Marshall Auerback on Why Quantitative Easing Won’t Fix the Economy Posted on September 3, 2010 by Yves Smith Via Bloomberg: View the segment here. Post navigation ← Eurobank Stress Tests: A Failed Confidence Ploy Fannie to Crack Down on Foreclosure Delays → Subscribe to Post Comments 47 comments Patriot September 3, 2010 at 2:53 am Nice to see the jobs guarantee getting exposure in the mainstream press. mannfm11 September 3, 2010 at 5:15 am I notice he works for PIMCO. Marshall has written a lot of stuff that has been right on. I don’t like the idea of government being in anything, but if they can figure out improvements that make sense, why not. If they are going to pour resources down the drain, forget it. I have studied the models of aggregate demand put out by Steve Keen. Prices take care of a lot of aggregate demand and what much of this extra debt props up are asset prices, not consumption. Propping up asset prices begs for more debt, not less. Guys like Bill Gross have made a fortune on more and more debt and since this mess started, have been begging for a bailout. Auerbach hits one thing on the head, the Bernanke policies and the government deficits are going to wreck the pension industry in the US, including the life insurance business, which can’t fulfill its policy guarantees at 1%. Matt Franko September 3, 2010 at 8:44 pm Guys like Bill Gross have made a fortune because they started their bond business in earnest in 1981, look at the long term interest rate chart since then….I think Taleb calls it “survivorship bias”. Resp, froggy September 3, 2010 at 6:54 am the link is broken, but here it is u=on you tube. http://www.youtube.com/watch?v=pTgi7DyE2Dc marcf fleury September 3, 2010 at 7:34 am hmmm…the whole “guaranteed” employment thing, will be perceived as a communist policy recommendation. Ironically the US of A would rather wage war and employ people that way, that doesn’t look like communism, quite the opposite. But it is QE as it was applied by Reagan (spend on defense). I find the dismissal of QE as a mere accounting trick a bit reckless. Yes, it is a mere accounting trick (hence its attractiveness) but it has real world impact. 1/ Securitized markets, which are so important to the level of liquidity were kept on life support through QE. QE has kept liquidity going. 2/ it has stabilized markets when the minsky bubble burst. The death dynamic is the fisher capsizing, where any attempt to deleverage leads to markets cratering. The the debt/asset ratio increase as asset prices plunge as you lower you debt. I for one fully credit the FED and QE for avoiding this scenario (so far). This means that the process of deleveraging is one that is always in equilibrium and not in total collapse. The maintenance of orderly markets and unwinding of leverage is important to the real economy. stf September 3, 2010 at 12:57 pm True, but QE2 is a pure swap of Treasuries for interest earning reserve balances. And even QE1 didn’t create any net financial assets for the non-govt sector–but did provide liquidity to a number of markets, mostly to keep credit spreads down. That’s really the only way QE can be effective–reduce interest spreads or lower Tsy rates and hope that reduces credit spreads–otherwise it’s a misnomer. joebhed September 3, 2010 at 8:04 am On the question of whether QE itself is an axe or a scalpel in terms of medically-analogous monetary policy, folks should have a read of: Innocent Frauds Meet Goodhart’s Law in Monetary Policy here: http://mpra.ub.uni-muenchen.de/23961/1/MPRA_paper_23961.pdf Thanks. F. Beard September 3, 2010 at 8:47 am Yep, a fiscal solution is needed but why waste effort on government hole digging and filling? The problem is excessive indebtedness of the population. The cause is the government backed counterfeiting cartel. A solution would be for the government to pay off that debt with new debt-free legal tender fiat. Oh, and give an equal amount to the savers lest they howl with some justification since they have been cheated of honest interest rates by that same government backed banking cartel. Government backed fractional reserve banking is crooked. Is there any wonder that it causes problems? joebhed September 3, 2010 at 10:45 am Totally agree. Unfortunately, the MMTers and Neo-Cists are oblivious to both the real problem of debt-saturation and the fallacy of the debt-money system. They see the symptoms of those failures (debt-saturation, personal/business bankruptcies, unemployment, lack of wages and benefits, deficit-hawking Austerians, etc) as a failure to understand the structural financial relationships, and their solutions, while commendable, fall far short of retaking control of the national economy via truly sound monetary policies. Marshall, Warren, Scott, Bill M., etc, all fortunately work from a premise of QUASI-monetary sovereignty, which provides the utility of public purpose deficit-spending without the issuance of debt. However, they see no problem with private debt forced upon the citizenry by the immoral debt-money system, and I believe they all favor maintaining what they call the private credit system – this being claimed as if public money issuance advocates do not support private banking, which, of course we do. Here’s my take on the MMT approach, a small part of which Marshall has tried to lay out in five minutes to his unimpressed interviewer. http://www.youtube.com/watch?v=qr96TB7adp8 The Money System Common F. Beard September 3, 2010 at 11:20 am Hey Joe, I watched you video. Though we might agree on bailing out the victims of the current system with new legal tender fiat, I have a different long term solution in mind. I would, (after the bailout) allow government money to be legal tender for government debts ONLY. As for the private sector, I would allow it to create its own moneys but without government backing. That would lead,IMO, to corporations being forced to share wealth via common stock issuance rather than loot it via money creation in a government enforced monopoly money supply. joebhed September 3, 2010 at 11:49 am Only the Congress shall have the power to create the nation’s money, to regulate the value thereof, and of foreign coin. So, if its $US denominated, it belongs to we the people. Let’s disagree on what comes next. I will stick by the Constitution, and the rights won in our War of Independence, collective rights of a sovereign people. I recognize we can change the Constitution, but until we do, I’ll keep the $US. I am OK with capital marketeers wanting to have their own separate private system of money-things, but I as a citizen would demand my right to have my government issue my currency for my national economy. The rest would be a monopoly game – you can play if you want to, but you can’t crash the people’s money system. F. Beard September 3, 2010 at 12:02 pm The rest would be a monopoly game – you can play if you want to, but you can’t crash the people’s money system. joe That’s what I aim for; a separation of government and private money supplies after a bailout of the victims of the current system. That should allow the government to tax but also allow the private economy to grow unhindered and with maximum decentralization and diversity. greg b September 3, 2010 at 12:27 pm I watched your YouTube (very good) but I’m a little gobsmacked by the claim that the Chartalists you mention (Warren, Bill, Marshall) are unclear about how they think about our govt debt. Ive been following these guys for almost a year and I have NO DOUBTS that they are AGAINST the govt issuance of debt with money. They are completely on board with a debt free money system. This is not to say that they see no reason to ever issue govt debt BUT they see NO reason to have the rule that there is $4$ debt issuance with spending or ridiculous debt ceilings. joebhed September 3, 2010 at 5:58 pm to greg I tried to be very clear on the distinction between monetary sovereignty and the limited proposals of the MMTers, who I respect completely. I said they DO propose that SOME level of money creation ought to happen where government Greenbacks provide what I call “the balances formerly known as deficits” to meet our public purpose goals. But Chartalists propose using totally unnecessary government debt-issuance for the purpose of managing the overnight funds rate. As a taxpayer, to me that is NO reason to take $450 Billion out of taxpayers’ pockets every year. Finally, I also said most of them, maybe all, also support the private creation of “debt-money”, the issuance of our national circulating medium first into circulation by private bankers as a debt, when the Constitution gives that right to WE the people and OUR government. After establishing a permanent and adequate supply of money, then let the banks lend it for whatever charge it can bear. Less regulation, more free-enterprise. The MMT focus on the equations of structural finance still leaves a lot of potential control in the same hands as we have today. Just saying. greg b September 3, 2010 at 10:05 pm “But Chartalists propose using totally unnecessary government debt-issuance for the purpose of managing the overnight funds rate. As a taxpayer, to me that is NO reason to take $450 Billion out of taxpayers’ pockets every year” Im not sure where you get this. Bill and Warren both emphatically argue that the FF should be zero. They argue that govt debt issuances ONLY purpose IS for managing the FF rate and therefore useless really, because if you set the funds rate at zero you wont need to “manage” the rate with debt issuance. “Finally, I also said most of them, maybe all, also support the private creation of “debt-money”, the issuance of our national circulating medium first into circulation by private bankers as a debt” If by support it you mean they would do it that way if it were up to them, I disagree, but if by support you mean they see very effective ways to revise the current system without fighting the huge fight of taking private banks out of the picture completely. “The MMT focus on the equations of structural finance still leaves a lot of potential control in the same hands as we have today. Just saying.” Well, yes I suppose it does but the changes they advocate would be profound and reduce the finance sectors influence significantly. joebhed September 4, 2010 at 11:32 am to greg Thanks. Two things: government debt issuances and private debt-money issuances. “Bill and Warren both … argue that govt debt issuance’s ONLY purpose IS for managing the FF rate and therefore useless really, because if you set the funds rate at zero you wont need to “manage” the rate with debt issuance.” To me, the reason the overnight interbank rate ought to be at or near zero is the reality of the existence of an adequate, permanent supply of the nation’s circulating medium at all times, in order to protect the purchasing power of our national currency. No need for government regulation by policy. The implication here is that MMT opposes government debt issuances generally, beyond the previously acknowledged balances that are public-purpose driven government expenditures “formerly known as deficits”. I have never seen opposition generally to government debt-issuance anywhere as part of MMT philosophy. Help me out with that. Thanks. “If by support it (the private creation of “debt-money”) you mean they would do it that way if it were up to them, I disagree”. Well, Bill and others have stated clearly they see no problem with doing exactly that. “, but if by support you mean they see very effective ways to revise the current system without fighting the huge fight of taking private banks out of the picture completely.” So, how far will MMT policy allow the private bankers’ money creation powers to extend? Don’t bother answering because without doubt, they will manipulate their way back to creating ALL the money necessary in the economy, and we will soon return to Status Quo as far as the money power goes. Which was my point. Private debt-money creation will be adequate to prevent the government’s public purpose efforts. No need for government intervention. Stay home. Nothing changes. MMTers might say that it would not matter, as we would have full(??) employment. Monetary reformers would say that our monetary sovereignty guarantees us the RIGHT to NOT have the private bankers indebting the people by lending money they do not have into existence as debt. I repeat, ONLY the Congress shall have the power to create the nation’s Money, to regulate the Value thereof, and of foreign Coin. When the conservative Neo-liberal Milton Friedman can advocate the end of private creation and destruction of the nation’s money, why are progressive-minded fiscal conservatives afraid to do the same? Just saying. Mark September 3, 2010 at 8:55 am Great. Another dig a hole, fill a hole “provocative” insight by son of Kaynes. All because asset prices can not be allowed to fall. Can’t have those losses on the Banks balance sheet discovered. It’s looking like Steve Keen’s models will become the new paradigm. Marshall Auerback September 3, 2010 at 7:11 pm This would be a good place to start for anybody who is genuinely interested in this idea, as opposed to resorting to simplistic caricature: http://e1.newcastle.edu.au/coffee/job_guarantee/JobGuarantee.cfm steve from virginia September 3, 2010 at 9:44 pm Do increases in base money trigger rises in unemployment? http://economic-undertow.blogspot.com/2010/08/residue-of-economy-that-no-longer.html Will anyone in government do anything for anyone who does not make (large) campaign contricutions? This question answers the one about the need for private debt- created money. In order to pay interest on old money new money must always be created. Do the little people borrow much cash into existence? Not so much as finance. Government assists finance as a measure of self- preservation. Industrialization and the illusion of productivity prohibits full unemployment. Productivty is a cultural phenomenon, a style without substance. Having machines do all the work is a Futurama conceit. It’s self- defeating but looks good in black. F. Beard September 3, 2010 at 9:30 am All because asset prices can not be allowed to fall. Mark Yep. The Keynesians seek indirect methods to provide debt relief. The Austrians, OTOH, prefer ruthless liquidation. NEITHER approach is based on principles of justice. Tao Jonesing September 3, 2010 at 10:38 am What Bernanke is doing isn’t Keynesian, it’s Milton Friedman monetarism (Chicago School), which was developed as an answer and alternative to Keynesianism. It’s ironic sad that Keynes’ name is now invoked whenever there’s deficit spending regardless of how that spending arises or who benefits. joebhed September 3, 2010 at 5:41 pm It’s a little of Friedman’s monetarism, after the conversion. In his Fiscal and Monetary Framework for Economic Stability, he advocated the government creation of the money and the restoration of a permanent money system, or as he called it, the end to the private creation and destruction of capital. I believe he advocated the same in his book A Program for Monetary Stability. And his book, Freedom to Choose – his “sound-money” solution therein stated: “Congress shall have power to authorize non-interest-bearing obligations of the government in the form of currency or book entries, provided that the total dollar amount outstanding increases by no more than 5 percent, nor less than 3 percent” per year. Ronnie Phillips’ book on the Chicago Plan includes this: ‘The young Milton Friedman was the best known advocate for the Chicago Plan in the postwar period, writing: “Henry Simons held the view…which I share – that the creation of fiat currency should be a government monopoly.” I hate defending Friedman here, except when he’s right. An end to the private creation and destruction of capital. Sounds like a solution to me. Kathi Berke September 3, 2010 at 10:00 am Auerback is not the first to suggest government spending on jobs jobs jobs as opposed to spending on unemployment benefits, welfare, prisons etc. Let him repeat: THE GOVERNMENT IS INVOLVED ANYWAY. (See unemployment benefits, welfare, prisons, etc.) All these memes (unemployment insurance causes unemployment, the long-term unemployed are unemployable) serves only corporate interests. Do you actually believe everyone in desperate straits deserves what they’re getting? Payback time? So what if a medical emergency puts someone in bankruptcy? Example: a 50-year old teacher whose laid off because his municipality ran out of money (maybe due to investing in interest rate swaps courtesy of whatchamacallit, financial engineering) or because the tax base fell due to perpetual double digit unemployment. Pundits weigh in on “wasteful spending”, “teacher accountability”, “unions are ogres”, cut to the bone until schools close or 60-kid classrooms become the “new normal.” Should he just accept his fate, take on more debt to go to one of the horrible for-profit “universities” springing up all over the place to take advantage of federal funding, then find out he is still unemployable because the private sector will not hire? I don’t know about you but I went to a public school, public university and on to law school and I’m damned glad I got a good education. It helps me as I raise chickens and grow broccoli awaiting the coming hordes of starving, desperate “unemployables”. Unless you think the private sector will provide for the common good, maybe teaching should be funded by tax dollars. Or maybe public education for all is a communist pipe dream. Even Adam Smith believed that government spending was necessary. From Wealth of Nations (Part II, Article II): Of the Public Works and Institutions Which Are Necessary For Facilitating Particular Branches of Commerce The object of the public works and institutions above mentioned is to facilitate commerce in general. But in order to facilitate some particular branches of it, particular institutions are necessary, which again require a particular and extraordinary expense. See? Even the Godfather of Economics believed that government could be a solution, not a problem. eric anderson September 3, 2010 at 11:20 pm “See? Even the Godfather of Economics believed that government could be a solution, not a problem.” If men were angels, we could each give the government half our money, put a few in charge, and they could solve our problems — wisely, and fairly. When I look at the obvious scamming and corruption occurring even on a relatively small scale in our local communities, and I ponder how much worse it is in the nation’s capital, where trillions are dispensed and there is no accountability, I can only shake my head and question how anyone could seriously suggest government as a solution. Until checks and balances and accountability are restored, government will keep doing what it has been doing, feeding our flesh to the beasts it serves. Did Adam Smith envision the depths to which our Ruling Class has sunk? Kathi Berke September 3, 2010 at 10:15 am Right now I’m staying in San Diego for a while where recently a young child choked to death because of cutbacks in public spending. The city cut $11.5 million out of their FY 2011 budget by closing firehouses. On his blog, a local real estate lawyer actually expressed concern that tax cuts on public spending could be bad . A real estate lawyer! He could be exiled. It’s a dog whistle word, taxes. A San Diegan would rather stand outside his home watching it burn down than pay a penny more in taxes to support a fire department. It’s fine to pay to rebuild the house, or to pay for the settlement on the wrongful death lawsuit, but a penny more in taxes? No way. Jim Haygood September 3, 2010 at 10:18 am Auerback touches on my hobbyhorsical theme, that for every borrower who gains from lower rates, there’s a pensioner who loses from them. So it’s a wash, unless new borrowing is stimulated by the lower rates on offer — and that hasn’t been the case. Nor are many observers addressing the expectations effect which featured so prominently in James Bullard’s paper. Pathologically low rates — including a near-complete disappearance of yield on traditional safe vehicles such as savings accounts and CDs — send a strong message to consumers that the economy is badly broken and the authorities haven’t a clue about fixing it (which is quite correct). To oversimplify a bit, Bernanke should lay off the T-note purchases and instead purchase Chinese T-notes. International reserves make up 78% of China’s M1 supply, vs. 7.5% of US M1. The $50 billion of euros and J-yen which the US holds, equal a mere one week’s worth of imports. A prudential case, not to mention a stimulus case, can be made for holding more international reserves. As Pink Floyd used to sing: Hey — Bennie — leave them yields alone! After all, you’re just another brick in the wall … jake chase September 3, 2010 at 10:27 am QE cannot generate anything except leveraged speculation. The real economy means, principally, real estate, which will remain comatose until land prices fall. Meanwhile, big business is consolidating, small business suffers inadequate demand, consumers remain overindebted, which means nothing moves except ever decreasing numbers of overpriced houses financed by government insured mortgages waiting to become black holes. Soon we will have 20% unemployment, regardless of how they fudge it. It isn’t that government investment is a good thing, but that government investment is the only thing possible. Tao Jonesing September 3, 2010 at 10:31 am Kathi, Your reliance on Adam Smith rests on a firm foundation. Unfortunately, Smith’s legacy has been so twisted and perverted by neoliberal revisionism that your fair observation likely will be met by blank stares. In particular, people like Milton Friedman, Friedrich Hayek and Ludwig von Mises led us to believe that Smith’s invisible hand metaphor means little more than “every man for himself” when it is nothing of the sort. Unenlightened self-interest was the result, and Yves wrote a book about how it led to the financial crisis. Kathi Berke September 3, 2010 at 12:01 pm Thanks, Tao. My secret plan is to bring back a sense of social justice and the common good to the American discourse by making things clear to everybody that reads my hometown paper, the New York Post. Unfortunately, the dog-whistle-provoking network is better funded and can respond more quickly than I can. If information moves @ E=MCsquared, it triggers a reptile brain response. It ain’t called “going viral” for nothing. I long for days past when rational thought and reflection could wedge itself between a Palin tweet and public and private action. Tom Hickey September 3, 2010 at 10:40 am Excellent case for employment assurance, Marshall. I would suggest adding a line or two in your next presentation of it of the huge cost of foregone opportunity due to an output gap, as well as the costly degradation of human resources through both unemployment and underemployment. These costs greatly exceed the government contribution required for employment assurance, and as you point out, with proper planning and administration at the local and state level, the program would be productive and advance public purpose. Also good that you pointed out how there are winners and losers in interest rate setting with low rates. Low rates are supposed to spur lending and investment, but at the zero bound that doesn’t happen. What happens is that leverage becomes cheap, spurring the same kind of financial speculation that got us in trouble. Moreover, as the Fed expands its balance sheet with bond purchases, the interest is withdrawn from nongovernment and transferred to government, further decreasing nongovernment net financial resources and adversely affecting effective demand. AndyC September 3, 2010 at 10:51 am This is the kind of idea I thought the government may eventually resort to, a massive WPA type hole digging/filling jobs program targeted at “youth” unemployment. The idea being that the government provides jobs to the youths, who as they are youths, are not currently in debt, once they have these jobs the credit can be turned on via new loans for home purchases, automobile purchases, credit cards and the like, this way the credit spigot can once again be opened and the Ponzi party can continue. Heck, if this plan were to push housing prices up again they may even be able to add another round of Helocs into the mix! joebhed September 3, 2010 at 12:01 pm There’s $4Trillion in infrastructure needs doing right now. If you want to call fixing the infrastructure that is needed to keep the economy moving as hole-digging-and-filling, that’s up to you. The problem with the Peterson Austerian approach is that it is NOBODY’s responsibility to keep people working, to provide wages and benefits, to maintain a national economy that respects the dignity of the nation’s peoples and their rights to participate in the national economy on an equal footing with the bankers, aristocrats and the corporatocracy. To me, that’s not what a country and national economy ought to be all about. It is first about the people. Since we are going to labor our way towards something productive and prosperous, we need jobs that pay wages for that labor. The bankers say, let them eat milk powder. The bankers are not responsible for employing anyone, nor are the corporations, the leaders of which get excessive pay for laying off workers. No, that ain’t gonna work any more. Fix the money system and the national economy as if people mattered. Problem is neither liberals nor conservatives have a clue about what should come next. F. Beard September 3, 2010 at 12:07 pm Good point about the need for infra-structure spending. That should be a no-brainer. But make work for people is a sick waste. Better to send them a unemployment check and let them decide how to spend their time. stf September 3, 2010 at 1:02 pm It’s not make work. Look at all the things Argentina did with head of household program–employed 5% of the population within 18 months doing everything from cleaning up neighborhoods to starting businesses and coops to deal with community needs. There’s literally thousands of good ideas out there for employing people who want to work but can’t get a job that would be net additions to national output compared to just giving them a check. F. Beard September 3, 2010 at 1:19 pm Actually, unemployment checks vs community projects is besides the point. The population was driven into unserviceable debt by the government backed banking cartel and should be bailed out by the government. And send an equal check to the savers too to compensate them for artificially suppressed interest rates. Debt forgiveness is Biblical (Deuteronomy 15, Leviticus 25) and that was commanded when debt was legitimate. It should apply even more when debt is the result of a government backed counterfeiting cartel. And while we’re at it, loaning at interest to one’s countrymen is forbidden too – Deuteronomy 23:19-20 There are ways to do money that do not require loaning. Two of them are common stock and the modern day equivalent of tally sticks. stf September 3, 2010 at 1:32 pm Agree with you there. The job guarantee is a more permanent, countercyclical measure, but more is needed at the moment than that. Thomas Williams September 3, 2010 at 12:38 pm Interesting but certainly not new. Also notable for its’ lack of detail ( I know – whadda ya expect on a TV segment) Didn’t we have a good post on this subject recently? Also, let’s recap our most recent stimulus package. For every $6 spent: -$4 was overtly political and had no business in a jobs/stimulus package. -$1 went to currently employed government employees. Useful? perhaps but with different consequences than private sector infrastucture jobs. -$1 went to private sector infracture jobs BUT had all meaningfull verification pulled out. Thus rendering it an illegal alien full employment bill. With this history, I doubt if the US taxpayers will swallow another. TW joebhed September 3, 2010 at 5:05 pm Those numbers could very well be true. And “more of the same” certainly will not cut it. Marshall never got to address the question of whether the stimulus (vs the QE) would be funded under the “voluntary-restraint” of needed government borrowing – and taxpayer repayment – or whether it would be funded “constraint-free” by new money creation, via government kind-of electronic Greenbacking those payments into the national economy. If its a $Trillion for infrastructure, or any legitimate government purpose, and it’s funded debt-free, like Henry Ford and Thomas Edison called for at Muscle Shoals, then, quite contrary, I think the American taxpayers will be very happy. Just saying. Marshall Auerback September 3, 2010 at 6:29 pm Joebhed, There is only so much one can address on a 5 minute TV segment. The points that Tom Hickey raised are all valid. We’re not simply proposing “make work” projects, or “digging up holes”. Yet more caricature. There is ample literature on how the Job Guarantee would work. Bill Mitchell has written copiously on this. So have Randy Wray, Scott Fullwiler, Warren Mosler, Pavlina Tcherneva, Matt Forstater and a host of other economists, who have studied the issue of unemployment for far longer than me. In the segment, I tried to address many of the rebuttals that many MMTers engender when we discuss this idea, notably the notion that it constitutes yet another statist attempt to impose a huge new wasteful layer of gov’t bureaucracy on the economy. Our goal is actually to create a pool of “shovel ready” labor for the private sector when the private sector is ready to spend and invest again. We also argue that the JG wage should be FIXED so that the government doesn’t outbid the private sector for labor (the government can always win there because it creates the currency). So it’s both pro private sector in terms of getting a “buffer stock” of employed people as well as mitigating the potential for government waste, given that we are trying to direct fiscal resources toward JOB CREATION, not bailouts. And, of course, if the JG keeps GDP at permanently higher levels, then you reduce spending on a number of unemployment-related items even without technically replacing them with the JG. Marshall Auerback September 3, 2010 at 7:12 pm This is a good place to start examining the Job Guarantee idea seriously: http://e1.newcastle.edu.au/coffee/job_guarantee/JobGuarantee.cfm joebhed September 3, 2010 at 7:33 pm Marshall, I totally support the government and the public purse being used to fund an Employer of Last Resort program, rather than the Banker of Last Resort “facility”. I thought you knew that. I never question that. I can’t say enough in support of these efforts and Bill’s CofFEE Program. My criticism is that in recognizing that a monetarily-sovereign nation is the MONOPOLY provider of its fiat currency, you all leave on the table the private creation of money by the private bankers. Imagine, if you will. The ELR program is well-established, and the “balances-formerly-known-as-deficits” are funded WITHIN the budget to provide full employment and general price stability, then WHY do we need any private creation of money? To promote inflation? That’s the question. Why do the MMTers not fully support the concept of monetary sovereignty where ALL the nation’s circulating medium that is needed is Greenbacked into existence. Like Simons, Fisher, Douglas etc. said: “Let the bankers lend REAL money”. Thanks. Kevin de Bruxelles September 4, 2010 at 3:21 am I’ve been thinking a lot about this and have the following questions: 1. What would be the impact on unemployment insurance of a JG? How long before a person would lose their benefits and be forced to take a minimum wage job? 2. Would there be higher paid JG jobs for educated people who are used to earning more? 3. Would illegal immigrants be eligible for a JG? If not would job seekers be required to prove citizenship before getting a JG? Do supporters of a JG agree that cutting demand for jobs (more immigrants flowing over the border) is just as important as providing supply of jobs? 4. I assume one could be fired from a JG job. For example if one didn’t show up. If one refused to work. If one was disruptive or created safety concerns. If not the JG would have to just allow the unemployable to get paid for doing nothing (which will encourage others to pretend to be unemployable). If they can be fired then somewhat logically, this JG proposal will do nothing for the unemployable; who constitute a growing percentage of the population in the US due to their attitude, culture, and / or lack of any meaningful education. 5. What would be the impact on other minimum wage jobs if a JG was enacted? For example instead of sweating my ass off flipping burgers at a greasy fast food joint I might choose to take a cushy JG job if they are indeed cushy. This might actually cause other jobs to compete with the JG wages and actually start paying their workers more. (While I might think this a good thing obviously there will be powerful forces who don’t). Kevin de Bruxelles September 4, 2010 at 7:49 am On further reflection, I can see a JG program like this being useful for young people just getting out of school. But one thing the US private sector is great at is creating minimum wage jobs – I don’t think the government has to join them in this race to the bottom except perhaps for youth programs. Would anyone over the age of 25 really want a minimum wage job? What a jobs program like this would really do is act as a shot of morphine to a body infected with cancer. The cancer of the US economy is that well paid jobs are either being shipped to the third world or the third world is shipping itself to the US and turning these formerly well-paid jobs into minimum wage or less. I never hear the MMT people talking about this. The only thing that will stop this cancer is the rising anger of the disposed people to take action against those causing it. So one potential mission for any JG crew would be to search out illegal immigrants at work. Once one is found they should be deported and one of the JG crew should take the place of the illegal. So if a community had 50 unemployed people the ideal situation would be if they found and booted 50 illegal immigrants and took over their jobs. All this should be funded by a steep out-sourcing tax on corporations who have sent jobs overseas. Of course the problem with all this talk is that within the current US power structure none of these policies will ever happen. The problem is a parasitical Rentier class that has been allowed free-reign to capture the levers of power in the US. Just like a mosquito can never be domesticated, leaving the light on at night and allowing the Rentier bloodsuckers to dominate your nation will only result in one thing, the ultimate destruction of the host people. Until drastic action is undertaken to wipe out the parasites, nothing will get better. stf September 4, 2010 at 3:09 pm The wage itself would be the minimum wage because nobody else could hire workers for less, but that doesn’t mean it’s at the current minimum wage. It could be a living wage in society’s that can afford this in terms of capacity to produce goods and services. A few other points- 1. The job guarantee could be added to the existing unemployment benefits so that the unemployed (at least those receiving benefits, which is less than half the unemployed) had the opportunity to work and earn a bit more income. This might be particularly useful for those with higher skills and larger income needs to service mortgages, etc. 2. The US economy actually isn’t as good as you think at creating minimum wage jobs, anyway. Wray has done a good deal of research showing this. Don’t confuse this with the fact that real wages haven’t kept up with productivity in most traditionally good jobs. 3. A properly instituted job guarantee would leave the economy closer to full employment permanently, which would mean that the good jobs that do exist would be far less prone to go away during recessions. This would enable the private sector to create and sustain more good jobs. stf September 4, 2010 at 3:13 pm All of your questions here can only be solved in the political arena. There are better and worse answers that could be implemented, for sure, but suffice it to say that virtually every country would answer them differently. Kevin de Bruxelles September 4, 2010 at 5:48 pm I think you make a really good point that this proposal has to be analysed within the context of different countries. I think in a most of Europe, Canada, or Australia a JG could be a positive policy, especially for young people. I would seriously question the wisdom of it in a basket case economy like the United States however. F. Beard September 4, 2010 at 7:19 pm Personally, I hope the unemployed sit on their asses, go to the gym, play golf like bankers and DEMAND unemployment compensation till they obtain relief on their underwater mortgages. What? Only the rich are allowed to use the government for their personal enrichment? And new debt to pay for it? No way! Just let the US Treasury create some new legal tender fiat to fund its deficit needs from now on. Too bad US bond holders; your days of living off US taxpayers should end, yesterday! Comments are closed. Tip Jar Please Donate or Subscribe!