The Gower Initiative for Modern Money Studies posted the video Week 2 lecture – Stephanie Kelton: Rethinking fiscal policy.

Stephanie Kelton presenting a lecture at UCL as part of the Rethinking Capitalism series for the Institute for Innovation and Public Purpose.

Covering deficits and the national debt she explains how the money system works and answers the question how will we pay for a progressive political agenda.

Not to miss!

Every time Stephanie Kelton gives this lecture, she improves it. I bet that she uses the questions she gets after the lecture as an indication of what she failed to convey, so she improves the lecture to convey more and do it better. I still learn more every time I listen to a new version of this lecture. All you need to do is to listen to one of these posts to get 90% of the benefit.

New Economic Perspectives has the article MMT’s Opening. It is a mish-mash of insights and blindness. I’ll pick just one blind spot that I have thought a lot about.

What makes the treasury bond even more magical, however, is that if, say, a big opportunity comes along to invest real sovereign fiat dollars in a killer profit-making venture—no problema! The secondary market for U.S. treasury bonds—other folks who can’t imagine, right now, what to do with their private commerce profits—provides instantaneous liquidity: the treasury bond can be traded for the real sovereign fiat dollars needed to make the killer investment.

Given this transparent and virtually seamless interchangeability between U.S. fiat dollars and U.S. treasury bonds, it is clear the treasury bond represents something fundamentally different than the government’s “borrowing” of dollars from private commerce. The fiat dollars supposedly “borrowed” are, in fact, replaced with another kind of fiat dollar represented by the treasury bond.

When the treasury bond is sold early to the market, the seller takes a loss over what he or she would get if held to maturity. The loss is either bigger or smaller depending on how the current interest compares to the interest rate on the bond. Depending on the size of the killer profit making venture, the bond holder may decide that the loss on the sale is worth taking to free up really, immediately spendable cash. There is no such loss occurring when converting really spendable cash into really spendable cash. In the author’s mind, the bond may be another kind of fiat dollar, but the two kinds have a significant difference as I just described.

Sometimes, some MMT proponents have an annoying habit of glossing over differences that are essential parts of how the economy works. They should not try to correct misunderstandings by injecting their own misunderstandings.

Truthdig has the article Richard Wolff: The Next Economic Crisis Is Coming.

Every time I sit down with economist Richard Wolff, he demonstrates why the field of economics is so necessary in the cultural critique of our American empire. In my recent interview with him, we discussed why the thriving economy touted by President Donald Trump hasn’t translated into real gains for the majority of Americans. We also went over what is hidden by the economic indicators that allow the financial industry to celebrate while so many Americans are still suffering.

There is a lot of great explanation in this video, 99% of which I agree with. However, lest you go away with some misinformation, I am going to comment on the mistake Wolff made.

We have paid an enormous price in hobbling the generation of people who would have otherwise lifted this economy and made us more productive. It is a disastrous mistake historically, and if you face that, and if you add to it the increased debt of our businesses, and the increased debt of our government, you see an economy that is held up by a monstrous increase in debt, not in underlying productivity, not in more jobs that really produce anything, but in debt.

That should frighten us because it was the debt bubble that burst in 2008 and brought us the crash. It is as if we cannot learn in our system to do other than we’ve always done and that’s taking us into another crash coming now.

The bubble that burst in 2008 was private sector debt, not Federal Government “debt”.

Wolff conflates the two, when actually Federal Government “debt” is private sector surplus. The Federal Government creates the money, and the private sector uses that money to conduct business. This difference between creator and user of money means our notions of debt among money users is just about the opposite of the meaning with the money creator.

I know that Wolff knows about Modern Money Theory. I am surprised he would make such a mistake. I am pretty sure he has not spent as much time as he should have in understanding MMT.

If you want to get some understanding of the economics I am talking about, watch what the Deficit Owls have to say.

Sorry, I am so pedantic, but I can’t help but note that one of the bullet points from the Deficit Owls should say “Deficits can be too big or too small.”

Vanity Fair has the article Hope vs. Change: Why Some Democrats Are Turning on Obama’s Legacy.

You could say Obama spent eight years deferring a radical disruption. His tragedy is that he could have led it.

Add Elizabeth Warren to the list of people who were given the opportunity to go down in history as major agents of change for the better, but they declined. Obama has left the stage, but Warren wants another chance with no indication that she understands the previous opportunity that she muffed.

The following quote is a grievous misunderstanding.

In the eyes of the radicals, our financial sector was an out-of-control predator built on a rotten edifice that was finally about to crumble. Its collapse wasn’t the threat; it was the cure.

Many of us were not recommending a collapse as the cure. I was recommending nationalization of the financial sector. I was not looking for a vacuum in the financial sector. I was looking for a rescue of the sector from the hands of the crooks. Make the sector perform its necessary function, but do it honestly

YouTube has the video Richard Wolff Interview: Capitalism Con Job, MMT, “Booming” Economy.

Worth every second to watch this video.

Of course being an engineer, I tend to focus on the exceptions.

As for reform solving our problems, I don’t think the problem in trying to reform was such a failure. It succeeded pretty well from after the war to about mid 1970s as Wolff said. The trouble was that people who were moderately happy with those reforms did not see the massive effort that was going on to undermine those reforms. Moreover, as the older generation goes away, and the younger generation takes over, they weren’t steeped in the reasons why the reforms were necessary. They were easy targets for the propagandists who explained to them the horrors of the reforms. The liberal/progressives failed in counter-education to the people who hadn’t lived through it. By the time we got to Obama, he was too young to know this himself.

As for MMT, Wolfe is partly right, but partly ignorant of what the MMT proponents see as their whole program. Sometimes I even chide the MMT people for thinking that it is all about monetary policy perhaps because the name ot the theory has the word money or monetary in it. Keynes, back in the 30s, explained why monetary policy is like pushing on a string when you are trying to fix economic recession or depression. You need a very strong fiscal policy with direct purchases of goods and services by the government. MMT people see it is there, but they don’t give fiscal policy enough emphasis. MMT people see the Job Guarantee as an integral part of MMT, which is in part Fiscal policy. MMT is what opens the policy choices for far more fiscal stimulus. Anything to do with fiddling with taxes is mostly monetary policy. Government direct investment in expanding the economic capacity of the country is the fiscal policy that needs more emphasis.

All of the other reforms that Wolfe mentions are also part of fixing our problems. MMT is only part of the solution. I know that, and I think even the MMT bigwigs know that.

The dreaded New Your Times Magazine has the article How Beauty Is Making Scientists Rethink Evolution.

The extravagant splendor of the animal kingdom can’t be explained by natural selection alone — so how did it come to be?

What the author of the article, Ferris Jabr, fails to appreciate is something that Nassim Nicholas Taleb pointed out. A description of something observed is on firmer ground than any attempt to explain why it happened. Jabr somehow doesn’t show enough appreciation for the observation of beauty in nature because Jabr is so anxious to know the explanation.

I find it interesting to apply some of the observations in the bird kingdom to the behavior of sexual selection in humans. It seems like the fashions of what women and men find to be attractive in each other changes more rapidly than in the other animal kingdoms. Since we are part of nature, this is natural selection, too, even if a lot of it is in our minds (or the eyes of the beholders).

Vanity Fair has the article The Real Story Behind the Havana Embassy Mystery. I think this is the story the internet is citing as the idea that the cause was crickets. Here is the excerpt that mentioned crickets.

And, in fact, once experts listened to the YouTube recording, there was an almost embarrassing revelation. What did many hear? Crickets.

Literally, crickets. Specifically, Gryllus assimilis, a.k.a. the Jamaican field cricket, also known sarcastically among bug experts as the “silent cricket.” And while Gryllus can get as loud as, say, a vacuum cleaner, it’s not noisy enough to cause deafness. Or, others argued, the sound might be cicadas. ProPublica’s groundbreaking investigation into the embassy mystery last winter quoted a biology professor named Allen Sanborn as saying that the only way a cicada could injure your hearing was if “it was shoved into your ear canal.”

In my scanning the article, I don’t think it is really postulating that crickets are the cause. However, crickets sounds cute as a meme going around the internet. Read the article your self, to see if you can figure out the most likely cause raised in the article. I thiink a Cuban attack is pretty thoroughly ruled out.

This excerpt gets to what I think the article is concluding as the cause.

“Think of mass psychogenic illness as the placebo effect in reverse,” says Robert Bartholomew, a professor of medical sociology and one of the leading experts on conversion disorder. “You can often make yourself feel better by taking a sugar pill. You can also make yourself feel sick if you think you are becoming sick. Mass psychogenic illness involves the nervous system, and can mimic a variety of illnesses.”

The article mentions another term that we might be more familiar with.

As it happens, there is and always has been one mechanism that produces precisely this effect in humans. Today it’s referred to in the medical literature as conversion disorder—that is, the conversion of stress and fear into actual physical illness. But most people know it by an older, creakier term: mass hysteria. Among scientists, it’s not a popular term these days, probably because “mass hysteria” summons the image of a huge mob, panicked into a stampede (with a whiff of misogyny thrown in). But properly understood, the official definition, when applied to the events in Havana, sounds eerily familiar. Conversion disorder, according to the International Journal of Social Psychiatry, is the “rapid spread of illness signs and symptoms among members of a cohesive social group, for which there is no corresponding organic origin.”

Paste Magazine has the article Alexandria Ocasio-Cortez is Singlehandedly Shifting the Overton Window

This is how politics gets done. We think of the president as having a “bully pulpit” because everything they say is newsworthy given their power, but anyone can have a bully pulpit. All you need is popularity and some media savvy and you can drive the conversation. This is what this last generation of Democrats failed to demonstrate they understand. They are obsessed with West Wing-style civility politics, and believe that scoring amorphous bipartisanship points with the mainstream press is more important than achieving truly liberal policy outcomes. AOC hasn’t even been a congresswoman for a week, yet she is setting the terms of the debate inside the Democratic Party. No one had heard of the Green New Deal before she joined Sunrise Movement’s protest outside Nancy Pelosi’s office a couple months ago, and now Cory Booker, Elizabeth Warren and Beto O’Rourke have come out in favor of the most ambitious policy proposal of most people’s lives.

Failure to understand this is what made Clinton’s “let’s be practical” approach so maddening. Elizabeth Warren’s support of Clinton’s politics was so unbelievable because Warren had shown that she understood the need to shift the Overton Window.

Back on December 22, 2018, I posted this video from Bernie Sanders. Five Ways to Trump the Border Wall.

I had occasion to post this again, so I decided I’d better have a reference copy here on my blog as well as having it on Facebook.

The Institute for New Economic Thinking has the interview The New Feudalism.

Are Mark Zuckerberg and Jeff Bezos the new feudal elite?

Anand Giridharadas talks to INET President Rob Johnson about how the titans of Silicon Valley use “philanthropy” to control more of our lives.

Here is another book that has gone onto my “must read” list. “Winners Take All: The Elite Charade of Changing the World”