#LearnEcon
— E.K-H (@AXECorg) September 3, 2023
The #MarketEconomy's political correspondence is NOT #Democracy but #Oligarchy with #Parliament/#Treasury/#BoE/#BigBusiness as integral parts. The #ProfitLaw Q≡(G−T)+(I−S)+Yd implies #PublicDeficitIsPrivateProfit, so #PrivateFinancialWealth ≈ #PublicDebt. pic.twitter.com/jJBceIkzQ6
Showing posts sorted by relevance for query label:Distribution. Sort by date Show all posts
Showing posts sorted by relevance for query label:Distribution. Sort by date Show all posts
September 3, 2023
Occasional Xs: How it works (XL)
August 3, 2018
The MMT-Yawner: Government is not a household
Comment on Bill Mitchell on ‘The government is not a household and imports are still a benefit’
Blog-Reference
Everybody got the MMT meme by now. Unfortunately, neither MMT academics nor the social media sales force ever understood its full implications.
It is trivially true that “… a government is not a household. It has a wider remit (objectives) than a household and must consider a broad range of concerns when it uses its currency-issuing capacity to shift real resources (as goods and services) from the non-government sector to the government sector to fulfill its elected mandate.” (Mitchell)
The problem comes in with the ‘use of currency-issuing capacity’ because there is, as always, good and bad use of a capacity. It is trivially true that Organized Crime in the definition of the Organized Crime Control Act OC≅OCCA has the capacity to print money and ‘to shift real resources (as goods and services) from the non-government sector to the OC≅OCCA sector.’
So, from the currency-issuing capacity of the government does NOT follow that it is a good policy to resort to deficit-spending/money-creation. In fact, it is a bad policy. Translated into MMT jargon: government is NOT a household but it is NOT a counterfeiter either.
The crucial distinction is this. The correct way to bring additional fiat money into circulation is to finance a growing wage bill. The incorrect way is to spend the additional money on goods and services, i.e. current output. This is analogous to going on a shopping spree with counterfeit money.
The first thing to grasp is: it is the household sector that pays in real terms in the form of a tiny price hike which is indistinguishable from a random price fluctuation. A government that resorts to deficit-spending/money-creation does NOT “fulfill its elected mandate” but in effect applies stealth taxation to the household sector.
The second thing to grasp is, that because of the macroeconomic Profit Law, i.e. Public Deficit = Private Profit, deficit-spending/money-creation increases macroeconomic profit by exactly the same amount.
The correct way for the central bank to inject out-of-thin-air money into the economy is by financing a growing wage bill. The incorrect way is the counterfeit-money-printers' way.#1, #2
True, the government is not a household. But equally true, the government is not OC≅OCCA either. Why Bill Mitchell claims that by deficit-spending/money-creation government fulfills its “elected mandate” is anybody’s guess.
Egmont Kakarot-Handtke
#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 The Kelton-Fraud
The use of AXEC: New Foundations of Economics is regulated by Copyright © and Trademark ® Laws. For details see Terms of Use.
This covers all publications/blog posts, in particular
AXEC
AXECorg blogspot
SSRN and other depositories.
Wikimedia, AXEC142
Blog-Reference
Everybody got the MMT meme by now. Unfortunately, neither MMT academics nor the social media sales force ever understood its full implications.
It is trivially true that “… a government is not a household. It has a wider remit (objectives) than a household and must consider a broad range of concerns when it uses its currency-issuing capacity to shift real resources (as goods and services) from the non-government sector to the government sector to fulfill its elected mandate.” (Mitchell)
The problem comes in with the ‘use of currency-issuing capacity’ because there is, as always, good and bad use of a capacity. It is trivially true that Organized Crime in the definition of the Organized Crime Control Act OC≅OCCA has the capacity to print money and ‘to shift real resources (as goods and services) from the non-government sector to the OC≅OCCA sector.’
So, from the currency-issuing capacity of the government does NOT follow that it is a good policy to resort to deficit-spending/money-creation. In fact, it is a bad policy. Translated into MMT jargon: government is NOT a household but it is NOT a counterfeiter either.
The crucial distinction is this. The correct way to bring additional fiat money into circulation is to finance a growing wage bill. The incorrect way is to spend the additional money on goods and services, i.e. current output. This is analogous to going on a shopping spree with counterfeit money.
The first thing to grasp is: it is the household sector that pays in real terms in the form of a tiny price hike which is indistinguishable from a random price fluctuation. A government that resorts to deficit-spending/money-creation does NOT “fulfill its elected mandate” but in effect applies stealth taxation to the household sector.
The second thing to grasp is, that because of the macroeconomic Profit Law, i.e. Public Deficit = Private Profit, deficit-spending/money-creation increases macroeconomic profit by exactly the same amount.
The correct way for the central bank to inject out-of-thin-air money into the economy is by financing a growing wage bill. The incorrect way is the counterfeit-money-printers' way.#1, #2
True, the government is not a household. But equally true, the government is not OC≅OCCA either. Why Bill Mitchell claims that by deficit-spending/money-creation government fulfills its “elected mandate” is anybody’s guess.
Egmont Kakarot-Handtke
#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 The Kelton-Fraud
Related 'Criminals and the monetary order'.
***
Wikimedia AXEC143d Macroeconomic Profit Law for an increasing number of sectors which implies Public Deficit (G−T) = Private Profit Qm
***
REPLY to ANC Driver on Aug 5The use of AXEC: New Foundations of Economics is regulated by Copyright © and Trademark ® Laws. For details see Terms of Use.
This covers all publications/blog posts, in particular
AXEC
AXECorg blogspot
SSRN and other depositories.
***
Wikimedia, AXEC142
January 5, 2017
Income distribution: No market failure but theory failure
Comment on John Quiggin on ‘Market Failure and Income Distribution’
Blog-Reference and Blog-Reference on Jan 6 adapted to context and Blog-Reference and Blog-Reference on Jan 9 and Blog-Reference
Every economist can know from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words: the confused confusers of economics have NO idea what the pivot of their subject matter is.
It is pretty obvious that without the true profit theory there is no true distribution theory.#1 So everybody can know for sure, without bothering much about the insane behavioral assumptions of utility and profit maximization, that the marginal theory of income distribution must be dead wrong.
The trouble with distribution theory started with Ricardo who got the distinction between wage, profit, and rent wrong.#2 Then Marx got the class theory of profit wrong.#3 Neoclassical marginal distribution theory, of course, is unsurpassable idiocy, but Keynesianism did not perform much better, and Heterodoxy has actually multiple profit theories that do not fit together.#4
Distribution theory has always been the deepest point in the swamp of economics. Do not expect that orthodox or heterodox economists who spent their clueless lives there will find a way out any time soon. The profit theory is false since Adam Smith#5 and Quiggin still filibusters about market failure. These folks simply don’t get it.
Egmont Kakarot-Handtke
#1 Essentials of Constructive Heterodoxy: Profit
#2 When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism
#3 Profit for Marxists
#4 Heterodoxy, too, is proto-scientific garbage
#5 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
The blah blah about opaque randomness is as enlightening as the blah blah about the Invisible Hand ever was and the shop talk about fat tails does not advance distribution theory one iota.
The observed income distribution PROVES that there is POSITIVE feedback built right into the core of the market economy.
Because positive feedback is incompatible with equilibrium the observed distribution is an empirical refutation of equilibrium theory. From this follows that standard economics is false because it has equilibrium built right into the axiomatic foundations. From this in turn follows that about 90 percent of papers published in the AER are proto-scientific garbage because they are equilibrium models.
It is pretty obvious that neither Taleb nor Milanovic have any clue what the observed distributions really mean. They mean that economics of the last 150 or so years is as thoroughly refuted as the Flat-Earth hypothesis.
Blog-Reference and Blog-Reference on Jan 6 adapted to context and Blog-Reference and Blog-Reference on Jan 9 and Blog-Reference
Every economist can know from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words: the confused confusers of economics have NO idea what the pivot of their subject matter is.
It is pretty obvious that without the true profit theory there is no true distribution theory.#1 So everybody can know for sure, without bothering much about the insane behavioral assumptions of utility and profit maximization, that the marginal theory of income distribution must be dead wrong.
The trouble with distribution theory started with Ricardo who got the distinction between wage, profit, and rent wrong.#2 Then Marx got the class theory of profit wrong.#3 Neoclassical marginal distribution theory, of course, is unsurpassable idiocy, but Keynesianism did not perform much better, and Heterodoxy has actually multiple profit theories that do not fit together.#4
Distribution theory has always been the deepest point in the swamp of economics. Do not expect that orthodox or heterodox economists who spent their clueless lives there will find a way out any time soon. The profit theory is false since Adam Smith#5 and Quiggin still filibusters about market failure. These folks simply don’t get it.
Egmont Kakarot-Handtke
#1 Essentials of Constructive Heterodoxy: Profit
#2 When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism
#3 Profit for Marxists
#4 Heterodoxy, too, is proto-scientific garbage
#5 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
***
ADDENDUM on Jan 10The blah blah about opaque randomness is as enlightening as the blah blah about the Invisible Hand ever was and the shop talk about fat tails does not advance distribution theory one iota.
The observed income distribution PROVES that there is POSITIVE feedback built right into the core of the market economy.
Because positive feedback is incompatible with equilibrium the observed distribution is an empirical refutation of equilibrium theory. From this follows that standard economics is false because it has equilibrium built right into the axiomatic foundations. From this in turn follows that about 90 percent of papers published in the AER are proto-scientific garbage because they are equilibrium models.
It is pretty obvious that neither Taleb nor Milanovic have any clue what the observed distributions really mean. They mean that economics of the last 150 or so years is as thoroughly refuted as the Flat-Earth hypothesis.
May 13, 2024
Occasional Xs: How it works (CXCVII)
#LearnRealEconomics#Deficit#Profit#Debt#Interest
— E.K-H (@AXECorg) May 13, 2024
The #MarketEconomy runs on #Profit. The macroeconomic #ProfitLaw implies #PublicDeficitIsPrivateProfit. So, #DeficitSpendingMoneyCreation is a #FreeLunch for the #Oligarchy.
The #PrivateFinancialWealth of the #WeTheOligarchy…
April 12, 2018
MMT and the inflation-red-herring
Comment on Richard Murphy on ‘Modern monetary theory provides the best mechanism for controlling inflation we now have’
Blog-Reference and Blog-Reference
Inflation theory is wrong, it is essentially the commonplace Quantity Theory that is at the back of peoples’ minds.#1
The lethal flaw of MMT policy is NOT inflation but distribution.#2 The government can replace taxation and, in addition, increase spending at any time for any consumptive purpose by deficit-spending/money-creation. This has two effects
The replacement of taxation by deficit spending clearly benefits the one-percenters. In essence, MMT argues that public deficit is good for the ninety-nine percenters and for democracy. The fact of the matter is that public deficit is good for the one-percenters and the Oligarchy.#3
The whole inflation issue has never been anything else than a red herring.#4
Egmont Kakarot-Handtke
#1 Economists never understood how the price mechanism works
#2 Gov-Deficits do NOT cause inflation
#3 Keynes, Lerner, MMT, Trump, and exploding profit
#4 For the full-spectrum refutation of MMT see cross-references MMT
Related 'The Third Way: Towards the Happy Zero-Tax economy' and 'Gov-Deficits do NOT cause inflation' and 'Attention: there are THREE types of inflation' and 'A la recherche de l'inflation perdue' and 'Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople' and 'Inflation: back to basics' and 'How some MMTers got inflation wrong'.
You cite Marx “In studying such transformations it is always necessary to distinguish between the material transformation of the economic conditions of production, which can be determined with the precision of natural science, and the legal, political, religious, artistic or philosophic – in short, ideological forms in which men become conscious of this conflict and fight it out.”
The philosopher and sociologist Marx never understood the “material transformation of the economic conditions of production, which can be determined with the precision of natural science”, that is, how the price- and profit mechanism works.#1, #2, #3
Marx was a soapbox economist and this excludes him forever from science and any scientific debate. The same applies to the philosopher Tom Hickey.
#1 Capitalism, poverty, exploitation, and cross-over exploitation
#2 Profit for Marxists
#3 For the basic economic Laws see Wikimedia AXEC112c.
Blog-Reference and Blog-Reference
Inflation theory is wrong, it is essentially the commonplace Quantity Theory that is at the back of peoples’ minds.#1
The lethal flaw of MMT policy is NOT inflation but distribution.#2 The government can replace taxation and, in addition, increase spending at any time for any consumptive purpose by deficit-spending/money-creation. This has two effects
- The household sector = ninety-nine-percenters is taxed in real terms by a one-off price hike (NOT inflation). Open taxation turns into stealth taxation, and in real terms, NOTHING changes.
- Because Public Deficit = Private Profit, the one-percenters enjoy an immediate profit boost. In addition, part or all of the increased public debt can become a long-term source of interest income depending on whether and how the public debt is consolidated.
The replacement of taxation by deficit spending clearly benefits the one-percenters. In essence, MMT argues that public deficit is good for the ninety-nine percenters and for democracy. The fact of the matter is that public deficit is good for the one-percenters and the Oligarchy.#3
The whole inflation issue has never been anything else than a red herring.#4
Egmont Kakarot-Handtke
#1 Economists never understood how the price mechanism works
#2 Gov-Deficits do NOT cause inflation
#3 Keynes, Lerner, MMT, Trump, and exploding profit
#4 For the full-spectrum refutation of MMT see cross-references MMT
Related 'The Third Way: Towards the Happy Zero-Tax economy' and 'Gov-Deficits do NOT cause inflation' and 'Attention: there are THREE types of inflation' and 'A la recherche de l'inflation perdue' and 'Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople' and 'Inflation: back to basics' and 'How some MMTers got inflation wrong'.
***
REPLY to Tom Hickey on Apr 15You cite Marx “In studying such transformations it is always necessary to distinguish between the material transformation of the economic conditions of production, which can be determined with the precision of natural science, and the legal, political, religious, artistic or philosophic – in short, ideological forms in which men become conscious of this conflict and fight it out.”
The philosopher and sociologist Marx never understood the “material transformation of the economic conditions of production, which can be determined with the precision of natural science”, that is, how the price- and profit mechanism works.#1, #2, #3
Marx was a soapbox economist and this excludes him forever from science and any scientific debate. The same applies to the philosopher Tom Hickey.
#1 Capitalism, poverty, exploitation, and cross-over exploitation
#2 Profit for Marxists
#3 For the basic economic Laws see Wikimedia AXEC112c.
April 25, 2025
Occasional Xs: How it works (CCCLXI)
#Economics#AllYouNeedToKnow
— AXEC (@EgmontHandtke) April 25, 2025
“America's $36 trillion debt … is because billionaires and corporations refuse to pay their fair share.” (@ProudSocialist)
There is indeed a causal relationship between public debt and the financial wealth of billionaires but it has more to do with… pic.twitter.com/b2dvU0VOqr
June 4, 2018
Neoclassics and MMT ― much like pest and cholera
Comment on Lars Syll on ‘From Wicksell to Le Bourva and MMT’
Blog-Reference and Blog-References and Blog-Reference on Jun 5
Compared to neoclassical economics, MMT looks like an improvement. But this is a rather small feat because compared to the proto-scientific garbage of mainstream economics almost everything is an improvement.
However, after 150+ years of repetition, the critique of neoclassical economics has turned out to be pointless: “… 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)
Does MMT beat the old theory? No! MMT is macrofounded, this is the improvement compared to microfounded Neoclassics, but the macrofoundations are inconsistent.#2 Methodology tells us that if the foundations are false the whole analytical superstructure is false.
MMT’s strong points are advertised as follows: “… a strong focus on balance sheets as opposed to theoretical models based on assumptions that are necessary for the mathematics to work. There is also a strong consensus that monetary theory is positive, not normative. Further relevant areas of agreement are found with respect to the idea of Chartalism when it comes to the origin and value of money; the endogeneity of money regarding bank creation of deposits; the role of the money market in the economy and the missing link to inflation; the monetary circuit and the link from debt to income; and the effects of deficit spending.” (Ehnts, Barberoux) and “… MMT [is] also updated macroeconomics based on not only the existing monetary systems but also by bringing together previous contributions, notably Wynne Godley’s stock-flow consistent modeling, Abba Lerner’s functional finance, and Hyman Minsky’s financial instability theory and job guarantee proposal.” (Hickey)
The problem is that all these elements do not fit consistently together because the underlying macroeconomic balance sheet mathematics, i.e. the sectoral balances equation, is provably false.#3, #4 From the scientific standpoint, MMT is as inconsistent and worthless as neoclassical economics. The policy guidance of both schools has NO sound scientific foundations.
The two main blunders of MMT are value and distribution theory
Egmont Kakarot-Handtke
#1 Stop beating mainstream economics ― it is long dead
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 Keynesians ― terminally stupid or worse?
#4 Rectification of MMT macro accounting
#5 The objective value of money
#6 Austerity and the political games Progressives play
Related 'Poor Wicksell — abused as a testimonial for MMT' and 'Macro imbeciles'.
Immediately following The Third Way: Towards the Happy Zero-Tax economy.
You say: “E.K-H keeps claiming that a public sector deficit benefits the 1% not the 99%. Complete nonsense: if a deficit is targeted on the 99%, then the deficit would benefit the 99%, amazing as that might seem.”
As Marx told already all Flat-earthers and Flat-thinkers: “But all science would be superfluous, if the appearance, the form, and the nature of things were wholly identical.”
The point of science is to figure out what is appearances and what is reality.
So let us assume the government creates money and distributes it to the households according to a social criterion. Let the total amount be A, the number of beneficiary households be n, and the amount per household a, then A=na.
In this case two, things happen:
(i) If all beneficiary households spend this money, the price goes up a little (NO inflation) and the household sector as a whole gets the SAME total real output under the conditions of market clearing.
(ii) The profit of the business sector increases because of Qm1=C1−Yw in comparison to Qm0=C0−Yw=0 with C1 greater C0. The difference between C1 and C0 is the amount A, i.e. the deficit-spending/money-creation of the government sector.
The real situation of the household sector remains unchanged because the price hike counteracts the nominal demand increase. The situation of the business sector as a whole improves, i.e. monetary profit Qm rises from Qm0=0 to Qm1=A. In other words, Public Deficit = Private Profit.
So, the social measure of the government only redistributes the output O between the ninety-nine-percenters. The real situation of the household sector as a whole does NOT change at all. The whole act is called stealth taxation#1 because the price hike reduces the real quantity the wage income receivers can buy with their wage income Yw.
So, yes, E.K-H keeps claiming (i) that a public sector deficit benefits the 1% not the 99%, (ii) MMT is a political fraud, and (iii) Ralph Musgrave is a clueless blatherer who does not know how the monetary economy works.
#1 MMT, money creation, stealth taxation, and redistribution
You cite from my answer to Ralph Musgrave: “If all beneficiary households spend this money, the price goes up a little (NO inflation) and the household sector as a whole gets the SAME total real output under the conditions of market clearing.” and then go on to claim: “That isn’t always true; the deeper a depression is ― and that will make such a distribution more likely ― the less true it is.”
Note that there are TWO issues here: (i) real and nominal distribution and (ii) employment. My answer to Ralph Musgrave addressed explicitly the issue of distribution under the condition of given employment.
This, of course, does not mean that it escaped my attention that there is also a relationship between money-creation/deficit-spending and employment. In fact, I addressed it on multiple occasions.#1, #2
The point is that you are too stupid/lazy to look up with the omnipresent Search Function what I have written about employment/NAIRU/wage-led growth and the whole Neoclassical/Keynesian/MMT garbage that fills the textbooks and blogs.#3
The axiomatically correct employment theory says (i) yes, of course, it is possible to increase employment through money-creation/deficit spending, (ii) it is better economic policy to apply the price-mechanism for this purpose#1 because (iii) deficit-spending causes unintentionally/intentionally the distributional effects that are before everybody’s eyes#4 and produce a lot of hypocritical surprises and communicative hyperventilation.
All these relationships between deficit-spending, employment, distribution are well-understood albeit NOT by MMT academics who are either scientifically incompetent or politically corrupt or both.
#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
#4 Keynes, Lerner, MMT, Trump and exploding profit
Blog-Reference and Blog-References and Blog-Reference on Jun 5
Compared to neoclassical economics, MMT looks like an improvement. But this is a rather small feat because compared to the proto-scientific garbage of mainstream economics almost everything is an improvement.
However, after 150+ years of repetition, the critique of neoclassical economics has turned out to be pointless: “… 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)
Does MMT beat the old theory? No! MMT is macrofounded, this is the improvement compared to microfounded Neoclassics, but the macrofoundations are inconsistent.#2 Methodology tells us that if the foundations are false the whole analytical superstructure is false.
MMT’s strong points are advertised as follows: “… a strong focus on balance sheets as opposed to theoretical models based on assumptions that are necessary for the mathematics to work. There is also a strong consensus that monetary theory is positive, not normative. Further relevant areas of agreement are found with respect to the idea of Chartalism when it comes to the origin and value of money; the endogeneity of money regarding bank creation of deposits; the role of the money market in the economy and the missing link to inflation; the monetary circuit and the link from debt to income; and the effects of deficit spending.” (Ehnts, Barberoux) and “… MMT [is] also updated macroeconomics based on not only the existing monetary systems but also by bringing together previous contributions, notably Wynne Godley’s stock-flow consistent modeling, Abba Lerner’s functional finance, and Hyman Minsky’s financial instability theory and job guarantee proposal.” (Hickey)
The problem is that all these elements do not fit consistently together because the underlying macroeconomic balance sheet mathematics, i.e. the sectoral balances equation, is provably false.#3, #4 From the scientific standpoint, MMT is as inconsistent and worthless as neoclassical economics. The policy guidance of both schools has NO sound scientific foundations.
The two main blunders of MMT are value and distribution theory
- “In modern times legal currencies are totally based on fiat. Currencies no longer have intrinsic value (as gold and silver). What gives them value is basically the simple fact that you have to pay your taxes with them.” (Syll) This is simply false, the value of money is independent of taxation.#5
- Because Public Deficit = Private Profit the money creation/deficit spending in all economic situations as proposed by MMTers has detrimental consequences for distribution. MMT policy proposals amount ultimately to agenda pushing for the one-percenters.#6
Egmont Kakarot-Handtke
#1 Stop beating mainstream economics ― it is long dead
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 Keynesians ― terminally stupid or worse?
#4 Rectification of MMT macro accounting
#5 The objective value of money
#6 Austerity and the political games Progressives play
Related 'Poor Wicksell — abused as a testimonial for MMT' and 'Macro imbeciles'.
Immediately following The Third Way: Towards the Happy Zero-Tax economy.
***
REPLY to Ralph Musgrave on Jun 5You say: “E.K-H keeps claiming that a public sector deficit benefits the 1% not the 99%. Complete nonsense: if a deficit is targeted on the 99%, then the deficit would benefit the 99%, amazing as that might seem.”
As Marx told already all Flat-earthers and Flat-thinkers: “But all science would be superfluous, if the appearance, the form, and the nature of things were wholly identical.”
The point of science is to figure out what is appearances and what is reality.
So let us assume the government creates money and distributes it to the households according to a social criterion. Let the total amount be A, the number of beneficiary households be n, and the amount per household a, then A=na.
In this case two, things happen:
(i) If all beneficiary households spend this money, the price goes up a little (NO inflation) and the household sector as a whole gets the SAME total real output under the conditions of market clearing.
(ii) The profit of the business sector increases because of Qm1=C1−Yw in comparison to Qm0=C0−Yw=0 with C1 greater C0. The difference between C1 and C0 is the amount A, i.e. the deficit-spending/money-creation of the government sector.
The real situation of the household sector remains unchanged because the price hike counteracts the nominal demand increase. The situation of the business sector as a whole improves, i.e. monetary profit Qm rises from Qm0=0 to Qm1=A. In other words, Public Deficit = Private Profit.
So, the social measure of the government only redistributes the output O between the ninety-nine-percenters. The real situation of the household sector as a whole does NOT change at all. The whole act is called stealth taxation#1 because the price hike reduces the real quantity the wage income receivers can buy with their wage income Yw.
So, yes, E.K-H keeps claiming (i) that a public sector deficit benefits the 1% not the 99%, (ii) MMT is a political fraud, and (iii) Ralph Musgrave is a clueless blatherer who does not know how the monetary economy works.
#1 MMT, money creation, stealth taxation, and redistribution
***
REPLY to Calgacus on Jun 6You cite from my answer to Ralph Musgrave: “If all beneficiary households spend this money, the price goes up a little (NO inflation) and the household sector as a whole gets the SAME total real output under the conditions of market clearing.” and then go on to claim: “That isn’t always true; the deeper a depression is ― and that will make such a distribution more likely ― the less true it is.”
Note that there are TWO issues here: (i) real and nominal distribution and (ii) employment. My answer to Ralph Musgrave addressed explicitly the issue of distribution under the condition of given employment.
This, of course, does not mean that it escaped my attention that there is also a relationship between money-creation/deficit-spending and employment. In fact, I addressed it on multiple occasions.#1, #2
The point is that you are too stupid/lazy to look up with the omnipresent Search Function what I have written about employment/NAIRU/wage-led growth and the whole Neoclassical/Keynesian/MMT garbage that fills the textbooks and blogs.#3
The axiomatically correct employment theory says (i) yes, of course, it is possible to increase employment through money-creation/deficit spending, (ii) it is better economic policy to apply the price-mechanism for this purpose#1 because (iii) deficit-spending causes unintentionally/intentionally the distributional effects that are before everybody’s eyes#4 and produce a lot of hypocritical surprises and communicative hyperventilation.
All these relationships between deficit-spending, employment, distribution are well-understood albeit NOT by MMT academics who are either scientifically incompetent or politically corrupt or both.
#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
#4 Keynes, Lerner, MMT, Trump and exploding profit
June 6, 2017
Profit and distribution: a primer
Comment on Cecchetti & Schoenholtz on ‘Labor’s Declining Share: A Primer’#1
Blog-Reference
The Palgrave Dictionary summarizes: “A satisfactory theory of profits is still elusive” (Desai, 2008) and this is the most damning verdict about economics. After 200+ years economists cannot tell the difference between profit and income. This is the current state of economics: the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong.#2
Quite naturally, because profit theory is false distribution theory, too, is false.
Cecchetti & Schoenholtz’s post starts with the observation: “For at least the past 15 years, and possibly for several decades, labor’s share of national income has been declining and capital’s share has been rising in most advanced and many emerging economies.” And they conclude: “But the race for a better understanding of what drives the income distribution is just getting started, so we still have a great deal to learn about what determines labor’s share.”
In order to get a better understanding, the very first thing to do is to get the profit theory right.#3. The axiomatically correct macroeconomic Profit Law is given with Qm≡Yd+(I−Sm)+(G−T)+(X−M) and reduces to Qm=(I−Sm)+(G−T) for Yd, X, M = 0; Legend: Qm total monetary profit, Yd distributed profit, I investment expenditures, Sm monetary saving, G government expenditures, T taxes, X exports, M imports.
Nominal labor share λ is in the elementary version of Cecchetti & Schoenholtz given as quotient of wage income Yw and the sum of wage income and monetary profit Qm, that is, λ≡Yw/(Yw+Qm)≡1/(1+Qm/Yw).
This gives one the drivers of the falling labor share λ which simply translates into Qm rises faster than Yw. Now monetary profit Qm for the world economy as a whole is in turn determined by growth expressed as investment expenditures I, monetary saving/dissaving Sm, and government deficit G−T. This is a testable proposition because all variables are measurable. Roughly speaking, growth of the capital stock (predominantly in Asia) and growth of overall household and government sector debt explains the decline in the worldwide labor share λ over the past decades.#4
Egmont Kakarot-Handtke
#1 Money and Banking blog
#2 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#3 First Lecture in New Economic Thinking
#4 To determine the real shares is another matter that has been dealt with elsewhere.
Related 'Where MMT got macro wrong' and 'Austerity and the idiocy of political economists' and 'Rethinking the Distribution' and 'Profit and the decline of workers’ nominal share' and 'Keynesianism as ultimate profit machine' and 'The profit theory is false since Adam Smith' and 'Profit, income, and the Humpty Dumpty Fallacy'.
Blog-Reference
The Palgrave Dictionary summarizes: “A satisfactory theory of profits is still elusive” (Desai, 2008) and this is the most damning verdict about economics. After 200+ years economists cannot tell the difference between profit and income. This is the current state of economics: the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong.#2
Quite naturally, because profit theory is false distribution theory, too, is false.
Cecchetti & Schoenholtz’s post starts with the observation: “For at least the past 15 years, and possibly for several decades, labor’s share of national income has been declining and capital’s share has been rising in most advanced and many emerging economies.” And they conclude: “But the race for a better understanding of what drives the income distribution is just getting started, so we still have a great deal to learn about what determines labor’s share.”
In order to get a better understanding, the very first thing to do is to get the profit theory right.#3. The axiomatically correct macroeconomic Profit Law is given with Qm≡Yd+(I−Sm)+(G−T)+(X−M) and reduces to Qm=(I−Sm)+(G−T) for Yd, X, M = 0; Legend: Qm total monetary profit, Yd distributed profit, I investment expenditures, Sm monetary saving, G government expenditures, T taxes, X exports, M imports.
Nominal labor share λ is in the elementary version of Cecchetti & Schoenholtz given as quotient of wage income Yw and the sum of wage income and monetary profit Qm, that is, λ≡Yw/(Yw+Qm)≡1/(1+Qm/Yw).
This gives one the drivers of the falling labor share λ which simply translates into Qm rises faster than Yw. Now monetary profit Qm for the world economy as a whole is in turn determined by growth expressed as investment expenditures I, monetary saving/dissaving Sm, and government deficit G−T. This is a testable proposition because all variables are measurable. Roughly speaking, growth of the capital stock (predominantly in Asia) and growth of overall household and government sector debt explains the decline in the worldwide labor share λ over the past decades.#4
Egmont Kakarot-Handtke
#1 Money and Banking blog
#2 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#3 First Lecture in New Economic Thinking
#4 To determine the real shares is another matter that has been dealt with elsewhere.
Related 'Where MMT got macro wrong' and 'Austerity and the idiocy of political economists' and 'Rethinking the Distribution' and 'Profit and the decline of workers’ nominal share' and 'Keynesianism as ultimate profit machine' and 'The profit theory is false since Adam Smith' and 'Profit, income, and the Humpty Dumpty Fallacy'.
June 22, 2011
Exploitation and its unintended outcomes: an axiomatic view of Marx's surplus value {09}
Working paper at SSRN
Abstract The present paper scrutinizes the logical foundation of Marx's dialectic analysis of the evolving money economy. The frame of reference is thereby given with the set of structural axioms. It turns out, first, that the commonplace notion of exploitation has to be replaced by crossover exploitation among capitalists and workers; second, that the concept of surplus-value cannot explain the existence and magnitude of overall profits; finally, that the real shares of output are determined in the spheres of income and expenditure and not, as classical, Marxian and neoclassical economists unanimously maintain, in the sphere of production.
Abstract The present paper scrutinizes the logical foundation of Marx's dialectic analysis of the evolving money economy. The frame of reference is thereby given with the set of structural axioms. It turns out, first, that the commonplace notion of exploitation has to be replaced by crossover exploitation among capitalists and workers; second, that the concept of surplus-value cannot explain the existence and magnitude of overall profits; finally, that the real shares of output are determined in the spheres of income and expenditure and not, as classical, Marxian and neoclassical economists unanimously maintain, in the sphere of production.
December 31, 2014
The profit theory is false since Adam Smith. What can you expect from distribution theory?
Comment on RWER issue 69 on Piketty's Capital
Blog-Reference
Critical economists never bought into marginalism as a theory of income distribution (Syll, 2014, p. 40) and it is clear by now that the orthodox approach is a failure. Quite naturally, Heterodoxy is drawn to Marx. Unfortunately, Marx also got it wrong. For the formal proof see (2014).
All major economic schools lack a consistent profit theory and therefore all distribution theories are hanging in the air. Piketty is no exception.
As Hicks already observed with regard to profit: economics is “a science still groping in the dark” (1931, p. 170). Economists have no true conception of the most important phenomenon in their universe. What is immediately obvious is that the theories of income distribution and wealth distribution are wrong by logical necessity.
The first step out of the cul-de-sac is (2012)
Egmont Kakarot-Handtke
References
Hicks, J. R. (1931). The Theory of Uncertainty and Profit. Economica, (32):
170–189. URL
Kakarot-Handtke, E. (2012). Income Distribution, Profit, and Real Shares. SSRN
Working Paper Series, 2012793: 1–13. URL
Kakarot-Handtke, E. (2014). Profit for Marxists. SSRN Working Paper Series,
2414301: 1–25. URL
Syll, L. P. (2014). Piketty and the Limits of Marginal Productivity Theory. realworld
economics review, (69): 36–43. URL
For an overview about the desolate state of profit theory, which has been known for
a long time but never rectified, see the web page here
Blog-Reference
Critical economists never bought into marginalism as a theory of income distribution (Syll, 2014, p. 40) and it is clear by now that the orthodox approach is a failure. Quite naturally, Heterodoxy is drawn to Marx. Unfortunately, Marx also got it wrong. For the formal proof see (2014).
All major economic schools lack a consistent profit theory and therefore all distribution theories are hanging in the air. Piketty is no exception.
As Hicks already observed with regard to profit: economics is “a science still groping in the dark” (1931, p. 170). Economists have no true conception of the most important phenomenon in their universe. What is immediately obvious is that the theories of income distribution and wealth distribution are wrong by logical necessity.
The first step out of the cul-de-sac is (2012)
Egmont Kakarot-Handtke
References
Hicks, J. R. (1931). The Theory of Uncertainty and Profit. Economica, (32):
170–189. URL
Kakarot-Handtke, E. (2012). Income Distribution, Profit, and Real Shares. SSRN
Working Paper Series, 2012793: 1–13. URL
Kakarot-Handtke, E. (2014). Profit for Marxists. SSRN Working Paper Series,
2414301: 1–25. URL
Syll, L. P. (2014). Piketty and the Limits of Marginal Productivity Theory. realworld
economics review, (69): 36–43. URL
For an overview about the desolate state of profit theory, which has been known for
a long time but never rectified, see the web page here
September 21, 2017
Profit and the decline of workers’ nominal share (II)
Comment on Noah Smith on ‘Why Workers Are Losing to Capitalists’
Blog-Reference and Blog-Reference
Every economist knows from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words, economists have NO clue about the foundational concept of their subject matter.#1
Without the true profit theory, there is no true distribution theory. The axiomatically correct macroeconomic Profit Law is given as Qm≡Yd+(I−Sm)+(G−T)+(X−M) [1] and this reduces to Qm=(I−Sm)+(G−T) [2] for Yd, X, M=0; Legend: Qm total monetary profit/loss, Yd distributed profit, I investment expenditure, Sm monetary saving/dissaving, G government expenditures (consumptive), T taxes, X exports, M imports.
The nominal labor share λ is defined as the quotient of wage income Yw and the sum of wage income and monetary profit Qm, that is, λ≡Yw/(Yw+Qm)≡1/(1+Qm/Yw) with Qm given by [1] above.
Noah Smith concludes: “In other words, the two most conventional explanations for rising inequality and falling wages might both be correct. A perfect storm of robots and free trade … could be shifting power from the proletariat to the capitalists.” This conclusion is based on the traditional = false profit theory.
The fact is that market power and automation cannot account for a falling nominal labor share λ. The main drivers of increasing overall profit have been the increased deficit spending of the household- and the government sector in the past decades. Market power and automation can only account for the distribution of overall profit Qm among firms but NOT for the total amount.#2
Traditional distribution theory is merely a stubborn Fallacy of Composition.
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#2 For details of the big picture see cross-references Profi/Distribution.
Wikimedia AXEC129d On closer inspection it turns out that the concept of labor/share is formally/dimensionally defective because profit is a balance and wage income is a flow. This blunder is called Flow-Balance Inconsistency.
Blog-Reference and Blog-Reference
Every economist knows from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words, economists have NO clue about the foundational concept of their subject matter.#1
Without the true profit theory, there is no true distribution theory. The axiomatically correct macroeconomic Profit Law is given as Qm≡Yd+(I−Sm)+(G−T)+(X−M) [1] and this reduces to Qm=(I−Sm)+(G−T) [2] for Yd, X, M=0; Legend: Qm total monetary profit/loss, Yd distributed profit, I investment expenditure, Sm monetary saving/dissaving, G government expenditures (consumptive), T taxes, X exports, M imports.
The nominal labor share λ is defined as the quotient of wage income Yw and the sum of wage income and monetary profit Qm, that is, λ≡Yw/(Yw+Qm)≡1/(1+Qm/Yw) with Qm given by [1] above.
Noah Smith concludes: “In other words, the two most conventional explanations for rising inequality and falling wages might both be correct. A perfect storm of robots and free trade … could be shifting power from the proletariat to the capitalists.” This conclusion is based on the traditional = false profit theory.
The fact is that market power and automation cannot account for a falling nominal labor share λ. The main drivers of increasing overall profit have been the increased deficit spending of the household- and the government sector in the past decades. Market power and automation can only account for the distribution of overall profit Qm among firms but NOT for the total amount.#2
Traditional distribution theory is merely a stubborn Fallacy of Composition.
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#2 For details of the big picture see cross-references Profi/Distribution.
Related 'How the Intelligent Non-Economist Can Refute Every Economist Hands Down' and 'Profit and the decline of labor’s nominal share (I)' and 'Austerity: Who takes the little man for a ride?' and 'The abject failure of orthodox and heterodox distribution theory' and 'Debunking Squared' and 'Intellectual deficit spending' and 'The GDP-death-blow for the economics profession'.
For more about the so-called wage/profit share see AXECquery.
***
Wikimedia AXEC129d On closer inspection it turns out that the concept of labor/share is formally/dimensionally defective because profit is a balance and wage income is a flow. This blunder is called Flow-Balance Inconsistency.
August 7, 2023
Occasional Xs: Time for economists to get the relationship between deficit, debt, and distribution right (II)
The GER political system is an #Oligarchy with Parliament/Treasury/CB/BigBusiness as integral parts. The #ProfitLaw Q≡(G−T)+(I−S)+Yd implies #PublicDeficitIsPrivateProfit i.e. private #FinancialWealth grows with #PublicDebt = basic distributional fact of the #MarketEconomy. pic.twitter.com/uA7xuYp3eO
— E.K-H (@AXECorg) August 7, 2023
For details of the big picture see cross-references Profit/Distribution.
February 7, 2021
Occasional Tweets: Clueless economists / Profit (I)
#Economics#FailedScience
— E.K-H (@AXECorg) February 7, 2021
You NEVER understood #Profit ― the foundational concept of #Economics.
The 3-sector #ProfitLaw Q≡(G−T)+(I−S)+Yd implies #PublicDeficitIsPrivateProfit. From more #DeficitSpendingMoneyCreation results a #ProfitExplosion. ⇒https://t.co/ABFUc41eMs
Profit
- Profit
- Understanding socialism presupposes understanding profit
- Marx and Marxists ― too stupid for the elementary algebra of profit
- Trump and MMT: Make profits great again
- Profit analysis ― another exercise in economic deception
- Profit and Distribution Theory is false for 200+ years
- The Levy/Kalecki Profit Equation is false
- Mad but true: 200+ years after Adam Smith economists still have no idea what profit is
- The public-debt and private-profit pushers
- How counterfeiters save America with an extra profit and make WeThePeople pay for it
- Dear idiots, Marx got profit and exploitation wrong
- Understanding public deficits, money, and profit
- What and where is profit?
- Profit and macrofoundations
- Deficit-spending, public debt, and macroeconomic profit/loss
- Keynes, Kalecki, MMT, and the accidental invention of the perpetual profit machine
- #PublicDeficitIsPrivateProfit #MMT #JustAnotherFraud
- Why the MMT benefactors of humanity never talk about profit
- Go! ― test the Profit and Employment Law
- Truth by definition? The Profit Theory has been axiomatically false for 200+ years
- Profit: after 200+ years, economists are still in the woods
- The profit theory is false since Adam Smith
- Cross-references Profit/Distribution
AXEC109i
September 12, 2023
Occasional Xs: Clueless economists / Profit (V)
The 3-sector #ProfitLaw Q≡(G−T)+(I−S)+Yd ↓ implies #PublicDeficitIsPrivateProfit. So, #DeficitSpendingMoneyCreation is a #FreeLunch for the #Oligarchy. Their #FinancialWealth grows with #PublicDebt becoming their #Interest #CashCow. This is how the #FreeMarketEconomy works. pic.twitter.com/lJyR6eM9CC
— E.K-H (@AXECorg) September 12, 2023
December 11, 2015
Wages and profits are NOT the components of income
Comment on David Ruccio on ‘Wages, profits, and inequality’
Blog-Reference
The trouble with distribution theory started with Ricardo who got the distinction between wage, profit, and rent wrong (2011). Then Marx got the class theory of profit wrong (2014a). Neoclassical distribution theory, of course, hit rock bottom, but Keynesianism did not perform much better, and Heterodoxy alone has multiple profit theories that do not fit together.#1
Yes, distribution theory has always been the deepest swamp of economics. For the correct approach see (2014b).
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2011). When Ricardo Saw Profit, He Called it Rent: On the Vice of Parochial Realism. SSRN Working Paper Series, 1932119: 1–19. URL
Kakarot-Handtke, E. (2014a). Profit for Marxists. SSRN Working Paper Series, 2414301: 1–25. URL
Kakarot-Handtke, E. (2014b). The Profit Theory is False Since Adam Smith. What About the True Distribution Theory? SSRN Working Paper Series, 2511741: 1–23. URL
#1 Heterodoxy, too, is proto-scientific garbage
For details of the bigger picture see cross-references Profit
Blog-Reference
The trouble with distribution theory started with Ricardo who got the distinction between wage, profit, and rent wrong (2011). Then Marx got the class theory of profit wrong (2014a). Neoclassical distribution theory, of course, hit rock bottom, but Keynesianism did not perform much better, and Heterodoxy alone has multiple profit theories that do not fit together.#1
Yes, distribution theory has always been the deepest swamp of economics. For the correct approach see (2014b).
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2011). When Ricardo Saw Profit, He Called it Rent: On the Vice of Parochial Realism. SSRN Working Paper Series, 1932119: 1–19. URL
Kakarot-Handtke, E. (2014a). Profit for Marxists. SSRN Working Paper Series, 2414301: 1–25. URL
Kakarot-Handtke, E. (2014b). The Profit Theory is False Since Adam Smith. What About the True Distribution Theory? SSRN Working Paper Series, 2511741: 1–23. URL
#1 Heterodoxy, too, is proto-scientific garbage
For details of the bigger picture see cross-references Profit
February 8, 2024
Occasional Xs: Clueless economists / Profit (XXXI)
The 3-sector #ProfitLaw Q≡(G−T)+(I−S)+Yd implies #PublicDeficitIsPrivateProfit. Thus, the policy of #DeficitSpendingMoneyCreation is a #FreeLunch for the #Oligarchy. Bigger is better, exploding #PublicDebt is best. #Billionires say well done, POTUS! pic.twitter.com/dF90gTEMbN
— E.K-H (@AXECorg) February 8, 2024
May 5, 2021
Economists’ periodically recurring crocodile tears about inequality
Comment on Brad DeLong on ‘RHETORICAL QUESTION: Why Do Economists Ignore the Greatest of All Market Failures?’
Distribution is the greatest of all theory failures.
Economics is failed/fake science for 200+ years. Walrasianism, Keynesianism, Marxianism, Austrianism, MMT are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit wrong. Because the foundational economic concept of profit is false the whole analytical superstructure is false. Economics is scientifically worthless.
Deficit-spending/money-creation is the cause of the extreme inequality of income and wealth. The 3-sector Profit Law Q≡(G−T)+(I−S)+Yd implies Public Deficit = Private Profit. Private financial wealth of the Oligarchy grows in lockstep with the public debt of WeThePeople. Public debt, in turn, is the interest cash cow that produces perpetual income which is taxed by the IRS from WeThePeople on behalf of the Oligarchy.
The Oligarchy, in turn, uses the opulent free lunches to corrupt what remains of the state’s legislative, executive, judiciary institutions. Ultimately, it is scientifically incompetent economists who work ― intentionally or unintentionally does NOT matter ― for the growing inequality of income/wealth. Only stupid/corrupt economists rhetorically wonder about the inequality of income/wealth.#1-#3
Egmont Kakarot-Handtke
August 9, 2023
Occasional Xs: How it works (XXIV)
The UK/EU/US political system is an #Oligarchy. The #ProfitLaw Q≡(G−T)+(I−S)+Yd implies #PublicDeficitIsPrivateProfit. #PrivateFinancialWealth grows with #PublicDebt & in the form of #Bonds becomes the Oligarchy's eternal #Interest #CashCow. Interest is taxed from #WeThePeople
— E.K-H (@AXECorg) August 9, 2023
April 28, 2025
Occasional Xs: Clueless economists / Distribution, Inequality (XIII)
#Economics#AllYouNeedToKnow
— AXEC (@EgmontHandtke) April 28, 2025
“In 2020, billionaires' share of GDP was 14.1%. Now, it's 21.1%. The Fed increased the money supply, asset prices went up, & guess who owns the assets? Billionaires.” (Steve Hanke)
To this day, economists do not understand what determines… pic.twitter.com/a63uW6Kn4d
July 25, 2019
The decisive reason to worry about government debt
Comment on J. W. Mason on ‘A Baker’s Dozen of Reasons Not to Worry about Government Debt’
Blog-Reference and Blog-Reference
Arguments 1. to 8. and 11. boils down to unemployment being bad for multiple reasons, and government deficit-spending can effectively reduce unemployment. This is widely accepted since Keynes but tacitly implies budget-balancing over the business cycle. So, there are two cases: temporary and permanent deficit spending. Not many people worry any longer about temporary deficit spending. But the fact that the self-regulating and self-optimizing free market economy is on the permanent life support of the government tells one that the system is not sustainable over the long run. And this is the life-and-death reason to worry about growing government debt. Permanently growing debt is an indicator that the system is dysfunctional.#1 This is the real problem to worry about.#2
Arguments 9. and 10. say that with low-interest rates the growth of public debt is slower in relation to GDP growth. This is trivially true, of course, and suggests that the problem will go away by itself. This is pure optics, though, that crucially depends on the tacit assumption that GDP will grow. If it does not, the debt/GDP ratio explodes and low-interest rates only dampen the process.
Argument 12 is circular. The macroeconomic Profit Law boils down to Public Deficit = Private Profit. So, the government continuously fills the coffers of the Oligarchy, which, in turn, is looking out for some safe and juicy assets. Again, the government jumps in and offers Treasuries to consolidate its overdrafts at the central bank. This is a case of simultaneous supply/demand creation.#3
What J. W. Mason misses altogether is the distributional effects of a permanently growing public debt. Deficit-spending/money-creation benefits the Oligarchy because it increases macroeconomic profit according to the Profit Law. MMT is a free lunch program for the Oligarchy. Financial wealth and public debt grow in lockstep, and the fabulous financial wealth in the USA is roughly equal to humongous public debt ($22 trillion and counting). The Profit Law explains how billionaires are able to accumulate that much money and why they can buy all the bonds the Treasury issues and cash in the ultra-safe interest that is reliably taxed from WeThePeople as long as the debt is rolled over, which can be very long indeed. This Ponzi scheme creates the extremely skewed distribution of income and wealth, and this works as long as public debt grows. But infinite growth is impossible on a finite planet. This also holds for public debt. Eventually, debt growth slows down and even reverses, and then macroeconomic profit turns into loss, and the so-called free market economy breaks down.
This is the decisive reason to worry about government debt. What J. W. Mason is doing is doling out an overdose of argumentative placebos.
Egmont Kakarot-Handtke
#1 Just one more day: How deficit-spending postpones the breakdown of Capitalism
#2 How to pay for the war and to be bamboozled by economists
#3 Safe assets ― how the State pampers the Oligarchy
Related 'MMT undermines democracy' and 'Some nasty MMT surprises behind the time horizon'.
REPLY to JW Mason, Arthurian, MisterMr, Unlearning, PeterT
Distribution is the problem of MMT policy and nothing else. For details see
Dear idiots, it is deficit spending that creates the distribution people complain about
and cross-references Profit/Distribution.
Blog-Reference and Blog-Reference
Arguments 1. to 8. and 11. boils down to unemployment being bad for multiple reasons, and government deficit-spending can effectively reduce unemployment. This is widely accepted since Keynes but tacitly implies budget-balancing over the business cycle. So, there are two cases: temporary and permanent deficit spending. Not many people worry any longer about temporary deficit spending. But the fact that the self-regulating and self-optimizing free market economy is on the permanent life support of the government tells one that the system is not sustainable over the long run. And this is the life-and-death reason to worry about growing government debt. Permanently growing debt is an indicator that the system is dysfunctional.#1 This is the real problem to worry about.#2
Arguments 9. and 10. say that with low-interest rates the growth of public debt is slower in relation to GDP growth. This is trivially true, of course, and suggests that the problem will go away by itself. This is pure optics, though, that crucially depends on the tacit assumption that GDP will grow. If it does not, the debt/GDP ratio explodes and low-interest rates only dampen the process.
Argument 12 is circular. The macroeconomic Profit Law boils down to Public Deficit = Private Profit. So, the government continuously fills the coffers of the Oligarchy, which, in turn, is looking out for some safe and juicy assets. Again, the government jumps in and offers Treasuries to consolidate its overdrafts at the central bank. This is a case of simultaneous supply/demand creation.#3
What J. W. Mason misses altogether is the distributional effects of a permanently growing public debt. Deficit-spending/money-creation benefits the Oligarchy because it increases macroeconomic profit according to the Profit Law. MMT is a free lunch program for the Oligarchy. Financial wealth and public debt grow in lockstep, and the fabulous financial wealth in the USA is roughly equal to humongous public debt ($22 trillion and counting). The Profit Law explains how billionaires are able to accumulate that much money and why they can buy all the bonds the Treasury issues and cash in the ultra-safe interest that is reliably taxed from WeThePeople as long as the debt is rolled over, which can be very long indeed. This Ponzi scheme creates the extremely skewed distribution of income and wealth, and this works as long as public debt grows. But infinite growth is impossible on a finite planet. This also holds for public debt. Eventually, debt growth slows down and even reverses, and then macroeconomic profit turns into loss, and the so-called free market economy breaks down.
This is the decisive reason to worry about government debt. What J. W. Mason is doing is doling out an overdose of argumentative placebos.
Egmont Kakarot-Handtke
#1 Just one more day: How deficit-spending postpones the breakdown of Capitalism
#2 How to pay for the war and to be bamboozled by economists
#3 Safe assets ― how the State pampers the Oligarchy
Related 'MMT undermines democracy' and 'Some nasty MMT surprises behind the time horizon'.
***
Distribution is the problem of MMT policy and nothing else. For details see
Dear idiots, it is deficit spending that creates the distribution people complain about
and cross-references Profit/Distribution.
***
#PointOfProof
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