Warren Mosler: scientific dilettante and political fraudster

Comment on Tom Hickey on ‘Brendan Greeley ― America has never worried about financing its priorities’

Blog-Reference

Tom Hickey features Stephanie Kelton and Warren Mosler as the two major MMT spokespersons.

Stephanie Kelton has been refuted elsewhere.#1 Here, Tom Hickey’s summary of Warren Mosler’s arguments is taken as a checklist for the detailed final refutation.

“1. The currency itself is a state monopoly.” Half-true. The central bank (in a closed economy) is the institution tasked with the creation/destruction of money according to the needs of the household sector, the business sector, and the government sector. The specifics of the task and the rights/obligations are defined by the Legitimate Sovereign.

“2. The ‘money story’ begins with a state desiring to provision itself.” False. The money story begins with the elementary production-consumption economy with the household sector receiving money wages from the business sector and the households spending their wage income by buying stuff from the business sector. Money is created out of nothing and completely destroyed in the process. There is no such thing as a fixed stock of money.#2, #3

“3. Taxation by design functions to create sellers of goods and services (unemployment) seeking the state’s currency in exchange to avoid tax penalties.” False. A Zero-Tax Economy is feasible.#4

“4. The state (or its agents) is the single supplier of that which it demands as payment of taxes.” False. The definition of central bank money as a general discharge of liabilities includes tax liabilities. As a generalized IOU central bank money discharges, first of all, the wage claims of workers against the firms that comprise the business sector.

“5. Therefore the state, from inception, necessarily spends first, after which tax payments are made …” False. The sequence, i.e. G before T vs T before T is NOT decisive. The crucial point is the balance, i.e. G greater T = deficit vs T greater G = surplus, in a period of a given length. The central bank finances G by money creation and gets T back and destroys the money. If T=G, the budget is balanced, otherwise not. If G is greater than T, the business sector makes a profit, otherwise, it makes a loss. This follows from the macroeconomic Profit Law.#5 It is completely irrelevant for profit/loss in a given period whether the government spends first and taxes later or the other way round.

“6. The public debt is nothing more than the funds spend by the state that have yet to be used for tax payment, …” True. Public debt is a tax liability of the household sector that is rolled over for an indefinite time. This liability generates interest income for the Oligarchy, which is taxed from WeThePeople for an indefinite time. When the accumulated deferred taxes (= public debt) are eventually paid, the economy faces a crisis because profit turns into loss.#5 In sum: The macroeconomic Profit Law Q≡(G−T)+(I−S)+Yd implies Public Deficit = Private Profit. So, private financial wealth grows in lockstep with public debt. WeThePeople owes the public debt, and the Oligarchy owns it.

Note well that Warren Mosler never mentions the word profit and the negative distributional effects of deficit-spending/money-creation on WeThePeople.#6

MMT’s Warren Mosler is a stupid/corrupt political agenda pusher.#7, #8

Egmont Kakarot-Handtke


#1 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#2 The ultimate ― analytical ― origin of money
#3 The creation and value of money and near-monies
#4 The Third Way: Towards the Happy Zero-Tax Economy
#5 Deficit-spending, public debt, and macroeconomic profit/loss
#6 MMT sucks
#7 MMT: The one deadly error/fraud of Warren Mosler
#8 MMT, Warren Mosler, and the little helpers from Wall Street and Academia

Related 'Proof of MMT's inconsistency' and 'Criminals and the monetary order' and 'The counterfeiter never runs out of money' and 'Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople' and 'MMT’s true program'.

For more on Warren Mosler see AXECquery.

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AXEC165b

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'.

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

Source: Twitter

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Switch of threads at this point.

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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.

#1 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

#2 The sectoral balances obfuscation: stupidity or corruption?

#3 Why MMTers permanently explode myths of public deficits

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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.

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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!

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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

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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.

#2 Money and time

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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.

#2 Down with idiocy!

#3 Refuting MMT’s Macroeconomics Textbook

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REPLY to Brian Romanchuk on Jan 9

The macroeconomic price, aka the price level, is in the elementary case given by P=ρ_E 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

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Graphic AXEC152

MMT, Warren Mosler, and the little helpers from Wall Street and Academia

Comment on Katia Dmitrieva/Bloomberg/Businessweek on ‘A Hedge Fund Guy Lefties Can Love’

Blog-Reference

There is the entertainment industry, and it is about personalities/emotions. There is science, and it is about knowledge/consistency. There are not many people who prefer science over entertainment. In order to appeal to the majority, one has no choice but to gossip about personality.

Accordingly, Warren Mosler is introduced: “He ran a hedge fund, lives in a Caribbean tax haven, and loves fast cars and yachts ― not obvious qualifications for a left-wing guru. But that’s what Warren Mosler is rapidly becoming.”

And this is his message: “Its [MMT’s] main argument is that governments with their own currencies can’t go broke. They have more room to spend than is usually supposed and don’t need to collect taxes (or even borrow) to pay for it. One thing they can, and should, spend money on is a jobs guarantee ― offering work to anyone who wants it.”

All this, of course, is way beside the point. Economics claims for 200+ years to be a science, and MMT claims to be a superior scientific theory, so the point at issue is NOT the personality of Warren Mosler but whether MMT is true/false according to well-defined scientific criteria.

The unambiguous answer is: MMT is materially/formally false, MMTers are fake scientists, MMT’s policy proposals boil down to deficit-spending/money-creation, and this translates to money-making for the Oligarchy because the macroeconomic Profit Law implicates Public Deficit = Private Profit, which follows straight from the axiomatically correct sectoral balances equation (X−M)+(G−T)+(I−Sm)−(Qm−Yd)=0. #1…#7

In sum, MMT is refuted as proto-scientific garbage, its social rhetoric is a plain political fraud, and its effect ― intended or unintended, does not matter ― it is to undermine genuine grassroots movements. MMT lacks valid scientific foundations and is no more than gossip/entertainment/fraud in the political Circus Maximus.

Deficit-spending/money-creation has always been a program for the self-alimentation of the Oligarchy #8 and quite naturally enjoys the support of Wall Street in general and Bloomberg in particular.

According to Stephanie Kelton, the MMT snake oil works just fine: “Democrats are beginning to see that all the stories they’ve been told, and that they in fact even repeated themselves, weren’t good stories.” #9

Indeed, but the MMT story isn’t one iota better. #10

Egmont Kakarot-Handtke


#1 MMT: agenda-pushing and money-making for the Oligarchy
#2 Rectification of MMT macro accounting
#3 MMT and the single most stupid physicist
#4 MMT and the promotion of Wall Street's idea of social policy
#5 MMT: The one deadly error/fraud of Warren Mosler
#6 MMTers are NOT Friends-of-the-People
#7 For the full-spectrum refutation, see cross-references MMT
#8 Keynes, Lerner, MMT, Trump, Biden and exploding profit
#9 The Kelton-Fraud
#10 MMT: How the Oligarchy communicates with WeThePeople

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AXEC142c

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REPLY to Kaivey on Oct 14

You say: “Egmont offers no answer, just more poverty for most people.”

The task of the economist as a scientist is to figure out how the economy works. Unfortunately, economists have done nothing of the sort over the last 200+ years because they were preoccupied with agenda-pushing.

As a result, the answers economists have offered from Adam Smith/Karl Marx onward have NO scientific content and have never been more than brain-dead political blather.

Needless to emphasize people with some scientific instinct have realized this long ago: “What is now taught as standard economic theory will eventually disappear … because it simply doesn’t work: were it engineering, the bridge would collapse.” (McCauley)

But economists have NO scientific instinct. They are clowns and useful idiots in the political Circus Maximus.

This is quite obvious in the case of Warren Mosler. Yes, he gives answers and offers solutions. The humanitarian mission of Warren Mosler, Stephanie Kelton, and the rest of the MMTers is to end the poverty of the one-percenters by deficit-spending/money-creation.

To be sure, I have no qualms with MMTers pulling off a political fraud. #1 Politics is NOT the issue! What has to be made clear is that Modern Monetary Theory is NOT a valid theory and that MMT has NOTHING to do with science.

MMT is failed science, MMTers are fake scientists, MMT academics are campaigners for Warren Mosler, and Warren Mosler, in turn, is a campaigner for Wall Street. #2

#1 MMT is ALWAYS a bad deal for the 99-percenters

#2 Lying for money: a generalization

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REPLY to Kaivey on Oct 14

You say: “Now, if the government taxes the people and spends it on public services, doesn/t that money also end up the pockets of the rich.”

I have presented the axiomatically correct Profit Law on more than one occasion. #1 It reads Qm≡Yd+(I−Sm)+(G−T)+(X−M) and answers ALL your questions. If the government taxes the household sector and thereby balances the budget, then G=T and the profit effect is ZERO. It is deficit-spending/money-creation that produces the macroeconomic profit of the business sector and benefits the Oligarchy immediately and exactly by the same amount. Get it: Public Deficit = Private Profit.

The Profit Law also tells one that it does not matter whether deficit-spending is private or public. The effect on profit is the same.

In the MMT balances equation (X−M)+(G−T)+(I−S)=0, profit does not appear. Isn’t that a bit curious? An economic theory that is completely silent about profit? #2

The MMT balances equation is mathematically false. And exactly at this point, MMT is outside of science. If profit theory is false, the whole analytical superstructure is false, including employment theory. #3 A policy that is based on a false theory is a fraud. This also holds for the MMT Job Guarantee. #4

So, the matter is settled. Warren Mosler is a political fraud, and MMT academics are his useful idiots.#5

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

#2 Why the MMT benefactors of humanity never talk about profit

#3 Employment theory as an example of proto-scientific soapbubbling

#4 Full employment through the price mechanism

#5 MMT: The one deadly error/fraud of Warren Mosler

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REPLY to Calgacus on Oct 15

Bloomberg presents Warren Mosler as the “guy Lefties can love”.

Calgacus presents himself as a class-fighter who can read the minds of the enemies: “But the purpose and action of such neoliberals and business leaders is NOT to enrich themselves in absolute terms, but rather in relative terms, to keep themselves in the saddle, to create and maintain rigid class divisions.” #1

Bill Mitchell presents himself as a Progressive, i.e. as a true Left who brings the somewhat naive and disoriented Socialist Parties back on the right path. #2

Tom Hickey uses every opportunity to make it clear that MMT is more than macroeconomic accounting and has deep philosophical roots in Hegel/Marx. #3

Stephanie Kelton presents herself as the Mother Teresa of economics who cares about everything between babies and global warming and promises a golden MMT future with “a pony for every American”. #4

All this is crappy personality marketing.

The fact is that MMTers are NOT in any sense Left or social or caring or fighting for WeThePeople. MMT is objective ― i.e., independent of what MMTers think or say of themselves ― agenda-pushing for the Oligarchy.#5 Calgacus is part of it.

#1 If we only had classes

#2 How Bill Mitchell stalks Jeremy Corbyn

#3 Note on Amy Willis ‘Can majoring in philosophy make you a better person?’

#4 The Kelton-Fraud

#5 Rethinking MMT

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REPLY to Kaivey on Oct 15

You say: “Did you watch the Spiders Web video I put out, which was about Britain’s second empire? These are the real issues if today.”

That Britain is NOT a sovereign nation but the annex to the money-making and money-laundering machine called the City of London is a well-known fact since the founding of the Bank of England.

The real issue of today is how economists helped to bring this state of affairs about. The curious fact of today is that Warren Mosler lives in a tax haven and promises full employment for WeThePeople by applying perpetual deficit-spending/money-creation. And he is supported by incompetent academics and brain-dead trolls like Kaivey.

The real issue of today is that the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” has been awarded. This has to be put in perspective.#1. Provably false:

• profit theory, for 200+ years,

• microfoundations, for 150+ years,

• macrofoundations, for 80+ years,

• the application of elementary logic and mathematics since the founding fathers.

For everyone with some scientific instinct, it is quite obvious:

• Economics is a cargo cult science,

• Both Nordhaus and Romer are fake scientists,

• The economics Nobel is a fraud.

MMT perfectly fits into the big picture. The political fraud of MMT, the corruption of the British banking system, and the agenda-pushing since Smith/Marx are bad, but the worst thing of all is the scientific corruption of economics in all its variants from Walrasianism, Keynesianism, Marxianism, Austrianism, Pluralism, to MMT.

This is the real issue of today

#1 Where economics went wrong

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REPLY to Calgacus on Oct 16

You say: “Attacks on deficit spending are almost always on ‘MMT welfare spending’ or ‘New Deal spending’ In that case that Egmont AND the oligarchs attack ― it is VERY clearly the opposite of the truth.”

The smart folks in the kindergarten already know that nobody can give a sh* about what politicians say about deficit spending or austerity.#1, #2 This has always been propaganda and NOT economics. My argument is NOT about deficit spending but about the profit effect of deficit spending.#3 It is exactly here, where the MMT fraud sneaks in.#4

You say “… if there is a Job Guarantee there is no unemployment. Period.” Agree, but that is not the point at issue. There can be a Job Guarantee with a balanced budget and then the profit effect is ZERO. Or, there can be a Job Guarantee with deficit spending. In this case, the Profit Law tells us that Public Deficit = Private Profit#5, and therefore the Oligarchy benefits biggly from the Job Guarantee. This is a bit ‘irrational’ for a social policy measure.

I have no qualms with the Job Guarantee. This is a political decision of the Legitimate Sovereign, which the economist as a scientist does NOT comment on but simply takes as a datum. My point is that the Job Guarantee is abused by MMTers to push the agenda of the Oligarchy. There are distributionally neutral ways to achieve full employment.#6

The fraud of MMTers consists of promising social benefits and hiding the fact that WeThePeople themselves pay in real terms for every single benefit, either through open or stealth taxation, and by hiding the fact that deficit-spending/money-creation feeds the Oligarchy.

The social policy of MMT is a fraud. I am NOT arguing against the goals of social policy but against the fraud.#7 Whoever claims that Warren Mosler is a guy WeThePeople can love or that MMT policy benefits WeThePeople is either stupid or corrupt, or both.

#1 Austerity and the idiocy of political economists

#2 MMT-Progressives: stupid or corrupt or both?

#3 Why the MMT benefactors of humanity never talk about profit

#4 Keynes, Lerner, MMT, Trump and exploding profit

#5 The profit effect of a Job Guarantee

#6 Full employment through the price mechanism

#7 For details of the big picture, see cross-references MMT

Deficit-spending/Money-creation is ALWAYS a bad deal for WeThePeople

Comment on Noah Smith/Bloomberg View on ‘Bigger Deficits for Bad Tax Cuts Is a Bad Deal’

Blog-Reference and Blog-Reference

Noah Smith summarizes: “Her [Stephanie Kelton’s] reasoning, common in MMT circles, is that government deficits are also private-sector surpluses. That’s simple accounting ― since there are only the government and the private sectors in the world, when the government borrows it’s the private sector that lends. When banks or individuals buy government bonds, they become net lenders, meaning that they’re running a financial surplus with respect to the government.”

That’s NOT simple accounting, that’s false accounting. The fact is that economists get macroeconomic accounting wrong since Keynes.#1 The scientific embarrassment is that accounting is elementary mathematics. Because MMTers are too stupid for elementary math the whole theoretical superstructure falls apart, which, in turn, means practically that MMT policy proposals have NO sound scientific foundation.

Whatever Stephanie Kelton thinks she is doing or claims she is doing for the ninety-nine percenters is a matter of indifference, what she is actually doing is agenda-pushing for the one-percenters.

From correct macroeconomic accounting follows Public Deficit = Private Profit. With the MMT policy, the business sector is always better off. The household sector, on the other hand, always holds the bag. It is taxed in real terms in the period of government deficit spending without realizing it. It is taxed in subsequent periods if the interest on government debt is greater than zero, and it is taxed in nominal terms in the indefinite future, i.e. beyond the time horizon, in order to eventually redeem the accumulated government debt.

The Pavlovian counter-argument against MMT is that it produces inflation. This is nonsense, more precisely, old Quantity Theory nonsense. MMT policy does not cause inflation but massive distributional distortions.#2

MMTers and Post Keynesians and Functional Financers in their utter scientific incompetence simply have no idea how the monetary economy works. The profit and employment theory is provably false since Keynes.#3

With MMT policy, Warren Mosler and his scientifically incompetent academic supporters have found a way to propagandistically endorse full employment, healthcare, and all other popular social agendas and to increase at the same time the business sector’s profit with the help of the sovereign money-issuing state.#4

Egmont Kakarot-Handtke


#1 Rectification of MMT macro accounting
#2 MMT, money creation, stealth taxation, and redistribution
#3 MMT: The one deadly error/fraud of Warren Mosler
#4 MMT and the promotion of Wall Street's idea of social policy

Related 'Selling public debt with Ricardo’s tear gland rhetoric' and 'How MMT enlightens Washington' and 'MMT: Just another political fraud' and 'MMT: Money-making for the one-percenters' and 'From the debt economy to the gift economy: how America is brainwashed to love budget deficits' and 'Links on Austerity'.

For details of the big picture see cross-references MMT.

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REPLY to Matt Franko on Dec 2

You say: “Well the MMT people will often readily admit that ‘the only limit to high deficit is inflation’ so your point here is a bit off the mark... iow it is not a counter argument but a disagreement on scale effect of the tax cuts... iow Smith thinks the "inflation" threshold will be breached and apparently the MMT elites do not...”

What the MMT people readily admit is old Quantity Theory nonsense. Deficit spending leads to a one-off price hike and NOT to inflation.#1 The disastrous effect of MMT is NOT on inflation but on DISTRIBUTION.#2

The whole inflation argument is a bit off the mark.


#1  Gov-Deficits do NOT cause inflation
#2 Austerity and the idiocy of political economists

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REPLY to MRW on Dec 3

You say: “You’re still peddling this notion that the US federal level macroeconomy is based on your definition of science, terms you insist must be obeyed in order for you to grant the poobahs from your point-of-view the honor of being an economic scientist here.”

The Law of Gravity and 2+2=4 applies always and everywhere. This is the very kick of science that it applies universally. The same holds, of course, for economic laws and the elementary math of accounting.

Warren Mosler argues: “In other words, government deficits equal increased ‘monetary savings’ for the rest of us, to the penny. Simply put, government deficits ADD to our savings (to the penny). This is an accounting fact, not theory or philosophy. There is no dispute. It is basic national income accounting.”#1

No, correct accounting says Public Deficit = Private Profit. Warren Mosler is either stupid or he deliberately deceives his brain-dead followers. His assertion “Simply put, government deficits ADD to our savings (to the penny).” is false. It is NOT “our” savings but “their” profits.

If you do not understand what science is all about, that’s OK. But that academics and people with an economics diploma like Mitchell, Tcherneva, Wray, Kelton, Fullwiler, Forstater, Kaboub, Tymoigne, etc. join Warren Mosler’s sales force is strange, to say the least.


#1 MMT: The one deadly error/fraud of Warren Mosler

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REPLY to MRW on Dec 4

You say: “I don’t agree, Public Deficit = Private Profit. Doesn’t make sense.”

National accounting deals with period flows for the economy as a whole. Your airport example shows that you do not understand what aggregated period flows are. The lack of sense is in your head.

Consistent National Accounting results in the formula Public Deficit = Private Profit. Private profit is total monetary profit for the business sector as a whole. The formula is provable and testable to the penny. For the proof see Rectification of MMT macro accounting.

For the MMT accounting mistake/error/fraud see MMT and the magical profit disappearance.

Public deficit spending has always been a profit machine for the one-percenters, see Keynesianism as ultimate profit machine.

That people who call themselves Progressives argue for deficit spending is either stupidity or fraud or both, see Austerity: Who takes the little man for a ride?.

MMT policy does NOT cause inflation but the gigantic distortions of the distribution of income and wealth that so-called Progressives criticize so vehemently. A bit schizo, isn’t it?

MMT: The fusion of Wall Street and Academia

Comment on Bill Mitchell on ‘When two original MMT developers get together to discuss their work’

Blog-Reference and Blog-Reference

Bill Mitchell summarizes: “Last week, Warren Mosler and I had one of our regular catchups and we discussed at length the state of play in Modern Monetary Theory (MMT). We are quite protective of it. We mused about how we started out on this Project and where it has gone. As old stagers do when they get together. We also reflected and compared notes on what the state of MMT is now, given the increasing visibility of the ideas in the mainstream media all around the world and the proliferation of social media activists who have chosen to identify and promote our ideas. There were aspects of that development that we identified as being of concern for us and other aspects which we considered to be a cause for optimism (celebration is too strong a word).”

In other words, the two MMT chief propagandists congratulated themselves and laid down the 2019 communication strategy for the foot soldiers, a.k.a social media activists, “who have chosen to identify and promote our ideas”. Unfortunately, these activists a.k.a trolls/operatives/shills/salespeople, impair the reputation of MMT because they “use the term MMT as a slogan rather than relating to it as a coherent and body of academic work in economic theory and practice that has been meticulously developed over more than 25 years.”

In order to restore reputation and credibility and to raise the low standards of social media communication, #1 and #2, Bill Mitchell took it upon himself to lay down the joint list of essential talking points of MMT propaganda.

What appears to be a bit strange at first glance is that Bill Mitchell and Warren Mosler do not address once the lethal critique of MMT, that is, that MMT’s policy of deficit-spending/money-creation is nothing but a free lunch for the Oligarchy. The word profit does not appear at all in the whole article. As the old quip says, Economics without profit is like Hamlet without the Prince of Denmark.

So, Bill Mitchell’s (Academia) and Warren Mosler’s (Wall Street) joint propaganda directive talks about everything between heaven and earth except MMT’s real political agenda, that is, money-making for the Oligarchy. #3 Obviously, it is intended as a user manual for disinformation and political fraud.

Accordingly, the basic principles of MMT, as laid down by the Oligarchy’s spokespersons, do not deal with how the monetary economy works but with how the state works.

Basic Principle 1: “The state, from inception, as the sole supplier of the funds needed to pay taxes or buy the debt issued by the state, must necessarily impose tax liabilities on the non-government sector before it can spend.”

This is NOT correct. A monetary economy with zero taxes is a real possibility. #4, #5, #6 So, the whole MMT “money story” breaks down already in the first sentence.

There is no need to waste time with the rest of the story. #7

MMT is simply poor science. “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) MMTers do NOT have the true theory.

This is the fact of the matter. The axiomatically correct macroeconomic Profit Law reads Q_m≡Y_d+(I−S_m)+(G−T)+(X−M). With regard to the government’s budget, it boils down to Public Deficit = Private Profit, i.e., (G−T)≡Q_m. This piece of pure economic analysis translates into the scientific insight that MMT’s foundational sectoral balances equation is false, and into the political insight that MMT’s policy of deficit-spending/money-creation is nothing but a free lunch for the Oligarchy. In other words, “progressive” MMT policy is a political fraud. #8

The fraud is exactly located in this assertion: “In accounting terms, the government’s deficit (surplus) is exactly equal at all times to the non-government sector’s surplus (deficit).” #9

MMT is a refuted economic theory, and its proponents are either stupid or corrupt or both. Bill Mitchell’s and Warren Mosler’s joint propaganda directive is the incontrovertible proof.

The general public, a.k.a. WeThePeople is accustomed to the idea that the state is in the hands of the Oligarchy but upholds the idea of the independence, objectivity, and impartiality of science. Economics has never been a science, but what Feynman called a cargo cult science. It is NOT a coincidence that both Adam Smith’s Wealth of Nations and the United States Declaration of Independence were published in 1776. Together, they constitute the birth certificate of the US Oligarchy.

MMT stands firmly in this tradition. Its scientific content is zero, and its scientific ethics is zero. #10

Egmont Kakarot-Handtke


#1 You are fighting for life? On all fronts? MMT can save you! Or maybe not?
#2 The Kelton-Fraud
#3 MMT: A free lunch for the Oligarchy
#4 The Third Way: Towards the Happy Zero-Tax economy
#5 The ultimate ― analytical ― origin of money
#6 Nick Rowe’s soapbubbling about money
#7 For the full-spectrum refutation of MMT see cross-references MMT
#8 Economics: A pointless left-right wrestling show
#9 MMT and the magical profit disappearance
#10 MMT: Time to say goodbye

Related 'MMT, Warren Mosler, and the little helpers from Wall Street and Academia' and 'Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople' and 'MMT and the promotion of Wall Street's idea of social policy' and 'MMT: The one deadly error/fraud of Warren Mosler' and 'Cryptoeconomics ― the best of Bill Mitchell’s spam folder'. For details of the big picture, see cross-references Scientific Incompetence.

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REPLY to Joe on Dec 14

You say: “Imo, Principle 3 should be principle 1, as the sectoral balances is the most important economic principle, by far. It’s the basis of every single economic transaction, monetary or barter, ever done. I gained what you lost and you gained what I lost. We may decide we’re both better off but nevertheless, the zero-sum nature of it remains. This principle alone rules out much of mainstream economic thought, especially in the European continental context. Everyone can’t be in surplus simultaneously.”

Mathematically true: Everyone can’t be in surplus simultaneously.

MMTers, though, got the math wrong. The blunder is exactly located in this assertion: “In accounting terms, the government’s deficit (surplus) is exactly equal at all times to the non-government sector’s surplus (deficit).”

The axiomatically correct 3-sector relation reads (G−T)≡Q_m+S_m, #1 i.e., the government’s deficit (surplus) is exactly equal at all times to the SUM of the business sector’s surplus (deficit) and the household sector’s surplus (deficit).

The business sector’s surplus Q_m is called profit, and the household sector’s surplus S_m is called saving. The business sector’s deficit is called loss, and the household sector’s deficit is called dissaving. All combinations of the business sector’s profit/loss and the household sector’s saving/dissaving that are equal to (G−T) are possible.

The blunder of Principle 3 invalidates the WHOLE of MMT. The two storytellers, Bill Mitchell and Warren Mosler, are too stupid for the elementary mathematics that underlies macroeconomic accounting. #2 Needless to emphasize that the “social media activists who have chosen to identify and promote” their ideas understand even less. They are brain-dead agenda pushers, as the posts of S400 and Clint Ballinger clearly demonstrate.


#1 Causally speaking, it reads Q_m⇐(G−T)−S_m, but this is not the point at the moment. The point is that one has 3 sectors (government, business, household) and NOT 2 (government, “non-government”). The inadmissible collapsing of the business sector and household sector to the “non-government” sector makes profit disappear. This operation, the Humpty Dumpty Fallacy, is absolutely disqualifying for an academic economist.
#2 Wikipedia and the promotion of economists’ idiotism

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REPLY to Kaivey on Dec 14

You say: “Egmont says they when the government deficit spends it creates inflation …”

No, I prove the exact opposite: deficit spending per se does NOT cause inflation. #1


#1 MMT and the inflation-red-herring

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REPLY to Kaivey on Dec 15

You say: “… when the government deficit spends … the rich capture the money, but they capture most of people’s money in the end anyway. If people borrow from the banks, they capture this money as well when they buy goods and services. ”

The answer is in the mathematical truth: Everyone can’t be in surplus simultaneously.

So, if the balance of the government sector (G−T) is zero, and the balance of the household sector Sm is zero, the business sector as a whole cannot make any profit, i.e., Qm=0. This follows from the macroeconomic Profit Law Qm≡(G−T)−Sm.

So, “the rich” can capture NOTHING, i.e., cannot be in surplus, if the other sectors together are not in deficit. Profit for the economy as a whole does NOT depend on greediness or grabbiness or profit maximization or other psychological/behavioral factors, but solely on the macroeconomic balances.

While it is true that one firm can increase profit by increasing productivity or lowering wages, this does NOT hold for the economy as a whole. This is the Fallacy of Composition.

“WeThePeople” can effortlessly prevent “the rich” from “capturing” profit by setting the sectoral balances right. #1 With deficit-spending/money-creation, though, MMTers do the exact OPPOSITE.


#1 How the 99 percent can bring overall profit of the 1 percent legally down to zero in 2017

MMT: The new Center of the Universe of political fraud

Comment on Warren Mosler on ‘Full Employment AND Price Stability’*

Own post, no external Blog-Reference

MMT claims that mainstream employment theory is false. So far, MMT is correct, mainstream economics is proto-scientific garbage since Adam Smith. But MMT claims also that MMT’s employment theory is superior. This claim is known to be false.#1, #2, #3

MMT is for the greater part storytelling and for the smaller part proper scientific analysis. The analysis is based on the MMT sectoral balances equation, i.e. (I−S)+(G−T)+(X−M)=0. This equation is provably false. The correct balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0.#4 It boils down to Public Deficit (G−T) = Private Profit Q. Proper scientific analysis tells one that the MMT policy of deficit-spending/money-creation is a free-lunch program for the Oligarchy.#5

Needless to emphasize that such a program cannot be sold to WeThePeople. This is why MMT is repackaged as a social program. The argument of the MMT snake oil sellers is simply that MMT has the solution for all problems beginning with unemployment and ending with global warming.#6 This is just a political fraud.#7 Because MMT’s foundational equation is false the whole analytical superstructure is false. Because the theory is false, MMT’s economic policy advice has NO valid scientific foundations.

From this follows that both academic and non-academic MMTers are either stupid or corrupt or both. MMT is a plain political fraud and Warren Mosler is one of Wall Street’s loudest and busiest agents.#8-#14

Egmont Kakarot-Handtke


* The Center of the Universe
#1 Full employment through the price mechanism
#2 Full employment, the Phillips Curve, and the end of Gaganomics
#3 For details of the big picture see cross-references Employment/Phillips Curve
#4 Controlled demolition of MMT ― an exercise in elementary logic
#5 MMT’s true program
#6 MMT: If you’ve got a problem, I don’t care what it is, let me help
#7 MMT Progressives: The knife in the back of WeThePeople
#8 MMT, Warren Mosler, and the little helpers from Wall Street and Academia
#9 Warren Mosler: scientific dilettante and political fraudster
#10 You know you are in the political Circus Maximus when economists talk about Democracy/Liberty/Freedom
#11 Very busy these days: Wall Street’s agents
#12 MMT: fundamentally false
#13 MMT: The one deadly error/fraud of Warren Mosler
#14 Stephanie Kelton: MMT’s public farce

Related 'Keynes, Lerner, MMT, Trump, etc. and exploding profit'. For the full-spectrum refutation of MMT see cross-references MMT.

***

Twitter Oct  30

Source: Twitter

MMT: The one deadly error/fraud of Warren Mosler

Comment on Warren Mosler on ‘Seven Deadly Innocent Frauds of Economic Policy’

Blog-Reference

Warren Mosler asserts: “Deadly Innocent Fraud No.1: The federal government must raise funds through taxation or borrowing in order to spend. In other words, government spending is limited by its ability to tax or borrow. Fact: Federal government spending is in no case operationally constrained by revenues, meaning that there is no ‘solvency risk.’“

Operationally true, of course. With regard to the economy holds, the Legitimate Sovereign can do anything. The two questions, what is legitimate and who is the sovereign, have to be discussed and decided in the political realm. What Legitimate Sovereignty means in concrete detail is NOT an issue for economics ― understood as science. It should be clear, though, that from the fact that the government is not operationally constrained to kill the whole population does not logically follow that this is legitimate. Legitimacy entails operational self-constraint. From the fact that government spending is not operationally constrained does not logically follow that it is legitimate. From the fact that the government is not constrained in creating any amount of money does not logically follow that this is ‘good’ economic policy. The detailed discussion about operational feasibility distracts from the core of the matter.

The core of economics is the question of how the monetary economy works and how deficit spending affects employment, income, profit, the creation/destruction of money, absolute and relative prices, growth, nominal and real distribution over the whole cycle from the origination of private and public debt to its full redemption.

Warren Mosler is right on all operational details, but he does not get the big picture. He is, like the economists he criticizes, an incompetent scientist and inexcusably bad at macroeconomics. #1 The common defect of all schools of economics is macroeconomic profit theory. #2 Warren Mosler’s MMT movement is no exception.

“Deadly Innocent Fraud No.2: With government deficits, we are leaving our debt burden to our children. Fact: Collectively, in real terms, there is no such burden possible. Debt or no debt, our children get to consume whatever they can produce.”

True, except for the fact that MMTer confuse (or play a shell game with) the words we, us, and our. #3 Debt or no debt makes a huge difference for the DISTRIBUTION of real output (and accumulated real wealth) between the ninety-nine percenters and the one-percenters ― “we” and “our” in ‘We owe the debt to ourselves’ refer to DIFFERENT people. #4

“Deadly Innocent Fraud No.3: Federal Government budget deficits take away savings. Fact: Federal Government budget deficits ADD to savings.” Or “Any $U.S. government deficit exactly EQUALS the total net increase in the holdings ($U.S. financial assets) of the rest of us ― businesses and households, residents and non-residents ― what is called the ‘non-government’ sector. In other words, government deficits equal increased ‘monetary savings’ for the rest of us, to the penny. Simply put, government deficits ADD to our savings (to the penny). This is an accounting fact, not a theory or philosophy. There is no dispute. It is basic national income accounting.”

Unfortunately, MMTers got National Accounting wrong. #5 Fact is that government deficits do NOT affect our savings but to the profit. It holds Public Deficit = Private Profit. Not to realize this (or to shell game it away) is the one deadly error (fraud) of MMT. #6

“Deadly Innocent Fraud No.6: We need savings to provide the funds for investment. Fact: Investment adds to savings.” Or “I like to say it this way: ‘Savings is the accounting record of investment.’”

This is garbage since Keynes. The axiomatically correct relationships are Q_m≡−S_m in the case of the pure production-consumption economy, Q_m≡I−S_m in the case of the investment economy, Q_m≡(I−S_m)+Y_d+(G−T)+(X−M) in the general case. Legend: Q_m monetary profit, S_m monetary saving, I investment expenditures, Y_d distributed profit, G government expenditures, T taxes, X export, M import.

Saving is NEVER equal to investment. Therefore, all I=S and IS-LM models are provably false, and this includes Post Keynesianism and MMT. #7

With MMT policy, Warren Mosler has found a way to endorse full employment, healthcare, and other social agendas and to increase at the same time the business sector’s profit with the help of the sovereign money issuing state. #8

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT, see cross-references MMT
#2 The profit theory is false since Adam Smith
#3 On the saying “We owe the debt to ourselves”
#4 MMT and the promotion of Wall Street's idea of social policy
#5 Rectification of MMT macro accounting
#6 MMT and the magical profit disappearance
#7 For details of the big picture, see cross-references Refutation of I=S
#8 MMT: Redistribution as wellness program

***

Graphic AXEC118d

***

REPLY to Kaivey on Nov 13

You say: “Our government is run by the oligarchy and we need a more democratic government accountable to the people.”

This, obviously, is a political analysis/conclusion. And, clearly, it has to be dealt with in the political realm. Economists, though, seem never to have fully realized that there is, for very good reasons, a strict separation of politics and science.

Since the founding fathers, economists violate the principle of the separation of science and politics, which has been clearly stated by J. S. Mill: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”

The compelling reason for the separation of politics and science is that the two realms are guided by different and incompatible principles. The one question in science is about the truth of a theory, i.e. its material and formal consistency: “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)

The designation MMT = Modern Monetary Theory indicates allegiance to science. The problem is that MMT is nothing but crappy proto-science. This status MMT shares with the rest of economics. Economics is what Feynman famously called a cargo cult science, and neither right-wing nor left-wing economic policy guidance ever had sound scientific foundations since the soapbox economists Adam Smith and Karl Marx.

At present, neither Krugman nor Wren-Lewis nor Keen #1 nor Varoufakis nor Mosler nor the rest of the political loudspeakers, fake scientists, amateur journalists, bloggers, and blatherers can back up their political agenda pushing with a scientifically acceptable economic theory. #2 In order to become a science, economics has to get rid of ALL these folks.

#1 Debunking Squared and Where advanced Heterodoxy — represented by Steve Keen — took the wrong turn and Keenonomics, aggregate demand/change of debt, and some misleading critique
#2 For details of the big picture, see cross-references Political Economics

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REPLY to Calgacus on Nov 14

You say: “New Deal style deficit spending can be and almost always is the option that causes the smallest future additional distributive burden of the 99% towards the 1% - one which is mostly negligible.” and “An important way station in realizing this is understanding the flaw in the idea that surpluses are needed to pay for deficits in some way. In particular, the idea that this follows from money being a creditary relationship.”

(i) Public deficit spending increases public debt. The concept of debt includes repayment in period t, otherwise, it is a gift. Now, the repayment can be postponed indefinitely. So, as a LIMITING case t goes to infinity, t → ∞. MMT simply pushes repayment beyond the time horizon where it is conveniently forgotten.

(ii) The limiting case, though, does NOT make the debt disappear. Debt gives rise to interest. And a debt with infinite duration gives rise to an infinite interest burden for the household sector, which takes the form of a tax burden.

(iii) Interest payments redistribute income from we = all taxpayers = creditors + non-creditors to creditors.

(iv) In the LIMITING case, the interest rate is zero if the debt is held in the form of overdrafts/deposits at the central bank (with deposits = money). In this limiting case, no redistribution of income takes place.

(v) The two limiting cases taken together make public debt resemble a gift: no repayment, no interest burden.

(vi) What is missing in this picture is that Public Deficit = Private Profit. Profit, though, is not indefinitely held as a zero-interest deposit at the central bank. Let us assume here that profit is distributed as dividends and that this dividend income is fully spent. The additional consumption expenditures lead to a price hike and a redistribution of period output between wage income receivers (a.k.a. ninety-nine-percenters) and the receivers of dividends (a.k.a. one-percenters). Needless to emphasize that non-distributed profits can alternatively be used to buy all kinds of assets, e.g., other firms.

In sum, Public deficit spending has real distributional effects. Whether these are ‘huge’ or ‘small’ depends on the duration of the debt, the rate of interest, and on profit distribution or how non-distributed profit is used. Compared to taxation, public deficit spending is, in any case, a BAD deal for the ninety-nine-percenters. #1 Apart from the distributional issue, it holds in any case that public deficit spending increases the economic power of the business sector.

MMTers, Post Keynesians, and Functional Financers, in their utter scientific incompetence, simply have no idea how the monetary economy works. #2 The profit and employment theory is provably false since Keynes. #3 The only positive feature of Keynesianism/MMT is that microfounded Orthodoxy is an even greater heap of proto-scientific garbage.


#1 On the saying “We owe the debt to ourselves”
#2 Why Post Keynesianism Is Not Yet a Science
#3 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster

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REPLY to Calgacus on Nov 15

The balances equations MMT is based upon are provably false. #1 By consequence, the whole analytical superstructure of MMT is false. As a matter of principle, there is NO NEED to refute more specific claims of MMT about the nature of money or about operational details of money creation/destruction.

The core of the argument is: the macroeconomic foundations of MMT are false since Keynes. Because of this, all MMT policy recommendations lack sound scientific foundations. And this, in turn, means that MMT is not economics but brainless agenda pushing. On closer inspection, it turns out that MMT claims to push the agenda of the ninety-nine-percenters, but in fact — intentionally or unintentionally, does not matter — it pushes the agenda of the one-percenters.

So, MMT is refuted as an approach. #2 The lack of consistent axiomatic foundations is, of course, compatible with the fact that SOME claims of MMT are accidentally or commonsensically or trivially true. This does not help much. The flat earth theory also makes trivially true statements, but this has not saved it from being flushed down the drain.

You say, “But what you are doing is like trying to refute or prove a statement of classical Euclidean plane geometry with calculus or differential geometry.” It is pretty obvious that this pseudo-methodological blather is beside the point and an insufficient answer to the PROOF of MMT’s material/formal inconsistency.

So, let us first of all get the sectoral balances equations right. At first, we have only the business and the household sector. #3 The two sectoral balances are given as follows:
Q_m≡C−Y_w  profit Q_m is the household sector’s spending C minus wages Y_w,
S_m≡Y_w−C   saving S_m is wage income Y_w minus consumption expenditures C,
---------------
Q_m≡−S_m

The business sector’s monetary profit Q_m is equal to the household sector’s dissaving. This is the most elementary form of the macroeconomic Profit Law. For a start, the household sector’s budget is balanced, i.e., C=Y_w, hence macroeconomic profit is zero.

Transaction money is needed by the business sector to pay the workers who receive the wage income Y_w per period. Transaction money is produced (i) either in the form of an IOU by the business sector, or (ii) by the central bank in the form of overdrafts/deposits with deposits = money. The average stock of transaction money is given as M=kY_w, with k determined by the payment pattern. In other words, the average stock of money M is determined by the AUTONOMOUS transactions of the household and business sector and created out of nothing by either the business sector as an IOU or by the central bank in the form of deposits and overdrafts, which are always equal. The idealized transaction pattern is shown under the label Graphic #4

The household sector’s deposits/overdrafts are zero at the beginning and end of the period. The business sector’s transaction pattern is the exact mirror image. Money, that is, deposits at the central bank, is continually created and destroyed during the period under consideration.

The transaction equation M=κYw=κPX=κPRL tells one that under the condition of budget-balancing C=Y_w and market-clearing X=O, the average stock of transaction money doubles if employment L doubles. The economy NEVER runs out of money. Transaction money is a generalized short-term IOU that bears no interest.

Now, the government sector GS is added. The three sectoral balances are given as follows:
Q_m≡C+G−Y_w  profit Q_m is HS and GS spending C+G minus wages Y_w,
S_m≡Y_w−T−C   saving S_m is wage income Y_w minus taxes T and expenditures C,
B_m≡T−G         budget surplus B_m is taxes T minus government expenditures G,
-------------------
Q_m≡−S_m−B_m.

The business sector’s monetary profit Q_m is equal to the household sector’s dissaving plus the government sector’s budget deficit. For a start, taxes T are set to zero. Deficit spending −G is equal to cumulative money creation by the central bank. The household sector’s budget is balanced, i.e., C=Y_w, i.e., S_m=0. In this case, the business sector’s profit is equal to the government’s deficit, i.e., Q_m =−G. It holds Public Deficit = Private Profit.

The combined transaction pattern of the household and the government sector is shown under the label Graphic. #5

The transaction pattern of the business sector is the exact mirror image. So, while the government sector ends up with overdrafts, the business sector ends up with deposits of equal magnitude.

Two things happen: (i) there is a price hike because aggregate nominal demand is now C+G, and (ii) output O is redistributed between the household and the government sector. There is REAL taxation without nominal taxation because of T=0. Nominal taxation is simply shifted into the indefinite future.

The government’s deficit spending causes an increase in the financial assets of the business sector. At first, the financial asset consists of deposits at the central bank, which bear zero interest.

In the second step, the public debt is consolidated by the issuance of long-term government bonds or other types of securities. Government securities are offered with a certain maturity and interest rate. In the present case, the business sector is in possession of deposits and decides which amount to buy. It is here assumed for simplicity that the whole government debt is consolidated. After the switch from non-interest-bearing deposits to interest-bearing bonds, the newly created money vanishes again from the central bank’s balance sheet.

So, over the whole cycle, the household sector is taxed in real terms, suffers a reduction of net income for the duration of consolidated government debt via interest payments = taxes, while the business sector makes a profit which is equal to the budget deficit and enjoys interest income for the duration of the consolidated debt.

Compared to immediate taxation T=G, the household sector is worse off with government deficit spending, and the business sector is better off. These are the distributional effects of the MMT policy. Other effects have been dealt with elsewhere (for employment policy see #6).

Bottom line: MMT is proto-scientific garbage, politically biased in favour of the one-percenters, and sold as beneficial for the ninety-nine percenters.


#1 Rectification of MMT macro accounting
#2 For the point-by-point refutation, see cross-references MMT
#3 The production-consumption economy is defined by the macro axiom set: (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) Y_w=WL wage income Y_w 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.
#4 Graphic AXEC98 Transaction pattern C=Yw
#5 Graphic AXEC99 Transaction pattern C+G greater than Yw
#6 Full employment through the price mechanism

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REPLY to Calgacus on Nov 16

I said, “The balances equations MMT is based upon are provably false. As a consequence, the whole analytical superstructure of MMT is false. As a matter of principle, there is NO NEED to refute more specific claims of MMT about the nature of money or about operational details of money creation/destruction.”

You answered: “That is getting things completely backwards. MMTers do not say that ‘MMT is based upon’ some balance equations.”

The fact is that the sectoral balances equations constitute the very core of MMT’s self-presentation. #1, #2, #3, #4, #5, #6. The fact is also that the MMT balances equations are mathematically/ provably false. #7

Because of this, ALL MMT policy recommendations lack sound scientific foundations. The economics of Kansas City, Bard, the Virgin Islands, Australia, etc., is qualitatively below the level of Trump University.

MMT is refuted on all counts, and whether Calgacus, Mitchell, Tcherneva, Mosler, Wray, Kelton, Fullwiler, Forstater, Kaboub, Tymoigne, and the rest of the scientifically incompetent MMTers understand/accept this is a matter of indifference.


#1 Presentation Pavlina Tcherneva, Sectoral Balances Spain

Source: Google Images

#2 Wikipedia Modern Monetary Theory
#3 Wikipedia Sectoral Balances
#4 Billy blog Flow-of-funds and sectoral balances
#5 For the point-by-point refutation of Peter Cooper’s posts, see cross-references MMT
#6 Warren Mosler “Simply put, government deficits ADD to our savings (to the penny). This is an accounting fact, not theory or philosophy. There is no dispute. It is basic national income accounting.”
#7 MMT and the magical profit disappearance

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LINK to Twitter Real Progressives "Sectoral analysis provides a key..." Nov 21

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COMMENT on Brad Voracek's 'USA 2017 Q1 Sectoral Balances Update' on Nov 21

Source: The Minskys, Brad Voracek

The sectoral balances are provably false. Profit = sectoral balance of the business sector is missing. See MMT and the magical profit disappearance, see also MMT: The one deadly error/fraud of Warren Mosler.

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COMMENT on Deficit Owls on Nov 28

Source: Twitter Deficit Owls

The sectoral balances are provably false. Profit = sectoral balance of the business sector is missing. See MMT and the magical profit disappearance, see also MMT: The one deadly error/fraud of Warren Mosler.

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LINK to Warren Mosler's MMT to Washington: There Is No Long-term Deficit Problem!', Huffpost, Dec 1

Source: Huffpost, Warren Mosler

For more misleading charts, see Down with idiocy!