guest post by Joel O’Bryan PhD
NPR news is running this story on Green New Deal financing by writer Scott Horsley:
When Rep. Alexandria Ocasio-Cortez rolled out her “Green New Deal,” calling for clean energy, universal health care and guaranteed jobs, one of the first questions she got was: How do you plan to pay for it?
The New York Democrat argued that ambitious programs can easily be financed through deficit spending.
“I think the first thing that we need to do is kind of break the mistaken idea that taxes pay for 100% of government expenditure,” Ocasio-Cortez told NPR’s Morning Edition in February.
In doing so, she shined a spotlight on a once-obscure brand of economics known as “modern monetary theory,” or MMT.
The NPR story by Mr Horsley goes on to try to describe in populist terms what MMT is:
There was something of an Oprah effect when she (AO-C) said that,” said economist Stephanie Kelton of Stony Brook University. “People immediately probably started Googling ‘modern monetary theory’ to find out what she was referring to.
Run that Google search and you’ll quickly find Kelton herself. The economist, who advised Bernie Sanders’ 2016 campaign, is one of the best-known evangelists for the theory. Kelton says paying for big government programs is the easy part. If Congress has the will, the Federal Reserve can effectively print the money.
If Congress authorizes a few billion dollars of additional spending, or a few hundred billion dollars, then the Fed’s job is to make sure that those checks don’t bounce,” Kelton told NPR.
Well, right there our “economics expert”, the person who advised Socialist Bernie Sanders, tells a whopper. While the US Congress can and does spend with abandon, it is not the job of the Federal Reserve to “fund the government and “make sure that those checks don’t bounce.” That job goes to the US Treasury, an executive branch under the Secretary of the Treasury, reporting to the President.
The roles of the Federal Reserve and the US Treasury are fundamentally different. The US Treasury has existed since the US was founded in 1789, the first Secretary of Treasury being Alexander Hamilton, the architect of the US Constitution. The US Treasury manages revenues (via the IRS primarily, but also things like import duties) and pays (via revenues and borrowing) the bills for appropriations made by Congress – it is the US Treasury that actually writes the checks to pay the bills. The US constitution expressly says this in the Appropriations Clause:
“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
Article I, Section 9, Clause 7
Secretary Hamilton brought discipline to the young US Government by ensuring war debts were paid to foreign governments. This earned the US government much needed international trust and future support when the British were still intent on re-taking the “colonies” when the time was right. Without that trust, things might have turned out much different in the War of 1812 when the US had to repeal the British Army from US soil once again. International financial trust is vitally important to the strategic position of any nation in our interconnected world today even more so than in 1812.
Since its creation in 1913 by an act from Congress, the Federal Reserve is a quasi-independent agency that is congressionally empowered to promote the stability of the US dollar. Congress’s latest amendment to that act directs the Federal Reserve to “Promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”
The Fed carries out this responsibility primarily via adjusting short term interest rates that banks and chartered financial institutions are charged for over-night loans and how much they’ll receive in interest for “parking” their liquidity (funds not invested elsewhere) with the Federal Reserve banking apparatus. Via these many complex banking transactions, the Fed’s rate controls are the levers on the amount of US dollars flowing in the banking system, and thus encouraging economic growth or pulling it back to keep inflation in check and thus stabilizing the US dollar’s value. The Fed currently does not have a role in “to make sure that those checks don’t bounce” as Ms Kelton falsely claims. That is the US Treasury’s job — always has been, and unless some serious amendment of the US Constitution occurs, it always will be.
That Ms Kelton, supposedly a highly educated academic, makes such a fundamental mischaracterization of the role of the Federal Reserve simply cannot be chalked up to ignorance. I’ll leave it to the reader to ascertain what the proper characterization of Ms Kelton’s assertion might be. That Scott Horsley of NPR, a long-time reporter there, would repeat her mis-characterization of the Fed without challenging it, as a journalist should do when dealt an obvious whopper, likely speaks to Mr Horsley’s motives and/or his own ideological blinders.
…
Now back to the topic of Modern Monetary Theory (MMT) and how it’s adoption by the Federal Reserve (the Fed) and the US Treasury via Congressional spending would (not “might”) fundamentally alter our entire financial system stability and the promise the US Treasury makes when other’s buy-up US debt instruments in order to fund US government deficit spending as envision by GND and MMT advocates.
To start one must understand the foundational difference of monetary policy versus fiscal policy. Monetary policy is generally consider the setting short-term interest rates to control the amount of liquidity in the banking system. In the longer term this serves to stabilize the US dollar’s value relative to foreign currencies by controlling inflationary growth. The Fed is supposed to carry out these rate actions independent of concerns or desires from the two political branches, Congress and the US President, and it generally does so for themes part.
On the other hand, Fiscal Policy is set by the US Congress via appropriations (spending) and authorizations to the US Treasury to borrow money (via sales of bonds, T-bills, etc). A current news topic lately is indeed the current “debt ceiling” authorized by Congress to the US Treasury to borrow to pay the bills is rapidly being approached again according to recent reporting on discussions between Speaker of the House Nancy Pelosi and Treasury Secretary Steven Mnuchin. But that’s another story, for another time.
The key point is the US Treasury must borrow (offer bonds/T-bills/notes to buyers at interest rates to attract them to the auctions with their money) to fund deficit spending as part the US Congress’s fiscal policy for the federal government. In the bond market where the Treasury operates everyday, the buyer’s demand a suitable rate of return on the money they lend to US Government. But without the trust that US government won’t just “start printing money” on wild spending demands from Congress, many lenders wouldn’t endure the risk and would walk away and put their money elsewhere to work for them. Those lenders that don’t walk-away will demand very high interest rates under the very real risk of high inflation/erosion of US dollar value compared to other currencies like the Euro, the Japanese Yen, etc. Such high interest rates to the US Treasury sales it would set in motion what is termed “fiscal dominance” at the Federal reserve. Fiscal dominance is where normal monetary policy of dollar stability, controlling inflation concerns are replaced by simply a re-write of the Fed charter by Congress to simply “assist the US Treasury in printing money.” In other words, the fiscal demands of paying for things like GND and Medicare-for-All overrides the normal monetary policy of dollar stability, thus the term “Fiscal Dominance” is very bad place for a government to find itself. As the downward spiral would be a trap that would be extremely painful to reverse.
Once the bond market’s confidence in the US Government’s “full faith and credit” is shattered by an adoption of MMT to pay for everything the Progressives want, high inflation will return to the US, just as it was in the late 1970’s economic malaise of “stag-flation”. Maybe even hyper-inflation if the economic insanity goes on too long. This is because any human run market is governed as much by human behavior and psychology as it is real values. Just look at how the crypto-currencies (Bitcoin, etc) undergo daily wild swings simply based on psychology for proof of that statement. And long-term values of the US dollar would be shattered by simply printing dollars, regardless of what useful idiots Ms Kelton, Bernie Sanders, or AO-C claim.
High inflation (and its worse form, hyper-inflation) rapidly destroys savings accounts as bank CD and money market interest rates do not keep up with the rising cost of living for those living on their fixed incomes and retirement accounts. This is how the Left intends on stealing the Trillions of dollars the US middle class has tucked-away in their IRA’s and 401k’s. They don’t need to change the laws on IRAs or 401k to actually taking the money via altered tax codes, that would provoke a vicious middle class backlash at the ballot box for Democrats. The Progressives simply plan on doing it by stealth, by adopting MMT which will destroy private retirement accounts’ values with high (hyper) inflation as they print Trillions of dollars without going to bond markets to pay for every socialist wish list item they can imagine to buy more political power, and leaving the Federal Reserve powerless to stabilize a plummeting US dollar value on the world’s currency markets.
This is exactly how Venezuelans were lured to support Hugo Chavez’s socialism for so many years as their country lurched towards the ruin it now suffers, by promising people free stuff while the government stole their future and their savings from Venezuela’s once vibrant middle class right under their noses. It was all fun and good times until they literally ran out of OPM (the bank accounts they were stealth stealing from essentially became worthless via inflation). It just happened faster in Venezuela than it would in the US because they had to borrow money in foreign currency. That the US has what many economists call a “fiat” currency doesn’t change that ultimate dynamic, it just would delay the outcome, and make a recovery from an MMT adoption catastrophe even harder than Venezuela’s will ultimately prove to be.
That Socialist Bernie Sanders openly admired and praised the Chavez government’s stealing their citizens’ futures is also why he embraced the economic theft of MMT for the US, as advocated by Ms Kelton at Stony Brook his campaign economic policy advisor in 2016. And it is now MMT that the economic illiterates like Congressperson Ocasio-Cortez (a Sander’s ally) also embraces to “pay” for their Green New Deal destruction of the US economy and work ethic … Venezuela-style.
Climate Change and the “green” policy prescriptions offered for it have not been about the “science” for several decades now. Climate Change is the economic vehicle by which progressive democrats and outright socialists like Sanders and AO-C intend to take-over the country. They are using irrational “climate crisis” fear-mongering on an ill-informed populace, promises of OPM-paid “free stuff” which thus they will drive the US into the dirt with all the misery, despair, and deprivation that socialism always brings. MMT is magical money drug that they intend to use to bring that destruction in the pursuit of their raw political power.
Joel O’Bryan, PhD
Tucson, Arizona
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There are lots of documentaries around discussing MMT and how utterly wrong it is. Here is one;
The problem with excessive magical MMT, especially a fraudulent one like thinking they can just throw money at a cause to magically change the weather somehow is that in the end, the correction is always equal and opposite to the deception that preceded it. Sort of like one of Newton’s economic laws, had he been an economist instead of a scientist. We still have to absorb a lot of the excessive money printing since the last 50+ years, especially incorporating a lot of the losses/costs of the 2008 economic meltdown and the expansion of the money supply and debts it generated. We are in better shape now with a healthier economy, but let’s not blow this rebound on catastrophic climate change policies.
Here is the U.S. debt clock in real time
https://www.usdebtclock.org/
Do not even think about following the ideas of this lunatic theory and make the digits turn round even faster.
tonyb
The debt clock shows the US isn’t paying its bills.
yes and sooner or later people and countries always want their bills paid, normally at the most inconvenient time for the debtor
tonyb
Actually what the debt clock does is tell us how far from “the budget and income” we are moving. If we were not paying our bills our economy would collapse. How long we can keep borrowing is difficult to say and made more complicated with far left whacko academic supposed economists. Few people appreciate that just the interest on our national debt will soon exceed our military spending.
The debt is being paid as it matures. No need to start spreading groundless rumors.
The problem is that we are generating new debt faster than the old debt is paid off.
Explain to me how Japan manages with a debt of 200% of GDP?
Piet
Because japans debt is mostly owed internally to its own citizens.
https://www.forbes.com/
Mind you there is a limit and if the panic spotlight were to be shone on Japan consistently then it might cause big problems
Tonyb
Well said Joel. This truth needs to be shouted from the rooftops. I have been telling my children for some time that the war their generation will face, and I firmly believe it will be war, is f these nut bars are not stopped now. Should the climate scaremongers succeed in stealing power from the people there will be green hell to pay and it will take he blood of many people to right things again. Hopefully this does not come to pass, but I cannot help feeling that we have let our children down by not teaching them history at home, but instead let our “education system” and worse yet our universities indoctrinate them.
“The long march through the institutions” the policy advanced by the Frankfurt School Marxists/socialists has been running for three generations as they predicted it would. They knew, it would take that long to capture the control mechanisms needed to shape society as they desired it.
Media, Education, Academia, The Public Sector, the Security services, were all targets and all have been taken in by the “progressives” constant demand for change.
We have a lot of repairing to do before we find the common sense needed, for safe sustainable life.
Neither Venezuela, or Zimbabwe are examples anyone should regard as sensible economic options to follow.
Excellent Mr. Evans! The Frankfurt School members, who have kept their Marxists/socialists/wet dreams of tyranny secret from the general population was indeed slipped into American society way back in the early 1900’s. That “School” was actually a huge experiment in applied research in propaganda and how to break the human psyche. That dream/nightmare extends way back to the likes of Stalin and others like him. WW II was in many respects a war between psychopaths set into motion by even worse people who most people would find to be sickening on many levels.
Most people I talk to have no idea what brainwashing is or how it works, let alone how it is carried out on people. They do not know that the human experiments carried out on people during the Third Reich WERE in fact real and a number of the experimenters survived to move to other countries including the United States.
The Frankfurt School Marxists set as their goal the systematic infiltration of societies throughout the world with America being their most prized “Ripe Peach” to infect and rot from within, so they set about their plan to infiltrate the very foundation of it’s society. What better way to do so than blending in with the “war refugees”? These along with the scientists that were brought over from Europe were welcomed to further the industrial complex that was born in America during the war effort.
Basically the more that I and others look into those who developed the Frankfurt School, the more dark it’s intentions appear. They HATED everything that the west and America demonstrated everyday during the war and beyond. The fevered dream of “Modern Monetary Theory” is but one more example a system of thought that cultivates the decay that is envy and entitlement and is at the core of Cultural Marxism.
It is good that you interjected this topic. It needs to be kept in mind today when dealing with the political environment all over the world. I have found that the Frankfurt School spread like a virus and it needs to be brought into the light of everyone’s awareness who has the strength and courage to handle what they discover.
Thank You.
re: “Should the climate scaremongers succeed in stealing power from the people”
Heh. To borrow from HBO: “The man in the Green Castle …”
“Without that trust, things might have turned out much different in the War of 1812…”
Yes, the White House might have been burnt down or something!
I’m convinced the money changers didn’t want to win the war in 1812 by Britain. It was much cheaper to let ‘free’ people pay for conquering The West. Once the difficult part was done they took over again in 1913. Since then The People have been enslaved again in the direct tax system
Slavery was never abolished it just changed the way it looks.
One of the vehicles of the take over was the passing of the 17th Amendment. Originally, U S Senators were chosen by the state legislatures to represent their State in the federal government. This was one of the many checks that were put in the Constitution to prevent centralization of power at the federal level. In 1913, under the guise of being more democratic, the 17th changed the way Senators were selected to a popular vote. This change allowed the special interests with loads of money to corrupt and influence those Senators who would become dependent on those special interests to be reelected. Without term limits we have seen Senators spend decades in their position without any allegiance to their State or its people.
And also with no means to recall a senator. 6 years without recourse of the electorate.
The problem with MMT is that markets have a say.
If someone has a dozen different policy initiatives, and what they all have in common is the destruction of the economy and impoverishment of the people, then at some point you have to start considering that this is the actual goal.
Joel,
How does quantitative easing fit into this? Between 2008 and 2014 the US Federal Reserve bought 4.5
trillion dollars worth of assets by essentially printing money. This did not cause run away inflation and
interest rates have remained at historical lows. Thus it is perfectly possible for the government to print trillions of dollars without there being any obvious ill-effects.
Ever go shopping?
They lied through their teeth about inflation. Do you not remember the games they played?
1) Fixes to the CPI: The “basket of goods” was constantly getting “adjusted”.
2) Electronics were getting faster and more powerful, so the govt. said this was equivalent to the old product becoming “cheaper”. The “cheaper” price was used as a “proxy” for a whole raft of goods and services, and used as a wide chunk of the CPI. Shameless.
3) Housing prices, the 400 lb Gorilla. When prices went down, it was included. When prices went up, it was excluded, because not everybody buys a home every year, so it was not “relevant”.
Good Lord Above. How could anybody have missed this?
I am a chemist by training and experience. I have exactly 0.00% expertise in finance and economics, yet I was horrified by the abuses I was witnessing.
Someone who has real expertise in this area could greatly expand on my list, I am sure.
Related:
Interest payed by banks to savers cratered at less than 1.0%, and even threatened to “break”. That is to go negative! What was that all about? Perhaps an effort to maintain the spread between interest gained from loans and interest payed to deposits. The govt. puts down pressure on interest from loans, so interest to savers has to give ground. *BUT* if interest to savers goes negative, the system explodes.
That’s how it works all right. It stinks. It cheats people on Social Security out of a righteous COLA. (Not that I want one – it’s an increase for the state, not the recipient because the state takes it from the poor immediately in triplicate through the various programs – Thomas Sowell calls it the highest tax rate of all: https://www.creators.com/read/thomas-sowell/12/12/taxing-the-poor
Another article on the Quality Adjustment Method. What they do to the numbers is fraudulent beyond belief. https://larouchepub.com/other/2000/ref_quality_adj_2742.html
“The successful functioning of the U.S. economy is incompatible with the continued application of the QAM. Introduced in 1967 by the financier oligarchy during Arthur Burns’s regime at the Federal Reserve, and spread by statisticians, it is set up to exclude anywhere from one-quarter to three-quarters of true inflation. It works from the continuous assumption that the quality of goods is improving: therefore, if the price of a product rose 10%, and the statisticians of the BLS claim two-thirds of the price increase was due to improved quality (the veracity of that statement will be explored below), the inflation of that product’s price is reported as only 3.3%
But this is only half the use of the QAM; it represents another major problem. As Lyndon LaRouche shows in this Feature, any accounting system that attempts to measure footprints of economic activity, rather than the transformative activity of human beings who make the footprints, has a fundamental problem.
The pricing results of the Quality Adjustment Method, once fabricated, are turned over the Commerce Department’s Bureau of Economic Analysis. The BEA makes the assumption that improved quality is the equivalent of increased output. So, if it is assumed that the quality of the product cited above improved by 6.7% per year, then the output is assumed to have increased by 6.7% (or more) per year. The BEA will apply this method to hundreds of products, and the increased output attributed to each of these products is added to Gross Domestic Product (GDP). That is a prime reason why real physical production is falling, but GDP is rising.
Further, the QAM is turned over to the Federal Reserve Board of Governors, which publishes the Industrial Production Index. The Fed uses the QAM to “increase” industrial production in a manner similar to the Department of Commerce’s hiking of GDP.
Therefore, the QAM is central in the calculation of three of the most important and closely-watched gauges of the economy: inflation, GDP, and industrial production. The fraud of pervades each of these three.
Exposing the QAM”
Quantitative Easing (QE) was Bernanke’s using the Federal Reserve to “purchase” those U S Treasuries. This created demand, driving bond (30 year instruments) and notes (3-5-10 year instrments) prices up, and thus long-term interest rates were forced down even further. The Fed has a much more difficult time trying to control long-term rates, so Bernanke’s QE was the stick to do that.
The thing that helped prevent an inflationary trap under QE (a downward dive of US dollar to foreign currency) was the rest of the Western world (except Australia) was generally in an funk as well. Many European governments (Greece, Ireland, Portugal, and few others) were having to get bailed by the EU Central Bank as well. There was bad debt everywhere, and Central Banks everywhere were in stimulus mode. It was not just a Sub-Prime melt down in the US and the freezing up of liquidity in the US banking system, there was real central bank monetary policy pain everywhere.
The key though is what the Fed did with those QE Treasury notes and Bonds it purchased .
Starting October 2017, the Federal Reserve slowly began working that QE debt off its balance sheets as the Treasury instruments naturally retire at their maturity dates, and also slowly selling the QE bonds on the bond market a little at a time.
https://www.ft.com/content/caf45d6a-9e28-11e7-8cd4-932067fbf946
This is how the system must work if bond investors are to have faith the the US Government will maintain the value of the US Dollar, and not go off into inflationary hell of MMT. If this faith is shattered by MMT, all bets are off in the international finance mayhem and uncertainty that would unless on the world’s financial systems and foreign Central Bank operations.
No market likes uncertainty. And when uncertainty is high, fear is even higher. And fear would take over then in the bond markets with the world’s fiat currency government adopting the insane MMT to pay for free stuff for Americans. Free stuff that would be paid for not just on US savings accounts (IRA, 401Ks), but also on the backs of people in other countries (like Germany, Canada, UK, etc) who hold US Dollar-denominated debt. Thus everyone would dump US debt. And the downward spiral of the US economy would be almost impossible to correct at that point.
There can be no doubt this is what the Chinese and ultimately the Russians want; an emaciated US economy no longer able to afford a SuperPower first-class military and the power projection we now have. Thus China has every strategic motive to push the Climate Change hysteria.
Joel,
So do you agree that the Federal Reserve printed over 4 trillion dollars to buy assets
from the banks between 2008 and 2014 with no ill effects and in fact stopped a worse
economic collapse?
Which would suggest that there are some cases in which the government can in fact
print money to pay for things without there being serious adverse consequences? Hence
some aspects of MMT might be correct at least some of the time.
If the Federal Reserve, under orders from new laws by Congress, had torn up (shredded) that $4.5 Trillion in QE Treasury paper, that would have de facto amounted to “printing money”.
There would have been no hiding that fact from the bond markets and investors. That would’ve destroyed the Faith in the US Government’s willingness to maintain the value of the US Dollar by investors.
Rational investors would then flee US Dollar denominated debt, even corporate debt denominated in US$. US corporations borrowing on the international market would have had to borrow in Euros or some other currency, driving their costs up quickly as the dollar goes into free fall.
QE was not printing dollars as long as the Fed plays by the accepted rules and it is now doing so by selling this debt back into market.
MMT would break those rules, and thus break the status of the US $dollar as a fiat currency. The result would be a downward spiral of the dollar igniting high/hyper inflation in the US.
…sort of like Jimmy Carter and his Fed Chair pick in G. William Miller.
A good teacher says the same thing at least twice, and in simpler terms to some.
Izaak, did you get it?
Also the current tarrifs, and responses to those tarrifs are a contemporary factor in holding inflation in check.
QE swopped long-dated assets for short-term liquid assets ( like cash) . No new money was created, that is widely misunderstood. The BIS and CBs in general are preparing the way for MMT to be introduced by wide spread use of negative interest rates. Negative interest rates acts on inflation ( ie creation of money) by destroying money. Imagine a system where nearly everything is electronic, no physical cash. 100% edollars at the start of the year could be made 0.97 edollars by the end through -3% interest rates. Physical dollars would be worth 3% less.
If $, Euro, £, Yen, etc were all doing the same, coordinated by the CBs ( like QE was coordinated) there would be no run on the $ because there would be nowhere to run to.
Its a frightening future, ordinary folk will have no control over their assets, completely dominated by the decisions of those controlling the edollar and the -ve rates.
You have missed the point. While they did print money for a short time, they stopped, then started to pull back the money they printed.
MMT proposes to open the floodgates many times wider, and do it forever.
The difference now is the crypto alternatives. If fiat currencies are not to be truste, there are alternatives, and I don’t mean Trojan horses like Libra, which is really an attempt to make Facebook the sovereign.
I think you have hit on what is called “The Big Reset”. The US $ will be replaced with another currency for world trade and anyone with US$ debt will return that to the US. People, I guess you could call them “Dooms Day Preppers”.
For most of the last 3,000 years the world currency for trade was gold. It worked perfectly. The only people that don’t like it are central bankers and politicians.
If 4.5Trillion doesn’t cause runaway inflation, then obviously 140Trillion won’t either.
I am of the belief, that this time is not different. Many of those alive now have never lived in times of high interest rates that were close to being out of control.
20 years ago there was real thoughtful discussion of economic issues and the limits of printing more money, in the news, particularly PBS.
Printing money is a sign of out of control government, chaos.
The problem starts when governments are forced to cut spending because it is no longer possible to borrow more money. When it happened in the past, small countries with poorly run governments such as Italy and Greece start the crisis.
Or explain how China and Japan has been following mmt and has kept inflation at or below 2% while growing their economies. China has already passed USA as the number 1 economy with purchasing power
Joel O’Brien,
Excellent financial analysis, with real examples for illustration of key points.
If Moron Monetary Theory becomes the financial fad du jour, we are in deep schist indeed!
A very good summary.
Occasional Cortex
Never miss on opportunity for instant gratification you can make future generations pay for.
Shouldn’t that be Stephanie Kelton of Stony Broke University?
The greatest strength of a fiat currency is that it is not dependent on production. The greatest weakness of a fiat currency is that it is not controlled by production.
Once you get it through your head that this is not a paradox, you have a start on creating a sane monetary theory.
Actually WO, MMT is all about the relationship among fiat money, inflation and production. If any of the idiots writing comments here ever took the time to read what MMT actually says, they would realize that are talking nonsense. MMT says that a country that has fiat money can create money and send it to its private sector so long as the economy is not CONSTRAINED. By that they mean as long as the new money can increase production. If the economy is constrained, then either you stop spending or you increase taxes to take some of the money back out of the private sector, The purpose of taxes is to control the amount of money in the economy, not to raise revenue.
While prices are proportional to the amount of money in the economy, they are inversely proportional to production. So if adding money to the economy increases production, prices will not rise too high.
The postmodernists point out that there are infinite possible explanations for anything. Jordan Peterson points out that the vast majority of those explanations are not viable. So it is with the economy.
We know from experience that when the government prints too much money, inflation results. If it gets bad enough, you need a wheelbarrow full of money to buy a loaf of bread.
If there is underutilized productive capacity plus under-met demand, stimulus has been shown occasionally to work … maybe. Did WW2 spending actually end the Great Depression?
There’s plenty of evidence that economists are almost always wrong. MMT and Marxism and neo-liberalism and all the other schools are in some way defective.
My hunch is that renewable energy is a highly inefficient use of money and will result in poverty creation rather than wealth creation. The medieval kind of farming so beloved of the environmentalists will result in most people living like dark ages peasants.
I would contend that the whole of our modern wealth comes from our increased ability to efficiently create wealth due to fossil fuels.
It’s like the difference between us and chimpanzees. We invented cooking so we can do something productive rather than spending our whole lives chewing leaves just to survive. link Once you start considering the many things that affect economics, you fall into a bottomless rabbit hole. Cooking … who knew?
For those who want to learn economics.
Peter Schiff
https://www.youtube.com/channel/UCIjuLiLHdFxYtFmWlbTGQRQ
“There’s plenty of evidence that economists are almost always wrong.”
commie Bob,
There is plenty of evidence that Paul Krugman is always wrong.
Krugman has been objectively wrong so many more times than he’s been correct or even close to correct. Basically you can play the opposite of whatever Krugman claims and come out the winner -85% of the time.
He’s an embarrassment, yet it is quite fitting the NYTime keeps him on as an editorialist. They are after all fully into the “All the Fake News that fit to print” business model.
Contra Krugman: The Podcast that Refutes Paul Krugman’s column, week after week
https://contrakrugman.com
Between late australopithecines and H. erectus were habilis-grade Homo species or subspecies, living from about 3.4 to 1.8 million years ago. It’s possible that some control and use of fire arose during this early interval in the human lineage.
Two of the three key mutations leading to increased brain size and linguistic ability occurred in this period of human evolution.
We know that late erectus-grade Homo used fire, whether capable of making it or not. Earlier H. habilis made crude stone tools, so might well have learned how to make fire as well.
Habilis not only “makes” fire. There’s 2 advances only Habilis possess:
– CONTROL of fire
– long-range weapons
There was plenty of deficit spending prior to the outbreak of WWII, it didn’t help.
What got the US out of the depression was government tearing up the vast regulations they had imposed on the economy in order to “get us out of the depression”.
commieBob July 18, 2019 at 12:18 am
Yup ….. when our early human ancestors no longer had to spend all of their awake hours trying to evade being eaten by a predator and/or searching frantically for something to eat to keep from starving …… they then had enough “free” time to discover and invent things that greatly improved their health, wealth and longevity.
Prometheus was an australopithecine!
Who knew, indeed.
A very nice summary, my compliments.
How well does the Fed hold price stability? Good question.
Want to buy a gallon of gasoline for 35 cents?
In 1972, the price of gasoline was floating around 29 -33 cents. the standard US currency was such that both dimes and quarters were both solid silver, 10 cents and 25 cents respectively. So a quarter and a dime would easily buy a gallon of gasoline.
Today:
The price of gas is up near $3.00, more or less a 10x increase.
So can you buy a gallon of gas with a quarter and a dime?
YES!!!
IF, IF, *IF* the quarter and dime are 1972 issue coins. The silver in the coinage held it’s value, the currency did not.
And that is how badly we have been getting ripped off.
Your basic premise is correct, but your dates are off a bit on the silver content of U.S. coinage.
The last general issue 90% silver coins were minted in 1964.
That’s true but the coins continued in circulation until the Hunt brothers tried to corner the silver market in the 1970s. link At that point, every gram of anything silver was melted down and sold for its silver value. Silver coins quickly disappeared from circulation.
Not entirely… they occasionally show up in my pocket change, but it’s a very rare event.
The US Mint stopped producing full silver dimes and quarters in 1964.
That said, I am also NOT a fan of gold and silver IRA’s for reasons not related to inflation or the threat of MMT adoption.
Joel,
Why are you not a fan. I have some guesses but would like to hear what you have to say. What about actual gold and silver?
True, my mistake.
Silver quarters and dimes were gone after 1964.
Exactly. The Private federal reserve has miserable failed to do its ‘job’ and should therefore be abolished.
https://onlygold.com/gold-prices/historical-gold-prices/
Direct taxation also was a consequence of the enactment of the private federal reserve. It took liberty away because it gave those in power the right to know EVERYTHING about you which is unconstitutional.
Form 1040 tells you you are less than a slave and you do it voluntary.
Not snow but We The People is a thing of the past as long as Big (Brother) Government has all their unconstitutional power.
“Form 1040 tells you you are less than a slave and you do it voluntary.”rt
I would say we do it sort of voluntarily. I wouldn’t call it voluntarily since, let’s fact it, we do it because a gun is pointed to our heads and a long jail sentence awaits if we fail to pay. Unless, of course, one is a favored politician or a friend of certain politicians, then, it is OK, it seems.
https://www.irs.gov/businesses/small-businesses-self-employed/anti-tax-law-evasion-schemes-law-and-arguments-section-i
Doesn’t sound like a free country
Why do you think they call it ‘ tax return’ ? Like the Patriot Act it’s never what the name may suggest. God only knows what will be hidden in the “Green New Deal” .
Lots of red: Ink, blood, communism, et al.
That’s what’s hidden in the GND. They’ve already admitted it’s not about saving the environment, but about creating a socialist “paradise”.
A $20 US gold coin contains 0.9675 troy oz of gold.
The current price of gold is $1,423.90 per ounce.
So, what you could purchase for $20 long time ago now costs you $1,377.62
Thus, I just hafta ask, just who has benefitted by/from that inflated $1,357.62 increase?
I was going to say something like that.
Put another way, imagine it’s 1900. One of your Great Grandpas hid $20 in the form of a $20 gold piece (They were used in circulation back then. They were not collectors’ items or investments.) in a desk.
Another did the same but he hid a $20 dollar bill.
You inherit both desks and find the money. The value to a collector aside, which find has more buying power?
The incentive to save has been killed. $20 dollars hidden in a desk today won’t have the same buying power 10 years from now.
Earn interest in a bank? Even if you earn interest the bank will take some of that buying power (rightfully) as payment for their service.
And the IRS and State Tax Authority will try to get “a piece of the action (interest)”
Several times, several different places, misuse of the apostrophe where none is needed; does Grammarly check for proper use of an apostrophe?
Awfully distracting for this pedant … (Words means things, and even though I am just a lowly engineer)
Jim, they do but you can’t really believe them. I’ve found them to be wrong numerous times and, then, I quit using them because they didn’t always work well with some web sites and interfered with functionality and not at all on some on which I really wanted to use them.
There is a new one I’m going to try out called Free Check.
Sustainability means handing on to our children no more debt than we ourselves inherited.
What the “Greens” intend doing is EXTREMIST and totally UNSUSTAINABLE.
Their whole idea is to borrow large amounts of money today to pay for crocodile tear green policies which they then intend their children to pay for … in an economy they wrecked by their crocodile tear policies.
If it were put before a script writer for James Bond as the plot of a film that the baddy wanted to destroy the whole economy of the western world and ensnare them in debt by creating a Climate Cult, it would appear so absolutely preposterous that it would never be considered. But Greens are happy to accept just that as their own political policy.
The whole of government is a pyramid scheme that is unsustainable. It’s a pyramid scheme at the city, county, state, and Federal level. They are always adding more government employees, more government spending and more government programs. Trump is trying to reduce its size, but it’s going to collapse as all pyramid schemes do.
The basic problem with MMT is that it is answering the wrong question. “Money” is not the issue, it is what money represents. I can be say a doctor. I get paid say $100k for that. Printing another $100k doesn’t mean I can now be a windmill engineer as well. However much money we print, each person can only do one job and each piece of steel can only be part of one machine. If you use a person and a bit of steel in the Green New Deal you can’t use them anywhere else. Printing money doesn’t increase the supply of resources.
All it is is inflationary, with the illusion of increasing resources.
What makes us richer is doing more with less, not less with more.
The Bretton Woods 1944 conference layed out the post war monetary policy. During that conference John Maynard Keynes was repeatedly blocked by Dexter White. MMT is simply Keynesianism on steroids.
Just yesterday the French finance minister has seen the writing on the wall – Bretton Woods is simply dead, especially after Nixon fatally wounded it and Clinton dumped Glass-Steagall in 1999.
It is urgent to start a new Bretton Woods this time with the BRI countries onboard – a much bigger deal. At the same time Bretton Woods only functioned as Glass Steagall bank separation was in effect. Tump campaigned on Glass-Steagall (ironically Bernie too).
The attempt to use a New Bretton Woods for a Green New Deal is attempted mass suicide. Instead it must be used for a crash program, Manhattan style, with Hamiltonian banking methods, for fusion and the Moon. Main ingredient and product being Optimism, and a future without a lid over the head (as Collins put it), insead of the mass GND pessimism with no future.
The Four Horsewomen of the Apocalypse (Trump’s tweet) are indeed just that.
MMT and GND believers are the reason a shampoo bottle has a how-to. (heard this week…).
Both Keynes and Hayek (Austrian school) both were London School of Economics stooges. The attempt today to control the narrative with these battling Moe and Curly is becoming a spectacle.
Goldbugs (British Gold Standard, von Mises) slugging it out with “fiat” fanatics (British Keynes) hides the reality of the Gold Reserve System of FDR’s Bretton-Woods. FDR refused attempts at a British Gold Standard in the 1930’s setting up the RFC (ReconstructionFinanceCorp) based on Hamilton, likely noting the Specie Resumption Act catastrophe of the late 1800’s.
Modern Money Theory (MMT) – aka: MCCT ( Maxedout Credit Card Theory).
Magic Money Tree
Exactly. Worstall tagged it years ago.
‘Secretary Hamilton brought discipline to the young US Government by ensuring war debts were paid to foreign governments. This earned the US government much needed international trust’
As long as the world was on a gold standard.
Now the world gets paid in worthless dollars. Why do you think prices go up. And don’t blame capitalism because we don’t live in a free market system. It’s all ‘big government’ controlled.
Thanks, WUWT!
This is an excellent article and one of the best explanations I’ve seen of the Socialist insanity of Sanders, AOC and the Democrats to date. I love how it explains the effects of their policies on the middle class and retirees and savers.
The great Socialist, Chavez, left his daughter over 4 Billion. Gee, I wonder how he made all that money while being a man “for the people”? Well, not really. It should be noted that his daughter, the richest woman in Venezuela, put all of that money in the US and Andora and got to all out of Venezuela and far away from the currency her father and Maduro devalued to the point that it is now so worthless, it is littering the streets of Venezuela.
And then there’s Venezuelan real estates in spain:
https://www.businesstimes.com.sg/real-estate/venezuelas-ruin-is-fuelling-spains-property-boom
https://www.google.com/search?q=Venezuela+real+estates+investment+in+Spain&oq=Venezuela+real+estates+investment+in+Spain+&aqs=chrome.
MMT is embezzlement by dilution similar to when a bar waters down the booze. But it is far worse because it enables the dangerous mirage the government can create wealth out of thin air. This leads to the attempt to have a government with no limits. That always leads to tyranny.
It also sends the moral signal that people do not need to be prudent with their own personal finances.
The purpose of government is to take money from those who work in order to buy votes from those who don’t want to.
Stealing our money through inflation is still stealing and should be as illegal as bank robbery. The federal government is already very deep in debt and every year a higher portion of our tax dollars goes to servicing the debt. The federal government is already virtually bankrupt. Before the federal government can even consider something like the green new deal, the Federal government needs to pay off its debts and balance its annual budget. That may take many decades to accomplish. The United States must also stop the huge trade deficit and start running an annual trade surplus so that we can pay off our accumulated debts. So before the USA can consider any new spending programs the USA must get its own economic house in order which may take many decades at best. The first step the federal government needs to take is to decrease spending and start posting annual surpluses that will be used to pay down the debt and hence lower the percentage of our annual tax dollars that goes to servicing the debt.
The green new deal hopes to lower CO2 emissions by spending trillions on wind and solar, But even if the USA stopped using fossil fuels it would not stop the amount of CO2 in the atmosphere from increasing. If they were really serious about reducing CO2 emissions then they would all be in favor of gradually replacing ageing fossil fuel based power plants with nuclear power plants.
Even if they could stop the Earth’s climate from changing, extreme weather events and sea level rise would continue because they are part of the current climate. Rather than killing the economy we should be trying to improve the economy so as to be able to pay for infrastructure improvements that will helps withstand the ravages of extreme weather events. The socialism that they are talking about will kill the global economy resulting in billions of early deaths. There are better ways to decrease human population than through mass starvation.
The reality is that the climate change we have been experiencing is caused by the sun and the oceans over which mankind has no control There is no real evidence that CO2 has any effect on climate and there is plenty of scientific rationale to support the idea that the climate sensitivity of CO2 is zero. This is all a matter of science. So if the green new deal is fully implemented globally, and CO2 levels in the Earth’s atmosphere stabilize the climate will continue to change as it has for billions of years. The green new deal provides no real benefits to mankind.
Right on Wiliam.
The big employers and merchant bankers are fully to blame. Filling the USA with cheap workers who live for the next giveaway is the epicenter of the rot.
The USA is now on a clear path to ruin.
As I say to my yank mates; get out while you can for the sake of your kids.
One of the reasons Bitcoin was created 🙂
https://www.youtube.com/watch?v=clbHyIAc8U0
🔴Peter Schiff’s LIVE Bitcoin Challenge!
I lost respect for Peter after QE where he want on and on like a prepper about end of the world inflation.