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Stephanie Kelton writes:

The US is broke. Government deficits are de facto evidence of a government gone wild. We’re careening toward Greece. Entitlements are the root cause of our fiscal woes, and the Chinese are coming for our grandchildren. How many Americans believe this garbage? My guess? Most of them.

Pete Peterson has won and the American people have lost. There is no effective counter narrative, not even from the left. Nearly all “progressives” have accepted the fundamental premise that the federal government is like a great big household. That it faces the same kinds of constraints that you and I face. That it should spend only what it takes in and that deficits are morally and/or fiscally irresponsible. President Obama told the nation, “We’re out of money.” . . .

Stephanie knows that there is a counter-narrative out there to Peter Peterson's take on fiscal responsibility, because she's one of the people who best expresses it. But she thinks it can't be called “effective,” because we've been unsuccessful so far in getting the fiscal responsibility counter-narrative developed by Modern Money Theory (MMT) economists communicated broadly enough to create a break in the Washington/New York political consensus, which insists that now our most urgent need is for austerity to bring the deficits and the public debt under control. I agree with Stephanie, of course. We've not been successful in persuading enough people yet.

So, in this Post, I'll make yet another effort to counter the neoliberal austerian fiscal responsibility ideology by juxtaposing the primary claims underlying the narrative, with my construction of the MMT answers to them. The austerian claims below all link to MMT-based posts that critique them. And they are all juxtaposed against an MMT-based claim that refute them. The paragraphs following each pair of claims, summarize my version of MMT answers, and together provide a counter-narrative.

The Government is running out of money

MMT answer: The Government cannot involuntarily run out of money

The US Government has the Constitutional Authority to create an unlimited amount of money provided Congress appropriates the spending, and places no constraints on spending, such as a need to issue debt instruments when the Government deficit spends, or debt ceiling limits. So, all constraints on spending appropriations are purely voluntary in the sense that they are due to Congressional mandates that Congress can repeal at any time, and not to financial limits inherent in the Government's authority.

Having said that, the constraints mentioned are now in place, and, so, it's important to emphasize that even with them, and without legislative changes, the Executive can always create enough money to pay for whatever spending Congress has appropriated and also repay debt, so that even with a Congress willfully maneuvering for default, or brandishing the threat of it, the Executive can still ensure that the Government doesn't run out of money even without more taxing and borrowing, because the Executive can use the option of Proof Platinum Coin Seigniorage (PPCS) as one method of getting around the debt ceiling.  Originally suggested by Beowulf some time ago, there are any number of PPCS options the President can use to generate coin seigniorage profits to use for a variety of purposes. I've outlined some of them here. Some PPCS options stop with $1/2 Trillion coins, some go over $1 Trillion up to $5 Trillion, and still others envision very high face value coins ranging to $60 Trillion and up.

For getting around the debt ceiling, coins with face-values up to $5 Trillion will certainly remove the need to issue further debt subject to the limit and break the debt ceiling. However, minting a platinum coin with a face-value of say, $60 Trillion is also a political game-changer, because it results in filling the Treasury General Account with enough in credits to make it obvious to the most concrete thinker that the Government has the capacity to pay all the debt subject to the limit, issue no more such debt if it so chooses, and also spend whatever Congress chooses to appropriate in the way of new programs to solve current problems.

So, issuing a $60T coin, removes the issue (excuse) of whether the Government of the United States can afford to pay for employment programs, educational programs, infrastructure, new energy foundations, a Medicare for All program, new R & D programs, or expansion of the social safety net from the political table. Issuing that coin can and would  create a new political climate moving American politics much further to the left within the space of a few months. In short, it would dramatically illustrate the MMT counter to the austerian deficit hawks, namely that the US Government is not running out of money and cannot do so as long as it has the intention to use its authority to create more of it.

The Government can only raise money by taxing or borrowing

MMT answer: The Government can create money; so it can never involuntarily run out

The austerian claim is false. First, the Federal Reserve, a Government agency can create unlimited money “out of thin air,” as the saying goes, though not for purposes of deficit spending, or directly liquidating Treasury debt. But second, I've just pointed out that PPCS can be used in the present legal framework to create money other than by taxing or borrowing. And third, if Congress doesn't want to use PPCS, it can authorize the Treasury to spend appropriations without issuing debt instruments any time it wants to take an afternoon off to get that done. So, plainly the Government can “raise money” without taxing or borrowing it by just creating the necessary money while spending.

We can't keep adding debt to the national credit card.

MMT answer: We can if we want to. There's no limit on the credit card except the one imposed arbitrarily by Congress.

Congress has placed a debt ceiling on the Government, and it has also mandated debt issuance when the Government deficit spends, by prohibiting the Fed from lending the Treasury money. So, it's only the self-imposed constraint of Congress that prevents the Government from continuing to add “debt to the national credit card.” There is nothing inherent in the international economic system, or our own Constitution that prevents us from adding debt as needed.

And even if current constraints on debt ceiling constraints remained in place, Treasury can still issue debt without breaching the debt ceiling. Beowulf, the blogger/commenter, who first proposed using high face-value PPCS to get by the debt ceiling, recently came up with a new option to avoid breaking the debt ceiling. That option follows:

Another way to sidestep the debt ceiling is to go the opposite extreme from one-day maturities, issue perpetual T-bonds with no maturity date (what the Brits call consols). Look at the debt ceiling law, the public debt adds up, for all outstanding debt, the face amount of the guaranteed principal. The future interest payments to be paid aren't counted. ("The face amount of obligations issued under this chapter and the face amount of obligations whose principal and interest are guaranteed by the United States Government").

If there's no maturity date, then there's no promise to repay principal and thus there's nothing to add to the public debt total. Tsy could issue an unlimited amount of consols without tripping over the debt ceiling."

Beowulf has more on consols here. But the possibility of consols is enough to show that the Treasury has an unlimited credit card under current legal arrangements, and can use it without breaching the debt ceiling, though of course, it can't spend more than Congress has appropriated, and is also required to repay debt and interest that is coming due.

If the Government borrows more money, the bond markets will raise our interest rates

MMT answer: The bond markets don’t control US interest rates.

The Treasury can flood overnight bank reserves and float short-term debt to meet its targeted interest rates, however low they may be. The Government, if Congress would let it, can even stop issuing debt subject to the limit when it deficit spends (using PPCS or consols, or by Congress moving the Fed into Treasury where it belongs) in which case the bond market interest rates would become entirely irrelevant to the United States.

If we continue to issue more debt, then our main creditors may refuse to buy it, an event that would lead us to insolvency and severe austerity

MMT answer: They'll most probably buy it for the foreseeable future; but if they don't we won't be forced into solvency because we can always create the money we need to meet our obligations

Our creditors all want export-led economies. This means that they must accumulate dollars, because the US is where the consumption power is, and if they want to keep exporting they must keep the American consumers’ business. Their dollar surpluses can sit idle in their Federal Reserve accounts or be used in a way that makes them money. Buying our debt makes them some money, however little it may be at current interest rates. Buying our goods and services reduces their trade surpluses with us, and goes against their export-led policies. Selling our currency, weakens the value of the USD holdings they retain. In short, they have little choice other than to buy our debt, unless they want to gradually adjust trade balances with us over time.

Even more importantly, as I keep repeating, we don’t need to raise money by borrowing USD from them or anyone else. We can simply spend/create it ourselves if Congress repeals its constraints prohibiting the Fed from “monetizing” the debt, or if the President decides to use PPCS or consols. The result of no more debt issuance, along with use of these other methods, would be paying off the national debt over time, without austerity. So, if we care so much about the high debt levels, then why don't we do that? Could it be that the austerians want austerity for political rather than economic reasons, and that the fiscal sustainability/responsibility justifications they give are just part of a complex fairy story they tell to avoid being candid about why they want austerity?

Our grandchildren must have the heavy burden of repaying our national debt

MMT answer: We're obligated to pay all US debts as they come due. But since we have an unlimited credit card to incur new debt at interest rates of our choosing, or, alternatively can create all the money we need to pay off debt subject to the limit, without incurring any more debt, our national debt cannot be a burden for our grandchildren unless they wish to make it make it so by stupidly taxing more than they spend. So, let's educate them well in MMT-based economics, so that they never make that mistake

No US generation except one has ever repaid the national debt by running budget surpluses. After the debt was paid off in 1835, that generation was rewarded with the depression of 1837. Moreover, each time the nation ran substantial surpluses for a period of time, the country fell into depression or recession, most recently the recession of 2001, following Clinton's four years of running a surplus. It’s a bad idea to repay the national debt by running surpluses, because taxing more than a Government spends destroys net financial assets in the private sector, unless one also exports more than one imports.

So, provided we continue to run a trade deficit, our grandchildren won't run surpluses. They may not issue debt subject to the limit while “deficit” spending. But that’s possible, only if the Congress repeals the mandate to issue debt when the Government deficit spends, or alternatively, the Government freely uses its PPCS power. In both cases the national debt can then be repaid without requiring that tax revenues match or exceed Government spending.

In any event, our grandchildren will not have the burden of repaying the national debt, if they are wise enough not to run surpluses. But if we are silly enough to attempt to pay it down, or pay it off, by running surpluses and practicing austerity, then they will have the burden of growing up in poor families, attending very poor schools, living in mal-integrated communities where they'll be subject to crime and violence, and living in a class-ridden nation run by a kleptocratic elite that monopolizes both the artificially constricted supply of financial wealth, and the increasingly scarce real wealth produced by a stagnant, broken economy. That's not what any of us want; but that's what the austerian/deficit hawk policies are producing.

I can't emphasize this last point enough. Austerity isn't moral. It's immoral! It kills, and it eventually impoverishes most people including our grandchildren, both those who are now living and growing up in difficult economic circumstances, and those yet unborn, who will be born and will grow up in a stagnant economy crippled by attempts to reduce the national debt, at the expense of full employment, and lost output for years on end.

There is a deficit/debt reduction problem for the Federal Government that is not self-imposed.

MMT answer: All together now, there is no such problem. Since the US Government has no limits other than self-imposed ones on spending or borrowing, the level of the national debt, or the debt-to-GDP ratio don't affect the Government's capacity to spend Congressional Appropriations at all.

These numbers aren't related to fiscal sustainability or responsibility in nations like the US with a non-convertible fiat currency, a floating exchange rate, and no debts denominated in a currency it doesn't issue. Such nations can't become involuntarily insolvent because they always create more currency to pay debts denominated in that currency.

If the debt-to-GDP ratio were 300% and there were no other changes in current policy, the US would still have the same ability to deficit spend it has now. Conversely, if the debt-to-GDP ratio were 10%, the same would apply. To put this simply, the size of the public debt subject to the limit, and the size of the debt-to-GDP ratio have no impact at all on our capability to deficit spend, because we can always make the money we need, if need be, through PPCS. So there is no need for a long-term deficit reduction plan to lower the debt-to-GDP ratio. There is also no need to run surpluses to decrease the size of the debt, since we can always use profits from PPCS to do that without either borrowing more or raising taxes.

Even though neither the level of the national debt, nor the level of the debt-to-GDP ratio creates a sustainability problem for the US, depending on conditions, the deficit itself can be “too high.” But the question of when a deficit is too high isn't an issue of fiscal sustainability in the sense that we can run out of money, but instead is an issue of the negative consequences of an excessively high deficit. The most important of these consequences is demand-pull inflation, and when that is observed, Federal spending should be reduced to control or eliminate it. However, there are two questions arising here. First, which spending, if cut, will produce the most overall benefit. And second, what's the impact of cutting spending vs. the impact of doing nothing, vs. the impact of raising taxes.

The Federal Government is like a household and that since households sacrifice to live within their means, Government ought to do that too.

MMT answer: No, the Federal Government is not like a household! Households can’t make their own currency and require that people use that currency to pay taxes.

Households can’t make their own currency and require that people use that currency to pay taxes. Households can run out of money; but the US can’t ever run out of money as long as Congress decides to appropriate spending and gives the Executive the authority to implement that spending. So, the Federal Government doesn't have to sacrifice to live within its means, since its “means” to create new currency is limited only by its own decisions and not by any factors external to it. Put simply, Federal spending including deficit spending doesn't cost anything in the doing. The only relevant question is its real effects on the economy.

We should also find a bipartisan solution to strengthen Social Security for future generations

MMT answer: Social Security has no fiscal problems. The SS crisis is a phoney one. So, no solution to this nonexistent fiscal crisis, bipartisan or partisan is needed. What is needed is a solution to the political problem of getting SS's funding guaranteed in perpetuity

Again, this austerian claim assumes that Social Security funding is a fiscal problem and that the program needs to be strengthened by making the program “fiscally sustainable.” But that claim is at issue. Apart from the fact, that it isn't obvious that a bi-partisan solution to a fiscal problem would produce a real solution, it's also true that this is a fake fiscal problem.

Social Security should be strengthened alright. But the way to strengthen it is to guarantee its funding in perpetuity, and to greatly increase benefits for many seniors whose current benefits leave them scraping the poverty line. Try doubling SS benefits while providing full payroll tax cuts. That will strengthen SS and the economy as well.

We face a crushing burden of Federal debt. The debt will soon eclipse our entire economy, and grow to catastrophic levels in the years ahead

MMT answer: This is total nonsense, because federal spending is costless to the Government

If the debt subject to the limit bothers the neoliberal austerians so much, they ought to be supporting full payoff of the debt using PPCS profits. Doing that won't harm the economy, and it won't cause inflation either, since the bonds retired are more inflationary then the money paid to redeem them.

The United States is in danger of becoming the next Greece or Ireland

MMT answer: Greece and Ireland are users of the Euro, not issuers of it. So, their supply is always limited and that's why they can run out of Euros. The US is the issuer of Dollars; so it's supply of dollars is limited only by its desire to create them, and that's why it can't become Greece, Ireland, or any other Eurozone nation.

This one is a real laugher. Greece and Ireland can run out of Euros. California can run out of dollars. But the United States can't run out of Dollars. Japan can't run out of Yen. The UK can't run out of Pounds, and Canada and Australia can't run out of Canadian or Australian Dollars. So, governments like California, Michigan, Wisconsin, etc. can become the next Greece or Ireland if the Federal Government allows that to happen by refusing to bailout States if they need it, but the US can't become the next Greece or Ireland, because it can always bail itself out if it chooses to do so.

The real danger for the US is in becoming the next Japan and losing a decade of economic progress by following neoliberal deficit reduction doctrines. The US is now four years into the decade we are losing. Why are we losing it? Because, as Warren Mosler is fond of saying: “. . . we fear becoming the next Greece, we continue to turn ourselves into the next Japan.” That is, we're making ourselves a stagnant economy by imposing fiscal austerity, rather than creating/spending the money we need to solve our increasingly serious national problems.

Fiscal Responsibility means stabilizing and then reducing the debt-to-GDP ratio and achieving a Federal Government surplus.

MMT answer: No! REAL Fiscal Responsibility is fiscal policy intended to achieve public purposes while also maintaining or increasing fiscal sustainability viewed as the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes.

So, the REAL Government fiscal responsibility problem is not the problem of everyone “sucking it up” and responsibly accepting austerity. It is not targeting the debt-to-GDP ratio and managing Government spending to try to stabilize it. Instead, it is the problem of people facing up to the need to use fiscal policy to stop our out of control economy from ruining the lives of any more Americans.

This means that the REAL solution to the REAL fiscal responsibility problem is for our leaders in Congress and the Executive Branch, to remove fiscal constraints and use the fiscal powers of the Federal Government to fund solutions to the many national problems we face, starting with creating full employment, and a real universal health care system in which no one is shut out, or forced into foreclosure or bankruptcy by medical bills, and then all the other serious problems we face, but now will not handle because we claim a non-existent fiscal incapacity of the Federal Government. There is no incapacity! We have not run out of money! We have only run out of smarts, morals, will, and courage! We need to get those back, and do what must be done to reclaim the future for working Americans.

Federal Government austerity will create jobs

MMT answer: Right! Show us one case where austerity is working

Well, let's see. We've got austerity now in Ireland, Spain, Portugal, Italy, the Baltics, and, of course, Greece, among nations in the Eurozone, and also in the UK. Is it creating jobs anywhere? Is there even one case, in which the “austerity will create jobs” theory isn't being refuted by events? Some may think that Latvia is beginning to recover because it's unemployment rate has now fallen to 15%; but that's because 200,000 Latvians (10% of the population) have chosen to emigrate, a particularly effective way of both leaving the labor force, and lowering the rate of unemployment. Bet we could lower unemployment here too, if we first ran the economy down by 30%, drove U-3 up to the 20% level, and then had 31,000,000 people leave the United States for parts unknown. Oh austerity, will thy wonders never cease?

Conclusion: Saying No to Neoliberal Austerity

So, the importance of continuing to counter austerian propaganda coming out of the Peterson Foundation and the organizations it allies with, and funds, remains. We must continue to try to break through the screen of the Petersonian closed system, the Washington/New York consensus. One of the popular slogans for the austerians this year is “Debate the Debt.” There's a petition web site urging politicians to debate the debt. There was even a proposal demanding that the presidential candidates devote a whole presidential debate to the debt and deficit issues.

But, what is it the austerians want us to debate? They want us to debate how we should reduce deficits over the medium and long-term by spending less and taxing more. But they most emphatically don't want to debate whether the debt, deficit, and debt-to-GDP ratio, represent real problems relating to fiscal sustainability or fiscal responsibility. Put simply, they don't want us to debate whether their deficit/debt “problem” is really a problem either for our capacity to spend in the future, or for government solvency, or for our grandchildren.

They say there's a government solvency problem and that all of us must and should suffer to solve it. MMT says that there is no solvency problem and there's no reason for people to suffer any more than they have already due to the crash of 2008. That's the debate about the debt we badly need right now, When they say debate the debt, they mean debate how we should all suffer to get rid of it. When I say “debate the debt,” I mean debate whether the public debt subject to the limit is a real problem, or a just a massive distraction from coming to grips with our real problems. I think that my debate question is clearly prior to the austerians' because it doesn't assume what it should prove, namely that there is a problem and that focusing on it isn't a distraction.

But, I think it is a massive distraction; and the President can prove it! Just mint that $60 T platinum coin and the debt problem will  go away. Then the Peterson Foundation and other agents of the emerging plutocratic elite, will need to invent a new fairy tale to distract us with; or maybe they'll do all of us a favor and just go out of business, so we can re-build our country without having to deal with their insolvency fantasy first!

(Cross-posted from New Economic Perspectives.)

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Comment Preferences

  •  Speaking as a working stiff, almost totally (3+ / 0-)
    Recommended by:
    psyched, Letsgetitdone, Ian S

    ignorant in economics, I'd ask: Is there a counter narrative to Petersen that lands in between MMT and the austerians? i.e. Keynesianism. Enough gov. spending on a 21st cent infrastructure to reboot the middle class economy for another century of growth, during which we will find dealing with the "debt" and "deficit" fairly easy, esp. after we get past the "boomer" demographic bump.

    I'm not seeing a "counter narrative" to Petersen in your diary. I'm seeing an intriguing idea, but I don't see it boiled down to a simple program that would convince the American public esp. considering how brainwashed they still are.
    The idea of minting a "$60 trillion coin" is fascinating, but it's not a "meat and potatoes", kitchen table concept that is going to be easily digested by the American consumer.
    Even if it works, it's too simple. It's a hard sell.
    I'm in your corner, but I think the concept has a hill to climb before it can be "messaged" to compete with Petersen's BS.

    You can't make this stuff up.

    by David54 on Tue Oct 30, 2012 at 06:41:06 PM PDT

    •  The simplest answer (3+ / 0-)
      Recommended by:
      psyched, Old Surgeon, Letsgetitdone

      is to repeal the debt ceiling law - which is an outdated leftover from 1917, a relic of the gold standard days, and serves no useful purpose. Alternatively, the debt ceiling could be automatically raised by Congress as needed. But we know from experience, that politicians find the debt ceiling to be an attractive way to hold the administration hostage. It also plays in to keeping the charade of the government budget being the same as a household budget going. So neither of these two options will be adopted by the current set of politicians we have in DC.

      Joe is pointing out a tool that is also currently written into law, and requires no action on part of either the Congress or even the President. It just requires the Secretary of the Treasury to act to keep the US Government able to meet its financial obligations that have already been authorized by Congress. Paying off the National Debt is also something that does not require Congressional authorization, and is in the purview of the Secretary of Treasury and the Fed acting in a coordinated manner.

      The common person has to realize (and this is where an understanding of MMT is useful) that the accumulated US Government deficits (aka the National Debt) is equal (to the penny) to the accumulated savings of the non-government sector. The problem is that these savings are not distributed evenly, and in the large, are the property of the richest Americans. The only way that these savings can be distributed more evenly is through progressive taxation, and through US Government spending on the bottom segment of the population (aka 'entitlement programs') It should be remembered, that taxation literally 'destroys money,' while government spending literally 'creates money."

      That the accumulated deficits are the same as private savings is not unknown in Congressional circles. It was best articulated by Rep. Pete Stark of California (an ex old school banker) in the interview by Jan Helfeld below - remember that Helfeld is talking from a widely held viewpoint that "being indebted is a bad  thing" and that government debt is similar to household debt. But it so happens that Pete is correct, while Helfeld is very wrong.

      The Peterson 'Austerity Program' will make inequality far worse at the same time that it causes the economy to collapse.

    •  Actually (3+ / 0-)
      Recommended by:
      clonal antibody, psyched, Ian S

      it is a counter narrative to Peterson's poison. Since he's focused on fiscal responsibility and austerity, and this narrative offers a different concept of fiscal responsibility which suggests it's not about austerity but about using Government deficit spending to accomplish public purposes without worrying about the fictional idea of solvency constraints on Government. The $60 T coin idea isn't meat and potatoes; but it is focused on removing the debt/deficit/fiscal terrorism issue and taking it off the table. It would certainly do that. What we decide to do from there is up to our conception of public purpose.

      I have a pretty expansive one which includes: full employment backed by a Federal Job Guarantee; Medicare for All, a first class educational system, re-inventing our crumbling infrastructure; creating new energy foundations for our economy; a rigorous program to combat climate change including phasing out fossil fuels within 10 years; State Revenue sharing to moderate business cycles; doubling SS benefits w/ automatic funding for SS part of the overall budget; reducing economic inequality through higher taxes on wealth and income.

      None of this, however, is a counter to Peterson. The counter to Peterson is about the stupidity, immorality, and stupidity of austerity alone. Nothing else.

      Finally, I agree that MMT has a hill to climb, but about "the middle ground" I'm afraid that they share Peterson's assumptions. They may differ on tactics and on the timing of austerity; but they believe in long-term deficit reduction plans. These however, will be impossible to implement and are also completely counter-productive for reasons I've stated here.

      •  If I were dictator or the Magic President I (1+ / 0-)
        Recommended by:

        imagine I would institute your laundry list of improvements. However, when I say "narrative", I am talking about a persuasive argument that has a snowflake's chance of not being brushed off as "socialism" or "pie in the sky", etc.
        Seems like we're pretty close to the "tipping point" of having the country accept the functionality of basic "Keynesisanism" since even Paul Ryan voted for it during the Bush years, and it worked, and since the only reason the gop opposed it during Obama's term was simply that they wanted his admin. to fail.

        You have to have a "concept" that you can boil down to 30 second commercials that will sell your idea.

        It seems like if we can get the country to take a few steps down the road to sensible "Keynesian" policies, then you could use that momentum to gain popular acceptance of MMT.

        It's also going to be a generation or so beyond the death of Marxism as a political force before we can rethink popular economics without hearing the cries of "Socialism" or "Communism". There's just too many old anti-communists or anticommunist hustlers out there with nothing to rail at except sustainable, regulated enterprise as being a threat to "Godly" capitalism.

        You can't make this stuff up.

        by David54 on Wed Oct 31, 2012 at 07:03:07 AM PDT

        [ Parent ]

        •  I appreciate your recognition of problems (2+ / 0-)
          Recommended by:
          David54, jellyyork

          in persuading the world to accept MMT. However, I don't think we should let up our current efforts; only magnify and improve them.

          Various individuals will approach this effort in different ways, some with a head-on approach, some with a more gradual approach, as I interpret yours.

          To draw an analogy, when folks sincerely believed the world to be flat, those who saw it as round had a massive conversion effort facing them. How to approach it must have been a question. Perhaps a first step would be to convince people that the earth was curved, then a little more curved, then more, until the curviness morphed into a globe.

          A stronger approach would be to just keep repeating that it is round, while showing evidence for that.

          But sometimes things are really just black or white: the world is round or it isn't; you can't be slightly pregnant; money is either this or that, but not somewhere in between.

          The basic idea behind money is simple, but in practice the use of money is enormously complex, involving nearly every aspect of human behavior. But this complexity can be seen as both a problem and a boon to the MMT proselytizer: the castle is enormous and strong, but there are multiple entrances and strategies for attacking it.

          So let every proselytizer work on this in their own way, but don't become discouraged.

          For the first time in human history, we possess both the means for destroying all life on Earth or realizing a paradise on the planet--Michio Kaku.

          by psyched on Wed Oct 31, 2012 at 10:35:29 AM PDT

          [ Parent ]

          •  I agree. (1+ / 0-)
            Recommended by:
            So let every proselytizer work on this in their own way, but don't become discouraged.
            I'm not sure if your globe analogy is perfect, though. The roundness of the planet is a simple fact.

            Economics is more complicated, and variable depending on the desired results.

            You can't make this stuff up.

            by David54 on Wed Oct 31, 2012 at 11:36:04 AM PDT

            [ Parent ]

            •  The roundness of the world was no more a simple (1+ / 0-)
              Recommended by:

              fact thousands of years ago than the factual role of government is in fiat currency today.  There is, in reality, no in between.  And that's the problem with Obama and the progressives--they believe in some kind of mystical in between.  It simply does not exist.  If the facts are too simple to be true then we are all in denial.

              •  One thing that the MMT theory (as I understand it) (0+ / 0-)

                fails to recognize as far as there theoretically being unlimited amounts of money to throw at our problems ($60 trillion at a time) is the idea of moral hazard.
                That is, that one way that we maintain discipline (in the case of government, discipline of bureaucracies to be responsive to the citizens, adroit, focused, responsible, etc.) is through the budget.
                Liberalism has contributed to its own downfall in recent decades precisely by the tendency of bureaucracies to become bloated, drunk on power, and devoted to their own survival rather than to the purpose for which they were originally created.
                This is still an operative fact, considering the bloat of the MIC and the trouble that creates in the world, and corporate welfare more generally.
                By tossing out the need for a budget, you basically give Wall Street carte blanche to dive even deeper into the pig trough.
                The connection of a budgeting of finite resources to discipline and responsiveness to actual problems is one of the main reasons that the Petersen message appeals to "kitchen tables" in the country.
                Maybe I'm missing something...

                You can't make this stuff up.

                by David54 on Thu Nov 01, 2012 at 06:14:57 AM PDT

                [ Parent ]

  •  Another excellent description of reality (4+ / 0-)

    As always, you cover the bases thoroughly. I guess we can’t repeat all this often enough, but, as Dr Kelton points out, repeating all this and repeating it again and again hasn’t been enough, and the comments from the high idiocracy are not encouraging.

    A big problem, as I see it, is that when you mention the national debt or the deficit it’s like hitting the patella with a hammer. They kick. I don’t think we’re ever going to extinguish that reflex because the concept of debt is immediately perceived through the mirror neuronal networks in terms of their personal relationship to debt. It's the eye of the beholder and, for most, it is a noxious stimulus that induces avoidance strategies.

    It would be good to find something different to use in referring to the debt and to deficit spending. Terms with different and better neuro-linguistic impacts. For example, deficit spending, which is a doubly negative term, could become sovereign spending containing both positive and negative impacts, or Sovereign Investment, which is doubly positive.

    If we could describe our National Debt in terms of our monetary base being subjected to interest, to bondage, etc (in better terms, of course), then the framing becomes our weapon when the encumbered money is compared in scope to the totality of the money supply. Use that to rail against financial-congressional complex for needlessly encumbering any of our money supply with the profanity of debt.  

    I’m not saying these are the right frames, only that we have got to reframe the arguments because facts alone won’t do against fear. We have to speak first to the gut, which is what the fear mongers do with their apocalyptic prophesies. We have to piss people off or shock them somehow and make them rage against the beast. Then perhaps we can make them look. If we can make them look, perhaps enough of them will see.

    We need an economic Frank Luntz or George Lakoff.

    •  It would be good (1+ / 0-)
      Recommended by:

      to find words with other connotations that don't fire off neural pathways and get them reinforced. But literally these are so ingrained that people won't know what you're talking about if you suddenly start referring to sovereign spending. So, I'm afraid that in certain situations we just have to face existing terms, deny their negative connotations and start to reinforce positive connotations for them. Over time, we can change connotations this way.

      Look what the conservatives did. During the 1940s, '50s and for most of the '60s the term "liberal" had a favorable connotation in much of the country, while the term "conservative" had a negative one. But the conservatives delivered a withering attack on the idea of being liberal and the liberals refused to defend their brand and ran away from it, becoming "progressives." We know from this that positive connotations can become negative and negative connotations can become positive. That is neuronal pathways can be reprogrammed by political trends and messaging.

      In the area of deficit spending we have no choice, we have to re-program people's thinking about federal deficit spending or we lose. I think the first step is to de-couple the debt from the deficit. That's what using the coin would do. You could pay back the debt and continue deficit spending. That would have the effect making deficit spending much more palatable because the chief visible disadvantage of it, namely increasing the debt wouldn't be there anymore.

      •  I'm not sure about (1+ / 0-)
        Recommended by:
        We know from this that positive connotations can become negative and negative connotations can become positive.
        the second part. It is much easier to associate a negative to an idea because it invokes a protective response. Extinguishing a negative association is much harder. I can't think of a negative turned positive a-priori, that seems to require experience, whereas the reverse is accomplished through threat alone.

        We do evolve language, though. I wonder if that isn't the approach we need with less sclerotic minds.

  •  You are fired up, Joe (2+ / 0-)
    Recommended by:
    clonal antibody, Letsgetitdone

    I'm still convinced that these ideas would be easier for most people to understand if they understood the basic concept of what money really is.

    Mention "money" and one immediately thinks of coins and paper bills. These are physical things, but they are only convenient physical representations of an intangible something--an IOU, a social relationship, a contract between buyer and seller, a governmental authorization.

    To most of the world's people, money is a physical thing and thus they assume that a national government must have a supply of the physical stuff to dole out when it spends. The physical stuff would run out if a government over-spent its supply.

    The advent of fiat money sort of recognized that the physical stuff, such as gold, is unnecessary. The federal government has the ability to issue these contracts or authorizations that we call "money" without owning or depleting a store of gold.

    Accordingly, the concept of a high-value platinum coin is confusing. Folks immediately focus on the physical coin instead of the underlying reality that it's an authorization between government entities to spend up to the value of the "coin" to fund certain projects or debts.

    The platinum coin will never be put into circulation. It would likely be placed in a museum display as a physical representation of an historic act of government. And it doesn't matter what material the coin is made of. Congress could just as well have authorized the coinage of a wooden coin.

    Yes, we need to convince as many people as possible, and especially those in power, that Modern Money Theory is the realistic, progressive approach to economics.

    For the first time in human history, we possess both the means for destroying all life on Earth or realizing a paradise on the planet--Michio Kaku.

    by psyched on Tue Oct 30, 2012 at 08:48:22 PM PDT

  •  Sandy will require a lot of money for repairs. (1+ / 0-)
    Recommended by:

    Happily, don't even have to call it "stimulus". There is therefore about to be a big debate in Congress around this issue. Please keep up these postings.

    Warren is neither a Clintonesque triangulator nor an Obamaesque conciliator. She is a throwback to a more combative progressive tradition, and her candidacy is a test of whether that approach can still appeal to voters.-J. Toobin

    by chuck utzman on Tue Oct 30, 2012 at 10:07:28 PM PDT

  •  Yet again, another excellent post. Thanks. (1+ / 0-)
    Recommended by:

    "The word bipartisan means some larger-than-usual deception is being carried out”. - George Carlin

    by Funkygal on Wed Oct 31, 2012 at 12:33:08 AM PDT

  •  I think a succinct argument based on sector (1+ / 0-)
    Recommended by:

    balances can be made to start knocking holes in the conventional thinking. If my understanding of the sector balance equation is correct, then the combination of three things most folks, politicians, and even the Petersons of this world profess to want is actually an economic impossibility: you CANNOT simultaneously have increasing private savings, a government surplus AND a trade surplus. The powers that be need to challenged on that simple fact.

    Just another faggity fag socialist fuckstick homosinner!

    by Ian S on Wed Oct 31, 2012 at 11:59:04 AM PDT

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