Heterodox economics: Marginal revolutionaries | The Economist
Posted by WARREN MOSLER on December 29th, 2011
The Center of the Universe
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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.-
MMT: Taxes function to regulate aggregate demand, and not to raise revenue per se.
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December 29th, 2011 at 1:59 am
What does your caricature mean (third one from top)?
Also what is the word “One Trillion ___ Dollars” on the notes? Soft?
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MamMoTh Reply:
December 29th, 2011 at 6:01 am
@Ramanan,
It’s soft currencies, inspired in Dali’s soft clocks.
Isn’t Warren the Marianne in the first caricature too?
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Ramanan Reply:
December 29th, 2011 at 8:07 am
@MamMoTh,
Thanks … like this
http://en.wikipedia.org/wiki/The_Persistence_of_Memory
About Marianne … possible
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Ramanan Reply:
December 29th, 2011 at 8:12 am
Guess this one isn’t wearing glasses http://en.wikipedia.org/wiki/File:Eug%C3%A8ne_Delacroix_-_La_libert%C3%A9_guidant_le_peuple.jpg
but the one in the first caricature is wearing it … so your guess is right.
Unforgiven Reply:
December 30th, 2011 at 3:16 am
@MamMoTh,
I’m going to print that out and frame it! Parkins has a great sense of humor! Even the platinum coins got mention.
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December 29th, 2011 at 9:00 am
i SAW THE PICTURE AND CAME BACK TO ASK THE SAME THING LOL!
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December 29th, 2011 at 12:13 pm
“In 1996 he earned them over $100m after he pledged to buy more of a certain type of Japanese paper than the government had issued. And his bank made a monthly return on required equity of over 10% in 2011 largely by buying American Treasury bonds, betting against celebrated investors like Bill Gross of Pimco, the world’s largest bond fund, who sold his fund’s Treasuries in early 2011 before recognising his mistake later on.”
Seriously? No wonder you are living in the Virgin Islands!
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wh10 Reply:
December 29th, 2011 at 2:49 pm
@pebird,
Read his bio in 7DIF. It’s really a fun story for people interested in finance :).
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Kristjan Reply:
January 2nd, 2012 at 7:32 am
@pebird,
I think this is what matters a lot to a lot of people. To academics like Bill Mitchell they could say that he lives in a socialist bubble and doesn’t know anything about real world. This is the way It goes usually, sad but true.
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Kristjan Reply:
January 2nd, 2012 at 7:44 am
@warren,
I accidentally posted a wrong link on your bank perfomance post, sorry. Could not post my comment there again, your site is blocking me there. Any way, US banks’ average ROE is much lower than the link suggests.
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December 29th, 2011 at 1:45 pm
Being mentioned in the Economist is no small feat. Congrats!
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WARREN MOSLER Reply:
December 29th, 2011 at 4:50 pm
thanks!
And thanks to everyone commenting on all the other websites- wouldn’t have happened without you all!!!
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December 29th, 2011 at 2:35 pm
Ezra made note of the Economist article under his blog post “How the Economy can come back in 2012″. No comments just a cut and paste from the Economist
http://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-how-the-economy-could-come-back-in-2012/2011/12/28/gIQANnVKOP_blog.html?wprss=ezra-klein
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December 29th, 2011 at 3:55 pm
It is tremendous being mentioned in The Economist. But the article itself reveals a lack of any understanding of, what to me, are the true insights of MMT;the difference between the gold standard and free-floating non-convertible currencies, an understanding of the reality of central and commercial banking operations (loans create deposits, reserves are not loaned, the true fiscal effects of monetary operations, etc), and an understanding of national accounts and flows of funds. The exposition of these realities by MMT has been a revelation for me. In these areas it is clear that mainstream economists are wrong. In not presenting these critical insights I think the Economist article is woefully deficient.
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Neil Wilson Reply:
December 29th, 2011 at 4:31 pm
@Jim Thomson,
There’s no such thing as bad publicity.
For The Economist this is a radical step.
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Jim Thomson Reply:
December 29th, 2011 at 5:09 pm
@Neil Wilson, I agree with your point. But I must have my chance to show how much I have learned from all of you.
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WARREN MOSLER Reply:
December 29th, 2011 at 4:53 pm
good response to post on their website
;)
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Talvez... Reply:
December 29th, 2011 at 7:03 pm
@Jim Thomson,
The true fiscal effects of monetary policy? Or the monetary effects of fiscal policy?
After having read a paper by Stephanie Bell, I realised Fiscal and Monetary policy are inseparable. There is no way you can split them and still have a consistent view of things.
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Jim Thomson Reply:
December 30th, 2011 at 12:37 am
@Talvez…, I agree with you. I was using the terms in their conventional sense, as separate activities. I was referring to the mainstream preference for monetary policy and thinking that it has great power, whereas the MMT insight is that the Federal Reserve controls interest rates only and monetary policy has very little effect, ie, QE does not increase the money supply. Trying to be brief.
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December 29th, 2011 at 4:28 pm
I’m happey for Mr. Mosler to actually be recognized in a major publication but the article was neither entertaining nor educational.
It consisted of a lot of benign rambling about the economy and constant comparisons between Austrians and MMT-ers all while denigrating both schools of thought. That’s to be expected by such a “mainstream” publication, but how has the “mainstream” economic answers and ideas worked out so far in regards to our economy??? The constant hype or push of mainstream economics based upon principles of meritocracy is not open to any suggestions or deviations of their dogma. After reading that “article” and understanding that there needs to be “more spending”, but BY WHOM and WHERE?
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Jim Thomson Reply:
December 29th, 2011 at 5:13 pm
@Fredisinmyhead, Great points. It criticizes MMT, Austrian and the others, but by implication accepts the mainstream, which of course predicted, explains and has solved the current problems, especially in the UK.
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Fredisinmyhead Reply:
December 29th, 2011 at 6:54 pm
@Jim Thomson,
Well, I just last night finished reading The 7DIF and one thing that MMT and the economics field in general overlooks is the inherent nature of people to always lean towards self-preservation. One thing that I noticed by reading that is that Warren Moslermay honestly(or deep down may not)beleive that various politicians and economists do not know certain aspects of the true workings of our monetary system. I beleive that they do but feign ignorance to somehow absolve themselves of the (known)outcomes. They obviously know what certain actions will/will not return, and consciously carry out destructive actions because the end results are intended, or I should say that the slected group benefits.
Mainstream economics has it’s loyal followers and minions, and as long as you “preach to the choir” or continue with the staus quo dogma, you will always have an outlet. Paul Krugman doesn’t ever really have to be correct about anything, but he does know what tack or line to follow or he will lose his prestigious podium at the NY Times. Why els would EVERY response or solution to every economic problem entail the same old actions?
To put it in the most blunt terms possible, it’s not the accuracy, it’s the content.
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Jim Thomson Reply:
December 30th, 2011 at 12:50 am
@Fredisinmyhead, I do wonder myself how many understand or not. Mr. Mosler has said that some in the Fed do understand but they do not control policy. I agree that many benefit from the current system and so might feign ignorance. Others likely do not understand but do not need to, they benefit anyway. It is hard to really know. I do think that most of the public truly do NOT understand, they believe what they hear and are told. As I have tried to explain MMT, as best I can, to friends and acquaintances I have been unpleasantly surprised at how many start attacking me back for various reasons. I have made one convert, but he is smarter than most and understood immediately. Regards, Jim
Fredisinmyhead Reply:
December 30th, 2011 at 4:20 pm
@Fredisinmyhead,
JIM,
I think that if Mr. Mosler were to unhinge his perspectives from some of his economic suggestions he would not encounter such resistance. If his theories of the monetary system and how it works were tied to his suggestions of response that aren’t directed oat the top of the economic ladder, the “mainstream economists” may be more receptive to them. As it stands now, if they accept his theories as valid, that makes his suggestions/ideas valid also, and the mainstream folks do not deviate from their selective and biased sloutions.
An example: unintended consequences
Unintended for WHO? If any actions have a negative impact, does that absolve the person/s that proposed it because they din’t mean it?
December 29th, 2011 at 6:59 pm
MMT is making inroads!
But some annoying people still think inflation is the growth in money supply, and they can only resort to ad hominem when they are confronted with the cold facts (I always use the graphs Mitchell posted in his The myth of rational expectations
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December 29th, 2011 at 9:34 pm
great publicity; but the DT propagandists just won’t quit;
left this comment:
> “Mr Mosler [says] that there is plenty of scope for borrowing more”
?? That’s a complete mischaracterization, given all definitions of chartalism, or MMT. If a nation switches from a commodity-money-supply standard, to a “fiat” standard where currency is backed by distributed public initiative, then currency is NOT borrowed, any more than public initiative is.
Beardsley Ruml, NY Fed, 1946
“Taxes for revenue are obsolete.”
http://www.curiousevidence.com/(S(ogop55gtqjr2sx5megbfybk5))/samples.aspx?id=21
1941
“ECCLES: We [the Federal Reserve] created it.
PATMAN: Out of what?
ECCLES: Out of the right to issue credit money.
PATMAN: And there is nothing behind it, is there, except our government’s credit?
ECCLES: That is what our money system is.”
– Federal Reserve Board Governor Marriner Eccles in testimony before the House Committee on Banking and Currency in 1941, during questioning by Congressman Wright Patman about how the Fed got the money to purchase two billion dollars worth of government bonds in 1933.
http://www.google.com/search?sourceid=chrome&ie=UTF-8&q=Federal+Reserve+Board+Governor+Marriner+Eccles+in+testimony+before+the+House+Committee+on+Banking+and+Currency+in+1941
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WARREN MOSLER Reply:
December 29th, 2011 at 11:52 pm
understood, but under today’s institutional arrangements the process is one of the tsy selling tsy secs to keep a positive balance in its fed account, whether operationally necessary or not. and there happens to always be infinite ‘scope’ for the tsy to do this, so no need to specifically jump on this at this point of entry.
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December 29th, 2011 at 9:38 pm
What is this statement referring to? Seems to be confusing multiple topics.
> Mr Krugman, does not seem to have revised his view that their
> business-cycle theory is “as worthy of serious study as the
> phlogiston theory of fire”.
The Economist may still have a great brand and soapbox, but they rarely make much sense anymore.
ps: few would recognize Warren if they hadn’t lowered his neckline :)
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Unforgiven Reply:
December 30th, 2011 at 2:45 am
@roger erickson,
The whole thing seemed a bit of a gloss-over, but if you try sometimes, you just might find, you just might find….
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