Steve's Politics Blog

New Economic Perspectives has the May 17, 2012 article Playing Monopolis Monopoly: An inquiry into why we are making ourselves so miserable. Don’t let the word Monopolis throw you. This is just mostly regular Monopoly.

If you have ever played or think you can learn to play the children’s board game of Monopoly, then you can understand this explanation of Modern Money Theory.

It wouldn’t surprise me to learn that the inventors of this game had in mind exactly this goal of teaching. (So look this idea up on Google and find the WikiPedia article History of the board game Monopoly.)

There is a Huffington Post article written in 2010 by Warren Mosler. The article is Taxes For Revenue Are Obsolete. Mosler introduces the article with the following statement:

April 15th has come and gone, but the issue of taxation remains the course de jour. I was recently forwarded an article entitled Taxes For Revenue Are Obsolete, written in 1946 by Beardsley Ruml, the former Chairman of the Federal Reserve Bank of New York and published in a periodical named American Affairs.

The following is an excerpt from what Beardley Ruml wrote in 1946.

The necessity for a government to tax in order to maintain both its independence and its solvency is true for state and local governments, but it is not true for a national government. Two changes of the greatest consequence have occurred in the last twenty-five years which have substantially altered the position of the national state with respect to the financing of its current requirements.

• The first of these changes is the gaining of vast new experience in the management of central banks.
• The second change is the elimination, for domestic purposes, of the convertibility of the currency into gold.

This shows that what the Modern Money Model describes as the way our sovereign currency works was well known in 1946. If people in 1946 understood this back then, why do people find it so hard to accept now? It is just amazing what knowledge we seem to have lost over the last 71 years.

History.com has the article FDR takes United States off gold standard.

On June 5, 1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold.
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The government held the $35 per ounce price until August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus completely abandoning the gold standard. In 1974, President Gerald Ford signed legislation that permitted Americans again to own gold bullion.

For a long time, I have known about the $35 per ounce price of gold and the restrictions on owning gold in the United States. This article told me about some details that I had not realized.

I didn’t realize that went “off the gold standard” since 1933. I did know that we were really off the gold standard since 1971.

How did we manage to go off the gold standard in 1933 and 1971? The Bretton Woods agreement is the answer.

Within the Final Act, the most important part in the eyes of the conference participants and for the later operation of the world economy was the IMF agreement. Its major features were:

• An adjustably pegged foreign exchange market rate system: Exchange rates were pegged to gold. Governments were only supposed to alter exchange rates to correct a “fundamental disequilibrium.”

One final piece of history from the WikiPedia article.

The institutions were formally organized at an inaugural meeting in Savannah, Georgia, on March 8–18, 1946.

I record this information here to pave the way for the next item I am about to post.

The Intercept has Glenn Greenwald’s article The New Yorker’s Big Cover Story Reveals Five Uncomfortable Truths About U.S. and Russia.

To stay within the bounds of fair use, I am only going to give you two paragraphs from the article. You really need to read the rest of it, by clicking on the link and giving the web site the traffic it deserves.

Constantly ratcheting up aggressive rhetoric and tension between Washington and Moscow is not a game. And yet it’s one that establishment Democrats – and their new allies in the war-loving wing of the GOP – are playing with reckless abandon, and with little to no apparent concern about the risks. They have re-created a climate in the U.S. where a desire for better relations with Russia triggers suspicions about one’s loyalties.
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There are, as usual, numerous highly influential factions in Washington that would stand to benefit enormously from the resurrection of the Cold War. They’re the same groups that benefitted so much the first time around: weapons manufacturers, the think tanks they fund, the public/private axis of the Pentagon and intelligence community, etc. And the people who exert the greatest influence over U.S. discourse continue to be the spokespeople for those very interests. When all of that is combined with the Democratic Party’s massive self-interest in inflating the Russia threat – it gives them a way to explain away their crushing 2016 defeat – it is completely unsurprising that the orthodoxy on Russia has become hawkish and pro-confrontation.

For the American voter it really comes down to a question of whether or not we want to take the chance of having a nuclear war. Iran is not the threat. We are the threat.

There is the YouTube video Stephanie Kelton -The Angry Birds Approach to Understanding Deficits in the Modern Economy. If you go to the YouTube post of the video, there are a dozen or so suggested followup links if you want to follow up on what you learned from the video.

If you pass up this opportunity to get a painless lesson on this subject, then you are unlikely to be much help in getting this country turned in the right direction. I cannot emphasize enough how important it is for you to know the information in this video.

A recent video from Real Progressives, RealProgressives LIVE w/ Ellis Winningham – The Federal Jobs Guarantee, cast aspersions on DSGE.

I decided to look up the topic that went with the acronym which landed me at this Wikipedia article Dynamic stochastic general equilibrium. I think the criticism made in the video is the one mentioned in this excerpt from the Wikipedia article.

Robert Solow blasted DSGE models currently in use:

‘I do not think that the currently popular DSGE models pass the smell test. They take it for granted that the whole economy can be thought about as if it were a single, consistent person or dynasty carrying out a rationally designed, long-term plan, occasionally disturbed by unexpected shocks, but adapting to them in a rational, consistent way… The protagonists of this idea make a claim to respectability by asserting that it is founded on what we know about microeconomic behavior, but I think that this claim is generally phony. The advocates no doubt believe what they say, but they seem to have stopped sniffing or to have lost their sense of smell altogether

Even after reading this article, I still don’t know enough yet to form a judgment. This post is the beginning of my education on this subject. I am sure more will follow.

Naked Capitalism has reprinted the article How Russia Is Using Oil Deals To Secure Its Influence In The Middle East.

Here is but one example mentioned in the article.

By taking over part of the Kurdistan Regional Government’s distribution burden, Russia is helping the semi-autonomous zone bypass potential hurdles with Baghdad, which controls the flow of oil through crucial pipelines. Disagreements between the Iraqi capital and Erbil regarding oil export contracts have caused pipeline closures in the past. With a new ally in Russia, the KRG can devise new ways to get their oil products out without having to negotiate with the Iraqi government, buttressed by the U.S.

<sarcasm>I’ll bet you are shocked to find out that geo-political game we are playing with Russia is all about oil. Of course the real reason we are now enemies with Russia is because they took the Crimea back. That in itself proves they hacked the DNC email to tell us the truth about the DNC.</sarcasm>

Mosler Economics has an article explaining the inflation of the 1970s in the article My story of the Thatcher era.

So back to the 70’s, and continuous oil price hikes by a foreign monopolist. All nations experienced pretty much the same inflation.

The point being that inflation was caused by the sudden increase in the cost of oil imposed by OPEC. It was not caused by the government creating too much money. (This leaves out the inflationary pressure of guns and butter policy of LBJ which was a case of the government creating more money than the economy could produce things to buy with that money. In fact this inflation may be what drove OPEC to the drastic action that they took. Of course, it didn’t help that we sent 500,000 people to fight a war in Vietnam when they could have been at home producing goods for the civilian economy. Also much of the goods that our economy was producing were being blown up in Vietnam.)

At the time of the inflation I thought that the “solution” would have been to raise taxes on gasoline. That would have forced the transition to fuel economy much faster and might have concentrated the inflation in the energy sector and away from general inflation. Others were saying that petroleum products were already too expensive and we didn’t need to make the situation worse.

Mosler does not address my “solution” to the problem.

By the way, the price of oil didn’t just happen to drop. Reagan threw us into a near depression, and that’s what suddenly cut the demand for OPEC petroleum. I think my way of cutting demand for OPEC’s product would have been less painful.

Thanks to Kristjan Andre for the link to this article. I requested such a link because I had never heard a leading light of the Modern Monetary Theory crowd address the inflation of the 1970s in any depth. This story is exactly what I wanted to hear from one of those leading lights such as Warren Mosler. I didn’t want MMT proponents to keep saying that WW II was the last time we faced inflationary pressures.

Popular Resistance has the article Be Wary Of The Democratic Wing Of The Protest Movement.

The self-labeled Progressive Movement that has arisen over the past decade is primarily one big propaganda campaign serving the political interests of the the Democratic Party’s richest one-percent who created it. The funders and owners of the Progressive Movement get richer and richer off Wall Street and the corporate system. But they happen to be Democrats, cultural and social liberals who can’t stomach Republican policies, and so after bruising electoral defeats a decade ago they decided to buy a movement, one just like the Republicans, a copy.

And we laughed at how the Tea Party followers were had by the Koch brothers. Some of us even entertained the possibility that it could happen to us, but I, for one, dismissed it.

I have since stopped supporting MoveOn.org, OFA, and Van Jones without even realizing the information in this article. I could recognize that these organizations no longer had interests that aligned with mine, but until I read this article, I didn’t quite understand the full reason for the divergence of interests. I even knew that George Soros was a backer of Hillary Clinton, but I still didn’t fully get it.

Thanks to Helicia Forest-Ussach for pointing me to this article via her Facebook posts.