Wasn't the American Rescue Plan of 2021, which sent $1,400 rebates to taxpayers, $2,800 for joint returns, and $1,400 for each taxpayer dependent, a major reason that we are now suffering 8.6 percent inflation? That is, we spent too much. This seems a real problem, not just a political constraint.
Isn't our bloated defense budget also a real problem? Can we just ignore it?
"Funding ever more generous entitlement programs could push the economy beyond its real resource constraint, specifically, full employment, and thus fuel inflation."
~ Stephanie Kelton
That's MMT pointing out that government spending does have restraints. Yes, endless money can be created by a few keystrokes at the Fed, but that's not the point or the problem. When those computer-generated dollars are spent by taxpayers and government entities in real time, our money supply will be flooded, which seems to be where we are at right now, and yet we're some distance from full employment.
While lots of mainstream economists are blaming Covid relief spending as a major reason for out current inflation, I’ve read other econs who are willing to put a number on it who assert that the relief spending accounts for one percentage point of current inflation.
From other analyses I’ve read, I’m inclined to believe that supply bottlenecks and record corporate profits make up a larger portion of the inflation we’re seeing now.
But what do I know? I’m just a retired English teacher.
Do you remember who those macroeconomists were that claim the relief spending accounts made up only one percent of inflation?
Some gouging, no doubt, does occur; for example, some major oil companies are charging the new, higher prices for gasoline they produced back before inflation hit: kind of a double gouge. (But sometimes they say that they lose money, so in a capitalistic system, they can charge what they can get somebody to pay for it. In my part of Florida, people complain bitterly about the higher gas prices, yet cut back on no trips, don't try to carpool, don't combine their trips, and speed constantly.)
English teachers are Renaissance men: They know a little about almost everything, but nothing in-depth except literature, grammar rules, spelling, and composition. And their minds are inevitably damaged, at least somewhat, from reading way too many freshman themes and term papers.
The solution is simple; tax the wealthy for their excess assets; ie. rockets for loss of gravity joy rides, more than 3 homes, yachts over 100 foot length, more ljunk than they can ever use...
Some rich people pay no taxes, but in general rich people pay most of the revenue that comes in through income taxes. Granted, we peons pay other taxes, like sales tax, property tax, excise taxes, payroll taxes, estate taxes.
The danger, I'm told, is that we peons can't abide the inequality: We can barely pay rent while they sit on golden thrones. If the natives get restless, heads roll. Thus, it's to society's advantage for the rabble to see the rich pay high taxes.
(If you read MMT, you learn that taxes pay for nothing in the federal government; taxes just soak up excess currency that could cause inflation, which is a real danger. Local governments, however, do need to tax before they can spend or sell bonds.)
Where on earth did you read MMT, James? Not what I’ve read. This might clear it up for you. Mosler offers a free pdf of his book, “Seven Deadly Innocent Frauds of Economic Policy” https://bit.ly/3Nvj7h6
What you're overlooking is the necessity of a new monetary paradigm concept of Direct and Reciprocal Monetary Gifting and its specific policy expression at the point of retail sale with a 50% Discount/Rebate. The truth is that the volume of money is at best a tertiary cause of inflation. You're correct that under the current monetary paradigm for the creation and distribution of money, namely Debt Only, inflation will continue to occur...because presently there is no effective, mathematical or macro-economic way to prevent it. The 50% Discount/Rebate policy at retail sale IS that VERY effective, mathematical and macro-economic means of ending inflation by of all things implementing beneficial price and asset deflation into profit making economic systems. The inversion of mental and pemporal universe reality is the classic sign of paradigm change. Perfect e4xample was the Copernican cosmological paradigm change which was nothing more and certainly nothing less than the inversion of the positions of the earth and the sun.
Normal garden variety inflation which the FED supposedly calls "good" inflation is around 1-3%. Bad inflation like we are currently experiencing is 8-9% and probably 10-15% because food and petroleum are not factored in. Hyper inflations very rarely occur because several disastrous circumstances must take place before them like going to war, losing the war, being punished by the winner with onerous debt reparations and finally the private banking system leveraging up currency speculators who short the currency and that is what initiates the hyperness. All of these circumstances can easily be avoided particularly the final one by the nation declaring that any such shorting of the currency is illegal and "null and void".
Now I'm not making a fetish of the 50% Discount/Rebate policy. There are additional policies, regulations and carrot type incentives that need to also be enacted to stabilize the new monetary paradigm that the 50% Discount/Rebate policy immediately/initially effects. But all of these are either additional benefits to economic agents or are ethical responses to obviously anti-social narcissistic human actions that would tend to game the new paradigm.
I'm not a macroeconomist, but I do not see how your idea -- "a new monetary paradigm concept of Direct and Reciprocal Monetary Gifting and its specific policy expression at the point of retail sale with a 50% Discount/Rebate" -- could ever work.
You would literally be creating twice as much money, all gifted by the Fed. It would also take a large bureaucracy to ensure that it is functioning fairly, correctly, and dependably ON EVERY SALE MADE. It sounds like a Manhattan Project, TVA, and moonshot in size and scope on a never-ending timeline. The government can't even get us to wear masks in a pandemic so how's it going to convince all of America to accept and implement a huge "socialistic" program? Only a small percentage will study your system enough to understand it or believe it workable, and certainly no Republicans would be interested in another FDR-sized gambit.
There is already a system in place, the accounting system all businesses utilize to compute their costs and determine profitability, and hence all they would need to do would be to open a new account to establish the ir discounts and receive rebates from the monetary authority.
Determining price rises or drops is also easily accountable. If we need forensic accountants like Bill Black and his accountants, then so be it. For the universal benefits the new paradigm bestows on every economic agent individual and commercial and the gracefully integrated freeflowingness it would bring to the economic system its a no brainer not implement it.
The new monetary paradigm is actually the end of the right's common compliant regarding socialism, namely the almost complete elimination of socialist re-distributive taxation for welfare, unemployment insurance, social security plus huge reductions on personal, and corporate income tax rates.
You convince the public and all business models except the private banks by showing them the incredible, empirical and continual monetary and benefits the policies bring to them, beneficial deflation, doubling their purchasing power etc. etc.
You're normal critiques are understandable given how long they've been acculturated, respectfully you're over thinking. Paradigm changes are the ultimate integrative phenomenon because they are single concepts that change an entire complex system, body of knowledge or area of human endeavor. This not just me saying this it is a readily discernable historic fact.
There's only one thing that is now necessary...a mass socio-economic and political mass movement that demonstrates the math of the new paradigm's policies to the general public and the legitimate economic business models that will benefit. Just communicate the math, address the misconceptions and orthodoxies the new paradigm now renders irrelevant. All of the leading reform movements (MMT, Keen's Minsky's Financial Instability Hypothesis, Hudson's financial parasitism, UBI and Ellen Brown's Public Banking) philosophically align with the new monetary paradigm and advocate policies that, again, align with its objectives. All they need to do is realize that together and analyzing from a paradigmatic perspective we can better and more quickly accomplish what they say we need. A paradigm integrates opposites in a way that creates a thirdness greater oneness of truths, applicabilities, workabilities and the highest ethical considerations in dualistic opposites. We need to return to Hegel in this respect. We have dueling dualisms (thesis vs antithesis) whose lingering conflicts are now actually bringing about disintegrative effects. We've forgotten the synthesis and missed how and where it can be accomplished. The new monetary paradigm and its policies is that synthesis.
But I still see that virtually every consumer will immediately have twice as much money. And if he or she are working or middle class, they spend that windfall rapidly. Seeing what's going on, merchants at all levels can and will gouge for more. It's a system wherein everyone has hit the lottery.
We can't even beg people to come back to work now; if their money goes twice as far as before, that's a serious business and even moral problem that will get much worse (in the sense that humans need gainful, meaningful employment for psychological health; idle minds are indeed the devil's workshop: Why not stay home even more and drink, party, and do drugs?).
As I said, I'm not a macroeconomist, but if the big dogs in that field get on-board, I'll probably follow. As it is, I just don't see that system working in the real world. And, worse, if it were implemented, it would make things much worse, at least after the first month or so when the chickens come home to roost, as they always do.
Retailer's would not be able to opt into the 50% discount/rebate policy without abiding by the rules where they would agree not to raise their prices. No one could refuse because if you require your customers to pay 100% of your price and the consumer can just go next door to your competitor and only pay 50%...how much of the market share are you going to lose?
Enterprise prior to retail would be able to virtually completely cut their personal, corporate and payroll tax costs if they do not raise their prices and if they do they would lose those tax savings.
If having a lot of money were such a danger the wealthy would have killed themselves off and/or sworn themselves to poverty long ago. There are uncountable positive and constructive purposes in addition to employment...and in my book I discuss ways we can in fact better acculturate ourselves to leisure AND constructive purpose.
Paradigm changes always disrupt orthodox thinking because their new tool and/or discovery results in the integration of seeming opposites into a thirdness greater oneness that resolves the problematic nature of the present paradigm. That's historically true. The beneficial effects I have described (and there are more) accomplish all of the signatures of historical paradigm changes.
Paradigm changes are "an offer they can't refuse" to all individuals and businesses except the private banks of course whose monopoly paradigm is the human civilization long source of their power and domination.
"If having a lot of money were such a danger the wealthy would have killed themselves off and/or sworn themselves to poverty long ago."
The danger is to the deflated currency. Wealthy people don't spend all their money; they invest it or even save it. Middle class and working-class people spend virtually every penny they can get their hands on, as quickly as possible. Such behavior would dump massive currency into the mix; demand would soar; prices would soar, causing a snowball effect, where more money buys fewer things.
Competitors tend to price-fix, e.g., in Dallas, the liquor merchants used to get together every Tuesday behind closed doors and set prices for the week. Real competition, price wars, would hurt retailers, maybe not unfairly, but they won't abide it. Retailers have to meet their margins, and, of course, they want as much over that as they can get away with. Love may make the world go around, but money greases the wheels.
Again, cunning, greedy human nature will always find ways to hack the system. Counterfeiting, embezzling, bank robberies, speeding, infidelity, lying, dead people voting are examples of such; nothing is off limits. So worrying about and doubting any new system that will blanket all businesses is not a waste of time on this plane of existence. We have met the enemy, and he is us.
Spend the 26 minutes to watch the video I sent and then ask me. Your bio says you are, “A disciple of Modern Monetary Theory,” and that you’re ready to learn (exactly where I am). We’re in good company with Stephanie. And read Mosler’s book I sent. Follow Robert Hockett’s articles in Forbes. He’s a great read – irreverent, funny and so smart. He’s big on production being one of the pillars of healthy economies.
Have fun. For me, it really is like finding myself in the middle of a thrilling spy series where each week another dark secret is revealed and our detective protagonists create solutions that are equal parts creative and brilliant.
It's kind of long, so here's the takeway. They actually have the American Rescue Plan boosting inflation by 2/10ths to 3/10ths of a percentage point:
"The results show that the increase in labor market tightness, attributable to the ARP, is expected to cause inflation to increase by about 0.3 percentage point in 2021 and by a bit more than 0.2 percentage point in 2022. The impact in 2023 is negligible and is not shown in the figure. Thus, the estimated impact of the ARP on inflation is meaningful, but it is still a far cry from the strong overheating of the 1960s."
I know there was one econ I read who estimated a one percentage point affect on inflation, so I'll see if I can track that one down.
What you're describing is monetary sovereignty, that is fiat creation of money by accounting entries. You're correct in your article. However, MMT and the rest of the very well considered monetary/economic/theoretical reforms still have not consciously recognized the new monetary
paradigm concept or the specific expression of that new paradigm in the specific places in the economic process that will make the economy flow like time.
Arrrrrrrrrrrrrrg … Stephanie, you, Mosler, and Robert Hockett are the most difficult reading I do each week. Also, the most thrilling. I have Dyscalculia so numbers and graphs are difficult, if not impossible, for me. When I found economic theory, via Robert, it was like reading a thriller I couldn’t put down.
MMT is so smart and simple to understand. It’s bloody frustrating that even well meaning policy makers are so thoroughly misled. Why are the chairman of the fed, sec of treasury, the damned federal reserve board, political appointees? Not sure how else one would do it but when I think of minds like Trump’s or Biden’s, for that matter, deciding who manages the economy, it’s, well … terrifyingly mind blowing.
Can’t think of it without thinking of Mosler’s stunning cars. Designed with the same elegant simplicity and logic of MMT, and would have changed the whole automobile industry when Elon Musk was still in high school. Mosler’s Consulier was shot down everywhere in media. Just like MMT and the principals that could pull us out of the quicksand that’s taking us under.
TIME FOR A BIG AD CAMPAIGN re SOC SECURITY. Something like, “Social Security – The Other Big Lie.”
The present paradigm is indirect and hence UNNECESSARILY complicated. Hence it's hard to explain. What you need is a policy that deals directly with the deepest problems of the economy (chronic inflation despite chronic individual and systemic monetary austerity) whose benefits are direct, empirical, continual and easy to mathematically comprehend. We've never had 50% yoy inflation and never have to have it. If you implement a 50% discount at retail sale for virtually everything you not only macro-economically implement price deflation that does good instead of harm you immediately double everyone's purchasing power and enable many other knock on benefits. Businesses will not raise their prices by a large percentage point like 20% because if they did and even one of their competitors didn't or even lowered their prices...just how much market share is the price raising enterprise going to lose??? In addition there are regulatory and inhibitive tax policies that can prevent enterprise from deciding to raise their prices. And even if after all of the regulatory and tax incentives and disincentives we still had 1-3% inflation then just index the discount at retail sale to that 1-3% and no fuss, no harm.
I’m not a macro economist but this is what I have gathered from reading Stephanie Kelton and others.
In the end what we have is the ability of the market economy to produce goods and services desired by society. This depends on having the resources, infrastructure, and knowledgeable labor applying itself to the task.
We get money (a made up thing) as a means of bidding on these goods and services (real things) in this economy. We have to bid against everyone else who desires the same goods we want. If we increase the amount of money without increasing production we don’t get more goods we get higher prices.
We get more goods and services by taking care of and developing our resources, investing capital in infrastructure and research for more efficiency and capacity, increasing labor skills and applying it where needed.
Government needs to be a fair referee. It could help create a fairer, more equitable economy. I keep hoping.
"Constraints on spending are entirely political."
~ Warren Mosler
Wasn't the American Rescue Plan of 2021, which sent $1,400 rebates to taxpayers, $2,800 for joint returns, and $1,400 for each taxpayer dependent, a major reason that we are now suffering 8.6 percent inflation? That is, we spent too much. This seems a real problem, not just a political constraint.
Isn't our bloated defense budget also a real problem? Can we just ignore it?
"Funding ever more generous entitlement programs could push the economy beyond its real resource constraint, specifically, full employment, and thus fuel inflation."
~ Stephanie Kelton
That's MMT pointing out that government spending does have restraints. Yes, endless money can be created by a few keystrokes at the Fed, but that's not the point or the problem. When those computer-generated dollars are spent by taxpayers and government entities in real time, our money supply will be flooded, which seems to be where we are at right now, and yet we're some distance from full employment.
What am I overlooking or misunderstanding?
While lots of mainstream economists are blaming Covid relief spending as a major reason for out current inflation, I’ve read other econs who are willing to put a number on it who assert that the relief spending accounts for one percentage point of current inflation.
From other analyses I’ve read, I’m inclined to believe that supply bottlenecks and record corporate profits make up a larger portion of the inflation we’re seeing now.
But what do I know? I’m just a retired English teacher.
Thanks for responding Ken.
Do you remember who those macroeconomists were that claim the relief spending accounts made up only one percent of inflation?
Some gouging, no doubt, does occur; for example, some major oil companies are charging the new, higher prices for gasoline they produced back before inflation hit: kind of a double gouge. (But sometimes they say that they lose money, so in a capitalistic system, they can charge what they can get somebody to pay for it. In my part of Florida, people complain bitterly about the higher gas prices, yet cut back on no trips, don't try to carpool, don't combine their trips, and speed constantly.)
English teachers are Renaissance men: They know a little about almost everything, but nothing in-depth except literature, grammar rules, spelling, and composition. And their minds are inevitably damaged, at least somewhat, from reading way too many freshman themes and term papers.
The solution is simple; tax the wealthy for their excess assets; ie. rockets for loss of gravity joy rides, more than 3 homes, yachts over 100 foot length, more ljunk than they can ever use...
I think Liz Warren is onto something....Mark
Some rich people pay no taxes, but in general rich people pay most of the revenue that comes in through income taxes. Granted, we peons pay other taxes, like sales tax, property tax, excise taxes, payroll taxes, estate taxes.
The danger, I'm told, is that we peons can't abide the inequality: We can barely pay rent while they sit on golden thrones. If the natives get restless, heads roll. Thus, it's to society's advantage for the rabble to see the rich pay high taxes.
(If you read MMT, you learn that taxes pay for nothing in the federal government; taxes just soak up excess currency that could cause inflation, which is a real danger. Local governments, however, do need to tax before they can spend or sell bonds.)
Where on earth did you read MMT, James? Not what I’ve read. This might clear it up for you. Mosler offers a free pdf of his book, “Seven Deadly Innocent Frauds of Economic Policy” https://bit.ly/3Nvj7h6
Paul, Thanx for your response. Mark
What you're overlooking is the necessity of a new monetary paradigm concept of Direct and Reciprocal Monetary Gifting and its specific policy expression at the point of retail sale with a 50% Discount/Rebate. The truth is that the volume of money is at best a tertiary cause of inflation. You're correct that under the current monetary paradigm for the creation and distribution of money, namely Debt Only, inflation will continue to occur...because presently there is no effective, mathematical or macro-economic way to prevent it. The 50% Discount/Rebate policy at retail sale IS that VERY effective, mathematical and macro-economic means of ending inflation by of all things implementing beneficial price and asset deflation into profit making economic systems. The inversion of mental and pemporal universe reality is the classic sign of paradigm change. Perfect e4xample was the Copernican cosmological paradigm change which was nothing more and certainly nothing less than the inversion of the positions of the earth and the sun.
Normal garden variety inflation which the FED supposedly calls "good" inflation is around 1-3%. Bad inflation like we are currently experiencing is 8-9% and probably 10-15% because food and petroleum are not factored in. Hyper inflations very rarely occur because several disastrous circumstances must take place before them like going to war, losing the war, being punished by the winner with onerous debt reparations and finally the private banking system leveraging up currency speculators who short the currency and that is what initiates the hyperness. All of these circumstances can easily be avoided particularly the final one by the nation declaring that any such shorting of the currency is illegal and "null and void".
Now I'm not making a fetish of the 50% Discount/Rebate policy. There are additional policies, regulations and carrot type incentives that need to also be enacted to stabilize the new monetary paradigm that the 50% Discount/Rebate policy immediately/initially effects. But all of these are either additional benefits to economic agents or are ethical responses to obviously anti-social narcissistic human actions that would tend to game the new paradigm.
Get the entire present program here: https://www.amazon.com/dp/B07PLNJLRN/ref=sr_1_1?keywords=wisdomics-Gracenomics&qid=1552358772&s=books&sr=1-1-catcorr
I'm not a macroeconomist, but I do not see how your idea -- "a new monetary paradigm concept of Direct and Reciprocal Monetary Gifting and its specific policy expression at the point of retail sale with a 50% Discount/Rebate" -- could ever work.
You would literally be creating twice as much money, all gifted by the Fed. It would also take a large bureaucracy to ensure that it is functioning fairly, correctly, and dependably ON EVERY SALE MADE. It sounds like a Manhattan Project, TVA, and moonshot in size and scope on a never-ending timeline. The government can't even get us to wear masks in a pandemic so how's it going to convince all of America to accept and implement a huge "socialistic" program? Only a small percentage will study your system enough to understand it or believe it workable, and certainly no Republicans would be interested in another FDR-sized gambit.
James, Mosler explains it in 26 minutes. https://bit.ly/3OGZUtY
Sorry, wrong link. Here’s the correct one: https://bit.ly/3a0260S
There is already a system in place, the accounting system all businesses utilize to compute their costs and determine profitability, and hence all they would need to do would be to open a new account to establish the ir discounts and receive rebates from the monetary authority.
Determining price rises or drops is also easily accountable. If we need forensic accountants like Bill Black and his accountants, then so be it. For the universal benefits the new paradigm bestows on every economic agent individual and commercial and the gracefully integrated freeflowingness it would bring to the economic system its a no brainer not implement it.
The new monetary paradigm is actually the end of the right's common compliant regarding socialism, namely the almost complete elimination of socialist re-distributive taxation for welfare, unemployment insurance, social security plus huge reductions on personal, and corporate income tax rates.
You convince the public and all business models except the private banks by showing them the incredible, empirical and continual monetary and benefits the policies bring to them, beneficial deflation, doubling their purchasing power etc. etc.
You're normal critiques are understandable given how long they've been acculturated, respectfully you're over thinking. Paradigm changes are the ultimate integrative phenomenon because they are single concepts that change an entire complex system, body of knowledge or area of human endeavor. This not just me saying this it is a readily discernable historic fact.
There's only one thing that is now necessary...a mass socio-economic and political mass movement that demonstrates the math of the new paradigm's policies to the general public and the legitimate economic business models that will benefit. Just communicate the math, address the misconceptions and orthodoxies the new paradigm now renders irrelevant. All of the leading reform movements (MMT, Keen's Minsky's Financial Instability Hypothesis, Hudson's financial parasitism, UBI and Ellen Brown's Public Banking) philosophically align with the new monetary paradigm and advocate policies that, again, align with its objectives. All they need to do is realize that together and analyzing from a paradigmatic perspective we can better and more quickly accomplish what they say we need. A paradigm integrates opposites in a way that creates a thirdness greater oneness of truths, applicabilities, workabilities and the highest ethical considerations in dualistic opposites. We need to return to Hegel in this respect. We have dueling dualisms (thesis vs antithesis) whose lingering conflicts are now actually bringing about disintegrative effects. We've forgotten the synthesis and missed how and where it can be accomplished. The new monetary paradigm and its policies is that synthesis.
But I still see that virtually every consumer will immediately have twice as much money. And if he or she are working or middle class, they spend that windfall rapidly. Seeing what's going on, merchants at all levels can and will gouge for more. It's a system wherein everyone has hit the lottery.
We can't even beg people to come back to work now; if their money goes twice as far as before, that's a serious business and even moral problem that will get much worse (in the sense that humans need gainful, meaningful employment for psychological health; idle minds are indeed the devil's workshop: Why not stay home even more and drink, party, and do drugs?).
As I said, I'm not a macroeconomist, but if the big dogs in that field get on-board, I'll probably follow. As it is, I just don't see that system working in the real world. And, worse, if it were implemented, it would make things much worse, at least after the first month or so when the chickens come home to roost, as they always do.
Retailer's would not be able to opt into the 50% discount/rebate policy without abiding by the rules where they would agree not to raise their prices. No one could refuse because if you require your customers to pay 100% of your price and the consumer can just go next door to your competitor and only pay 50%...how much of the market share are you going to lose?
Enterprise prior to retail would be able to virtually completely cut their personal, corporate and payroll tax costs if they do not raise their prices and if they do they would lose those tax savings.
If having a lot of money were such a danger the wealthy would have killed themselves off and/or sworn themselves to poverty long ago. There are uncountable positive and constructive purposes in addition to employment...and in my book I discuss ways we can in fact better acculturate ourselves to leisure AND constructive purpose.
Paradigm changes always disrupt orthodox thinking because their new tool and/or discovery results in the integration of seeming opposites into a thirdness greater oneness that resolves the problematic nature of the present paradigm. That's historically true. The beneficial effects I have described (and there are more) accomplish all of the signatures of historical paradigm changes.
Paradigm changes are "an offer they can't refuse" to all individuals and businesses except the private banks of course whose monopoly paradigm is the human civilization long source of their power and domination.
"If having a lot of money were such a danger the wealthy would have killed themselves off and/or sworn themselves to poverty long ago."
The danger is to the deflated currency. Wealthy people don't spend all their money; they invest it or even save it. Middle class and working-class people spend virtually every penny they can get their hands on, as quickly as possible. Such behavior would dump massive currency into the mix; demand would soar; prices would soar, causing a snowball effect, where more money buys fewer things.
Competitors tend to price-fix, e.g., in Dallas, the liquor merchants used to get together every Tuesday behind closed doors and set prices for the week. Real competition, price wars, would hurt retailers, maybe not unfairly, but they won't abide it. Retailers have to meet their margins, and, of course, they want as much over that as they can get away with. Love may make the world go around, but money greases the wheels.
Again, cunning, greedy human nature will always find ways to hack the system. Counterfeiting, embezzling, bank robberies, speeding, infidelity, lying, dead people voting are examples of such; nothing is off limits. So worrying about and doubting any new system that will blanket all businesses is not a waste of time on this plane of existence. We have met the enemy, and he is us.
Spend the 26 minutes to watch the video I sent and then ask me. Your bio says you are, “A disciple of Modern Monetary Theory,” and that you’re ready to learn (exactly where I am). We’re in good company with Stephanie. And read Mosler’s book I sent. Follow Robert Hockett’s articles in Forbes. He’s a great read – irreverent, funny and so smart. He’s big on production being one of the pillars of healthy economies.
Have fun. For me, it really is like finding myself in the middle of a thrilling spy series where each week another dark secret is revealed and our detective protagonists create solutions that are equal parts creative and brilliant.
Thanks, Lex, very thoughtful of you. I will watch the video.
I found one so far, James. This study was actually linked in an earlier post Professor Kelton posted on inflation:
https://www.frbsf.org/economic-research/publications/economic-letter/2021/october/is-american-rescue-plan-taking-us-back-to-1960s/
It's kind of long, so here's the takeway. They actually have the American Rescue Plan boosting inflation by 2/10ths to 3/10ths of a percentage point:
"The results show that the increase in labor market tightness, attributable to the ARP, is expected to cause inflation to increase by about 0.3 percentage point in 2021 and by a bit more than 0.2 percentage point in 2022. The impact in 2023 is negligible and is not shown in the figure. Thus, the estimated impact of the ARP on inflation is meaningful, but it is still a far cry from the strong overheating of the 1960s."
I know there was one econ I read who estimated a one percentage point affect on inflation, so I'll see if I can track that one down.
Thank you very much, Ken, especially for the brief encapsulation.
I will save the link to use in future discussions.
What you're describing is monetary sovereignty, that is fiat creation of money by accounting entries. You're correct in your article. However, MMT and the rest of the very well considered monetary/economic/theoretical reforms still have not consciously recognized the new monetary
paradigm concept or the specific expression of that new paradigm in the specific places in the economic process that will make the economy flow like time.
Arrrrrrrrrrrrrrg … Stephanie, you, Mosler, and Robert Hockett are the most difficult reading I do each week. Also, the most thrilling. I have Dyscalculia so numbers and graphs are difficult, if not impossible, for me. When I found economic theory, via Robert, it was like reading a thriller I couldn’t put down.
MMT is so smart and simple to understand. It’s bloody frustrating that even well meaning policy makers are so thoroughly misled. Why are the chairman of the fed, sec of treasury, the damned federal reserve board, political appointees? Not sure how else one would do it but when I think of minds like Trump’s or Biden’s, for that matter, deciding who manages the economy, it’s, well … terrifyingly mind blowing.
Can’t think of it without thinking of Mosler’s stunning cars. Designed with the same elegant simplicity and logic of MMT, and would have changed the whole automobile industry when Elon Musk was still in high school. Mosler’s Consulier was shot down everywhere in media. Just like MMT and the principals that could pull us out of the quicksand that’s taking us under.
TIME FOR A BIG AD CAMPAIGN re SOC SECURITY. Something like, “Social Security – The Other Big Lie.”
The present paradigm is indirect and hence UNNECESSARILY complicated. Hence it's hard to explain. What you need is a policy that deals directly with the deepest problems of the economy (chronic inflation despite chronic individual and systemic monetary austerity) whose benefits are direct, empirical, continual and easy to mathematically comprehend. We've never had 50% yoy inflation and never have to have it. If you implement a 50% discount at retail sale for virtually everything you not only macro-economically implement price deflation that does good instead of harm you immediately double everyone's purchasing power and enable many other knock on benefits. Businesses will not raise their prices by a large percentage point like 20% because if they did and even one of their competitors didn't or even lowered their prices...just how much market share is the price raising enterprise going to lose??? In addition there are regulatory and inhibitive tax policies that can prevent enterprise from deciding to raise their prices. And even if after all of the regulatory and tax incentives and disincentives we still had 1-3% inflation then just index the discount at retail sale to that 1-3% and no fuss, no harm.
I’ve always wondered if the Fed could lend through SSI so the first interest payment from banks might fund an expansion of SSI.
Since all of us “owe” the debt we might as well get to retire on it.
As part of that I think that banks would need to be restricted to charging a rate less than double what they borrow at to close wealth inequality.
It’s been a long time since the USA needed 12 geographically dispersed Fed reserve banks to put money into the economy.
It’s not like we pony express cash around the country any more.
I’m not a macro economist but this is what I have gathered from reading Stephanie Kelton and others.
In the end what we have is the ability of the market economy to produce goods and services desired by society. This depends on having the resources, infrastructure, and knowledgeable labor applying itself to the task.
We get money (a made up thing) as a means of bidding on these goods and services (real things) in this economy. We have to bid against everyone else who desires the same goods we want. If we increase the amount of money without increasing production we don’t get more goods we get higher prices.
We get more goods and services by taking care of and developing our resources, investing capital in infrastructure and research for more efficiency and capacity, increasing labor skills and applying it where needed.
Government needs to be a fair referee. It could help create a fairer, more equitable economy. I keep hoping.