Showing posts sorted by date for query Romanchuk. Sort by relevance Show all posts
Showing posts sorted by date for query Romanchuk. Sort by relevance Show all posts

November 20, 2023

The Fed's generation of profit, interest, and capital gains is second to none

Comment on Brian Romanchuk on 'No, QE Is Not Costless'


The US economy runs on profit. The 3-sector  ProfitLaw Q≡(G−T)+(I−S)+Yd implies that the greater part is produced by deficit-spending/money-creation. The institutional setup ― including Congress/Fed/Treasury/Wall Street/Big Business ― guarantees the  Oligarchy's continuous self-alimentation with  Profit. Profit generation has worked just fine over the last 200+ years.

So, private financial wealth grows with public debt and, in the form of bonds, becomes the eternal interest cash cow for the  Oligarchy. WeThePeople owe the public debt and are taxed for interest. The IRS ensures that interest is paid on time to the Oligarchy.

The profit/interest double-whopper explains the observable time path of distribution, i.e., the exponentially growing inequality of income/wealth in the so-called free market economies.

In sum, the Fed is pivotal for the creation of the profit/interest/financial wealth of the US economy, respectively, its oligarchic owners. Actually, that's the Fed's main task. 

How does this work over the interest rate cycle? Remember how Mr. Volcker pushed the interest rate up to exorbitant heights and how it then fell gradually to the zero lower bound?

Everybody knows that there is an inverse relation between the interest rate and the current value of a bond. So, bondholders (banks, funds, asset management groups, investment management groups, etc.) could realize capital gains all the way down from the Volcker peak until the interest rate reached the zero lower bound.

At this point, the easy part of the game was over. The Fed could not lower the interest rates any further, and everybody knew that nominal/realized capital losses would be inevitable as soon as the  Fed raised interest rates again. But the Fed wouldn't commit such financial cruelties to the esteemed holders of public debt? So, the Fed was trapped at the zero lower bound.

At this point ― lowest interest rate and highest bond value ― the Fed started QE, i.e., buying bonds from its financial market “customers/partners/colleagues” who swapped their bonds for liquidity, a.k.a. central bank balances.

Smart move, because in this way the big Wall Street players avoided any nominal/realized losses when the interest rate increases eventually happened. As they did when the Fed declared it would fight inflation at any cost. Those who were hit immediately with nominal losses were some banks and institutional investors who traditionally hold bonds to maturity ― and, of course, the Fed itself with its gargantuan QE assets.

Over the interest rate cycle, the losses of the  Fed during the current phase of rising interest rates are the counterpart of the realized capital gains of fixed-interest securities during the phase of falling interest rates. In other words, with QE, the Fed acted as a direct Profit Pump for the Oligarchy.

Seen from the Oligarchy, the Fed's generation of profit, interest, and capital gains is second to none.

Egmont Kakarot-Handtke

***

Twitter/X Aug 31, 2025  Some statistics about the profit pump




Twitter/X Dec 11, 2025 Shortened rollover periods and interest pump



Twitter/X Dec 11, 2025 The interest pump and its inverse connection with bond price moves



Twitter/X Jan 17, 2026  Rollover? 1/4 of US debt matures in the next 12 months.



Twitter/X Jan 21,2026



Twitter/X Jan 28, 2026 The refinancing/rollover is one-third of the debt in 2026 and needs an attractive interest rate



Twitter/X Jan 28, 2026 Unrealized losses



Twitter/X Mar 25, 2026 The $10 trillion roll-over

Posted by at
Labels: , , ,

March 1, 2021

Occasional Tweets: MMTers are a bunch of petty crooks

 


For more about fraud in economics, see AXECquery.
For more about Brian Romanchuk, see AXECquery.
Posted by at
Labels: , , ,

February 25, 2021

Occasional Tweets: How the MMT fraud works

 
 

Refutation of the MMT sectoral balances equation

Posted by at
Labels: , , , ,

February 24, 2021

Occasional Tweets: MMT is not science, MMTers are not scientists

 

For the final clarification of the finer points of profit theory in an earlier discussion with Brian Romanchuk see AXECquery.
Posted by at
Labels: , , , , , ,

September 16, 2020

Psychologism: how morons explain the world

Comment on Brian Romanchuk/Tom Hickey on ‘Canadian Establishment: "Deficit Myths? Yes, Please!"’


Brian Romanchuk explains: “The Canadian economic establishment is very much wedded to sound finance beliefs, courtesy of the Great Canadian Fiscal Crisis of the early 1990s.”

This sounds like an explanation, but is pure blather. First, who is the “Canadian economic establishment” and, second, how can we know to which beliefs this fictitious subject is wedded, and third, is there any way to prove that Brian Romanchuk's statement is true?

This psychological motive-imputation is as far away from science as can be. It is, however, the stuff political propaganda is made of. Read three Trump tweets, and you get the pattern.

Things are bad enough with fresh political events, but they get exponentially worse with historical events.

As usual, Tom Hickey cannot resist jumping headfirst into the poop: “As an aside, Germany still can't get over the Weimar hyperinflation and ignores the turnaround engineered by Reichsbank president Hjalmar Schacht that contributed to the economic success of the Hitler regime through ‘creative finance’.”

Folk psychologist Tom Hickey has “Germany” on his couch and diagnoses a trauma: hyperinflation.  And now it comes, “since the end of WWII, Germany has been firmly committed to ‘sound finance’.” That is hysteresis of the worst sort.

OK, Doctor, got it. Everybody who talks of sound finance is psychologically deranged. In particular, those people who accuse MMT of unsound economic policy. Your psycho-babble proves nothing, but it is good enough for social media trolling.

The first point to realize is: the attempt to explain things historically is bound to fail because, in most cases, we have NO such thing as a historical fact. Everybody could know this since 1440 when Lorenzo Valla “proved that the Donation of Constantine was a forgery.”#1 This can be extrapolated backward to the folks who fabricated the bible and forward to those who wrote the Warren Report, which “concluded that President Kennedy was assassinated by Lee Harvey Oswald and that Oswald acted entirely alone.” (Wikipedia)

Most people are aware that most of what is called history is silly propaganda. For this reason, it is a bad idea to use historical events or mere opinions about those events in an economic argument. History and psychology prove NOTHING. Scientific proof consists of the demonstration of material/formal consistency.

Psychoanalyzing the collective psyche of “Germany” and inflation is a futile exercise. What we know is (i) that hyperinflation does not happen by accident but has to be engineered, (ii) that it ruined the German economy, with the middle class as the primary victim. Given the historical context, the combination of Weimar/Inflation is a signifier of an unprecedented political/economical catastrophe and not for some irrational phobia. Inflation has to be understood less as a mental illness and more as a weapon of economic warfare/subversion.

Having enjoyed a thorough economic education, Germany” is well-prepared to smell an economic rat. MMTers understandably do not like this and call “Germany” a paranoid Swabian housewife.

All this has nothing to do with economics understood as science. It is just a political shit show. Scientifically, MMT is worthless and politically it is a fraud. Brian Romanchuk is part of it.#2

Egmont Kakarot-Handtke


#1 Wikipedia Lorenzo Valla
#2 For more about Brian Romanchuk, see AXECquery.


***

REPLY to Global Markets Training on Sep 17

You say: “When a bank makes a loan they DEBIT the asset named LOANS and they CREDIT the liability named DEPOSITS. Look up any definition of money as M1 or M2 and you will see that loans create deposits hence create M1 or M2 hence create money.”

For all practical purposes and in normal times, central bank deposits and bank deposits are functionally identical. However, in the strict sense, bank deposits are near-money, only central bank deposits/notes are money. #1 This explains the phenomenon of bank runs, i.e., when many people suddenly try to get central bank money/notes for their bank deposits.

You say: “And I audited banks for Ernst & Young. So I think I know something about the debits and credits of which I speak.”

Agreed. But despite the fact that the underlying math is the same, business accounting and macroeconomic accounting are different things. Obviously, you have not yet realized that MMT gets the macroeconomic sectoral balances equation wrong.#2 This foundational blunder makes that MMT as a whole is scientifically worthless.#3


#2 “And, although a classically trained economist I now fully accept the complete MMT lens.”

***
REPLY to Tom Hickey on Sep 20

I argued above, “For this reason, it is a bad idea to use historical events or mere opinions about those events in an economic argument. They prove NOTHING.”

For those economists who do not understand how the economy works and habitually try to explain actual problems with a reference to alledged historical precedents some devastating news about history in general just comes in: Almost all you know about history is probably wrong: How Long Was the First Millenium? #1



***

Twitter May 17, 2021 History got lost around 1900; what remained is propaganda


Posted by at
Labels: , , , , ,

July 10, 2020

What Is MMT? (II) ― Short Version

Comment on Brian Romanchuk on ‘What Is MMT? (Short Version)’

Blog-Reference and Blog-Reference and Blog-Reference on Sep 23 and Blog-Reference Sep 24

  • MMT is the issuance of counterfeit currency in the form of deficit spending/ money creation for the benefit of the one-percenters.
  • Genuine currency and counterfeit currency are indistinguishable because they originate from the same source: the Fed. It all depends on whether additional fiat money is injected on the supply or the demand side.
  • MMTers are not scientists but political agenda pushers. MMT policy is to the disadvantage of the ninety-nine-percenters. The counterfeiter steals from the rest of society via the anonymous price mechanism.
  • It is the ninety-nine-percenters who owes the public debt. And it is the one-percenters who own the corresponding financial assets. Interest on public debt works like a regressive tax as long as the debt is rolled over.
  • Because #PublicDeficitIsPrivateProfit, MMT is the biggest redistribution program ever.
  • MMT is a political fraud.#1

Egmont Kakarot-Handtke


#1 More details

Related 'What is MMT?' and 'Keynes, Lerner, MMT, Trump, etc. and exploding profit' and 'MMT Basics' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' and 'From the debt economy to the gift economy: how America is brainwashed to love budget deficits'. For the full-spectrum refutation, see cross-references MMT.

***
AXEC165b


***

REPLY to Asad Zaman

You say: “One of the key insights of MMT is that NOBODY ‘owes’ the public debt.”

This is not a key insight but a key deception of MMTers in order to sell the deficit-spending/money-creation program to a naive public.

Note that

• The macroeconomic Profit Law implies Public Deficit = Private Profit.#1 MMT policy is a free lunch for the Oligarchy.

• Public debt grows in lockstep with deficit-spending/money-creation. It holds that WeThePeople owe the debt, and the Oligarchy owns the corresponding financial assets. The state manages the public debt on behalf of WeThePeople.

• The Oligarchy appreciates this very much because the taxman collects interest from WeThePeople in the form of taxes and hands the full amount in time over to the Oligarchy. The state is considered the best debtor because of its unlimited taxing power.

• Taxing power replaces the bone-breaking of private debt collection, which the Oligarchy considers as inefficient/expensive.

• Thus, the debt-slavery of WeThePeople is established by pretending that nobody owes the debt and nobody pays interest. As Lerner's Lie goes: We owe the debt to ourselves and pay interest to ourselves. The lie is the fake collective We.

MMTers are the academic agenda-pushers of Wall Street. They deceive WeThePeople. Asad Zaman and the rest of the self-styled Progressives are complicit in the greatest financial fraud in history.#3


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 MMT and the unbearable lightness of public debt slavery
#3 How Keynesians, Lernerians, MMTers make the Oligarchy great

***
REPLY to Yoshinori Shiozawa on Sep 28

The lethal defect of the MMT policy of deficit-spending/money-creation is on distribution, not on inflation. The observable distribution of income and financial wealth between the 1% and the 99% is the outcome of MMT policy.#1

The inflation discussion is a smokescreen.#2

The macroeconomic price formula states for the elementary case P=ρW/R. ρ>1 represents private/public deficit-spending/money-creation, and this implies that a period deficit produces a one-off price hike and NOT inflation.#3


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 Gosh! The One Percent have gotten $21 trillion richer Links on Distribution
#3 Links on Inflation

***
REPLY to Asad Zaman on Sep 29

The MMT textbook gets the foundational macroeconomics sectoral balances equation wrong. For details, see Refuting MMT’s Macroeconomics Textbook.

Because of this, the analytical superstructure (inflation, employment, etc.) is provably false.
Posted by at
Labels: , , , , , , ,

January 3, 2020

Why MMTers permanently explode "myths of public deficits"

Comment on Crispin Savage on ‘Visiting economist explodes myths of public deficits’*

Blog-Reference

More than 200 years ago, economics started as Political Economy. Those were honest times, and the Founding Fathers identified themselves openly as political agenda pushers. John Stuart Mill, the philosopher of Liberalism, was from 1823 to 1858 on the payroll of the British East India Company. #1 Things changed with Jevons, who renamed Political Economy to Economics and claimed to do science.

So, there are 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.

Despite their commitment to science, economists have produced NOTHING of scientific value in the last 200+ years. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational economic concept of profit wrong.

Economics is proto-scientific garbage but advertises itself as science. Economists deceive the general public. The “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud.

Economics is propaganda for the benefit of the Oligarchy. MMT is just the latest example. Stephanie Kelton is currently the most popular proponent of the false MMT message ‘Deficits Are Good For You’.

“Professor Kelton will deliver the annual Harcourt lecture ― The Deficit Myth ― Modern Monetary Theory and the Birth of the People’s Economy ― at the University of Adelaide on Tuesday 14 January to a packed audience. The event was sold-out almost as soon as it was announced.”

“Her much-anticipated book, The Deficit Myth: Modern Monetary Theory and Creating an Economy for the People (to be published on 9 June 2020), will show how to break free of the thinking that she says has hamstrung policymakers in Australia and around the world.”

Now, the plain scientific fact of the matter is that the MMT policy of deficit-spending/ money-creation is bad for WeThePeople and good for the Oligarchy. #2, #3

According to the macroeconomic Profit Law, #4, MMT deficit-spending/money-creation has serious negative distributional effects:
(i) The Law implies Public Deficit = Private Profit.
(ii) The greater part of private profit is invested in government securities and earns interest, which is taxed from WeThePeople as long as the debt is rolled over. #5
(iii) A growing public debt can be rolled over for a very long time, but at some future date has to be redeemed. This will cause severe economic problems. #6, #7

The communicative task of MMT academics is to brush all negative distributional effects and the inevitable future problems aside: “Government deficits are normal and even necessary to the health of most economies ― that’s according to one of the world’s most influential economists, Professor Stephanie Kelton, who will be a Visiting Professor at the University of Adelaide this month.”

Economics students are expected to swallow proto-scientific garbage and brain-dead propaganda without turning an eyelid. After all, that is what they have done since the founding fathers. #8

The fact of the matter is that public deficit-spending/money-creation is a free lunch program for the Oligarchy. #9 The fact is that the so-called market economy is on the life support of the State, and Wall Street is on the life support of the Central Bank. Macroeconomic profit is in the main produced by public deficits. Financial wealth grows in lockstep with public debt. The Oligarchy, in turn, uses the opulent free lunches to corrupt what remains of the State’s legislative, executive, and judiciary institutions and, not to forget, academia. #10

Egmont Kakarot-Handtke


* University of Adelaide
#1 “The company ended up seizing control of large parts of the Indian subcontinent, colonised parts of Southeast Asia, and colonised Hong Kong after a war with Qing China.” (Wikipedia)
#2 For the full-spectrum refutation of MMT, see cross-references MMT
#3 Exploding the Household Fallacy
#4 Qm≡Yd+(X−M)+(G−T)+I−Sm Legend: Qm monetary profit/loss, Sm monetary saving/dissaving, I investment expenditures, G government spending, T taxes, X export, M import, Yd distributed profit.
#5 Stephanie Kelton sells children into debt slavery
#6 How to pay for the war and to be bamboozled by economists
#7 Some nasty MMT surprises behind the time horizon
#8 Econ 101: Economists flunk the intelligence test at the first hurdle
#9 MMT: The fusion of Wall Street and Academia
#10 Stephanie Kelton: MMT’s public farce

Related 'The Kelton-Fraud' and 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'Down with idiocy!' and 'The sectoral balances obfuscation: stupidity or corruption?'  and 'Dear idiots, MMTers are Wall Street’s agenda pushers'.

***

Twitter Jan 13, Deficit-spending/money-creation is Capitalism's elixir of life

Source: Twitter

***

Switch of threads at this point.

***

REPLY to Ahmed Fares on Jan 3 and Blog-Reference

You say: “For a closed economy, such as the global economy as a whole:

Government Deficit = Non-government Surplus.”

This is false. #1, #2 The axiomatically correct macroeconomic relationships read with increasing complexity and simplified notation:
(1) Q≡−S in the elementary production-consumption economy,
(2) Q≡I−S in the elementary investment economy,
(3) Q≡Yd+I−S in the investment economy with profit distribution,
(4) Q≡Yd+I−S+(G−T)+(X−M) in the general case with government in an open economy.

For the three sectors (business, household, government) of a closed economy, this boils down to Q≡(G−T)−S (I=0, Yd=0), and for two sectors (business, government) to Q=(G−T), i.e., Public Deficit (G−T) = Private Profit Q.

This tells one that MMT’s policy of deficit-spending/money-creation is a free-lunch program for the Oligarchy, and that Warren Mosler is a Wall Street agenda pusher and that his White Paper is proto-scientific garbage. #3

For the detailed refutation of Peter Cooper, enter his name in the search field at AXEC.


#3 Why MMTers permanently explode myths of public deficits

***

REPLY to Brian Romanchuk on Jan 4 and Blog-Reference

You summarized the White Paper: “Mosler answers the question ‘What is MMT?’ as follows. MMT began largely a description of monetary operations, which are best thought of as debits and credits to accounts kept by banks, businesses, and individuals.” and “To give further background, Warren Mosler is successful fixed income investor who developed the ideas around MMT independently of the other founders, …”

The problem is this: Warren Mosler’s approach is microeconomic and institutional. Now, we know from methodology that ALL microfounded approaches run into the Fallacy of Composition. NO way leads from the description of the institutional/operational details of the Fed or other banking systems to the understanding of how the monetary economy works. Monetary Theory has to be macrofounded.

Because Warren Mosler gets the analytical starting point wrong, he gets the determination of the price level and the key interest rate wrong.

From the correct macrofoundations follows the correct balances mechanics, i.e., the interdependence of the balances of the business, household, and government sector. From the mathematically correct balances analysis (= macroeconomic accounting) follows that MMT’s sectoral balances equation is false.

So, both Warren Mosler’s microfoundations approach and the post-Keynesian macrofoundations approach are provably false. And when the foundations are false, the whole analytical superstructure is false.

Conclusion: Forget the White Paper, forget MMT, and stop blathering about the absolutely irrelevant institutional/operational details of Fed/Treasury/Private Bank interactions. The lethal blunder of economics is that the macrofoundations are false since Keynes, because economists are too stupid for the elementary algebra that underlies macro.

People love hands-on practitioners like Warren Mosler and love to get lost in operational details, and regard Mosler as an expert because he has made tons of money on Wall Street. Nothing wrong with this, except that economics is above Warren Mosler’s intellectual pay grade. The proof is in his White Paper.

***
REPLY to Matt Franko on Jan 4

You say: “Egmont you here: ‘Public Deficit (G−T)’ G doesnt include Transfer Payments so that is not the ‘Deficit’... at least not in Cash Basis Accounting ...”

Right, transfer payments have been left out of the picture here. But you can easily apply the analogous case, which has been dealt with elsewhere. #1 Just substitute transfers for Yg.

The inclusion of transfers does NOT change the crucial relationship Public Deficit = Private Profit, so there is no need to bring transfers in at this point.


#1 Q: How are you going to pay for it? MMT: By stealth taxation!

***
REPLY to Brian Romanchuk on Jan 5

I said: “Now, we know from methodology that ALL microfounded approaches run into the Fallacy of Composition. NO way leads from the description of the institutional/operational details of the Fed or other banking systems to the understanding of how the monetary economy works. … Because Warren Mosler gets the analytical starting point wrong, he gets the determination of the price level and the key interest rate wrong.”

The Fallacy-of-Composition argument does NOT relate to monopolistic money creation but to the determination of the price level. The price level is NOT determined à la Mosler by the government “setting one price” but by total output and total spending of all households and the government taken together. If in the limiting case, government spending is zero, the price is still determined.

For the production-consumption economy without government, the macroeconomic Law of Supply and Demand says for the elementary case that P=W/R.

The government is neither needed for the determination of the price level nor for bringing money into the economy. #1

From Warren Mosler’s ‘operational core’ follows NOTHING about the price level or other macroeconomic variables. Obviously, Warren Mosler has NO idea what macroeconomic profit is, and this alone is proof that the White Paper is proto-scientific garbage.


#1 The right and the wrong way to bring money into the economy

***
REPLY to Matt Franko on Jan 5

You ask: “What basis of Accounting are you using? Cash? Accrual? Modified Accrual?”

Obviously, you do not remember that this question has already been discussed and settled in 2017. #1

All macroeconomic variables relate to the same period, and all transactions are settled with fiat money in the same period, as you can see from the transaction patterns. #2

So, the question of different accounting methods does NOT arise at this point because the variables G, T, Q in the algebraically determined macroeconomic relationship Public Deficit (G−T) = Private Profit Q relate to the same period.

Your repeated attempts to obscure with irrelevant technicalities the plain fact that MMT is a free-lunch program for the Oligarchy are futile. This only makes you part of a manifest political fraud.


#1 Just enter “accrual” into the search field at AXEC.

***

REPLY to Brian Romanchuk on Jan 5 and Blog-Reference

You say: “Woah, buddy, you’re jumping all over the place. Your first comment referred to ‘accounting’, and that only makes sense in the context of discussing the monopoly issuer status of the central government. Now you are pretending you are just talking about price level determination ― which your accounting mumbo-jumbo tells us nothing about.”

The fact is that I start with well-defined macrofoundations. #1 From these macrofoundations follows the price level as P=W/R and the elementary balances equation (which is the algebraic counterpart of macroeconomic accounting) as Q≡−S. In plain words: macroeconomic profit of the business sector Q is equal to dissaving (= deficit-spending) of the household sector −S.

For the government sector, follows analogously Q≡(G−T), i.e., private profit Q is equal to public deficit (G−T), i.e., equal to the deficit-spending of the government sector.

For the household and government sector combined, this gives Q≡(G−T)−S. This equation replaces the false MMT slogan “Government Deficit = Non-government Surplus.” #2

From Warren Mosler’s “operational core” follows NOTHING about the price level or about macroeconomic profit. Accordingly, the word profit does NOT appear once in your discussion of the White Paper.

Profit also does NOT appear in MMT’s foundational sectoral balances equation. We have (I−S)+(G−T)+(X−M)=0 in the MMT textbook #3, and this contrasts with the correct equation (I−S)+(G−T)+(X−M)−Q=0, which contains the balance of the business sector Q.

From Warren Mosler’s “operational core” follows NOTHING about the macroeconomic balances.

You say: “In any event, your entire theory is based on you doing macro accounting in wacky fashion that nobody agrees with.”

Of course, NO MMTer agrees with it because the axiomatically correct algebra implies (i) Public Deficit = Private Profit, (ii) MMTers are too stupid for elementary math, (iii) MMT’s policy of deficit-spending/money-creation is a free-lunch program for the Oligarchy, (iv) Warren Mosler is an agenda pusher/useful idiot for Wall Street, (v) Brian Romanchuk is Warren Mosler’s applause troll, (vi) MMTers are NOT scientists but political fraudsters because they deceive WeThePeople about the present and future negative effects of the MMT policy of deficit-spending/money-creation.


#1 Macrofoundations are, for a star,t defined by three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw), and two definitions (Q≡C−Yw, S≡Yw−C) in simplified notation.
#3 Refuting MMT’s Macroeconomics Textbook

***
REPLY to Brian Romanchuk on Jan 9

The macroeconomic price, aka the price level, is in the elementary case given by P=ρE W/R. This is the macroeconomic Law of Supply and Demand. Extensive explanations have been given elsewhere.

The price level follows logically from macrofoundations, which are, for a start, defined by three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw), and two definitions (Q≡C−Yw, S≡Yw−C)

The equation is composed of measurable variables and is therefore testable in principle, i.e., as an integral part of the complete and more complex price equation.

From Warren Mosler’s “operational core” follows NOTHING about the price level. #1


#1 Why MMTers permanently explode myths of public deficits

***
Graphic AXEC152

Posted by at
Labels: , , , , ,

December 19, 2019

Blowing smoke about bipartisan failure

Comment on Brian Romanchuk on ‘A Skeptics Guide To Mankiw’s Skeptic’s Guide To MMT’*

Blog-Reference

Brian Romanchuk summarizes: “I would paraphrase Mankiw’s criticism of MMT as follows: if we assume that neoclassical theory is correct, MMT is either incorrect (where it contradicts neoclassical theory) or trivial. This is an obviously true statement, but it begs the question: is neoclassical theory correct? As my earlier discussion noted, one of core topics of discussion of the MMT literature are critiques of neoclassical theory. We need to investigate whether those MMT critiques are out to lunch.”

NO, there is absolutely NO need for further investigations of neoclassical economics: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

Neoclassical economics is dead for 150+ years. Is MMT the valid new theory? Again NO, MMT, too, is refuted on all counts.#1 Therefore, the comparison of standard textbooks of both approaches, i.e. Neoclassics vs MMT, is an exercise in smoke blowing.#2-#4 More specifically, both approaches get the foundational macroeconomic balances equation wrong which proves that they are too stupid for elementary algebra.

Because the conceptual foundations are false the whole analytical superstructure is false and, as a result, the respective textbooks are scientifically worthless.#5-#11 Neither Neoclassical nor MMT policy guidance has sound scientific foundations. Neither mainstreamers nor MMTers have something worthwhile to say about how the monetary economy works.

Egmont Kakarot-Handtke


* Bond Economics
* Gregory Mankiw A Skeptic’s Guide to Modern Monetary Theory
#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 Get it econ suckers: behavioral microfoundations ⇒ false, systemic macrofoundations ⇒ true
#3 Neoclassics and MMT ― much like pest and cholera
#4 Heterodoxy ― an axiomatic failure just like Orthodoxy
#5 To this day, economists have produced NOT ONE textbook that satisfies scientific standards
#6 Refuting MMT’s Macroeconomics Textbook
#7 The father of modern economics and his imbecile kids
#8 False on principle
#9 Economics textbooks ― tombstones at the Flat-Earth-Cemetery
#10 CORE: more lipstick on the dead economics pig
#11 Macroeconomics and the fake History of Economic Thought
Posted by at
Labels: , , , , , , , , ,

October 7, 2019

The state of MMT? Stone-dead!

Comment on Brian Romanchuk/Tom Hickey on ‘The State Of MMT?’*

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

Tom Hickey maintains: “MMT is ‘winning’ because it cuts to the chase instead of wandering in the weeds. People wanting change are provided with direct answers in terms they can understand and relate too. Nor do MMT economists shy from debate about the weeds if it is seriously informed.”

Brian Romanchuk maintains: “The relationship between MMT and Post-Keynesian thinking is currently the largest area of awkwardness I see with respect to MMT. The special issue of the RWER seems to provide evidence for that assessment.”

The scientific fact of the matter is that Post-Keynesianism is proto-scientific garbage#1 and MMT is proto-scientific garbage.#2 The relationship between the two is NOT AT ALL awkward, though, because both approaches share the same foundational blunder. Together with Keynes’ faulty approach, both end up in the same wastebasket.#3

The blunder that brings macroeconomics in general and Post-Keynesianism and MMT, in particular, down is to be found in Randall Wray’s contribution Alternative paths to modern money theory, section The theoretical path to MMT.*

Here it is: “Government spending, like private investment, is an injection that raises income. More specifically, as Kalecki showed, government spending creates profits because it is a source of business revenue but not a cost of production. Taxes are a leakage, reducing household net income and business net revenue. If government spends more than it taxes, this is a net spending surplus ― increasing profits dollar-for-dollar. A net spending surplus by government cannot ‘crowd-out’ private investment ― it creates profits that are likely to boost the desire to invest. A net spending surplus by the US government cannot absorb global savings ― instead it creates net income for the US private domestic sector as well as for the rest of the world.” and “Now, it is true that government spending is not the only injection. Private investment and exports (or, net exports) also create income that can be leaked. Wynne Godley’s sectoral balance approach ― long incorporated within MMT ― shows that the sum of the balances of the government, domestic private, and foreign sectors is identically zero.”

Accordingly, MMT boils formally down to the sectoral balances equation (I−S)+(G−T)+(X−M)=0. This equation is provably false.#4, #5 The mistake lies in the sentence: “Government spending … is an injection that raises income.” No! Government spending … is an injection that raises profit. And profit is a balance, i.e. the difference of flows, and NOT a flow like wage income. So, profit is NOT income. Economists not only confuse stocks and flows but also balances and flows.

In the elementary case, 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, that is, the balances of the household and business sector ad up to zero.

Only when profit is distributed it becomes income of the household sector. So, total income Y is wage income Yw plus distributed profit Yd and NOT wages Yw plus profits Q. The difference between profit Q and distributed profit Yd is retained profit Qre.

Neither profit Q, i.e. the balance of the business sector, nor distributed profit Yd appear in the MMT sectoral balances equation. Because it lacks the balance of the business sector the MMT balances equation is false.#6 Therefore, the whole analytical superstructure of MMT is false. By the ultimate consequence, MMT policy guidance is false.

“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)

So, all one needs to know about MMT is that MMT is NOT the true theory. Scientifically, it is stone-dead.

Egmont Kakarot-Handtke


* Refers to RWER, real-world economics review, Issue no. 89, Modern monetary theory and its critics
#1 Why Post Keynesianism Is Not Yet a Science
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 Keynes ― the poster boy for the weakness of the economist’s mind
#4 Controlled demolition of MMT ― an exercise in elementary logic
#5 Wikipedia and the promotion of economists’ idiotism (I)
#6 The axiomatically correct sectoral balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0.

Related 'The Levy/Kalecki Profit Equation is false' and 'Truth by definition? The Profit Theory has been axiomatically false for 200+ years' and 'Macroeconomics and the fake History of Economic Thought' and 'The sectoral balances obfuscation: stupidity or corruption?' and 'Profit'

***

REPLY to Brian Romanchuk on Oct 8 and Blog-Reference

You say: “Given that one of the defining characteristics of the scientific method is that theories need to be convincing to other people, said isolated individual(s) are operating outside scientific practice.”

NO! To convince “other people” is the goal of political agenda pushing. Science is about true/false and nothing else: “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)

The fact of the matter is that the MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is provably false.#1 Randall Wray argues: “Government spending … is an injection that raises income. More specifically, as Kalecki showed, government spending creates profits because it is a source of business revenue but not a cost of production.” However, profit ― the balance of the business sector and the pivotal magnitude of economics ― does NOT appear in the MMT balances equation.

Either MMTers are too stupid for the elementary math that underlies macroeconomics or they are intentionally hiding macroeconomic profit. It is the latter as I have shown elsewhere.

In his post, MMT: REPORT FROM THE FRONT Randall Wray reports “Fifth front: the blogs. I was skeptical of their usefulness ― but Bill and Stephanie recognized that they were the future. They were right. You’re reading this one, created by Stephanie and then taken over by Bill Black. Blogs spread MMT outside academia and official policy circles. And then came videos and tweets. There are tens of thousands of followers now. This helped to foam the runways to the seats of power. No one can afford to ignore MMT any longer. The viral movement, as well as a few fearless candidates ― Bernie and AOC ― brought MMT out of the shadows.”#2

“Tens of thousands of followers” is a respectable propaganda success. So, the money of Wall Street funders was well-spent. This, however, does not change the fact that MMT is proto-scientific garbage. Science is NOT about “convincing other people”, i.e., brainwashing imbeciles. The number of followers is absolutely irrelevant to the question of whether a theory is true or false.

The macroeconomic Profit Law says Public Deficit = Private Profit. So MMT deficit-spending/money-creation is for the benefit of the Oligarchy and NOT of WeThePeople. Scientifically, MMT is garbage, and politically, it is a fraud.


#1 The axiomatically correct sectoral balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0.
#2 New Economic Perspectives

***
AXEC118d


***
#PointOfProof
Oct 8
before
after
Posted by at
Labels: , , , , , , , , , , , , , ,

August 28, 2019

On the deliberate creation of institutional shitholes

Comment on Brian Romanchuk/Matt Franko on ‘So Are We All MMTists Now?’

Blog-Reference

Matt Franko recaps: “No there was a policy change post GFC which created different regulatory conditions... ie depositories are required to possess $Ts more as % total assets of Tier1 QUALITY assets in order to comply with the CCAR... TODAY... So the effect of rate increases TODAY UNDER DIFFERENT REGULATORY CONDITIONS has a differing effect than under previous conditions.”

Life insurers, for example, have a demand for very long-term government securities. What they have done in the past is to buy bonds and to put them with the actual purchase prices on the books and to hold them until maturity. This type of buy-and-hold investor did not up-value the bonds when the interest rate fell and accordingly needed no down-valuation in the opposite case. These corporations normally sat on a buffer of hidden reserves that could be activated in case of emergency.

The same holds for banks with a significant share of bonds in their portfolio.

Now, with the continuous decrease of interest rates since the Volcker heights, these buy-and-hold investors were told to be a bit retarded. Why not apply mark-to-market valuation and show the paper profits in the profit and loss account as a sign of the success of a smart investment strategy? And why not increase profit distribution to the shareholders? Quite naturally, mark-to-market was pushed by hedge funds, Wall Street, and other folks with a short time horizon and a commitment to shareholder value.

The drawback of this strategy makes itself felt when the Central Bank eventually switches to a policy of rising interest rates. In this case, paper losses show up in the profit and loss accounts, and the structural balance relations deteriorate.

The effect is that the Central Bank is now practically locked in at the zero interest level. Interest rate increases tend to automatically put the whole finance sector at risk, with spill-overs to the real economy. Mark-to-market eventually shows its ugly face.

All these problems were perfectly foreseeable and could have been avoided by sticking to the tried and tested principles of prudent valuation that were and still are characteristic of an institutionally sound finance sector.

There has been a general trend in the political, social, and economic realm of throwing the principles of sound institution-building overboard, with the unsurprising result that a growing number of states have finally turned into institutional shitholes.

MMT’s policy of deficit-spending/money-creation has been and still is a driver of this development. #1

Egmont Kakarot-Handtke


#1 MMT undermines democracy

***

Twitter Sep 5, 2019

Source: Bloomberg


Twitter/X Feb 4, 2026 Down from the Volcker heights

Posted by at
Labels: , , , , , , , ,

March 22, 2019

Meet the MMT smart-arses

Comment on Kaivey on ‘Richard Murphy ― Steve Keen on MMT’*

Blog-Reference

The applause troll Richard Murphy introduces Steve Keen: “I think it fair to say that at a technical level you are quite right that Steve Keen is a smart arse: he is an incredibly intelligent man. … I don’t know Steve well, but I know well enough to be aware that what happens to the people and planet the matter to him, a great deal.”

The applause troll Kaivey introduces MMT: “MMT is a fantastic system for producing a fairer and wealthier society. Social democracy and capitalism can work together, strengthening both. We end up with far less suffering, a safer society, a well educated workforce producing wealth, less crime ― so less money spent on crime prevention ― more people in work, so the tax burden is spread more widely, less ill health ― because people are happier and less stressed ― and excellent infrastructure, etc. The job guarantee can get help people back into work, which won’t be a grind but an enjoyable social, work experience, and a way of meeting new people instead of being stuck at home with nothing to do. And the old and people with disabilities can get the help they require, and need never be lonely either. The countryside can be managed better, with any litter being cleaned up. …”

These, of course, are merely talking points for the MMT sales team. MMT claims to be a superior economic theory and therefore has to be seen against the background of present-day economics. The four major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the pivotal concept of the subject matter ― profit ― wrong.#1 Economics is a failed science, and MMT, as a relatively young approach, fits in this pattern. MMT is NOT a scientifically valid theory, but a political agenda pushing for the Oligarchy in a scientific/social bluff package. #2, #3, #4

Accordingly, MMTers and their supporters cannot be taken seriously. These folks are not so much smart-arses but either stupid or corrupt or both. For details about this motley crew of proto-scientific con artists, see Stephanie Kelton, #5, #6 Richard Murphy, #7 Warren Mosler, #8 Ellis Winningham, #9 Bill Mitchell, #10 Lars Syll/Dirk Ehnts, #11 Clint Ballinger, #12 Brian Romanchuk, #13 Steve Keen, #14.

Needless to emphasize that scientific standards do not exist for economists in general and MMTers, in particular. #15, #16, #17

Egmont Kakarot-Handtke


* Tax Research UK
#1 To this day, economists have produced NOT ONE textbook that satisfies scientific standards
#2 MMT is better than mainstream economics but still not good enough
#3 Refuting MMT’s Macroeconomics Textbook
#4 For the full-spectrum refutation of MMT, see cross-references MMT
#5 The Kelton-Fraud
#6 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#7 Richard Murphy: the MMT fraudster dressed up as realist
#8 MMT: The one deadly error/fraud of Warren Mosler
#9 A clueless MMTer explains macroeconomics to clueless beginners
#10 Bill Mitchell, MMT’s fake scientist
#11 The public-debt and private-profit pushers
#12 What and where is profit?
#13 Economics: How to stop mental pollution and global dumbing
#14 Where advanced Heterodoxy — represented by Steve Keen — took the wrong turn
#15 Economists/MMTers: agenda pushers, distractors, blockers, muters, censors
#16 Economics: The proto-scientific mob embroiled in just another gang war
#17 Economics: 200+ years of scientific incompetence and fraud

***
REPLY to Kaivey on Mar 23

You say: “Let’s assume all Businesses make 5% profit.”

That is your problem: you have no macroeconomic theory, to begin with, and therefore you have no idea how a 5% profit comes about.

The first question of economics is this: “How can they [the capitalists] 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.” (Marx)

Marx did not answer the question correctly, and neither did Walrasians, Keynesians, Austrians, and MMTers.#1 What all these fake scientists lack for a proper analysis are the correct macrofoundations.

The correct macrofoundations are given with this axiom set: (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.

So, if the total wage income of the household sector Yw is 100 in a given period and the household sector spends all on consumption C=Yw, then the macroeconomic profit of the business sector Q≡C−Yw is zero. It does not matter whether there is full employment or unemployment. Profit is zero at any employment level.#2

If the total wage income of the household sector is 100 and the household sector spends C=105 on consumption, then there is a one-off price hike and the profit of the business sector is 5. This is how the business sector makes a 5% profit. Profit comes from deficit-spending/dissaving of the household sector. The macroeconomic Profit Law says Q≡−S for the most elementary case.

This is, in essence, how the monetary economy works. And economists, including MMTers, don’t get it to this day. #3

If the total wage income of the household sector is 100, and the household sector spends all on consumption, and the government sector applies deficit-spending/money-creation of 5, then there is a one-off price hike, and the profit of the business sector is 5.

If the total wage income of the household sector is 100 and the household sector spends all on consumption and if the government sector puts hitherto unemployed to work for cleaning up the environment and pays them 5 and these additional workers fully spend their income on the unchanged output O of consumer goods, then there is a one-off price hike and the profit of the business sector is 5.

Note well that this deficit-spending/money-creation has to be repeated in subsequent periods; otherwise, employment and profit fall back to their initial levels. This has the effect that public debt grows continuously. The mirror image of growing public debt is the growing financial wealth of the Oligarchy. This is what the smart-arse MMT policy of deficit-spending/money-creation amounts to. #4, #5

There is a better way to achieve full employment. #6


#1 The Profit Theory is False Since Adam Smith
#2 Essentials of Constructive Heterodoxy: Employment
#3 Refuting MMT’s Macroeconomics Textbook
#4 Keynes, Lerner, MMT, Trump, Biden, and exploding profit
#5 MMTers make Capitalism work
#6 Full employment through the price mechanism

***
REPLY to Kaivey on Mar 23

You say: “Richard Wolff says the capitalists have to mark up prices more than they cost to produce, and so the wages of the wages will never be enough to buy all the products they make, and this leads to unemployment and poverty.”

To recall, the elementary production-consumption economy is, for a star,t defined by three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw), and two definitions (Q≡C−Yw, S≡Yw−C).

Given the two conditions, (i) the market-clearing price is P=W/R (= macroeconomic Law of Supply and Demand), and (ii) monetary profit Q is zero because of C=Yw (= macroeconomic Profit Law).

The Law of Supply and Demand says that the price P is the dependent variable. On the other hand: “Richard Wolff says the capitalists have to mark up prices …”

In this case, the price is NOT the dependent variable but the independent variable. As a consequence, the quantity variable has to adapt. So, the condition of market-clearing X=O has to be skipped. With a markup price P>W/R, the business sector obviously can no longer sell the whole output, i.e. X<O, and the stock of unsold output accumulates. Profit, though, is still zero because of C=Yw.

Markup pricing does NOT produce a higher profit, only a higher inventory. This, of course, is not a stable situation. If the business sector reduces employment, this only slows down the growth of inventory. The economy is in a death spiral.

The methodological point is that economists cannot make up their minds between two incompatible models: (i) market-clearing and price as dependent variable, (ii) markup price-setting and change of inventory as dependent variable. Supply-demand-equilibrium Walrasians and markup Keynesians simply blather past each other in all eternity.

The upshot, however, is that all this has no bearing on profit because profit Q depends alone on deficit spending, i.e., on C>Yw.

MMTers, though, have not realized anything. The proof is in the MMT sectoral balances equation, which reads (I−S)+(G−T)+(X−M)=0. In this equation, the balance of the business sector Q ― the key variable of Capitalism ― is missing. Not so smart, the MMT smart-arses.

***
REPLY to Calgacus on Mar 24

You say: “As the Robinson-Kalecki saying goes, Workers spend what they get. Capitalists get what they spend. And the last includes capitalist, rentier spending on taxes. The tax take has to be put back into the economy or there will be unsustainable surpluses and depressions.”

The first point to notice is that the Kalecki profit equation is provably false.#1, #2

Secondly, you do not properly differentiate between wage income Yw, and distributed profit income Yd. Roughly speaking, wage income goes to the ninety-nine-percenters, and distributed profit income goes to the one-percenters.

It is generally agreed since Kalecki that the spending out of wage income is proportionally higher than spending out of distributed profit income. So, let us assume that the taxation of wage income is reduced and the taxation of distributed profit is increased by the same amount such that total taxes remain unchanged.

Because of the different spending propensities, the increase in spending of the ninety-nine-percenters is higher than the reduction of spending of the one-percenters, and the net effect is an increase of overall demand, which has a positive employment effect. So there will NOT be “unsustainable surpluses and depressions”.

The fact that tax-the-rich has, before AOC, not been a prominent element of MMT economic policy guidance #3 is another indicator that MMTers are, contrary to their social rhetoric, agenda pushers for the Oligarchy.

Your attempt to psychologically defuse the tax-the-rich issue is not very convincing: “Sure progressive taxation is good, but what is really important is the job guarantee, the spending on the non-rentiers. That is what the rentiers hate above all, above progressive taxation.”

You are in line with Bill Mitchell: “The ‘tax the rich’ call bestows unwarranted importance on them.” So MMTers, let’s forget taxation and return to our main job, i.e., to crank up deficit-spending/money-creation and thereby profit.

You say: “The rentiers and the MMTers are the only ones who understand what’s going on.” Yes, these smart-arses are well aware that Public Deficit = Private Profit.


#1 Truth by definition? The Profit Theory has been axiomatically false for 200+ years
#2 The axiomatically correct macroeconomic Profit Law is given by Q≡Yd+(I−S)+(G−T)+(X−M) with Q as monetary profit and Yd as distributed profit income.
#3 MMT: Distribution is the drawback NOT Inflation
Posted by at
Labels: , , , , ,
Subscribe to: Posts (Atom)