While many mainstream economists have been coming out to defend their reputations against the growing awareness that Modern Monetary Theory (MMT) presents a direct challenge to their hegemony, some of the mainstream haven’t responded at all and continue to confirm what the standard mainstream macroeconomics is about and how far removed from MMT it really is. The MMT critics claim that there is nothing new in MMT (‘we knew it all along’) in one breathe, and then ‘MMT is crazy dangerous’ in another, without seemingly realising how conflicted that juxtaposition is. But when leading mainstreamers, who are not engaging with the public MMT discussion going on, publish their Op Ed pieces, we gain an insight into what the mainstream is really about despite all the attempts by other mainstreamers to co-opt as much of MMT as they can while still claiming it is crazy. A recent Op Ed article in the Wall Street Journal (March 20, 2019) – The Debt Crisis Is Coming Soon – by Harvard economics professor Martin Feldstein – is a great demonstration of the DNA of mainstream macroeconomics. MMT presents a diametrically opposed view to this standard mainstream analysis. There is no correspondence possible between the two positions.
I am travelling across Europe today and so am just writing this in between various commitments. I will soon be back home in Australia and have received a lot of E-mails about the way the Australian media has been treating the recent upsurge in attention about Modern Monetary Theory (MMT). The short description is appalling – one-sided, no balance and hardly about MMT at all, despite dismissing our work as garbage. So par for the course really. While most of the articles have just been syndicated hashes of the foreign criticisms that have been published elsewhere from Krugman, Rogoff, Summers and others. But there was one article by a local journalist who tried to predict which side of history would end up looking good in all this and chose, wrongly I think, to throw his cap in with the New Keynesians. More alarmingly though is that this local effort clearly followed the international trend by setting out a fiction and then tearing into that fiction claiming to his readers that this was about MMT. He missed the mark and ended up totally confusing himself. So par for the course.
The US-based Eastern Economic Association, which aims to promote “educational and scholarly exchange on economic affairs”, held its annual conference in New York over the weekend just gone. One of the panels focused on “New Views of Money” and I am reliably told turned into a bash MMT session as yet another disaffected economist, feeling a little attention deficit, sought to demolish our work. The technique is becoming rather standardised: construct MMT as something that it is not; refer to hardly any primary sources and only those that can be twisted with word ploys to fit into the argument; use this false construction to accuse MMT authors that are not cited of a range of sins; conclude that MMT is useless – either because the things it has right were known anyway and the novelties are wrong, proceed as normal. In denial. Afraid to admit you are part of a degenerative paradigm that has lost credibility. Bluster your way forward muttering something about optimising transversality conditions that need to be met. Feel happy to be part of the conga line. Well that conga line is heading for oblivion I hope. Where it belongs. On the scrap heap of anti-knowledge.
On February 21, 2019, the British Office of National Statistics (ONS) released the latest fiscal data for the British government – Public sector finances, UK: January 2019. There was a lot of press reaction applauding the result and even progressive writers found it possible to misrepresent what the data actually is telling us has been happening. The fact that the British government recorded a fiscal surplus of £14.9 billion in January 2019 was touted in terms of creating a ‘war chest’ that the Government will be able to delve into when the next crisis arrives (which might be soon if the current Brexit mishaps continue). The reality, is, of course, totally different. There is no stored up spending capacity (stock) created when a government runs a surplus. What is actually happening is that the net flows out of the economy to the government squeeze an already over-indebted non-government sector for liquidity and destroy that much of its wealth portfolio. Moreover, while all and sundry, including the Euro-leaning Left are frothing at the mouth over Brexit, new data now allows us to compute the losses arising from the deliberate strategy of fiscal austerity that the Government has pursued. Guess what? They appear to dwarf all the Project Fear estimates of losses arising from Brexit (notwithstanding the flaky nature of those estimates). Where is the Guardian’s column Austerity Watch to match its hapless Brexit Watch column? Where is the relentless stream of articles from Guardian journalists and Op Writers about austerity? Sorry, that would take up space which is occupied by the relentless stream of articles about Brexit?
It is Wednesday and despite being on the other side of the Planet than usual (in Helsinki at present) I am still not intending to write a detailed blog post today. I am quite busy here – teaching MMT to graduate students and other things. But I wanted to follow up on a few details I didn’t have time to write about yesterday concerning the role that NAIRU estimates play in maintaining the ideological dominance of neoliberalism. And some more details about the Textbook launch in London on Friday, and then some beautiful music, as is my practice (these days) on Wednesdays. As you will see, my ‘short’ blog post didn’t quite turn out that way. Such is the tendency of an inveterate writer.
There is a campaign on the Internet calling itself CANOO (the Campaign against nonsense output gaps) which one Robin Brooks, economist at the Institute of International Finance and former Goldman Sachs and IMF employee, is pursuing. You cannot easily access his written memos on this because the IIF forces you to pay for them. However, there is nothing novel about his claims and the points he is making are well-known. However, they are points that are worthwhile repeating at loud volume because the implications of the ‘nonsense’ are devastating to the well-being of workers, particularly those most vulnerable to precarious work and unemployment. So while the CANOO is just dredging up old issues I am very glad that it is. The concept of biased estimates of output gaps and so-called ‘full employment unemployment rates’ goes to the heart of the way the neoliberal economists, who dominate policy making units in government and places like the IMF, the OECD and the European Commission, create technical smokescreens to justify their dirty work. The more people find out about the basis of the scam the better. I have been working on this issue (estimating, writing and publishing) since the late 1970s as a graduate student. So welcome Robin Brooks, and make a lot of noise.
It is Wednesday – so just a few observations and then we get down a bit dirty (funky that is). Today, I consider the GND a bit, critics of MMT, Japan, and more. Never a dull moment really. I didn’t really intend writing much but when you piece together a few thoughts, the words flow and so it is. The main issue is the recurring one – the lets have a little, some or no MMT narrative. This misconception regularly crops up in social media (blog posts, Twitter etc) and tells me that people are still not exactly clear about what MMT is, even those who hold themselves as speaking for MMT in one way or another. As I have written often, MMT is not a regime that you ‘apply’ or ‘switch to’ or ‘introduce’. An application of this misconception is prominent at the moment in the Green New Deal discussions. The argument appears to be that we should not tie progressive policies (for example, the Green New Deal) to Modern Monetary Theory (MMT) given the hostility that many might have for the latter but who are sympathetic with the former. Apparently, it is better to couch the Green New Deal in mainstream macroeconomic concepts to make the idea acceptable to the population. That sounds like accepting Donald Trump’s current ravings about the scourge of socialism. It amounts to deliberately lying to the public about one aspect of the economics of the GND just to get support for the interventions. I doubt anyone who thinks democracy is a good thing would support such a public scam. And so it goes.
It is Wednesday – a blog lite day – sort of. I am travelling a lot today and I have a large report to finish. But I couldn’t resist typing out the term “Keynesianisticists”, which refers to those imbeciles who think Modern Monetary Theory (MMT) has any credibility – it hasn’t!. These MMTers types – imbecilic is being kind – are parading around telling people that governments cannot run out of spending power as long as there are things for sale in the currency they issue on a monopoly basis. I have only one word for them – Zimbabwe – well two words – add Venezuela. And Lebanon thrown in! And I should know. I have predicted “9 of the Past 5 Recessions” (a Paul Samuelson quote from 1966). I told people that bond yields would rise sharply, they fell. I told people the share market would collapse, it boomed. I told people the gold price would soar, it fell. But that is nothing compared to what those Imbecilic Keynesianisticists want us to believe. Believe me, I know what I am talking about. They are imbeciles, they are imbeciles, imbecile is too kind a word, they are imbeciles, imbeciles, I am an imbecile … stop the record. Time to catch an aeroplane!
The – Final Report – from Australia’s Royal Commission into to Misconduct in the Banking, Superannuation and Financial Services Industry was released to the public yesterday. The Commission was conducted under highly restricted terms of reference and barely scratched the surface of what goes on in this sector because the conservative federal government that was finally forced into establishing it didn’t want their mates to be exposed. Even so, the Report reveals massive fraud, deception and all manner of cheating behaviour from the major players in the financial sector. But its recommendations are pathetic. It is highly likely that no-one will go to jail for their criminal misconduct and no board member will lose anything as a result of their incompetence. Yet, if an indigenous Australia commits a minor infraction they go straight to jail to not pass go! It is also clear than commentators who appear in influential media publications and predict the worse then steer their readers to financial services they offer themselves should be held to account for the veracity of their claims. If a commentator is making money from their predictions then they should be subject to professional negligence claims if these predictions are systematically incorrect. That shift in law would prevent outlandish and wrongful commentary entering the public domain and influencing the way unsuspecting and/or unknowing customers invest their savings.
Remember back in early 2009, when the then head of the European Central Bank Jean-Claude Trichet (boasted that the “euro … is a success … it helps to secure prosperity in participating states”. He was still making these claims in October 2018. At an event in honour of he and former German finance minister Theodor Waigel, organised by the Banque de France, Trichet said that “the euro is a historic success … in terms of credibility, resilience, adaptability, popular support and real growth during its first 20 years is impressive”. He particularly singled out the “delivery of price stability”. Well the latest data confirms beyond doubt that the ECB has failed to deliver on its price stability charter. Further, the descent back into recession in Italy and probably Germany in the December-quarter 2018 tells us that this reliance on monetary policy to stimulate growth while maintaining ridiculous levels of fiscal rectitude has undermined growth and unnecessarily condemned millions to unemployment and rising poverty.