We were energy independent before the Biden administration took over. And the price of energy was relatively low. The war on current energy producers is why energy prices are so high. Stop promoting your WOKE-failing-Keynesian -economic mush!!
The U.S. is still energy-independent--It's an easy fact to check. Maybe oil companies are just robbing us because they're owned by people with agendas, and they don't care who they hurt. You're smart, right? Stop believing lies.
You’re smart. Aren’t you? Discourage supply with high demand and the price goes up. Reduce regulations, issue permits, expand pipe lines and you will increase supply-and the price will drop. It’s a shame you progressives don’t see that.
The price rose because they're attempting to influence the people's elected government via extortion. Punish extortion and price-fixing by nationalizing critical extractive industries. It's a shame you submissive masochists don't see that.
Only 7% of the world's oil and gas reserves are in countries that allow private extraction. The remaining 93% include Saudi Aramco, Petrobras, and the Kuwait Petroleum Corporation. None of these are in socialist countries.
No! Austerity is misery. Address the problem by funding and incentivizing the changes we need to make not by protecting the interests of those causing the problem.
Markets already do that. It's government that keeps interfering. The incentive is to keep government out of free markets, but too many souls demand these morons regulate the affairs of people far wiser.
The effort got all the way to 3/5 I would have loved to hear more but lacking, and stopping at 4&5 leaves me without the benefit of what appeared to be your best thinking. I do it to BTW, usually it emotional sh for me.
Quite true. Milton saw flaws in his prescription. The problem is not the creation of money, but rather what is done with it. Handing over vast resources to awkward, wasteful, destructive government has proven invariably a colossal blunder.
Friedman’s theories were little more than mindless mathematics - rubbish in, rubbish out - , sold very well. And have caused immense damage around the world. Tragically they are still regarded as the last word by the majority of financial and economic decision makers and pundits, so we go on making the same old mistakes. That’s why people like Prof Kelton are so badly needed.
Your ignorance of the contributions of our federal government is breathtaking. Your Profit, Thomas Sowell, is a corporate shill who sold his soul to sell lies. He’s living big for his service to our rich and the oligarchs of the world.
Same goes for big business. The fundamentals: Businesses' goal is not the good of the society, but the profitability; government is supposed to work for the greatest good for the greatest number, but it is often imperfect. We can work on reforming government, but businesses will always be creatures of self-aggrandizement. It was the private sector and not the public that gave us the Great Depression and the Great Recession of 2008. It was the government that bailed out business.
The goal of business is profit. Absolutely. By pushing the marginal or less able producers out of business, profits rise as prices decline. And greater profits attract more able producers.
The only way to remain in business is to keep investing and pushing down prices, from which consumers with better quality, lower cost goods, benefit.
Scrooge did wonders for consumers buying his products. He drove all the marginal producers out.
What will it take for the Biden Administration to admit that their sanctions against Russia are hurting the western economies more than they are hurting Russia? Peace in Ukraine would be most welcomed of course, but unless the sanctions are lifted Russia has no way to sell its resources.
One thing all foreigners think Americans could do to reduce energy demand is turn down aircon (raise temperature) a couple of degrees, especially in offices. When I was working in Miami I used to put on a sweater in the height of summer because the temperature in the office was so cold. Outside it was sweltering. And it was the same in all offices , not just ours. This is crazy. That was 20 years ago so maybe things have changed, but if not ….. (Conversely of course make sure people do need to wear a sweater when it’s cold outside!)
America has a Socialist Political Party. If Democrats were Socialists, the Socialist party wouldn’t exist. So, who do you think understands socialism best: You or the Socialist party? The obvious should not have to be said, but here it is: Democrats are NOT socialist. “Ignorance is bliss” comes to mind.
All of your suggestions are valid, but why not go to the heart of our economic problems and solve more than just inflation? We can do this by implementing a single policy that has instantaneous, universal and ongoing macro-economic effects. That policy is a 50% discount at retail sale, the entirety of which is rebated back to the retail merchant granting it to their customers by the FED or some other monetary authority. Not only will this immediately reverse all of the present inflation, but it will (amazingly) implement beneficial price and asset deflation into profit making economic systems. It will also immediately double everyone's purchasing power and potentially double the demand for every enterprises goods and services so its integrative of the self intersts of the traditionally opposed economic constituency of consumer and enterprise.
I'm surprised that Modern MONETARY Theorists have not recognized such a policy and latched onto it because it ends inflation forever and hence shuts the mouth of every conservative/libertarian who says fiscal spending is inflationary. If you end any possibility of inflation that means you can fund every rational socio-economic and climate/ecological mega project...exactly like MMTers and others would like to see. What do you think Stephanie?
Any response? A critique even. Happy to respond either way. All I'm interested in is the resolution of economic, social and political problems. Money DOES make the economic world go 'round, and Direct and Reciprocal Monetary Gifting will finally enable us to right things economically and accomplish the general Good.
No, that is the typical response by someone who thinks they know what free markets are. Free market theorists have confused the chaos of alternately goosed and strangled financial dominance by the current monetary paradigm of Debt Only with freedom. What you want is economic free flowingness and that is exactly what doubling everyone's purchasing power and hence demand for every enterprise's goods and services. In the temporal universe that we all live in there is only freedom amongst known and enforced barriers. That's being honest and real. Free market theorists make a fetish out of freedom that accomplishes nothing but distracting people from the real economic problem, namely the monopolistic monetary paradigm of Debt Only that the private banks wield to dominate everyone.
In my book in order for retailers to opt into the 50% Discount/Rebate privilege they must submit their books to forensic accounting analysis that shows they have not incurred additional costs. Their costs will be massively decreased by massive cuts in payroll, personal and corporate taxes enabled by the new paradigm so there is virtually no possibility of them incurring additional costs from before the new paradigm. Also, any business model/enterprise prior to retail sale who arbitrarily raises their prices will be taxed at a rate of 100% on any revenue they may have garnered from such inflation. If any retailer becomes a serial inflater they will lose their 50% Discount/Rebate privileges and any prior enterprise to retail sale who is a serial inflater will lose their payroll, personal and corporate tax cuts. No retailer can resist opting into the new 50% discount/rebate policy because even the stupidest consumer is not going to pay 100% of the price of everything when they can walk next door and only pay 50%. Such extortion is totally justified by the general good the new monetary paradigm bequeaths to every economic agent individual and commercial. That's what sovereign and ethically redeemed control looks like.
What enables production? That's right...money. And the new monetary paradigm and its philosophically aligned policies will enable us to wake up and die right in so many ways.
"Everyone in a free-market economy is just going to happily open up their books to hard audits by the authorities???"
Yes, if they want to participate in a policy that will double the amount of purchasing power for their products and services...and consequently if they want to survive because as I said what consumer is going to pay them 100% of their price when they can get the same amount of consumption for 50% of it...from their competitor. And of course when the can also get like a 75% cut in their personal and corporate taxes by playing by the new gracious rules...you don't think thats enough incentive to turn even the socio-pathic CEO into a balanced actor??? Even socio-paths can compute and understand survival.
Historically paradigm changes are marked by conceptual opposition as in Debt Only to Monetary Gifting and geo-centrism to helio-centrism. They are also marked by complete inversion of temporal universe reality as in geo-centriam and helio-centrism and Debt Only to debt and Monetary Gifting. Same with nomadic hunting and gathering to agriculture, homesteading and urbanization. My policy program for the new monetary paradigm accomplishes every one of the classic signatures of historical paradigm changes. In fact it accomplishes the signatures of only the two mega-paradigm changes that humanity has evolved through.
If you increase everyone’s spending power it seems there would be no control over the availability of resources. Some may be deleted rapidly causing assured inflation of some products.
Doubling everyone's purchasing power does not necessarily equate to a doubling of consumption/economic throughput. The poor will have an increase in consumption for sure and even a substancial increase in over all consumption can probably be handled without any significant inflation even under a non-monetary paradigm change. If we have a 3-4% rate of inflation even with the regulatory and tax carrot and stick program I advocate in my book all you'd need to do is index the discount/rebate percentage to it. In other words if its 3% then the discount is 53%.
Now resource conservation and even reducing consumptiion level is an excellent idea, but that is a much easier thing for all consumers to agree about doing in an abundance situation with the new monetary paradigm than an austerity/scarcity of demand one like now. Paradigm changes have always resolved more problems than they later create, and because they always integrate the self interests of traditionally opposed constituencies, cooperation is also one of its signatures. Regardless, if we forever resolve inflation with the 50% Discount/Rebate policy then there is no longer any reason not to fund the fiscal mega-projects necessary to confront climate change like off and under planeting the dirtiest of production. All kinds of addional ecologically sane things can occur like incentivizing turning lawns into gardens to save water, re-enrich the soil and de-centralize/disinvest the agri-business cluster fuck that has destroyed our soil, reduced the vitamin and mineral content of what we eat by up to 80% and fostered numerous auto-immune diseases like Parkinson's and Lupus. Paradigm changes are the ultimate integrative phenomenon which is exactly what we need because we've wallowed in idiotic dualisms for so long that we are now in a disintegrative trend. The key to accomplishing the thirdness greater oneness of the truths, workabilities and highest ethical considerations in seeming opposites is thinking and acting on the paradighmatic level. Most specifically the monetary paradigm which hasn't changed for the entire course of human civilization. As I said before all of the leading economic reforms are well and good, but they haven't recognized the biggest, most underlying economic problem that needs to be resolved is the current monopolistic monetary paradigm that the private banks now own and control.
The private banks are heavily dependent upon depositors or lenders. If depositors or bondholders don't like what the private banks are doing, that is frivolous lending, they pull their money. The banks own and control very little.
Or, we could cap wealth to $100 million. This would eliminate the competition for higher positions on the Forbes Most Wealthy lists. Seems the rich are so jealous of their peers that they stoop into the abyss to be richer.
Do we have any reason to think that reducing demand for gasoline (to pick one thing) would reduce the price? Eventually, sure, but has there really been a shortage? I don't drive, I wouldn't know directly. My impression is generally, where in the past businesses were able to squeeze labor to obtain high profits in the recovery, this time that wasn't working so they went for high prices instead. There's no competition with an alternative business model to worry about. Whatever reduction in demand we could create with WFH, transit, etc., they could probably easily make up by lowering the price a bit. Would going from $5 to $4 solve the political problem?
"First and foremost, we need a negotiated end to the war in Ukraine."
Most people don't appreciate where this war is probably headed. If the U.S. and other NATO countries keep supplying Ukraine with advanced weaponry, the Ukrainians are going to slaughter--SLAUGHTER--the Russians. And it will happen in the next 60 days. The so-called experts are predicting a war that will last years--this is almost certainly nonsense. The Russians are massing in the southeastern region of Ukraine--historians will soon be referring to them as the "Sitting Ducks of Donbas." By mid-August all Russian armored vehicles will be destroyed by GPS guided missiles (along with any Russian naval vessel sailing the Black Seas that isn't a submarine), and so they won't even be able to cart away the Russian corpses that will pile up by the thousands per day.
Why is this important? Because Putin has threatened nuclear war. Believe him. Inflation will be the least of our problems.
Really nice appearance on Hasan's show last night. I guess this will sound like nitpicking, but Stephanie at one point mentioned increased "tax revenue" as part of the explanation for a lower deficit. But based on her own research and writings, Stephanie has shown that there is no such thing as FEDERAL (as opposed to state and local) tax "revenue." (Her 1998 paper is a seminal work on this issue.) It's impossible to spend these federal tax dollars because the money disappears as soon as the Treasury deposits those TAX RECEIPTS in its account at the Fed to offset deficit spending. It's always new money created out of thin air that is spent by the federal gov't.
Why is this distinction important? If Americans think they have to be taxed FIRST before the federal gov't can spend the money, then, well, they'll be less likely to want the gov't to spend money even when that spending is crucial to creating a prosperous economy.
Anyway, congrats on a forceful and cogent defense of MMT.
Stephanie was technically correct that the deficit is being reduced because tax revenues have grown faster than expenditures -- this does not contradict any core MMT principle.
The US Govt adds $trillions in spending, generating high rates of inflation, and you MMT nutjobs pat yourselves on the back when tax revenues start a return to their former levels????
Stephanie's 1998 paper was an epiphany for me. I don't want to put words in her mouth, but she seemed to be arguing that it's impossible for FEDERAL taxes to PAY FOR ANYTHING because the collection of that money is tantamount to an act of destruction. And federal tax "revenues" growing faster than federal expenditures is a recipe for economic disaster. Why would the gov't want to make its citizens poorer by running a budget surplus? For me, another shocker of MMT is that federal deficits are THE ONLY SOURCE OF OUR FINANCIAL WEALTH EXPRESSED IN US DOLLARS! Where else could the US dollars in your savings account have come from? Dollars don't grow on trees! And it can't be money created by the banking system, since banks have a nasty habit of wanting to get repaid in full. Unless you robbed a bank! The point is that the federal gov't doesn't care about getting paid back in full--that's what a deficit means. Theoretically, the gov't could run annual balanced budgets, but then Americans couldn't get financially rich (which is different from REAL wealth in property, buildings, equipment, etc.)! Of course, how that wealth is being unfairly distributed is an issue we should all be concerned about, and the reason our $30 trillion so-called "national debt" hasn't led to a much greater rate of inflation is because the wealthy--who have a high propensity to save--have captured a huge percentage of those accumulated deficits. A saved dollar that isn't chasing scarce goods and services can't cause inflation.
You assume that anytime the Govt. spends money, it is creating wealth.
Paying people to dig holes in the morning and fill them in the afternoon is a great way to enrich the populace? Is that right?
In reality, it's a massive waste of resources and impoverishment of those who could have benefitted from use of those resources so abhorrently squandered.
There are 2 types of wealth--real and financial. Let's say a contractor borrows $2 billion from a bank to build a new hospital. She completes the project and sells the hospital to a giant health conglomerate. Then she pays off her loan and the simultaneous assets and liabilities of both the bank and contractor simply disappear. All that's left is the brand-new hospital. Real wealth was thus created through the magic of money used to employ workers, energy, equipment and other raw materials. But there was zero financial wealth created because every bank loan is both an asset and liability that sum to zero. The contractor held a $2 billion asset while at the same time having a $2 billion liability because she had a legal requirement to repay that $2 billion. The bank incurred a $2 billion liability when it handed over $2 billion to the contractor but then gained an asset of $2 billion in the form of the contractor's pledge to pay it back.
BTW, paying folks to build a hospital is way better than digging holes and then filling them in. But when people desperately need income, digging holes is better than doing nothing.
Because the federal gov't issues the currency, there is no need to claw back in taxes every dime that it spends. The only constraint is inflation--any deficit is pretty much irrelevant if it's not inflationary. The gov't successfully accumulated about $28 trillion of these deficits by 2020 without causing significant inflation. This was an amazing achievement. Then, of course, covid came. This $28 trillion represents the financial wealth expressed in US dollars held by Americans and foreigners worldwide. People like to call it the "national debt," but unlike a bank loan, what we have here is an asset in search of a liability that simply doesn't exist. It would be insane to try to pay it back. Why would the gov't want to make us $28 trillion poorer? Clearly, the gov't wants Americans to be rich. Problem is, our collective financial wealth--and real wealth--is not equitably distributed throughout society.
The Federal Govt does not issue currency. The Fed does and for its members, the banks, who then pass it along to their needy customers.
There is only 1 type of wealth, though it may take many forms.
How does the Fed reconcile its members accounts, that is the banks and the Govt's treasury account? Funds flow into the accounts of member banks from the govt for services rendered, but the govt treasury account is never debited? How on earth does that work?
A bank takes in $2 billion on which it pays interest to depositors. It then lends the funds out to the contractor at a rate that covers the depositors' interest, the fees for the bank's services and its profits. The asset and liability do not cancel out.
Working from home sure had an effect on gas prices when the pandemic hit. Why not use what we learned then? It wouldn't be a lockdown and it would reduce costs for those who must work (essential workers).
I'm glad to hear that Professor Friedman had second thoughts when he saw the effects of his policy. He had effectively separated shareholders from citizens, which broke the 'We're all in this together' consensus from WWII and the moon landing project. The bean counters did the rest.
Kelton is an adherent of the 'rising oil prices cause inflation' crowd!!!
Not much of a surprise. Rising oil prices are a symptom of inflation, not the cause of it. A rising oil price, all things remaining the same, has a deflationary effect, not an inflationary effect. Let us say one earns $1000 per month and energy use comprises $200 of that amount. A rise in the price of energy such that one must spend $300 to obtain the same amount requires one to spend $100 less on other goods - aka a recessionary effect.
But the prices of many goods are rising such that ceteris paribus does not apply.
What is causing the general price rise? Well, government reaction to Covid throttled production and trade everywhere. Then government used central banks to print massive amounts of money to throttle it even more.
If one seeks an end to inflation, then one should let those who produce do so. Government, so inclined to limit and destroy production, should not even be involved other than to clear the government imposed roadblocks to production, to oil production, food production, trade, etc.
But wait, there’s more: two driving habits that can substantially reduce gas consumption: 1) wait to accelerate until you’re on a downhill grade. Gaining speed down hill uses substantially less gas, amplified by 10’s of millions of autos. This could mean a delay of just a few seconds in many cases. I call this inertia driving. I’ll even accelerate on a lesser inclined road to coast up an elevated section. Inertia driving gains me 30% more mpg on longer drives with many hills. 2) Don’t do complete stops when it is obvious that safety would not be compromised. If you have to accelerate rapidly because you didn’t stop, you’ve just wasted 10 times (my guess) the fuel you would have saved by not stopping. Don’t do rapid accelerations. Probably don’t want to “not stop” at intersections with red/yellow/green lights. But, a “stop sign” has the intelligence of a rock. It has no idea if it’s safe to not do a complete stop.
I'm surprised you are not talking about windfall profit taxes. Is that not a legitimate way to encourage a reduction in prices? Is this chart inaccurate?
There are a few things in life, if any, that could be worse than wishful thinking. "We" shouldn't be constrained in analysis by what the Biden administration believes to be viable, or the Democrats as a political party. It is this administration that requires the leveling.
1. First, we had the wishful thinking of Covid repression and lockdowns to be appropriate responses, while it was already clear that the current vaccines couldn't stop the spread. Moreover, we can still see such grupthink on a much larger scale in China. It is misplaced policy related to Covid that should be pinpointed, rather than abstractly blaming it on the pandemic. It is the people in charge that have to be accountable for particular choices.
2. For a while now, there was wishful thinking that is a good idea to reduce nuclear energy production. Now we have coal plants powering up in the EU, related to another wishful thinking well before the war that it would be viable to reduce the natural gas production.
3. The gas prices in the US were also going up for a while before the war, due to the green agenda. It is this agenda that requires serious reconsideration about its pace and means. None of the issues at hand are short-term, but they have to be considered. It goes both ways that action on climate and possible oil supply increases are not short-term measures.
4. Where are the critical parts for the solar panels, such as polysilicon, coming from? Maybe from the coal production and slave labor in the Chinese Uyghur region? None of that is green or ethical.
5. The same could be asked for electric battery production. How are renewables ever going to be enough to cleanly replace fossil fuels, without resorting to more nuclear power?
6. While we should oppose Putin, oil sanctions have been a net benefit for Russia. They are exporting it elsewhere, at higher prices. Those sanctions need reconsideration or abolishment.
Like elsewhere in life, goals and policies must be realistic and well-paced. Otherwise, there is nothing faster that brings to ruins than failed wishful thinking!
We were energy independent before the Biden administration took over. And the price of energy was relatively low. The war on current energy producers is why energy prices are so high. Stop promoting your WOKE-failing-Keynesian -economic mush!!
The U.S. is still energy-independent--It's an easy fact to check. Maybe oil companies are just robbing us because they're owned by people with agendas, and they don't care who they hurt. You're smart, right? Stop believing lies.
You’re smart. Aren’t you? Discourage supply with high demand and the price goes up. Reduce regulations, issue permits, expand pipe lines and you will increase supply-and the price will drop. It’s a shame you progressives don’t see that.
The price rose because they're attempting to influence the people's elected government via extortion. Punish extortion and price-fixing by nationalizing critical extractive industries. It's a shame you submissive masochists don't see that.
Oh, that'll do it. Venezuela, once the wealthiest of nations, did exactly that. And now the people eat dirt.
Socialism is misery!
Only 7% of the world's oil and gas reserves are in countries that allow private extraction. The remaining 93% include Saudi Aramco, Petrobras, and the Kuwait Petroleum Corporation. None of these are in socialist countries.
The US, Canada, Mexico, Britain, Norway, etc.
Your figures are a little out.
A large number of the OPEC and non Opec tyrannies rely upon private companies to extract, refine, and transport the oil to markets.
You sound a lot smarter than Geoffrey and Gary! Thank you for doing the homework.
No! Austerity is misery. Address the problem by funding and incentivizing the changes we need to make not by protecting the interests of those causing the problem.
Markets already do that. It's government that keeps interfering. The incentive is to keep government out of free markets, but too many souls demand these morons regulate the affairs of people far wiser.
Had my attention.
Lost it with the 4th sentence.
THINK
thoughtful
honest
intelligent
necessary
kind
The effort got all the way to 3/5 I would have loved to hear more but lacking, and stopping at 4&5 leaves me without the benefit of what appeared to be your best thinking. I do it to BTW, usually it emotional sh for me.
If Milton Friedman were here he would expose you for who you are: “A misguided leftist so called economist”
Uncle Milty admitted he was wrong:
"The use of quantity of money as a target has not been a success... I'm not sure I would as of today push it as hard as I once did."
Milton Friedman, Financial Times, June 2003
http://socialdemocracy21stcentury.blogspot.com/2013/08/monetarists-fail-history-101-time-and.html
Quite true. Milton saw flaws in his prescription. The problem is not the creation of money, but rather what is done with it. Handing over vast resources to awkward, wasteful, destructive government has proven invariably a colossal blunder.
A socialist tyranny is the worst form of society.
93% of the world’s oil supply is not privately own. If it’s as bad as you claim it is that number would be 1%. Not 93%. Could you be one of the sheep?
I made no such claim that 93% of oil reserves lie in private hands. That was CF. Pay attention!
You’ve missed the point. So, never mind.
You attribute a statement to me that I never uttered. Then you claim I missed your point. Yes I did.
You attribute a statement to me that I never uttered. Then you claim I missed your point. Yes I did.
Friedman’s theories were little more than mindless mathematics - rubbish in, rubbish out - , sold very well. And have caused immense damage around the world. Tragically they are still regarded as the last word by the majority of financial and economic decision makers and pundits, so we go on making the same old mistakes. That’s why people like Prof Kelton are so badly needed.
When the lion dies the rats come out!!
Right. Big govt as all can see solves the big problems - never!
Your ignorance of the contributions of our federal government is breathtaking. Your Profit, Thomas Sowell, is a corporate shill who sold his soul to sell lies. He’s living big for his service to our rich and the oligarchs of the world.
Other than slurs, not much of a response. I'm convinced.
Same goes for big business. The fundamentals: Businesses' goal is not the good of the society, but the profitability; government is supposed to work for the greatest good for the greatest number, but it is often imperfect. We can work on reforming government, but businesses will always be creatures of self-aggrandizement. It was the private sector and not the public that gave us the Great Depression and the Great Recession of 2008. It was the government that bailed out business.
Where should we put our faith?
You note, badly though, Adam Smith's dictum.
The goal of business is profit. Absolutely. By pushing the marginal or less able producers out of business, profits rise as prices decline. And greater profits attract more able producers.
The only way to remain in business is to keep investing and pushing down prices, from which consumers with better quality, lower cost goods, benefit.
Scrooge did wonders for consumers buying his products. He drove all the marginal producers out.
What will it take for the Biden Administration to admit that their sanctions against Russia are hurting the western economies more than they are hurting Russia? Peace in Ukraine would be most welcomed of course, but unless the sanctions are lifted Russia has no way to sell its resources.
One thing all foreigners think Americans could do to reduce energy demand is turn down aircon (raise temperature) a couple of degrees, especially in offices. When I was working in Miami I used to put on a sweater in the height of summer because the temperature in the office was so cold. Outside it was sweltering. And it was the same in all offices , not just ours. This is crazy. That was 20 years ago so maybe things have changed, but if not ….. (Conversely of course make sure people do need to wear a sweater when it’s cold outside!)
We all know why the socialist solution to every problem is to make do with less?
Because socialism gives you far less.
We eat and live far better than the N Korean elite, and we want to keep it that way.
Absolutely.
America has a Socialist Political Party. If Democrats were Socialists, the Socialist party wouldn’t exist. So, who do you think understands socialism best: You or the Socialist party? The obvious should not have to be said, but here it is: Democrats are NOT socialist. “Ignorance is bliss” comes to mind.
The left loves big government: the Demwits, the socialists, the commies, the dictators, and a good number of Republicans.
All of your suggestions are valid, but why not go to the heart of our economic problems and solve more than just inflation? We can do this by implementing a single policy that has instantaneous, universal and ongoing macro-economic effects. That policy is a 50% discount at retail sale, the entirety of which is rebated back to the retail merchant granting it to their customers by the FED or some other monetary authority. Not only will this immediately reverse all of the present inflation, but it will (amazingly) implement beneficial price and asset deflation into profit making economic systems. It will also immediately double everyone's purchasing power and potentially double the demand for every enterprises goods and services so its integrative of the self intersts of the traditionally opposed economic constituency of consumer and enterprise.
I'm surprised that Modern MONETARY Theorists have not recognized such a policy and latched onto it because it ends inflation forever and hence shuts the mouth of every conservative/libertarian who says fiscal spending is inflationary. If you end any possibility of inflation that means you can fund every rational socio-economic and climate/ecological mega project...exactly like MMTers and others would like to see. What do you think Stephanie?
Any response? A critique even. Happy to respond either way. All I'm interested in is the resolution of economic, social and political problems. Money DOES make the economic world go 'round, and Direct and Reciprocal Monetary Gifting will finally enable us to right things economically and accomplish the general Good.
So everyone just doubles their prices.
And money doesn't make the world go round. Production does!
"So everyone just doubles their prices."
No, that is the typical response by someone who thinks they know what free markets are. Free market theorists have confused the chaos of alternately goosed and strangled financial dominance by the current monetary paradigm of Debt Only with freedom. What you want is economic free flowingness and that is exactly what doubling everyone's purchasing power and hence demand for every enterprise's goods and services. In the temporal universe that we all live in there is only freedom amongst known and enforced barriers. That's being honest and real. Free market theorists make a fetish out of freedom that accomplishes nothing but distracting people from the real economic problem, namely the monopolistic monetary paradigm of Debt Only that the private banks wield to dominate everyone.
In my book in order for retailers to opt into the 50% Discount/Rebate privilege they must submit their books to forensic accounting analysis that shows they have not incurred additional costs. Their costs will be massively decreased by massive cuts in payroll, personal and corporate taxes enabled by the new paradigm so there is virtually no possibility of them incurring additional costs from before the new paradigm. Also, any business model/enterprise prior to retail sale who arbitrarily raises their prices will be taxed at a rate of 100% on any revenue they may have garnered from such inflation. If any retailer becomes a serial inflater they will lose their 50% Discount/Rebate privileges and any prior enterprise to retail sale who is a serial inflater will lose their payroll, personal and corporate tax cuts. No retailer can resist opting into the new 50% discount/rebate policy because even the stupidest consumer is not going to pay 100% of the price of everything when they can walk next door and only pay 50%. Such extortion is totally justified by the general good the new monetary paradigm bequeaths to every economic agent individual and commercial. That's what sovereign and ethically redeemed control looks like.
What enables production? That's right...money. And the new monetary paradigm and its philosophically aligned policies will enable us to wake up and die right in so many ways.
You wrote a book?????
Everyone in a free-market economy is just going to happily open up their books to hard audits by the authorities???
Resources enable production. Money enables exchange. And Venezuelan Bolivars paper streets.
"Everyone in a free-market economy is just going to happily open up their books to hard audits by the authorities???"
Yes, if they want to participate in a policy that will double the amount of purchasing power for their products and services...and consequently if they want to survive because as I said what consumer is going to pay them 100% of their price when they can get the same amount of consumption for 50% of it...from their competitor. And of course when the can also get like a 75% cut in their personal and corporate taxes by playing by the new gracious rules...you don't think thats enough incentive to turn even the socio-pathic CEO into a balanced actor??? Even socio-paths can compute and understand survival.
Historically paradigm changes are marked by conceptual opposition as in Debt Only to Monetary Gifting and geo-centrism to helio-centrism. They are also marked by complete inversion of temporal universe reality as in geo-centriam and helio-centrism and Debt Only to debt and Monetary Gifting. Same with nomadic hunting and gathering to agriculture, homesteading and urbanization. My policy program for the new monetary paradigm accomplishes every one of the classic signatures of historical paradigm changes. In fact it accomplishes the signatures of only the two mega-paradigm changes that humanity has evolved through.
Well that is some free market!! The Commies would love it.
And who tames the psychopaths in government?
If you increase everyone’s spending power it seems there would be no control over the availability of resources. Some may be deleted rapidly causing assured inflation of some products.
Doubling everyone's purchasing power does not necessarily equate to a doubling of consumption/economic throughput. The poor will have an increase in consumption for sure and even a substancial increase in over all consumption can probably be handled without any significant inflation even under a non-monetary paradigm change. If we have a 3-4% rate of inflation even with the regulatory and tax carrot and stick program I advocate in my book all you'd need to do is index the discount/rebate percentage to it. In other words if its 3% then the discount is 53%.
Now resource conservation and even reducing consumptiion level is an excellent idea, but that is a much easier thing for all consumers to agree about doing in an abundance situation with the new monetary paradigm than an austerity/scarcity of demand one like now. Paradigm changes have always resolved more problems than they later create, and because they always integrate the self interests of traditionally opposed constituencies, cooperation is also one of its signatures. Regardless, if we forever resolve inflation with the 50% Discount/Rebate policy then there is no longer any reason not to fund the fiscal mega-projects necessary to confront climate change like off and under planeting the dirtiest of production. All kinds of addional ecologically sane things can occur like incentivizing turning lawns into gardens to save water, re-enrich the soil and de-centralize/disinvest the agri-business cluster fuck that has destroyed our soil, reduced the vitamin and mineral content of what we eat by up to 80% and fostered numerous auto-immune diseases like Parkinson's and Lupus. Paradigm changes are the ultimate integrative phenomenon which is exactly what we need because we've wallowed in idiotic dualisms for so long that we are now in a disintegrative trend. The key to accomplishing the thirdness greater oneness of the truths, workabilities and highest ethical considerations in seeming opposites is thinking and acting on the paradighmatic level. Most specifically the monetary paradigm which hasn't changed for the entire course of human civilization. As I said before all of the leading economic reforms are well and good, but they haven't recognized the biggest, most underlying economic problem that needs to be resolved is the current monopolistic monetary paradigm that the private banks now own and control.
The private banks are heavily dependent upon depositors or lenders. If depositors or bondholders don't like what the private banks are doing, that is frivolous lending, they pull their money. The banks own and control very little.
Or, we could cap wealth to $100 million. This would eliminate the competition for higher positions on the Forbes Most Wealthy lists. Seems the rich are so jealous of their peers that they stoop into the abyss to be richer.
Do we have any reason to think that reducing demand for gasoline (to pick one thing) would reduce the price? Eventually, sure, but has there really been a shortage? I don't drive, I wouldn't know directly. My impression is generally, where in the past businesses were able to squeeze labor to obtain high profits in the recovery, this time that wasn't working so they went for high prices instead. There's no competition with an alternative business model to worry about. Whatever reduction in demand we could create with WFH, transit, etc., they could probably easily make up by lowering the price a bit. Would going from $5 to $4 solve the political problem?
"First and foremost, we need a negotiated end to the war in Ukraine."
Most people don't appreciate where this war is probably headed. If the U.S. and other NATO countries keep supplying Ukraine with advanced weaponry, the Ukrainians are going to slaughter--SLAUGHTER--the Russians. And it will happen in the next 60 days. The so-called experts are predicting a war that will last years--this is almost certainly nonsense. The Russians are massing in the southeastern region of Ukraine--historians will soon be referring to them as the "Sitting Ducks of Donbas." By mid-August all Russian armored vehicles will be destroyed by GPS guided missiles (along with any Russian naval vessel sailing the Black Seas that isn't a submarine), and so they won't even be able to cart away the Russian corpses that will pile up by the thousands per day.
Why is this important? Because Putin has threatened nuclear war. Believe him. Inflation will be the least of our problems.
We should have been off carbon a long time ago. Plus Russia invaded Ukraine, Plus, the oil companies are posting higher than normal profits
Great analysis, as always from Ms. Kelton
The commentariat here (for the most part) is precisely why administration after administration can continue to get away with what they do or don't do.
The most aggressively narrative-managed population in the entire planet.
The success of which is distressingly evident.
Stop Blinken!
Stop nuclear brinkmanship!
Stop disproductive finance!
Stop profit incentive deathcare!
Stop building coalitions and walls!
Stop the 1% extracting rent from the 80%!
Stop entrenched monopoly monetary allocation!
Stop being so numbingly credulous!
If we don't, the new giant sucking sound is the drain.
Really nice appearance on Hasan's show last night. I guess this will sound like nitpicking, but Stephanie at one point mentioned increased "tax revenue" as part of the explanation for a lower deficit. But based on her own research and writings, Stephanie has shown that there is no such thing as FEDERAL (as opposed to state and local) tax "revenue." (Her 1998 paper is a seminal work on this issue.) It's impossible to spend these federal tax dollars because the money disappears as soon as the Treasury deposits those TAX RECEIPTS in its account at the Fed to offset deficit spending. It's always new money created out of thin air that is spent by the federal gov't.
Why is this distinction important? If Americans think they have to be taxed FIRST before the federal gov't can spend the money, then, well, they'll be less likely to want the gov't to spend money even when that spending is crucial to creating a prosperous economy.
Anyway, congrats on a forceful and cogent defense of MMT.
Stephanie was technically correct that the deficit is being reduced because tax revenues have grown faster than expenditures -- this does not contradict any core MMT principle.
The US Govt adds $trillions in spending, generating high rates of inflation, and you MMT nutjobs pat yourselves on the back when tax revenues start a return to their former levels????
Stephanie's 1998 paper was an epiphany for me. I don't want to put words in her mouth, but she seemed to be arguing that it's impossible for FEDERAL taxes to PAY FOR ANYTHING because the collection of that money is tantamount to an act of destruction. And federal tax "revenues" growing faster than federal expenditures is a recipe for economic disaster. Why would the gov't want to make its citizens poorer by running a budget surplus? For me, another shocker of MMT is that federal deficits are THE ONLY SOURCE OF OUR FINANCIAL WEALTH EXPRESSED IN US DOLLARS! Where else could the US dollars in your savings account have come from? Dollars don't grow on trees! And it can't be money created by the banking system, since banks have a nasty habit of wanting to get repaid in full. Unless you robbed a bank! The point is that the federal gov't doesn't care about getting paid back in full--that's what a deficit means. Theoretically, the gov't could run annual balanced budgets, but then Americans couldn't get financially rich (which is different from REAL wealth in property, buildings, equipment, etc.)! Of course, how that wealth is being unfairly distributed is an issue we should all be concerned about, and the reason our $30 trillion so-called "national debt" hasn't led to a much greater rate of inflation is because the wealthy--who have a high propensity to save--have captured a huge percentage of those accumulated deficits. A saved dollar that isn't chasing scarce goods and services can't cause inflation.
You assume that anytime the Govt. spends money, it is creating wealth.
Paying people to dig holes in the morning and fill them in the afternoon is a great way to enrich the populace? Is that right?
In reality, it's a massive waste of resources and impoverishment of those who could have benefitted from use of those resources so abhorrently squandered.
There are 2 types of wealth--real and financial. Let's say a contractor borrows $2 billion from a bank to build a new hospital. She completes the project and sells the hospital to a giant health conglomerate. Then she pays off her loan and the simultaneous assets and liabilities of both the bank and contractor simply disappear. All that's left is the brand-new hospital. Real wealth was thus created through the magic of money used to employ workers, energy, equipment and other raw materials. But there was zero financial wealth created because every bank loan is both an asset and liability that sum to zero. The contractor held a $2 billion asset while at the same time having a $2 billion liability because she had a legal requirement to repay that $2 billion. The bank incurred a $2 billion liability when it handed over $2 billion to the contractor but then gained an asset of $2 billion in the form of the contractor's pledge to pay it back.
BTW, paying folks to build a hospital is way better than digging holes and then filling them in. But when people desperately need income, digging holes is better than doing nothing.
Because the federal gov't issues the currency, there is no need to claw back in taxes every dime that it spends. The only constraint is inflation--any deficit is pretty much irrelevant if it's not inflationary. The gov't successfully accumulated about $28 trillion of these deficits by 2020 without causing significant inflation. This was an amazing achievement. Then, of course, covid came. This $28 trillion represents the financial wealth expressed in US dollars held by Americans and foreigners worldwide. People like to call it the "national debt," but unlike a bank loan, what we have here is an asset in search of a liability that simply doesn't exist. It would be insane to try to pay it back. Why would the gov't want to make us $28 trillion poorer? Clearly, the gov't wants Americans to be rich. Problem is, our collective financial wealth--and real wealth--is not equitably distributed throughout society.
The Federal Govt does not issue currency. The Fed does and for its members, the banks, who then pass it along to their needy customers.
There is only 1 type of wealth, though it may take many forms.
How does the Fed reconcile its members accounts, that is the banks and the Govt's treasury account? Funds flow into the accounts of member banks from the govt for services rendered, but the govt treasury account is never debited? How on earth does that work?
A bank takes in $2 billion on which it pays interest to depositors. It then lends the funds out to the contractor at a rate that covers the depositors' interest, the fees for the bank's services and its profits. The asset and liability do not cancel out.
Now you're just trolling. What's the point?
Then I have been deficit spending for decades.
Working from home sure had an effect on gas prices when the pandemic hit. Why not use what we learned then? It wouldn't be a lockdown and it would reduce costs for those who must work (essential workers).
I'm glad to hear that Professor Friedman had second thoughts when he saw the effects of his policy. He had effectively separated shareholders from citizens, which broke the 'We're all in this together' consensus from WWII and the moon landing project. The bean counters did the rest.
Kelton is an adherent of the 'rising oil prices cause inflation' crowd!!!
Not much of a surprise. Rising oil prices are a symptom of inflation, not the cause of it. A rising oil price, all things remaining the same, has a deflationary effect, not an inflationary effect. Let us say one earns $1000 per month and energy use comprises $200 of that amount. A rise in the price of energy such that one must spend $300 to obtain the same amount requires one to spend $100 less on other goods - aka a recessionary effect.
But the prices of many goods are rising such that ceteris paribus does not apply.
What is causing the general price rise? Well, government reaction to Covid throttled production and trade everywhere. Then government used central banks to print massive amounts of money to throttle it even more.
If one seeks an end to inflation, then one should let those who produce do so. Government, so inclined to limit and destroy production, should not even be involved other than to clear the government imposed roadblocks to production, to oil production, food production, trade, etc.
But wait, there’s more: two driving habits that can substantially reduce gas consumption: 1) wait to accelerate until you’re on a downhill grade. Gaining speed down hill uses substantially less gas, amplified by 10’s of millions of autos. This could mean a delay of just a few seconds in many cases. I call this inertia driving. I’ll even accelerate on a lesser inclined road to coast up an elevated section. Inertia driving gains me 30% more mpg on longer drives with many hills. 2) Don’t do complete stops when it is obvious that safety would not be compromised. If you have to accelerate rapidly because you didn’t stop, you’ve just wasted 10 times (my guess) the fuel you would have saved by not stopping. Don’t do rapid accelerations. Probably don’t want to “not stop” at intersections with red/yellow/green lights. But, a “stop sign” has the intelligence of a rock. It has no idea if it’s safe to not do a complete stop.
The only people who wish to reduce gas consumption are greenies. Go ahead and leave us to do as we please.
I'm surprised you are not talking about windfall profit taxes. Is that not a legitimate way to encourage a reduction in prices? Is this chart inaccurate?
https://www.macrotrends.net/2501/crude-oil-vs-gasoline-prices-chart
There are a few things in life, if any, that could be worse than wishful thinking. "We" shouldn't be constrained in analysis by what the Biden administration believes to be viable, or the Democrats as a political party. It is this administration that requires the leveling.
1. First, we had the wishful thinking of Covid repression and lockdowns to be appropriate responses, while it was already clear that the current vaccines couldn't stop the spread. Moreover, we can still see such grupthink on a much larger scale in China. It is misplaced policy related to Covid that should be pinpointed, rather than abstractly blaming it on the pandemic. It is the people in charge that have to be accountable for particular choices.
2. For a while now, there was wishful thinking that is a good idea to reduce nuclear energy production. Now we have coal plants powering up in the EU, related to another wishful thinking well before the war that it would be viable to reduce the natural gas production.
3. The gas prices in the US were also going up for a while before the war, due to the green agenda. It is this agenda that requires serious reconsideration about its pace and means. None of the issues at hand are short-term, but they have to be considered. It goes both ways that action on climate and possible oil supply increases are not short-term measures.
4. Where are the critical parts for the solar panels, such as polysilicon, coming from? Maybe from the coal production and slave labor in the Chinese Uyghur region? None of that is green or ethical.
5. The same could be asked for electric battery production. How are renewables ever going to be enough to cleanly replace fossil fuels, without resorting to more nuclear power?
6. While we should oppose Putin, oil sanctions have been a net benefit for Russia. They are exporting it elsewhere, at higher prices. Those sanctions need reconsideration or abolishment.
Like elsewhere in life, goals and policies must be realistic and well-paced. Otherwise, there is nothing faster that brings to ruins than failed wishful thinking!