The Binzagr Institute for Sustainable Prosperity has the working paper Monetary Policy for Full Employment and Price Stability.

One explanation for the perpetuation of the barter economy story and the continued misunderstandings it creates about the tools available to a sovereign currency issuer is “because it is central to the entire discourse in economics” (Graeb er 2011, 44). Orthodox economics is a powerful institutional force that continues to ignore the historical and institutional realities of money at great cost to society. This separation from history allows a great deal of economic analysis to begin from an imaginary world where money emerges from market transactions and is thus a private phenomenon which is then inefficiently redistributed by fiscal authorities. The monetary policy analysis described from this imaginary world is one in which, “the whole discussion now takes place without requiring the mention of the word money ,” and this unnecessary commitment to real analysis is considered “intellectual progress” in the field (Friedman 2004, 83).

Meanwhile, the participants of the real world face the harsh realities perpetuated by disembedding our economy from social structures. These difficulties are displayed in a spatial quantitative qualitative sQ ² method by utilizing geographic information system (GIS) maps. These maps will demonstrate some of the realities ignored by abstract economic analysis and provide the locations for which an alternative monetary policy can prevent and potentially heal the allostatic processes occurring in both the cities and rural areas across the United States. The combination of historical, institutional, and geographic analysis of the economic system is offered to shed new light on the value of expanding the policy disc ourse and how advances can be made by grounding economies and policy spatially, rather than in the abstract.

I have only read about 25% of this article so far, but it looks very promising. I record it here to make sure I don’t lose it in case I don’t finish reading it in this sitting.

This working paper provides me with much more explanation of what the Fed actually has done to alleviate the financial crisis that came to a head in 2008/2009. The analysis has been published before, but this is the first time I have had access to it.

I have seen the estimate of the size of the Fed efforts, but this is the first time I have seen a comparison of the size of the components of that effort. I won’t reproduce the graph here, but I will quote the summary.

As this abbreviated description of the stabilization plan of the Federal Reserve hopefully suggests, the actions are indeed unprecedented and extraordinary. After summing all of the individual transactions and unconventional LOLR facilities, Felkerson (2012) totals the response at $29,616.3 billion. [$29.6163 trillion]

Below is the beginning of an explanation of the limitations in what the Fed has been able to accomplish for reasons explained in the rest of the working paper.

Despite arguments that “credit easing will undoubtedly play a leading role in promoting a full recovery of the economy and financial markets” (Carlson et al. 2009), the economy remains hampered by long-term unemployment, part-time employment and a general economic insecurity despite 10 years of historically low interest rates.

Below is where we start to get into the solution this working paper proposes.

The reason QE has not been able to generate positive employment outcomes is that it is not purchasing the correct assets and it is failing to communicate the “objectives and outlook for the economy” (Bernanke et al. 2004, 77) in an effective manner. Rather than continuing the opaque process of purchasing assets from financial institutions for reserves they are not going to lend, the Federal Reserve needs to provide credit easing directly to those who need it most, Americans lacking credit and income, by lending against the strongest commodity collateral they possess, their labor power.

I translate this wordy explanation to mean applying (almost) traditional Keynesian fiscal stimulus. Or, I could call it fiscal stimulus disguised as monetary stimulus.

Here are some of the working paper’s own words to explain what they mean. You have to read the paper itself to get the details. I think I am bordering on the edge of fair use with my extensive excerpts.

The difficulty, as explained above, is in the financial order of operations. The Federal Reserve continues to swap collateral assets for cash in hopes of stimulating lending activity. Draining collateral from the banking system does not stimulate new lending activity and appears to make this process more difficult. In order to actually stimulate the economy, the Federal Reserve will need to undertake a new “monetarist experiment”. Similar to the radical transition made in the 1980s, this policy change is related to changing the money supply. This proposed experiment is guided by modern money theory and a Keynesian on-the-spot work program (Tcherneva 2012), falls within existing legal constraints of the FRA, and the theoretical prescriptions of the NMC.

Bill Mitchell – billy blog: Modern Monetary Theory … macroeconomic reality has the article Modern monetary theory and inflation – Part 2.

Raw material shocks can also trigger of a cost-push inflation. They can be imported or domestically-sourced. I will devote a special blog to imported raw material shocks in the future.

But the essence is that an imported resource price shock amounts to a loss of real income for the nation in question. This can have significant distributional implications (as the OPEC oil price shocks in the 1970s had). How the government handles such a shock is critical.

The dynamic is that the imported resources reduces the real income that is available for distribution domestically. Something has to give. The loss has to be shared or borne by one of the claimants or another. If the workers resist the lower real wages or if bosses do not accept that some squeeze on their profit margin is inevitable then a wage-price/price-wage spiral can emerge.

I am glad to see an MMT person address the issue of cost-push inflation as we experienced with oil in 1974. However, I find this article’s explanation a good deal weaker than the part 1 explanation of demand-pull inflation. After wading through the article, the only prescription that I can find is the following:

The preferred approach is to use employment buffer stocks in conjunction with fiscal policy adjustments to allow the available real income to be rendered compatible with the existing claims.

The way I interpret this is that the government puts the brakes on the economy to increase private sector unemployment, but the government Job Guarantee takes up the slack in employment. With the JG, there is no unemployment, but the average salary is lowered. I have always felt that the way Ronald Reagan finally got inflation under control was to put the brakes on the economy to increase private sector unemployment. In Reagan’s case there was no government JG to ease the pain.

Bill Mitchell – billy blog: Modern Monetary Theory … macroeconomic reality has the article Modern monetary theory and inflation – Part 1. Here is the introduction to the article.

It regularly comes up in the comments section that Modern Monetary Theory (MMT) lacks a concern for inflation. That somehow we ignore the inflation risk. One of the surprising aspects of the public debate as the current economic crisis unfolded was the repetitive concern that people had about inflation. There concerns echoed at the same time as the real economy in almost every nation collapsed, capacity utilisation rates were going down below 70 per cent and more in most nations and unemployment was sky-rocketing. But still the inflation anxiety was regularly being voiced. These commentators could not believe that rising budget deficits or a significant build-up of bank reserves do not inevitably cause inflation. The fact is that in voicing those concerns just tells me they never really understand how the monetary system operates. Further in suggesting the MMT lacks a concern for inflation those making these statements belie their own lack of research. Full employment and price stability is at the heart of MMT. The body of theory and policy applications that stem from that theory integrate the notion of a nominal anchor as a core element. That is what this blog is about.

I have never labored under the misconception that MMT was uninterested in controlling inflation. This article fully addresses, for those who haven’t seen it, the way MMT would control inflation under some circumstances. I am going to follow the link in the article to part 2 that addresses what to do about supply shocks as we experienced in 1974. I have been concerned that I have not seen anything written or talked about how MMT addresses this issue. I am glad to see that this missing component may just have been my lack of reading, not the lack of the issue being addressed.

You will see the term NAIRU in the article. Here is the explanation. Non-Accelerating Inflation Rate Of Unemployment – NAIRU

Consortium News has the article The FBI Hand Behind Russia-gate.

Despite the extraordinary gravity of the charge, even New York Times correspondent Scott Shane noted that proof was lacking. He wrote at the time: “What is missing from the [the Jan. 6] public report is what many Americans most eagerly anticipated: hard evidence to back up the agencies’ claims that the Russian government engineered the election attack. … Instead, the message from the agencies essentially amounts to ‘trust us.’”

This excerpt is the least of what is in this article, but it does show why I stopped believing in Russia-gate. This is about the initial ‘intelligence” report that “proved” it was Russia doing the meddling.

New Economics Perspectives has the article Answers from the MMTers. In the article, they answer questions about Modern Money Theory raised by economist Jared Bernstein. Here is an excerpt from one of the answers that touches on one of my favorite misunderstandings about the Federal Reserve Bank.

The bottom line is that the Fed does not have veto rights over Congress. We rest assured by the twin facts that a) the Fed is a creature of Congress and can be brought to heel should that become necessary, and b) that the exigencies of providing a smoothly functioning payments system leaves no room for the Fed to veto the Congressionally-approved budget under which the Administration operates.

While I like most of the article, I did raise my favorite subtle gripe about MMT.

There is one issue that MMT tends to gloss over. The static accounting balances of the three sectors is true, but that does not necessarily constrain the economy in the short term. MMT has made the argument that with bank created money there is a debit for every credit. What they fail to talk about is that the debit to the private sector is the loan that must be paid back in the future, whereas the money given out in the loan is an immediate credit to the private sector. This time difference in the flow of money has a profound impact on the economy, but not on the accounting static balance. Ironically this very article does admit that Central Banks do not control the money supply.

I am not doubting the validity of MMT so much as I am asking MMTers to stop emphasizing the accounting static balance as an explanation. That is too easy to poke a hole in to try to use this to explain MMT to the unconvinced.

The Christian Century has the article The deficit doesn’t matter: Thinking morally about the economy with Stephanie Kelton.

Daniel: I don’t want to overly psychologize politicians’ motives, but how genuine do you think the concern about the deficit is when there’s so much flip-flopping?

Kelton: It’s not at all and everybody knows it. They do not care. And they are right not to care. What concerns me, honestly, is that the Democrats are going to make their persistent message that Republicans are hypocrites when it comes to the deficit but that they had it right when they were hysterical about it. That is not where I would like to see the party end up. I would much rather see the party go, “You know what? The Republicans have said it’s okay to add $1.5 trillion to the deficit over the next 10 years as long as we’re doing it for a good reason.” Take that. It’s a gift. Take that gift and say, “Look, you’re willing to do $1.5 trillion. We’re willing to do $1.5 trillion. But you’re making your check paid to the order of big wealthy corporations and the richest people in this country. Let me show you how we’re going to write our checks for $1.5 trillion—this is where a moral vision is crucial. Our checks are going to go the poor, the struggling, and the people with no healthcare. We’re going to do this with our $1.5 trillion.”

‘

Stephanie Kelton does her usual excellent job of explaining economics. Her explanation is not as simple as the deficit doesn’t matter. Instead she explains how and when it does matter as opposed to when it doesn’t matter.

There are just a wealth of economic insights in the article. Please read it. Stephanie Kelton is a teacher who can really make complicated things easy to understand.

The Ring Of Fire network showcased the interview Is America Due for Another Economic Crash? (w/Guest Richard Wolff).

Thom is joined by Dr. Richard Wolff to discuss the possibility of a new economic crash.

I don’t see how there can be any doubt that the Fed’s efforts to stave off the worsening of the crash of 2008/2009 has led to a stock market bubble that is not supported by the underlying economy of this country. When the support for the bubble is being withdrawn, we can only be concerned with the possible consequences. As Wolff points out, there could be countervailing actions taken to prevent the normal consequences of such a withdrawal, but in the current political climate, such actions are unlikely to be taken.

If you are aware of the talk going around after Oprah made her acceptance speech, you won’t wonder why this is on my political blog.

Oprah Winfrey – 2018 Golden Globes – Full Backstage Speech

Democracy Now has the interview The Biggest Secret: James Risen on Life as a NY Times Reporter in the Shadow of the War on Terror.

In the story, Jim Risen gives a personal account of his struggles to publish significant stories involving national security in the post-9/11 period and how both the government and the top Times editors suppressed his reporting on stories, including the Bush administration’s warrantless wiretapping program, for which he ultimately would win The New York Times a Pulitzer Prize in 2006.

The continuation of the interview is published as a second article How the NY Times & U.S. Government Worked Together to Suppress James Risen’s Post-9/11 Reporting.

I can see that I am quite justified in no longer having any respect for the journalistic integrity of The New York Times management. I have a tough time understanding why that newspaper has any respect from knowledgeable people. In the end, Risen says of his former employer that he thinks they have learned some lessons on not giving in to government requests to suppress stories as easily they once did. I think he is going far too easy on them as The New York Times continues to press the phony story of how Russia meddled in our 2016 election.

Here is the link to the article that is the subject of the above interview, the Risen article in The Intercept – The Biggest Secret: My Life as a New York Times Reporter in the Shadow of the War on Terror