Karl Denninger

[stone]

Gumby, MMT claims to both describe our current system and to thereby reveal "self evident" policy proscriptions about deficits etc. A fiat monetary system could either follow balanced budgets and not expand or could endlessly expand as ours does and MMTers recommend.

Scott Fullwiler is a leading MMT economist who advocates keeping the legacy bond system since he says that it doesn't impede an ever growing government debt and so why rock the boat. Bill Mitchel does advocate just keeping the national debt as bank reserves rather than as bonds.

To me whether the debt is kept as an ever growing stock of bonds or as an ever growing stock of bank reserves isn't what leads to the system being incomprehensible and distorting. The complication and distortion all comes from the shifting sands of constant expansion. It means that all but the most sophisticated financiers have no idea where they are or what is going on. It means that economic "rational agents" don't exist because all the would be "rational agents" are bamboozled.

[Gumby]

The complication and distortion all comes from the shifting sands of constant expansion. It means that all but the most sophisticated financiers have no idea where they are or what is going on. It means that economic "rational agents" don't exist because all the would be "rational agents" are bamboozled.

Ah yes, I see. But, I'm still not sure if that counts as MMT being deceptive. MMT is just the user manual/framework to decipher and control the incredibly complex, powerful and dangerous monetary system we've inherited. Even without MMT as our guide, our fiat currency will always be complicated and distorted to the public by officials and politicians.

[stone]

Gumby, what bugs me about MMT is that they make out that supporting aggregate demand requires deficit spending. They conflate the smoke and mirrors of an expanding currency with the positive aspects of wealth redistribution and yet at the same time evade the fact that what they are advocating is wealth redistribution. A fiat currency need not be governed like that. A lot could be done to make a fiat currency straightforward and "sound". There is no reason why a fiat currency couldn't be in the form of say a trillion electronic dollars  each with an assigned number from one to a trillion. Any wealth redistribution that was required for economic reasons could be done by overt taxation and transfer of some of those.

[Gumby]

They conflate the smoke and mirrors of an expanding currency with the positive aspects of wealth redistribution and yet at the same time evade the fact that what they are advocating is wealth redistribution.

I'm not sure MMT — which was invented in the 1940s — specifically advocates wealth redistribution. But, I think what you're saying is that the solutions of the MMT economists bug you.

And I'm not sure they're evading the fact that it's wealth redistribution. I think they are just advocating solutions to fix the mess that we're in. I mean, a great wealth redistribution has already taken place (in the form of bank bailouts, huge tax cuts for the rich, jobs being shipped overseas, etc.). MMT economists are offering a solution to reverse what already transpired. Households are getting squeezed...

http://blogs.wsj.com/economics/2011/06/ ... 2-in-debt/

How else would you reverse that trend?

[stone]

Gumby, it isn't called wealth redistribution by MMTers even though that is all it is. That is my objection to MMT. The idea that deficits will increase aggregate demand is just a convoluted card trick. Using an expanding currency to transfer wealth by dilution is just a like a conjurer bamboozling the audience by distracting them with irrelevant rabbits, flowers etc. The massive problem with it is that it inevitably ends up just (inadvertently?) transferring wealth and power to whoever sees through what is happening and devotes themselves to playing the system (eg Goldman Sachs et al).

I totally agree with MMTers that aggregate demand needs to be supported. I'm just saying that an expanding monetary system is an awful way to try to do that. A simple, no-nonsense alternative would be to move the tax burden to being an asset tax and move some government spending to being a citizen's dividend. If you consider that to be unjustified confiscation then logically you ought to also consider attempting to engineer that result by convoluted monetary shennanigans to also be unjustified confiscation.

[Storm]

Gumby, great article by Shiller.

I personally find it very nauseating to hear the constant doom and gloom from the tea baggers about the imminent collapse of the US dollar.  We all know that the debt is excessive, but we have some time to get it under control.  Debt to GDP ratio always goes up during a recession because incomes are lower and the government is taxing less...  When the economy recovers we can hopefully scale back the government spending a bit and enjoy some surpluses again.

[Gumby]

Gumby, it isn't called wealth redistribution by MMTers even though that is all it is. That is my objection to MMT. The idea that deficits will increase aggregate demand is just a convoluted card trick. Using an expanding currency to transfer wealth by dilution is just a like a conjurer bamboozling the audience by distracting them with irrelevant rabbits, flowers etc. The massive problem with it is that it inevitably ends up just (inadvertently?) transferring wealth and power to whoever sees through what is happening and devotes themselves to playing the system (eg Goldman Sachs et al).

I totally agree with MMTers that aggregate demand needs to be supported. I'm just saying that an expanding monetary system is an awful way to try to do that. A simple, no-nonsense alternative would be to move the tax burden to being an asset tax and move some government spending to being a citizen's dividend. If you consider that to be unjustified confiscation then logically you ought to also consider attempting to engineer that result by convoluted monetary shennanigans to also be unjustified confiscation.

I see your point. But, I still think you're confusing the recommendations of MMT proponents and theorists with the framework of MMT itself. If we look at MMT by itself, all it does is provide a framework for how fiat money actually works. MMT doesn't prescribe constantly expanding the monetary base. But, many MMT economists have latched onto the MMT framework and use it to justify their opinions — such as fiscal stimulus as their solution to fixing our current balance sheet problem. Your problem lies with those MMT economists.

For instance, if we look at the definition of MMT on wikipedia, we see the following:

Prescriptive use
Based on the descriptive aspects of MMT outlined above, proponents and theorists prescribe a number of methods to manage the economy. These prescriptions range across the political spectrum, from left-supported job guarantees to traditionally rightwing-supported tax cuts. Some of these are outlined below.

Source: http://en.wikipedia.org/wiki/Chartalism ... iptive_use

You could easily use your citizens dividend and asset tax within the confines of MMT. (Though, whether or not your economy grew as well is anyone's guess). You would just be expressing a different solution than the other MMT proponents. MMT is politically agnostic. It allows for a wide range of solutions within its framework.

But, keep in mind that the money supply probably needs to increase sometimes — depending on the circumstances and needs of a country. If we had to fight a war, it wouldn't make much sense for a government to sit on its hands because it didn't want to change the money supply.

[Lone Wolf]

I personally find it very nauseating to hear the constant doom and gloom from the tea baggers about the imminent collapse of the US dollar.

I could gladly live without this "tea baggers" and "terrorists" rhetoric I've been seeing pop up here lately.  I expect to see that kind of junk on the Pointless Internet Argument Forum, but here?

Do we actually need to describe those with whom we disagree via terrorist comparisons and euphemisms for ball-sucking?

Some of the political stuff on here has taken a major step downward since the early days.

[Gumby]

When the economy recovers we can hopefully scale back the government spending a bit and enjoy some surpluses again.

Surpluses can be dangerous too..

Wray: The Federal Budget is NOT like a Household Budget – Here’s Why

[l82start]

I personally find it very nauseating to hear the constant doom and gloom from the tea baggers about the imminent collapse of the US dollar.

I could gladly live without this "tea baggers" and "terrorists" rhetoric I've been seeing pop up here lately.  I expect to see that kind of junk on the Pointless Internet Argument Forum, but here?

Do we actually need to describe those with whom we disagree via terrorist comparisons and euphemisms for ball-sucking?

Some of the political stuff on here has taken a major step downward since the early days.

i second the motion,    i love to hear well reasoned political views from both sides,  and i don't mind the quantity of political content going up here as election season comes around, but we would do well to keep it civil and approach it with the same agnostic dispassionate stance we try to take with the 4 economic conditions...

[stone]

Gumby, I agree, the dividing line between where MMT makes sense and doesn't is precisely the point where they move from describing and start recommending or maybe even the point where they start giving their approval of actions already being taken. As you say, MMTers slip between saying MMT is merely the description of the operations of fiat currency (ie what mouse clicks and key strokes are made by people at the Fed and the tax revenue office and what consequences those have) and then saying MMT shows that deficits should increase until (supposidly) that causes unemployment and underemployment to fall to <2%.
It is like saying modern military theory is simply a description of gunpowder and shows that we should bomb each other.

[Gumby]

Gumby, I agree, the dividing line between where MMT makes sense and doesn't is precisely the point where they move from describing and start recommending or maybe even the point where they start giving their approval of actions already being taken. As you say, MMTers slip between saying MMT is merely the description of the operations of fiat currency (ie what mouse clicks and key strokes are made by people at the Fed and the tax revenue office and what consequences those have) and then saying MMT shows that deficits should increase until (supposidly) that causes unemployment and underemployment to fall to <2%.
It is like saying modern military theory is simply a description of gunpowder and shows that we should bomb each other.

Exactly. MMT isn't a specific recommendation. It's a framework. We just happen to be hearing a lot of recommendations based on the MMT framework, to justify certain strategies. You could easily support your strategy within the framework of MMT as well.

[stone]

Gumby "But, keep in mind that the money supply probably needs to increase sometimes — depending on the circumstances and needs of a country. If we had to fight a war, it wouldn't make much sense for a government to sit on its hands because it didn't want to change the money supply."

I'm not advocating the government sitting on its hands. I'm actually not even disagreeing with the MMTers about the required extent of fiscal stimulus (note NOT monetary stimulus via QE etc). I am just saying that matching that fiscal stimulus spending with an asset tax would increase aggregate demand without causing the distortions that come from monetary expansion. To my mind it is much better to have a steady, sustainable, drain on asset prices rather than have them bubble up for decades, then pop leaving a balance sheet recession that could spiral down for decades.

[Gumby]

I'm not advocating the government sitting on its hands. I'm actually not even disagreeing with the MMTers about the required extent of fiscal stimulus (note NOT monetary stimulus via QE etc). I am just saying that matching that fiscal stimulus spending with an asset tax would increase aggregate demand without causing the distortions that come from monetary expansion. To my mind it is much better to have a steady, sustainable, drain on asset prices rather than have them bubble up for decades, then pop leaving a balance sheet recession that could spiral down for decades.

Ah... Ok, Got it.. You're making a lot of sense. Interesting idea.

[moda0306]

For the record, I believe "Tea Party Patriots" proudly went by the name "Tea Baggers" before they found out what it meant.

But I'll accept that it's a bit crude to continue to use... I won't use that term... though I don't even know if I have.

Regarding calling the hard-right of congress "fiscal terrorists," I think some of what they were doing to get WAY more out of government than their representation would normally allow could be considered very dishonest, lowball politics that contain some of the same "terrorist" tactics of not following by the rules and demanding extreme conditions.

It's their practices and their apparent dishonesty (a fiscal crisis but taxes are off the table?) that makes me refer to them as that... not simply "because they disagree with me."

But I realize the connotation is quite extreme and I'll quit using that term as well.

I think some of our economic discussions of late have been great, despite a bit more emotion thrown in at times.  We finally are having very solid, balanced discussions on Keynesianism, Austrianism and MMT, a gold standard, etc, with people on all sides voicing their view.  Let's just try to keep things calm, and when one person takes it over the edge (often me I'm sure), just politely call them on it and don't make the same mistake... I think things will turn out fine.

[Gumby]

For the record, I believe "Tea Party Patriots" proudly went by the name "Tea Baggers" before they found out what it meant.

That is true. They asked people to "Tea Bag" their representatives, by sending tea bags in the mail to government officials.







...and then the media couldn't stop laughing about it.

Some are still even proud of the term.

[stone]

moda and lone wolf, I agree. This forum seems one of the very few places where people actually try and understand and engage with divergent views rather than simply trying to enforce an echo chamber mentality by denigrating dissenters.

[Lone Wolf]

Don't worry about what Denninger does or does not think will happen.  He has no crystal ball.

Case in point: this very frightening prediction from March of 2009.  We are talking literally cities engulfed in chaos and the end of life as we know it.

It's a chilling piece.  Fortunately, it bore absolutely no resemblance to reality.

That is true. They asked people to "Tea Bag" their representatives, by sending tea bags in the mail to government officials.

I guess we could try it your way, then.  Let's all call each other "tea baggers" and "libtards" and "right-wingers" and "commies".  Then we can justify it with pictures from left- or right-wing websites of someone we've never met holding a hammer & sickle sign or wearing a beverage on their head or wearing a "Che" shirt.

I imagine that this should lead to extremely fruitful discussions.  If for any reason this plan should fail, we could try bringing up religion, Israel, or how fat we all look in our leather chaps.

[moda0306]

Alright... no more straw men... we all know 99% of the people here are smarter than the average Tea Party Patriot or left-wing revolutionary.

[Gumby]

That is true. They asked people to "Tea Bag" their representatives, by sending tea bags in the mail to government officials.

I guess we could try it your way, then.

It's not my way. I was trying to clarify where the name actually came from. Those were photos of Tea Party members using the term to describe themselves. They are proud of the term, and there's nothing wrong with that. The New Oxford American Dictionary made "teabagger" a finalist for their Word of the Year in 2009, defining it as, "a person who protests President Obama’s tax policies and stimulus package, often through local demonstrations known as ‘Tea Party’ protests (in allusion to the Boston Tea Party of 1773)."

I agree it's probably not the best label and I don't plan on using it. I was just pointing out that they gave themselves the name, willingly.

[l82start]

the etymology of tea bagger...  i believe it began with older generation conservatives who were unaware of the connotation, this being hysterically funny it was adopted by the left as a insult, which the tea party people then turned back on the left by pointing out that if they are the tea baggers the people opposing their view became teabaggies...

i wish i had something meaningful to contribute to the topic of MMT instead of posting this...

[MediumTex]

The evolution of the term "teabagger" is probably similar to the evolution of the word "gay."

[Storm]

I personally find it very nauseating to hear the constant doom and gloom from the tea baggers about the imminent collapse of the US dollar.

I could gladly live without this "tea baggers" and "terrorists" rhetoric I've been seeing pop up here lately.  I expect to see that kind of junk on the Pointless Internet Argument Forum, but here?

Do we actually need to describe those with whom we disagree via terrorist comparisons and euphemisms for ball-sucking?

Some of the political stuff on here has taken a major step downward since the early days.

i second the motion,    i love to hear well reasoned political views from both sides,  and i don't mind the quantity of political content going up here as election season comes around, but we would do well to keep it civil and approach it with the same agnostic dispassionate stance we try to take with the 4 economic conditions...

Point taken, I shouldn't use inflammatory rhetoric.  I do find it hilarious that they would willingly choose to use that term, obviously not knowing the slang meaning, but when I use that term it has a negative meaning in my mind and obviously has no place here.  My apologies.

[Lone Wolf]

I agree it's probably not the best label and I don't plan on using it. I was just pointing out that they gave themselves the name, willingly.

I apologize.  That's strictly my mistake then.  I got people mixed up, which was dumb of me.

I just need to keep repeating your name in my head to make sure I don't get confused in the future.  Grumby Grumby Grumby Grumby... that should help.

[Gumby]

I just need to keep repeating your name in my head to make sure I don't get confused in the future.  Grumby Grumby Grumby Grumby... that should help.