I'll be visiting my nation's longest war next week in Afghanistan, thanks to a wonderful organization called Voices for Creative Nonviolence which seeks to build friendship and understanding between countries. I'll be meeting with ordinary and prominent Afghans and reporting on what they think of their country's future -- often a more complex view than will fit into a television sound byte. Read more about On Visiting an Unwinnable War
(Reprinted with the Permission of the Author)
(Editor's Note: This is a long and difficult piece, originally published at Yves Smith's Naked Capitalism site, and has an academic style. But, nevertheless, if you want to understand more about what the Modern Monetary Theory (MMT) school of economics has to offer, it is well worth your investment of time. It is the definitive critique of Paul Krugman's two recent blog posts on MMT, in my view.
In addition, in the process of criticizing Paul's views, Scott Fullwiler illuminates a lot of the deep thinking and knowledge developed by those following the MMT approach over many years, now. If you read this, you can see just how far off-base Paul Krugman is in his attempt to de-construct MMT, and you can also see how much work Paul has to do to really understand what his colleague economists using the MMT approach have developed.)
The old saying that bad press is better than no press is definitely true in this case. Without the advent of the blogosphere, our work would likely never even be noticed by the likes of Paul Krugman, so the fact that he’s writing about us (here and here) this weekend at least means we’re doing better than that, even if his assessment of us is far less than glowing. At the same time, and particularly given that Krugman is so widely read, it’s imperative to at the very least set the record straight on where MMT and Krugman differ. I should note before I start that others have done very good critiques already that overlap mine in several places (see here, here, here, and here).
Krugman makes three incorrect assumptions about what MMT policy proposals actually are while also demonstrating a lack of understanding of our modern monetary system (as is generally verified by volumes of empirical research on the monetary system by both MMT’ers and non-MMTer’s). These are the following:
Assumption A: The size of the monetary base directly (or indirectly, for that matter) affects inflation if we’re not in a “liquidity trap”
Assumption B: MMT’s preferred fiscal policy approach or strategy—Abba Lerner’s functional finance—is Non-Ricardian
Assumption C: Bond markets alone set interest rates on the national debt of a sovereign currency issuer operating under flexible exchange rates
Assumptions A and C are central to the Neo-Liberal macroeconomic model. Assumption B is a common misconception about MMT and a common perception of Neo-Liberals about the nature and macroeconomic effects of fiscal policy (i.e., Neo-Liberals often believe that activist fiscal policy is Non-Ricardian). Read more about Paul Krugman – The Conscience of a Neo--Liberal
Amelia “Milka” Sablich (Check this site out - soooooo much more about her - I took some from it, thank you, and there's a page dedicated to her here.)
A lesser-known rebel girl who is definitely worth mentioning is Amelia “Milka” Sablich, also known as the “girl in flaming red” after her bright red clothes. Hailing from Trinidad, Colo., this 19-year-old was compared to the famous Mother Jones, however, the media decided Milka was much tougher. Given that she was known to get into physical fights with men, including police, it’s hard to take that away from her! Read more about Women's History Month Union Woman of the Day: Amelia “Milka” Sablich
(Reprinted from Moslereconomics.com with the Express Permission of the Author)
CAUTION: BE SEATED WHEN READING
By N. Gregory Mankiw
March 26 (NYT)
The following is a presidential address to the nation — to be delivered in March 2026.
My fellow Americans, I come to you today with a heavy heart. We have a crisis on our hands. It is one of our own making. And it is one that leaves us with no good choices.
For many years, our nation’s government has lived beyond its means.
A rookie, first year student mistake. Our real means are everything we can produce at full employment domestically plus whatever the rest of the world wants to net send us. The currency is the means for achieving this. Dollars are purely nominal and not the real resources. Read more about Harvard's Mankiw – A Disgrace To the Economics Profession
A friend, Julia Williams, writes and asks:
Isn't it true that in actuality, the US doesn't, in fact "borrow'? It spends or trades? And if that is the case, doesn't that just blow the deficit hawks out of the water?
Here's my answer to her. Read more about Is the Debt Held By the Public Really Debt?
After the scorching he received in many of the comments on his printing press post Paul Krugman decided to dig his MMT blogging hole even deeper.
“. . . I think one way to clarify my difference with, say, Jamie Galbraith is this: imagine that at some future date, say in 2017, we’re more or less at full employment and have a federal deficit equal to 6 percent of GDP. Does it matter whether the United States can still sell bonds on international markets?
The Modern Monetary Theory (MMT) approach to economics must be starting to make some waves, because today, Paul Krugman, followed his earlier attack on it and his debate with Jamie Galbraith and others last summer, with another swing at MMT. The debate last summer was an extensive one at Paul's blog site at the New York Times, and, in addition, there were a number of posts at other sites replying to Paul. The debate was a classic in the developing conflict of views between the “deficit doves” (represented by Paul) and the “deficit owls” (represented by Jamie Galbraith and other MMT writers).
Given the earlier debate, you'd expect that Paul's second try at MMT would reflect a bit of learning on his part, and also a characterization of the views of MMT practitioners that is a little more fair than he provided in his first attempt. This post will analyze Paul's new attack and assess how much he's learned. But first, I'll review the earlier debate. Read more about Paul Takes Another Swipe at MMT
The responses to my previous entry were exactly what I hoped they would be: lively. And I'm not done yet, not by a long shot. I'm going to expand upon a comment I made in the other thread. Read more about On the Immorality of Supporting an Amoral Dictator
I seem to recall that someone, late last month, posted an entry arguing that it is immoral for Democrats not to run a primary challenge against Barry Obama in 2012, in light of the things he's done to institutionalize Bush-Cheney crimes. (Glenn Greenwald chronicled the latest violation of the Constitution by Obama on his own blog, which you can read here). Read more about It is Immoral Not to Challenge Obama and the Democrats in 2012
(Author's note: I've offered this idea a couple of times over the past few months here, with surprisingly little reaction. I'm trying once again, because I'm persuaded that much of the leverage that conservatives and Republicans have over our fate is due to the belief that most people hold that federal deficits, the national debt, and the GDP ratio are important, and that we must bring them under control to avoid Government insolvency. In addition every one seems to believe that the existence of the debt is due the to the profligacy of the Government, its monumental waste, and the lack of courage of its politicians who spend too freely to please constituents, gain campaign contributions, and help themselves to stay in office. None of this is true. The current existence of the National Debt, and also of a non-zero public debt-to-GDP ratio is the inevitable result of a technical decision that Congress has made about how the Treasury should finance its spending. This post talks about that decision, points out that its consequence is the National Debt, and also points out that the very existence of the National Debt is the fault of Congress.)
It is Congress's fault that we have a national debt at this point in our history. And also Congress can largely get rid of this debt over a 10 year period any time it wants to.
The national debt exists today because when the nation went off the Gold Standard in 1971 and adopted its fiat currency system, Congress did not repeal its mandate, very appropriate when our currency was convertible to Gold on demand, in least in theory, requiring that the Government back all its deficit spending with already existing borrowed dollars whose convertibility was covered by our holdings of Gold. This Congressional mandate to borrow funds by issuing debt instruments when the Government deficit spends, is what has caused the national debt to persist.
Had Congress repealed it when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our 1971 debts as they came due, and our national debt today would be zero and our debt-to-GDP would now be at 0%.
The Congressional mandate to issue debt when the Government deficit spends has no useful function today, and the interest income it provides for mostly wealthy investors and foreign Governments who buy Treasury Securities is simply a form of welfare for the rich. In fact, it is welfare that will cost the Treasury almost $12 Trillion over the next 15 years if we continue the policy of issuing debt instruments. Read more about Once Again, the National Debt Is Congress's Fault
Over the last couple of weeks there's been an exchange between Charles Krauthammer writing in one of the austerity mongers' favorite newspapers and Jack Lew, the Director of the Office of Management and Budget (OMB), writing at the OMB blog. This exchange illustrates a kerfuffle, that ignores the real issue surrounding entitlements and fiscal responsibility.
Krauthammer kicked off his criticism of the Administration's recent statements that Social Security is “off the table” for spending cuts at present with this: Read more about Moral Choices of the Fictional Kind: Krauthammer and Lew on Social Security
Sometimes remembered tangentially for being a love interest of Big Bill Haywood, Jessie Ashley was an IWW figure in her own right. As one of the few women attorneys in the early 20th century United States, she dedicated her career to defending jailed unionists, and later in life, to advocating for a woman’s right for access to birth control. From a highly-educated and wealthy background, Ashley and many of her East Village compatriots were looked at with suspicion by some in the ranks of the IWW, but she threw herself into solidarity work without hesitation. Read more about Women's History Month Union Woman of the Day: Jessie Ashley