The worthlessness of value theory

Comment on Matias Vernengo on ‘Why do we need a theory of value?’*

Blog-Reference and Blog-Reference

Matias Vernengo correctly observes: “The theory of value and distribution is at the heart of economics. … However, most economists have no clue about it, about the centrality of value.”

Then he summarizes the main approaches:

• “Let me start with the authors of the surplus approach. In fact, a bit earlier with the economists that would eventually be known as Mercantilists (if you can talk about a school). If we are allowed to generalize and simplify, the latter believed that the wealth of nations depended essentially on maintaining trade surpluses and accumulating precious metals. Profits were essentially the result of buying cheap and selling dear, or profits upon alienation, which indicates that, for Mercantilists, profits were generated in the exchange process.”

• “Classical political economy authors, starting with William Petty, emphasize the determination of profits in the process of production, as a residual of output, once the conditions for the reproduction of the productive system were satisfied. So profits are not the result of selling high and buying low, something that could result from the mere fluctuation of market prices, but from the ability to produce beyond what was needed for the simple material reproduction of society. … So the normal rate of profit is needed to determine prices, and prices are needed to determine the normal rate of profit. This was well understood by both Ricardo and Marx.”

• “In other words, for a coherent theory of output, accumulation, international trade, technological change and more (taxation, etc.) you need a theory of value and distribution. That is also the case in the mainstream. Marginalism developed in the last quarter of the 19th century, both as a result of the lack of analytical solution in that period for the problems of the LTV and as a reaction to radical revival of the theory (Marxism). The important distinction is that while classical political economy authors dealt only with objective factors, and considered demand as given when determined value and distribution, marginalism incorporated subjective preferences as central for the explanation of long term normal prices, and prices and quantities were determined simultaneously.”

Let us make it short here: the theory of value/profit/distribution is false since Adam Smith. #1, #2 However, Matias Vernengo, too, has no clue about what profit is and how the monetary economy works.

The elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector, which, in turn, consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Yw in each period, the price as the dependent variable is given by P=W/R (1a). The price is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R. The elementary production-consumption economy is shown in picture AXEC31. #2

The macroeconomic Law of Supply and Demand (1a) implies W/P=R (1b), i.e., the real wage is always equal to the productivity, no matter how the wage rate W is set. Labor gets the whole product.

The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e., it holds X=O. The condition of budget-balancing, i.e., C=Yw, is now skipped. The monetary saving/dissaving of the household sector is defined as S≡Yw−C. The monetary profit/loss of the business sector is defined as Q≡C−Yw. Ergo Q≡−S.

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

Ramifications: (i) The business sector’s revenues can only be greater than costs if, in the simplest of all possible cases, consumption expenditures are greater than wage income. (ii) In order that profit comes into existence for the first time in the elementary production-consumption economy, the household sector must run a deficit at least in one period. This presupposes the existence of a credit-creating entity. (iii) Profit is, in the most elementary case, determined by the increase and decrease of the household sector’s debt. There is a close relation between profit/loss and the expansion/contraction of debt for the economy as a whole. (iv) Wage income is the factor remuneration of labor input. Profit is not a factor income. Since capital is nonexistent in the elementary production-consumption economy, profit is not functionally attributable to capital. (v) There is no relation at all between profit, capital, marginal, or average productivity. (vi) The value of output is, in the general case, different from the sum of factor incomes. This is the defining property of the monetary economy. (vii) Profit is a factor-independent residual and qualitatively different from wage income. Therefore, it is an elementary mistake to maintain that total income is the sum of wages and profits.

In brief, to this day, Walrasians, Keynesians, Marxians, Austrians, MMTers, and Matias Vernengo have no clue about profit and, as a consequence, about value and distribution. They will all be buried at the darkest corner of the Flat-Earth Cemetery.

Egmont Kakarot-Handtke


* Naked Keynesianism
#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#2 Economics ― nothing but claptrap, twaddle, drivel, slip-slop, wish-wash, waffle, and proto-scientific garbage
#3 Graphic AXEC31 Elementary production-consumption economy

Related 'The Logic of Value and the Value of Logic'.

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REPLY to André on Jul 23

You say: “Price is not directly related to costs, be it wages or any other costs. A theory that relies on relations between prices and costs is lacking, to put it mildly.”

Observing one firm and then generalizing for the economy as a whole is called the Fallacy of Composition. This fallacy is the main reason why economics is proto-scientific garbage to this day.

Take, for a start, the most elementary case that the households fully spend their wage income on consumption, i.e., C=Yw, and that there are two products. Under the condition of market clearing and W1=W2=W, the prices are given by P1=W/R1 and P2=W/R2. The profits in both firms are zero, i.e., Q1≡C1―Yw1=0, Q2≡C2―Yw2=0, C=C1+C2, Yw=Yw1+Yw2, C=Yw, Q=Q1+Q2=0.

For relative prices, i.e., the exchange relation, holds P1/P2=R2/R1 in the most elementary case with equal wages. The exchange relation between the two goods is determined by the objectively given productivities.

Now firm 1 increases the price P1. The households pay more for good 1 but keep total consumption expenditures unchanged, i.e., C=Yw, so they spend less on good 2. P2 falls under the condition of market-clearing. As a result, firm 1 now makes a profit and firm 2 makes a loss, and the total profit of the business sector Q is zero as before.

Alternatively. Firm 1 increases the price P1. The households pay more for good 1 but keep expenditures on good 2 constant, that is, total consumption expenditures C are now greater than wage income Yw. In other words, the household sector deficit-spends or dissaves. In this case, the profit of the business sector as a whole Q is greater than zero. It holds Q≡−S, i.e., the total profit of the business sector is equal to the total dissaving of the household sector. The balances of the two sectors add up to zero, i.e., Q+S=0. One may call this the Law of the Conservation of Value.

One cannot do Price Theory and Value Theory without taking the macroeconomic balances equation into account. #1 OK, you can because you are a scientifically incompetent blatherer, to put it mildly.


#1 The Pure Logic of Value, Profit, Interest

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REPLY to André on Jul 23

You say: “Price is not necessarily related to costs, and this is a fact. If you ignore facts, you are just like a mainstream economist - ie, no scientist at all.”

Indeed, price is not necessarily related to costs. This is a well-known triviality. I treat this case in the section that starts with “Now firm 1 increases the price P1.” and in the section that starts with “Alternatively. Firm 1 increases the price P1.”

So, the point at issue is that you make a trivial statement about the price-setting capacity of a single firm. This is not “realism” but dumb partial analysis. The Walrasians can be criticized for many things, but their point is valid that Marshallian partial analysis is worthless and has to be replaced by total analysis because of the interdependence of markets.

The interdependence of markets is a reality. It is nowhere to be found in your trivial examples. You simply do not get the essential point of price/value theory, to put it mildly.

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#PointOfProof

Jul 24
post still missing

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. #1

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 ultimately amount to agenda pushing for the one-percenters. #6

The difference between Neoclassics and MMT is, on closer inspection, analogous to the difference between pest and cholera. There is no difference in the scientific incompetence between orthodox and heterodox economists.

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.

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REPLY to Ralph Musgrave on Jun 5

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 already told 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 appearance is and what reality is.

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

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REPLY to Calgacus on Jun 6

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 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 #3 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, and 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

Occasional Tweets: What's the use of economics? ― No scientific truth-value, only political use-value

 

#Walrasianism, #Keynesianism, #Marxianism, #Austrianism, #MMT are axiomatically false & materially/formally inconsistent. Therefore, economic policy guidance NEVER has had sound scientific foundations. #Economists are just #Clowns / #UsefulIdiots in the political #CircusMaximus. pic.twitter.com/8JipJlsyFq

— E.K-H (@AXECorg) October 6, 2022

The objective value of money

Comment on David Glasner on ‘Is “a Stable Cryptocurrency” an Oxymoron?’

Blog-Reference

David Glasner recalls: “One of my first posts after launching this blog was called ‘The Paradox of Fiat Money’ in which I posed this question: how do fiat moneys retain a positive value, when the future value of any fiat money will surely fall to zero? This question is based on the backward-induction argument that is widely used in game theory and dynamic programming.”

This train of thought is based on microfoundations, or as Krugman put it: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.” This subjective-behavioral starting point is axiomatically false and has to be replaced by objective-systemic macrofoundations. Walrasian microfoundations and Keynesian macrofoundations have to be scrapped. This also affects the theory of money.

As the new analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) 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.

Under the conditions of market-clearing X=O and budget-balancing C=Y_w in each period, the price is given by P=W/R (1), i.e., the market-clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation, see Figure 1. #1

The price is determined by the wage rate, which takes the role of the nominal numéraire, and the productivity. The quantity of money is NOT among the price determinants. This puts the commonplace Quantity Theory to rest.

So, what is the "value of money"? What can one dollar of wage income buy in the elementary production-consumption economy? All we have to do is divide the wage rate by the price. From (1) follows W/P=R, i.e., real wage = productivity.

Monetary profit for the economy as a whole is defined as Q_m≡C−Y_w, and monetary saving as S_m≡Y_w−C. It always holds Q_m≡−S_m. Under the condition of budget-balancing total monetary profit is zero.

What is needed for a start is two things: (i) a Central Bank which creates money on its balance sheet in the form of deposits, and (ii) a legal system which declares the central bank’s deposits as legal tender. Without the Central Bank, money takes the form of an IOU of the business sector.

Deposit money is needed by the business sector to pay the workers who receive the wage income Y_w per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e., if C=Y_w.

Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. This time sequence is no problem for the central bank because the temporary overdrafts vanish with wage payments.

For the case of a balanced budget C=Y_w, the idealized transaction sequence of deposits/overdrafts of the household sector at the Central Bank over the course of one period is shown in Figure 2. #2

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. There is NO such thing as a fixed quantity of money. The central bank plays an ACCOMMODATIVE role and simply supports the AUTONOMOUS market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=κY_w, with κ determined by the transaction 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 the central bank. The economy NEVER runs out of money.

The transaction equation reads M=κY_w=κPX=κPRL in the case of budget balancing and market clearing, and this yields the commonplace correlation between the average stock of money M and price P for a given employment level L, except for the fact that M is the DEPENDENT variable.

Money comes into existence on the balance sheet of the central bank as soon as the Central Bank enters an overdraft for the business sector on the asset side and a deposit of an equal amount on the liability side (step 1). This deposit is then transferred to the household sector as wage payment (step 2) and returns in the form of consumption expenditures (step 3).

In the elementary production-consumption economy, money is a means of transaction and nothing else. The stock of money is zero at the beginning and the end of a period. Money is continuously created and destroyed. Strictly speaking, money itself has no value. Money is not stuff but information.

The workers accept money from the business sector in the form of wage income because they can be reasonably sure that the business sector, in turn, accepts the money and hands over the consumption good output. This cycle usually lasts for one month. The real value of money is, under the conditions of budget balancing and market clearing, exactly equal to productivity.

Over time, productivity changes, and therefore the "value of money" changes. The price is kept absolutely constant over time if the rate of change of the wage rate W in each period is exactly equal to the rate of change of the productivity R.

The ideas that the "value of fiat money" depends on convertibility into gold or on the taxing power of the state, or that it will surely fall to zero, are the crackpot ideas of folks who never rose above the proto-scientific level.

Egmont Kakarot-Handtke


#1 Graphic AXEC31 Elementary production-consumption economy
#2 Graphic AXEC98 Idealized transaction pattern, household sector, balanced budget

Occasional Tweets: The value of counterfeit currency

 

#Crypto derives its “value” from the fact that the #BlackEconomy needs an ANONYMOUS medium of exchange. It privatizes #Seigniorage. The volume of #Crypto is a metric for the private/public corruption of an #Economy.

Criminals and the monetary orderhttps://t.co/Iq1lVxePy1

— E.K-H (@AXECorg) January 9, 2022

For more about the value of money see AXECquery.

For more about counterfeit currency see AXECquery.

 

How to end the Punch and Judy Show about profit

Comment on Fred Moseley and Peter Dorman on ‘It’s Red Friday and Time to Discuss the Role of Exploitation in Profit’

Blog-Reference

The profit theory is false. It has been false since Adam Smith. #1 Economists have NO idea of the pivotal magnitude of their subject matter. This includes the four main sects: Walrasianism, Keynesianism, Marxianism, Austrianism, and, of course, Fred Moseley and Peter Dorman.

There are three things that are intertwined but have to be analytically kept apart: (i) Theory of Value, (ii) Theory of Profit for the economy as a WHOLE, (iii) DISTRIBUTION of overall profit between sub-sectors (production, banking, land use, etc.) and individual firms.

The Law of Value says that relative prices in the pure production-consumption economy are inverse to the productivities. #2 This Law replaces the Labour Theory of Value.

The Profit Law for the pure production-consumption economy says that OVERALL profit depends on the expenditure ratio and the distributed profit ratio .#3

It holds in particular:
• Overall profit does not depend upon the agents’ personal qualities, motives, their ideas about what profit is, nor on profit-maximizing behavior. These subjective factors are irrelevant; profit for the economy as a whole is OBJECTIVELY determined. #4
• In order that profit comes into existence for the first time in the pure production-consumption economy, the household sector must run a deficit at least in one period.
• Profit is, in the simplest case, determined by the increase and decrease of the household sector’s debt. There is a close relation between profit/loss and the expansion/contraction of credit for the economy as a whole.
• Wage income is the factor remuneration of labor input. Profit is NOT a factor income. Since capital is nonexistent in the pure production-consumption economy, profit is not functionally attributable to capital.
• There is no relation at all between profit, capital, marginal, or average productivity. Proudhon’s increasing returns theory of profit is plain rubbish. #5
• Profit has NO real counterpart in the form of a piece of the output cake. Profit has a monetary counterpart.
• The existence and magnitude of overall profit do not depend on the ownership of the firms that comprise the business sector. The Profit Law is the SAME in capitalism and communism.
• The value of output is, in the general case, DIFFERENT from the sum of factor incomes. This is the defining property of the monetary economy.
• Profit is a factor-independent residual and qualitatively different from wage income. Therefore, it is an elementary mistake to maintain that total income is the sum of wages and profits. #6
• There is NO antagonism between total wages and total profits, and the distribution of consumption good output has nothing at all to do with profit.
• Innovation and efficiency are IRRELEVANT for the profit of the business sector as a WHOLE. It is a Fallacy of Composition to trivially generalize what can be observed in an individual firm.

The classical/neoclassical and Keynesian/Post-Keynesian theories of value/profit are provably false or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” #7 Time for Fred Moseley and Peter Dorman to end this HiFred-HiPeter Punch and Judy Show.

Egmont Kakarot-Handtke


#1 The Profit Theory is False Since Adam Smith
#2 The Pure Logic of Value, Profit, Interest
#3 Essentials of Constructive Heterodoxy: Profit
#4 See the Profit Law for the elementary production-consumption economy Graphic AXEC08 

#5 Increasing Returns and Stability
#6 When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism
#7 One way to get it right, many ways to get it wrong

Immediately preceding The thing with profit and exploitation.

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Graphic AXEC143d

Occasional Tweets: The value of currency ― debunking Warren Mosler for good

 

#DearIdiots#LearnEconomics

The creation and value of money and near-monieshttps://t.co/vZflD86Pfv pic.twitter.com/nesXJjuq0N

— E.K-H (@AXECorg) October 3, 2021

For the full-spectrum refutation of MMT see cross-references MMT.

For more about the value of money see AXECquery.

For more about Warren Mosler see AXECquery.

The Pure Logic of Value, Profit, Interest {03}

Working paper at SSRN

Working paper at ARCHIVE

Abstract Standard economic models are based on axioms that epitomize the fundamental behavioral assumptions. This approach is trapped in a blind alley. The suggested change of perspective is guided by the question: what is the minimum set of nonbehavioral propositions for the consistent reconstruction of the evolving monetary economy? We start with three structural axioms and determine their real-world implications. The differentiation of the axiom set leads to the structural value theorem. For the limiting case of the harmonic structure a formal link to the classical and neoclassical value theories can be established. 

AXEC100 Transaction money, store of value

 

The logic of value and the value of logic {54}

Working paper at SSRN

Working paper at ARCHIVE

Abstract  Jevons composed his value theory of nonentities. These creatures are elusive. Subsequent formal refinements did not eliminate the fundamental flaw but made it only harder to detect. A vacuous formal structure is one that cannot be interpreted in some domain. For want of any correspondence in the monetary economy, Jevons's approach could not produce viable results. Roughly speaking, Jevons made value dependent on subjective factors. This paper gives a rigorous formal proof that value is determined by objective conditions. Within the structural-axiomatic framework, there is no formal spare room for the major behavioral nonentities utility, optimization, rational expectations, and equilibrium.

For the complete set of foundational equations — structural axioms, definitions, and behavioral propensity function — see Graphic AXEC61.

Occasional X: Clueless economists / Value (II)

“In 1871, Menger published his groundbreaking Principles of Economics, arguing that the value of a good is not determined by the labour required to produce it, but by the subjective importance individuals place on it. Value is not objective or embodied in objects. It is marginal… pic.twitter.com/mRXVWf9BjI

— AXEC (@EgmontHandtke) August 3, 2026

Related 'The value of water and diamonds: back to square one' and 'Value — the Bermuda Triangle for economic theories'

MMT, money, value, and transcendental Capitalism

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

Blog-Reference and Blog-Reference

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

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

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

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

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

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

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

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

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

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

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

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

Egmont Kakarot-Handtke


#1 This is the true core of macroeconomic premises: (A0) The objectively given and most elementary systemic configuration of the economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) 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, i.e., market-clearing holds. The ratio ρ_E≡C/Y_w is called the expenditure ratio; ρ_E=1 indicates budget balancing of the household sector.
#2 True macrofoundations: the reset of economics
#3 MMT is dead
#4 The thing with profit and exploitation
#5 Capitalism, poverty, exploitation, and cross-over exploitation
#6 Graphic AXEC101 Law of Supply and Demand, elementary production-consumption economy
#7 Economics ― nothing but claptrap, twaddle, drivel, slip-slop, wish-wash, waffle, and proto-scientific garbage
#8 No future for Socialism and Capitalism
#9 Keynes, Lerner, MMT, Trump, Biden, and exploding profit

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

The value of water and diamonds: back to square one {22}

Working paper at SSRN

Working paper at ARCHIVE

Abstract  Taking the water—diamond paradox as a time-honored challenge, at first the structural value theorem is derived from the set of structural axioms. This enables a reevaluation of classical and neoclassical conceptions. Ricardo realized that there are two entirely different kinds of markets but excluded the secondary markets by defining commodity in a restricted sense. Walras's markets are secondary markets by construction. Primary markets thereby drop from sight. Since secondary markets presuppose primary markets the marginalistic approach is hanging in the air. The structural axiomatic approach demonstrates that the pricing in primary and secondary markets depends on different principles.

The creation and value of money and near-monies

Comment on Clint Ballinger on ‘Of Bitcoins and balance sheets: the real lesson from Bitcoin’

Blog-Reference

Clint Ballinger argues: “The national government creates the numeraire for the system (the 'Dollar' in the US, the 'Pound' in the UK, etc.) and, in addition to spending directly into the economy in that numeraire, the government allows a public/private system (publicly regulated private banking system) to operate with the same numeraire. This creates a single system for the public, but in fact, arises from two separate but linked balance sheet expansions.
But why do the tokens from either of these balance sheet expansions have and maintain value?
The government maintains the value of its balance sheet tokens by demanding that some of its tokens, once a year, must be paid back to the government. This guarantees that everyone in that nation will accept and value the tokens from the national balance-sheet expansion.
The tokens that arise from the public/private bank balance-sheet expansion maintain their value analogously ― by the obligation to repay bank loans.
Together, the obligation to pay taxes and the obligation to repay bank loans maintain the value of a currency. Note that both of these rest on the government/legal system of a nation.”

The claim that the value of money depends ultimately on the taxing power of the state is, of course, plain MMT nonsense.

Time to finally settle the theory of money. Because economics is a failed science, it has to be reconstructed from scratch. Walrasian microfoundations and Keynesian macrofoundations have to be scrapped.

As the new analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) 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.

Under the conditions of market-clearing X=O and budget-balancing C=Y_w in each period, the price is given by P=W/R (1), i.e., the market-clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation, see Figure 1. #1

The price is determined by the wage rate, which takes the role of the nominal numéraire, and productivity. The quantity of money is NOT among the price determinants. This puts the commonplace Quantity Theory to rest.

The real value of money is ultimately given by productivity. From (1) follows W/P=R, i.e., real wage = productivity. The value of money has NOTHING AT ALL to do with the taxing power of the state. In the production-consumption economy with budget balancing and market clearing, the wage income receivers always get the whole output O=RL.

Monetary profit for the economy as a whole is defined as Q_m≡C−Y_wand monetary saving as S_m≡Yw−C. It always holds Q_m≡−S_m, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget balancing, total monetary profit is zero.

What is needed for a start is two things: (i) a central bank that creates money on its balance sheet in the form of deposits, and (ii) a legal system that declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Y_w per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e., if C=Y_w.

Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. This time sequence is no problem for the central bank because the temporary overdrafts vanish with wage payments.

For the case of a balanced budget C=Y_w, the idealized transaction sequence of deposits/overdrafts of the household sector at the central bank over the course of one period is shown in Figure 2. #2

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. There is NO such thing as a fixed quantity of money. The central bank plays an ACCOMMODATIVE role and simply supports the AUTONOMOUS market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=κY_w, with κ determined by the transaction 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 the central bank. The economy NEVER runs out of money if the central bank does a good job.

The transaction equation reads M=κY_w=κPX=κPRL in the case of budget balancing and market clearing, and this yields the commonplace correlation between the average stock of money M and price P for a given employment level L, except for the fact that M is the DEPENDENT variable.

Money comes into existence on the balance sheet of the central bank as soon as the central bank enters an overdraft for the business sector on the asset side and a deposit of an equal amount on the liability side (step 1). This deposit is then transferred to the household sector as wage payment (step 2) and returns in the form of consumption expenditures (step 3). #3

Now, commercial banks are introduced. They can create and destroy ‘money’ technically exactly in the same way as the central bank, except for the fact that it is bank money and not central bank money. The crucial condition for the functioning of the two-monies system is that the business sector and household sector accept bank money as practically identical to central bank money.

To be sure, in the strict sense, bank deposits are NOT money; only central bank deposits are money. This becomes clear as soon as the households/firms try to exchange huge amounts of bank money for central bank money. This is known as a bank run. In this case, the central bank has to step in and help the banks out with the one and only genuine money. The best way to prevent bank runs from ever happening is the unconditional guarantee of the central bank to exchange bank money anytime and in any amount into central bank money.

So, the private sector = banks can create near-money that works under the appropriate institutional conditions just as central bank money. The real value of near money is the same as central bank money. Acceptance and the real value of money and near-money do NOT depend on the state’s taxing power.

Problems arise if money is not brought into circulation in the right way. Roughly speaking, as long as the central bank or the private banks or whoever else finances the wage bill Yw, and the wage rate W moves exactly with the productivity, the price P remains according to (1) absolutely constant. The real value of money/near money rises and falls ultimately with productivity.

However, if the money is brought into circulation at the demand side, such that the household sector takes up credit and spends it on consumption goods, things are radically different. The market-clearing price rises, and this reduces the real value of wage income. The output is now redistributed between income spenders and credit spenders, i.e. P₁=(C+C_cr)/O > P=C/O with C=Y_w and O=X. #4

Secondly, the business sector now makes a profit, i.e., Q_m=C_cr. It holds that the household sector’s deficit (dissaving) is equal to the business sector’s surplus (profit). If the money is brought into circulation by the government’s deficit spending it holds Public Deficit = Private Profit. Hence, MMTers as champions of state money creation and deficit-spending are ultimately ― knowingly or unknowingly does not matter ― agenda-pushers for the one-percenters. #5

With regard to Bitcoin, it follows that it is not even remote money, like a traveler’s check, for example, because the issuer does not guarantee to exchange it back at any time one-to-one into bank money or central bank money. The value of Bitcoin depends solely on the expectation that another private person will eventually exchange it for money or near-money or a financial or real asset. #6

Egmont Kakarot-Handtke


#1 Graphic AXEC31 Elementary production-consumption economy
#2 Graphic AXEC98 Idealized transaction pattern, household sector, balanced budget
#3 Basics of monetary theory: the two monies
#4 MMT, money creation, stealth taxation, and redistribution
#5 MMT is ALWAYS a bad deal for the 99-percenters
#6 Primary and Secondary Markets

Related 'The ultimate ― analytical ― origin of money'.

For more details about money, see AXECquery.

***

REPLY to Matt Franko, Tom Hickey Dec 30

In the political realm, there is rhetoric, storytelling, and obfuscation. In the scientific realm, there is axiomatization, consistency/proof, and clarity.

In the political realm, Humpty Dumpty rules: “‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all’.” #1

In the scientific realm, Aristotle rules: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

Economists never got above the level of proto-scientific storytelling and political agenda pushing. #2

Money is clearly defined and measurable with the precision of two decimal places. Money (liability side of the central bank’s balance sheet) is different from bank money, near-money, remote-money, pseudo-money, quasi-money, counterfeit money, crypto money, clay tablets, bullion, IOU, etcetera.

Needless to emphasize that the representative economist in general, and the MMTer in particular, have until this very day NO clear idea of the basic concepts of his subject matter, e.g. profit, income, money, and so on. But he has a lot to blather about democracy, the mob, and liberalism.


#1 Humpty Dumpty is back again
#2 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist

***

Specifics of the creation of E-Money/eMoney, cryptocurrency, etc.

Twitter Aug 21, 2021

Twitter Jan 28, 2022 #CryptoIsCrime

Twitter Nov 11, 2022

Twitter Nov 18, 2022

Twitter Nov 19, 2022 Media promotion of crypto and FTX

Twitter Nov 22, 2022

Occasional Tweets: Yes, MMTers are value-driven ― unfortunately not by scientific values

 

Yes, #MMTers are value-driven. Their top-value is #Profit for the #Oligarchy. The 3-sector #ProfitLaw Q≡(G−T)+(I−S)+Yd implies #PublicDeficitIsPrivateProfit. Thus, the #MMT policy of #DeficitSpendingMoneyCreation is a #FreeLunch for the #Oligarchy. pic.twitter.com/cfA49hnhse

— E.K-H (@AXECorg) January 29, 2022

***

Yes, #MMTers are value-driven ― unfortunately not by the scientific values of material/formal consistency.

Bill Mitchell’s dishonorable discharge from the scienceshttps://t.co/op89BTNCxE#MMT is refuted on all countshttps://t.co/9Rldtrw2J1#MMTers are just #UsefulIdiots. pic.twitter.com/RMO1lKI6C7

— E.K-H (@AXECorg) January 29, 2022

Occasional X: Clueless economists / Science (CCCLXIX)

“Ricardo begins with the simplest case: the commodities are produced by one type of labor alone, working perhaps on free land (I, 12 ff.) In this simplest case the relative values of commodities will clearly equal the relative quantities of labor necessary to produce them, and… pic.twitter.com/UWrvJdMR6x

— AXEC (@EgmontHandtke) August 4, 2026

For more on Ricardo, see the AXECblog. 

Value — the Bermuda Triangle for economic theories

Comment on Bruce Edmond on ‘Economic Value is not Price’

Blog-Reference

“Repeated reflection and inquiry have led me to the somewhat novel opinion, that value depends entirely on utility.” (Jevons, 1911, p. 1)

Since Jevons and the other Neoclassicals, utility and equilibrium have been seen as the two pillars that support the whole theoretical superstructure of standard economics. It is common knowledge that standard economics is a failure. And it is pretty clear why. Utility and equilibrium are NONENTITIES, green-cheese assumptions, much too swampy and muddy to build anything more upon than a shaky proto-scientific construct.

Because of this, the new heterodox curriculum will certainly not mention these concepts except as an example of orthodox incompetence, or worse. By the way, that utility is not such a good starting point for a serious theory of value is known since Cournot: “The abstract idea of wealth or value in exchange ... must be carefully distinguished from accessory ideas of utility, scarcity and suitability to the needs and enjoyment of mankind... These ideas are variable, and by nature indeterminate and consequently ill-suited for the foundation of a scientific theory ....” (Cournot 1897, quoted in Mirowski, 1995, p. 208)

What is more, as already Ricardo saw clearly, the theory of value cannot be based on exchange alone but must include production: “In speaking then of commodities, of their exchangeable value, and of the laws which regulate their relative prices, we mean always such commodities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint.” (Ricardo, 1981, p. 12)

Marx developed this idea further in his analysis of surplus-value. This goes in the right direction because the ultimate goal of value theory is the explanation of profit: “But in the act of exchange viewed as a whole, equals are in general always exchanged for equals, individual variations being canceled out. How then, are profits made, for, obviously, they are made?” (Kirkenfeld, 1948, p. 35)

As real-world economists, the Classicals and Marx had an objective value theory in mind, while Jevons ended in subjective wish-wash. In a nutshell, this is his value theory: “The truth is that pearls are valuable because there are so many ladies who have not got pearl necklaces, and who would like to have them.” (Jevons, see Google-Books)

This blather counts as an explanation among orthodox economists. Or take Samuelson's entirely tautological solution of the so-called water-diamond paradox: “In other words, how is it that water, which is essential to life, has little value, while diamonds, which are generally used for conspicuous consumption, command an exalted price? Although it troubled Adam Smith 200 years ago, we can resolve this paradox as follows: ‘The supply and demand curves for water intersect at a very low price, while supply and demand for diamonds are such that their equilibrium price is very high’.” (Samuelson and Nordhaus, 1998, p. 90), see also (2011b)

Note well that supply and demand curves, too, are NONENTITIES because they are ultimately based on utility. So, on closer inspection, economics has no acceptable value theory.

There can be no doubt that a lot of New Economic Thinking is required for Heterodoxy to develop a superior value theory — without ever mentioning utility again (for a start, see 2011a).

Egmont Kakarot-Handtke


References
Jevons, W. S. (1911). The Theory of Political Economy. London, Bombay, etc.: Macmillan, 4th edition. URL
Kakarot-Handtke, E. (2011a). The Pure Logic of Value, Profit, Interest. SSRN Working Paper Series, 1838203: 1–27. URL
Kakarot-Handtke, E. (2011b). The Value of Water and Diamonds: Back to Square One. SSRN Working Paper Series, 1954047: 1–19. URL
Kirkenfeld, T. (1948). The Paradox of Profit. Science & Society, 12(1): 33–41. URL
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
Ricardo, D. (1981). On the Principles of Political Economy and Taxation. The Works and Correspondence of David Ricardo. Cambridge, New York, etc.: Cambridge University Press. URL
Samuelson, P. A., and Nordhaus, W. D. (1998). Economics. Boston, Burr Ridge, etc.: Irwin, McGraw-Hill, 16th edition.

Related 'Capitalism, poverty, exploitation, and cross-over exploitation' and 'Profit for Marxists' and 'Exploitation and Its Unintended Outcomes: An Axiomatic View of Marx's Surplus Value' and 'The Logic of Value and the Value of Logic' and 'The creation and value of money and near-monies' and 'The Theory of Value and the worthlessness of economics' and 'Basics of Value Theory' and 'Primary and Secondary Markets'.

***

Graphic AXEC89  Circuit Theory of Value, elementary case with equal wages, Legend: P price, R productivity

Occasional X: Clueless economists / Science (CCCLXXVI)

“The answer to the water-diamond paradox falsified Marx’s assumption that value is derived from labor. Adam Smith in 1776 couldn’t answer why diamonds cost a bundle whereas water costs almost nothing in comparison although it’s necessary for survival. Carl Menger figured out that… pic.twitter.com/Febjk7TCYX

— AXEC (@EgmontHandtke) August 15, 2026

The value of money and the worthlessness of economics

Comment on David Glasner on ‘What’s Right and not so Right with Modern Monetary Theory’

Blog-Reference and Blog-Reference

David Glasner sets the frame: “In writing the paper, it occurred to me that it might be worthwhile to include a comment on Modern Monetary Theory inasmuch as the proposition that the value of fiat money is derived from the acceptability of fiat money for discharging the tax liabilities imposed by the governments issuing those fiat moneys, which is a proposition that Modern Monetary Theorists have adopted from the chartalist school of thought associated with the work of G. F. Knapp.”

Of course, other economists have said other things, and in the end, nobody has any idea what the value of money is. Economic reality is complex, you know, and economics ends always in the swamp where “nothing is clear and everything is possible.” (Keynes)

Walrasian microfoundations and Keynesian macrofoundations are provably false. Because economics is a failed science, it has to be reconstructed from scratch. This has already been done elsewhere #1, #2, #3, so here is the bare-bones version.

The elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household sector 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.

Under the conditions of market-clearing X=O and budget-balancing C=Y_w in each period, the price is given by P=W/R (1), i.e., the market-clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation, see AXEC31a. #4

The price is determined by the wage rate, which takes the role of the nominal numéraire, and productivity. The quantity of money is NOT among the price determinants. This puts the commonplace quantity theory to rest.

The real value of money is ultimately given by productivity. From (1) follows W/P=R, i.e., real wage = productivity. The value of money has nothing at all to do with the taxing power of the state.

Transaction money is zero at the beginning and the end of the period under consideration, see Graphic AXEC98. #5 All transactions are handled by the central bank, which continuously creates and destroys fiat money (= deposits and overdrafts) on its balance sheet. There is NO such thing as a fixed quantity of money. The central bank plays an ACCOMMODATIVE role and simply supports the AUTONOMOUS market transactions between the household and the business sector. The economy never runs out of money. Money comes into the economy on the supply side.

Monetary profit for the economy as a whole is defined as Q_m≡C−Y_w, and monetary saving as S_m≡Y_w−C. It always holds Q_m≡−S_m, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the macroeconomic Profit Law.

The problem with MMT is that it is bad theory #6 and bad policy #7, more specifically: MMT is a plain political fraud. #8

The Profit Law for the 3-sector case (household, business, state sector) reads Q_m≡(G−T)−S_m, which says that the business sector's profit/loss is given by the state sector's budget deficit/surplus and the household sector's dissaving/saving. For Sm=0, this boils down to (G−T)=Q_m, i.e., public deficit equals private profit. The profit of the monetary economy is, in this analytical limiting case, produced entirely by the state sector. In other words, deficit-spending/money-creation is a free lunch for the Oligarchy. Financial wealth grows in lockstep with public debt.

MMT is not a scientifically valid monetary theory but brain-dead propaganda for the benefit of Wall Street. The question is whether David Glasner does not understand how the monetary economy works or whether he is complicit in the fraud.

Egmont Kakarot-Handtke


#1 The creation and value of money and near-monies
#2 The objective value of money
#3 Sovereign Economics, Sec. 1.3, 4.6
#4 Graphic AXEC31a  Elementary production-consumption economy
#5 Graphic AXEC98 Idealized transaction pattern, household sector, balanced budget
#6 Wikipedia, economics, scientific knowledge, or political agenda pushing?
#7 MMT, money printing, stealth taxation, and redistribution
#8 Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople

Related 'MMT, money, value, and transcendental Capitalism' and 'The value of money and the worthlessness of economics' and 'The Dark-Matter Theory of Fiat Money {78a}'.

***

REPLY to Matt Franko on Jul 3

I said, “The quantity of money is NOT among the price determinants. This puts the commonplace quantity theory to rest.”

You say “LOL! not for the Monetarists it’s not... Just had Bill Dudley in Bloomberg op-ed saying “banks will lend out the Reserves!” last week... QT is certainly not put to rest... it’s being used right now by policy people.”

Right, but this proves only what everybody knows by now, i.e., that policy people are IQ-wise well below room temperature. The fact that there are still flat-earthers around does not prove anything against heliocentrism. Get it, the quantity theory and monetarism are scientifically dead.

What Bill Dudley or Bloomberg or any other clown in the political Circus Maximus says is just irrelevant.

If you still take these folks seriously, better loosen the straps on your facemask. Your last brain cell is dying for lack of oxygen.

***

REPLY to Matt Franko on Jul 5

You say “I submit that there are max 1,000 of us on planet earth that understand this.,. Out of 7.5 billion people.”

You are in the wrong reference frame. In science, the opinions and votes and clicks and likes of 7.5 billion people count exactly for zero.

MMT is provably false; that is what counts in science.

***

REPLY to LAL, Frank Restly, Henry Rech, ralph47 on Jul 5

You constantly argue: MMTers say this and MMTers say that. It is a matter of indifference to what MMTers say because MMT is provably false. MMTers are too stupid for the elementary algebra that underlies macroeconomics. For proof, see the section 'Scientific blunder from Keynes to MMT' in #1

So, there is no need at all to listen to what MMTers say, except for the political fact that MMTers betray the general populace.

Because of the macroeconomic Profit Law, it holds that Public Deficit = Private Profit. Therefore, public deficit spending is a free lunch for the ten percenters and amounts in real terms to stealth taxation of the ninety percenters.

This, though, is only the beginning. The business sector distributes profit to the ten-percenters. The ten percenters, in turn, buy the bonds that are issued in order to consolidate the short-term liabilities of the government sector.

Then, the ninety percenters are taxed in order to pay the interest on government bonds that are in the possession of the ten percenters. This goes as long as the public debt is rolled over. This is fine for the ten-percenters as long as the central bank keeps the interest rate above zero.

All in all, public deficit spending/money creation amounts to a fourfold fraud for the benefit of the ten percenters and the detriment of the ninety percenters.

MMT is the biggest redistribution program in the history of humankind. Private financial wealth is roughly equal to public debt. MMTers are currently the worst disgrace of academic economics, which has run for 200+ years now on a very high level of scientific incompetence, stupidity, and corruption.

Your comments are beside the point and absolutely irrelevant.


#1 Profit

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REPLY to Frank Restly, Henry Rech on Jul 8

You still do not get the crucial point of monetary policy. Roughly speaking, when fiat money is brought into the economy in order to pay a growing wage bill, it is a good thing; when fiat money is brought into the economy for deficit spending, it is a criminal thing because it amounts to counterfeiting. This puts the MMT talking points into a new perspective.

• The counterfeiter never runs out of money.
• The counterfeiter never stops stealing stuff from the rest of society.
• The counterfeiter increases the profit of the business sector with his additional demand.
• The counterfeiter says that he is good for the economy and employment.
• When the economy breaks down, the counterfeiter increases deficit spending/ money creation.
• The counterfeiter 'solves' any problem from unemployment to pandemics to global warming with deficit spending/money creation.
• The counterfeiter continuously increases the public debt but says that it does not matter.
• The counterfeiter is a criminal, but never gets caught because he games the fiat money system from within.
• The counterfeiter gets valuable PR support from academia, in particular from the MMT fake science trolls.

With your ignorance and scientific incompetence, you are practically — intentionally or unintentionally does not matter — part of a gigantic political fraud.

***

REPLY to Frank Restly on Jul 9

You are in the wrong reference frame. Economics is about how the monetary economy works and NOT what the Constitution says. Economics is, according to its explicit self-definition #1, a science, and the Constitution is politics. It is the foundational principle of science that both spheres must be kept apart. It is a well-known fact that politics corrupts everything it touches. It is the story of Midas, but instead of turning everything into gold, politics turns everything into shit. So, the principle of the strict separation of science and politics is constitutional for science.

The macroeconomic profit law implies Public Deficit = Private Profit. So, the MMT policy of deficit spending/money creation is clearly a free lunch for the one-percenters. #2 MMT claims that MMT policy benefits the ninety-nine percenters, while the exact opposite is true. So MMT is a political fraud. It is academics like Stephanie Kelton who promote the greatest redistribution of income and financial wealth in history. #3 The current distribution is, in the main, the result of the growth of public debt over the last 200+ years. Make no mistake, it is WeThePeople who owes the debt. And it is the one-percenters who own the financial assets.

By blowing smoke about the Constitution, you are covering the political fraud of MMT. This may be okay according to the Constitution, but it is not okay according to the principles of science.

The scientific fact of the matter is that MMT goes down the scientific toilet and you with it.


#1 “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.
#2 Keynes, Lerner, MMT, Trump, etc. and exploding profit
#3 MMT: For the record

***

REPLY on Jul 10

What Is MMT? (Short Version)

MMT is the issuance of counterfeit currency in the form of deficit spending/money creation for the benefit of the one-percenters.

Genuine currency and counterfeit currency are indistinguishable because they originate from the same source: the FED. It all depends on whether additional fiat money is injected on the supply or the demand side.

MMTers are not scientists but political agenda pushers. MMT policy is to the disadvantage of the ninety-nine percenters. The counterfeiter steals from the rest of society via the anonymous price mechanism.

It is the ninety-nine percenters who owe the public debt. And it is the one-percenters who own the corresponding financial assets. Interest on public debt works like a regressive tax as long as the debt is rolled over.

Because #PublicDeficitIsPrivateProfit, MMT is the biggest redistribution program ever.

MMT is a political fraud.

***

CROSS-POSTING on Jul 12

MMT – a Wall Street myth
Comment on Chris Dillow on ‘The Deficit Myth: A Review’

Chris Dillow’s main point of critique is “For me, Kelton is – albeit very lucidly – reinventing the wheel.”

This is, in fact, a compliment because MMT is proto-scientific garbage and Kelton is academic fraud. #1

MMT’s macroeconomics is provably false since Keynes, Kalecki, Lerner, etc. So, MMT policy guidance has no sound scientific foundations.

The macroeconomic Profit Law implies Public Deficit = Private Profit. This means that the greater part of the profit in the United States is actually produced by the state. The US economy has been hanging for a long time already on the state ventilator for its survival.

Among all that academic crap, MMT has the right message for Wall Street. Who is MMT’s first apostle? Right, Warren Mossler, ex-Wall Street. But Stephanie Kelton is, without a doubt, the more attractive salesperson. Economics has become part of the entertainment industry long ago, and the casting is done in Hollywood, where they know best what sells.

The rest is marketing/PR routine. Interviews, book, media hype, No. 1 on the best-seller list, and then, of course, trolling on social media. This is where Chris Dillow comes in: “Dr Kelton explain these ideas wonderfully clearly, so I recommend this book to all non-economists interested in government finances.”

MMT is itself a myth. MMT policy is NOT for the benefit of WeThePeople. MMT is the issuance of counterfeit currency in the form of deficit spending/money creation for the benefit of the one-percenters. Because PublicDeficit = PrivateProfit, MMT is the biggest redistribution program ever. MMT is a political fraud.

“Chris Dillow is a Marxian economist,” says Tom Hickey at Mike Norman Economics. There are historians who claim that Marx was already on the payroll of the financial Oligarchy.


#1 More details

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REPLY to David Glasner, Frank Restly, Henry Rech on Jul 15

It is pretty obvious that you have NO idea of how the monetary economy works. Because of this, you cannot properly assess MMT.

The underlying problem is that the monetary economy (capitalism or communism does not matter) is NOT a self-optimizing equilibrium system but eventually breaks down. #1

The Profit Law No 3 Q_m≡I−S_m tells one that macroeconomic profit is positive in a growing economy as long as the business sector’s investment is greater than the household sector’s saving. If this fails, macroeconomic profit turns into a loss, and the economy breaks down. This must eventually happen; what is unknown is the exact date. #2

However, there is a way to postpone the breakdown. The Profit Law, including the state sector, reads Q_m≡(I−S_m)+(G−T), that is, the second component of macroeconomic profit is the state sector’s deficit. It holds Public Deficit = Private Profit. #3

The MMT policy of deficit spending/money creation is ultimately a means of postponing the breakdown of the US economy. From a political standpoint, the COVID pandemic provides a good rationale to mute the budget balancers and to blow the deficit up to hitherto unknown proportions.

The volume of the deficit and the popularity of MMT #4 are good metrics for the acceleration of the breakdown.

If you intend to learn economics, I recommend the new textbook Sovereign Economics. #5


#1 Major Defects of the Market Economy
#2 Mathematical Proof of the Breakdown of Capitalism
#3 Graphic AXEC143d
#4 Keynes, Lerner, MMT, Trump and exploding profit
#5 Amazon or BoD

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#PointOfProof

before Jul 16

after Jul 16

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