New York Magazin Intelligencer has the article For First Act in Power, Democrats Consider Making Their Own Agenda Impossible to Pass.

All this would be a bit less problematic if the Democratic Party had overcome its allergy to deficit spending (and/or accepted Modern Monetary Theory as its personal truth). But it hasn’t: In addition to forbidding tax increases on the bottom 80 percent, Pelosi has vowed to honor the “pay as you go” rule, which requires the House to fully finance any and all new government spending.

The article focuses on the roadblock to tax increases on the bottom 80 percent, but only mentions “pay as you go” in passing. The second item is particularly stupid. Deficits and increasing deficits play a role in economic planning. If we should have a sudden increase in our trade deficit, the federal government might need to increase their deficit to replenish the money leaving the country in foreign trade. If the Democrats take a stance against deficits no matter what the economy requires, they are not only not doing their jobs, but they don’t seem to understand what their jobs are.

Naked Capitalism has the article Everything You Thought You Knew About Western Civilization Is Wrong: A Review of Michael Hudson’s New Book, And Forgive Them Their Debts.

“Mesopotamian societies were not interested in equality,” he told me, “but they were civilized. And they possessed the financial sophistication to understand that, since interest on loans increases exponentially, while economic growth at best follows an S-curve. This means that debtors will, if not protected by a central authority, end up becoming permanent bondservants to their creditors. So Mesopotamian kings regularly rescued debtors who were getting crushed by their debts. They knew that they needed to do this. Again and again, century after century, they proclaimed Clean Slate Amnesties.”

Reading Michael Hudson, I am finally getting some of the deeper lessons of Modern Money Theory (MMT). I have many posts on this blog about Michael Hudson. I don’t think I put it all together until I read his book Killing the Host: How Financial Parasites and Debt Destroy the Global Economy. Searching this blog for all the posts about the book helps to remind me of what I learned from the book,

There seem to be two things about Modern Money Theory (MMT) that ttest whether you really understand it or not. I have run into many MMT devotees that seem to have misunderstood these two funsamental ideas.

Do you understand what it means when MMT says the ability of the Federal Reserve Bank to create USA money is infinite?

There seems to be something very fundamental about infinity that non-mathemeticians miss. If you subtract a trillion dollars from an infinite supply how much is left. The answer is “infinity”. If you add 100 trillion dollars to an infinite supply, how much do you now have? The answer is, “Infinity”. Doing mathematical operations on infinity with finite numbers does not change infinity (at least in rudimentary understanding of infinity, and certainly for addition and subtraction). So if you are thinking of doing double entry book keeping, and one account has an infinite supply, you have to realize that the infinite entity behaves very differently from the finite one.

MMT depends on a fundamental accounting identity that measures hom money flows from one economic sector to another. These flows are finite, and you can do normal mathematics on the flow. But the source of the flow of money from the Fed is not finite, so you cannot extend the mathematics of the flows to the source of the Fed’s infinite supply of money.

My previous post When Will the White House and OMB Ever Learn About Sector Financial Balances? explains the following diagram of the sectors.

Because MMT is about money (or monetary policy), do you understand that MMT is not saying that fiscal policy is irrelevant? What MMT focuses on is not everything.

The flow of money among the sectors of the economy imposes some constraints on the various sectors, but it does not control everything within a sector. Once the Fed let’s loose a couple trillion dollars of money into the private sector, it has very little control of what that money is used for. Government’s fiscal policy has more power over the economy than monetary policy, once the monetary policy sets the private sector free of monetary constraints. Any economist that has irrational expectations of what the private sector will do with the money available is not expert about the real world. For instance, when the economy is contracting because people because people are not buying consumer goods, no rational capitalist will use his or her available money to prduce more consumer goods, The availability of consumer goods at prices people cannot afford has little bearing on what they can purchase and keep without repossession.

Back in the 1930s, John Maynard Keynes had an explanation of how fiscal and monetary policy work together. MMT is not a contradiction of that policy. Any modern economist (including some Mobel Prize winners) who thinks that Keynes fundamental insight is not loner applicable should be ashamed of herself or himself for claiming to be an expert. This excludes Milton Friedman, because he had no sense of shame.

The dreaded New York Times has the article What if the Placebo Effect Isn’t a Trick?

New research is zeroing in on a biochemical basis for the placebo effect — possibly opening a Pandora’s box for Western medicine.

The subject interests me because I have been taking a placebo for over 25 years, and it seems to be an important part of my mental health. The last time I tried to wean myself off the placebo, it did not work out well. I’ve decided never to try that experiment again.

New Economic Perspectives has the article Future Dollars.

In recent essays I’ve made reference to a new framing of what is actually happening when the U.S. treasury issues a bond. It seems to me, this new framing goes to the heart of MMT and might well hold the key to a practical implementation of MMT principles in real world applications. The framing is this:

A U.S. treasury bond is a certificate of issuance of future dollars.

I already understand Modern Money Theory (MMT), so I don’t need any convincing. For those who do not accept the truth off MMT, I fear that they will just think this essay is an attempt to convince them that the naked emperor really is fully clothed if only they looked at him from the proper perspective.

Alternet has the article Here’s How the Country Could Actually Secure Our Elections If Politicians Actually Cared to Try.

This is a good, detailed, fact-based discussion of the problems of getting accurate and honest election results. Of course it addresses the counting of ballots cast. It does nothing to solve the problems of manipulating who gets to vote and who doesn’t. We need to work both on each type of problem separately and the system of elections as a whole. So the title of the article is a tad overblown, but the article itself is certainly worth reading.

In comparing the approaches discussed in this article to my proposal for an all electronic system is that my proposal uses a distributed verification system, where this article focuses on various forms of centralized verification. My distributed verification makes the voter responsible for checking whether the voter’s intent has been captured correctly before the voter leaves the polling place. The centralized system has only the ballot that was cast to use to determine the voter’s intent with no check on whether the intent was clear by what the ballot looks like. At a higher level there needs to be a discussion of the merits of distributed verification versus centralized verification,

My proposal for an electronic voting system is described in the post Making Electronic Voting Transparent. I also have an article on how to standardize voting systems Standardize Electronic Voting Technology,

Naked Capitalism has the article Cryptocurrencies: Financial (In)stability and (Un)fairness.

While I think that cryptocurrencies do not make much sense and are destined to end up worthless, (Danielsson 2018a, 2018b), suppose I am wrong. The success of privately issued cryptocurrencies like Bitcoin would come at a considerable cost. It would increase financial instability and wealth inequality, while bringing no discernible benefits.

This article gives some reasons to my own feelings that cryptocurrencies don’t make much sense. I suppose it would present a political/social/economic problem if government were to completely privatize the creation of base money, crypto or not.

Naked Capitalism has the article Marshall Auerback: Apple Has an Early Case of GE’s Disease.

To be fair to Apple, it is hardly unique. As early as 2010, market analyst Rob Parenteau noted that company managements, “ostensibly under the guise of maximizing shareholder value, would much rather pay themselves handsome bonuses, or pay out special dividends to their shareholders, or play casino games with all sorts of financial engineering thrown into obfuscate the nature of their financial speculation, than fulfill the traditional roles of capitalist, which is to use profits as both a signal to invest in expanding the productive capital stock, as well as a source of financing the widening and upgrading of productive plant and equipment.” Likewise, Professor William Lazonick noted in his work, “Profits Without Prosperity,” that the 449 companies that were publicly listed between 2003 and 2012 “used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market.”

Share buybacks were effectively illegal under SEC rules until 1982, in the midst of the Reagan deregulation wave, when SEC Rule 10b-18 was introduced. Until that time, buybacks had been considered a form of stock manipulation. As early as the mid-1980s, more and more companies have resorted to them, and the practice has grown exponentially.

In one sense stock buy backs are effectively shrinking the size of the company to match the shrinking demand for its products. That may be wise policy, but the stock buyback masks what is going on from investors who only look at the per share numbers. Of course, turning cash into debt is not the smartest thing one could do if you cared about the longevity of the company.

Here are the unofficial 2018 Sturbridge Election Results from the town’s website. It is probably easier to view if you click on the previous link than trying to view it from the included frame. There are two sheets in the spreadsheet. The kinks to the sheets are in the bottom left hand corner of the frame below.

Ars Technica has the article Strange snafu misroutes domestic US Internet traffic through China Telecom.

Telecom with ties to China’s government misdirected traffic for two and a half years.

China Telecom, the large international communications carrier with close ties to the Chinese government, misdirected big chunks of Internet traffic through a roundabout path that threatened the security and integrity of data passing between various providers’ backbones for two and a half years, a security expert said Monday. It remained unclear if the highly circuitous paths were intentional hijackings of the Internet’s Border Gateway Protocol or were caused by accidental mishandling.

I don’t want to scare anybody, but … I have been meaning to write about a recent incident where I received a blackmail email with my email password in it. I realized that my email account, which I had set up many years ago, was not set up to use even minimal password security (and it had a weak password). I fixed both problems, and ignored the blackmail threat.

If you use a password over the internet and the destination uses an unencrypted protocol (http) instead of the encrypted protocol (https), then your password can easily be stolen. This rerouting gimmick mentioned in this article would be an ideal way to carry out this theft. Many browsers show a green padlock in the address area to show that the trip to the destination is secure.

If you think https is totally secure, then read the ars technica article Why you probably shouldn’t be doing work on that in-flight Wi-Fi

Until last year, Gogo was also issuing its own certificates for some secure websites—including Google. That allowed them to perform content screening even in apparently secure Google searches.

I just found the Mozilla article What do the security warning codes mean?, It explains some messages I have received from Firefox, but did not fully understand the significance until preparing this post.