The Full Case Against Ultra Low and Negative Interest Rates

The Institute for New Economic Thinking has the article The Full Case Against Ultra Low and Negative Interest Rates.

There are several reasons why unprecedentedly low interest rates will probably not stimulate demand and may even threaten financial stability

We don’t pay enough attention to the lesson Keynes taught. When demand is insufficient, pumping money into the system is not effective. The paradox of saving is no paradox at all. We know why it happens, and we should have learned by now that fiscal policy is the only way out. If the private sector can’t put people back to work, the government has to do it.


Resolving Paradox of Quantum Entanglement 2

I just realized how to resolve the Quantum Entanglement Paradox that stumped Albert Einstein and every physicist since then.

WikiPedia has an article about Quantum entanglement.

Quantum entanglement is a physical phenomenon that occurs when a pair or group of particles is generated, interact, or share spatial proximity in a way such that the quantum state of each particle of the pair or group cannot be described independently of the state of the others, including when the particles are separated by a large distance. The topic of quantum entanglement is at the heart of the disparity between classical and quantum physics: entanglement is a primary feature of quantum mechanics lacking in classical mechanics.

You have to know about what WikiPedia has to say about Wave Function Collapse

In quantum mechanics, wave function collapse occurs when a wave function—initially in a superposition of several eigenstates—reduces to a single eigenstate due to interaction with the external world. This interaction is called an “observation”.

Of course there is much more, but I have to stop excerpting at some point

WikiPedia has another article that discusses the EPR Paradox.

The Einstein–Podolsky–Rosen paradox (EPR paradox) is a thought experiment proposed by physicists Albert Einstein, Boris Podolsky and Nathan Rosen (EPR), with which they argued that the description of physical reality provided by quantum mechanics was incomplete
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They invoked a principle, later known as the “EPR criterion of reality”, positing that, “If, without in any way disturbing a system, we can predict with certainty (i.e., with probability equal to unity) the value of a physical quantity, then there exists an element of reality corresponding to that quantity”. From this, they inferred that the second particle must have a definite value of position and of momentum prior to either being measured. This contradicted the view associated with Niels Bohr and Werner Heisenberg, according to which a quantum particle does not have a definite value of a property like momentum until the measurement takes place.

Now that I am putting this article together, I see that Albert Einstein did recognize the solution to the paradox. If you have to give up the idea that nothing can exceed the speed of light, or the idea the quantum property does not have a definite value until it is measured, I’d prefer to give up the second one. Although, perhaps it is true that the act of entanglement is the very thing that gives each entangled particle a definite value. The experimenters may not know what this definite value is until they measure it, but perhaps the entangled particles have their definite value before the particles are separated by large distances. So neither particle has to have a waveform collapse at the time of observation to give it a value and give the opposite value to the other particle that is now far away. I find it hard to imagine how to do an experiment to see if it has a value before you do the experiment to see what value it has.

That is, if the entanglement experiment and the separation wasn’t enough proof, I don’t know what else you would need. Why imagine the answer is in the impossible, when it could very well be in the possible. You just have to change your opinion of what is possible when confronted by experimental evidence.


The Standard Economic Paradigm is Based on Bad Modeling

The Instutute for New Economic Thinking has the article The Standard Economic Paradigm is Based on Bad Modeling.

Mainstream macroeconomics finds itself in a deeply unsatisfactory state, unable to make correct predictions and incapable of providing meaningful longer-term analyses and advice. It clearly needs a major rethink.

I like this article because it uses words like reflexivity and multi-equilibrium. It does not seem to acknowledge that John Maynard Keynes work had multi-equilibrium in it, perhaps its greatest contribution.

My other quibble is that this article regurgitates one fundamental misunderstanding of the private financial system, Private banks do not create money. What they do create is promises of money. This all works well as long as not too many people want the real thing at the same time. This is what happened in the crash of 2008/2009. Too many people suddenly woke up to the fact that the private financial sector could not make good on all that it had promised. If the private financial system could have actually created money, there would not have been this reason for the collapse.

To prevent a complete financial crash without any recovery the Federal Reserve Bank of the USA and other countries’ central banks had to create money and pump it into the private financial sectors around the world..


The Long-Overdue Revolution in Economic Thinking

The Institute for New Economic Thinking has the post and video The Long-Overdue Revolution in Economic Thinking.

University of Texas economist James K. Galbraith engages in a wide-ranging discussion of the many ways in which conventional economics has failed us, ranging from how to manage the post-pandemic economy to the problems of inequality and climate change.


I haven’t been hearing much from James K. Galbraith lately. I am glad to find this interview. He puts so much perspective to what is happening to economies around the world.


The Hedge Fund Activists Wrecking America’s Green New Deal

Naked Capitalism has published the article Meet the “New Koch Brothers” – the Hedge Fund Activists Wrecking America’s Green New Deal.

I have been screaming about the fire that is ravaging our economy, but I have my doubts that the message is getting through to many people. Naked Capitalism has an article that lays out one big part of the problem. I’ll tease you with this excerpt from the end of the article.

Now that we understand the activist predator problem, what is the solution? Meaningful plans to fight climate change require money – though they cost less in terms of resources and human misery than what’s coming if we don’t act. Nevertheless, as taxpayers we want our money spent wisely. If a company is going to get special status and funding in a Green New Deal, then we’d rather not see our hard-earned cash ending up funding a party for Donald Trump or exotic birds for Nelson Peltz.

Lazonick recommends that if the government wants to partner with a company to develop and produce climate change-fighting technology, the following rules should apply:

Yes, this funny business on Wall Street is what is funding my retirement. My only excuse is that if this is the way the big money people want to set the rules, I can learn to play by those rules. I’d prefer to play by a better set of rules, but I can’t fight the oligarchs with my piddly fortune. I can fight them through politics, while I play the economics game their way.

The article explains that there are entities in the world that know the value of what the Hedge Fund Activists want to sell. They are willing to pay good money to buy what the USA Hedge Fund Activists don’t value. We can’t blame China, Taiwan, Japan, and South Korea for having a different perspective on what to value. If they are right, and we are wrong, maybe we should learn something.

Even Ayn Rand’s protagonists were the type of capitalist that took pride in building something. Today’s rentier capitalists only want to make money. Making money by playing investing games is far easier than building innovative companies.


What Happens If Bitcoin Succeeds?

Naked Capitalism has the post What Happens If Bitcoin Succeeds?

As the price of bitcoin continues to rise, this column argues that most of us would not want to live in a society where bitcoin succeeds. Fortunately, the internal contradictions and perverse consequences of cryptocurrencies’ success mean that they are destined for failure. Until then, it might make sense for speculators to ride the cryptocurrency bubble, so long as they get out in time.

Since I know that I am a procrastinator, I know that I won’t be able to get out in time. I will miss the ride up and the crash down.


Think More Deeply About Modern Money Theory

I have come to think about a nuance of MMT that I don’t hear being discussed by the proponents of the theory. They talk about doing sector balances to come up with some basic truths of MMT. The sectors are Federal Government sector and other sectors that are not the Federal Government. They show that the only way the other sectors can get a surplus of USA money is for the Federal Government to have a net outflow of USA money.

The fly in this ointment concerns Treasury securities that the USA treasury sells to the other sectors. When you buy a Treasury security, you own something of value, but you are letting the Federal Government hold your money for you. Your money that the Federal Government gave you by spending money into the non-government sectors, is not available to you to spend as long as you hold Treasury Securities instead of the money. In fact, during WW II, one of the means of controlling inflation was to encourage you to lend your earnings back to the Federal Government by buying war bonds.

If you wanted to spend an equivalent sum of money to what the Federal Government was holding for you, you had to sell your bond to someone else in the non-Federal government sector. Now the Fed was holding onto someone else’s money instead of yours, but it still was not outside the Federal government sector.

The sector balances may still be true if you are measuring wealth ownership, but is not so true if you are talking about spendable wealth. It seems to me, if you are assessing the stimulative effect of what we traditionally call Federal Government deficit spending, this effect is largely diminished by selling treasury securities in the amount of the deficit. The stimulative effect can come from where the government spends the money that it does not leave to you to spend. The Federal Reserve bank undoes some of the damage of Treasury security sales, when the Fed buys these securities on the open market and pays the money into the non-Federal Government sectors. If the Fed were allowed to just give the money to the Treasury without the necessity of the Treasury selling securities, the stimulative effect would be even higher.


The Radical Imagination | Imagining the Economic Winds of Change Under Biden

This started out for me with a post by Naked Capitalism Michael Hudson Discusses the Economic Winds of [Non] Change Under Biden on Radical Imagination.

Yves here. Michael Hudson describes the fealty of Biden and the Democratic party to neoliberal policies and how, as Biden himself said, nothing fundamental will change. Hudson agrees nothing much will improve for ordinary citizens as long as the current Democratic party is calling the shots. He lays out a way to tackle rentierism by promoting building of moderate-priced homes and setting strict terms for FHA mortgages.

Here is the video of the interview from The Radical Imagination | Imagining the Economic Winds of Change Under Biden.


This is a new high for Michael Hudson in telling us what he has been holding back for so long. He has been trying to tell us this for years with a certain amount of tact and diplomacy. Ether he has gotten tired of putting on the semii-happy mask, or this interviewer and this not very well known medum has finally set him free.


Recovery Bonds – The very opposite of what is needed.

The Gower Initiative for Modern Money Studies has the article Recovery Bonds – The very opposite of what is needed.

As the economist John Maynard Keynes made clear at the time, the money the government removed from circulation through offering War Bonds did not go anywhere and did not fund the war. Furthermore, with the present-day economy in a depressed state, which is likely to continue for some time to come, maybe years as our experience with the GFC showed, and made worse by economically illiterate years of austerity, this is not the moment to encourage saving. We need the exact opposite to recover and grow.

Frequently I find myself repeating what John Maynard Keynes explained. I get the feeling that people just don’t believe it when I say it. Some people may be impressed by seeing it in print from another source on the web.


Is Now the Time for a Federal Jobs Guarantee?

The Gower Initiative for Modern Money Studies featured the interview Is Now the Time for a Federal Jobs Guarantee?. For those who do not have Facebook access, here is a link to the interview on SoundCloud.

On this episode Mark talks with economist Pavlina Tcherneva about a policy proposal that’s bubbling under in the US policy debate: the creation of a federal jobs guarantee. Pavlina is an Assistant Professor of Economics at Bard College and author of ‘The Case for a Job Guarantee.’ As Pavlina describes it, a federal jobs guarantee isn’t just a good idea; in the face of our economic, environmental, and epidemiological crises, it may be a necessary one.

The interviewer still doesn’t get MMT even though Pavlina tried to move his misconceptions a few times. It’s not a question of whether or not we have an MMT economy. MMT is just a description of the economy we have. The economy we have is what it is and was, long before MMT came along to explain it.

Despite the interviewer’s inability to understand MMT, this is a good discussion of the Jobs Guarantee. Another failure at the end is the discussion of the cost of the Jobs Guarantee. Pavlina fails to point out that when we pay for employing people, we actually get useful production from that employment.