Monthly Archives: May 2019

How to Pay for the Green New Deal

New Economic Perspectives has the post How to Pay for the Green New Deal – Levy Institute.

This paper follows the methodology developed by J. M. Keynes in his How to Pay for the War pamphlet to estimate the “costs” of the Green New Deal (GND) in terms of resource requirements.

Here is the link to the actual How to Pay for the Green New Deal WORKING PAPER NO. 931 | May 2019. This is a 56 page PDF document.

Why Martin Wolf Is Wrong on Modern Monetary Theory (MMT)

Naked Capitalism has the article Why Martin Wolf Is Wrong on Modern Monetary Theory (MMT). I thought it was a very good article, until I got close to the end.

I do not understand how we get to the conclusion

The result is we need to sweep away the central bank and the independence it has that is this impediment to progress.

I don’t see the central banks as an impediment to progress. I see that central banks only have monetary tools. Those tools are not enough to do the job. The government spending for things like the GND are using fiscal policy tools. The impediment to progress is the part of government that refuses to make use of its fiscal tools.

Back in the 1930s and 1940s, John Maynard Keynes explained exactly why monetary tools are not enough to stimulate an economy out of a deep recession or depression. Just because the word money or monetary is in MMT is no reason to forget that monetary policy is only half of the set of economic tools that must be applied to run an economy.

Are Americans living the ‘American dream’ in rented trailer parks?

RT has the episode Are Americans living the ‘American dream’ in rented trailer parks? RT’s Keiser Report finds out.

Roughly 1 in 15 Americans live in so-called trailer parks which are shorthand for poverty, according to a report by the Financial Times. Most of them are part of households earning less than $50,000 a year.

RT’s Keiser Report looks into the problem where many Americans have to pay rent for the land underneath their own trailers while traditional mortgages on such properties aren’t available.

The actual details are much more horrifying than the above summary hints. Then the report talks about China, which is just as scary.

This gets two OMGs from me. It does talk about an “investment” “opportunity” that I have been missing. I think I will do a better job of staying away from this one than I did with Collateralized Debt Obligations that led to the economic crash of 2008/2009. The other OMG is about China.

Sometime the Keiser report is equal part information and craziness. This one is very low on the craziness scale and high on the information scale. If the thought of watching something on a Russian supported medium is too much for you to bear, then you won’t know what is hitting you when it does.

May 26, 2019

When I heard Max Keiser mention KOA in the discussion of mobile home parks, I thought he had just picked a wrong company to mention. Then I decided to do a little research. Here is the first clue I stumbled across – Golden Rule Koa Mobile Home Park.

The Google search KOA “mobile home parks” may not be the best, but there are additional hints here.

Then there is the Forbes article 7 Powerful Benefits To Mobile Home Park Investing. The early 2000s purveyors of real estate derivatives backed with liar loans didn’t ask “What could possibly go wrong?” They had back tested the theory of their investments using decades of real-estate mortgage history. There would have to be a rate of mortgage default unheard of in history before the CDOs would run into trouble. What they didn’t account for was that history was built in an era of high standards in mortgage underwriting. The very product these purveyors were inventing would smash those standards to bits. Is there a similar route to disaster in large scale investing in mobile home parks?

Dr Stephanie Kelton dissects dangerous myths about our economy

YouTube has the video Dr Steph Kelton unpicks dangerous myths about our economy.

Dr. Stephanie Kelton is a professor of public policy and economics at Stony Brook University. She served as chief economist for the Democrats on the U.S. Senate Budget Committee in 2015, and as a senior economic adviser to Bernie Sanders’s 2016 presidential campaign. In 2016, POLITICO named her one of the 50 people most influencing the public public debate in America.

Doctor Stephanie Kelton toured Australia with Becky Bond in November this year to promote a raft of bold economic policies to meet the serious challenges our society is facing.

In this talk, she discusses the problems with how progressives discuss government expenditure, dispels myths about currency, deficits, and tax, and encourages a new conversation about economics that focuses on public good and outcomes for real people.

More people in the USA need to hear this talk, and digest it. I’ll admit that there is a flaw in her easy explanation of the graph she shows about how the government deficits are an exact match for the private sector surpluses, If you are sharp enough to see it, we can discuss it. It does not negate the point she is trying to make, but if you insist on being accurate, you need to understand where it comes from.

Hint: Think about foreign trade deficits. It actually reinforces the point she is trying to make, but it would complicate the explanation. The picture of the three pots on my Facebook page is the one that I use to clarify the picture. It is a standard tool of Modern Money Theorists.

Well, as long as I have gone this far, I might as well show you the image I used in a previous post Stephanie Kelton Explains It All.

Three Pots

There is more explanation of the image in the previous post When Will the White House and OMB Ever Learn About Sector Financial Balances?

How Obama Failed

Jacobin Magazine has the article How Obama Failed.

These aren’t the words of a Trump supporter, or even a Republican. Nor do they come from an advocate of some kind of Red-Brown alliance. The author in question is Reed Hundt, a high-level Democratic Party apparatchik — Al Gore’s longtime advisor (and high school classmate), Bill Clinton’s former FCC commissioner, a McKinsey consultant and a member of both the Clinton and Obama transition teams.

Hundt is, in other words, a card-carrying member of the Democratic establishment. And yet he’s written a book witheringly critical of not just the Obama administration’s handling of the 2008 financial crisis and its aftermath, but of the Democratic establishment’s response to it — an insider’s step-by-step account of all the mistakes, false assumptions, and timidities that, over Obama’s eight years, helped deliver the electorate into the hands of Trump.

It is articles like this that assure me that nothing less than Bernie Sanders will do. If the Democrats prevent Sanders from getting the nomination, I hope the Green Party will run somebody who can get the job done. I am sorry to says that anybody without a deep team like Obama lacked, will not do either.

The radical plan to change how Harvard teaches economics

Vox has the article The radical plan to change how Harvard teaches economics.

While reading this long article, I think I was more troubled than encouraged.

There is some discussion of the way economics is taught at Harvard traditionally.

Mankiw’s textbook covers the abstract theory that underpins economics as it has been understood for decades. It is about supply and demand, about how prices can be used to match production of a good to its consumption, and about the power of markets as a tool for allocating scarce resources. Students in Ec 10 are asked to plot supply and demand curves, to solve simple word problems about what happens when the mayor of Smalltown, USA, imposes a tax on hotel rooms.

The idea is to impart a basic theory, to lay a foundation for understanding how society works. And that theory strongly implies that markets tend to work without much intervention, and that things like minimum wages might hurt more than help.
Feldstein and Mankiw were perfect leaders for the course. They both write frequently for popular audiences and are somewhat heterodox for Republicans. Feldstein became an irritant in the Reagan White House by bemoaning soaring budget deficits and demanding that tax increases kick in if Reagan’s cuts continued to add to the debt.

I have known about Feldstein and Mankiw for quite a while. I knew how pernicious was their influence on economic “thinking” is the USA. This article emphasizes just how big an influence they have been.

The part of the above excerpt talking about Mankiw is a good demonstration of the fallacies that crop up when you build macro economic theories on the framework of microeconomics. When you get to size of the economy that macroeconomics covers, there are feedback effects that become important that were not even measurable on the microeconomics scale.

The mention of Feldstein and federal government deficits showed how little Feldstein understood about macroeconomics that had all been thoroughly explained by John Maynard Keynes in the 1930s.

Data analysis was so subjective, so easily pliable to one’s own pre-chosen conclusions, as to feel almost useless. Then a new generation of economists — like Card, the late Alan Krueger, MIT’s Joshua Angrist, and many others — took it upon themselves to change that status quo, by carefully adopting research designs better able to determine causation (not just correlation), and focusing heavily on actual experiments and quasi-experiments where it’s clearer what factor is causing what phenomenon.

There is little in the article that talks about exactly how the new generation of economists are better able to determine causation not just correlation. I have read a number of books by Nassim Nicholas Taleb, Skin In the Game, Antifragile, The Black Swan, Fooled by Randomness, and The Bed of Procrustes. In one of them, he had a simple thought experiment about the difficulty of discerning causation by reconstructing it from the evidence you can gather. If you see a puddle on the floor in the kitchen, you would be hard pressed to give a detailed description about the ice cube that melted to cause the puddle. You would need a lot more information than you can get just by observing the puddle. He emphasizes that you are on much firmer ground describing what you see than in explaining how it happened.

George Soros introduced the idea of reflexivity in showing the difference between Social Science and Physical Scinece. (This may explain reflexivity – Reflexivity and Economics: George Soros’s theory of reflexivity and the methodology of economic science).

When you are developing the theory of planetary motion, the planets are not going to read your theory and change their behavior just to trip you up. On the other hand, when you write about how economic markets work and you pass laws to regulate those markets, the key players in these markets are avidly reading what you wrote and the laws you passed to figure how the loopholes that they can exploit. What you wrote about the market does change the way the market operates.

I’d be very interested to learn how these new economists are using big data statistics to avoid just these two pitfalls.

The article extols the use of differences of differences. I have heard the term before, but I don’t have much knowledge of what the experts are meaning with this phrase. All I have at this point is this excerpt from the article.

But most of Chetty’s discussion of the paper was about his methodology, what’s known in economics as a “differences in differences” approach. The key was to compare how sales of unaffected products in the stores changed from the start (26.48 sold per week) to the end (27.32 sold per week) of the experiment to how sales of affected products with the new label changed: from 25.17 per week to 23.87 per week.

The discussion sections for the class, run by Chetty’s graduate student teaching fellows, hammered home the point further. Michael Droste and John Macke, the grad students whose sections I attended, emphasized that differences-in-differences is a general technique that can be used in cases even when an actual experiment hasn’t been conducted.

I have used differences of differences in some personal financial software I have written. I have found the data calculated this way to be close to useless. Since I have other ways at getting at the information that are more likely to tell me something useful, I don’t know why I haven’t ripped out the differences of differences part of the software. Sometimes I find it hard to throw away software that I have worked so hard to write.

Without Medicare for All, the Healthcare System Will Collapse – Wendell Potter RAI (7/7)

The Real News Network has a seven part series on the healthcare system in the USA.

I am going to list all 7 parts here. I came into this series at part 7, but all 7 parts are worth watching.

Trump and Pelosi Both Cater to Private Health Insurance – RAI with Wendell Potter (1/7).

Trump’s “great healthcare plan” and opposition to Medicare for All’s “socialism” and Pelosi’s defense of the ACA and opposition to single-payer are both aimed at garnering support from the private insurance industry. Wendell Potter on Reality Asserts Itself hosted by Paul Jay

Riveting Testimony at Historic Hearing on Medicare for All – RAI with Wendell Potter (2/7).

The House Rules Committee heard powerful testimony about the urgency of passing Medicare for All from Ady Barkan, who is in late stages of ALS. Wendell Potter on Reality Asserts Itself hosted by Paul Jay

The Making of a Medical Insurance Spin Doctor – RAI with Wendell Potter (3/7).

Wendell Potter, author of ‘Deadly Spin: How Corporate PR is Killing Healthcare and Deceiving Americans’, traces his life from growing up poor and Republican in Tennessee, to radicalization during the Vietnam War, to cynical journalist who just wanted to make money – on Reality Asserts Itself with Paul Jay

Medical Insurance Companies Can Decide Who Lives and Dies – RAI with Wendell Potter (4/7).

Whistleblower Wendell Potter says the death of a young woman denied care by the insurance company he worked for was a turning point in his life; he says these practices are still taking place under the Affordable Care Act – on Reality Asserts Itself with Paul Jay

Health Insurance Abuses Continue in Spite of ACA – RAI with Wendell Potter (5/7).

We revisit Wendell Potter’s whistleblowing testimony that exposed how the insurance industry is more interested in pleasing Wall Street than in people’s care, and asked him if these abuses continued after the passing of the ACA–Wendell Potter on Reality Asserts Itself, hosted by Paul Jay

More Die From Medical Insurance ‘Aggressive Prior Authorization’ Than Before ACA – Wendell Potter RAI (6/7).

Wall Street demands medical insurance companies maintain their profits under the Affordable Care Act, which means they get even more aggressive in denying coverage and creating insurance models that under-insure patients – Wendell Potter on Reality Asserts Itself with Paul Jay

Without Medicare for All, the Healthcare System Will Collapse – Wendell Potter RAI (7/7).

The healthcare system is unsustainable; without a Medicare for All system, only the wealthiest will be able to afford decent care – Wendell Potter on Reality Asserts Itself with Paul Jay

Here is a link to Wendell Potter’s web site

Tarbell is pioneering journalism that informs, galvanizes and changes America.

We take a unique approach to coverage of money in policy, not just politics. We uncover how powerful people and companies use their influence to shape a system that works for them, not you. We highlight solutions to pressing problems. Our fiercely independent, unbiased news inspires our members in all 50 U.S. states to take action.

MMT and Capitalism from a Marxist Standpoint

Heteconomist has the article MMT and Capitalism from a Marxist Standpoint.

A perennial question for Marxists is how to overturn capitalism. Will institutional changes that improve the lot of workers but fall short of ending capitalism immediately help or harm this cause? To the extent that social struggle is a learning-by-doing process, it may be that the securing of small gains can whet the appetite for more significant gains and that institutional reforms of a transformational nature can place revolution on a more secure footing if and when it does occur. But there is also the possibility of complacency in which workers come to tolerate capitalism so long as their own situation is not so dire.

Consider the possibility that we could have an economy where the profit motive is applied to that segment of the economy where it makes sense, and socialism is applied to the rest of the economy. Could such a system persist for a very long time?

Why must the economy evolve to the point where there is only one way to provide goods and services? It is exactly by “a learning-by-doing process” that we can come to the ultimate answer. Since human involved systems are dynamic, the “ultimate” answer will not be a static answer.

Mark Cuban: Ocasio-Cortez, Sanders don’t understand socialism

Faux Business Noise has the article Mark Cuban: Ocasio-Cortez, Sanders don’t understand socialism.

“As someone who’s wealthy, as someone who is looking to benefit the company, every capitalist has got to do the same thing,” he said. “We’ve got to say, look if we if at the top make a little bit less and we help those at the bottom more, capitalism gets stronger. And it’s not socialism it’s stronger and smarter and more, better capitalism.”

There are some things that a society needs that are not well provided by profit driven systems, especially when capitalists in those systems are completely unrestrained. Health care, education, low-income housing, and infrastructure are some examples where the profit motive damages the delivery of these services.

Capitalists are always looking for ways to deliver services at less cost. They are willing to cut quality, cut wages, and use their power to squeeze out more profit from those less powerful than they are. Capitalists nowadays make more short term profits by foregoing long term investment. A society that intends to survive longer than one human generation has to take a much longer view. There are some things that can only be provided (funded) collectively in sufficient quantity and quality to assure the long term survival of the society.

Capitalists want to take advantage of what society provides, but they don’t want to bear the cost of providing it.