tag:blogger.com,1999:blog-5908830827135060852.post3452761856572980754..comments2024-03-01T02:40:14.946-05:00Comments on Bond Economics: Misunderestimating MMTBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger46125tag:blogger.com,1999:blog-5908830827135060852.post-3541326932214628132020-05-13T07:36:58.157-04:002020-05-13T07:36:58.157-04:00This comment has been removed by a blog administrator.Alia parkerhttps://www.blogger.com/profile/02326303770549335930noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-9714421063497272232020-02-04T09:16:12.931-05:002020-02-04T09:16:12.931-05:00This comment has been removed by a blog administrator.Michael Smithhttps://www.blogger.com/profile/00547070311046082252noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-68520038222123330892017-05-22T05:13:02.049-04:002017-05-22T05:13:02.049-04:00This comment has been removed by a blog administrator.stephanie williamhttps://www.blogger.com/profile/16822207043229270852noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-15816657156053540812017-05-22T05:02:48.343-04:002017-05-22T05:02:48.343-04:00This comment has been removed by a blog administrator.stephanie williamhttps://www.blogger.com/profile/16822207043229270852noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-52520745876724104452017-01-25T13:41:31.585-05:002017-01-25T13:41:31.585-05:00@Ramanan:
"So the language that "taxes ...@Ramanan:<br /><br />"So the language that "taxes do not fund expenditures" are quite wrong actually."<br />Doesn't that depend on how you define what it means to "fund"? The MMT position, as far as I understand it, is that the government does not need to obtain money through taxation before it can spend. The government does need taxation to give value to the money it issues and to reduce private-sector demand if the latter is too large in relation to the economy's capacity to produce and the government's demand for the economy's output (i.e. to contain inflation). If you define the purpose of taxation as described in the previous sentence as "funding", then, yes, taxation does indeed "fund" government expenditures. However, it seems to me that this is quite different from the way I, as a private individual, use my income to "fund" my expenditures. To me, the two types of "funding" are completey different, both conceptually and operationally. The government has much less constraints when "funding" its expenditures than myself.<br /><br />"Imagine a government where taxes are only on household income and it is just 1%. This government can spend far less than the government which taxes at 40%. <br />Well, I suppose that would depend on the private sector's desires with respect to saving, wouldn't it? Also, wouldn't it depend on the details of the institutional setup. This setup is not clear to me, but you seem to have in mind a setup where taxation is constrained to be max. 1% in first case and max. 40% in the second, because of politics for example. In such a setup, clearly the second government has more (non-inflationary) spending room than the first, everything else being equal. This seems to me to perfectly consistent with the MMT position, again as far as I understand it (which may not be very far).<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-9972355702644118292017-01-22T17:34:59.954-05:002017-01-22T17:34:59.954-05:00Thanks Jerry. Mr. Peterson seemed quite reasonabl...Thanks Jerry. Mr. Peterson seemed quite reasonable in his interview with Socarates, but he is getting on in years...Detroit Danhttps://www.blogger.com/profile/03718490473585220856noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-42767464946610646732017-01-22T16:50:47.169-05:002017-01-22T16:50:47.169-05:00STF, thank you for the explanation.
I should not ...STF, thank you for the explanation.<br /><br />I should not have told you to lighten up. I felt somewhat responsible for inspiring Mr. MacDonell's discussion of MMT, (I assume I was the reader he mentioned in his post) and was concerned that the lambasting he was experiencing here might be due to my request to him. This is silly of course, and in any case, it is pretty clear from his reply article that Mr. MacDonell does not agree with your criticism or mine either. <br /><br />Aside from that, if STF is short for Scott Fullwiler, I want to thank you for the many articles and comments you have written over the years that have helped me to learn about MMT.<br />Jerry Brownnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-18970239476965464662017-01-22T14:23:58.836-05:002017-01-22T14:23:58.836-05:00"The advantage of the current SS system is th..."The advantage of the current SS system is that citizens feel that they have paid into the system, and they want to get what they deserve. Taking away promised payments from them is extremely difficult. The strategy of suggesting that the plan is underfunded only works if the actuaries go along with it."<br /><br />Which they do. And they go along with it because legally the payroll tax revenues fund the system. Note I very carefully did not say that you shouldn't tie some sort of pay-in to the rights to later benefits. I said you should not make a law that says the current benefits can't be paid if the current and past (via trust funds) revenues aren't high enough. Some parts of Medicare do not make this mistake, actually.STFhttps://www.blogger.com/profile/16261666934714196464noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-34988220953891192162017-01-22T14:06:32.912-05:002017-01-22T14:06:32.912-05:00On R/R, Timothy Sharpe and Martin Watts have publ...On R/R, Timothy Sharpe and Martin Watts have published 2 papers that do the identical regressions as R/R in their book, but unlike R/R they separate sovereign/non-sovereign monetary systems. The results are what MMT says they would be--R/R results hold for non-sovereigns but not for sovereigns.STFhttps://www.blogger.com/profile/16261666934714196464noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-56361832657991574422017-01-22T14:04:02.412-05:002017-01-22T14:04:02.412-05:00The pension savings, and particularly govt tax pre...The pension savings, and particularly govt tax preferences for them, is something Mosler has harped on for years as requiring larger govt deficits. STFhttps://www.blogger.com/profile/16261666934714196464noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-62651987271406927522017-01-22T14:02:44.812-05:002017-01-22T14:02:44.812-05:00Jerry Brown . .
I see the two pieces similarly--...Jerry Brown . . <br /><br />I see the two pieces similarly--both are unscholarly. It's certainly the case, though, that Mr. Holden has an absolute perfect grasp on what is scholarly and isn't though, whereas Mr. MacDonall might be offered some space on that point.<br /><br />What I see as the big difference, though, is that Mr. Holden essentially "went Trump" on commenters that proved he was misrepresenting MMT by misrepresenting them, claiming they'd written something they didn't, etc. Further, the quote from an earlier Billy Blog on inflation to back his point was such an obvious misinterpretation, and again, when others called him on it, he "went Trump" on them.<br /><br />On the other hand, Mr. MacDonell's comments here have not been disingenuous, regardless whether or not I agree with them.STFhttps://www.blogger.com/profile/16261666934714196464noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-75453642617963971612017-01-22T13:37:12.827-05:002017-01-22T13:37:12.827-05:00This comment has been removed by the author.STFhttps://www.blogger.com/profile/16261666934714196464noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-15528682970626966192017-01-22T11:09:59.007-05:002017-01-22T11:09:59.007-05:00Thanks Dan. I had read that previously and enjoye...Thanks Dan. I had read that previously and enjoyed it. Unfortunately Peterson needs a remedial session with Socrates.Jerry Brownnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-67639873544213387942017-01-22T09:34:33.125-05:002017-01-22T09:34:33.125-05:00There were a few substantive points made my Gerard...There were a few substantive points made my Gerard; some were about political strategy that I did not address.<br /><br />On the analytical side, his complaint was that you cannot lock interest rates at zero because the central bank cannot respond to inflation, and "everyone" knows that is bad. That's a standard mainstream view, but that is what he needed to discuss.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-30429018363705868102017-01-22T09:04:11.291-05:002017-01-22T09:04:11.291-05:00In my opinion, a problem for MMT is that many peop...<i> In my opinion, a problem for MMT is that many people say OMG what would happen if people realized MMT was correct. They don't always try to refute the theory, they base their opinion on what they imagine the consequences of accepting the theory would entail. </i> [Jerry Brown]<br /><br />It's similar to religion in that regard. Actually, the current public discourse about religion in western countries has moved beyond that of economics, in my opinion. But up until the last 100 or 200 years in western civilizations, it was considered unacceptable to criticize the logic or historical truth of the Bible because this would undermine the moral bedrock of society. (And that concern was not wholly unfounded, although most people today agree that no one authority should have a monopoly on the truth.)<br /><br />A couple months ago I tried to write an explanation of the national debt which would deal sympathetically with common questions: <br /><br /><a href="http://mindorenyo.blogspot.com/2016/11/the-socrates-show-with-guest-pete.html" rel="nofollow">The Socrates Show, with guest Pete Peterson</a>Detroit Danhttps://www.blogger.com/profile/03718490473585220856noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-62886343129464204352017-01-22T00:41:46.678-05:002017-01-22T00:41:46.678-05:00Is the substantive argument essentially the same o...Is the substantive argument essentially the same one DeLong made here: https://modernmoney.wordpress.com/2013/05/13/a-conversation-with-an-economic-policy-analyst/ ?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-79205488840321788212017-01-21T20:55:56.583-05:002017-01-21T20:55:56.583-05:00Perry Mehrling wrote one of the best papers I have...Perry Mehrling wrote one of the best papers I have ever read since it accurately describes financial systems as dealer networks and accurately describes the State as a very unique type of financial intermediary:<br /><br />https://economics.barnard.edu/sites/default/files/inline/the_state_as_financial_intermediary.pdf<br /><br />One argument on the third page is that the state invests in human capital (via spending for education and training) such that social security is "funded" by this capital which does not otherwise appear as an asset on private or public books.<br /><br />In the United States the families now go into direct federal debt to the Education Department (ED) which pays schools. ED borrows from the Treasury which sells Treasuries if necessary to spend funds tied to direct student loans. The financial markets get more secure federal savings instruments in the Treasuries float. The so-called "job creators" get to cherry-pick the talent pool. The honest but unfortunate student borrowers, who are the least sophisticated members of society, are effectively prevented from obtaining a discharge of educational debt in bankruptcy on a statistical basis, and the this is due to the fact that ED would be in perpetual debt to Treasury inside the government if it cannot recapture funds from student borrowers without another source of revenue to ED such as a share of progressive taxes or some earmark.<br /><br />If human capital were to be recorded somewhere the unavoidable loss on the student loan portfolio might be seen as a write-off that is smaller then the capitalized value of the educated workforce.Joe Leotehttps://www.blogger.com/profile/01292763300917387201noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-57705695245789220442017-01-21T18:35:54.049-05:002017-01-21T18:35:54.049-05:00What I try to do is remember to always copy my blo...What I try to do is remember to always copy my blog posts to the clipboard before hitting the publish button.<br /><br />This is a great post. The key insight is how financial assets start to accumulate in sectors of the economy and how this might change the government policy via efforts to stabilize output of GDP. <br /><br />I witnessed the debate over whether taxes and government securities are necessary to "finance" government spending several times on the Understanding Money threads. My view is that the central bank and Treasury of a fiat sovereign government must emit instruments that are similar to other financial instruments and therefore these are financial operations. However they are financial operations of a super-organism which does not have to raise taxes to repay its debts but can rollover debt in perpetuity compared to any economic unit that saves today to spend in the future.<br /><br />Does a hive of bees need to save money in a bank account? No. The bees go to work with and against nature and accumulate honey, for whatever real purpose that serves the hive (I'm not a biologist). Does a fiat sovereign government need to hold a bank account for any reason other than to transact with other units in the economy? No. The society is like a hive of bees engaging the natural world and attempting to save financial assets for future spending plans in the private and non-sovereign government sectors. The fiat sovereign exists to stabilize the savings and plans of the society and does not need its own store of financial savings.Joe Leotehttps://www.blogger.com/profile/01292763300917387201noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-57633475721920094512017-01-21T18:09:15.413-05:002017-01-21T18:09:15.413-05:00Well Dr. Romanchuck, perhaps I was using the term ...Well Dr. Romanchuck, perhaps I was using the term professor loosely. In any event, thanks for addressing my question. I think you would admit that fiscal policy might have to pivot fairly quickly to respond to changes in those overall trends should they occur. And getting fiscal policy to respond has been a problem here in the US, let alone places like the EU. <br /><br />But I see that as a political problem unrelated to MMT's description of how the economy works and whether that is true or not. In my opinion, a problem for MMT is that many people say OMG what would happen if people realized MMT was correct. They don't always try to refute the theory, they base their opinion on what they imagine the consequences of accepting the theory would entail. That was my biggest criticism of Mr. MacDonell's piece. <br /><br />Thanks again.Jerry Brownnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-473395168504048482017-01-21T17:50:07.321-05:002017-01-21T17:50:07.321-05:00STF:
"I'm going to disagree with you on S...STF:<br />"I'm going to disagree with you on SS, Brian. The only reason there is a public discussion about SS is because we pretend we pay for it (financially) with the payroll tax (obviously, legally it's tied to payroll tax revenues and the trust fund). It's quite possible to create a system of "paying into" a public retirement scheme (i.e,. with credits, etc.) without tying it to program revenues funding program expenses (and thus create a politically influential constituency of the program's supporters). ..."<br /><br />Admittedly, I am looking at this from a Canadian perspective (Canada Pension Plan/ Quebec Pension Plan), and so I might be getting the U.S. political developments wrong. However, I agree that various Republicans have been targeting SS (for decades): but my feeling is that touching SS has been and always will be political suicide.<br /><br />The advantage of the current SS system is that citizens feel that they have paid into the system, and they want to get what they deserve. Taking away promised payments from them is extremely difficult. The strategy of suggesting that the plan is underfunded only works if the actuaries go along with it.<br /><br />In my view, it's a lot easier to starve programmes of transfer payments in which it is seen that the payout is entirely a discretionary expenditure. The rest of the welfare state look like they are in pretty rough shape when compared to SS and unemployment insurance (which is also structured to look like an insurance scheme, flouting Functional Finance).Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-22620137452400033392017-01-21T17:39:11.760-05:002017-01-21T17:39:11.760-05:00Gerard MacDonell: "I don't think R&R&...Gerard MacDonell: "I don't think R&R's factual comments on base money defaults have been "debunked", although I concede I am not the least familiar with any of those incidents. They would make a nice separate study, I think."<br /><br />Ever since I found that R&R listed Alberta as a *sovereign* default in one of the working papers, I feel that it is necessary to do a lot of fact-checking of their claims. They also listed a gilt reorganisation as being a default, which is not what the British court system ruled. If you took every time some whiner bond holders lost a court case as a "default", then you could get a lot of them.<br /><br />In any event, governments can always voluntarily default on any of their liabilities, whether it is "money" or "debt." The key is that it is voluntary, and not something that is imposed by "markets." This is very different than the case of a corporation.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-57808740225235691732017-01-21T17:30:39.905-05:002017-01-21T17:30:39.905-05:00Ex-professor... (Although Doctor Romanchuk sounds ...Ex-professor... (Although Doctor Romanchuk sounds good; I spent four years getting that degree.)<br /><br />If the hoarding behaviour reverses, it presumably would increase demand, and so government fiscal policy would need to tighten to keep things at a steady state. You could interpret that as "there is no free lunch." However, there is no point in tightening policy in 2017 to prepare for increased demand in 2027, which a finance-oriented approach would suggest makes sense (since discounted cash flows allegedly rule).<br />Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-86377787239796996502017-01-21T17:13:41.987-05:002017-01-21T17:13:41.987-05:00Gerard's link in a more convenient format...
h...Gerard's link in a more convenient format...<br /><a rel="nofollow">https://www.youtube.com/watch?v=9wWUc8BZgWE</a><br />Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-55694682825747790182017-01-21T17:10:01.517-05:002017-01-21T17:10:01.517-05:00{Technical point...}
[STF wrote: (Brian--for what...{Technical point...}<br /><br />[STF wrote: (Brian--for whatever reason, some of my posts are not showing up. It appears random to me which ones do vs. do not.)]<br /><br />One of mine got eaten as well; ouch. I looked in the "spambox," and they were not put there. I have had issues with anonymous comments disappearing into the spam box, but I have not noticed this issue before. I hope it will be fixed by Google, as it is something I have no real control over...Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-33643668357370173892017-01-21T14:34:49.795-05:002017-01-21T14:34:49.795-05:00Gerald,
"This Time is Different", which...Gerald,<br /><br />"This Time is Different", which is the R&R you mention in your paper, has been thoroughly debunked. For example, <a href="http://www.theatlantic.com/business/archive/2013/04/forget-excel-this-was-reinhart-and-rogoffs-biggest-mistake/275088/" rel="nofollow">Forget Excel: This Was Reinhart and Rogoff's Biggest Mistake --<br />Correlation is not causation</a><br /><br />Excerpt: <br /><br /><i> the best argument against taking R-R as austerity's gospel truth was it was just a correlation. Of course a ratio tends to increase more when its denominator increases less. That's how fractions work. But it doesn't prove that the rising ratio causes the stagnating denominator. If anything, the causality runs the other way -- lower growth tends to cause higher debt, as tax revenue falls and safety-net spending rises during a slump.</i>Detroit Danhttps://www.blogger.com/profile/03718490473585220856noreply@blogger.com