Policymaking in a Pan(dem)ic

Stephaie Kelton has a Substack article Policymaking in a Pan(dem)ic.

Talking about the 2020/2021 pandemic recovery, she made the following comments:

We did better this time not because we got better policy from the Federal Reserve. Indeed, we got mostly the same thing we got after 2008—i.e. zero interest rate policy (ZIRP) and massive bond-buying (QE). We did better because Congress delivered not one, not two, but three substantial pieces of legislation that actively supported the economy with around $5 trillion in additional spending.

And so, once again, Deficits Saved the World. But this time deficits didn’t increase mainly due to Congressional inaction—i.e. the automatic stabilizers—but because of the proactive—i.e. discretionary—actions of Congress and the White House.

Did they get everything right? No. Did we need all $5 trillion? Probably not. Could some of that spending have been better targeted? You bet. Should some of it have been set to phase out sooner? Probably.

But remember that the three biggest packages ($2.2 trillion in March 2020, $900 billion in December 2020, and $1.9 trillion in March 2021) were all passed in middle of a global pandemic. For better or worse (I think it was for the better), lawmakers decided it was preferable to err on the side of doing too much as opposed to doing too little.

In the future, we should try to avoid cobbling together multi-trillion dollar fiscal rescue packages in a state of panic. One way to do that is to begin to strengthen our automatic stabilizers. An old rule of thumb advised drivers to consider replacing the shock absorbers in their vehicle every 50,000 miles or so. When it comes to our economic shock absorbers, we’re long overdue for an upgrade.

Michael Hudson Discusses the Future of Europe and Global Restructuring

Naked Capitalism has published the transcript of the interview Michael Hudson Discusses the Future of Europe and Global Restructuring.

Michael Hudson was interviewed Thursday on MEGA, a German news radio program, focusing on the economic impact of the war with Russia on major players, particularly Europe. We have a translated transcript below and will embed the YouTube version (in German) which is expected to be posted early next week.

Here is some of Question 10 and its answer.

10. … What is your take on digital currencies?

MH: It’s not my department. All banking is electronic, so what does “digital” mean? To libertarians, it means no government oversight, but in government hands, the government will have a record of everything that anyone spends.

If you understand data mining, the government already has a record of what everyone spends in crypto currencies. The ledger of these purchases is open to all to view. People think it is anonymous, but data mining takes out the anonymity.

Here is another good zinger that came earlier,

(8.) Currently we saw the collapse and bankruptcy of the crypto exchange FXT. The management of this company seems to be highly criminal. How do you judge that?

MH: Crime is what made crypto a growth sector for the past few years. Investors bought crypto because it is a vehicle for the fortunes being made in international drug dealing, the arms trade, other crime and tax evasion. These are the great post-industrial growth sectors in Western economies. 

Ponzi schemes often are good investment vehicles in their take-off stage – the pump-and-dump stage. It was inevitable that criminals would not only use crypto to transfer funds, but actually set up their own currencies “free of oppressive government regulation.” Criminals are the ultimate Chicago School free market libertarians.

The Petrodollar’s Long Goodbye

Consortium News has the article The Petrodollar’s Long Goodbye.

China has three advantages which aid this diversification that the U.S. does not: a complete industrial system, a new type of productive force (immense-scale infrastructure project management and development) and a vast growing consumer market.

The USA hasn’t the foggiest idea of the possibility of win-win situations in international trade. These other countries see the promise of what the USA cannot even imagine.

China the Change Agent

Michael Hudson’s web site has just posted the transcript of China the Change Agent – Patreon Q&A #3.

The reason I don’t teach anywhere except in China is because there is no way that I can fit my ideas into the curriculum. The curriculum doesn’t talk about land or real estate or debt or national income accounting. It just says lower living standards, that’s the solution to everything. So, I don’t think studying Economics would help at all.

I think this is why there is a concerted effort by Western leaders to demonize China. It is not in working people’s interest to allow this to happen. We must fight the demonization. That is not a call to cover up problems in China. What I want to promote is a reasoned discussion of Michael Hudson’s ideas. It seems that China is one of the few places in the world where this is happening.

Oligopoly Unchecked

Michael Hudson has another great interview Oligopoly Unchecked.

After the Civil War, American students interested in economics mainly went to Germany to study, and they came back to the U.S. with an idea of Bismarckian state socialism. The chair of the first business school at Wharton School of Economics at the University of Pennsylvania was Simon Patten, who said that land, labor, and capital all receive the respective forms of income, but there is a fourth factor of production: public infrastructure. Public infrastructure differs in that it’s not trying to make a profit or an economic rent. It sells at less than the cost of production, because it’s trying to subsidize the economy, and its productivity should be measured in principle by the degree to which it lowers the economy’s overall cost of production by providing subsidized or free public services.

Coffeezilla: SBF, FTX, Fraud, Scams, Fake Gurus, Money, Fame, and Power | Lex Fridman Podcast #345

YouTube has the video Coffeezilla: SBF, FTX, Fraud, Scams, Fake Gurus, Money, Fame, and Power | Lex Fridman Podcast #345.

Coffeezilla is a journalist and investigator on YouTube who exposes financial frauds, scams, and fake gurus.

I have only had the time to listen to 1 hour of this 3 hour and 46 minute interview. One of the places where I think they are missing the boat is to not realize how fraudulent and worthless the whole idea of crypto-currency is. Read Michael Hudson’s many books on the history of money and how government money gets its value. If you haven’t read Michael Hudson or other experts in modern money theory, you have no idea how money works. Lex Fridman has not done the required reading. As good as the interview seems to be, it could have been so much better if Lex knew whom to talk to.

They talk about the importance of decentralization of power. I always think that decentralization is very important in making systems anti-fragile. Too much power in the hands of a small number of people whether they be in private enterprise or in government is very dangerous. One thing that gets missed in the argument of capitalism versus socialism is the value of competition among small centers of power. Diversification is a central tenet of safe investment. You never can be sure whose ideas will be best for the future. That’s why there is some wisdom in the rule of thumb that it is not safe to put all your eggs in one basket. It is valuable to have many people trying different ideas, to see which ones actually pan out over time.

The other issue is the inevitability of some fraud. If you build any system that depends on the absence of fraud, that system will be doomed to failure. Asking honest people and especially ones who have no experience detecting fraud how a con artist is going to invent a fraudulent scheme, then you have committed yourself to unilateral disarmament. That is what I learned from reading William K. Black’s book, “The Best Way to Rob a Bank Is To Own One.”

What worksism

YouTube has the video Barack Obama – Protecting Democracy and the Commitment to Facts | The Daily Show

This starts around 23:29 in the video.

The point, though, is they’ve got some blend, some mix. There is an advantage in terms of efficiency and also freedom to a market system. You have a control system. You have some guy in an office is deciding how many potatoes we’re going to grow this year. That usually does not work. The flip side of it is that what we’ve also learned is that some guy in a boardroom is deciding, I’m going to ravage the environment to do whatever I want, that doesn’t work either. So we’re going to have a blend of some sort. We want some collective decision making about the social good. And we want something that’s efficient and dynamic and allows us to exercise our innovation and freedom. And we don’t need to worry so much about the labels as we do about being practical and thinking about what’s working and what isn’t.

This is what I call “what worksism”. The trouble with Obama’s administration is that he made some horrible decisions about what was working and what was not. We cannot exercise our innovation and freedom in a private market that is controlled by oligarchs as monopolists. Privatizing natural monopolies like infrastructure is a terrible idea. Efficiency is not always the primary feature you want to emphasize. There is a place for worrying about resiliency. If you have a system that is highly efficient, but highly fragile, then that is not a good compromise. It takes more nuanced thinking than saying you don’t want some guy deciding how many potatoes to grow this year is a necessary of part of socialism, than a guy deciding on just-in-time efficiency in private enterprise being a necessary part of capitalism. High resilience to the detriment of all concerns about efficiency is not a good compromise either.

Having a financialized and de-industrialized economy is not a good compromise either. Nobody talked about why China’s compromise, mixed-system was beating the USA all to hell in world trade.

The Austerity to Fascism Pipeline (w/ Clara Mattei)

YouTube has the Bad Faith episode The Austerity to Fascism Pipeline (w/ Clara Mattei).

This week, Briahna Joy Gray spoke to political economist Clara Mattei about her new book, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. She explains the invention of austerity politics, how it’s been sold to the masses historically, and breaks down a recent Obama interview in which he carries water for what he calls, “inclusive capitalism” when presented with the possibility of transitioning to a more equitable economic system. How does austerity play into the conflict in Ukraine and various “democracy building” neo-colonial endeavors across the world? And what are the alternatives Obama found so difficult to imagine?

These people could use a good dose of understanding Modern Money Theory. They are right about the complaints of the current system, but they are way off the mark in coming up with solutions because they have no concept of how money works in the USA. If they only had an inkling of what it is that they don’t know. They did not talk about the financialization and de-industrialization of our economy. They did not seem to understand that rich people spend their money on different things than working people. They did not understand the purpose of taxation. They did not realize that there are people like Michael Hudson that study and write about all the things they do not understand.

I was surprised to hear that Clara Mattei had appeared on “Macro and Cheese”. Steve Grumbine, the host, touts himself as an expert in Modern Money Theory. The possibility that he did not correct her on her faulty assumptions about how money works may be related to the reason that I pay no attention to Steve Grumbine anymore.

In the commentary on the Obama clip their was no recognition of his describing what I believe in. I call it “what worksism”. What Trevor Noah failed to push on was to make Obama ask himself the question, “Does the current system actually work the best way that can possibly be achieved?” Obama even admitted some problems without being pushed, but there was no follow up in the clip they showed.

Using Marxism to Understand the Ukraine War – Richard Wolff & David Harvey Democracy At Work

YouTube has the video Using Marxism to Understand the Ukraine War – Richard Wolff & David Harvey.

If you read most mainstream media’s explanations of the war in Ukraine, you hear a lot about freedom, decency, and equity. You hear personalized psychological profiles of Mr Putin or Mr Zelensky. But what is missing is an explanation of how the functions and contradictions of capitalism are driving and fueling this conflict in many interconnected ways.

Whatever you think about Karl Marx’s contribution to understanding capitalism, this video could be something that you can consider with some objectivity.