Periodic Posts

Posts made periodically by a particular author. The periodicity may be totally random.

Myths and Landmarks in US Economic History   Recently updated !

The Institute for New Economic Thinking has the podcast (and transcript) Myths and Landmarks in US Economic History

Economic historian and INET board member Richard Vague, talks about his latest book, The Illustrated Business History of the United States, which reveals a number of misconceptions and myths about the development of the US economy

An early comment by Rob Johnson astonished me in how much he had missed the issue.
It’s not a question of whether or not the financial system should have been bailed out in 2008. The issue is what should have been bailed out. People mix up financial institutions with the executives that ran them (into the ground). We could have bailed out the institutions and jailed the executives.

Warren Mosler on MMT, CBDC, bitcoin, bonds, interest rates, inflation, taxes and unemployment.   Recently updated !

YouTube has the video Warren Mosler on MMT, CBDC, bitcoin, bonds, interest rates, inflation, taxes and unemployment.

MMT founding father, Warren Mosler, explains Modern Monetary Theory (MMT). He says it’s about sequence. Governments don’t need to borrow or tax before they spend, if they issue their own currency. The economy needs the government money, not the other way around. Most politicians don’t understand how the monetary system works, also for example the way how banks create money.

As this interviewer shows, it is quite possible to talk to Warren Mosler and still not agree with nor understand what he is saying. The mind with preconceived notions is very hard to change. As this interviewer implies, “Yes, Warren Mosler, Modern Monetary (Money) Theory changes everything, but all the ideas I have had before knowing MMT still hold.” It is just so funny to hear it. I am sure I suffer from the same problem.

A wewsite that warren mentions is Mosler also mentioned Money on the Left.

How & How Not to do Economics   Recently updated !

How & How Not to do Economics is an 2019 INET series of 11 lectures that are about 15 to 20 minutes in length each. I have made it through 4 so far. It is not a matter of agreeing or disagreeing as it is a matter of being exposed to a broader range of ideas. I studied or read about many of the historical figures mentioned here, but at the time I didn’t have enough context to really understand what I was reading. The more I hear lectures like this, the more I realize what I missed when studying these things over 50 years ago,

Interestingly, the various people I listen to who talk about the history of economics don’t always agree on the significance or lessons of the various historical figures that they discuss.

I think it was Taleb who said that you are on the firmest grounds when you just describe what happened, and on much more unstable grounds when you try to explain why things happened the way they did.

I have learned that even discussing what happened is fraught with interpretation. So describing why something happened must be on less firm ground if you can’t even agree on what happened.

Here is the fist lecture. See the link to INET above to get to all the lectures.

The role of bank deposits in Modern Monetary Theory   Recently updated !

Bill Mitchell’s blog has the article The role of bank deposits in Modern Monetary Theory.

You can read this article and still be confused by the word play. I think this sentence in the conclusion settles it for me.

Deposits do not fund loans. But they are one source of funds that the bank has available to ensure that its role in the settlement process is not compromised which would require borrowing from the central bank.

I get a lot of pushback from people who have read about MMT when I try to make the above point. Mitchell’s article discusses the myriad ways that a bank can raise the money it needs. He discusses the different costs that a bank might incur by employing any of these methods. That discussion leads to the above concluding sentence mentioning two of the alternative methods.

Richard Wolff: Global Capitalism: The Challenge of China

YouTube has the video Global Capitalism: The Challenge of China [July 2021].

In this month’s lecture, Prof. Wolff will discuss the following:
1. China’s Economic Growth since its Revolution (1949)
2. China’s Economic “Model” and the Global Economy
3. China, Capitalism, and Socialism
4. China versus the US: Options versus Threats

A very good presentation by Richard Wolff. Lately I have been feeling that I have learned everything from him that I am going to learn from him, but this was an excellent presentation that rounds out everything that people think Richard Wolff has been pushing. It presents a picture of a better way we can interact with China than we seem to be heading in the last administration and the current one.

James K. Galbraith: Dismal Economics   Recently updated !

James K. Galbraith has published a very eye-opening article Dismal Economics. I was almost discouraged from signing up for a free subscription that allowed me to see a couple of articles a month on Project Syndicate. Here is the introduction.

Although neoclassical economics relies on assumptions that should have been discarded long ago, it remains the mainstream orthodoxy. Three recent books, and one older one, help to show why its staying power should be regarded as a scandal.

He then goes on to review 4 books. There are so many revelations in this article, that I cannot quote them all. One of the first ones I came to is:

It was this latter group that shifted the discipline’s focus from social classes (landlords, capitalists, workers) to individual units (households, firms) and declared that these units interacted to maximize not “surplus” but “utility” and efficiency. The marginalists also introduced a “sophisticated” mathematical technique to the field: namely, the differential calculus, with which one can show that maximum efficiency is reached when firms are small and competitive, as this tends to reduce profits to zero.

He then goes on to criticize some of what I have always considered to be bêtes noires of Economics, but even criticizes some of my idols. The critique of my idols has opened my eyes to things about them that I have missed noticing before.

I am going to have to decide which of these books to read first,

Mason Gaffney and Fred Harrison, The Corruption of Economics, Shepheard-Walwyn Publishers Ltd., 2006 (first published 1994).
Stephen A. Marglin, Raising Keynes: A Twenty-First-Century General Theory, Harvard University Press, 2021.
Alessandro Roncaglia, The Age of Fragmentation: A History of Contemporary Economic Thought, Cambridge University Press, 2019.
Robert Skidelsky, What’s Wrong with Economics?: A Primer for the Perplexed, Yale University Press, 2020.

Why We Need Some Socialism   Recently updated !

The socialist programs pay for things that do not make money by themselves, but they build the infrastructure that the capitalism in our society needs to grow the economy. One benefit of socialism is that it provides what the economy needs despite the fact that no single private company can make a profit from these activities.

China’s economy is growing so fast not because they are cheating. It’s just that China is making the investments that the USA refuses to make. China is industrializing while the USA de-industrializes. What actually wise capitalist thinks that our de-insdustrialization is good for the society as a whole? They all know that it is the most profitable path for individual companies in the short term. In the long term, after all value has been sucked out of USA companies, there will only be a tiny, shrunken USA economy.

What the USA is doing has been likened to killing the goose that lays the golden eggs.

For anybody who thinks they read in the above paragraphs any support for the lack of democracy in China, the truth is that what you think you read is a fantasy of your own mind. Just because I support investing in infrastructure like China does, in no way means I support everything else that China does. Don’t let your hot head make you see things in my post that are not there.

I can actually tell the difference between what I like, and what I don’t like. I wish more people had that ability.

Reconciliation Explained

Bernie Sanders explained the purpose of his reconciliation efforts.

In the midst of the many long-ignored crises that our budget reconciliation bill is attempting to address, let’s be completely honest: we will not have one Republican senator voting for it. Tragically, many Republican leaders in Congress and around the country are just too busy continuing to lie about the 2020 presidential election, undermining democracy by suppressing voting rights, denying the reality of climate change, and casting doubts about the efficacy of the Covid-19 vaccines. That is their focus at this moment.

That means that the 50 Democrats in the US Senate, plus the vice-president, will have to pass this most consequential piece of legislation alone. And that’s what we will do. The future of working families is at stake. The future of our democracy is at stake. The future of our planet is at stake. That is my focus at this moment.

Now is the time.

This effort will take the inflation pressure off of our current path. The Federal Reserve is pumping trillions of dollars into the economy in a futile effort to prevent a stock market and economic crash. The money is mostly going to the rich who boost stock prices by insisting corporations buy back their shares. None of this increases the productive capacity of our economy. If we were to shift that money creation intro investments in the productive capacity of the economy, then the economy would actually grow with the money pumped in.. With the current policy, the economy is shrinking while the money gets pumped in.. This is what leads to inflation.

Are we going to stand for Democrats not backing Bernie on this? How could any consideration be more important than this?

We Must Shift Away From Non-Productive Monetary Stimulus   Recently updated !

The Yahoo News article Bipartisan infrastructure plan: ‘If this is a take it or leave it…I’m going to leave it,’ Rep. DeFazio says has prompted this post.

Pretty good interview with Rep. DeFazio He and other Democrats still haven’t come up with a good answer on inflation. This was better than most, but still not good enough. He could mention that the Fed is already pumping inflation into the non-productive stock market and the hard asset market. He could point out that if we shifted that source of money to go to investments in the future, this will probably stave off any future inflation. In fact it is essential to remove the necessity of the Fed pumping up the stock market by shifting the monetary stimulus of the Fed to a more fiscally oriented stimulus from Congress.

What’s The Matter With USA Capitalism   Recently updated !

YouTube has the INET video The Rise and Fall of the Black Blue-Collar Middle Class.

Umass Lowell Economics professor William Lazonick, outlines the history of how government and economic conditions favored the rise of a Black blue-collar middle class from the 1960’s to the 1970’s, and how shifts in policy and in the economy caused its unmaking from the 1980’s onwards.

The above quote does more justice to this interview that the title that INET chose to use.

Wow, this talk explains so much. I have just finished watching this. I’ll probably be digesting all I learned from this for a long time. One thing they did not get around to discussing were the rules that allow vulture capitalists to buy out any company that is trying to fix the current situation. Not only do the vulture capitalists make huge fortunes by stripping the assets of these companies, but they also scare any other companies from trying to do the right thing. At some point we have to change the rules to protect companies who want to do the right thing, and punish the vulture capitalists who want to ruin the society.