SENATORS HAGAN, MCCAIN TO INTRODUCE REPATRIATION

Good report on this supposed ‘job creator’ here.

Hint, it’s not…

US Daily : Profit Repatriation Tax Holiday: Still an Uphill Climb (Phillips)

Published October 5, 2011

* Media reports indicate that Sens. Kay Hagan (D-NC) and John McCain (R-AZ) plan to introduce legislation to allow for a one-time tax holiday for repatriation of corporate profits from abroad. If such a plan were enacted, it would most likely increase dividend payments and share buybacks, potentially resulting in a slight easing of financial conditions. However, we would not expect a significant change in corporate hiring or investment plans: most firms with large amounts of overseas profits are likely to have adequate access to financing, so the availability of cash on hand is unlikely to be a constraint on investment at the present time.

* Repatriation legislation also still appears to face significant legislative hurdles. The most important may be its estimated cost; the official cost estimate of a repeat of the 5.25% temporary tax rate enacted in 2004 is nearly $80bn over ten years in lost revenue. A second hurdle is the interest some lawmakers have in saving such a tax break as an incentive for broader tax reform.

Shameless

DJN: US Senators Plan To Introduce Repatriation Tax Break Bill

By Kristina Peterson

October 5 (Dow Jones) — A bipartisan pair of senators plans to introduce on Thursday a bill proposing a tax break for U.S. companies that bring home foreign profits.

Sens. John McCain (R., Ariz.) and Kay Hagan (D., N.C.) will co-sponsor legislation that would create a repatriation tax holiday, reducing the corporate taxes that U.S. multinationals would pay when bringing home overseas profits, in an effort to boost the economy. Their bill, called the Foreign Earnings Reinvestment Act, would create an incentive for companies to bring back an estimated $1.4 trillion currently kept overseas, according to an advisory from their offices.

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61 Responses to SENATORS HAGAN, MCCAIN TO INTRODUCE REPATRIATION

  1. John O'Connell says:

    “what would the purpose of that tax be?”

    No different from any other: to control aggregate demand, because government spending is more than the sum of non-government savings and net imports. There must be some taxes, otherwise inflation. Or else much smaller government.

    A “good” tax is one with a low rate, so as not to distort incentives, a large base so as to be able to raise lots of money and still keep the rate low, and is easy to comply with and enforce.

    Reply

    WARREN MOSLER Reply:

    not to forget transactions taxes discourage transactions, the things that add real wealth via specialization of labor, economies of scale, etc., so only tax transactions you don’t want to happen, etc.

    Reply

  2. Tyler says:

    Shouldn’t we just eliminate the corporate income tax? Wouldn’t that create lots of jobs, along with reducing prices?

    Reply

    WARREN MOSLER Reply:

    there isn’t much of an argument that says corps should be taxed (they should be ‘regulated’, but that’s another story)
    all corp taxes are pass throughs to consumers, including compliance costs
    but cutting corp taxes doesn’t ‘create jobs’ apart from some kitchen help and gardners for the owners.
    what it does is cut prices for consumers, which is a good thing by most.

    Reply

    John O'Connell Reply:

    @WARREN MOSLER,

    Abolishing the corporate income tax would also be beneficial in that it would eliminate double taxation of dividends, so that they could be taxed as ordinary income on individual returns, and Warren Buffet could use the same tax tables as his secretary.

    However, I think the corporate income tax should be replaced by a low-rate (no access to the inputs, but I’m figuring 3% or so should be enough to collect the same $ amount?) corporate gross receipts tax. Easy to calculate, cheap to comply, easy to collect, hard to evade, low enough rate to claim no distortion of incentives.

    Not a VAT, which is hard to calculate and enforce, and relatively easier to evade, and must be at a high enough rate to distort incentives; therefore my tax would tax items more than once as they passed through the supply chain, but at a low rate and to the extent that it did encourage vertical consolidation, it might help productivity and reduce other costs as well.

    It’s true that no tax can be perfectly fair by all standards, but the lower the rate the less it matters.

    Reply

    WARREN MOSLER Reply:

    what would the purpose of that tax be?

    Tom Hickey Reply:

    @Warren,

    “what would the purpose of that tax be?”

    Taxes do two things. First they remove nongovernment NFA, reducing the purchasing power of the private sector, and secondly, they act as a negative incentive wert that which is taxed.

    Both of these functions have to be considered in tax policy. For example, the first is used in functional finance. The second is used wrt negative externalities and socially undesirable behaviors.

    WARREN MOSLER Reply:

    my point being the consideration was dollars ‘raised’ which misses the point.

    Winslow R. Reply:

    @WARREN MOSLER,

    “there isn’t much of an argument that says corps should be taxed (they should be ‘regulated’, but that’s another story)”

    If we follow the Citizen’s United decision to its logical conclusion, haven’t corporations been turned into citizens/consumers and therefore subject to citizen rates?

    In terms of dual taxation, why shouldn’t dividends be double taxed as would citizen ‘gifting’ from one to another?

    Reply

    John O'Connell Reply:

    @Winslow R.,

    Gifting is not taxed, and corporations are not citizens. Corporations don’t vote, nor do they count in the census.

    A corporation is merely a form of organization for a business. Parterships and sole proprietorships are not separately taxed, their income is taxed to their owners. Only corporations (and LLCs, if they elect it) pay tax first, and then the income that is passed to the owners is taxed again.

    It is probably corrupt that corporations (and not only corporations, but other large givers, too) can make political contributions, simply because of size, but there is no logical basis for allowing other people to join together to make large political contributions, and not allow business owners to do it.

    ESM Reply:

    @Winslow R.,

    The court did not rule that corporations were people or citizens. It merely ruled (quite logically I think) that many people express themselves (“speak” if you will) by banding together in various associations, including legal entities known as corporations.

    The 1st Amendment reads “Congress shall make no law … abridging the freedom of speech …”

    If Congress makes a law prohibiting political speech by a particular form of human association, then that certainly could be seen as “abridging” freedom of speech. It’s a judgment call, but I think the Court got this one right.

    WARREN MOSLER Reply:

    i used to think that freedom of speech meant you could say what you wanted to, and not that you could use your wealth as you wanted to be heard.

    that is, the right to speaking vs the right to be heard

    Tom Hickey Reply:

    @Winslow R.,

    I suppose one could say that the corporate tax is the price of the corporate veil. :o

    WARREN MOSLER Reply:

    the price of limited liability would better be activity limited to public purpose

    Winslow R. Reply:

    @WJohn and ESM,

    Noticed I put…

    “If we follow the Citizen’s United decision to its logical conclusion”

    Corporations are groups of citizens which endow them with some sorts of citizenship. Funny part is there is little to no requirement to be a citizen to own a part of a U.S. corporation.

    John wrote,
    “Gifting is not taxed”

    ..sometimes not, sometimes once, and sometimes twice.

    In the case of dividends I’d say citizens would be taxed twice given it is a form of ‘compensation’ for an unsecured loan.

    Perhaps my interpretation is wrong?

    Tom Hickey Reply:

    @Winslow R.,

    “If Congress makes a law prohibiting political speech by a particular form of human association, then that certainly could be seen as “abridging” freedom of speech. It’s a judgment call, but I think the Court got this one right.”

    Funny how some people are all for corporate right and are against the right of labor to organize, collectively bargain, and also influence the political process through campaign contributions.

    Some inconsistency if not hypocrisy in this?

    Winslow R. Reply:

    @Tom,

    Inconsistency to say the least!

    The idea let alone the reality of men spawning corporations with citizen rights compared to women giving birth to citizens with reduced rights, deserves some Freudian psychoanalysis.

    ESM Reply:

    @Winslow R.,

    @Tom:

    “Funny how some people are all for corporate right and are against the right of labor to organize, collectively bargain, and also influence the political process through campaign contributions.”

    I don’t think there are many people who are against those rights for labor unions. It’s the right to come in between a willing laborer and a willing employer and basically prevent a labor transaction from happening that is the problem.

    I suppose an analog on the corporate side would be a monopoly granted to a utility by the government. However, I’m against that too.

    There are analogs in some other areas as well. For example, I think it’s ridiculous that you have to go to an accredited law school in order to practice law. You would think that passing the bar exam should be sufficient. Same goes for medical school come to think of it. It should be enough that you pass certain competency tests, not that you forked over $150K for medical school.

    ESM Reply:

    @Winslow R.,

    “… compared to women giving birth to citizens with reduced rights …”

    I think Tom was referring to “labor” in the economic sense of the word. :^)

    WARREN MOSLER Reply:

    yikes…

    Tom Hickey Reply:

    @Tyler,

    A sound principle is not to tax gain from productive contributions (profit and income), but rather to tax (negatively reinforce) non-productive gains (economic rent), as well as to penalize gains that result from anti-social behavior, or in any way damage the economic system (illegal and unethical practices).
    (h/t Michael Hudson)

    Reply

  3. Jacob says:

    RJ, If you’re running out of sites to post on could you please join DigitalSpy http://forums.digitalspy.co.uk/ and start posting in the politics section, the site has a large membership and the more people who have a greater understanding of MMT posting there the better. Same goes for Neil Wilson, that’s if you don’t mind endless arguments with people who seem to lean towards the Austrian way of thinking.

    Reply

    RJ Reply:

    @Jacob,

    I’ve still got a number of sites that I post on. But I start a new contract tomorrow so will be busy for a few months

    But might look into this one when time permits.

    Reply

  4. RJ says:

    Another site that I have been banned from

    Market-Ticker Reading Ok Restriction is permanent

    For daring to suggest with reasons that he (Karl Denninger) might be wrong about Govt debt

    Its nonsense on websites like this that is not helping. Karl has even written a book.

    Reply

  5. RJ says:

    And while Im on this subject

    Heres another site that I have been banned from. For no other reeason thna challenging their nonsense on various blogs.

    http://www.positivemoney.org.uk/blog/

    Its supposedly a money reform site but the blog contributors do not have a clue

    But there is hope. Here’s one comment from one thread

    http://www.positivemoney.org.uk/2011/09/fractional-reserve-banking-leads-booms-busts/

    “This is by far the most interesting thread I have encountered in many months/years of reading.
    I cannot claim to have exactly followed RJ’s thinking, but for me it does touch on an essential aspect of Monetary Reform, namely the extent to which Reformers fail to remove the ‘smoke and mirrors’ aspects of the current economic system.
    I deplore the tendency of Reformers, when feeling obliged to mention double entry bookkeeping (DEB), to use words like ‘magic’. DEB, though surrounded by mystique, is in fact no more than a forensic application of the laws of arithmetic in the area of financial management. DEB has the qualities of a scientific Law, it has universal application from micro to macro levels, and it cannot be avoided simply as an inconvenience.”

    One by one this battle to remove the ignorance and confusion will be won. But it does not help that so called monetary reform sites are promoted garbage like

    Debt free money and
    100% reserve backing etc

    It is confusing and misleading people who are trying to get to the bottom of these issues. Including politicians.

    Reply

    WARREN MOSLER Reply:

    accounting is how you account for things. that is, after the fact record keeping

    Reply

  6. RJ says:

    And here’s another article on a book that I have responded to

    http://www.neweconomics.org/publications/where-does-money-come-from

    “3 Banks decide where to allocate credit in the economy. ”

    My response

    Not correct.

    Please correct this to NEW credit. Otherwise the statement is obviously nonsense. I spend my credit balances (bank deposits) as I see fit. (The banks do not spend my money for me).

    But even for NEW credit it is not really correct either is it?

    Banks and the non bank sector decide jointly. The banks can only approve a loan if there is a willing borrower. etc etc

    And then this

    “4 Fiscal policy does not in itself result in an expansion of the money supply. Indeed, the government has in practice no direct involvement in the money creation and allocation process. This is little known, but has an important impact on the effectiveness of fiscal policy and the role of the government in the economy.”

    My response

    And this is completely wrong for a monetary sovereign country like the UK. Govt spending directly creates new money (bank deposits) £1 for £1. This new money may be removed (drained) by taxes or bonds but spending always results in new money creation without exception. (Just do the journal entries).

    And also consider this

    If the banks holds Govt bonds rather than the non bank sector then bank deposits are NOT drained (bank reserves are but not customer deposits). This can be easily proved by doing the appropriate journal entries.

    How can politicians be blamed when there is this amount of confusion. Even from an article on a books that is supposed to clear up confusion on banking and money.

    Reply

    WARREN MOSLER Reply:

    banks are public private partnerships that make loans

    Reply

  7. RJ says:

    Your name Warren was mentioned by Steve Keen in response to comments from me on a paper he posted

    http://www.debtdeflation.com/blogs/2010/11/05/solving-the-paradox-of-monetary-profits-2/

    “To handle this in a dynamic model of the money creation and circulation process, I am effectively working with a broader definition of money that includes these “not in circulation” notes and coins (and other liquid assets). This may be the source of the conflict between me and other Post Keynesians on this–certainly that’s what Warren Mosler argued in a verbal debate some years ago. I argue for my approach and my wider definition when modelling a dynamic process, since to do otherwise implies there is a “sink” (in dynamic systems terminology) through which the notes and coins literally are destroyed.”

    I beleive Steve has formed incorrect conclusions in his paper.

    But this is a problem. Many economists do not understand money and banking. So can politicians be blamed for being confused too.

    Reply

    Neil Wilson Reply:

    @RJ,

    Steve’s thinking is developing over time. He’s quite right that notes and coins don’t disappear when out of circulation. They are vaulted at the banks as part of their float. The worst that happens is that the demand for new notes and coins dips a bit during that time period.

    In aggregate the demand for notes and coins is on a stable upward path – as you would expect for a growing nominal economy. And it has wiggles around high demand times – like Christmas.

    The only difference I can ascertain between Steve and the MMT is one of focus and terminology. They both have the same elephant from different ends IMHO

    Reply

    RJ Reply:

    @Neil Wilson,

    You can read my comments on this thread (at the bottom).

    Warren is 100% right IMHO.

    And regarding this

    “He’s quite right that notes and coins don’t disappear when out of circulation.”

    So what. It is of no relevance at all. The key is credit NOT notes and coins sitting in the banks vault.

    If a bank produced trillions of $ coins and locked in their bank vault. Then destroyed them all 2 years later. It makes no difference at all to the economy.

    Reply

    RJ Reply:

    @Neil Wilson,

    And for me Steve’s understanding is not even close to MMT. He has stated that he does not agree with it. (he never gave reasons though)

    For example Steve wants to reduce debt and does not understand the difference between Govt debt and non Govt debt at all.

    I also think Steve has a confused idea about what money is. He thinks it is something but not credit.

    Maybe notes and coins is real money in Steve’s view.

    He is polite and does allow debate though (except when he wanted to partially restrict my postings so I left except for 3 recent ones)

    Reply

    Neil Wilson Reply:

    @RJ,

    That may be changing as his thinking evolves. In his latest lecture he mentions that the central bank debt ‘is a very strange debt indeed’ and then describes transactions that are pure government deficit spending.

    Once he’s explored the Vertical circuit we shall see what he understands and what alternative he proposed to essentially extinguishing the private sector debt with public sector liabilities which is the aggregate effect of MMT proposals.

    Matt Franko Reply:

    @Neil Wilson/RJ, “He’s quite right that notes and coins don’t disappear when out of circulation.”

    He seems inappropriately focused on the physical existence of notes and coins…. maybe his wife does all of the shopping and he doesnt yet realize that there are debit cards and credit cards and electronic bill paying these days?

    Seems like to maintain your open invitation to speak at all of the ‘Debt Doomsday Conferences’, you have to maintain at least a modicum of monetarism… Resp,

    Reply

    Neil Wilson Reply:

    @Matt Franko,

    You got to be careful about reading the stuff out of context (and Steve’s attempts to explain it). When you get into the guts of the model it’s near identical to the MMT version. There’s a touch of the ‘my description of a tiger is better than your description’ amongst economists.

    RJ Reply:

    @Matt Franko,

    I think Steve is miles away from MMT. Not even close

    His solution is to write off private debt without realising that another party (like pension funds or taxpayers) will pick up the lose.

    To be honest I don’t think Steve has even got the debt and credit link yet.

    WARREN MOSLER Reply:

    seems parts are just too hard for him

    Reply

    Adam (ak) Reply:

    @WARREN MOSLER,

    Unfortunately in my opinion Warren is 100% right in this case. The questions Steve asks are right but the most of the answers are as invalid as these given by the neoclassical economists.

    The underlying theme is “the markets and the differential equations describing the debt level are the masters – the humans can do very little, the societies and governments are helpless and all we can do is to acknowledge that we are all doomed”. This is deeply infused with the Austrian ideology – supposedly there are objective “axioms of human action” and everything can be deduced from them.

    I spent several days trying to show that repaying a loan is a pure reversal of issuing a loan. The trouble is that I am not an average bloke brainwashed by studying economics and using the models from the late 18th century. I have 20 years of practical experience in building bottom-up models which have to be consistent with the reality otherwise nobody will pay me a salary. The modern banking system is in fact a set of linked databases and operations performed on the tables can be easily defined. There is nothing special about this case.

    There are several other issues which make some of the final conclusions totally invalid. The dynamic circuit model has very little to do with the reality as decaying processes dX(t)/dt = -const * Y(t) are used instead of delayed processes dX(t-t0)/dt = Y(t), there is no reason to insist on pretending to do all the simulations in the continuous time (integration still occurs in discrete time anyway) and crucially the models do not depict correctly the interaction between the government sector and the private sector. The models are monetarist in their nature as the quantity of money (deposits) determines the output through the velocity of the transactions (“time lag”).

    I agree with the idea of (partial) debt jubilee. I disagree with the statement that we are doomed as supposedly the governments cannot override the debt deleveraging process. So how did the New Deal work in the 1930ies?

    The underlying issue is I would say a kind of certain inconsistency in the attitude. I know that unfortunately we all live in an era of instant celebrities (“false prophets”) but this doesn’t mean that everyone should try to be one and “steal the limelight”. It is easy to throw rocks at the neoclassical economists but one who does that must show some humility and accept the valid critique of his or her own ideas. Otherwise we merely replace one set of invalid assumptions by another set of invalid assumptions.

    How can somebody dare to criticise the neoliberal order based on greed and cult of absolute property rights and then make attempts to monetize the blog by charging for the access? This is simply bizarre to me but I have totally lost any interest in answering this question.

    Reply

    Neil Wilson Reply:

    @Adam (ak),

    “crucially the models do not depict correctly the interaction between the government sector and the private sector.”

    That’s the key bit that’s missing.

    Interestingly in the latest book the tables in there do have loans reversing themselves. Obviously at aggregate level individual loans reversing themselves are replaced rapidly with new loans so there is emergence there.

    Have you written up your criticism anywhere? My mathematics is not sufficient to analyse the equations in depth.

    Adam (ak) Reply:

    Neil,

    I haven’t seen the Steve’s book yet as it is not available on Amazon (I prefer to use Kindle). I will obviously read it.

    If the leak related to credit repayment has been fixed in the models I am very happy. However other more serious flaws probably remain. This article is not very encouraging – I don’t agree that we are doomed at all, only the neoliberal model is doomed:
    http://www.monbiot.com/2011/10/10/sounding-the-deeps/
    The idea of a debt jubilee may make some sense however the assets of the savers need to be at least partially guaranteed by the state if the banks are to abolish the liabilities of the debtors otherwise the solution to the problem is extremely unfair to people who did not take the loans they cannot repay but saved money instead. It would be much more feasible just to guarantee jobs for everyone and allow the debtors to repay the most of their debt.

    I have sent you an email with the presentation prepared a few months ago. Unfortunately I don’t have time to write anything more serious and I still have to learn a lot to be able to make any real contribution.

    RJ Reply:

    @Adam (ak),

    “I agree with the idea of (partial) debt jubilee.?”

    I can see no reason at all to justify a debt jubilee

    And who should pick up the equal lose. Maybe we could start with people like Steve.

    People willingly took on debt. A debt jubilee would strike down a legal contract and rewards the risk takers and careless consumers at the expense of others who did not do this.

    And guess who would almost certainly pick up the loss. Pension funds or taxpayers.

    This is a really dumb idea by Steve

    WARREN MOSLER Reply:

    we have continuous debt jubilee
    it’s called bankruptcy
    and i thought the recent change in bankruptcy law wasn’t well thought out from the perspective of public purpose.

    Neil Wilson Reply:

    RJ,

    That’s because you’re seeing the lender as virtuous and the borrower as evil.

    The other viewpoint is that the lender tried to buy an income stream that wasn’t there and made a huge mistake. Why shouldn’t the rules of caveat emptor apply? Why should the majority be held to ransom by the few in a democracy?

    RJ Reply:

    @Neil (ak),

    “That’s because you’re seeing the lender as virtuous and the borrower as evil.”

    Are you being serious with this strange comment

    The borrower took on a debt to either buy assets or consume. They were not forced to

    They agreed to pay this loan back. Unless there is a sound reason for the Govt to step in and break this contract (and there is not) then the contract should stand.

    “and made a huge mistake. ”

    Tough luck. It happens all the time. If I take a punt and lose money I do not expect the Govt to wipe out my lose. It might be nice if they did but where would this lead. if they did it for me everyone would want the same.

    It a really dumb idea by someone (Steve) who is struggling to understand what has occurred and what should be done

    He should fall into line with MMT but will not due to difficulty in grasping what money is

    Neil Wilson Reply:

    @RJ,

    The lender wasn’t forced to lend. They were the one with the money initially and bought an income stream that wasn’t there.

    Why shouldn’t caveat emptor apply to this transaction, but does to all other purchases?

    ESM Reply:

    @Adam (ak),

    @Neil:

    The borrower always has the option to default on the loan. Of course, there are certain consequences to exercising that option. Caveat emptor.

    I think it is damaging for the government to change the rules of the game after the fact. It is unfair too, but that is not really an argument since lots of things are unfair. The problem is that one of the things that distinguishes developed countries from undeveloped countries is that it is possible to rely on and (if necessary) enforce contracts. If the government comes in and abrogates contracts arbitrarily, it undermines the very system that facilitates the creation of so much wealth.

    Neil Wilson Reply:

    ESM,

    “The problem is that one of the things that distinguishes developed countries from undeveloped countries is that it is possible to rely on and (if necessary) enforce contracts. If the government comes in and abrogates contracts arbitrarily, it undermines the very system that facilitates the creation of so much wealth.”

    So you were against the abolition of slavery as well.

    ESM Reply:

    @Adam (ak),

    @Neil:

    “So you were against the abolition of slavery as well.”

    Hmmm. I guess that a corollary of Godwin’s Law is applicable here. If so, that means I’ve won the argument.

    The obvious rebuttal is that there was no legitimate contract in place entered into by willing parties (i.e. not under false pretenses or duress).

    And generally in terms of the sancity of contracts, I have no problem with certain kinds of contracts being made illegal. I agree that we shouldn’t allow somebody to sell themselves into indentured servitude (or any one else obviously). There are certain non-compete provisions in employment contracts which are not allowed under NY law. I have no problem with that, although once again I don’t like things being changed after-the-fact.

    As for slavery, I think that Lincoln should have implemented a form of eminent domain to buy the freedom of every slave in the country while abolishing slavery. It might have avoided a war which killed over 2% of the population.

    Neil Wilson Reply:

    @ESM

    In that case then don’t you think the bail outs advanced to the banks should buy some freedom?

    The most appropriate system here is to allow rapid bankruptcy while providing a very good safety net that catches people who decide to call it a draw.

    That allows both the assets and the liabilities to be written down rapidly to sustainable levels.

    At the moment the argument is all about various pressure groups all trying to avoid being the last one to sit down in a game of musical chairs.

    Somebody has to decide how the credit writedowns are going to be allocated and then just get on with it. Otherwise it’s Japan time.

    ESM Reply:

    @Adam (ak),

    @Neil:

    “In that case then don’t you think the bail outs advanced to the banks should buy some freedom?”

    Could/should have been negotiated at the time. In any case, who needs their debt written down that isn’t getting it written down? We have a bankruptcy process for most debts, and for mortgages (whether they are recourse or not) mortgagors can walk away from their debts quite easily.

    The majority of mortgage defaults right now are strategic defaults. You’ll just encourage more if you offer them bailout.

    I feel the biggest problem right now is that delinquent homeowners are being allowed to stay in their homes for years (for a whole host of reasons, but in part because of government pressure).

    The best program of all might be for the government to subsidize moving costs for these people, so as to get them out as quickly as possible. That would avoid moral hazard (after all, you’d still be punished for defaulting by having to get out of the house), but it would help these people to get back on their feet.

    RJ Reply:

    @Adam (ak),

    What I think thsi debate will come down to is

    People who have lots of debt will of course support a debt write off. A great idea for them

    People without will not. As they will pick up the extra lose through Govt deficits or pension loses.

    The fairer solution is say a massive tax cut. In that way everyone benefits not just poor investors or careless consumers

    Adam (ak) Reply:

    RJ,

    Because without debt relief the system may take too long to recover even if full employment is restored.

    http://mobile.reuters.com/article/topNews/idUSTRE79125J20111003

    Also because I think that usury and imposing debt peonage is equally immoral as breaking contractual obligations. Not all the debt can be relieved by “jingle mail” as in the US. Mortgages are recourse in Australia and in Continental Europe (at least in these countries which I am familiar with). Please bear in mind that serfdom was only abolished in 1864 in Poland and debt servitude still exists in some Asian countries. I know that some people think that it is more moral to drive someone to suicide rather than allow for debt forgiveness but I am not one of them.

    http://inthearena.blogs.cnn.com/2011/07/05/david-graeber-studied-5000-years-of-debt-real-dirty-secret-is-that-if-the-deficit-ever-completely-went-away-it-would-cause-a-major-catastrophe/

    Reply

    RJ Reply:

    @Adam (ak),

    We should have a vote on this

    People who vote for a debt write should pick up the lose. Those that vote no do not in any way.

    Matt Franko Reply:

    @RJ, Keen: ” Graziani’s brilliant initial proposition was that a credit economy must be using a non-commodity as money, since the alternative of “an economy using as money a commodity coming out of a regular process of production, cannot be distinguished from a barter economy” Graziani (1995: 518). From the fact that an intrinsically valueless token is nonetheless accepted as full payment in the exchange of goods, Graziani derived the conclusion that:
    any monetary payment must therefore be a triangular transaction, involving at least three agents, the payer, the payee, and the bank… Since in a monetary economy money payments go necessarily through a third agent, the third agent being one that specialises in the activity of producing means of payment (in modern times a bank), banks and firms must be considered as two distinct kinds of agents ”

    Here he seems to miss the fact that as WM says banks are part (“partners”) of the government; he seems to be treating them as as yes “distinct kinds” of agents, but he falls short of making the direct connection between banks and the govt authority (govt authority: WM’s 9mm). So when he misses this connection, he can say we have a so-called “credit economy”; and then follows his preoccupation with “debt/credit”, his view that all “debt”(incl govt) is the same, and it spins off from there.. Keen here (as most others) has a hard time accepting the fact that it is govt authority that is supposed to be running all of this; iow not a “credit economy” but a “government economy” (and that is NOT “Socialism”)… Resp,

    Reply

    Neil Wilson Reply:

    @Matt Franko,

    I don’t see where you’re getting that from. You can model the banks without any government to get your horizontal system and you conclude what Steve has concluded. That central bank debt ‘is a very strange kind of debt’ – particularly when coupled with the ownership or dividend relationship with the government.

    Fundamentally Steve has ignored the government in the model and appears to be bolting it on. At which point he’ll have some fun with that feedback loop.

    Reply

    Tom Hickey Reply:

    @Neil Wilson,

    This is the mistake that economists make because they have not studied anthropology, sociology, and political science. They have an erroneous idea of institutional structures or ignore them, and therefore they are unable to model the economy with their simplistic assumptions. Then they make further assumptions about human behavior that don’t fit the facts as shown through empirical studies in the life and social sciences. If it weren’t a mess, it would be a laugh. Why does anyone take these people seriously?

    WARREN MOSLER Reply:

    i don’t care if you take me seriously or not…

    Tom Hickey Reply:

    @Neil Wilson,

    I see that Dani Rodrik speaks to this today in Milton Friedman’s Magical Thinking

    Tom Hickey Reply:

    @Matt Franko,

    Matt, how is the state as monopoly issuer of the currency not “socialism.” The state is in control of financial capital through issuance (injection) and taxation (withdrawal) and also controls the financial sector through legislation and regulation. Indeed, the state issue all charters and licenses without which an in terms of which firms operate. The state also make laws regulating virtually all activity including commercial activity.

    The very notion of “free market capitalism” is inapplicable in a modern state and economy, which is socialistic through and through. The idea of reducing the government’s role to the point of making the government irrelevant for all practical purposes is a fool’s errand.

    In a modern state, government necessarily controls the institutional structure of the country and its society. In a liberal democracy, the government is purportedly “of the people, by the people and for the people.” That is socialism.

    But, of course, that is the ideal. The reality is that a ruling elite captures the government through the exercise of power and accumulation of wealth, which initially arose from privatizing the commons (which is an argument for taxing land rent).

    Reply

    Matt Franko Reply:

    @Tom Hickey, You’re right I guess…. I’m just thinking in perhaps what has become the popular definition of ‘socialism’. iow we could have school choice funded thru fiscal with private schools and mandated attendance with govt regulated basic outcomes, etc vice govt owned public schools.. that kind of thing.

    But you’re right, the whole thing is technically “socialism” and most people dont want to admit that… Resp,

    Tom Hickey Reply:

    @Matt,

    “But you’re right, the whole thing is technically “socialism” and most people dont want to admit that”

    Right, and once that admission is made then we can begin having an informed conversation about what that implies and how to address it. Presently, we are dealing with myth as if it were reality, and magical thinking as if were science.

    I would say that this recognition is really a sine qua non of acceptance of MMT wrt to policy. And as many objectors have brought up, for a economic policy based on fiscal policy to work, the fiscal authority, in the case of the US, the legislature, must be truly representative of the people and not special interests.

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