Dr. Kelton tweet thread on issuing money

“As the government has the right to issue fiat money, government debt is safe from danger of default of either interest or principal when due.”
~H.P. Minsky, 1959
Putting it more crudely, “the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default.” ~Alan Greenspan…
Warren Buffett: “We’ve got the right to print our own money. That’s the key.”
Even the King of Debt (sometimes) gets it: “This is the United States government. You never have to default because you print the money, OK. I hate to tell you.” (video of Trump)
None of this should be remotely controversial. Here’s the STL Fed making the same point. “Our challenge is not “finding money” but managing inflation-risk in an economy where the government-as currency issuer-is not constrained by the need to raise revenue.”
Hence, “pay-fors” (tax hikes or cuts to other parts of the budget) exist to offset the inflationary effects of proposed spending. More-or-less unnecessary in a depressed economy. Closer to full employment, they MAY be necessary. Depends on several factors.
It would be extremely useful if lawmakers (and their budget-scoring agents) began with the question, “Will this proposed spending bill require offsets and, if so, how much needs to be offset?” And show your work!
Instead, we start with the proposition that any new spending bill should be “paid for”–i.e. government must demonstrate that it has a plan to remove a $ from the economy for every $ it plans to spend into the economy. That is holding us back, big time.
Can I close out this thread and get back to my book now? I can’t tell whether I’ve convinced everyone on Twitter. 😉
Lastly, to anyone who thinks MMT is some flighty, print-your-way-to-prosperity program, NO! What I’m advocating is a far more *serious and technical* way to approach the federal budgeting process.

Source: Thread by @StephanieKelton: “”As the government has the right to issue fiat money, government debt is safe from danger of default of either interest or principal when du […]”


The 12-Point Platform | Corrente

Just because:

Happy birthday, Social Security! – – – – – – – – – – – – – – – – ✂ – – – – – – – – – – – – – – – – “The 12-Point Platform” is a simple and self-explanatory list of common-sense programs that will benefit every American, no matter their class, gender, race, or age. “The 12 Reforms” are the programs needed to secure the benefits of the Platform. The Single Value ties the Platform and the Reforms together: Government is to be used for “public purpose,” and not for privilege (which means “private law”).

The 12-Point Platform

    A Living Wage
    Medicare for All
    Tax the Rich
    Job and Income Guarantee
    Debt Jubilee
    Retirement Security
    Free Public Education, pre-K-16
    Post Office Bank
    Enforce the Bill of Rights
    End the Wars
    Clean Air, Water, Soil, and Food Carbon Negative Economy

The 12 Reforms

    Net Neutrality
    Fairness Doctrine
    Local Ownership of Media
    Public Campaign Financing
    Electoral Integrity
    Self-Organizing Web-Based Citizen Deliberation
    MMT Macro-economic Policies
    Preserve and Expand the Commons
    More Co-operatives, Fewer Corporations
    Justice Starts at the Top
    Strategic Non-Violence
    Points and Reforms Are Indivisible

The Single Value

    Public Purpose

Source: The 12-Point Platform | Corrente


239 Years Ago, Adam Smith Predicted Fury of Seattle Business at CEO Who Pays Workers Well

For the quotes, mostly, click here to read the whole thing and get the links to the Adam Smith volumes:
239 Years Ago, Adam Smith Predicted Fury of Seattle Business at CEO Who Pays Workers Well.

But here are the quotes:

But if Smith were alive today he’d be considered a crazy radical. In addition to his claim about employers, here are some other things he wrote in The Wealth of Nations:

• “All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” Book III, Chapter III

• “Men of inferior wealth combine to defend those of superior wealth in the possession of their property, in order that men of superior wealth may combine to defend them in the possession of theirs. … Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.” Book V, Chapter I

• “High profits tend much more to raise the price of work than high wages. … Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.” Book I, Chapter IX

• “The proposal of any new law or regulation of commerce which comes from [business], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public …” Book I, Chapter XI

• “The rate of profit … is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin.” Book I, Chapter XI

• “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Book I, Chapter X

I’m not sure how exactly the U.S. right came to love Adam Smith so much. I guess they just never read him.


Income Inequality & the Causes of Poverty | Positive Money

Not just the UK, either:

Because almost all of our money is ‘on loan’ from banks, someone has to pay interest on nearly every pound in the UK. This interest redistributes money from the bottom 90% of the population to the very top 10%. Meanwhile, inflated house prices and financial instability all lead to a growing gap between the poor and the rich.

via Income Inequality & the Causes of Poverty | Positive Money.


Austrian Religion, like most religions, never dies..

Due to a recent invasion of my IRC channel on Freenode — ##political_reality — of amateur devotees of, I feel compelled to bring them up to date on some of the policy recommendations of one of their favorite heroes, Friedrich Hayek, from Robert Solow:

One Tea Party activist reported that his group’s goal is to fill Congress with Hayekians. This project is unlikely to go smoothly if the price of admission includes an extensive reading of Hayek’s writings. As Davidson remarks, some of Hayek’s ideas would not go down well at all with the American far right: among them is a willingness to entertain a national health care program, and even a state-provided basic income for the poor.

The source of confusion here is that there was a Good Hayek and a Bad Hayek. The Good Hayek was a serious scholar who was particularly interested in the role of knowledge in the economy (and in the rest of society). Since knowledge—about technological possibilities, about citizens’ preferences, about the interconnections of these, about still more—is inevitably and thoroughly decentralized, the centralization of decisions is bound to generate errors and then fail to correct them. The consequences for society can be calamitous, as the history of central planning confirms. That is where markets come in. All economists know that a system of competitive markets is a remarkably efficient way to aggregate all that knowledge while preserving decentralization.

But the Good Hayek also knew that unrestricted laissez-faire is unworkable. It has serious defects: successful actors reach for monopoly power, and some of them succeed in grasping it; better-informed actors can exploit the relatively ignorant, creating an inefficiency in the process; the resulting distribution of income may be grossly unequal and widely perceived as intolerably unfair; industrial market economies have been vulnerable to excessively long episodes of unemployment and underutilized capacity, not accidentally but intrinsically; environmental damage is encouraged as a way of reducing private costs—the list is long.

and later…

THE GOOD HAYEK was not happy with the reception of The Road to Serfdom. He had not meant to provide a manifesto for the far right. Careless readers ignored his rejection of unqualified laissez-faire, and the fact that he reserved a useful, limited economic role for government. He had not actually claimed that the descent into serfdom was inevitable. There is no reason to doubt Hayek’s sincerity in this (although the Bad Hayek occasionally made other appearances).

Furthermore, Hayek actually foresaw the result of the misuse of his work and sensibly Hayek rejected the idea of dispensing with central banking.

Hayek argued that commercial banks in a competitive system produce “the same effect” as an overissuing central bank because, faced with an increase in the demand for loans, the banks characteristically expand the quantity of loans (by increasing their liabilities relative to their reserves) (147). They do not simply ration an unchanging volume of loans (by raising their loan rate of interest); by expanding, they hold the market rate of interest below the increased natural rate of interest…

One argument I had recently involved the rate of interest. With the Fed now paying little to no interest on bonds, the argument went that this held interest rates “artificially low.” In the first place, the government choosing *not* to inject money in the form of dividends into the market would seem to be in line with what these guys say they want–and in the second place, whatever interest rate results when such support is withdrawn has to be the private market’s “natural rate”, obviously. Which, much to Austrian chagrin, appears to be zero or below. The only direction it can go is up, unless the markets want to pay for the government to protect their cash. Which they actually do on occasion.

Hayek set forth his thesis on the discoordinating character of competitive banking as follows:

If in the course of our investigation, it is possible to prove that the rate of interest charged by the banks to their borrowers is not promptly adjusted to all changes in the economic data (as it would be if the volume of money in circulation were constant)—either because the supply of bank credits is, within certain limits, fundamentally independent of changes in the supply of savings, or because the banks have no particular interest in keeping the supply of bank credit in equilibrium with the supply of savings (there goes “loanable funds”–zap) and because it is, in any case, impossible to do so—then we shall have proved that, under the existing credit organization, monetary fluctuations must inevitably occur and must represent an immanent feature of our economic system.

Hayek’s thought on this is illustrated now by Steve Keen’s modeling of banking behavior, much of which doesn’t include governments.

Oddly, readers of the above-mentioned never seem to have ever heard of these facts. Like many religions, they don’t actually *read* the works of their gods.


Mixed fortunes as solidarity economy takes root in Greece | World news | The Guardian

This is big, really really big. Buried in this article about the Greek people coping with their incredible money crisis is this:

“There were a lot of ideas circulating before, but in the context of the crisis there was an incentive to put them into action. The other part was need, you had a lot of people who had lost their jobs,” said Ilias Ziogas, of the Syn Allios (Together with Others) cooperative, set up in 2011 to sell fair-trade goods.

It has managed to increase sales as regular shops have failed

Traditional (capitalist) business startup failure rates after 5 years are in the 95% range, even in *good* economic times. At the same time, 80-90% of co-ops are still going strong.

Right now, in the US, more businesses are dying than being born. It’s time to bring co-ops to the fore, with financial and legal support.

Here is the most famous success story, Mondragon

And How to go about it and why.
via Mixed fortunes as solidarity economy takes root in Greece | World news | The Guardian.


An Unsustainable Position – Hoisted from Krugman’s Comments

Actually let’s be clear… after taking on Germany’s "austerity" plan, also known as "let the German bankers inflate bubbles in your country and profit, then make your poor people suffer when the bubble collapses", the Greek economy has suffered as much damage as Germany’s economy did as a result of WWII. 25% reduction, in both cases. So, after being a member of the Euro destroyed Greece’s economy at a level that usually involves carpet bombing, they *still* managed to produce a primary surplus. At this point saying that they are less responsible than the Germans is nothing more than racism at its finest.

via An Unsustainable Position – The New York Times.


Mosler’s 11 steps to fix the economy

A great time to consider these again (from 2010):

1. A full ‘payroll tax holiday’ where the US Treasury makes all FICA payments for us (15.3%). This will restore ‘spending power’ and, by allowing households to make their mortgage payments, will fix banks from the bottom up. It may also keep prices down as competitive pressures may lead businesses to cut prices, passing on their tax savings to consumers even as sales increase.

2. A $500 per capita federal distribution to all the states to sustain employment in essential services, service debt, and reduce the need for state tax hikes. This can be repeated at perhaps 6 month intervals until GDP surpasses previous high levels at which point state revenues that depend on GDP would be restored.

3. A federally-funded $8/hr job and healthcare benefits for anyone willing and able to work. The economy will improve rapidly with my first two proposals and the private sector far more readily hires folks that are already employed. In 2001 Argentina implemented this proposal, putting to work 2 million people who had never held a ‘real’ job. Within 2 years, 750,000 of those 2 million were employed by the private sector.

4. Making banks utilities. The following are disruptive, serve no public purpose and should be done away with:

–Secondary market transactions
–Proprietary trading
–Lending against financial assets
–Business activities beyond approved lending and bank account services.
–Contracting in LIBOR. Fed funds should be used.
–Subsidiaries of any kind.
–Offshore lending.
–Contracting in credit default insurance.

5. Federal Reserve — The liability side of banking is the wrong place to impose market discipline.

The Fed should lend in the fed funds market to all member banks to ensure permanent liquidity. Demanding collateral from banks is disruptive and redundant, as the FDIC already regulates and supervises all bank assets.

6. The Treasury should issue nothing longer than 3 month bills. Longer term securities serve to keep long term rates higher than otherwise.


–Remove the $250,000 cap on deposit insurance. Liquidity is no longer an issue when fed funds are available from the Fed.
–Don’t tax good banks for losses by bad banks. This serves only to raise interest rates.

8. The Treasury should directly fund the housing agencies to eliminate hedging needs while directly targeting mortgage rates at desired levels.

9. Homeowners being foreclosed should have the option to stay in their homes at fair market rents with ownership going to the government at the lower of the mortgage balance or fair market value of the home.

10. Remove ‘self imposed constraints’ that are disruptive to operations and serve no public purpose.

–Dump the debt ceiling – Congress already votes on spending and taxes.
–Allow Treasury ‘overdrafts’ at the Fed rather than forcing it to sell notes and bonds. This is left over from the gold standard days and is currently inapplicable.

11. Federal taxes function to regulate aggregate demand, not to raise revenue per se, and therefore should be increased only to cool down an overheating economy, and not to ‘pay for’ anything.
Mosler’s 11 steps to fix the economy.

To understand how these would work, go here: The 7 Deadly Innocent Frauds