Bitter Money Fights Shaped U.S History (Part 1): Johnson & Kwak

The authors are making fools of themselves with this statement:

As a nation, we will have to make a choice, one way or another. If the national debt grows faster than the economy for long enough, investors could lose their appetite for Treasury bonds, making it impossible for the government to borrow money at any price — as almost happened in 1813.

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56 Responses to Bitter Money Fights Shaped U.S History (Part 1): Johnson & Kwak

  1. SteveK9 says:

    @Warren Mosler

    Don’t know if you are still reading comments here, but I appreciate you informing me that Dean Baker is at least well aware of your approach. You can only do what you can do…

    At the risk of beating a dead horse, I read another article by Mark Weisbrot today on the new choice for President of the World Bank. Mark again decries ‘neoliberal economics’, etc.

    http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/washingtons-loss-of-control-over-world-bank-is-a-big-historic-change

    I’m only thinking about this, because although I am onboard (to the extent I understand), I matter not at all. So, thinking about people with at least some influence …

    Reply

    Art Patten Reply:

    @SteveK9,

    “I appreciate you informing me that Dean Baker is at least well aware of your approach.”

    As is Krugman, as are others. May be more a matter of protecting reputations, maintaining current benefactors and readerships, and avoiding textbook rewrites than anything else??

    Reply

    WARREN MOSLER Reply:

    thanks!

    Reply

  2. pebird says:

    @WARREN MOSLER, Every time I see James Kwak’s byline on a post, I think of Aflac. Weird brain connection. l do like some of Kwak’s policy posts, but when the topic shifts to the economic, it is just kwaking.

    Reply

  3. roger erickson says:

    More review of Marriner Eccles

    ‘Central Bankers are seldom known for their heterodoxy.’

    He had that right!

    ‘… When it came to explaining the Great Depression and what had to be done, Marriner Eccles was quite aware that he had “challenged all that had been said up to that point and [that he] was practically alone in doing so,” (Eccles, 1951, p. 104).’

    https://docs.google.com/a/270tech.net/viewer?a=v&q=cache:uog0m_dyLUYJ:www.econ.utah.edu/~vernengo/papers/eccles.pdf+eccles+Demand+Side+Economics&hl=en&gl=us&pid=bl&srcid=ADGEESgnlFYnK8kzr1SQvJxK7uOVUOmrz7OAB65yw_Oe502cyhPg3Cfbc2xZC75ZEzou1IOSS6J-vO_FY-Q9b9Wvvi0VCWbLLKqjhYqQ6URylokUOOv3mzS2AA7Erw1wXmtERs8dRlAw&sig=AHIEtbQJlB00umFn4fvOblnhS9fwbz-1Dg&pli=1

    http://www.econ.utah.edu/~vernengo/papers/eccles.pdf

    Reply

  4. roger erickson says:

    [brief] Triumph of the Demand Side (so close, yet so far, and in the past)

    p. 74 “… national income accounting, that the state should calculate the purchasing power necessary to produce full employment. Any deficit projected on this basis should be accommodated through direct [National] spending or tax cuts. This kind of active economic management … signaled a sea change in the economic ideas governing the United States.”

    p. 75 “Given that the decline in purchasing power was the root cause of the slump, not only was budget balancing exactly the wrong policy, it actually augered against historical precedent.”

    p. 75 [in a fireside chate] “Roosevelt concluded that, ‘let us unanimously recognize … that the federal debt, whether it be 25Billions or 40Billions can only be paid if the nation obtains a vastly increased citizen income.'”
    http://books.google.com/books?id=sNXT0rpJuDkC&pg=PA74&lpg=PA74&dq=eccles+Demand+Side+Economics&source=bl&ots=pwxALu8j3E&sig=_jzzjU2AmwcWYV7_K-r2NuC1kXs&hl=en&sa=X&ei=QANyT57MAYLY0QHuhNToAQ&sqi=2&ved=0CEkQ6AEwBQ#v=onepage&q=eccles%20Demand%20Side%20Economics&f=false

    Reply

    Art Patten Reply:

    @roger erickson,

    “Roosevelt concluded that, ‘let us unanimously recognize … that the federal debt, whether it be 25Billions or 40Billions can only be paid if the nation obtains a vastly increased citizen income.’”

    Which sounds very non-MMT, but at the time (under semi-operational gold standards), was true. And expanded private sector incomes required nothing less than raising the nominal price of gold (an analogue to running larger deficits today), which he eventually did.

    Reply

  5. owen owens says:

    For more information, look no further than the issues surrounding the first bank of the United States, and its charter.

    Reply

  6. Tyler says:

    John Carney reads this blog. John, please do what you can to cordon off a guest spot for an MMT rep on one of CNBC’s most popular shows.

    Mass communication is imperative. This is why the GOP/Fox News wins.

    Reply

  7. Look, Kwak and Johnson work for organizations supported by the Peterson Foundation, don’t they. They’re not paid to tell the truth.

    Reply

    dan Reply:

    @LetsGetItDone,

    I don’t agree that they are paid to not tell the truth. Both of them have been very level headed though the whole crisis writing about failed policies and corruption within the system.

    Unfortunately, for some unknown reason, when it comes to monetary sovereignty they go off on these tangents.

    I really believe Johnson and Kwak do not compromise their beliefs for ideology or money.

    Reply

    pebird Reply:

    @dan, They don’t force anyone to pay them. Being paid to not tell the truth doesn’t mean they are aware of the arrangement.

    Reply

    WARREN MOSLER Reply:

    innocent fraud

    Reply

    WARREN MOSLER Reply:

    if it kwaks like a duck…???

    Reply

  8. Dan Kervick says:

    As a nation, we will have to make a choice, one way or another! If we give ourselves too much of the money we manufacture, and promise ourselves too much of that money back, we could lose our appetite for borrowing it from ourselves and paying ourselves back, at which point we will just have to give it to ourselves.

    Then we’ll have to go to war with somebody, or something.

    Reply

    WARREN MOSLER Reply:

    yes!!!

    Reply

    Ed Rombach Reply:

    @Dan Kervick,

    Rather Zen-like…

    Reply

    Dan Kervick Reply:

    @Ed Rombach,

    Worrying that the US government will lose it’s access to the bond market is like worrying that the Topps company will lose it’s access to neighborhood baseball card swaps.

    What’s going to happen? If it can’t go to the swaps, Topps won’t be able to get it’s hands on any Derek Jeters?

    Reply

    Ed Rombach Reply:

    @Dan Kervick,

    Sounds like inside baseball to me.

    roger erickson Reply:

    @Dan Kervick,

    Classic summary Dan!

    Reply

  9. RWJ says:

    I gave up on their blog some time ago because of nonsense like this. OK I read it occasionally to see if they have made any progress, but they have not. See this post for the most recent example.

    And then there’s Johnson’s association with the Peterson Institute. Johnson and Kwak are neo-liberals of the worst sort.

    Reply

  10. MRW says:

    Warren,

    I am one of those you have managed to convince, but I am not ‘convinced’ enough to convince others when they bring up parts I don’t understand. I just read the Johnson & Kwak article. It doesn’t comport with my understanding of history, especially the fight to remove Colonial scrip that started with The Currency Act of 1764. What Hamilton did, as far as I remember, was to ensure British bankers dominion over the US via banking. It was congress’ refusal to renew Hamilton’s bank charter that started the War of 1812, because the Brits went ballistic. We lost. They won.

    Would you write an article taking the Johnson & Kwak article apart?

    Reply

    Paul Reply:

    @MRW,
    Would be interested in learning more about that topic in Colonial/Early American History, does anyone recommend a good read on it?

    Thanks,

    Reply

    MRW Reply:

    @Paul,

    Paul, I poked around. I was doing research for something else and came across Binderup’s 1940 speech and Alain Pilote’s translated 1985 article on the history of US Banking. So I looked into Benjamin Franklin’s papers (Yale, franklinpapers.org). I read “The Nature and Necessity of a Paper-Currency,” available at franklinpapers.org if you use their search function. Franklin wrote this when he was 23 years old around 1727. Then I read “Benjamin Franklin And the Birth of a Paper Money Economy” By Farley Grubb, Professor of Economics, University of Delaware, and National Bureau of Economic Research” published by the Philadelphia Fed at:
    http://www.philadelphiafed.org/publications/economic-education/ben-franklin-and-paper-money-economy.pdf

    Reply

    Poomac Oracle Reply:

    @MRW, @CebesMMT

    You could also Google Stephen Zarlenga’s “The History of Money”

    dan Reply:

    @MRW,

    That FED paper is a great read!

    Paul Reply:

    @MRW, Excellent read, thanks for sharing. I could see some MMT tenants way back then!

    SteveK9 Reply:

    @MRW,

    Also amazing to read:
    The statement by M S Eccles to the Senate Finance Committee in 1933. Wherein he was urging the government to increase demand by running a larger deficit.

    Eccles became chairman of the Federal Reserve (in fact the building is named after him). Everything old is new again. Here is his take on the cause of the depression:

    … but Eccles has become better known after his death for his having founded Demand Side Economics in 1951, when he wrote in his Beckoning Frontiers: “As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth … to provide men with buying power. … Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. … The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”.

    MRW Reply:

    @Dan, Paul, and SteveK9,

    If you have 30 spare minutes, watch this uproarious lecture with Robert Wahl to NYU film students about our nation’s history, and how we’ve been told it: “Assume The Position.”
    http://video.google.com/videoplay?docid=6731102750245618218

    It gives you a hint why so much has been hidden from us.

    WARREN MOSLER Reply:

    Let me think about it. it’s almost too painful to even read.

    Reply

    MRW Reply:

    @WARREN MOSLER,

    Warren, Simon Johnson just did a talk on NPR, so if the above is too painful to read, how about a mojito on the boat and you listen to him? Then, using a second recorder, you can stop what he’s saying and interject your POV, then play his next tidbit, and you react, etcetera. (OK, have a few mojitos.) Upload the audio to YouTube and we can make it go viral.

    Here’s the story and audio link.
    http://www.npr.org/2012/04/05/149394336/debt-struggles-as-old-as-america-itself
    Here’s the transcript:
    http://www.npr.org/templates/transcript/transcript.php?storyId=149394336

    (This guy was the Chief Economist for the IMF? Even I, now, know enough to counter this guy.)

    Reply

  11. Unforgiven says:

    I could have been an economist, but I wound up here.
    I just have to sound good, I don’t have to be clear.
    Let me whisper in your ear ’bout US Bankruptcy!

    See the bubbleheaded goldbug coming on at 5
    Talking Bond Vigilantes with a glint in his eye
    It’s interesting when people lie, ’bout US Bankruptcy!

    Trick ‘em when they’re up
    Trick ‘em when they’re down
    Trick ‘em till they vote
    For another clown…

    Reply

    WARREN MOSLER Reply:

    you’re a poet and you don’t even realize it!

    Reply

    chewitup Reply:

    @Unforgiven,
    They should just keep their dirty laundry to themselves. ;- )

    Reply

    markg Reply:

    @chewitup,
    You know what you call 2000 lbs of dirty laundry?
    A: Washington

    Reply

    walter Reply:

    @Unforgiven, Wow! That’s a beautiful poem.
    To force an MMT breakthrough ….maybe a book with MMT poems ….?…..

    Reply

    WARREN MOSLER Reply:

    MMT for you and me

    Reply

    walter Reply:

    @WARREN MOSLER,
    You are a poet
    and you don’t even know it!

    WARREN MOSLER Reply:

    my version of that was my attempt at self deprecation type humor
    ;)

  12. paul says:

    …and these are very smart people. Is there any hope?

    Reply

    WARREN MOSLER Reply:

    the only hope is this website and its derivatives

    Reply

    Kristjan Reply:

    @WARREN MOSLER,
    completely agree.
    Non of my business but you must have had a frustrating life so far. Going around and talking to walls.

    Reply

    walter Reply:

    @Kristjan, ‘one should never compromise principles, no matter how much trouble other people have in understanding them’

    7dif p4.

    Kristjan Reply:

    @Kristjan,
    thank you walter

    WARREN MOSLER Reply:

    it’s like i died and went to heck in august 2008 and watching this slow motion train wreck is my punishment

    SteveK9 Reply:

    @WARREN MOSLER, A longer book? A meeting with someone like Paul Krugman (you must like at least some of what he says, and he has an influential perch). Dean Baker is an even better choice. He is pretty close to MMT now and get’s on the tube fairly often.

    Reply

    Abram Larson Reply:

    @SteveK9, I agree with Steve here. A full length book aimed at a lay audience is what is needed. Perhaps you could combine forces with Randy Wray, Stephanie Kelton, Marshall Auerbeck(sp?), Bill Mitchell, etc. Next step would be to get one of you on a popular show like The Daily Show. I’m not sure what the process is for that, but I’ve seen far less interesting people on there. For the mean time, keep up the radio interviews you’ve been doing and I’ll keep making people listen to them.

    chewitup Reply:

    @SteveK9,
    Randy and Bill Mitchell are writing a textbook. Knowing Bill, it will be plenty long. Stay tuned. (Due next year?)

    WARREN MOSLER Reply:

    taken plenty long to write for sure- they agreed in 2006 or so to do it and estimated it would take a year or so.

    WARREN MOSLER Reply:

    neither would stoop that low

    SteveK9 Reply:

    @SteveK9,

    Well, I wrote to Mark Weisbrot (Dean’s junior partner at CEPR) about MMT and he wrote back and asked for some info/links. I sent him some things and promised not to bug him after that.

    What Dean Baker writes is often very close to MMT principles (as I understand them). There are just a few pieces missing. Maybe Mark would be more accessible.

    I do know that Bill Mitchell and Randy Wray are writing a text. Didn’t know it was that long in the making … often seems to be the way.

    WARREN MOSLER Reply:

    dean has read my book and i’ve discussed it in depth.

    he believes the progressive agenda is best served by what he’s doing.
    i disagree.
    it’s about lerner’s law

    SteveK9 Reply:

    @SteveK9, Well this is kind of a coincidence. Here is Dean Baker criticizing Johnson & Kwak’s book ‘White House Burning’. Not exactly the same critique, but interesting.

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