this day disqualifies you as a mathematician and economist.


#1 Wikimedia, Profit Law
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REPLY to Brian Romanchuk on Feb 16

You say: “You missed the entire point. There is no market-clearing in the model I referred to; there are inventories.”

The model you published last week is NOT the point at issue. The definition of macroeconomic profit is at issue. You said: “You’re defining profits wrong.”

The fact is that there are two cases (i) market-clearing (ii) inventory changes.

Case (ii) has been dealt with elsewhere.#1 This leaves one with (i). And in this case, macroeconomic profit is in the elementary production-consumption economy Qm≡−Sm. This formula is sufficient to disprove Keynes and MMT and you. There is NO need to go any further. You got the basics wrong.


#1 Primary and Secondary Markets, Levy Economics Institute of Bard College Working Paper No. 741

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#PointOfProof
Feb 16