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Friday lay day – the tide is turning but there is a long way to travel yet

Its my Friday lay day so less blog more other things. I noted yesterday that I can sense that the tide is turning in the policy debate. There is now increased commentary that talks up the need for larger deficits and claiming we should not be worried about debt ratios and all the rest of the irrelevant financial ratios that blight the political capacity of governments to maintain high levels of employment and growth. The IMF and the OECD is increasingly urging governments to spend more on infrastructure even though they retain their blighted (and wrong) notion of ‘fiscal space’. Just a few years ago these organisations led the charge for austerity. The evidence has not supported their previous zeal. While those who desire a more evidence-based and theoretically consistent macroeconomics debate applaud the shift in rhetoric and sentiment, there is still the danger that the debates will be based on erroneous principles or blurred reasoning. It is good that the tools and arguments of Modern Monetary Theory (MMT) are being use in the mainstream media to analyse important economic issues. But we also have to be careful to make sure our stories that accompany those tools and concepts don’t just create more fog – and resistance. The evidence suggests that there is still a long way to travel yet … but the tide is slowly turning. I will just keep at it!

There was an article this week (October 28, 2015) from a mainstream financial commentator in the Fairfax media (Malcolm Maiden) – The D word: Suddenly it’s safe to use it for infrastructure – which is representative of this new tide of opinion.

The article basically argues that there is a growing relaxation about government debt. He says:

that both the government and the opposition are not only talking about ways to create the right conditions, but talking about the government taking on new debt …

The scaremongering about fiscal deficits that has characterised federal politics over the last 5 or so years appears to be abating.

There have been some immediate changes in Federal policy since Tony Abbott (a master scaremonger) was sacked as Prime Minister by his own party.

Within their mainstream framework:

both sides now are … acknowledging that with interest rates and government bond yields still close to record lows, government debt funding is part of the solution …

The journalist says that “having both sides talk openly about Commonwealth debt funding for infrastructure is a big step forward”.

The argument is full of mainstream flaws but still it is light years ahead of where the debate has been in the past decades where government surpluses were revered and deficits and increased debt considered to be the exemplar of irresponsibility and catastrophe.

As another example, the sectoral balances are now featuring in the UK Guardian. The article by David Graeber (October 28, 2015) – Britain is heading for another 2008 crash: here’s why – uses the sectoral balances framework to suggest that the pursuit of fiscal austerity and the negative consequences for non-government balance sheets that arise from that policy orientation will generate another financial crisis.

David Graeber is an anthropologist.

I understand the limitations of an 800-word Op Ed space, which is why the blog platform is more appealing. But within that sort of constraint there is no room for error – by commission or omission.

The article is mostly correct although doesn’t provide enough insight for a non-educated (in this field) reader to fully grasp the argument.

David Graeber is correct that our understanding of macroeconomics is blighted by the role of taboos. I considered the role of taboos in my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015).

As the story goes, the British explorer Captain Cook introduced the word taboo into the English language after observing Tongan society in 1777.

There is a very detailed and diverse literature on the concept of taboos in western society. We learn early in life the things we can say and do in polite company, and those things that will attract opprobrium as forbidden behaviour.

We isolate individuals who step over these rather indistinct lines and consider their behaviour aberrant. Taboos are ways in which the status quo reinforces itself and resists change.

But taboos are not inscribed in marble and as social values evolve so does the list of taboos. Further, while there are some things that all societies and cultures consider to be taboo, there are other things that are culturally specific.

Dominant hegemonies also isolate options, as taboos, if they consider they would undermine their capacity to maintain ideological control over public policy.

In relation to macroeconomics, I might disagree with David Graeber that “the greatest taboo of all” relates to fiscal policy (taxation and spending). I still think that the ‘money printing creates hyperinflation’ is the basis of the greatest taboo facing a currency-issuing government, and the fiscal policy antagonism is seen as a lesser, though significant issue.

But that is by and by.

In this era of ‘anti-knowledge’ there are some huge myths surrounding the role of fiscal policy.

David Graeber produces a graph showing the UK sectoral balances – which are decomposed into the external balance, the private domestic balance and the government balance.

We should be clear what these balances actually are. They represent the difference between income (revenue) and outlays (spending) for each of the three major macroeconomic sectors. The external balance and the private domestic balance are decompositions of the non-government balance.

The government/non-government dichotomy is the most aggregated relationship in macroeconomics.

Importantly, these balances are not levels of spending or revenue flows. So a 2 per cent government deficit as a percent of GDP could be associated with very large government spending (and revenue) as a proportion of overall GDP just as much as it could be associated with a very small government relative to the rest of the economy.

The example might be as follows (I know it is extreme):

Aggregate Case A Case B
GDP $1000 $1000
Government Spending (G) $900 $100
Government Taxation (T) $880 $80
Fiscal Balance (G – T) $20 $20
Fiscal Balance as a percent of GDP 2.0 2.0
G as a percent of GDP 90% 10%

The balances also do not assume a constant GDP. Indeed, it is the movements in national income (GDP) that ensure that the balances maintain their unique relationship which is summarised by the statement:

Government deficit (surplus) exactly equals the Non-government surplus (deficit).

But that equality can occur with vastly different levels of GDP and rates of GDP growth.

So if we consider the sectoral balances to be exactly like a zero sum game (the example in the Guardian article is that there are only 40 Poker chips available) then we might get some false perceptions of what is going on.

David Graeber say that the sectoral balances just an application of maths rather than theory. Which on one level is correct but on a more intrinsic level completely mistaken.

How for example, if there is external balance (zero current account deficit), does the private domestic sector surplus increase $ for $ as the government deficit increases.

The answer is that we have to have theories of national income determination. First, we have to understand that the players in these balances are hardly equal in terms of their capacities within the monetary system.

The government issues the currency, which the non-government sector uses. The capacity to issue a currency means that the government is the only player in this story that can increase or decrease net financial assets in the monetary system by dint of its net spending decisions.

When it spends a $1, non-government net financial assets increase by $1 irrespective of the form in which those assets are held. It is anything but a zero sum game.

An increase in the government deficit, for example drives an equal increase in the non-government surplus because the non-government sector increases its income relative to its spending. How do we know that? Theory tells us that saving is a fucntion of income and an increased public deficit stimulates increases in national income, which promote higher saving.

Net spending decisions in the non-government sector do no change the net financial position of that sector. For example, when the non-government sector is spending more than it is earning, the increased indebtedness overall is exactly offset by an increase in assets overall – every liability must be matched by a corresponding asset within the sector.

That doesn’t mean that the increased non-government indebtedness may not become a problem (which is the point that David Graeber wishes to make). But it means that we have to have deeper than accounting understandings of the national accounts to appreciate the point.

Second, and relatedly, we have to have theories of household consumption and saving and private sector capital formation to understand why income changes impact on the private domestic balance. Accordingly, we learn that household saving is a residual after consumption decisions are taken and are influenced by the level of disposable income.

This is significant because saving was not always considered to be a function of income. Classical theory constructed saving as a function of the real interest rate which Keynes and others in the 1930s were at pains to debunk.

So there is deep theory underlying these balances even though they are by construct an accounting perspective of the measured national income flows.

The use of language is also important.

David Graeber says that:

So if the government runs a surplus, the private sector goes into deficit. If the government reduces its debt, everyone else has to go into debt in exactly that proportion in order to balance their own budgets.

The statement has two flaws. First, as anyone who risks their reputation by doing my Saturday quizzes [:-)] will attest, the Non-government sector cannot be equated with the private sector.

The Non-government sector is the sum of the external sector and the private domestic sector. The former included official (that is, foreign government) foreign transactions.

The correct statement is the one I have above which I repeat to match the quote:

So if the government runs a surplus, the non-government goes into deficit.

But the private domestic sector may, in fact, also be in surplus if the external sector (such as in Norway) is in surplus of
a sufficient magnitude to more than offset the spending drain coming from the government and private domestic surpluses taken together.

Second, the correct statement is that if the government reduces it debt (by running surpluses and not turning over the existing debt upon maturity) the non-government sector has to be running deficits and as a user of the currency that the government issues it has to fund the spending in excess of income. This might involve increasing its indebtedness after it has exhausted other funding sources (drawing down prior savings, selling assets).

But by personalising the statement with the use of the term “everyone”, David Graeber potentially misleads the reader. Everyone means each and everyone one of us. We know he is not referring to the ‘sector’ as a whole because he uses the plural “their own budgets” rather than ‘its budget’.

Applying that meaning to this context would lead to the conclusion that if the government is running surpluses then every private citizen is forced to increase their debt levels, which is clearly not true at all – perhaps not even remotely close to the reality.

Third, the statement “everyone else has to go into debt in exactly that proportion in order to balance their own budgets” is also misleading even aside from the ‘everyone’ problem.

The statement “balance their budgets” in usage means that the spending is equal to income. Households borrow to fund deficits in the spending-income relationship. So when the non-government sector is increasing its indebtedness it is because it is running deficits – that is, spending more than it is earning – and the borrowing is the way it maintains those deficits.

But the sector is not by any constructing balancing its budget in these situations.

He also later makes similar statements such as “if the government manages to balance its books, that means you can’t balance yours” which falls foul of the mistaken individual-sector analogy.

Further, if the government does “balance its books”, then the non-government is also doing the same thing – spending exactly the same amount it earns. And if the government fiscal balance is zero, the private domestic sector could still be in surplus if there is an external surplus.

So his rhetoric, which is an attempt to ‘personalise’ the sectoral balances fails. It is as equally fraught as comparing the government to a household when discussing is ‘budget’.

David Graeber then proceeds to inform the reader that there are distributional implications within a sector of the increased indebtedness that would accompany a fiscal surplus.

Once again he falls into the trap of equating the ‘private’ sector with the non-government sector. That conflation is problematic.

There are similar ‘mistakes’ when he talks about governments taxing people to pay off debt. But I will leave that for now.

It also appears that David Graeber borrowed a graph from one of my earlier blogs – The non-austerity British Labour party and reality – Part 2 (without credit I should add).

But the lack of attribution is not the issue. Rather the fact that in my own discussion of my graph I specifically talked about the private domestic vulnerability increasing when governments ran surpluses if there were external deficits.

The three recessions before the GFC – the Roy Jenkins’ austerity in the late 1960s, Nigel Lawson’s austerity in the late 1980s and Gordon Brown’s fiscal squeeze in the late 1990s – were all associated with increasing external deficits, which guaranteed that the fiscal surpluses were also associated with rising private domestic indebtedness.

The fiscal surpluses would not have had the same impact if there were strong net exports, for example.

So when David Graeber conflates government surpluses with increased “private debt” he is missing an essential element in the story. The increased precariousness of the private domestic sector also requires an increased financial exposure to the external sector via the current account deficits.

It was the deterioration in the private domestic balance sheet that has caused the period of appalling economic performance since the GFC. The unsustainable private debt accumulation was not just the result of a few periods of fiscal surplus.

I agree that the same dynamics are in place again – the government is relying on increased private sector indebtedness for growth as it engages in fiscal austerity and that that strategy is doomed to fail.

Eventually, the private domestic sector’s willingness to increase its level of indebtedness will stall as will its spending. Then the fiscal drag will be shown to be unsustainable.

But you cannot leave out the external sector from this narrative as noted above.

Conclusion

So while it is good that the tools of Modern Monetary Theory (MMT) are being use in the mainstream media to analyse important economic issues, we also have to be careful to make sure our stories that accompany those tools don’t just create more fog – and resistance.

ARC Grant Success

I mentioned a few weeks ago how research groups within Australian universities have to rely on gaining grants from increasingly competitive funding systems for their on-going existence. My research group is no exception. All our funding is derived from grants that I am able to win from various funding agencies and schemes.

Today, my colleague at Griffith University, Professor Scott Baum and I were awarded a large Australian Research Council (ARC) grant which will help fund our work until the end of 2018. This is the apex of the funding schemes in Australia and typically provides three-year funding flows of some significance.

Scott and I were also successful last year in the same funding scheme and the funds flowing from these two grants will allow me to continue supporting the researchers at my research centre – the Centre of Full Employment and Equity (CofFEE).

The project for which we were successful this year:

… explains the nature of individual employment dynamics during and after the global financial crisis in the context of the social and economic characteristics of individuals and the characteristics of the local labour markets in which they operate. Understanding how the dynamic paths through various employment states vary according to both individual (people-based) and place-based influences has important implications for the development of sustainable labour market policies and reducing the impact of disadvantaged employment outcomes. These issues are investigated using new functional economic regions and state of art modelling. The project seeks to improve policy responses to and academic understanding of uneven employment outcomes across Australia.

Technical stuff. But then the funding agencies won’t fund Modern Monetary Theory (MMT) (yet!).

I also note that last year the Federal Government funded ARC distributed $A250,044,435 whereas this year (for grants starting in 2016) the pool was cut to $244,935,035 and the success rate for applications dropped. So much for our innovation nation aspiration.

But at any rate, a happy day for our research group – so we need some music …

Music – Social Message from Skully and Bunny!

This is what I have been listening to this morning while I have been working. It is from the foundation members of the Jamaica all Stars, which brings together some of the greatest recording artists in Caribbean music history.

Noel ‘Skully’ Simms and Arthur ‘Bunny’ Robinson feature on this track, which was released on 7 inch disk in September 2014 (Cubiculo Records).

Skully Simms is blind and was one of the original Jamaican recording artists. He started recording in the early 1950s and is still going.

He is known for his vocals and keteh drumming techniques (which were the foundations of mento music, the 1950s precursor to ska then rock steady then reggae) and features on many top recordings as a percussionist.

This song – All Rudies in Jail – showcases their gorgeous harmonies.

“Be a good rudie, listen to your mother and your father. And don’t be a rudie. If not the police will come at you”.

Here is a great interview with the pair who were school mates.

I love Skully answering the phone during the interview and then at 3:11 they break out into a great duet reprising their first audition. Beautiful.

Saturday Quiz

The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.

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    This Post Has 31 Comments
    1. Since you mentioned the Saturday quizzes, and the implications to my reputation, I want to make a few points. Before yesterday I would have said- just because I comment about a question does not mean I got the answer to that question wrong. That would have been the case only 95% of the time.

      Last night I had the fortune to watch the “debate” amongst the Republican candidates for president here in the U.S. It turns out that ALL of my answers have been correct and any discrepancy in your tabulations is due to the fact that you asked the wrong questions. Plus, those questions were probably biased in a liberal nefarious way, but that doesn’t matter since the answers were right even though the questions were wrong.

      I trust that you will fix your quizzes to reflect my correct answers in the future. I am also thinking that the anti-spam question for comments should be included in the quiz. Then I could be right 180% of the time.

    2. Taboos are an interesting subject.As is religion which is closely related
      These phenomena are just the tip of the iceberg which is the inability of Homo Saps to come to terms with reality without inventing convenient self serving stories. Of course both taboos and religion tend to develop whole industries around them. Then self interest enters the arena with predictable results.
      I support anybody who exposes irrational thought and behaviour regardless of their motive.
      Dark areas need light.

    3. Horrified that you think we need growth (but not surprised)

      I come from a country which has experienced massive and destructive growth and depression over the post war period.
      The memory of this convulsion is seared on Irish minds whether they consciously realize it or not.

      Growth is needed under a usurious system only.
      The modern data is very clear in Ireland.
      A increase in the rate and amount of extraction in the 80s and beyond drove the wasteful finance capitalism model into the stratosphere…….be it house construction (because of a lack of purchasing power rather then house scarcity )or international aviation growth.
      The recent increase in the amount of extraction (19 billion net subtraction of taxes in 2013 and 21 billion last year) is clearly fueling the current pointless rise in the % of transport with respect to total final energy consumption.
      Finance capitalism is the mobilization that you desire.
      Its mission is to destroy civilization.
      To reshape society in its own demonic image.

    4. Mephistophilis is a demon which Faustus conjures up while first using his magical powers. Readers initially feel sympathy for the demon when he attempts to dissuade Faustus from giving his soul to Lucifer. Mephistophilis gives Faustus a description of hell and the continuous horrors it possesses. He wants Faustus to know what he is getting himself into before going through with the plan.

      “Think’st thou that I who saw the face of God
      And tasted the eternal joy of heaven
      Am not tormented with ten thousand hells
      In being deprived of everlasting bliss?
      O Faustus, leave these frivolous demands
      Which strikes a terror to my fainting soul!” [29]
      Sadly, his attempts fail with Faustus believing that supernatural powers were worth a lifetime in hell.

      “Say he (Faustus) surrender up to him (Lucifer) his soul
      So he will spare him four and twenty years,
      Letting him live in all voluptuousness
      Having thee (Mephistophilis) ever to attend on me” (Marlowe 15)
      Some scholars argue that Mephistophilis depicts the sorrow that comes with separation from God. Mephistophilis is foreshadowing the pain Faustus would have to endure, should he go through with his plan.[30] In this facet, Faustus can be likened to Icarus, whose insatiable ambition was the source of his misery and the cause of his plight

    5. I think that it was Michal Kalecki who first analyzed the economy in terms of sectoral balances. He also assumed that workers savings where negligible, which is fairly realistic, since they necessarily must spend most or all of their incime. It was therefore decisions of rentiers and capitalists that determined profits, their level of consumption and investment. He also explained how government deficits and trade surpluses would be in the interest of these classes: they enable their profits to increase beyond the level determined by their level of consumption & investment. German capitalists seem to excel at this game.

    6. “The IMF and the OECD is increasingly urging governments to spend more on infrastructure..”. That makes me wonder whether the latter two bunch of clowns ever do anything other than repeat the conventional and usually flawed wisdom.

      Some countries doubtless need better infrastructure, but that’s for the long term. What’s absurd is the currently fashionable idea that RECESSIONS should be dealt with with infrastructure spending. The flaw there is that infrastructure spending normally cannot be suddenly increased because most such projects are not shovel ready. Nor does it make sense to suddenly stop building a road or bridge just because a recession comes to an end.

    7. “The correct statement is the one I have above which I repeat to match the quote:

      So if the government runs a surplus, the non-government goes into deficit.”

      That may be generalised further I think.

      “If the Currency Issuing sector runs a surplus, the Currency Using sector goes into deficit”

      That then encompasses the Eurozone, which has no ‘currency issuing government’. The whole supply is managed by ECB liquidity swaps.

    8. “What’s absurd is the currently fashionable idea that RECESSIONS should be dealt with with infrastructure spending. The flaw there is that infrastructure spending normally cannot be suddenly increased because most such projects are not shovel ready.”

      The flaw is to lump infrastructure spending into one category.

      There is the *required* infrastructure spending which should have first access to resources and requires space in the economy regardless of the cycle. These are the roads and the schools, etc. The stuff you’d normally call ‘infrastructure’.

      Then there is the ‘nice to have’ infrastructure spending – which is just capital spending at a fixed price and therefore will vary in amount over time. So you don’t need to replace the central reservation barriers on motorways with concrete blocks, but it is a nice to have. Therefore when the private sector has finished building enormous skyscrapers and casinos the construction works always have a fixed price offer of a few dozen miles of motorway reservations to use up the spare concrete capacity on.

      With only a little imagination you can stretch the ‘nice to have’ further – insulating council houses, repairing the Palace of Westminster, creating works of art (tangible assets), creating software (intangible asset). There are many things you can do before you move onto the bridges to nowhere and ornamental improvements to parks and gardens. All of which is ‘capital spending’.

    9. Congratulations on new funding! It must seem at times Sisyphean, but thanks for your blog and for your refusal to quit pushing that dumb rock!

    10. If you want to see how pointless artificial growth truly is look at Irish energy stats.

      In 1990 59.83% of energy consumption in the residential sector was coal and peat direct burn. (Totalhousehold co2 emissions from houses : 10,764)
      In 2011 16.59% of consumption was peat and coal (total household co2 emissions from houses 10,479…..)
      But yet there is a drive to eliminate coal and peat in the interests of co2 reduction ( see yet another scarcity scam)
      The housing stock and size of house exploded for sure.
      But the mercantalism that drove this race for houses was a result of the continued and increased net taxes subtracted from the jurisdiction creating a consumerist orgy.

      There never was a shortage of houses , at least until external labour began to follow this capital fungal growth after 1994~.
      There is no need for “growth” in Ireland.
      The growth seen since 2012~ has created a artificial shortage of houses even though 240,000 remain empty.
      What is needed is distribution of purchasing power.

      Bills mobilization of resources will not achieve this.

    11. Agreed on Graeber getting confused, and hence confusing to readers. However great credit to him for getting sectoral balance diagrams out there in mainstream media.

      As an aside I was really disappointed in Ann Pettifor’s negative tweets on Graeber’s article…

      “The concept of sectoral balances belongs to the sphere of accounting, not economics. I am not comfortable with it.”
      “Uncomfortable because its a “snapshot” at any given time..and doesn’t explain causation.”
      “As it implies a form of automaticity that cannot explain economic causes, its not my preferred explanation.”

      …One wag tweeted in reply “Step 1: get the accounting right. Step 2: look for causation. That’s science.”

    12. There are many things you can do before you move onto … ornamental improvements to parks and gardens.

      Yet these are things that distinguish a great civilization and a great period from the also-rans.

    13. The fact that so many comments on Graebers piece, including such a tragic one from Pettifor noted by Stephen, shows to me that there isnt TOO much point in going into any more depth and pointing out the errors hes made.
      I know enough people who would at least start to open up if they saw that graph he uses in an article every week rather than DEFICIT, EXPLOSION, BANKRUPT, which currently take their meagre attentions.

      Unfortunately thats the way the perhaps 10-20% of people who are even REMOTELY interested are. As to the majority, they arent even bothered with the headline words and tend to skip to the glamour pages. We should remember that living in a democracy its incredibly hard to get people on-side.

      As an aside you might get a spike in views bill – john mauldin who has a huge readership has linked this http://bilbo.economicoutlook.net/blog/?p=5537 yesterday so hopefully some newbies will be along soon.

    14. Posted on FACEBOOK, but relevant to the Billy Blog….

      Bernie Sanders should be given the Presidential Medal of Freedom for breaking the jinx laid on Americans by our “frightened ones” –i.e., by brazenly using the word “socialism”. Ever since the lunacy of McCarthyism, our “frightened ones” have waved and flailed their arms with the “commie behind every tree” nonsense—and it has crippled America, and paralyzed our advancement into the 21st Century. As every informed American knows, we have a blended economy—[a blend of socialism and capitalism]–and capitalism, in America, would fold like a cheap tent if we didn’t! Ref: OUR GREED AND IGNORANCE, Amazon/Kindle

    15. Update: Ann, in response to tweet by Stephanie K (to effect that Ann wasn’t really disputing the reality of accounting identities), has toned it down a bit…

      “Precisely.While economics cannot violate identities & while useful..they don’t IMHO tell us ( & the public) enough. ”

      But Bill’s posts are full of nuances (as are Stephanie’s and other MMTers), which makes me wonder is Ann’s view really any different to that of MMT after all? Is so very frustrating that fellow PK economists so misread ‘simplistic’ MMT. Is it that they are just so fond of hand waving and not reasoned argument based on concrete empirical evidence?

      Hate to break it to Ann, but hand waving ‘deficit dove-ism’ is way more confusing to Joe Public than compelling hard evidence.

    16. Bill, I wanted to say first that I really enjoy reading your posts.

      For me, the main problem with Graeber’s argument is that it looks at net private sector debt rather than gross private sector debt. The real problem is gross private sector debt, in that a) it cause financials instability and b) the servicing of it drains the economy of demand by transferring money from people with a high marginal propensity to consume to those with a low one.

      Gross private sector debt over the last decades has been growing at around 10% of GDP per year, even as public sector debt rose at around 4% of GDP. p.a. This is the real cause of the 2008 crisis as well as the low interest rates, high asset prices and rent seeker’s economy that we now have.

      The problem with government surpluses is that it takes away money flow with a high multiplier. That demand needs to be replaced and the only way to do so is with private sector debt. This has a low multiplier. Much much more private sector debt is needed to replace government deficit spending. It is certainly not a 1 for 1 relationship as Graeber suggests. In fact, as I discuss in the post below, there is some empirical evidence that it is closer to 8 to 1 (on a gross basis).

      http://www.notesonthenextbust.com/2015/06/the-government-must-run-deficits-even.html

    17. Having helped on this draft there was no way to squeeze this into 800 words of text and 3 minutes of video. If MMT wants to spread it must be willing to work with simplifications. Most of those in this text were derived from Kelton. With those constraints I don’t think we did a terrible job.

    18. Dear Phil (at 2015/10/31 at 12:16)

      There is a difference between simplification and error. Unfortunately, there were errors in the Graeber article. Any mainstream economist who bothered could tear the article apart and associate the errors with Modern Monetary Theory (MMT) and I do not consider that to be desirable. Even within 800 words the message could have been stated in simple terms without the errors.

      I will leave it to Stephanie Kelton to state whether she has been faithfully rendered or not.

      best wishes
      bill

    19. No mention of net national income relative to net national product.
      Targeting Gdp growth in national accounting leads to total disaster.
      Although net national income and product is are not recorded prior to 1995 you can see the continual and widening gap from this period (this hole was filled with domestic bank credit) , a breakdown of this dynamic between 07 and 10 and a replacement of domestic credit with outside credit via ever more extreme mercantalism and outside rentier (property and commons seizure)

      Bills inflationary rise of Gdp leads to increase in costs (even if Modest)
      For example if the people can only afford products deflating at 3% per annum while a employment scheme inflates products at 1% per annum then the products become unaffordable even when a deflationary environment persists.
      The objective should be about closing the production distribution and consumption loop and not growth or employment.

    20. I would plead with you to rewrite the essence of Graeber’s piece correctly, but in language simple enough for the layman. I have a hunch that will take more than 800 words, but I would hope it could remain relatively brief.

      It’s vital that some of these concepts make it into the discussions of ordinary people – but more simplicity is required for that.

    21. Plot net national product vs net national income over time (1995-2014)
      Note the widening of the gap ( waste gap) until breakdown , then resumption of the consumer war economy post 2010 bailout.

    22. My Irish Cso net income / net product graph was eaten.

      We can speculate that it is the Euro / London agenda to push Transport / distribution costs beyond 30% and then 40% of total final energy consumption so as to link their europroject together (via euro mobile labour Etc)
      no matter what the cost.
      This rise to absurd transport TFC % is the defining characteristic of modern neo liberal economies…. Always and everywhere creating a domestic production consumption crisis as distribution costs eat all the pies.

      Austerity can be defined as the rationing process required to sustain the consumer war economy.

      We can see this process happening in the Ireland of 1973 (a slight Blip) with a subsequent car boom and 80s crash.
      Reaching its nadir in 1988~
      I remember a car boom in 1989 and 1990 while young people left for London (including my brother)
      There was a actual real fall in the population between 1986 and 1991 ( only period in modern Times) increasing the domestic pet capita energy consumption.
      Very unlike today’s population movements where Irish labour vacates the burning building only to be replaced by a globalised (rather then British)wage slavery army.

    23. Write it in 800 words then. I’m not being sarcastic. If the message must be spread then it must be spread in popular media. Your typical word count is 800 and your typical video exposure is 3 minutes. So if you think it can be done better write it up and we can use it as a template.

    24. Also Bill, if you do choose to put such a framework together please do consider that your audience is not a panel or jury that will listen to the high level debates between a mainstream and a non-mainstream economist. Rather they are people who are swayed by metaphor and analogy. You yourself have suggested that this is the direction to take this rather than concerns over rigour. Let’s keep that in mind. Please.

    25. Well I was pleased to see it in the Guardian. Mistakes and all.
      Yes he might have mentioned MMT or Wynne Godley and could written a more accurate piece but I can’t see what purpose it serves to badmouth it now or call for rewrites. It just pisses everyone off and anyone thinking another version is going to get printed in the Guardian is living in La La land.

    26. Congrats on the grant. I remember a while ago you wrote about some modelling work with some very interesting graphics (I think it was related to the topic of this grant, anyway).

    27. “The scaremongering about fiscal deficits that has characterised federal politics over the last 5 or so years appears to be abating.”

      Yes, but the self-preenng sanctimony about the Howard/Costello fidcal surpluses carries happily on. :-(

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