Gyroscopic Investing

MachineGhost wrote:

Gumby wrote: Sorry, I'm not an MMTer MG. You'd have to ask an MMTer.

You made the original assertation that "consumer demand causes inflation", posted a chart and made statements about employment and inflation being linked (which is a claim of the Philips Curve), so at least back it up, even if you've got to go get a revised version from a MMTer.  How else do you have any basis for your claim?

MG, What I said was hardly earth-shattering. It's a well known effect, known as Demand-pull inflation.

MachineGhost wrote: Here's some quick proof for mine:

From Inflation and the Size of Government:
http://research.stlouisfed.org/publicat ... t2/Han.pdf

The paper you cited as "proof" is hardly conclusive about anything. It finds some strong correlation during wartime. That's about it. The correlation could be due to anything.

MachineGhost wrote:From the web:

I don't see much correlation over the past decade. And we already know that wages were tied to inflation during the 70s — which explains that correlation. Anyway, you didn't get that chart from "the web". You got it from John Hussman.

See: http://www.hussman.net/wmc/wmc100119.htm

MachineGhost wrote:Again:

INFLATION = ( GOVERNMENT SPENDING + CHANGE IN VELOCITY ) - PRODUCTIVITY

Again... You are citing a very rudimentary version of the Quantity of Money Theory. It doesn't work over the short term, and nobody can predict the future over the long term with an equation. That is Monetarism. There is no simple nifty formula to predict inflation based on the money supply and velocity, period.

MachineGhost wrote:Take note that I've said over and over it is UNPRODUCTIVE government spending, not spending per se, that causes inflation.

Even MMT agrees with you there. There is no economic theory that endorses "unproductive" government spending.

MachineGhost wrote:Look at Iran's hyperinflation right now

It's hardly the same thing. Iran's inflation is due to exogenous circumstances — sanctions and civil unrest, for instance — not something you can pinpoint in your equation. Iranians have the world's militaries against them, and they are not really a free market. They are a dictatorship. It's not comparable.

MachineGhost wrote:This is all in accord with MMR (and probably some parts of MMT?).  So my point has nothing to do with the QUANTITY of money nor am I alleging Monetarism.

The rules of MMT and MMR do not apply to Iran, since it has significant sanctions. There is no currency on the planet that could withstand massive sanctions. The rial dropped nearly 15% not 48 hours after Obama announced the recent sanctions.

MachineGhost wrote:Has the equilibrium theory been discredited or disputed in some way?  Then point it out.  It may be simple, but it is descriptive of how people actually behave in reality.

Equilibrium hasn't been discredited. But, it won't predict the future in the way you are using it. You can't predict the future. This should be obvious, but you seem to think you've discovered some kind of model for predicting inflation. You haven't.

Your rudimentary quantity of money theory was discredited decades ago. No mainstream economists are predicting the double-digit inflation that your equation is spitting out. Hussman might be predicting double-digit inflation, but that hardly counts for anything.

MachineGhost wrote:When the government appropriates goods/services away from the private sector, there is a reduction in supply along with a concommital increase in money (because it first creates the money to spend).

Again. You're quoting Hussman's article. Building a productive and useful bridge with government spending isn't an example of this. Educating children isn't an example of this.

MachineGhost wrote:Here's a question: Do you deny that competitive supply and demand forces have any effect on money itself?  Because I think that gets to the crux of the argument.

What do you mean by "have any effect on money itself"? I believe in Demand-pull inflation and Cost-push inflation. Most Keynesian economists believe in those types of inflation. Not much to discredit there. There is also wage inflation, etc...

This idea that you can determine inflation simply by looking at a simple rudimentary formula involving government spending is totally wrong. Stop reading Hussman. He's filling your head with false prophesies.

MG, it's pretty clear you are a fan of Hussman. Unfortunately, Hussman is often dead wrong when it comes to inflation. This is what Hussman said in 2010:

“A week ago, the Federal Reserve initiated a new program of “quantitative easing”? (QE), with the Fed purchasing U.S. Treasury securities and paying for those securities by creating billions of dollars in new monetary base. Treasury bond prices surged on the action. With the U.S. economy predictably weakening, this second round of quantitative easing appears likely to continue. Unfortunately, the unintended side effect of this policy shift is likely to be an abrupt collapse in the foreign exchange value of the U.S. dollar.”?
Source: http://hussmanfunds.com/wmc/wmc100823.htm

Ooops.

MachineGhost wrote:INFLATION = ( GOVERNMENT SPENDING + CHANGE IN VELOCITY ) - PRODUCTIVITY

So, this is directly from Hussman. He takes the "equation of exchange" and uses it to try to (unsuccessfully) guess inflation.

Scott Fullwiler was recently asked about Hussman's take on variations of the exchange equation. If you're not familiar with Scott Fulwiler, he is a leading expert on Treasury/Fed operations. He's also made significant contributions to the operational aspects of MMT/MMR. Unlike Hussman, Fullwiler got QE right before before it even started. Fulwiler was asked to testify before Congress, about QE — unfortunately, they cancelled his testimony before he was scheduled to appear. Too bad.

Anyway, here is Fullwiler's response to the question about Hussman and the equation of exchange you've been citing:

WH10: Scott, I was wondering if you have a link, paper or a response that debunks “the exchange equation (monetary velocity)”? and its correlation with short-term interest rates and ultimately inflationary effects. Hussman uses these equations and relationships to show how you can supposedly back out the inflation that could result from an increase in interest rates given a certain monetary base. Much of his points seem to be at total odds with MMT, fundamentally, yet the data and graphical relationships don’t seem to lie (though I realize they often can and do). I figure there must be some explanation. In the beginning of the piece he says you can’t use LM=PY alone to predict changes in inflation resulting from a changed monetary base, but by the end of the piece he is saying if you take into tsy interest rates, you can.

SCOTT FULLWILER: Looks like a typical monetarist model using Tbill rates to predict velocity. In reality, the monetary base and velocity are outcomes, not causes. So, it’s perfectly consistent with MMT to have charts as Hussman does, as we’d expect the same correlations. The problem is he’s got the correlations right but the causation wrong.

WH10: That makes sense and was the feeling I had.

M/PY = .094 – .022 * ln(i) seems to predict actual velocity terribly well.

Is rearranging that equation in the way he does (P= M/[(.094-.022*ln(i))*Y]) wrong because of your point that the causality is incorrect? I guess why does the first work but not the second?

Are there more proper causal relationships and/or equations? Perhaps the MMT version of this monetarist model?

SCOTT FULLWILER: The point is, why is velocity really low when i is really low? Think about why the Fed would set i really low (the Tbill is indistinguishable statistically from the Fed funds rate) and it’s pretty obvious.

WH10: Thanks Scott. So you’re saying when the Fed sees low velocity, they’ll target “i”? low to stimulate the economy, and when velocity is high they’ll raise it. But it’s not that a rise in “i”? will cause inflation (in fact it should in theory stifle it right?).

SCOTT FULLWILER: It’s not velocity they’re targeting, it’s the state of the economy. You can’t “target”? velocity. It’s a residual, a ratio of nominal GDP/MB. He’s just flipping that over for MB/nominal GDP in the first graph. The monetary base is almost completely unrelated to both, so lower i target is associated with lower GDP is basically all he’s showing. Adding QE’s effect (raising the monetary base) just enhances the relation since that’s only undertaken with lower GDP. Just flip it back to nominal GDP/MB for the second graph and you flip the graph. Third graph is growth in MB has negative relation to growth in nominal GDP/MB–almost tautological. All of it is completely as expected.

Like velocity, the MB doesn’t “cause”? anything; the currency component is well-known to have a trend growth path with minor cycles that are reflections of GDP and other seasonal issues. But it’s completely in response to these–it doesn’t cause them. And reserve balances are known to move opposite to interest rates (a bit–since the rate is the opportunity cost of holding reserve balances) or rises with QE. But, again, reserve balances don’t “cause”? banks to do anything.

So, overall, the relationships are as expected, but they aren’t causal relationships.
Hope that helps.

Source: http://pragcap.com/welcome-to-the-7th-u ... ment-47554

Hussman gets a lot of things right. But his Monetarist views of inflation isn't one of them. Hussman's QE-will-result-in-hyperinflation call is just embarrassing.

Gumby wrote: Even MMT agrees with you there. There is no economic theory that endorses "unproductive" government spending.

It seems pretty obvious to me that if any quantity of money isn't inflationary or deflationary, then only that part which is not increasing/decreasing productivity in the economy would have any negative/positive effects since its not being nominalized out.  If this hasn't been satisfied to the rigors of peer-reviewed academia, then it's either wrong or academia is behind the curve again.

But, I find it strange that it would be difficult for economics to undersand asymmetrical inflation.  Too much money chasing too much goods is as equivalent as too much demand chasing too few goods.  Who cares what the form is?  An excess of anything is inflationary.

The rules of MMT and MMR do not apply to Iran, since it has significant sanctions. There is no currency on the planet that could withstand massive sanctions. The rial dropped nearly 15% not 48 hours after Obama announced the recent sanctions.

You don't think sanctions would decrease an economy's productivity rapidly?

Again. You're quoting Hussman's article. Building a productive and useful bridge with government spending isn't an example of this. Educating children isn't an example of this.

You cant know whether or not the appropriation is productive ahead of time.  That is why there is a lag before inflation from unproductive spending shows up in the economy.  We have plenty of historical evidence the government can't spend productively anyway, so I don't think it should be given the benefit of doubt here.

What do you mean by "have any effect on money itself"? I believe in Demand-pull inflation and Cost-push inflation. Most Keynesian economists believe in those types of inflation. Not much to discredit there. There is also wage inflation, etc...

This idea that you can determine inflation simply by looking at a simple rudimentary formula involving government spending is totally wrong. Stop reading Hussman. He's filling your head with false prophesies.

Okay, it all makes sense to me now.  You're pushing Keynesianism and accusing me of Monetarism.  I think both alone are B.S..

MG, it's pretty clear you are a fan of Hussman. Unfortunately, Hussman is often dead wrong when it comes to inflation. This is what Hussman said in 2010:

Hussman is one of the few economists I've come across that realizes inflation isn't strictly a monetary policy phenomenom, and proved it without discarding it as an afterthought, and without ignoring the supply side like Keynesianism does.  What Hussman has in common with MMR is that both agree that the fiscal policy is what creates money.  But, Hussman also recognizes the four sources of inflation in the economy, both fiscal side and demand/supply side.  I'm sorry, but I'll take a more comprehensive view of inflation over the narrow Keynesianism dogma anyday.  If Keynesiasm was so accurate in describing the way the world works, there wouldn't be all these competing heterodox economics in the first place.

I'm not going to be an apologist for Hussman, but come on, errors in timing isn't going to sufficiently discredit anyone given how low probability timing is to begin with.  If you look at a USDX chart it was already tanking when Hussman wrote that anyway and didn't put in a bottom until middle of 2011.  Exogenous factors like "flight to safety" from Europe probably have prevented an "abrupt collapse" (which without the proper context sounds like a prophesy, but as I recall he had been talking about the abrupt collapse in currencies necessary to bring about higher forward real rates necessary to attract capital flows back to a country, ala Asian Currency Crisis, etc.).  That can't be discredited anymore than those "exogenous" factors currently affecting Iran that you want to use to ignore the inflation equation (BTW, the Keynesianism is in the "productive output" but because Keynesianism doesn't normally see things in terms of supply-side, it can be hard to grok.)

MG

Gumby wrote: Hussman gets a lot of things right. But his Monetarist views of inflation isn't one of them. Hussman's QE-will-result-in-hyperinflation call is just embarrassing.

I didn't read anything in the response that discredits the equation, just a claim that the causations acting on the equation are different than alleged.  That I can buy, but given that this topic is occuring under MMT it is all a theoretical pissing contest.

Oh please, stop with the ad hominem attacks.  Hussman hasn't predicted hyperinflation, he expects inflation to double over a period of decade.  That is only 7% CAR, likely back loaded as velocity increases when the economy recovers.  In other words, I suspect Hussman expects the Fed to screw up by not taking back the huge increases in the monetary base/not rising short term rates fast enough to offset the decreased demand for money (velocity = supply/demand for money).  Given the Fed's historical performance, that is not an inaccurate observation.  It prefers "full employment" over "tight money" which also just happens to be the PP's weak spot.

MG

MachineGhost wrote:

What do you mean by "have any effect on money itself"? I believe in Demand-pull inflation and Cost-push inflation. Most Keynesian economists believe in those types of inflation. Not much to discredit there. There is also wage inflation, etc...

This idea that you can determine inflation simply by looking at a simple rudimentary formula involving government spending is totally wrong. Stop reading Hussman. He's filling your head with false prophesies.

Okay, it all makes sense to me now.  You're pushing Keynesianism and accusing me of Monetarism.  I think both alone are B.S..

Huh? I'm not a Keynesian. Just about everyone on the planet understands demand-pull inflation. That's Econ 101. You even gave an example of demand-pull inflation the other day when you said..

MachineGhost wrote:What they forget is all that "free" government money appropriating the good/services in the private sector will drive up the cost as there isn't enough supply to meet the increased demand.

...and I agreed with you. That's demand-pull inflation! Even you believe in it and you don't even realize it. You don't need to be a Keynesian to understand how supply and demand affects the price of goods.

Anyway, MG. We just have different views of the world. But, I enjoyed the discussion. Cheers!

Gumby wrote: ...and I agreed with you. That's demand-pull inflation! Even you believe in it and you don't even realize it. You don't need to be a Keynesian to understand how supply and demand affects the price of goods.

Of course I believe in it.  But look at it from my point of view: you've been ascribing to me and claiming only Monetarism while making only Keynesianism claims (consumer demand, Philips Curve), while I believe in many aspects from both (and others) schools of thought.  You would have me cut off my arm to spite my leg.

I mean, seriously, when in the heck did inflation ever get divorced from money?  It's a foundational tenant!  Friedman may have been inaccurate about the source and the Fed experiment was a disaster, but it doesn't mean inflation doesn't exist in money in addition to goods/services.  You would imply that the quantity theory of money/Monetarism hasn't evolved anymore than the Philips Curve did.

The only way I'll be persuaded to adopt a better framework for describing inflation manifestation is when someone presents a better equation or model along with historical explanatory evidence, etc..  Ascribing different causations to the same working equation just seems like a tautology to me.  But maybe that's not possible because we haven't had that many different economic environments under post-gold standard yet.  I certainly doubt we'd have a wage-price spiral the next time, so the similarities between that and the gold-standard in terms of the Philip Curve won't repeat.

MG

MachineGhost wrote:I mean, seriously, when in the heck did inflation ever get divorced from money?

It happened in the early 1990s when people realized that all of the government spending wasn't translating into inflation. We are still waiting.

I mean, does Hussman assume all unproductive government spending is inflationary? But how inflationary could that spending really be if most of the money were to wind up in the pockets of the top 1%?

Medium Ghost, is it possible that what you (and Hussman) are thinking of is currency slide inflation? If there is a free choice as to which currency any one uses, then a glut of one currency can cause it to be exchanged for an alternative currency. Those currency exchange transactions are a high rate of velocity I guess -so fitting in with your equations. Within the USA, the tax and other laws mean that people have to use USD. That is why there is little danger of domesticly instigated currency slide inflation. Outside the USA, the situation is more muddy. The glut of USD outside the USA is making it increasingly hard to keep the USD as the sole currency for global commodity trading. If oil and iron ore  are no-longer offered for sale in USD, then the USD could collapse in foriegn exchange markets- hence the "petrodollar wars" to enforce USD trade.

Gumby wrote: It happened in the early 1990s when people realized that all of the government spending wasn't translating into inflation. We are still waiting.

I'm unclear how you can say there hasn't been any inflation since the early 1990s.  We've had a 2.5% CAR of inflation since 1991.  We can't define "inflation" as only when it is "high".  In the early 90's, the Fed abolished reserve requirements for everything but checking accounts, so if there was any argument that fiddling with the money supply alone equates to inflation ("Monetarism"), then it got nullified.  And the 90's had a productivity boom with the PC and the Internet (I'm aware it was lower than in the 50's-60's).  The early 90's also saw the pinnacle of highly leveraged hedge funds that could take on central banks/governments and which changed the nature of interest rates forever.  Plus there was significant welfare reform under Bush Sr and Clinton, i.e. no more Welfare Queens driving Cadillacs.

I mean, does Hussman assume all unproductive government spending is inflationary? But how inflationary could that spending really be if most of the money were to wind up in the pockets of the top 1%?

I can't speak for Hussman, but this is my interpretation: Its not that just creating any "excess" MMR money is inflationary like the quantity theory of money theory (a direct relationship with the price level) or Monetarism (excess money supply generated by a central bank) would claim.  Let me try a different track:

INFLATION = ( MMR + MONETARISM ) - (KEYNESIANISM + AUSTRIAN + SUPPLY-SIDE)

So unproductive to me means the inflationary end result of the left side of the equation not monetizing enough (or too much) of the right side of the equation.  In other words, it is transfer payments to the unproductive consumers or businesses of society, those that don't create any direct value (less indirect value creation from their own spending, of course).  The "gap" between productive monetization and unproductive monetization would be reflected in the inflation rate.

By including Monetarism in the above equation, you realize that hoarding MMR money has the same net effect as the Fed decreasing bank reserves.  Its not until that hoarded MMR money is circulating in a relatively less productive economy (and not being exported ala Japan) that it would be inflationary and have any effect on the inflation rate (and subject to the Fed not taking it back fast enough... which can police the rate of but not inflation per se).  So long as people prefer to hoard MMR money under negative/low real interest rate periods, then inflation will remain low insofar as inflation relates to the supply/demand for money.  It's certainly possible that you could have low demand/supply for money but high demand/low supply for goods/services and have a high inflation rate.  That probably happens under fixed exchange rate regimes or immediately post-currency collapse.

But hey, I could be wrong.  I don't got no PhD in economics or have a self-serving agenda for any economic school.

MG

stone wrote: Medium Ghost, is it possible that what you (and Hussman) are thinking of is currency slide inflation? If there is a free choice as to which currency any one uses, then a glut of one currency can cause it to be exchanged for an alternative currency. Those currency exchange transactions are a high rate of velocity I guess -so fitting in with your equations. Within the USA, the tax and other laws mean that people have to use USD. That is why there is little danger of domesticly instigated currency slide inflation. Outside the USA, the situation is more muddy. The glut of USD outside the USA is making it increasingly hard to keep the USD as the sole currency for global commodity trading. If oil and iron ore  are no-longer offered for sale in USD, then the USD could collapse in foriegn exchange markets- hence the "petrodollar wars" to enforce USD trade.

I never heard of that term before, but Hussman has been talking about the currency adjustments needed to attract capital under equilibrium, i.e. increasing the real rate of return by a collapse in the value abruptly.  Currencies don't generally move very much in any given period of time, nevermind collapse abruptly, so that typically only occurs when fixed exchange rates finally give up the ghost.  The USD has been pretty volatile the past several years though, so I suppose abruptly is rather subjective for the world's reserve currency.  Its not like demand would completely dry up as with previous currency crisises (Thai baht comes to mind).

It seems to me though that the rudimentary inflation equation doesnt specifically account for the capital account, inter-country capital flows or worldwide competitive real interest rates at all.  It is rather domestic specific.

MG

Medium Ghost, Hussman doesn't seem to follow the MMT idea that the natural rate of interest under our current monetary set up is zero and creating an interest rate above zero requires a concious effort on the part of the central bank. I really wonder whether a Fed target rate for short term treasuries much above inflation would be possible with the current level of government debt outstanding. I wonder whether it would only be possible if some very unlikely taxation regime (such as an asset tax) was in force. Someone has to hold all of the bank reserves currently out there. Those bank reserves massively swamp any liquidity requirements of the banks. That is an enormous dampener on any attempts to raise interest rates even if the Fed were to want to (which it doesn't).

Weimar hyperinflation entailed a lot of currency slide inflation. People borrowing German currency to buy USD drove the exchange rate slide. The German government then printed into that vortex.

stone wrote: Medium Ghost, Hussman doesn't seem to follow the MMT idea that the natural rate of interest under our current monetary set up is zero and creating an interest rate above zero requires a concious effort on the part of the central bank. I really wonder whether a Fed target rate for short term treasuries much above inflation would be possible with the current level of government debt outstanding. I wonder whether it would only be possible if some very unlikely taxation regime (such as an asset tax) was in force. Someone has to hold all of the bank reserves currently out there. Those bank reserves massively swamp any liquidity requirements of the banks. That is an enormous dampener on any attempts to raise interest rates even if the Fed were to want to (which it doesn't).

Weimar hyperinflation entailed a lot of currency slide inflation. People borrowing German currency to buy USD drove the exchange rate slide. The German government then printed into that vortex.

My impression was that MMT believes holding the short term rate to zero would allow the marketplace to effectively optimize the level of interest rates.  I suppose that conflicts with equilibrium theory as it would essentially be "maximum velocity" at all times irregardless of what the underlying economy is doing, so it might also be "maximum inflationary" as well.  In some ways, that is more of a purer free market approach
than having a central bank engage in monetary policy by constantly fiddling with interest rates/bank reserves.  Heck, I thought the original purpose of bank reserves back in the day was to limit the leverage, which is the achilles heel of the FIRE sector.  I don't recall if Frank-Dodd finally set limits on leverage, but it is sorely overdue ever since the [hedge fund] Bond Market Rout of 1994.  The question is if government can ever apply such limits effectively?  It is hugely problematic in terms of measurement and application.  The big reason why Friedman's Monetarism failed when tried as a target by the Fed was because they just couldn't accurately (or what to) measure "monetary velocity" and "money supply".  Some things may just be unquantifiable.

I don't think the current situation is comparable with Weimer Germany.  The government was paying the striking workers directly with government bonds for their wages, i.e. pure Keynesianism demand-side stimulation.  We at least have to go through the dog and pony show of a bond market auction and route through monetary policy.

MG

MG,

I think that simple, strict bank regulation is supposed to play the role of "interest rate setting."  For instance, if banks had a 20% reserve requirement and had to hold on to more of the loans they create, you'd see much more responsible lending.

I think one of the reasons "anyone could get a loan" is that the ultimate borrower (your and my 401k plan, aka, US!) was so far seperated from the loan generator.

You can't have such a cobbled system of borrower and borrowee without tons of unintended consequences IMO... there were too many moral hazards worked into a system where nobody really felt like they had ultimate accountability.

moda, I totally agree with banks having to keep the loans on their own books right until they are paid off.

Bank reserve requirements are not such an obvious issue are they? Capital requirements are quite different from reserve requirements. Capital requirements are as a proportion of loans made. Reserve requirements are as a proportion of deposits held. I'm not sure quite why you think high reserve requirements help?

I just had a thought.

If Congress creates money into existence through spending by decree, I presume the Treasury Department actually cuts and sends out the checks, ACHs or otherwise disburses the funds to all of the recipients.  That's fiscal policy, i.e. creating bookkeeping money out of thin air with a wee bit of currency and coins thrown in as a sideline business for anarchronists.  The Treasury bond auctions are unnecessary and are just a dog and pony show.  All fine and good.

If that created bookkeeping money goes directly to the recipients, then how do Treasury bonds reflect the "net financial savings" of the private sector?  Almost all recipients will spend the bookkeeping money and keep it circulating that otherwise has exactly nothing to do with Treasury bonds.  For the small minority that doesn't spend the bookkeeping money, what assurance is there that they will "park" it in Treasury Bonds to properly reflect the "net financial savings" of the private sector?

MachineGhost wrote: I just had a thought.
If Congress creates money into existence through spending by decree, I presume the Treasury Department actually cuts and sends out the checks, ACHs or otherwise disburses the funds to all of the recipients.  That's fiscal policy, i.e. creating bookkeeping money out of thin air with a wee bit of currency and coins thrown in as a sideline business for anarchronists.  The Treasury bond auctions are unnecessary and are just a dog and pony show.  All fine and good.
If that created bookkeeping money goes directly to the recipients, then how do Treasury bonds reflect the "net financial savings" of the private sector?  Almost all recipients will spend the bookkeeping money and keep it circulating that otherwise has exactly nothing to do with Treasury bonds.  For the small minority that doesn't spend the bookkeeping money, what assurance is there that they will "park" it in Treasury Bonds to properly reflect the "net financial savings" of the private sector?

Spending money doesn't get rid of money it just passes it on to someone else UNLESS it is spent on treasury bonds in a primary auction (let's leave aside tax for the minute which is the other way that money gets withdrawn). All the money used to buy treasury bonds at the bond auction gets withdrawn from the system (that is the whole point of the exersize). So the government spends say $1B, then sells $1B of treasuries. That bond sale drains the $1B of bank reserves and so the net financial asset increase is $1B of treasury bonds.
The people who buy the treasury bonds at the bond auction are using money that has traversed all the way through the economy from the original recipients of the government spending.

stone wrote: The people who buy the treasury bonds at the bond auction are using money that has traversed all the way through the economy from the original recipients of the government spending.

Doesn't this imply a competition to see he who can collect the most Treasury bonds, for he who has the most proverbial gold, makes the rules?  And don't the rest of us poor peons have to compete among each other for a limited amount of money previously injected into the economy by Congress?

More and more I think pulling a John Galt and going on government assistance makes rational economic sense under MMR.  Its not like you're mooching off other taxpayers, instead you're just choosing not to compete for an artifically fixed amount of money with millions of other sharks in a never-ending rat race.

"More and more I think pulling a John Galt and going on government assistance makes rational economic sense under MMR.  Its not like you're mooching off other taxpayers, instead you're just choosing not to compete for an artifically fixed amount of money with millions of other sharks in a never-ending rat race."

I mean no offense, but I'm going to be very direct here...

In my view, MMR is convoluted snake-oil...sold by con-men and/or useful idiots...bought into by folks who think there's such a thing as a free lunch.

Go Galt...live off the grid...but Please don't be a moocher.

MachineGhost wrote: More and more I think pulling a John Galt and going on government assistance makes rational economic sense under MMR.  Its not like you're mooching off other taxpayers, instead you're just choosing not to compete for an artifically fixed amount of money with millions of other sharks in a never-ending rat race.

When you use your government assistance to buy goods and services, supply and demand dictates that you are bidding up the prices of said goods and services so that everyone--including people who are not on government assistance--have to pay more for them. So you actually are mooching off of people who aren't on government assistance.

MG,

Halt lived off the grid... I don't think he was a welfare recipient though.

Murphy,

After seeing what Austrian "economists" of late have been spewing, I'm surprised you think MMR is the snake oil.  And there is no free lunch.  When resources are fully tapped we get inflation.  If government builds an inefficient freeway or creates bad incentives, it has the potential to limit economic growth.  There are plenty of constrainststo what government can do, but when MMR insists that one of those constraints is not budgetary, it's simply pointing out something about the functional facts of having a treasury and fed that behave the way ours does.

The real result of excessive or corrupt government is inflation and economic stagnation.  Now insisting that inflation will maintain tame in spite of low rates and high deficits isnt really MMR so much as what a lot of MMR followers happen to also believe due to the nature of balance sheets, supply/demand equilibrium, and productive capacity in an economy such as ours, as well as the nature of private credit in both leveraging and deleveraging scenarios.

There is no free lunch.  People getting up at 6:00 in the morning to go build a bridge, repair a road, or upgrade a tunnel vs sitting on their asses unemployed is not a "free lunch."

Tortoise wrote: When you use your government assistance to buy goods and services, supply and demand dictates that you are bidding up the prices of said goods and services so that everyone--including people who are not on government assistance--have to pay more for them. So you actually are mooching off of people who aren't on government assistance.

I don't see it that way.  The elastic supply of bookeeping money relative to fixed goods and services causes inflation, not demand per se.  Sure, inflation may not be manifest in the system until the bookeeping money circulates, but I think that confuses cause and effect.  We're all being screwed by the debt-based currency issue monopoly system.  It seems unfair to single out one group over the other.

If we all received a flat and basic Citizen's Dividend check each month that does not ever change, how could there ever be inflation in goods or services absent natural disasters or other Black Swan events causing temporary scarcity?

Like moda said, MMR does claim to try and focus on the real rather than the bugetary.

I do agree with Murphy that MMR enthusiasts are the worst people around when it comes to trying to "game the system" in order to herd people into doing stuff on false pretences. Printing off money in order to get people to build roads etc seems to me to undermine the monetary system and the real economy suffers as a result. I think monetary expansion is a way to temporarily avoid facing up to real problems such as concentration of (financial) power. Failing to face up to that real problem just lets it snowball bigger in the background until it outgrows the capacity for money printing to cover it up.

Machine Ghost, I think our monetary system is so screwed up/hacked into/corrupted etc that it is almost impossible to use it as a way to gauge whether a way of life is "good" or not. I think if you're doing stuff that seems to be valued by other people in a non-financial sense then that now often provides a better way to gauge the worthiness of what you do.

But the worst aspect of the present global money system is its built-in requirement for continual growth – what I call the growth imperative. This stems from the fact that money is created on the basis of interest-bearing debt, so that the amount owed increases simply with the passage of time. But compound interest is an exponential growth function, which means that debt grows, not at a constant steady pace, but at an accelerating rate. The global money system requires the further continual expansion of debt in order to avoid financial collapse. Thus the bubble-and-bust cycles we have seen become ever more extreme, and the competition amongst borrowers for an insufficient supply of money results is ever increasing environmental despoliation and social degradation.

The credit commons has been the most overlooked aspect of the commons, yet it is the most crucial, because credit is the very foundation and substance of modern money, and money is the essential medium for exchanging goods and services. Whoever controls money controls virtually everything in the material world. The privatization of the credit commons has not only enabled the few to exploit the many, it has also driven economic expansion beyond any reasonable limits and fueled conflict over the control of resources around the world.

http://beyondmoney.files.wordpress.com/ ... ommons.pdf

That was one chapter of a collection of 73 essays in the new book The Wealth of the Commons: A World Beyond Market & State available at http://www.wealthofthecommons.org/