The printing is to allow those closest to the recipients to make profit and also to replace real assets with paper ones. These are the less clever ones as the smarter ones saw this coming and fear that the RoW will find out where the money is going and do something involving tumbrils …

Those naice gentlemen on Irisheconomy removed all my contributions a while ago. Was it something I said?

I saw a phrase recently (on guardian CiF, I think) that Iliked. “A recession is God’s way to make us learn economics”.

Well, it certainly had that effect on me, if one ignores the metaphysical concept of “God”.

MMT? I haven’t completely grasped it. My gut feeling is, it doesn’t take enough account of irrational, “madness of crowds” factors, regarding money. That Japan, for example, can still find buyers for its bonds, is a fact. But “past performance is no guide to future performance”, as they say. I really cannot see how a long-term negative real return on japanese sovereign bonds is going to be an acceptable investment. Life Assurers, for example, have minimum guaranteed return to meet. It would be suicidal to stay in japanese bonds.

As for why they still find buyers? My guess is, a Japan’s a strongly cohesive society, and that society is reflected in a strongly corporatist economy. But when the big corporate buyers finally tip away from them, it’s going to be a very ugly stampede.

And I don’t think MMT will model that stampede at all well.

http://www.fsa.gov.uk/library/communication/speeches/2013/0206-at

I’ve seen it pointed out (e.g. in

http://www.thedailybell.com/2226/Real-Cause-for-Gaddafis-Expulsion-Wanted-Gold-Currency.html

) that Col. Gaddafi was overthrown just as he was making headway with a pan-African plan to sell oil in currencies other than $US.

The reference also suggests that similar concerns about Saddam Hussain wishing to sell oil in Euros could have been a factor in the decision to remove him.

Similarly the US blockade of Iranian trade and financial activity

http://www.juancole.com/2012/04/washingtons-dangerous-blockade-of-iran-cole-at-tomdispatch.html

may be directly related to its plan to sell oil to China and others without using the $US – as well as being about the nuclear issue.

To quote from that second reference:

“To sidestep Washington, India has worked out an agreement to pay for half of its allotment of Iranian oil in rupees, a soft currency. Iran would then have to use those rupees on food and goods from India, a windfall for its exporters. Defying the American president yet again, the Indians are even offering a tax break to Indian firms that trade with Iran. That country is, in turn, offering to pay for some Indian goods with gold.”

These appear to be examples of exactly what you suggest – strong imperialist action from the dominant trader taken to keep a particular currency in use, with creative action from an ‘upstart’ (in this case India) to insert theirs into the trade.

I wonder if anyone can identify other, perhaps less-obvious, examples of this kind of commodity-related ‘currency utilization protection’.

“Typically, the central bank starts out by preventing the short term interest rate from rising to its equilibrium level. This leads to central bank credit creation. In turn, this encourages investments which are profitable only so long as the central bank prevents the interest rate structure from rising to its free-market equilibrium level. All of this manifests itself in the form of higher prices – higher prices of goods/services and/or the higher prices of assets. At some point, the central bank can no longer tolerate what it has wrought, and raises the level of the short-term interest rate above its free-market equilibrium. This precipitates a decline in asset prices, an economic recession and, later, a decline in goods/services prices (or
a slowing in their rate of increase). It was recognized by Austrian economists during the sharp run-up in U.S. stock prices in the late 1990s and the subsequent housing boom that the Greenspan-led Fed was especially egregious in keeping the federal funds rate far below its equilibrium level too long. We are now experiencing the economic and financial market fallout from Greenspan’s interference with the free market.

In free markets, risk-takers get rewarded if they are correct in the risks they take, but are punished if they are incorrect. Here, too, Greenspan intervened in the free markets. When it turned out some risk-takers had erred, Greenspan cushioned their losses by slashing the federal funds rate and creating central bank (counterfeit) credit. This central bank intervention in free markets encouraged risk-takers to take on even more risk inasmuch as their upside rewards would seem to be unlimited but their downside punishment would be limited.”

http://globaleconomicanalysis.blogspot.ca/2009/05/case-against-fed-and-fractional-reserve.html

“To those who claim credit extended by fractional reserve lending is not fraudulent because it’s backed by assets, I ask: “What assets?” […]

Close analysis shows the “backed by assets” claim only holds true as long as asset prices are rising. When asset prices are falling as they are now, the true state of the non-existent backing is plain to see.

Credit extended via FRL is backed by nothing more than thin air and promises. Those promises are currently worth pennies on the dollar, and the entire global banking system is insolvent as a result. […]

Proponents of FRL claim no one is harmed by it. In practice, everyone is harmed by it. Here is how it starts. Those with first access to money accumulate assets and those with later access to money bid up those assets. Consider housing. GSE creation of credit out of thin air is a perfect example of what happens. By the time credit was available to those of lower economic status, the bubble was already formed and ripe for a collapse. Even the non-participants were harmed. How so? Via rising property taxes and rising prices of goods and services without the benefit of rising wages.

Ironically, even those with first access to money (the banks and wealthy) ultimately did not fare well because they were greedy. When the bubble popped (as all debt bubbles eventually do) the only winners were the few who made timely bets on the demise of the bubble.

FRL is the enabler for credit bubbles. Given enough time, credit bubbles are guaranteed to implode in deflationary fashion. History is replete with examples. The South Seas bubble, the John Law Mississippi bubble, and tulip mania are prime examples.”

http://globaleconomicanalysis.blogspot.ca/2009/05/case-against-fed-and-fractional-reserve.html

Capitalism cannot be reformed or transformed into something that values human dignity/life. It’s an economic system based on exploitation of people and resources for profit.
It will always be hostile to any kind co-operation or any anything that tries to limit it’s expansion.
It’s endless cycles of boom and bust with all their attendant human costs are unsustainable.

Democracy and Capitalism can never occupy the same space.

Capitalism has to be destroyed or it will destroy us.

To transform human relations capitalism must be replaced as the essential first step, anything less is fanciful.

The powerful global ‘elites’ are only powerful because we allow them – we are many, they are few.

While it is a waste of money paying interest to someone when you don’t need to, the fact is the the Govt DOES borrow – every week. The currency traders gamble on our dollar and that is one of the reasons it is so high. If we can’t fix our currency then there must be other ways. Lowering the interest rate doesn’t do it. That only means that people can and do borrow money to invest – in houses the prices of which are also in cloud cuckoo land. While I like the idea of a job guarantee scheme that, in my view, is not a solution in itself. We would end up building bridges to nowhere unless there is comprehensive plan to deal with a high dollar and a HUGE private debt albeit a relatively low public debt. That private debt means we can buy all matter of rubbish manufactured overseas while more and more people become unemployed – all their own fault according to the Government.
Has any MMT theorist applied the theory to an actual country to show how and what could be achieved? It would be so interesting to see what could be done.

be

The price of houses in UK didn’t ‘go crazy’ until the 1980s – quite a discrepancy from a 1971 driven narrative. (I know this, I was there.)

Ann Petifor offers a good commentary on the period in this recent paper:

http://www.primeeconomics.org/wp-content/uploads/2013/01/The-power-to-create-money-out-of-thin-air5.pdf

I think you need to ask the question too, as regards a +modest+ level of inflation, is inflation in what, how much & did it matter? And in the case of things like oil (1970s & now), what could we do about it?

The only inflation that has been a major problem in my lifetime has been the very specific one of ridiculous land/property prices. There is no doubt that the banks are heavily implicated in this, effectively shovelling in credit largely for existing assets, not productive activity. The key, as said before, is what the credit is used for. This has to be a matter of bank/financial regulation.

Apart from this clear issue of asset ‘bubble’ finance, not hard to regulate for, if the ‘will’ is present, I think you need to decide whether you want to obsess over (modest) inflation or be a bit more concerned about the huge mess in the real economy?

Specifically the massive economic costs – dwarfing any other costs in this whole crisis (yes, including all the bank losses!!) – of all the lost output of real goods & services. As per (BoE) Andy Haldane’s paper, considering these costs in the context of a Tobin tax, we’re talking around 10% of US & EU total GDP +per year+. Times 5 years, probably another 10 to go, if the same sh1t continues…..you do the sums.

Then we can talk about the devastating-for-generations social costs….

So, seriously, ‘be’, what problem is it exactly you think we need to prioritise??

MMT is +not+ ‘just print some money’. It is about bringing about a society where no one gets ‘dumped’ in the trash with some ‘shirker’, ‘scrounger’ or ‘untermenschen’ label because their labour is surplus to an elites’ requirements this week/month/year/decade.

It explains that for fiat (etc) currencies THERE IS NO ‘MONEY’ CONSTRAINT’ in doing this – NONE.

It does this in such a way that people can decide, by whatever means – democracy, chucking dice, whatever – how much is in the private sector & how much in the public sector. BUT, that whatever proportion of ‘private’ is chosen, if they cannot deliver, the public ensures no one gets ‘dumped’.

MMT advocates also say unequivocally that the banks etc. must be properly regulated to ensure credit/money is properly provided at the micro level & asset hedging or other speculative credit strictly limited. If Bill Black thinks we can do this – good enough for me.

To me, this provides a stable +inclusive+ framework from which to make the decisions, investments etc. required to achieve ecological sustainability. And importantly, whatever we choose can be done to the maximum use of our available resources – human & material. Time is short, we need to get on with it.