I am doing the Thursday is Wednesday trick again today, given that I posted Part 2 of my detailed response to enquiries about MMT and what I term the MMT Project yesterday, and that I have promised myself to use Wednesday’s for other writing. I am also quite busy in Helsinki today with commitments so only a short post today. So just a brief comment on the latest fiasco from ‘Mr Spreadsheet’ Kenneth Rogoff as he stares into the abyss of irrelevance and is trying to hand on like grim death to any shred of credibility. He has none. If he ever did, the spreadsheet scandal finished it. But he never did anyway.
Apparently more negative interest rates are what we need
One of the themes I am promoting in my current European and UK teaching and speaking tour is that we are amidst a paradigm shift in macroeconomics, which provides Modern Monetary Theory (MMT) economists with a fantastic opportunity to fill the gap as the old neoliberal consensus starts to fracture.
There are various forces driving this shift.
First. there is clearly an anti-establishment revolt underway as the mainstream Left political parties decay and lose relevance.
They signed their own death warrant when they adopted the mainstream macroeconomics as their centrepiece, claiming they would ‘do’ surpluses bigger and better than the conservatives.
In some nations, while in power, they inflicted the neoliberal austerity more harshly than the conservatives, all in the name of ‘fiscal consolidation’ and appeasing the financial markets.
They also tried to divert attention from that reality by talking incessantly about identity issues.
The only way these parties could continue to claim they were left of centre is because in surrendering to the core neoliberal agenda, they pushed the centre way to the right.
The old conservative stances of the 1950s/1960s now look positively progressive when compared to the ‘left’ parties now who are lost somewhere out in the right.
This lacuna has allow extreme elements on Right to strengthen.
The ‘popularist’ Right movements have provided a coherent response to the widespread and growing—yearning for greater territorial or national sovereignty.
There is a desire among people to regain some degree of collective control over politics and society and take it away from the elites who have crafted policies to suit themselves.
There is also a desire to ensure flows of capital, trade, and people – that constitute the essence of neoliberal globalisation – do not work against society.
And there is a desire to reverse the neoliberal depoliticisation that has allowed elected governments to divert responsibility to ‘external’ agencies or ‘independent’ central banks for the harsh policy regimes that have undermine our material standards of living and retrenched public services.
In Europe, the experiment with Emmanuel Macron, who was seen as the ‘extreme centre’, has failed. The on-going struggles with the gilets and the repressive response from state instruments such as the police and troopers to their demonstrations is evidence enough.
Britain is now free from the neoliberal dictates of the European Union. They can now call the shots.
And we have the real prospect of a Trump versus Sanders Presidential election later this year, if the DNC doesn’t get its way and sabotage the latter, which would represent a major shift in American politics.
These are two outsiders, largely divorced from the mainstream Republican and Democrat elites, but representing them all the same. Both happy to abandon the neoliberal austerity.
Second, there is now widespread acceptance that economic policy is creating dissonant outcomes. Growth is faltering, inequality is rising, and precarious work is on the rise.
Even central bankers are now making political statements, making a mockery of their so-called ‘independence’ (or exposing the lie that they were independent).
They have admitted that monetary policy has nowhere to go and is now an ineffective counter-stabilisation tool. It was never effective but at least they are making that reality public now.
Their calls for a return to fiscal dominance is also driving the paradigm shift.
It is obvious that monetary policy has been proven to be ineffective. The expansion of central bank balance sheets as they funded deficits (via QE) in search of higher inflation rates has failed.
The ECB, for example, has systematically failed to achieve its primary policy goal – price stability – but, meanwhile, has been effectively operating outside of the Treaty by funding government deficits.
Finally, the extremes that monetary policy have been pushed as governments refuse to engage in fiscal interventions of any sizeable scale, are now undermining the top-end-of-town – financial capital.
The latter are finally realising that listening to mainstream economists is a bad bet and the exclusive use of monetary policy has pushed the parameters (rates, yields, etc) to levels that actually undermine profitability in the financial sector and push large insurance and pension funds to the brink of insolvency.
They are also calling for an end to the monetary policy madness and for governments to start investing significant amounts on public infrastructure to repair the damage that austerity has created, and, obviously, to give them investment opportunities that will make profits.
All these factors reflect different motivations but they are pushing the debate in one direction.
We are now entering a period of fiscal dominance.
Only Modern Monetary Theory (MMT) has advocated the effectiveness of fiscal policy against massive mainstream opposition.
That is the fact.
Of course, all this presents a wee problem for the mainstream macroeconomists who have been caught out by the shift.
Several of them are now trying to save face by publishing papers claiming that they advocated fiscal policy interventions all along and stealing ideas from MMT and other writers to fill the gap in their public record.
The ‘we knew it all along’ strategy.
They just look like sneaky fools.
But that is always the case when a paradigm shifts gets underway. Some of the old guard will try to stay relevant by attempting to capture the emerging challenger’s ideas and presenting them, unreferenced, as if they were their own.
Meanwhile, they actively attack the challenger in the media to try to discredit it in the eyes of the public as they steal its ideas and relabel them as their own work.
Enter Kenneth Rogoff again. He is working hard on this ‘rats deserting the sinking ship’ strategy.
On March 4, 2019, he wrote a Project Syndicate article – Modern Monetary Nonsense – which was a catalogue of lies.
Next day, he put out another article for MarketWatch – Opinion: Modern Monetary Theory is smoke and mirrors nonsense.
They told us that he hadn’t actually read much of our work.
More recently, he has been busy trying to salvage his place in the debate.
This blog post – Discredited academic dinosaurs continue to seek relevance (December 12, 2019) – analysed one of those attempts published by the UK Guardian.
It seems the UK Guardian has become one of his outlets, which discredits that masthead.
But with Brexit done – I know – there are all the agreements to finalise – but it is done in the sense that Britain has LEFT – the UK Guardian has to publish something I suppose.
So it gives further voice to the Rogoff stuff.
Fighting back all the forces that are pushing the paradigm shift, Rogoff has decided on what he must think is a clever, differentiating strategy.
In his latest UK Guardian article – West Wing-style fiscal policies aren’t the only way to fight the next recession (February 4, 2020) – he writes that fiscal policy should not be used to provide stimulus in a downturn because it “involves messy, hard-fought compromises”.
That is, politicians, who we elect, make decisions after considering the range of views.
Rather he wants the “modern, independent, technocratic central bank” to be in charge. Unelected, unaccountable, opaque and detached from the voters.
It is the typical argument people like Rogoff make. Depoliticise so that democratic choices are swept aside.
But within his argument we see how confused he is.
Earlier he writes:
… that the time has come for activist fiscal policy, given the limits to monetary policy in an environment of ultra-low interest rates. Many leading central bankers also maintain that, instead of just playing its traditional role of deciding the allocation of government spending, investment, taxes, and transfers, fiscal policy can substitute for monetary policy in economic fine-tuning and fighting recession.
So these technocrats in the central banks have admitted they cannot be effective any longer.
That the neoliberal obsession with the primacy of monetary policy has pushed the parameters to ridiculous levels (negative rates etc).
Then he says:
… central banks have succeeded in doing with monetary policy.
The selective quote here is that monetary policy has been “consistent, stable, and predictable”, which he claims is “the greatest innovation in macroeconomics since John Maynard Keynes pioneered demand management.”
Yes, definitely “consistent, stable, and predictable”, but the only problem is that it hasn’t worked.
Even central bankers have admitted that despite building the asset-side of their balance sheet up to ridiculous levels, they have not been able to get inflation close to their price targets.
Because they have been presuming the economy works like the mainstream textbooks say it works. Like Rogoff thinks the system operates.
And the reality is that the mainstream macroeconomics operates in a fictional world.
So for Mr Rogoff, the solution is:
… by finding ways to use negative rates more fairly and effectively.
Tell that to the asset managers in the big pension and insurance funds who are staring at widening maturity mismatches and pushing their companies to the brink of insolvency.
European and UK Teaching and Speaking Tour, February 2020
- Wednesday, February 05, 2020 – Teaching, University of Helsinki – 10.15-11.45, Language Centre in Fabianinkatu room 207.
- Thursday, February 06, 2020 – Teaching, University of Helsinki – 10.15-11.45 Main building, Hall 16.
- Friday, February 07, 2020 – Presentation at Italian Parliament, Rome – details to follow.
- Saturday, February 08, 2020 – Events in Rome with activists – details to follow.
- Sunday, February 09, 2020 – Travel.
- Monday, February 10, 2020 – Breakfast presentation – ‘The future of monetary policies’ – Nordic West Group, Helsinki.
- Monday, February 10, 2020 – Speaking on ‘What is the meaning of political economy today?’ at Think Corner, Helsinki – 17:00 to 19:00
- Tuesday, February 11, 2020 – Teaching, University of Helsinki – 16.15-17.45, Porthania room 723.
- Wednesday, February 12, 2020 – Teaching, University of Helsinki – 10.15-11.45, Language Centre in Fabianinkatu room 207.
- Thursday, February 13, 2020 – Teaching, University of Helsinki – 10.15-11.45 Main building, Hall 16.
- Friday, February 14, 2020 – Presentation, Dublin.
- Saturday, February 15, 2020 – Presentation, Dublin.
- Sunday, February 16, 2020 – Athens.
- Monday, February 17, 2020 – Meetings and Presentations, Athens.
- Tuesday, February 18, 2020 – Paris, Reception, French Senat, Palace of Luxembourg – 18:00.
- Wednesday, February 19, 2020 – Paris, events and interviews – details to follow.
- Thursday, February 20, 2020 – Paris, Presentation to French Senate Commission, Palace of Luxembourg – 8:30-10:30.
- Thursday, February 20, 2020 – London, GIMMS presentation, MMT education – afternoon – Details.
- Friday, February 21, 2020 – Manchester, GIMMS presentation, The Harwood Room in the Barnes Wallis Building, University of Manchester, Details.
- Saturday, February 22, 2020 – MMTed Masterclass Workshop, London, for Details and Tickets. Limited spaces available.
- Sunday, February 23, 2020 – Amsterdam – travel home.
This tour is fully booked. I will be back in Europe in June-July 2020. If you want to book an event or a meeting, then please contact me.
You can see the current June-July schedule – HERE.
GIMMS Events, London and Manchester, February
As more detail, to encourage you to support these public events in the UK:
1. February 20, 2020 – I will speaking in London about the recent political events in the UK and how an understanding of MMT is essential to rebuild a progressive political force in Britain. Criminologist Steve Hall will also talk and will focus on the current rise of populism in the West.
The event will be at the Unite the Union (Diskus Theatre) in central London and will run from 13:30 to 17:00.
For – Details.
2. February 21, 2020 – The same show moves to Manchester.
The event will be at the Barnes Wallis Building (The Harwood Room) at the University of Manchester and will run from 13:30 to 16:30.
For – Details.
This is a teaching seminar exclusively and will suit those who want to build their understanding of macroeconomics from an MMT perspective.
For more details – MMT Masterclass, London.
There are still vacancies available.
Music for the cold
I am away from home at present – working in Finland and doing other events around Europe and the UK. It is cold here.
And yes, it is time for Santana’s Moonflower album – especially Track 5 – I’ll Be Waiting – which has some great guitar playing (although that mostly happens on a Santana track).
It was released in 1977 and I think I purchased it soon after. At the time, I was a little over the Latin Jazz Fusion era (which this album remained embedded within) but I still liked several of the tracks.
Europa (Track 4 on the flip side of the first album – it was a double album) is one of my favourite pieces of music.
Anyway, good antidote to the cold weather and being away.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.