Reggie thinks Ireland and Portugal are on the way to default. For his take on the Irish situation

“As any who have been following me know, I believe that several European countries are bound to default, ie. restructure their debt. Ireland is in that camp. What makes me so sure about this? Well, its simple math. While I have calculated probable restructuring and haircut scenarios, I am not at liberty to put it out in the public domain just yet, but I can illustrate incontrovertible evidence that shows that Ireland is on an unsustainable path – a path made even more unsustainable by the recent bailout”

http://boombustblog.com/index.php?option=com_k2&Itemid=200079&id=4075&lang=en&view=item.

Japan has consistently had an export surplus, but its economy has veared from booming to stagnant, which suggests that the importance of balance of trade is greatly exagerrated. Mosler says as much in his pamphlet 7 deadly innocent frauds.

Clearly japan would do well to kill off the zombie banks, but as long as they have an undercapacity and their own currency the deficit is not a problem. Or so my understanding of MMT suggests.

I like the way Mike took over then. You were like two reporters on the Onion.

Hello CGT!

I remember coming in from the badlands saying there be dragons and getting a warm welcome from folk around the fireplace. Awesome feeling, Make yourself at home bro and don’t worry about writing anything or making a fool out of yourself, I never have.

What you talk of is the veil. Just think about it. If that dude married to Debbie Magee could fool us with card tricks, what hope have folk when they are blinded by centuries of “watch the pea, where’s the pea, keep watching the pea, where the pea go, watch the pea. Ok which shell is it under?

You sure?”

They have books on this, bound with the skin of the innocent.

It’s 2012 though, the year the people http://www.youtube.com/watch?v=LK8sxngSWaU

Thanks Golem! I managed to understand that – so no indegestion!:)

Cheers

Not really much detail in there, but as far as it goes, framing the question as ‘what kind of capitalism’ is something I think many here would agree with, & useful. The general operation of capitalism in the +real+ economy is acceptable to most I would think. Provided it is appropriately & democratically regulated. IMO a workable balance between the opposing interests, at it’s most basic, capital on the one hand vs labour on the other is possible. But we need far better structures and vigilance to ensure the ever present attacks of corruption are kept at bay.

Some kind of control over the economy is going to be centralised somewhere, & I would include in that the hugely important question of control of money supply. The latter is not mentioned in the article and generally nowhere. Those who presently control money, the private banks together with their placemen in central banks & other supposedly ‘regulatory’ bodies, very much like it that way. I see the present crisis being used as a means by which bankers can usurp even more control from democracy, such as it is.

Probably the best writer for me on this topic of ‘political economy’ is Michael Hudson. Anything he writes is worth reading imo. He has a recent piece here:

http://neweconomicperspectives.blogspot.com/2012/01/banks-werent-meant-to-be-like-this-what.html

Yes, and graphically exposes the lie, repeated ad nauseam by Tories, that government ‘profligacy’ prior to the crisis is responsible for the present public ‘debt’.

MMT of course correctly states that the total stock of public debt is not a useful policy target. In fact the opposite is true. Obsessing over debt that historically virtually never gets paid down (or needs to be), when in its own sovereign fiat currency, is a very damaging approach. But useful, of course, if your intention is to enable the ever greater share of wealth to the top few percent.

Kenny

That’s pretty much it. (Tho’ of course the full details are important.)

I would add that when it comes to the question of money ‘printing’, we should realise that a very fundamental power struggle is being played out.

Since all major currencies became true ‘fiat’, ‘pegged’ to nothing, decades ago, private banks have enjoyed quite a monopoly on money creation. This facility, gifted them free gratis by own governments was a very important factor in enabling their reckless behaviour of the last decade particularly. Reckless for us of course, not themselves.

We see that private banks & their representatives, the psuedo ‘independent’ central banks, have no difficulty in printing billions when it favours their exclusive interests.

Bankers have risen to the very top of the real power structures in society & this control over the creation of money, from which all non democratic power flows, is what got them there & keeps them there.

It’s high time that economics & money functioned for the majority of citizens, not the privileged & powerful few alone.

From a historical perspective, one can see that without the immense data collection & processing capability of the present day, managing fiat currencies to their full potential would be difficult. I see some good reasons why such rigid & inflexible control provided by a ‘gold standard’ or similar approaches to money would be useful, even essential otherwise. This is profoundly not true today.

Arguably, meaningful democracy can never exist without democratic control of the monetary system. Previously the means to achieve that may not have existed in practical terms. Today it does. If we do not demand it soon, there will be even less ‘democracy’ than the sham we have allowed to develop thus far.

Mike I got this graph
http://www.economicshelp.org/blog/wp-content/uploads/2011/09/uk-debt.png
from here
http://www.economicshelp.org/blog/334/uk-economy/uk-national-debt/
which i think is as dramatic an exposition of the ‘we cant afford’ attitude as is possible

I look forward to seeing the film, I saw Terence Malik’s ” Tree of life ” last week, maybe based on a similar idea, the way of nature & the way of grace, a wonderful film in my opinion.

There was some talk about Corzine replacing Geithner , & I have seen some articles talking about Jamie Dimon as a prospect, I think Satan is too busy at the moment.

Thanks David (Golem)

That’s a pretty good explanation.

Strictly speaking, MMT does not say inflation is not possible, but is no more likely than when any other mechanisms create growth in jobs & output. For example, the increased money supply could just as easily be drawn from bank lending, which is money ‘created’ on banks’ keyboards & is +not+ extinguished in the real economy until some years later when the loan is repaid. Even then, much commercial lending is simply rolled over. In the future, the economics circumstances may be different & must be dealt with at that time, as required. Which may well mean money needs to be extinguisehd to cool inflation. An easy matter.

As Golem says, the inflation issue arises at the point of spending. The key being, are there enough real resources to be purchased? Most markets in the real economy are sufficiently competitive, such that when more money is available, more demand for a ‘good’, then suppliers will (& do) increase output, rather than simply put prices up. Individual firms will aim to increase market share & increase profits that way. They know if they try to raise prices, they will lose business to competitors. Only if their is some fundamental bottleneck, applying to all suppliers equally, will prices be forced up if demand rises.

My post was written with our present circumstances in mind. We +know+ very few, if any such bottlenecks in resources exist, for the simple fact that millions of workers were engaged in productive activity who are unemployed now. That is, we know we have the capacity to produce goods because we’ve already been there. So there’s not much rationale to expect prices to rise rather than output.

The Job Guarantee (JG) jobs are not intended to be permanent & must be designed such that they don’t substitute for ‘normal’ activity in public or private sectors. The proposal is that JG jobs are offered to any unemployed who want them – at minimum wage, so that there is clear incentive to move to the new permanent jobs created by the expansion of aggregate demand as JG workers spend into the economy. It is this spending that is key, not what they do, or ‘produce’. But there’s no doubt that a useful social dividend can be provided also. There exist all manner NGO, Charitable & Community works & projects which can’t be ‘commercially’ achieved in normal circumstances, that become possible with a free, albeit temporary workforce.

The authorities in Europe & elsewhere are beginning grudgingly to aknowledge that the real problem (besides the large private sector debt overhang) is lack of growth – a return to prior levels of activity, GDP. With the double effect of high unemployment – loss of production – and loss of tax revenues that ensue. Austerity policies are failing in precisely the way that MMT (& some others) predicted they would. Failing that is, if we assume that the ass***s running things could actually give a damn about the wellbeing of the majority of citizens. (Very far from a reasonable assumption imo.)

However, whilst all these authorities pretend concern for ‘growth’, they have not one single policy to produce it, & fail to recognise that the austerity they still advocate is the exact opposite of a growth policy. Enraptured, as they are, in their fantasy world of neo liberal economics, and the myriad empirically false assumptions underlying it.

As many of us do, I have great concern for the ecological & material resource constraints humanity is rapidly approaching. There is a huge job of transformation to be done.

The present crisis is being used as an excuse to curtail even the meagre efforts in that direction thus far. ‘We can’t afford it’, they say meaning there isn’t the ‘money’. And the public at large are suffering with there own priorities in the midst of all this economic vandalism being inflicted on them. If we don’t act, this situation will languish on for decades.

The important insight that MMT provides here is twofold.

First, jobs and growth can be restored quickly, so we can all get back to focussing (hopefully more so) on the really important issues of the coming decades.

Second, ‘money’ is +not+ the constraining issue in moving to a sustainable society. Rather, the question is do we have, or can we allocate, sufficient +real+ resources to solve these problems. If they are available to be purchased, the government (appropriately consolidated with the central bank) can +always+ buy them, with little or no inflation risk.

Probably the best resources for further reading on MMT are the blogs of those credited as the founders, Prof Bill Mitchell, Prof Randall Wray & Warren Mosler (tho’ there are many other advocates with blogs too).

Mitchell is likely the most prolific:

http://bilbo.economicoutlook.net/blog/

Wray blogs with others at the University of Missouri Kansas City

http://neweconomicperspectives.blogspot.com/