Valance Chartbook update- Weather or not the US is leveling off?

Chart Book

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31 Responses to Valance Chartbook update- Weather or not the US is leveling off?

  1. Matt P. says:

    Great list Tom. Thanks for that. Will make it easier for me to get my friends on board with MMT.


  2. Matt Franko says:

    Piling on: Looks like Japan went neg. in the 4th qtr.


  3. danw says:

    @ Warren, Tom, etc.

    Any comments here:


    Tom Hickey Reply:

    Incoherent. Jesse is apparently reminiscing about how great things were under the gold standard.


    danw Reply:

    @ Tom

    My sense was that Jesse was trying to point out that open market operations (et al) are critical to reinforcing market discipline on fiat currency. And that one of the liabilities of MMT (as such) is that it acts (or says that it can act) without a real world sense for how complex market and social systems will respond to claims of unlimited access to “money”.


    danw Reply:


    I think folks like Jesse…and Karl, Tyler, Mish, etc….conflate the issues of anger and desire for change. I am angry at my government for many things. I am angry about rampant systemic fraud, about the fact that the rule of law is in fact the rule of men (and law benefits the wealthy far more than it does the common man), about the fact that my leaders pursue foreign policies that lead to suffering and destruction abroad, etc. But I watch Egypt, and I wince. I wince because I have studied history. I know what happens during these times of upheaval. I know how men of goodwill are often swayed toward violence and extremism in defense of an idea, even as that idea becomes perverted by the very anger that precipitated the righteous struggle. There are very few Gandhi’s in this world—men (and women…Aung San Suu Kyi for example) who refuse to employ violence in their quest to pursue justice…for all.

    I watched the video from Cairo. I saw the terror on the faces of the children—even as those children were holding two-fingers aloft in “victory”. For the children, the inflamed passions of their fathers is terrifying. A righteous revolution it may be…but the children of revolution are always scarred.

    I heard it here once, and I agree: Tyler and Mish and Karl et al. may be angry…but I fear that they may get what they want….and such an upheaval, built upon anger and resentment and hatred, will cause suffering to an extent we have never before seen in the USA.

    Tom Hickey Reply:

    DanW, it’s one thing to attack a theory on the merits and another in practicality. Jesse cites Cullen Roche’s summary of MMT with respect to “debt monetization.” This a brief summary of a particular issue, and not an authoritative account of MMT by an MMT economist. Jesse does not address MMT as theory but rants about his pet issues, seemingly unaware of what MMT is about or that it addresses many of the issues about which he is concerned, e.g., Fed/Treasury consolidation, no bonds, and Warren’s proposals. It is basically an uninformed screed that I cannot take seriously. Unfortunately, Jesse’s blog doesn’t suport comments.

    THE ANIMAL SPIRITS PAGE is out with a similar screed, concerning which I left a dismissive comment as being uninformed.

    It seems that neither Jesse nor Benign Brodwicz have taken the time to investigate MMT and understand the theory and various policy proposals based on it. Criticizing something about which one is uninformed is unprofessional.

    Tom Hickey Reply:

    DanW, you might be interested in these eye-opening articles by Mahdi Darius Nazemroaya on the Arab Revolution that is underway:

    Revolution: Is 1848 Repeating Itself in the Arab World? PART I: The Dynamics of Global Capitalism

    The Struggle for Self-Determination in the Arab World: The Alliance between Arab Dictators and Global Capital PART II: Is 1848 Repeating Itself in the Arab World?

    Tom Hickey Reply:

    Add this one to the above:

    Matt Stoller: The Egyptian Labor Uprising Against Rubinites


    both pretty lame criticism. more like he has a reading problem


    pretty good by cullen!


    danw Reply:

    @ Warren and Tom,

    Where is the place at which views like Jesse’s become refutable with data that prove that MMT, if purposefully employed and properly regulated, succeeds in helping…well…everyone??

    Again, and I have said this before…that dismissive statements (like Warren’s above) do nothing to mitigate “Jesse’s” disgruntlement. And…as I have also said before…I would suggest that Jesse is conflating MMT with the fraud and greed that characterize our current and inequitable and exploitative economic system.

    I know one thing for certain. The global herd is moving in a scary direction, and I’d prefer we discovered solutions soon, so that my kids can live quietly and in relative peace and comfort and humble times.


    Tom Hickey Reply:

    Well, I start people with Warren’s book.

    Here is a list of links, too:

    MMT-oriented bloggers:

    Marshal Auerback

    Scott Fulwiller

    Bill Mitchell

    Warren Mosler


    L. Randall Wray

    There are also a number of working papers by these and others writing in the field that are available (free) at:

    The Levy Institute

    Center for Full Employment and Price Stability


    Frank Ashe:

    A kindergarten guide to modern monetary theory

    Mathew Forstater:

    Functional Finance and Full Employment: Lessons from Lerner for Today

    Scott Fullwiler:

    Modern Monetary Theory – A Primer on the Operational Realities of the Monetary System

    Bill Mitchell:

    Barnaby, better to walk before we run

    A simple business card economy

    Some neighbours arrive

    A modern monetary theory lullaby

    Functional finance and modern monetary theory

    Deficit spending 101 – Part 1

    Deficit spending 101 – Part 2

    Deficit spending 101 – Part 3

    Stock-flow consistent macro models

    Warren Mosler:

    7 Deadly Innocent Frauds

    Mandatory Readings

    Cullen Roche:

    Understanding The Modern Monetary System

    Neil Wilson:

    How the government’s super-platinum credit card works


    Post Keynesianism in a Nutshell

    L. Randall Wray:

    Understanding Modern Money: The Key to Full Employment and Price Stability (1998)

    The Federal Balance Sheet Is Nothing Like Your Household Balance Sheet, So You Shouldn’t Freak Out About Debt

    Not MMT, but contributory to it:

    Irving Fisher:

    The Debt-Deflation Theory of Depressions

    Wynne Godley/Marc Lavoie:

    Prolegomena to Realistic Monetary Macroeconomics:
    A Theory of Intelligible Sequences

    Monetary Economics Palgrave Macmillan (2007)

    Abba Lerner:

    Functional Finance and the Federal Debt

    Hyman Minsky:

    The Financial Instability Hypothesis


    it’s not so much about data. it’s about reaching is opinion leader

    beowulf Reply:

    Tom, you’re not just the man with the plan, you’re the man with the links. :o)

    Of late I’ve been thinking that the federal system is so fouled up with both parties fighting out who’s the real deficit hawk, that perhaps Ellen Brown’s state banks in conjunction with Steven Attewell’s state-level Keynesian policies is worth pursuing.

    Instead of waiting for Congress and the President of pursuing counter-cyclical policies at the national level, there are 49 different states (North Dakota already has a state bank) that could try pursuing such policies on their own that may inspire other states–or some fine day, our federal government– to take similar action. And dread not Warren, if a state bank follows the North Dakota “bank of banks” model of partnering with community banks, it wouldn’t displace local banks. :o)

    Tom Hickey Reply:

    Yves Smith, State Banks, or, If You Can’t Regulate TBTF Banks, Why Not Compete Instead?.

  4. RSG says:

    Warren, on the last slide you show japanese vs chinese us treasury holdings with japans holdings going higher and china’s flattening out. you have maintained that china’s treasury holdings is more of a function of the us buying their stuff and giving them us$ and they simply switch the us$ from noninterest bearing to interesat bearing (us treas) accounts. how can one tell which is effecting treas holdings more, them buying us$ (to strengthen currency and impove their ability to export) or them selling us stuff to get us$?



    doesn’t matter- all the same thing in this case.

    the exporter gets the dollars, buys yuan from the bank of china via the fx markets, where the boc ‘intervenes’ at it’s desired level for the currency.


    Anders Reply:

    Warren – a bit off-topic, but pls can I ask you about your take on QE?

    Your pieces on the topic seem to say the inflationary consequences are zero because you are exclusively buying bonds from banks and settling the purchases with reserves – which obviously aren’t inflationary.

    But what if QE were to buy direct from the non-bank private sector? (Does this happen at present?) Doesn’t this inject substantial purchasing power into the economy and risk pushing up inflation (subject to the initial size of the output gap of course)? Appreciate that Tsys are almost as liquid as cash, but there is presumably some effect from this effective purchasing power (perhaps just on asset prices, not on CPI?)

    A key plank in the argument that debt/GDP ratios are irrelevant to sustainability is that sovereign govts can pursue ZIRP. But ZIRP could involve buying bonds with a longer maturity than banks typically hold – forcing the govt/CB to buy from the private sector, which makes this a real issue.




    it’s not inflationary because the negative effect of removing interest income from the private sector in my opinion probably more than offsets gains from the resulting lower term structure of rates and valuations.

    also, the supply side effects of lower rates are deflationary.

    also, it doesn’t matter who the fed buys the tsy’s from. the sell exchanges one govt liability for another, etc.

  5. Oliver says:

    weather or not?? pun intended?





  6. BFG says:

    The net foreign liability (IIP) of the eurozone countries is also affected because the national central banks have to borrow from the eurosystem.

    The only growth in the eurozone is coming from inventories from the non-financial sector, but they got a bit ahead of themselves, and are now levelling off. The eurozone governments are only contributing 0.3%, 0.3%, and 0.2% to GDP for the last 3 quarters. The saving rate of households in the euro area is 15% of gross disposable income and has remained relatively constant throughout the last decade.

    The euro areas growth of 3% cannot be maintained if the household sector pulls in their spending.

    Contributions of expenditures by sector to the growth of nominal GDP in the euro area
    2010 Q2 Q3
    Households 1.4, 1.7
    Non-financial corporations 1.8, 1.3
    Financial corporations -0.1, 0.1
    Government 0.3, 0.2
    Net exports -0.4, -0.3
    GDP 3.0, 3.0

    So, taken as a whole it looks pretty anemic.


    Anders Reply:

    BFG – thanks again…you’re a gent.


  7. BFG says:

    Here is a graph of the Euro area Financial Balances if anyone is interested.


    Ramanan Reply:

    Nice graph.

    In the case of the Euro Zone, severe problems within the zone becomes important even though overall the financial balances may show less problems.

    Attaching a Guardian article from 1991 “Commonsense Route To A Commonsense Europe” by Wynne Godley where he says:

    If we are to proceed creatively towards EMU, it is essential to break out of the vicious circle of ‘negative integration’— the process by which power is progressively removed from individual governments without there being any positive, organic, all-European alternative to transcend it. The nightmare is that the whole country, not just the countryside becomes at best a prairie, at worst a derelict area.

    He also talks of big fiscal equalization payments required if the region were to not “fly apart”. (Opens with Internet Explorer).


    But more disturbing still is the notion that with a common
    currency the ‘balance or payments problem’ is eliminated
    and therefore that individual countries are relieved of the
    need to pay for their imports with exports.

    Quite the reverse: the existence or a common currency
    makes a country more directly dependent on its ability to sell
    exports and import substitutes than it was before, particularly
    as it will then possess no means whereby it can (in the broadest sense) protect itself against failure.


    Anders Reply:

    Thanks BFG. Is this data from Eurostat? I’ve found it very hard to pull such data – any pointers?


    BFG Reply:

    Yes, it is. If you go to the following site European sector accounts, and at the top under charts you will find them there. It is an excellent source for data. All the various charts are already done for you and they break the various sectors down into their constituent parts.


    Anders Reply:

    Thanks BFG – interesting that they only provide the charts on an aggregate Euro area basis. As ram says, that glosses over some stark imbalances…

    BFG Reply:


    You can get the breakdown by following this link Quarterly sector accounts.

    Select Financial balance sheets, Financial transactions and beside the View Table (Tab) at the top. Select the Select Data (Tab) and add the various sectors. This will give you the individual breakdows for each country.

    Annual sector accounts.

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