The Center of the Universe

St Croix, United States Virgin Islands

MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Meet the Genius Behind the Trillion-Dollar Coin

Posted by WARREN MOSLER on January 10th, 2013

Meet the Genius Behind the Trillion-Dollar Coin and the Plot to Breach the Debt Ceiling

By Ryan Tate

53 Responses to “Meet the Genius Behind the Trillion-Dollar Coin”

  1. Ed Says:

    the center of the universe is now also the center of the trillion dollar coin “plot”!

    See, once they start calling is a “plot” that guarantee’a there’s a great movie opportunity here!…:-)

    Could be a great MMT promotional opportunity.

    Reply

    AP Reply:

    @Ed,

    Agree. Suggest posting links to 7DIF in comments, especially on sites with unfriendly readers (which Wired appears to be, surprisingly).

    Reply

    beshiva Reply:

    @AP, Not really. Mainstream econ “experts” will link MMT to the coin and say that both are a joke. This is not the way for MMT to get better PR.

    Reply

    beshiva Reply:

    @beshiva, Sorry, AP – meant to reply to Ed’s post.

    nobody Reply:

    @beshiva, Mainstream econ “experts” already think that MMT is a joke, their jobs and salary depend on it.

  2. Andy Says:

    “Online Bull session”. ????
    Surely not.

    Reply

  3. Monica Smith Says:

    How is the debt ceiling different from a chastity belt?

    Reply

    Andy Reply:

    @Monica Smith, Don’t think the debt ceiling is gender specific.

    Reply

    WARREN MOSLER Reply:

    neither are pro life?

    Reply

    roger erickson Reply:

    @WARREN MOSLER, no, but one is ‘fo wife

    Reply

    Art Patten Reply:

    @WARREN MOSLER,

    “neither are pro life?”

    Well played, Sir.

    Reply

  4. Piero from Italy Says:

    may be : we continuosly need or to do debt or to print new money (Paper Bit Platinum it’s quite the same) becuase capitalism have natural tendency to act a wrong distribution of resources between labour/businesess.. so middle class of consumers don’t have money to buy a close output gap = unemployment.. the index of Gini that is more bad decade after decade is a signal.. utilization of production capacity in Usa that decline from 1970 to now (with big wave of course) is another signal.. so.. new money/deficit = redistribution..

    may be.. Platinum Coin it’s only a way to avoid political obstacle of people that don’t agree with this view ?

    Reply

    Adam (ak) Reply:

    @Piero from Italy,

    There is a reason the system needs an expansion of the quantity of net financial assets at a rate greater than the rate of growth of real resources – it is called “money hoarding”, encouraged in the age of “financialisation”. I would ask the so-called “1%” (especially the superannuation fund managers) what they need these gazillions of dollars for.

    Actually hoarding affects “financial assets” in general not “net financial assets” – since “money” is mostly endogenous (created within the banking system – see http://www.nakedcapitalism.com/2012/04/scott-fullwiler-krugmans-flashing-neon-sign.html ). Since the post-Great Depression constraints were removed, the process of debt expansion and contraction resumed its cyclical character (think about housing bubbles). When the private debt is being repaid after bursting the bubble (Japan, USA), the only entity capable of spending left standing is the government. No magic IS-LM curve shifts – just Fisherian debt deflation. Now we have a leaky bucket during the debt deleveraging phase – if the bucket is not filled up at the proper rate determined by the size of the hole at the bottom, it will become empty. NB the “debt expansion/deflation” theory also neatly explains why the government could have run surpluses without any visible adverse effects during the bubble years.

    Money hoarding is one of the cornerstones of the system introduced in the neoliberal era (think about private pension plans) because some deluded economists thought that increasing the rate of saving would provide more funds for investment. It is true that encouraging financial assets hoarding was a way to provide more space (in real goods and services space) for deficit spending during WW2. Increased hoarding has however absolutely nothing to do with increasing investment because monetary savings are not reinvested as loans. It is the other way around – loans create savings. In fact the term “saving” can be misleading as it applies equally to purchasing equity in companies or purchasing debt of companies (what may indeed provide funds for investment but also may feed speculation) and to increasing the quantity of deposits in the banking system / purchasing government bonds which has a rather opposite indirect effect. (See Paul Davidson, “John Mayard Keynes”, Figure 5.1 “Two-stage spending decision-making process for saving out of current income”. on page 49)

    There is a superb article written by prof Laski (mentioned already several times on this forum) addressing the fallacy of increasing saving rate. Actually I think that this article should be a Mandatory Reading.

    “Growth of aggregate demand at any given private saving rate depends on growth of private investment, export surplus and budget deficit. Slower growth of private investment in the mid-1970s has triggered stagnation trends in Europe’s developed economies, caused mainly by inadequate aggregate demand. The relation between aggregate demand and the propensity to save is analysed in the present paper using the model of ‘stunted growth’ of Josef Steindl. The decreased utilization of capacity characteristic of stagnation can be counteracted by a reduction of the propensity to save. The most important factors determining the saving rate are distribution of incomes and the progressivity of the tax system. In many countries and periods, an inverse relation between the growth of GDP and of the private saving rate has been found and resented in the study.”
    http://www.wiiw.ac.at/modPubl/download.php?publ=WP45

    In that sense the views presented by Paul Krugman or socialist economists that the tax loopholes for the rich need to be closed make sense in the very long run as it could de-financialise the economy. (Another hole in the US is a persistent trade deficit caused by money hoarding occurring overseas – but this is compensated in real terms by the surplus of real goods). This would seal of the bucket – but debt deleveraging has to take its course anyway. In the short run the leaky bucket needs to be filled up at a rate determined by the rate of deleveraging – or the GDP will stabilise at a lower value corresponding to low utilisation of productive capacities.

    Reply

    ESM Reply:

    @Adam (ak),

    You make it sound like “money hoarding” is a bad thing. I submit that “hoarding” money is a good thing. If people can be made to feel happy and secure because of some numbers on a paper statement or a computer screen, which are certainly easier to produce than real goods and services, that’s a pretty big advance for humanity. Of course, it took a lot of work to get to the point where people could be satisfied by numbers on a spreadsheet, but now that we’re there, why deny ourselves the benefit of it?

    Reply

    Piero from Italy Reply:

    @ESM,

    I agree: with tecnology it’s only a psicological problem..
    if people and work&consume only with placebo money it’s good to give it to them.. But my doubt are two: if Central Banks&States don’t print/make deficit the Private sector close himself in a loophole because tend to concentrate money and leave mass without placebo.
    Two: on very long term global scarcity of commodities with 6 billions of consumers is unsustainable.

    Nihat Reply:

    @ESM,

    But does it make people feel happy and secure? Or does it make them insecure and paranoid?

    Greg Reply:

    @ESM,

    Agreed

    But they have to understand how it is that everyones dollar savings desires are met.

    I do have a problem with people thinking they can “not spend” today on an item, wait ten years and then still get the equivalent item without doing any additional work. And if they dont get that they cry foul and blame govt spending for their economic woes.

    Adam (ak) Reply:

    @ESM,

    I am talking not about “saving” but “hoarding”, the difference is similar to comparing a fish and a whale. Saving for better retirement alone by working-class individuals (while the state-run pension system is in place) would not blow such a hole in the circular flow of funds. The system which was in place 1945..1974 was a bit more balanced in the long run. I refer to the post-1974 period, when “financialisation” of capitalism occurred – see:
    http://www.soas.ac.uk/economics/research/workingpapers/file43195.pdf

    Please tell me what people need $500000000 in financial assets for? To have a comfortable retirement? And this is not a big hoard. I dare to say – no, that person expects an interest income or gambles in the global financial casino. This used to be called “usury” and was universally condemned by monotheistic religions of Middle East and Europe. I am not a religious person but I totally agree with the primacy of spiritual values over irrationality and greed of hoarding. To me someone sacrificing his and his own family lives, sucking blood from the others and irreversibly damaging natural environment is a psychopath. It is true that the current system did a bit to tame these individuals. He/she would have been a Viking raider murdering Western Europeans or Mongol tribesman looting and burning Eastern Europe in the past. I am not sure whether you visited castles and palaces of magnates in Eastern Europe. In the past centuries thousands of serfs worked to feed one parasite and his wife/mistress spending time on gambling and drinking. (This system also gave employment to arendars, too, if you know what I mean. Sometimes serfs organised pogroms of these arendars but nobody dared to get rid of the overlords or criticise the system where Catholic Church gave legitimacy to the rigid social structure based on exploitation).

    Now the magnates are gone but the system of exploitation and hoarding has not been dismantled – it only evolved. One ideology glorifying exploitation and irresponsible wasting of natural resources has been replaced by another – neoliberal. The golden calf from Exodus 32:4 has been resurrected. Usury helps providing funds for “investment”. We are repeatedly told that “wealth trickles down” or that psychopaths running big corporations bring about progress. Not much more than communist apparatchiks of the past era. Please be aware that I am not against capitalism with strong social responsibility and environmental controls. I don’t believe in any social utopia but I judge the social processes from libertarian positions. I just think that corporations and greedy individuals worshipping absolute property rights often pose a greater threat to individual’s liberties than the state bureaucracy. Greed and obsessive competition may play a positive role if properly tamed. Unfortunately they are not tamed and the “1%” have subverted the Western system. They did the same thing as the magnates of the bygone era – the American political system based on “liberum veto” (obstructionism) in the Congress is a direct continuation of the rotten golden freedom from the 18th century Polish and Lithuanian Commonwealth. Eventually the Polish magnates and aristocrats betrayed the country – because, blinded by extreme egoism, they totally lost the moral compass and did not take into account the common interest of the whole society.

    A platinum coin may fix things for a year or two and break the Republican obstructionism for a while (not that I defend the Democrats – they are the same). I don’t believe that the economic system can work in a stable manner until the process of financialisation is reversed. I obviously don’t think that public debt in America is “unsustainable” but the society will not leave the state of deep stagnation until the issues mentioned above are addressed. Not to mention the environmental unsustainability of the current model.

    ESM Reply:

    @ESM,

    In a free market, transactions are voluntary. If voluntary, presumably they are win-win. If somebody ends up acquiring a huge amount of financial wealth through a series of voluntary transactions, I’m not sure what you would have him do? Spend his wealth on building a house made of gold? Spend it hiring thousands of workers to dig holes and fill them back in again? Give it to charity (which is simply a separate spending decision, and possibly just as wasteful, depending on the charity)? Give it to the government (which is equivalent to burning the financial wealth, except maybe there is less carbon emission)?

    The liberal hero Warren Buffett has chosen to give 99% of his financial wealth to charity, but only after he dies. Perhaps he thinks it’s too much work for him right now to figure out how best to distribute his wealth in charitable ways. He thinks his time is better spent trying to produce more value using his investing and managing skills. One thing is certain though. Despite his self-serving rhetoric about how the wealthy do not pay enough taxes, he sure does a good job of not paying any. He evidently believes he can do a better job spending money than the government.

    Adam (ak) Reply:

    @ESM,

    I do not subscribe to any axiomatic social theory whether it is Marxism, Neo-Classical or Austrian Economics or anything else. The assumptions you have made have very little in common with the reality.

    How do you define “free market”? The system which exists in the US or the idealised system found in the books of theorists? NB very little has been said about the role of the nearly-absolute property rights (denying access to land and other resources such as technology) as a cornerstone of the laissez-faire system. Not only financial but real wealth hoarding occurs and as a result the most of limited resources end up in the hands of a few wealthy individuals. The proponents of laissez-faire often ignore the social and macroeconomic environment, concentrating instead on idealised transactions between individual agents in the absence of any real constraints.

    Just because “transactions are voluntary” and “presumably win-win” doesn’t prove that they are morally acceptable. This is a classical non sequitur argument. OK I want to start making heroin and selling it to your children – this would bring me good profits. What if I establish a biotech company making biological weapons for the Iranian regime? This may help killing some people one day but I don’t care – the profits are sacrosanct and I should maximize them. What about a payday loan company lending money to a poor gambling addict who is “consciously and voluntairly” ruining the life of his vulnerable family?

    1. In a free market some people (the rich) have access to financial resources (capital) while the poor don’t. I won’t quote he whole Karl Marx’s masterpiece. In the modern-days America, how many of the rich have actually started with very little?
    http://www.psychologytoday.com/blog/wired-success/201209/the-myth-social-mobility-and-the-self-made-man-in-america

    2. In a free market system some people are denied the right to sell their labour. The very existence of the involuntary unemployment (as described by Keynes and Kalecki) invalidates the myth of social justice support (“equal chances”, “fair go”) supposedly in-built into the free market system. NB MMT is an attempt to address this fundamental systemic flaw.

    3. Can you prove that real living conditions of serfs living in Poland / Russia in 18th century were significantly worse than the “free” labour force living in 19th England? What about the Irish Famine? Also a “win-win”? How did it differ from http://en.wikipedia.org/wiki/Holodomor ? So the fact that the transactions were voluntary did not mean that they always benefited everyone involved.

    I would re-introduce the progressive taxation system which existed in the Western countries after the end of WW2 and consider rationing of non-renewable natural resources. There is zero social benefit from allowing individuals like Warren Buffet to accumulate the insane level of wealth. To me this is also deeply immoral (and “giving to charities” won’t fix it) – while there are so many people suffering from extreme poverty. Please be aware that I don’t believe in “socialism”, “communism”, “political correctness” or the state replacing individual entrepreneurs. But there is a subtle difference in size between a fish and a whale. We need to re-introduce the Biblical “Jubilee” wealth restoration and redistribution mechanism while maintaining strong protection of limited property rights of the individuals.

    ESM Reply:

    @ESM,

    @Adam:

    “Just because “transactions are voluntary” and “presumably win-win” doesn’t prove that they are morally acceptable. This is a classical non sequitur argument.”

    There are always externalities (both positive and negative), and it is a proper role for government to adjust for them. Obviously, if a transaction has a negative impact on a 3rd party, that 3rd party should be protected, and either the transaction should either be prohibited or taxed so as to allow compensation for the 3rd party.

    But my main point is that extreme aggregation of wealth will happen from a series of voluntary transactions, even if there are no externalities, or only positive ones. J. K. Rowling makes roughly $200MM for every book she writes. Who is hurt by that? Nobody I can think of, except for people who are sick and tired of Harry Potter.

    You claim that some people do not have the opportunities to become wealthy. They might not get the education needed to develop a good idea, or the resources necessary to pursue it. That is life, I suppose, and also irrelevant. Not everybody is born equal, and life is unfair at many levels. Some people are socially awkward, some are ugly, some are dim-witted, or have poor health. Society actually goes a long way towards trying to correct for unequal educational opportunities. Not so much for the other inequities.

    Yes, perhaps it is unfair that somebody born to a single mother in the inner city is extremely unlikely to be taught math and computer skills and futher motivated to become a software engineer that goes on to found a billion dollar company. On the other hand, that unlucky person is not hurt by somebody else doing that. In fact, he only benefits.

    My fundamental point is that nobody is really hurt by somebody becoming a billionaire, unless that billionaire actually uses his financial wealth to hoard or consume extreme amounts of real goods and services (thus leaving less for everybody else). The main reason most people don’t like other people becoming billionaires is envy.

    Anders Reply:

    @ESM,

    “The main reason most people don’t like other people becoming billionaires is envy”

    Why does that matter? If some reflective people in the top 1% or 0.01% would favour more distributive taxation, then don’t you think this is enough to consider whether there is an argument for this, rather than dismissing it out of hand, as you do?

    You clearly feel you do nicely out of the current system. But inequality is increasingly sharply. With greater inequality, equal opportunities looks more and more of a joke. Do you not even see the argument for doing something to stabilise the Gini index, without even necessarily agreing to try and reduce it?

    Adam (ak) Reply:

    @ESM,

    I am talking about the system not an individual in isolation. The whole is more than a just a sum of the components. Nobody is personally hurt by J.K.Rowlng. Yet the society is increasingly dysfunctional. It is not a matter of levelling the field and compensating for the “externalities”, believing that the system will self-regulate itself at the macro scale.

    My initial point was about the financial assets. In the economy with positive real interest rates a rich person possessing a hoard of financial assets receives a stream of income generated either by the government or by debtors. One of the fundamental changes which occurred in the 1970s-1980s was dismantling the barriers limiting actions of financial institutions. The “great moderation” was actually a great debt bubble. Real incomes of the workers did not increase – these people often had to borrow a lot of money in order to buy houses and consumer goods. Real incomes of the rich increased dramatically (due to changing wage/profits ratio) and were increasingly fattened up by the interest payments. Until the bubble burst. All the individual transactions are voluntary – so what? Your analysis simply omits the question why wages are so low and profits are so high. I hope that you don’t believe in the usual “marginal utility” story about wage determination. Why did real wages not increase? This is a political question which must be asked.

    “In short, our current system and philosophy is creating a country of a few million overlords and 300+ million serfs.”

    http://www.businessinsider.com/corporate-profits-just-hit-an-all-time-high-wages-just-hit-an-all-time-low-2012-6

    The following short article is an eye-opener on what is going on “behind the scenes”:
    http://www2.ucsc.edu/whorulesamerica/power/wealth.html

    Why should people be driven by the dream of “becoming wealthy” if this destroys our natural habitat? This ideology is also the source of the “envy” you mentioned. I would rather say that we don’t need to be wealthy, we should possess and consume just enough to satisfy our needs, leaving some of the real resources for the future generations.

    Sergei_new Reply:

    @ESM,

    “In a free market, transactions are voluntary”

    ESM, I have full respect but you sometimes really go too far. Free market requires people of equal standing when they can express independent will. How do you describe a market where whatever share of people transact purely for necessities?

    ESM Reply:

    @ESM,

    @Anders:

    Why does that matter? If some reflective people in the top 1% or 0.01% would favour more distributive taxation, then don’t you think this is enough to consider whether there is an argument for this, rather than dismissing it out of hand, as you do?”

    I am not dismissing it out of hand. I understand that there are people who value equality of financial resources (or, more narrowly, income) highly, and some might be pointed towards redistributionist policies by their own internal moral compass. I have long argued here that one of the fundamental differences between conservatives and progressives is that conservatives want to see more emphasis on individual “freedom” and progressives want to see more emphasis on “fairness”. The quotes are too indicate that those terms are not so well-defined and leave room for interpretation. Arguments over moral axioms do not interest me terribly, although clearly I have my own, which tend to leave me slightly right of center on the political spectrum (in the US at least). The reason they don’t interest me is that there is no right answer, and there is little prospect of convincing anyone to crossover from one side to the other.

    However, I think it is important to point out to people when they are stretching the facts to justify their moral starting point. You might not like it that Warren Buffett is crazily rich (and personally I think envy is the most harmful of human emotions, so that I try to fight it as much as possible, admittedly with not great success), but there are costs and benefits to stripping him of his riches (or preventing his acquisition of them in the first place), and these must be analyzed. The purpose of my comment was to argue that the benefits are very small, beyond some sort of psychic reward on the part of envious people. I could go on at length about the costs (and already have many times on this blog).

    If you want to argue for government policies which reduce the Gini index, be my guest. But in my experience, such policies which have been employed in the past not only impose a huge hidden cost on economic growth, but they utterly fail to mitigate inequality – often they exacerbate it.

    The focus on income inequality I think is particularly misplaced, as well as the usual prescription of making the income tax code more progressive.

    ESM Reply:

    @ESM,

    @Adam:

    “Why did real wages not increase? This is a political question which must be asked.”

    The main reason that real wages, as measured by the bean-counters, did not increase is that more worker compensation now comes in the form of benefits other than wages (the tax code is to blame for this, since these benefits are not taxed to the worker). Most of these benefits are in the form of increasingly valuable health insurance. Some are in the form of better work hours or a better work environment. Basically, I claim that just looking at inflation-adjusted wages (and even inflation is a crock, since inflation measures don’t truly capture the exponential improvement in the quality of goods and services available now versus those of 30 years ago) doesn’t tell the whole story, or even the most important part of the story.

    Yes, globalization has kept workers’ wages depressed relatively, and has enhanced capital’s returns relatively. But in the aggregate, everybody is a huge, huge winner. I am continually shocked at the high quality and low-cost of goods for sale in my local supermarket, or Costco, car dealership, or at Amazon.com, especially when I think back to the early 1980s.

    Is there a counterfactual where workers could have done even better than they have? Maybe so. But I think if we had followed the prescriptions of the union advocates and the “fair” traders, and had had a more regulated market, with greater barriers to trade, etc., they – we – would have done worse.

    “I would rather say that we don’t need to be wealthy, we should possess and consume just enough to satisfy our needs, leaving some of the real resources for the future generations.”

    Well, I don’t agree that we are consuming too much right now, but I was trying to point out the important distinction between consumption of real resources and just sitting around on a pile of bank statements. Warren Buffett can wallow around in his money like Woody Harrelson in Indecent Proposal, and it doesn’t have any effect on the environment.

    ESM Reply:

    @ESM,

    @Sergei:

    I’ll admit to exaggerating a bit to make a point. Makes things more interesting, right? I agree no market is perfectly free, nor is that desirable. It’s all relative, and right now I think we should be more free than we are, not less.

    Anders Reply:

    @ESM,

    Obviously Rawls’ point was that if you didn’t know your endowments and preferences (ie, drawing back the Veil of Ignorance), you would actually prefer a slightly fairer society too. But this argument is notorious for failing to get any conservatives to admit to it!

    Are you really relaxed about actually increasing inequality?

    Fairness and freedom = a false dichotomy anyway. Don’t you agree that galloping inequality makes a hollow mockery of equal opportunities? Do you really think that, because a token number of poor kids make it rich despite their backgrounds, equal opportunities are alive and well in America? That one’s work and talent makes all the difference, and one’s background makes no difference to outcomes?

    Or have you given up caring about equal opportunities anyway?

    Adam (ak) Reply:

    @ESM,

    Do you have any data supporting the statement that workers in the US are compensated more (in real terms) that suggested by the share of their wages in GDP?

    Have you taken into account the severe overpricing of the most of medical procedures in the US as compared with similarly developed countries?
    http://www.washingtonpost.com/wp-srv/special/business/high-cost-of-medical-procedures-in-the-us/

    To clarify: I am generally against regulations and micromanaging the market. I am also not a supporter of trade unions or a worshipper of Labor Party here in Australia (a local equivalent of American Democrats).

    But what is the problem in slapping 5% p.a. tax on the value of real estate, ending the special treatment of capital gains – here in Australia closing the negative gearing loophole? This has nothing to do with a “more regulated market” with “greater barriers of trade”. The purpose of higher taxation on income would be precisely to make hoarding of real and financial resources more difficult. (I understand the distinction between financial and real assets but the whole purpose of hoarding money or similar assets is that they can one day be spent).

    If we fail to remove the imbalance in flows – the system will be less and less stable, even if the hole in aggregate demand is filled up by the government spending completely (as advocated by MMT). But nobody has proven that the exponentially rising hoard of financial assets and the increasing size of “finance industry” compared with the rest of the economy won’t lead to violent swings in exchange rates which can lead to inflation or rapid changes in real business conditions. Saying that the size doesn’t matter because stocks are not flows doesn’t convince me. These stocks may generate flows. If the size of the hoard of financial assets (even only backed by the public not private debt) approaches for example 1000% of GDP or 10000% of GDP and there are no capital flow restrictions between countries, I don’t believe that such a system can function properly because the speculators would introduce so much noise that market signals would disappear. Imagine that there are claims on 100 years worth of production in the system…

    Finally I am not convinced that the economy based on FIRE services is more environmentally friendly that based on modern technology manufacturing but this is another issue.

    ESM Reply:

    @ESM,

    @Anders:

    “Obviously Rawls’ point was that if you didn’t know your endowments and preferences (ie, drawing back the Veil of Ignorance), you would actually prefer a slightly fairer society too. But this argument is notorious for failing to get any conservatives to admit to it!”

    Perhaps that’s because Rawls’ argument is thoroughly unpersuasive, at least I found it so. I would be more interested in maximizing my expected standard of living, subject to some sort of floor, than in reducing the volatility. And this is how I want to see society structured, and I think it is, approximately, although it could be done better.

    “Are you really relaxed about actually increasing inequality?”

    I care more about inequality of consumption than financial wealth, and even less so about income (which to a large extent is determined by individual productivity).

    “That one’s work and talent makes all the difference, and one’s background makes no difference to outcomes?”

    The older I get, and the more I watch kids develop, the more I come to believe in the importance of innate traits. I think most parents with multiple kids come to understand this as well. That being said, of course I think environment is extremely important as well. But environment is mostly about your parents. I think parenting is multiple times as important as how good your neighborhood schools are. But what can the government do about bad parenting? What do you want it to do?

    “Or have you given up caring about equal opportunities anyway?”

    I care about equal opportunities quite a bit. Which is one of the reasons I oppose public school teacher unions and support school vouchers. But I don’t see how you can overcome a bad parenting situation, except through a multi-generational effort, which starts with getting rid of the welfare programs which incentivize single-motherhood.

    ESM Reply:

    @ESM,

    @Adam:

    “Saying that the size doesn’t matter because stocks are not flows doesn’t convince me. These stocks may generate flows.”

    Yes, I worry about this as well. But I think having automatic stabilizers in place goes a long way towards maintaining equilibrium. We already have very good stabilizers in place with a highly progressive income tax code. I would prefer to see consumption taxed instead of income, and I think this would make a better automatic stabilizer, but that’s probably a pipe dream. In any case, we can start worrying about public debts of 1000% of GDP when we get there. We’re not even at ratios that we haven’t been (and other countries haven’t been) in the past, without any dislocations. The dislocations seem mainly to be caused by a collapse in aggregate demand, not a spike.

    WARREN MOSLER Reply:

    as woody allen would say the food is terrible and the portions are small

    Reply

  5. Paolo Barnard Says:

    Warren, I just wish these bloggers recognized your role a bit more. 98% of REAL economic innovation in the last 30 years came form you. P

    Reply

    RVMarkov Reply:

    @Paolo Barnard,

    You are very right, Sir. And for me, it isn’t that much about recognition, I believe history will do it properly, but efficiency of our (bloggers’) time and efforts.

    90% of my Bulgarian MMT blog so far is pure Warren’s work translations. When somebody has already “discovered America” and has put everything nicely and clearly, we just have to spread it around – that’s all. Unless we really start discovering some unknown frontiers.

    Reply

    Andy Reply:

    @Paolo Barnard, I’m interested in the history. It’s clear to me that Warren played a massive part in getting us where we are today. I just don’t get the fallout with the PKs.
    Wasn’t Godley PK ? Isn’t Davidson PK ?. Is the story written down anywhere ?

    Reply

    Ed Reply:

    @Andy, what is the fallout with pk’s and mmt’ers about? still learning….:-)

    Reply

    Art Patten Reply:

    @Ed,

    PK = Post Keynesians, not to be confused w/ Paul Krugmanytes

    Quibbles re how the monetary system “really” operates?
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1723198
    http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_251-300/WP279.pdf

    There’s also the ‘monetary reality’ splinter (http://monetaryrealism.com/) which, from more conservative and supply-side-type backgrounds (same place I cut my macro teeth) feels that MMT elevates govt to too central a role. Granted, as far as political values, Randy Wray and Bill Mitchell (for example) can be extremely abrasive. But on issues like a job guarantee, Randy’s politically incorrect assertion of ‘retarded’ toward ‘MMR’ seems spot on. David Frum and Ned Phelps have both expressed support on the right. I suspect honest thinkers like Tom Nugent would too. Not sure why people who actually understand sovereign operations can’t be OK with an EOLR paying a minimum wage.

    WARREN MOSLER Reply:

    thanks!
    I just want to live out my sunset years in a good economy

    :(

    Reply

    roger erickson Reply:

    @WARREN MOSLER, Well, in addition to the movie lefts, you and Beowulf could now franchise Platinum Fiscal Enema clinics.

    Also, tell the DoD they can always afford to expand their C.O.I.N. program using Platinum Fiscal Enemas for politicians.
    http://usacac.army.mil/cac2/coin/
    Should help promote general success.

    Reply

    Andy Reply:

    @WARREN MOSLEROK That was the last time I’ll ever bring it up anywhere. Promise.

    Reply

  6. Matt Says:

    What is or are PK’s? I really dislike this mania for acronyms which everyone is supposed to be familiar with.

    Reply

    WARREN MOSLER Reply:

    post keynesians

    Reply

    ESM Reply:

    @Matt,

    You can also think of PK as Paul Krugmanians.

    Reply

  7. Walid M Says:

    it reads like the new Treasury Sec does not like Gov waste..bodes well for those who want to cut spending .

    Reply

  8. Anders Says:

    Warren, what do you make of the Pozsar / McCulley piece “Helicopter Money?

    It seems pretty good progress from mainstream sources: subordinating the central bank to fiscal objectives.

    http://www.interdependence.org/wp-content/uploads/2013/01/Helicopter_Money_Final1.pdf

    Reply

    WARREN MOSLER Reply:

    haven’t read it

    Reply

  9. AWK Says:

    Just read the article. It’s the first major national/international article I’ve read on this subject in the mainstream press that significantly associates the coin idea with MMT.

    It seems to me that the press this whole thing is getting is the ideal opportunity for MMT to break out into mainstream consciousness. Yet, it seems we aren’t doing much to do so or none in the MMT community really has much clout with the media or a willingness to develop it. And unless we get out there to help define ourselves others more ignorant will do so – and already are. The undercurrent of the Wired story is that MMT/MR are a bunch of weirdo geeks chatting from their mama’s basement. Why don’t we have somebody on Nightline at least?

    I hope somebody is working on something now behind the scenes to exploit this. Otherwise, what a huge missed opportunity. What a shame.

    Reply

    Neil Wilson Reply:

    @AWK,

    I don’t think it will come out via the standard media. The world has changed and the traditional media are in a fight for survival creating dog whistle articles for their shrinking reader/listenership.

    The reason the $1T coin has hit the big time is because it is a neat little idea that is easy to comprehend in a Twitter hash tag. #MintTheCoin.

    And that leads onto what we need to do in the future. It’s no longer about what MMT says about the economy function under the hood.

    It’s about what MMT says the economy can deliver for the individuals in the public – lower taxes, more job security, good pensions.

    MMT takes the money argument off the table. It’s then just a question of what we want to do with the real surplus of manpower we have.

    Reply

    Ed Rombach Reply:

    @Neil Wilson,

    “lower taxes, more job security, good pensions.”

    Pretty good slogan for some aspiring politician.

    Reply

    MRW Reply:

    @AWK,

    Stephanie Kelton will be on UP with Chris Hayes tomorrow AM (12th) on MSNBC. It’s one of the more intelligent talk shows.

    Reply

  10. madmac Says:

    When I first heard about this idea, I have to admit that I thought it was a crock. But the more I read about it and read the law behind this idea, I screamed to myself “this *(&Y is $&%*()N legal”. And there’s nothing the republicans can do to stop it. To which I say Make enough of them to eliminate the debt and don’t pubicize how many you actually minted. That way if you come up to the limit again there’ll be bypass for it.

    Genius Beowulf. Pure Genius.

    Reply

  11. Vincenzo Says:

    In a recent interview, Speaker Boehner indicated that his most important remaining leverage is in the fate of sequestration, and not the debt limit.

    Reply

  12. SandyT Says:

    The banking cartel shut the platinum coin down, can have the peasants learn that the identity of the wizard behind the curtain.

    Reply

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