May 31, 2019

The missing elephant of full employment policy

Comment on Bill Mitchell on ‘Talking of elephants ― plain old, garden variety fiscal policy’

Blog-Reference and Blog-Reference

With the actual economic situation of Japan in view, Bill Mitchell argues “If there were two lessons that can be taken from the GFC among others then we should know, once and for all, that, first, monetary policy (in all its glorious forms these days) is not a very effective tool for influencing the level of economic activity nor the price level, and, second, that fiscal policy is very effective in manipulating total spending and activity. Of course, those lessons provided the evidence that turned macroeconomics on its head because for several decades, as the Monetarist surge morphed into all manner of variants, tried to eulogise the primacy of monetary policy and rejected the use of fiscal policy.” and “Eventually, we will move beyond that but the pain of holding on to the myth is damaging for people, especially those who are without work, are underemployed or have been forced into early retirement by the poor economic performance in this austerity-biased era.”

The problem for Japan’s policymakers is currently this: “What happens if all the shots have been fired, but they’re not enough to keep the economy growing? The fact is that the low interest rates have not provided much support to growth anyway. … At that point, he [Gittins] says that ‘all that’s left’ is ‘increased government spending or tax cuts’.”

So, uneasily sitting on a mountain of government debt, Japan is ripe for another round of deficit-spending/money-creation. This seems to be a clear-cut MMT Moment. The problem is that the macroeconomics that underlies this conclusion is provably false.

Bill Mitchell argues within the familiar Keynesian macro framework. He has not realized that this paradigm is scientifically worthless.#1

The elementary version of the axiomatically correct Employment Law#2 is shown on Wikimedia.#3


From this equation follows:

(i) An increase in the expenditure ratio ρE leads to higher employment L (the Greek letter ρ stands for ratio). An expenditure ratio ρE greater than 1 indicates a budget deficit (= dissaving, credit expansion) of the household sector, a ratio ρE less than 1 indicates a budget surplus (= saving, credit contraction). ρE is supposed to be dependent on the interest rate Jc.

ρE is defined as C/Y, with C = consumption expenditures of the household sector. The ratio can easily be expanded to include deficit spending of the government sector, i.e. C'=C+G. This yields the total expenditure ratio ρE' with taxation T here set to zero.

(ii) Increasing investment expenditures I exert a positive influence on employment. I is supposed to be dependent on the interest rate Ji.

(iii) An increase in the factor cost ratio ρF≡W/PR leads to higher employment.

The complete Employment Law contains in addition profit distribution and foreign trade.

Item (i) and (ii) cover Keynes’ familiar arguments about aggregate demand. The Employment Law shows how monetary policy via the interest rates Jc and Ji and fiscal policy via the total expenditure ratio ρE' moves the economy towards full employment. This is the plain garden variety of employment policy. It crucially depends on an interest elasticity greater than zero.

However, the right side of the Employment Law shows that there are additional policy parameters.

The factor cost ratio ρF as defined in (iii) embodies the macroeconomic price mechanism. The fact of the matter is that overall employment INCREASES if the AVERAGE wage rate W INCREASES relative to average price P and productivity R. This is the OPPOSITE of what microfounded economics teaches.

It follows that employment policy does not work if ρF is not properly controlled. Economic policy has to make sure at least that the average wage rate W rises in lockstep with productivity R and price P, i.e. W/PR = const., in order to keep employment at the level as determined by aggregate demand.

So, the set screws for controlling employment are the interest rates Jc and Ji, government (deficit) spending G, and ρF. Bill Mitchell completely ignores the macroeconomic price mechanism that is formally embodied in ρF. It is not sufficient to fix the minimum wage, the average wage rate W and the average price P, too, have to be controlled.

False theory leads to false policy guidance. With their defective employment theories, economists bear the intellectual responsibility for the social devastation of mass unemployment. Neither the garden variety of employment policy nor MMT deficit-spending/money-creation alone are suitable to establish full-employment.#4

Both traditional Employment Theory and MMT are axiomatically false and because of this, economic policy guidance has never been more than clueless blather.

Egmont Kakarot-Handtke


#1 The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment
#2 The macrofoundations approach starts with three systemic 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. For a start it holds X=O.
#3 Wikimedia AXEC62 Employment Law
#4 For details of the big picture see cross-references Employment.

Related 'Full employment through the price mechanism' and 'Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster' and 'Wage rate and employment: the basics' and 'NAIRU, wage-led growth, and Samuelson's Dyscalculia' and 'Go! ― test the Profit and Employment Law'.

MMT: doom or survival?

Comment on Stephanie Kelton on ‘Modern Monetary Theory Is Not a Recipe for Doom’*

Blog-Reference and Blog-Reference

Stephanie Kelton introduces her rebuttal of Paul Krugman thusly: “Although he’s had almost a decade to come to terms with the approach, he is still getting some of the basic ideas wrong. This matters for two reasons: one, because people listen to Paul Krugman, who won the Nobel economics prize in 2008, and, two, because the approach he is discussing is at the heart of how to design economic policies that affect millions of Americans. I’d like to try to move the conversation forward by addressing his concerns.”

The conversation is pointless for the simple reason that both Paul Krugman and Stephanie Kelton are failed/fake scientists. Paul Krugman never understood how the economy works,#1 he is an agenda-pushing journalist on a large fake-news platform, and the economics “Nobel” signifies nothing because economics is a failed science.#2 Stephanie Kelton, on the other hand, promotes the profit-boosting MMT policy of deficit-spending/money-creation in a social/environmental bluff package.#3, #4, #5, #6

Stephanie Kelton’s critique of Paul Krugman’s policy blather hits the point: mainstream economics is a scientific Zombie ― dead but not buried. But Paul Krugman’s critique of MMT is entirely beside the point. The lethal effect of MMT policy is NOT on inflation or crowding out or on the monetary-fiscal tradeoff but on distribution.

The macroeconomic Profit Law entails Public Deficit = Private Profit which means that the Oligarchy’s financial wealth and public debt (currently $22 trillion) grow in lockstep. Hence the MMTers’ arguments for permanent deficit-spending/money-creation have a tangible use-value for the Oligarchy. The so-called free-market economy hangs already for a long time on the full life-support of the state, i.e. on a smoothly growing public debt.

On closer inspection, both Stephanie Kelton and Paul Krugman are in the same business, i.e. of helping the Oligarchy to survive for another day by brain-washing WeThePeople with academic snake oil.#8

Egmont Kakarot-Handtke


* BloombergOpinion
#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#2 Krugman and the scientific implosion of economics
#3 The Kelton-Fraud
#4 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#5 Down with idiocy!
#6 No MMT illusions! YOU are going to pay for it
#7 The canonical macroeconomic model
#8 Just one more day: Howdeficit-spending delays the breakdown of Capitalism

Related 'Paul’s and Stephanie’s economic delirium talk' and 'The clock runs down on economics' and 'Mission impossible: economists join WeThePeople'.

May 30, 2019

Finally, the embarrassment of economics is over

Comment on Robert Heilbroner/Brad DeLong on ‘The Embarrassment of Economics’*

Blog-Reference and Blog-Reference and Blog-Reference on May 31

The embarrassment of economics is that it is NOT, as claimed, part of science but part of the entertainment industry. Robert Heilbroner as an early representative of Circus-Maximus economics applies the tried and tested communication tools.

• Personality gossip instead of knowledge transfer: “Schumpeter arrived in his famous riding habit and great cloak, of which he divested himself in a grand gesture. He greeted us in a typically Schumpeterian way: ‘Gentlemen, a depression is for capitalism like a good, cold douche.’ The remark shocked us for two reasons: First, was a depression a good thing? Second, few of us knew that a douche was the European term for ‘shower’.”
• Appeal to prestige/celebrity/popularity: “Milton Friedman-Nobel laureate, famous theorist”, Alvin Hansen (one of America’s best-regarded economists), “Friedman is a brilliant man”, “Scientific thought is probably the most highly regarded of all the activities that make up our complex modern way of life”.

Needless to emphasize that the audience likes this stuff, after all, it got all its education in the talk-show format. Needless to emphasize that the scientific criteria true/false do not appear once in the whole article.

With his blather, Robert Heilbroner misses the point. The lethal embarrassment of economics is this: there is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed. The fact is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept ― profit ― wrong.

The embarrassment of economics is NOT so much that it hides ideology but that it claims from Adam Smith/Karl Marx onward to the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” to be science.

The fact is that economics is what Feynman called cargo cult science. In his utter scientific incompetence, Robert Heilbroner maintains “… a Martian who came across a copy of the American Economic Review might be forgiven for concluding that it was a journal of physics.” As a being with superior intelligence, a Martian would immediately recognize: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

Economics is a failed/fake science. What is needed is a Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations. Curiously, Robert Heilbroner saw the light for a short moment before he fell back into the darkness of political economics: “Surely the recognition of the inextricably social roots of all behavior leads to the view that macrofoundations must precede microbehavior, not the other way round, as modern economic thought perceives the issue.” (p. 8)#1

In other words: If it isn’t macro-axiomatized, it isn’t economics.#2

Egmont Kakarot-Handtke


* Weekend reading
#1 Heilbroner, R., and Milberg, W. (1995). The Crisis of Vision of Modern Economic Thought. Cambridge, New York, Melbourne: Cambridge University Press.
#2 Do first your macroeconomic homework

Related 'Did economics fail? No! Yes, and everybody knows it!' and 'Why is economics such a scientific embarrassment?'.

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Wikimedia AXEC121i

May 29, 2019

No MMT illusions! YOU are going to pay for it

Own post, no external Blog-Reference

For the average citizen, the essence of smartness is to get more out of the social trough than to put into it. Or, in monetary terms, to get stuff and to make others pay for it. Or, in national terms “I will build a great, great wall … and I will have Mexico pay for that wall.” Most people never get above this pig-trough world view which, after all, serves for 150+ years now as one of the axioms of economics, i.e. “HC3 Agents independently optimize subject to constraints” (Weintraub) or in plain text: people seek to make the difference between utility and disutility as big as they possibly can, or in the words of the founding fathers “Just in the same manner does Political Economy presuppose an arbitrary definition of man, as a being who invariably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained in the existing state of knowledge.” (J. S. Mill)

The obvious logical problem with the pig-trough world view is that it cannot work for all: it is impossible that all get more out of the trough than they throw into it. This is, as Marx realized, the fundamental problem of capitalism: “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.” Neither Marx nor the rest of scientifically incompetent economists have answered this fundamental question of economics to this day.#1

Because of their pig-trough thinking, people fall since time immemorial for gold-makers, snake oil sellers, bubble blowers, and all types of wealth creators, chief among them economists: “… in the introduction to Book IV we read that Political Economy ‘proposes to enrich both the people and the sovereign,’ and it is this definition which expresses both what Smith wanted above everything and what interested his readers more than anything else.” (Schumpeter)#2

Pig-trough psychology explains the political attractiveness of MMT. MMT answers the question of How are you going to pay for it? with deficit-spending/money-creation. Posing as real Progressives, MMTers do not criticize governments for permanently increasing the public debt but only for not handing over the money to needy people or GND world savers but to farmers or other unworthy folks: “Have you noticed that when the president unilaterally directs $16 bn in bailout payments to agricultural interests, no one says: but how will you pay for it?”#4

This rhetorical question stirs up outrage and deflects from political fraud, i.e. from the economic fact that deficit-spending/money-creation is in the end to the disadvantage of WeThePeople and to the advantage of the Oligarchy.#5

The economic fact of the matter is: either the budget is balanced then WeThePeople pay for government spending through open taxation, or the government deficit-spends then WeThePeople pay through stealth taxation, i.e. through an almost unnoticeable one-off price hike (NO inflation). Because the macroeconomic Profit Law entails Public Deficit = Private Profit the financial wealth of the Oligarchy grows in lockstep with public debt. For the overall profit of the business sector, it does NOT matter at all whether the deficit spending goes to the military, the farmers, or the Green New Deal. #6, #7, #8

So, the answer to the question Who pays? is always and everywhere: WeThePeople pay in real terms no matter whether the budget is balanced or money is created out of nothing. WeThePeople pay vastly more in the case of deficit-spending/money-creation (because of the interest on public debt) than in the case of budget balancing.

Economists in general and MMTers, in particular, are a hazard to their fellow citizens because they are either stupid or corrupt or both.#9

Egmont Kakarot-Handtke


#1 The Profit Theory is False Since Adam Smith
#2 Fraud comes always in the cloak of charity, salvation, or threat of doom
#3 How to pay for the war and to be bamboozled by economists
#4 Twitter, Chris Hayes
#5 Dear idiots, MMTers are Wall Street’s agenda pushers
#6 How to pay for the war and to be bamboozled by economists
#7 MMT and the Green New Deal: Where is the snag? (II)
#8 MMT and the Green New Deal: Where is the snag? (I)
#9 Econogenics in action

Related 'Gold-making, wine from water, M-C-M+, perpetuum mobile, free lunch, beating the stock market, and the perennial human dream' and 'Economics between science and magic' and 'How MMT makes everybody happy' and 'The Magic Money Tree is real ― too bad that the magic is fraud' and 'Keynes, Lerner, MMT, Trump, etc. and exploding profit' and 'The Kelton-Fraud'. For details of the big picture see cross-references MMT.

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Wikimedia AXEC152

May 28, 2019

Links on Austerity

Comment on Robert Skidelsky/Lars Syll on ‘Alesina’s ‘expansionary austerity’ — a tale of scientific delusion’

Blog-Reference

The macroeconomic Profit Law entails Public Deficit = Private Profit. Because of this, the one-percenters and their useful academic/journalistic spokespersons should consistently argue FOR deficit-spending/money-creation and the ninety-nine-percenters and their academic/journalistic spokespersons should consistently argue AGAINST it. It is often just the reverse in the political Circus Maximus.

► Austerity and the idiocy of political economists
► Austerity and the utter scientific ignorance of economists
► Austerity and the total disconnect between economic policy and science
► Austerity and the political games Progressives play
► Austerity: Who takes the little man for a ride?
► MMT Progressives: stupid or corrupt or both?
► The biggest scientific mistake of the last centuries, and it has much to do with academic economists
► MMT: No sound basis
► Keynes, Lerner, MMT, Trump, etc. and exploding profit
► MMT: Distribution is the drawback NOT Inflation
► Post-Keynesianism vs MMT: a Zombie debate
► Economists: Trolls with a mortarboard
► Stephanie Kelton and the self-destructive stupidity of the super-rich
► Deficit-spending, public debt, and macroeconomic profit/loss
► Swabian housewife vs Wall Street loan shark
► For details of the big picture see cross-references Political Economics/Stupidity/Corruption

Egmont Kakarot-Handtke

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Twitter Jan 14 Here comes the turncoats




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Roosevelt Institute Feb 25, 2021 Austerity officially abandoned



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Twitter Mar 3 Here they are, the academic agenda pushers


Twitter Jun 18 Senator John Yarmuth declares the policy switch from austerity to the deficit overdrive


May 24, 2019

Links on McKinsey’s A new look at the declining labor share of income in the United States

Blog-Reference

Distribution Theory is false because Profit Theory is false. After 200+ years, economists still have NO idea about the foundational magnitude of their subject matter. This holds for Walrasianism, Keynesianism, Marxianism, Austrianism, and MMT.

McKinsey* identifies as main drivers of the capital share by sector 1998-2002: Supercycles and boom-bust, Rising and faster depreciation, Superstar effects and consolidation, Capital substitution and automation, Globalization and labor bargaining power.

The factors that explain the development of sectoral profits, though, do NOT explain the drivers of overall macroeconomic profit. They explain only the distribution of overall macroeconomic profit between the sectors.

The axiomatically correct macroeconomic Profit Law is given by Q≡Qm+Qn with Qm≡Yd+(I−Sm)+(G−T)+(X−M). This reduces to Qm≡−Sm+(G−T) which says that the main drivers of increasing macroeconomic Profit Qm have been in the past decades the increased deficit spending of the household sector (-Sm) and the government sector (G−T) which translates into an ever-growing private/public debt.

Distribution Theory and the concept of a wage/profit “share” is abysmal proto-scientific garbage since the founding fathers. See:

► There is NO such thing as a “labor share of income”
► Profit and the decline of workers’ nominal share (II)
► Profit and the decline of labor’s nominal share (I)
► Profit and distribution: a primer
► Profit and macrofoundations
► Rethinking the Profit Law
► Rethinking the Distribution
► Profit, income, and the Humpty Dumpty Fallacy
► Keynes, Lerner, MMT, Trump, etc. and exploding profit
The GDP-death-blow for the economics profession
► For details of the big picture see cross-references Profit

Egmont Kakarot-Handtke


* McKinsey Global Institute

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Wikimedia AXEC143d Macroeconomic Profit Law (with increasing complexity) and sectoral balances equation


May 22, 2019

You know you are in the political Circus Maximus when economists talk about Democracy/Liberty/Freedom

Comment on Warren Mosler on ‘Entweder wir glauben an die Demokratie oder nicht; Either we believe in Democracy or not’*

Blog-Reference and Blog-Reference on May 23

Economics is a science and the task of economists is to explain how the monetary economy works. The task of economists is NOT to push a political agenda. This should be pretty obvious. From an astrophysicist, we expect that he explains how the universe works and we are disappointed when he tells us after years of research that he has come to the conclusion that Democrats are corrupt and stupid and Republicans are stupid and corrupt. This does NOT count as scientific insight.

Economics claims to be a science but does not live up to the definition of science. The most striking feature of economics is schizophrenia: there is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed. Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, and materially/formally inconsistent.#1

MMT is refuted on all counts.#2 And Warren Mosler’s story that fiat money has to be spent by the state into the economy is false. Money has to be lent into the economy in order to enable the business sector to pay the wage income which in turn is then spent on the consumption good output of the business sector.#3

The problem with MMT is that it is built upon a provably false sectoral balances equation. Now, it is known from methodology that when the foundations are false the whole analytical superstructure is false and the whole approach is scientifically worthless.

However, in the political sphere, it does not matter at all whether a theory is true or false. What matters is the propagandistic use-value and not the scientific truth-value.

The macroeconomic Profit Law entails Public Deficit = Private Profit which means that the Oligarchy’s financial wealth and public debt (currently $22 trillion) grow in lockstep. Hence the MMTers’ arguments for permanent deficit-spending/money-creation have a tangible use-value for the Oligarchy. Warren Mosler’s claim that MMT is good for Democracy is plain political fraud. MMTers stand firmly in the tradition of the fake scientists and politically useful idiots Adam Smith and Karl Marx. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are all proto-scientific garbage and political fraud.

Egmont Kakarot-Handtke


* Zeit Online
#1 For details of the big picture see cross-references Political Economics/Stupidity/Corruption
#2 For details of the big picture see cross-references MMT
#3 MMT: fundamentally false

Related 'MMT undermines democracy'.

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Twitter May 26

Source: Twitter

MMT and the Green New Deal: Where is the snag? (II)

Comment on Richard Murphy on ‘Growth, MMT and the Green New Deal’

Blog-Reference and Blog-Reference

Strictly speaking, environmental protection is an issue for physicists, chemists, and other scientists. Economists are not scientists because they do not know to this day how the monetary economy works. This does not stop these abysmally incompetent folks to utter their irrelevant opinion on every issue between heaven and earth.

Richard Murphy claims to have synthesized MMT and GND: “This one takes an explanation because it has become very closely associated with the Green New Deal, which is again at least in part my fault.”

Unfortunately, he gets the economics part in the synthesis badly wrong. In more detail:

1. “Fundamentally it [MMT] suggests that since we came off the gold standard all money is ‘fiat’ currency It’s a promise to pay and nothing more. The promise backed by the power of the state to tax.” FALSE! TRUE: The creation and value of money does NOT depend on the taxing power of the State.#1, #2 ,#3, #4

2. “But the state does not need tax to spend. All spending is effectively settled with money created by banks on demand from a customer. It is not paid for out of a stock of savings. And in the case of a government it is not paid for out of tax received.” FALSE! TRUE: Spending on current output with newly created money is analogous to the spending of the counterfeiter.#5

3. “Instead gov’t spending is paid for by the government asking its bank ― the Bank of England ― to make payment for it. This is exactly akin to the fact that banks do not lend out customer funds: rather they make the funds they lend by a process of double-entry book-keeping and bank deposits are the result of that process, and not where it starts.” FALSE! TRUE: Money is a generalized IOU. Government deposits and overdrafts are produced simultaneously. The government spending is ‘financed’ by overdrafts at the central bank which have to be eventually repaid.#6

4. “The result is that a government with its own central bank and currency can never run short of money ― because it can instruct that it be made at will. And it can never go bankrupt if it borrows solely in its own currency because it can always create the funds to make payment. But of course it cannot print money at will ― because inflation will result.” FALSE! TRUE: This is the good old Quantity Theory Fallacy. Continuous deficit spending and growing public debt does NOT cause inflation.#7

5. “So action has to be taken to keep inflation under control ― and that is the real purpose of tax in MMT.” FALSE because of 4.

6. “Its secondary purposes are to Ratify the value of money; Redistribute income and weatlh; Reprice market failure; Reorganise the economy; Raise representation in a democracy.” FALSE! TRUE: Because of the macroeconomic Profit Law it holds Public Deficit = Private Profit and this means that the lethal effect of MMT policy is on distribution and that it secures ― intentionally or unintentionally does not matter ― the self-alimentation of the Oligarchy. Nothing could be more anti-democratic than MMT policy.

The claim of MMTers that a Green New Deal can be realized at any time by deficit spending is misleading at best. Technically, of course, there is no problem. However, as a matter of principle, any Green New Deal can be realized with a balanced budget. But in the MMT scheme of things, a balanced budget is something for the Swabian housewife and permanent deficit spending is the prerogative and duty of the Sovereign State.

The point is that MMTers are not so much interested in how the government’s budget is allocated but that the government runs a deficit because it is the deficit as such that produces the macroeconomic profit for the Oligarchy.#8

MMT is NOT science but political agenda pushing in a social/environmental bluff package. MMT and GND together are the dream team for deceiving WeThePeople for the benefit of the Oligarchy.#9

Egmont Kakarot-Handtke


#1 The creation and value of money and near-monies
#2 MMT, money, value, and transcendental Capitalism
#3 The canonical macroeconomic model
#4 MMT: fundamentally false
#5 How counterfeiters save America with an extra profit and make WeThePeople pay for it
#6 How to pay for the war and to be bamboozled by economists
#7 Settling the MMT―Inflation issue for good
#8 MMT and the promotion of Wall Street socialism
#9 Just one more day: How deficit-spending delays the breakdown of Capitalism

Immediately preceding MMT and the Green New Deal: Where is the snag? (I)

Related 'Economists: Trolls with a mortarboard' and 'The half-truths and half-falsehoods of MMT' and 'Fraud comes always in the cloak of charity, salvation, or threat of doom' and 'MMT: If you’ve got a problem, I don’t care what it is, let me help' and 'MMT is NOT bold policy but spineless fraud' and 'Econogenics in action'.

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ADDENDUM (re. Andrew (Andy) Crow on May 24, submission closed)

Economists fall into two categories: political economists (= agenda pushers) and theoretical economists (= scientists).

As in every walk of life, there is the genuine thing and the lookalike: “A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. ... A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham, and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack)

Political economists in general, and MMTers, in particular, are fake scientists. MMT is provably false, i.e. materially and formally inconsistent.

When I as an economist say “Economists are not scientists because they do not know to this day how the monetary economy works.” the word “economists” clearly refers to political economists.

Needless to emphasize that the general public does NOT discriminate between P-economists and T-economists and does not realize that P-economics is fake science. The point to grasp is: MMT is proto-scientific garbage and MMTers are agenda pushers for the Oligarchy.

May 21, 2019

Just one more day: How deficit spending delays the breakdown of Capitalism

Comment on Bill Mitchell on ‘Japan Finance Minister getting paranoid about MMT’

Blog-Reference and Blog-Reference

MMT claims to be a theory, i.e. a materially/formally consistent mental representation of reality, and NOT a policy. “MMT should not been seen as a regime that you ‘apply’ or ‘switch to’ or ‘introduce’. As I have noted regularly, MMT is rather a lens which allows us to see the true (intrinsic) workings of the fiat monetary system. … The point is that MMT is agnostic about policy bar its preference for an employment buffer rather than an unemployment buffer to discipline inflation. … In general, it makes no sense to talk about an ‘MMT-type prescription’ or an ‘MMT solution’. To make that MMT understanding operational in a policy context, a value system or ideology must be introduced. MMT is not intrinsically ‘Left-leaning’.” (Mitchell)

This is a futile attempt to obfuscate MMT’s true agenda.

Scientifically, MMT is refuted on all counts.#1 MMT is axiomatically false, just like mainstream economics. However, there are degrees of falsehood and it is pretty obvious that MMT is superior to mainstream economics for the simple reason that it is impossible to surpass the idiocy of mainstream economics.#2 In methodological terms, economics has to be based on macrofoundations but mainstream economics is based on microfoundations. The bad luck of economics is that Keynes messed up the Paradigm Shift from microfoundations to macrofoundations.

So, Bill Mitchell is right: “The conclusion is obvious. … It is clear that the mainstream macroeconomic explanation of the relationships between fiscal deficits, interest rates, bond yields and inflation rates is unable to adequately capture the real world dynamics in Japan. Such a categorical failure to provide an explanation suggests that the mainstream theory is seriously deficient.”#3

Mainstream economics claims to have proved that the free market economy has some very desirable properties, first and foremost optimality, efficiency, and stability. Now, General Equilibrium Theory is based on microfoundations, which is to say that it is proto-scientific garbage and proves NOTHING. From axiomatically correct macrofoundations follows that the market economy is intrinsically unstable and that it will eventually break down. The ultimate reason lies in the macroeconomic Profit Law which is given by Q≡Yd+(I−S)+(G−T)+(X−M).

The reduced macroeconomic Profit Law Q≡(I−S)+(G−T) tells one that profit in the monetary economy is positive (i) if business sector investment I is greater than household sector saving S and (ii) if the state runs a deficit, i.e. (G−T) is greater than 0.

Case (i) is characteristic of early Capitalism and case (ii) is characteristic of late Capitalism. Currently, the so-called free market economy is on the full life support of the state. The macroeconomic Profit Law boils down to Public Deficit = Private Profit and thus the Oligarchy’s financial wealth and public debt (currently $22 trillion) grow in lockstep. Capitalism will break down as soon as the sum of (i) and (ii) turns negative. The same holds for Socialism.#4

As the example of Japan shows, the state and its Oligarchy are literally forced to run deficits in order to keep the economy going for just another day. However, it would certainly not be such a good idea to cause panic among the public in general and investors, in particular, by admitting that the government is riding a tiger and cannot dismount. This means that the government actually follows the MMT policy of permanent deficit-spending/money-creation while denying it publicly: “Money, Monetary Theory … MMT for short … this is often spoken about now by politicians, various people … I don’t think we need to explain the theory here … there are many people in the US – many officials including Larry Summers who are against it … But to do it in Japan … and think about that kind of reaction the market would have … I do not intend to make Japan an experimental site for it.”

This is the political fraud of the government. The political fraud of MMTers consists of claiming that MMT policy is for the benefit of WeThePeople.#5 This is correct only in the trivial sense that everybody suffers if the economy breaks down. This, though, does not change the fact that MMT is NOT science but political agenda pushing for the Oligarchy. In this respect, MMT is not different from mainstream economics. MMTers are no exception to the verdict that economists are either stupid or corrupt or both.

The fact of the matter is that the so-called free-market economy and its Oligarchy are already for a long time on full life-support of the state and this is something that cannot be openly admitted. The MMT policy of permanent deficit-spending/money-creation prolongs the situation, it does NOT really solve any social/economic problems but only shifts them beyond the time horizon.#6

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 To this day‡, economists have produced NOT ONE textbook that satisfies scientific standards
#3 MMT is better than mainstream economics but still not good enough
#4 No future for Socialism and Capitalism
#5 MMT and the Green New Deal: Where is the snag? (I)
#6 Some nasty MMT surprises behind the time horizon

Related 'MMT vs The Rest of Economics ― a Punch and Judy show' and 'If religion is opium of the people, economics is crack of the people' and 'Economics as storytelling and entertainment for the masses' and 'Economics debate ― just another variant of hardcore wrestling' and 'Econ 101: Economists flunk the intelligence test at the first hurdle' and 'The Palgrave Dictionary ― a comprehensive collection of False-Hero-Memorials' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?'.

May 20, 2019

MMT and the Green New Deal: Where is the snag? (I)

Comment on Randall Wray on ‘How To Pay For The War’

Blog-Reference

MMT claims to be a theory, i.e. a materially/formally consistent mental representation of reality, and NOT a policy.#0 Accordingly, MMT is, as a matter of principle, compatible with any policy: “Consequently, the message from the MMT camp to all those campaigning on progressive … economic issues is that MMT macro is complementary, is something to be added and should prove a boost to whatever the specific issue, e.g., GND, happens to be.”#1

This is correct, MMTers jump on any bandwagon from unemployment to healthcare to a Pony-for-every-American to the Green New Deal.#2 MMTers have a solution to almost all social/economic problems and it consists of deficit-spending/money-creation.#3

The first schizophrenic fact of the matter is, though, that MMTers present themselves as real Progressives ― in contradistinction to the debilitated old Left ― who fight hard for the cause of WeThePeople. The second schizophrenic fact is that MMTers are not so much social activists but agenda pushers for the Oligarchy. On closer inspection, MMT is neither a scientific theory nor a social program but a political fraud.

The first thing to note is that MMTers always mix up Employment Theory and Allocation Theory and Monetary Theory. For the purpose of analysis, these issues have to be treated separately.

Since Keynes, most economists agree that unemployment can be reduced by government deficit spending. However, most economists do not know the macroeconomic Profit Law which entails Public Deficit = Private Profit. By consequence, to fight unemployment with deficit-spending/money-creation means to feed the Oligarchy.#4

Let us assume for a moment that the employment problem has been solved and turn to the question of allocation. So, what is now the answer to the question of how will you pay for the Green New Deal?

The answer is pretty obvious: shift the money from the military budget to the environmental protection budget. This has two effects, (i) because the military is the greater polluter compared to the average household, CO2 emissions and other negative environmental impacts go down immediately as a result, and (ii), neither tax increases nor additional deficit-spending/money-creation is necessary. A quite ordinary re-allocation of the existing budget is sufficient for the implementation of a Green New Deal program.

So, the answer of MMTers that a Green New Deal can be realized at any time by deficit spending is a bit misleading.#5, #6 As a matter of principle, any New Green Deal can be realized with a balanced budget. But in the MMT scheme of things, a balanced budget is something for the Swabian housewife and permanent deficit spending is the prerogative of a Sovereign State.

The point is that MMTers are not so much interested in how the government’s budget is allocated but that the government runs a deficit because it is the deficit as such that produces the macroeconomic profit for the Oligarchy.#7 From a higher standpoint, it is a matter of economic indifference whether a deficit stems from military or environmental spending. This is the reason why MMTers jump on any popular social movement with the well-received message that money is not a problem for a sovereign government because the money-issuer cannot go bankrupt. This is true, of course, but only obfuscates the economic fact that MMT policy amounts to stealth taxation of WeThePeople and a free lunch for the Oligarchy.

Real Progressives would answer the question How are you going to pay for a GND? with Simple, by re-allocating the budget. Phony Progressives answer with Simple, by telling the Central Bank to digitally create some extra money on the government’s account.

MMT is NOT science but political agenda pushing in a social cloak. MMT and GND together are the dream team for a financial coup of mind-blowing proportions in the tradition of John Law.#8

Egmont Kakarot-Handtke


#0 “MMT should not been seen as a regime that you ‘apply’ or ‘switch to’ or ‘introduce’. As I have noted regularly, MMT is rather a lens which allows us to see the true (intrinsic) workings of the fiat monetary system. … The point is that MMT is agnostic about policy bar its preference for an employment buffer rather than an unemployment buffer to discipline inflation. … In general, it makes no sense to talk about an “MMT-type prescription” or an “MMT solution”. To make that MMT understanding operational in a policy context, a value system or ideology must be introduced. MMT is not intrinsically ‘Left-leaning’.” (Bill Mitchell)
#1 Twitter David Merrill Message from the MMT camp
#2 MMT: If you’ve got a problem, I don’t care what it is, let me help
#3 Twitter William J. Luther, MMT in a nutshell
#4 Keynes, Lerner, MMT, Trump, etc. and exploding profit
#5 How counterfeiters save America with an extra profit and make WeThePeople pay for it
#6 How to pay for the war and to be bamboozled by economists
#7 MMT and the promotion of Wall Street socialism
#8 Wikipedia John Law (economist)

Related 'Full employment through the price mechanism' and 'Economics debate ― just another variant of hardcore wrestling' and 'MMT Progressives: stupid or corrupt or both?'. For the full-spectrum refutation of MMT see cross-references MMT.

Immediately following MMT and the Green New Deal: Where is the snag? (II).

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Twitter: MMT in a nutshell












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Twitter Jun 20
Source: Twitter

Twitter Jun 20

Source: Twitter

May 17, 2019

How to pay for the war and to be bamboozled by economists

Comment on Randall Wray on ‘How To Pay For The War’*

Blog-Reference and Blog-Reference (Link)

Randall Wray puts the issue into perspective: “I’m going to talk about war, not peace, in relation to our work on the Green New Deal ― which I argue is the big MEOW — moral equivalent of war ― and how we are going to pay for it. So I’m going to focus on Keynes’s 1940 book ― How To Pay for the War …” and “Our analysis (and the MMT approach in general) is in line with J. M. Keynes’s approach. Keynes rightly believed that war planning is not a financial challenge, but a real resource problem.” and “We’ve timed our GND to be completed by 2030. We have 10 years to make Keynes’s vision become reality. The alternative is annihilation.”

What Randall Wray has not grasped, though, is that Keynes got macroeconomics wrong and because of this, Keynesianism and its derivatives up to MMT are scientifically worthless. So, in order to avoid annihilation, the proto-scientific garbage of macroeconomics has to be fixed first.#1

Macroeconomic foundations


The production-consumption economy is defined by the following set of macroeconomic axioms:#2 (A0) The 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 as the dependent variable is given by P=W/R. The price is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R. This is the macroeconomic Law of Supply and Demand.

The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. it holds X=O. L is set at full employment.

The condition of budget balancing, i.e. C=Yw, is now skipped. The monetary saving/ dissaving of the household sector is defined as S≡Yw−C. The monetary profit/loss of the business sector is defined as Q≡C−Yw. Ergo  Q≡−S.

The balances add up to zero. The mirror image of household sector saving S is business sector loss −Q. The mirror image of household sector dissaving (-S) is business sector profit Q. Q≡−S is the elementary version of the macroeconomic Profit Law.

With additional sectors, the complete macroeconomic Profit Law is given by Q≡Yd+(I−S)+(G−T)+(EX−IM). It is here reduced to Q=(−S)+(G−T) which says that profit Q is determined by the household sector’s and government sector’s deficit spending.

Scenario_0


With employment L and wage rate W given, wage income is Yw=100 monetary units [e.g. trillion $]. Productivity R and output O remain constant throughout. Consumption expenditures C are equal to wage income, i.e. C=Yw. As a consequence, the profit of the business sector is zero. The household sector consumes the whole output. The required stock of transaction money is provided by the central bank and is here left out of the picture.

Scenario_1 War with full taxation


The government needs part of the current output O in period t=1. The need is legitimate and undisputed, e.g. war. The government taxes the wage income, i.e. T=10. Disposable income is reduced from 100 to 90. The households reduce consumption expenditures in lockstep from 100 to Ch=90. The government fully spends the income tax of 10 units, that is, total consumption expenditures C=Ch+G remain unchanged and the market-clearing price P remains constant. Both, the household sector and the government sector fully consume their respective shares of output Oh and Og, i.e. O=Oh+Og. The real war consumption Og is fully paid for by taxes. The government’s budget is balanced, i.e. G=T. The household sector’s budget is balanced, i.e. Ch+T=Yw. In real terms, the households pay Og for the war effort, in nominal terms T.

In period 2, the war is over and income tax is again zero, and everything else is like in the initial scenario_0.

Scenario_2 No taxation, household sector saving, government deficit spending


The government imposes no income tax. The household sector reduces consumption expenditures voluntarily from 100 to Ch=90 in period 1. Through saving of 10 units the household sector’s current deposits at the central bank increase. At the same time, the government spends G=10 and takes up overdrafts at the central bank. Both sides of the central bank’s balance sheet are equal. Households’ deposits = government’s overdrafts. Total consumption expenditures, i.e. C=Ch+G, and the market-clearing price P remain unchanged. The government runs a deficit, i.e. G−T=10 with T=0. Profit is zero because of G−T=S.

The war is over in period 2 and no changes happen in periods 2, 3, 4. The households keep the deposits and the government keeps the overdrafts. Interest payments are left out of the picture. The household sector’s financial assets are equal to the public debt. Seen in isolation, the household sector is wealthier after the war. This, of course, is an illusion that stems from ignoring the public debt which is psychologically nobody's debt.

In period 5 the government is supposed to pay back the overdrafts. The wage income of Yw=100 is taxed with T=10 units. Disposable income is reduced to 90. The government uses the 10 units of income tax to reduce its overdrafts at the central bank to zero. At the same time, the household sector dissaves 10 units, i.e. reduces its deposits to zero. Consumption expenditures C are then equal to disposable income 90 plus dissaving 10, i.e. C=100. The balance sheet of the central bank at the end of period 5 is again zero as in the initial period. Deposits (= money) and overdrafts are destroyed, i.e. reduced to zero.

What actually happens in scenario_2 in comparison to scenario_1 is that the taxation for the war is shifted from period 1 to period 5. In real terms, there is NO difference at all. Real consumption of the household sector is in both cases reduced in period 1. In other words, the taxes are paid in period 5 with a saving of 10 units from period 1. That’s all if the interest rate is zero. The whole exercise amounts to an indefinite tax deferment.

If the government issues bonds with a volume of 10 units in period 2 the household sector’s deposits are reduced to zero and so are the government's overdrafts. The central bank’s balance sheet reduces to zero. The household sector holds bonds instead of deposits and the government switches overdrafts into bond liabilities. The central bank is out as an intermediary and there is a direct creditor-debtor relationship between the household and the government sector in the form of bonds or similar types of government securities.

The interest on bonds is taxed from the household sector and paid to the bondholders. There is a redistribution of disposable income as long as the public debt is rolled over. This redistribution is normally not for the benefit of WeThePeople but for the benefit of the Oligarchy. The lower the interest rate the smaller the redistribution from the ninety-nine-percenters to the one-percenters.

In period 4, the whole securitization transaction is exactly reversed. The government sector takes up 10 units of overdrafts and redeems the bonds. Accordingly, the household sector’s stock of bonds is reduced from 10 to zero and the deposits go up from zero to 10.

In period 5 the households are taxed, they dissave and the government fully repays the overdrafts.

In period 6 everything is again as it was in the initial period.

Scenario_2 fully replaces Ricardian Equivalence.

Scenario_3 No taxation, no saving, government deficit spending


The government spends G=10 on war but the households do NOT reduce consumption expenditures, i.e. Ch=100, and accordingly, their deposits are zero at the beginning and the end of period 1. The government takes up overdrafts at the central bank and spends these 10 units IN ADDITION to the households, so total consumption expenditures are now C=Ch+G=110. Since total output remains unchanged the market-clearing price now rises and the business sector makes a profit of Q=10 which is equal to the government’s budget deficit, i.e. G−T=10 with T=0. At the central bank, the business sector’s deposits are 10 and government overdrafts are also 10 at the end of period 1. The redistribution of current output O between the household and the government sector does not happen via the income tax or saving but via a one-off hike of the market-clearing price P. There is NO inflation.

In real terms, there is again NO difference between the scenarios. The difference compared to scenario_2 is that the business sector now has 10 units deposits instead of the household sector because the households do not save and the business sector makes a profit of 10 units. Business sector’s deposits = money = government’s overdrafts.

In the next period, the war is over, the government’s war spending stops, and the market-clearing price falls back to the initial level. The business sector can hold its deposits indefinitely and the government can keep its overdrafts indefinitely. Alternatively, the government sector can sell bonds to the business sector which takes the central bank out of the loop and establishes a direct credit relationship between the business sector and the government sector.

As long as the government does not tax the households, everything remains unchanged for an indefinite time. So, the whole issue of war financing can simply be pushed beyond the time horizon and forgotten. The trouble comes here in period 5 when the disposable income is reduced due to taxation from 100 to 90 and consumption expenditures fall also to 90 because now there is no dissaving. In this case, the market-clearing price falls and the business sector makes a loss of 10 units which reduces its deposits to zero. The one-off price hike of period 1 is reversed in period 5. Summed over all periods, macroeconomic profit is zero.

The government is now in the possession of 10 units of deposits from taxation which can be used to redeem the bonds/overdrafts. Everything is then again as it was in the initial period.

Comparison


In scenario_1, the households pay income tax in period 1 and NO credit relationships ensue. In scenario_2, the tax payment is deferred via saving in period 1 and dissaving in period 5. In scenario_3 we have instead of the saving/dissaving of the household sector profit in period 1 and loss in period 5. Summed over all periods profit and loss cancel out. In scenario_2, profit is zero over all periods.

In REAL terms and with an interest rate of zero, there is absolutely NO difference between the scenarios. In real terms, the war is paid for in period 1 by the household sector. The significant difference is between the saving/dissaving scenario and the profit/loss scenario.

In the real world, a mixture of the three scenarios happens. The war is paid for in nominal terms by a combination of taxation, household sector saving, and government deficit spending.

Summary


From the perspective of WeThePeople scenario_1 is the best. It entails budget balancing. Scenario_2 brings additional taxes for the payment of interest on the public debt. From the perspective of the Oligarchy, scenario_3 is the best. This scenario produces the macroeconomic profit of the business sector. In other words, the MMT policy of deficit-spending/money-creation is the Oligarchy’s profit booster.

The households pay in real terms for the war through a reduction of real private consumption in period 1. In nominal terms, the question is how long is taxation deferred? The central bank can extend the deferment in principle until eternity by buying the government securities and keeping them on the asset side. Otherwise, the households are taxed for interest payments on the public debt in all eternity for the benefit of the Oligarchy.

Neither in war nor in peace the MMT policy of deficit-spending/money-creation is ultimately in the interest of WeThePeople. When it comes to the debate about the Green New Deal ― allegedly the moral equivalent of war ― people should be aware that economists are scientifically incompetent or/and morally corrupt. The proof is in the actual distribution of financial wealth and the amount of public debt (about $22 trillion and counting). When MMTers talk about physical annihilation it should be realized that people live already for a long time in a state of deferred financial annihilation.

Egmont Kakarot-Handtke


* New Economic Perspectives
#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 The canonical macroeconomic model

Related 'What comes first: eco-self-destruction or oeco-self-destruction?' and 'How to solve almost any problem' and 'The true nature of economists' confusion' and 'MMT and the Green New Deal: Where is the snag? (I)' and 'MMT and the Green New Deal: Where is the snag? (II)' and 'Stephanie Kelton sells children into debt slavery'.

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Twitter Dec 22


Twitter Jan19, 2021

May 15, 2019

MMT, money, value, and transcendental Capitalism

Comment on Peter Cooper on ‘Currency Acceptance, Currency Value, and Transcending Capitalism’

Blog-Reference and Blog-Reference

Peter Cooper argues: “A currency’s role as public utility hinges on currency acceptance. A currency expresses (marxist) value in the sphere of commodity production so long as it represents an amount of socially necessary abstract labor. If so, it is relevant to distinguish two questions: (i) what drives acceptance of the currency? and (ii) what determines the value of the currency?”

Peter Cooper answers the question of acceptance: “Government has the authority to impose taxes (and other obligations) on members of the community and specify what will be accepted in payment. In principle, this authority is bestowed upon government by the community and, ideally, will be exercised in a democratically accountable way.”

This is not correct. Imagine an elementary production-consumption economy consisting of the household sector and the business sector.#1, #2, #3 The business sector pays the wage income Yw with own IOUs, and the households, in turn, fully spend the IOUs for buying the consumption good output from the business sector, i.e. C=Yw. The workers will accept the business sector’s IOU’s as payment if they can be reasonably sure that the creation/destruction of IOUs is fraud-safe. This can best be achieved if the business sector’s IOUs are replaced by the central bank’s generalized IOUs, i.e. by fiat money. The acceptance of fiat money does NOT depend on the taxing power of the state but on institutional safeguards.

Peter Cooper answers the question of value: “In Marx’s theory, ‘value’ (defined as socially necessary labor time) governs commodity production and exchange.”

This is not correct because Marx’s Theory of Value is provably false. Marx got profit, exploitation, and classes wrong.#4 To this day, Marx and Marxians lack the concept of cross-over exploitation.#5

From the true macrofoundations follows the macroeconomic Law of Supply and Demand as shown on Wikimedia.#6 It says:


(i) An increase of the expenditure ratio ρE≡C/Yw leads to a higher market clearing price (the Greek letter ρ stands for ratio). An expenditure ratio ρE greater than 1 indicates deficit-spending/dissaving/credit-expansion, a ratio ρE less than 1 indicates saving/credit-contraction.

(ii) An expenditure ratio greater than 1 makes that macroeconomic profit, i.e. Q≡C−Yw or Q≡(ρE−1)Yw, is greater than zero.

(iii) Deficit spending, i.e. the move from ρE=1 to ρE greater than 1 causes a one-off price hike but NOT inflation.

From the macroeconomic Law of Supply and Demand follows the purchasing power of the wage a.k.a. the Value of Money as W/P=R in the elementary case of budget balancing, i.e. of C=Yw or ρE=1. In other words, the Labour Theory of Value is false since the founding fathers. Value does NOT depend on socially necessary labor time.#7 The Value of Money depends on productivity R.

When the government sector is added the macroeconomic Profit Law reads Q≡(G−T)+(I−S) or Public Deficit (G−T) = Private Profit Q if I and S are taken out of the picture for a moment.

So, profit in transcendental Capitalism does NOT depend on the exploitation of the workers but on the deficit spending of the government sector and the household sector. Roughly speaking, transcendental Capitalism is state-sponsored.#8 The accumulated sponsoring is measured by the public debt which stands currently at $22 trillion. The so-called free-market economy is already for a long time on full life-support of the state.#9

Egmont Kakarot-Handtke


#1 This is the true core of macroeconomic premises: (A0) 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. (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.
For a start X=O, i.e. market-clearing holds. The ratio ρE≡C/Yw is called the expenditure ratio; ρE=1 indicates budget balancing of the household sector.
#2 True macrofoundations: the reset of economics
#3 MMT is dead
#4 The thing with profit and exploitation
#5 Capitalism, poverty, exploitation, and cross-over exploitation
#6 Wikimedia AXEC101 Law of Supply and Demand, elementary production-consumption economy
#7 Economics ― nothing but claptrap, twaddle, drivel, slip-slop, wish-wash, waffle, and proto-scientific garbage
#8 No future for Socialism and Capitalism
#9 Keynes, Lerner, MMT, Trump, etc. and exploding profit

Related 'The objective value of money'. and 'MMT: fundamentally false' and 'Warren Mosler: scientific dilettante and political fraudster' and 'MMT: The fusion of Wall Street and Academia' and 'Rethinking the Profit Law' and 'Basics of Value Theory' and 'Mathematical Proof of the Breakdown of Capitalism'.