DTM-ren oinarriak, eguneraketa

Iruzkinak (2)

• 

  joseba says:

  2019/08/27 at 09:55

  Bill Mitchell-en On money printing and bond issuance – Part 2

  http://bilbo.economicoutlook.net/blog/?p=43017
  On power
  Claims that MMT ignores power also fall into the ‘confusing MMT with a regime’ class of errors.
  An MMT understanding clearly provides for a comprehensive appreciation of the power of the currency-issuer to influence resource usage and control financial markets.
  But broader discussions about the lobbying power of capital etc are not part of MMT.
  Nor are the designing strategies for cricket coaches to win Test matches part of MMT.
  Nor are algorithms to get a person comfortably to Mars and back part of MMT.
  But to say that MMT as a body of work ignores something is also not the same thing as saying that proponents of MMT ignore that same thing.
  This is where the US-centricity comes back in again.
  The recent claims by the US commentator Matthew Stoller, who is apparently writing a book on Monopoly power, that MMT is about “money printing” and that MMT economists have ignored the “power” of financial markets is representative of this insularity and stupidity.
  He wrote (in a recent Tweet):
  Running interest rates at zero and using taxes to regulate resources is besides the point if you leave out massive speculation going on in derivatives markets. We have got to restructure the big banks and end this multi-trillion speculative nonsense
  First, this sort of input perpetuates the confusion between the lens v policy application (based on values) distinction. Stoller clearly hasn’t divined that distinction because he hasn’t read much on the topic.
  Second, he cited one of those ‘Marxist’ characters about the absence of power discussions and policy approaches to deal with global capital. This character is the one who only cites a narrow US-based MMT literature and then gets it wrong.
  Had any of these characters really been interested in what core MMT economists actually write and had read a little more broadly than what they see on Twitter and a few antagonistic Op Eds they might have seen my relatively popular book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017).
  The argument presented in that book, which is motivated by an MMT understanding and a Left value set, provides extensive analysis and a blueprint about a progressive strategy to deal with ‘power’ among lobbyists, financial markets, global capital and all the rest.
  For years I have written about the need to eliminate financial market instruments that do not add value directly to the real economy.
  I have advocated banning financial trading on food.
  Forcing banks to be banks rather than casinos.
  Nationalising banks and pension systems.
  Invoking capital controls to prevent speculative currency shifts.
  Tight regulation of product, financial and labour markets to ensure they serve public purpose (advance the well-being of the 99).
  Abolishing the World Bank and the IMF and putting in place a multi-lateral institutional framework that will ensure countries with few available real resources can still move out of poverty and enjoy a secure currency.
  All that was laid out in blog posts, academic articles and books including Reclaiming the State over several decades.
  But then I am not an American author and so that literature doesn’t exist for these self-proclaimed experts.

• 

  joseba says:

  2019/08/30 at 17:48

  Bill Mitchell-en Spending equals income whether it comes from government or non-government
  August 29, 2019
  (http://bilbo.economicoutlook.net/blog/?p=43031)

  … These sort of attacks from a mainstream are unsurprising given its credibility is in tatters. But they are also coming from the self-proclaimed Left, who seem opposed to a reliance on nation states, and in the British context, this debate is caught up in the Brexit matter, where the Europhile Left are pulling any argument they can write down quickly enough to try to prevent Britain leaving the EU, as it appears it now will (and that couldn’t come quickly enough).
  The latest Leftist salvo was published an article – It’s all going pear-shaped (August 24, 2019) – written by one Michael Roberts (who is actually some City of London economist and writes under cover – one of them).
  On his blog he refers to himself as marxist economist. Which means what exactly?
  I would also say that my career in economics has been inspired by the basic insights about Capitalism provided by Karl Marx (and Friedrich Engels) and the writers that followed in that tradition.
  But I would also be sure to disagree with Michael Roberts assertion that “MMTers deny the validity and relevance of Marx’s key contribution to understanding the capitalist system: that is it is a system of production for profit; and profits emerge from the exploitation of labour power – where value and surplus value arises” (Source).
  As one of the developers of MMT, I have always made it explicit that Marx’s ideas on class and exploitation lie at the basis of Capitalist dynamics and should be the starting point for a progressive understanding.
  So it is hard at times to know what being ‘Marxist’ means, which is especially the case when we consider the post-modern distractions that made ‘Marxism’ appear recondite, to say the least.
  So while the pursuit of profits in a class system clearly drives non-government investment behaviour, history shows that a deterministic interpretation and extrapolation of this behaviour independent of government is likely to mislead.
  Social democratic movements (political, industrial, social) rose to counter the power of capitalist producers and expressed that counterveiling force in the form of government policy after the Second World War.
  Yes, profit expectations drove private business investment, but those expectations became tempered, regulated, conditioned (choose your own word) by government impost.
  For sure there was a continual resistance from Capital to the popularism of social democratic governments.
  We know from released Australian Cabinet documents that in the 1960s the business lobbies were demanding the then conservative government deliberately create higher unemployment to reduce the capacity of the workers to realise wage demands.
  Neoliberalism (as a catch-all term) rose in the 1970s as a political and economic strategy to address what had been summarily termed the ‘profit squeeze’.
  And as we explained in detail in our recent book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) – that resistance from Capital was expressed and engendered through the state not by replacing the state.
  The state was reconfigured and became an agent for Capital rather than a mediator between capital and labour, as it had been in the ‘full employment’ Post World War 2 period.
  That conditions what I think about the role of the state and its capacities in a fiat monetary system.
  The basic claim by Michael Roberts in the article cited above is that it is incorrect to think:
  … that fiscal stimulus through budget deficits and government spending can stop ‘aggregate demand’ collapsing.
  He thinks this idea – which I am calling a move to fiscal dominance – is gaining traction among economists (who mostly have changed their previous views) as it becomes clear that monetary policy “can do little or nothing to sustain capitalist economies in 2019”.
  He lumps “Modern Monetary Theory economists” among this group.
  Apparently, we “got very excited because Summers seemed to agree with” us about the need for fiscal dominance.
  Well, let me say, as one of the original MMT economists I didn’t get excited at all about the attempt by Larry Summers to reinvent himself and cover his past history of myriad failures.
  I don’t take anything that Summers says that agrees with what I write as ‘endorsement’ of MMT. He is not qualified to hand out such endorsements.
  I just see a man who has a terrible track record in the profession across a number of dimensions (economist, policy advisor, university manager, etc) trying to be relevant when time has passed him by – more pathos really.
  But I understand the nature of Michael Robert’s trying a sort-of MMT putdown to condition his readers to accept his argument, which, as you will see, has little substance.
  His thesis is that no policy intervention – “nothing will stop the oncoming slump”.
  That is categorical.
  And his rationale?
  That’s because it is not to do with weak ‘aggregate demand’ …
  Some basics:
  1. Aggregate demand is total spending in the economy.
  2. Given the way we measure economic activity (as an aggregate of output and income produced per period), nominal (money) values of spending must equal income as an accounting statement.
  3. If inflation is stable, then increased spending equals increased real income.
  4. When we talk of ‘slumps’ (or recessions, which would constitute a serious slump) we are talking about a contraction in real spending and income.
  5. An “oncoming slump” must therefore be the result of the growth of aggregate spending (‘demand’) falling behind the growth in productive capacity, which leads to cuts to production, unemployment, and, ultimately, recession if not curtailed.
  It makes no sense to characterise a recession as being divorced from movements in aggregate spending.
  There can be no recession if aggregate spending keeps pace with productive capacity growth and the spending that producers expect, which conditions their production decisions.
  Michael Roberts says that “household consumption in most economies is relatively strong as people continue to spend more”, which is questionable – true to a point.
  But in the case of Australia, the slowdown in GDP growth is being driven exactly by a slowdown in household consumption in the face of subdued business investment and an austerity obsessed federal government.
  Further, in the case of the US, the contribution to real GDP growth from ‘personal consumption expenditures’ has been falling sharply since the middle of last year.
  And in the UK, growth in household consumption expenditure has been in trend decline since 2016, with occasional solid quarters.
  And in Japan, one could hardly say that household consumption expenditure has been a uniformly strong driver of growth and will slump again if the Government goes ahead with the scheduled increases in sales tax in October 2019.
  I could go on.
  (…)
  His aim in the article (and prior work) is to deny that government spending matters as a determinant of aggregate output and income generation.
  He writes:
  The Keynesians, post-Keynesians (and MMT supporters) see fiscal stimulus through more government spending and increased government budget deficits as the way to end the Long Depression and avoid a new slump. But there has never been any firm evidence that such fiscal spending works, except in the 1940s war economy when the bulk of investment was made by government or directed by government, with business investment decisions taken away from capitalist companies.
  This statement is a denial of history.
  First, what does “fiscal spending works” actually mean?
  Does he want us to believe that if the government adds to its net spending when there is idle capacity that there is zero impact on total demand and income?
  Second, there are many examples of the use of discretionary fiscal policy stimulus being used outside of the 1940s, to offset declines in non-government spending (particularly business investment spending).
  Sometimes, that fiscal intervention is not sufficient – usually because governments are bullied into taking more conservative lines.
  In other cases, the fiscal intervention clearly prevents recession even when business investment collapses and/or export revenue declines sharply.
  Three cases are within our recent historical grasp.
  First, consider China.
  Regardless of its political system, China operates a fiat monetary system where the Chinese government is the currency issuer and they demonstrated during the early stages of the GFC that they know exactly what they are doing with respect to using that monetary supremacy to maintain growth as one component of spending collapses.
  (…)
  Michael Roberts concludes by citing the example of Japan:
  The irony is that the biggest fiscal spenders globally have been Japan, which has run budget deficits for 20 years with little success in getting economic growth much above 1% a year since the end of the Great Recession …
  No irony here at all.
  Japan experienced arguably the biggest property collapse in history in the early 1990s. It introduced a rather significant fiscal stimulus response and only experienced one-negative quarter of GDP growth.
  As I have explained previously – in this blog post for example – () – political forces panicked the Government and they introduced a sales tax hike in 1997.
  I have written about the Japanese experience with sales tax rises before:
  1. Japan is different, right? Wrong! Fiscal policy works (August 15, 2017).
  2. Japan returns to 1997 – idiocy rules! (November 18, 2014).
  3. Japan’s growth slows under tax hikes but the OECD want more (September 16, 2014).
  4. Japan – signs of growth but grey clouds remain (May 21, 2015).
  5. Japan thinks it is Greece but cannot remember 1997 (August 13, 2012).
  Everytime they hike sales taxes, it ends in misery – spending falls and economic activity comes to a crashing halt.
  They saw that in 1997. And again in 2014.
  In April 2014, the Abe government raised the sales tax from 5 per cent to 8 per cent.
  After the sales tax hike, there was a sharp drop in private consumption spending as a direct result of the policy shift. At the time, I predicted it would get worse unless they changed tack.
  It certainly did get worse. Consumers stopped spending and the impact of static consumption expenditure was that business investment then lags.
  Here is the history of real GDP growth (annualised) since the March-quarter 1994 to the March-quarter 2015. The red areas denote sales tax driven recessions.
  In both episodes, these recessions were followed by a renewed bout of fiscal stimulus (monetary policy was ‘loose’ throughout).
  In both episodes, there was a rapid return to sustained growth as a result of the fiscal boost.
  Nothing could be clearer.
  (…)
  Fiscal policy has been very effective in Japan.
  Trying to equate low growth rates in a nation with an ageing population and very high saving ratios with a lack of effectiveness is invalid.
  For another view, examine the evolution of the Japanese unemployment rate. In the years after the property crash, the rate rose modestly to around 3.5 per cent, which given the scale of the crash was an incredible testament to the effectiveness of fiscal policy.
  And then, later, during the GFC, it only peaked at 5.4 per cent (August 2009) and then fell relatively quickly to its current (low) level of 2.4 per cent.
  I could continue to offer countless examples of historical episodes where fiscal intervention works in both directions. But time is out today.
  Conclusion
  Michael Roberts claims that any renewed fiscal stimulus “won’t work”.
  The problem that he ignores history and basic logic.
  Spending equals income.
  When I go to the shop after work the checkout operator doesn’t ask me whether I work for a public wage or a private wage.
  What do you think would happen if, say, the UK government announced it was going to upgrade infrastructure (say school or hospital buildings) throughout the north of England and were calling for tenders? Do you think it is realistic to assume there would be no tenders received at all?
  Or that there would be no private leverage off that activity as a result of the renewed construction and procurement?
  What do you think would happen if the UK government announced a Job Guarantee – an unconditional job offer to anyone at a socially-inclusive minimum wage? Do you think no one would turn up for a job?
  Some of the newly created income would go into imports. Some into increased savings. But there would be growth – undoubted.
  In a later post I will consider the import and saving leakages, which are, in themselves, interesting.