Nation Of Change has the article Chelsea Manning and the Deepwater Horizon Killings by Greg Palast.  The conclusion of the articel was:

As I see it, the State Department officials who withheld BP’s blow-out secret are as culpable as the oil company in the deaths of those 11 workers on the Deepwater Horizon. You can say that the men who died on the rig were victims of the corporate-government enslavement of information, martyrs to official secrecy.

To see the connection to Chelsea Manning, you’ll have to read the article.

I won’t buy Exxon/Mobil gasoline nor their stock because of the Exxon Valdez disaster in Alaska.  I wonder what this says about my Chevron stock?

It is bad enough that I hold the stock after posting 500 Attend High-Profile MIT Divestment Debate.

Ed Markey posted on his Facebook page about his press relelase Markey, Franken, Senate Colleagues Call on Federal Regulators to Block Massive Comcast-Time Warner Cable Deal.  You can join the conversatio on his Facebook page where he said:

The Comcast-Time Warner mega merger would give Comcast too much market power and lead to fewer choices, higher prices, and even worse service for consumers in Massachusetts and across the U.S. I joined with Senators Al Franken, Senator Ron Wyden Bernie Sanders, U.S. Senator Elizabeth Warren & Senator Richard Blumenthal in urging DOJ & FCC to take a stand for U.S. consumers and businesses & reject the Comcast-Time Warner massive merger.

We in Sturbridge have been assuming the deal would go through, and as a result Comcast would take over for Charter here in Sturbridge.  Maybe we don’t have tp assume it  is a fait accompli.

Pragmatic Capitalism has the paper A Critique of Modern Monetary Theory (MMT).  The introduction states the following:

Neochartalism, also known as Modern Monetary Theory (MMT) is an interesting and relatively new arm of Post+Keynesian Economics (PKE) that has developed in recent decades and has become quite popular in the last few years largely on the internet.  As an arm of PKE there is much that is correct within MMT, but there are also some newer contributions made by the “neochartalists” that render the theory flawed and inapplicable to the modern monetary system.  Although I find that MMT is incomplete, it is important to note that their description of the monetary system is, in my view, superior to the neoclassical models that tend to dominate modern economic discourse.  I hope this critique will be viewed as a constructive criticism and not an attack on MMT.

A Google search will find you this definition of chartalism.

Chartalism is a term derived from the Latin word ‘charta’ meaning a ticket or token. Chartal money is the token for value, while metallist money is the thing of value itself. Precious Metal Viewed as Money.

I have only read 11 of the 73 pages of A Critique of Modern Monetary Theory (MMT).  I am not sure of what I make of it yet, but other readers of this blog might want to have their own go at it.

I stumbled upon this paper as I contemplated the possible wealth effects mentioned in the article of my previous post Nobel Prize Winner Robert Merton Slams Fed for “Negative Wealth Effect” Policies.  I am nowhere near settling the issue, but I will try to describe what that issue is.

My epiphany on the wealth effect came about when considering how the Fed can get out of its low interest policy regime. If it raises interest rates, then the economy collapses. If it keeps interest rates low the economy is no longer being stimulated by a policy that has lost its effectiveness. My first thought is that a massive government stimulus spending plan will have to take place at the same time the Fed raises interest rates. Then I started to think about what is really being taken out of and put back into the private sector by the combination of these policies.

I got to thinking about the current state of inflated assets (stock market) and the impact of deflating that bubble. The bubble exists only because people value their stocks at mark-to-market prices. The wealth doesn’t really exist, but people think it does and they behave accordingly. If the stock market collapses and assumed wealth disappears, the government hasn’t actually taken anything out of the private sector pot and put it into its own pot. And yet, there are huge effects on the economy. So it is true that the accounting of “outside money” is not the whole story. “Inside money” is important, too.

The MMT assumes that “inside money” is less powerful than “outside money” because each creation of “inside money” creates a balancing debt on someone’s books.  The trouble with mark-to-market accounting of the value of your stock holdings is the creation and destruction of notional money without any balancing debt creation or destruction.  I am using notional money to mean money that you assume you have because of mark-to-market accounting, but this money only exists if you could sell all your stock instantly at the current market price.  For small  investors this might almost be true sometimes.  If large investors or if many small investors make a similar buy or sell decision, then the mark-to-market price means nothing.  The act of changing your stock into actual money changes the market price. You will only get the amount of money for your stock as you will find a willing buyer will give you.

What I am trying to research is what all this means in practical and in theoretical terms.  This issue has been argued for thousands of years and is the subject of many PhD theses, books, articles, and Nobel Prizes.  So it’s not that I expect to come up with a definitive answer.  The point is to come to a better understanding from just looking into the question.

April 22, 2015

Now that I have read some more of the critique, I see a pattern developing. The author, Cullen Roche, seems to read into MMT extreme positions that I don’t think the proponents of MMT have ever taken, and then he criticizes those imaginary positions. There may be a few valid criticisms in what I have read so far, but most of it is knocking down a strawman that is the sole creation of Cullen Roche.

I think I will have to search elsewhere for what I am seeking. I am going to try to look at the composition of our money supply to see how much is outside money and how much is inside money.

Naked Capitalism has the story Nobel Prize Winner Robert Merton Slams Fed for “Negative Wealth Effect” Policies.  This post is a discussion of the Pensions & Investments article Monetary policy: It’s all relative by Robert C. Merton and Arun Muralidhar.

The Naked Capitalism article starts with the explanation:

Nobel Prize winner* Robert Merton and Arun Muralidhar have charged ZIRP and QE happy central banks with economic malpractice. One of the main justifications for low interest rates is that they create a “wealth effect” by elevating asset prices. People allegedly feel richer and spend more, stimulating growth.

As we’ve pointed out, the first central bank to try the bright idea of lowering interest rates to spur consumption was Japan in the late 1980s. We know how that movie ended. Japanese banks and companies engaged in what was then called zaitech, or speculation, funded by being able to borrow 100% against urban land.** The result was to massively inflate already-large commercial and residential real estate bubbles, and to funnel Japanese cash into largely misguided and/or overpriced foreign investments.
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Super low interest rates lower incomes to asset owners, producing what they describe as a “negative wealth effect”. The Fed seems to think that retirees and others who live mainly off their assets will happily eat their seed corn, um, liquidate some of their capital gains to make up for the loss of income. Instead, people in that position who come up short most often curb spending.

As a retiree who is managing my own investments just as Merton and Muralidhar describe, I can attest to the fact that I am behaving just as they say I should.  Though I have had a good  boost in my net worth, my income has not gone up by much  since the crash of 2007-2009.  Perhaps Merton and Muralidhar are not devotees of the newsletter Investment Quality Trends.  IQT’s methods do extract a little rising income out of the  current situation. without eating into your principle.  As I mentioned above, both my principle and income have increased since the crash, although the income is way down from the pre-crash level and my net worth is above the pre-crash level.  I have adjusted my spending in response to my new level of income.

I have since realized that no matter what my dividend income is, I should limit my expenditures to no more than 5% (maybe it is 4%) of my invested assets.  According to historical performance, that level of spending should be sustainable pretty much forever.  I have modified my investing goal from what used to be just maximizing my investment income stream, to a mix of capital appreciation and investment income, where the income doesn’t have to be more than about 5%.  The rest can be capital gains.  If I manage income higher than 5%, I just reinvest the excess instead of happily spending it.