Links 1/15/13

I-95 Diagnosed With Highway Cancer Onion (Valissa)

The Flu, Explained Mother Jones

MIT Develop New Material which can Generate Energy from Water Vapour OilPrice

Apple IPhone Suppliers Decline on Report Orders Cut by 50% Bloomberg

Pakistan court orders PM arrest BBC

Pettis: The 2013 points of Chinese rebalancing MacroBusiness

HMV collapses into administration Telegraph

Mario Draghi has saved the rich, now he must save the poor Ambrose Evans-Pritchard, Telegraph. the overall picture is not new, but the stats are still stunning, particularly all together. And be sure to read to the end to the discussion of Latvia.

Netanyahu: tactical genius, strategic idiot Financial Times

More Aaron Swartz:

Remember Aaron Swartz by working against government abuses Dan Gilmore, Guardian

DOJ Invoked Aaron Swartz’ Manifesto To Justify Investigative Methods Marcy Wheeler

Lambert ran this yesterday but it bears repeating: The Truth about Aaron Swartz’s “Crime” Unhandled Exception

And in general (I know I owe a hat tip for this..) Dont Talk to Police YouTube

Catfood watch:

Double trouble: House GOP eyes default, shutdown Politico

Fitch: Debt ceiling delay would prompt formal US rating review Reuters

Bernanke: Get rid of the debt ceiling, it has no practical value Washington Examiner. He says this only now?

Why the US economic crisis is a depression and not a recession Ed Harrison

NYT Runs Propaganda Piece to Promote Europe-U.S. Trade Deal Dean Baker

Restoring felons’ voting rights crosses partisan lines (a bit) in Virginia Daily Kos

What We in the 1% Don’t Want the 99% to Know Heteconomist (diptherio)

JPMorgan under fire for ‘whale’ errors Financial Times

FSA opens investigation into JP Morgan’s London Whale loss Telegraph

Jack Lew, Tim Geithner: the treasury’s new boss, same as the old boss Charles Ferguson, Guardian

Wal-Mart to Hire Any Veteran Who Wants a Job New York Times. So veterans can look forward to having to get food stamps to get by?

What ‘Lincoln’ misses and another Civil War film gets right CNN (furzy mouse)

The Myth of Human Progress TruthDig (Aquifer)

Antidote du jour:

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  1. petridish

    RE: What we in the 1%…

    A new rule I am adopting is that the significance and/or importance of an idea or concept is proportional to the amount of ridicule and denigration it generates.

    The truth about the creation of money represented by the platinum coin was impossibly dangerous to the entrenched idea that the US must “borrow” money from someone else in order to operate, not to mention the problems with explaining WHO these lenders are and exactly HOW they got more money than the government that actually prints it.

    1. MyLessThanPrimeBeef

      Well, maybe peope will ridicule this idea – GDP sharing based on the ideal of one person, one share, combined with single payer healthcare.

      It takes the idea of profit sharing at a corporate level to a national one.

      We all get the same paycheck every week and if you get sick or get into a car accident, you are covered. But if you over spend, tough luck.

      When no one is driven by a desire to dominate his fellow men or women, we will see what the ‘natural’ GDP will be. My guess is it will one that is much less taxing on Nature, if you look at our GDP as a tax on Nature.

      Because GDP is a product of our teamwork, and I understand this requires a new Weltanshauunng, but everyone gets a share. And becuase everyone contributes by working something he or she is passionate about, rather than to pay bills or to dominate others, unemployment ceases to be an issue.

      Money creation also ceases to be an issue. If there is too much or not enough money, everyone gets the same share in the increase or decrease.

      Yes, you might be ridiculed and/or you are being distracted, tempted or seduced by MMT or the platinum coin, but I believe it’s worth that ridicule to look at sharing our GDP, on an equitable one-person one-share basis.

    2. Kurt Sperry

      Ridicule and denigration work. It’s not always the prettiest tactic but it should be used for good as well as evil. We’re often too deferential and polite for our own good.

  2. taunger

    “What we in the 1% . . . ” really trots out the largest problem in MMT in a blatant fashion. Sovereigns with their own floating fiat are not constrained in purchasing power through debt, but rather through ethical principles.

    For the time being, major economies require raw material inputs. “It is resources (including labor resources) that matter and that present the only real constraint on what we do.” I recognize that we live in a period of relative abundance, despite what any environmentalist might say. But out ethics and economy are so out of whack we couldn’t tell the real resources available if we wanted. And there is no desire – both our current theories and MMT stand on the back of individualism and competition as measuring sticks.

    This is my problem with MMT. It is an accurate reflection of economic reality – but that current reality reflects a sick and twisted ethic. Get more, don’t worry where it came from, get yours, go go go. MMT may provide some paths toward the light on the debt, the deficit, and even distribution. But it won’t move us from a economic system based on the individual and competition into one based on cooperation and community .

    1. Susan the other

      And to take it further: Chris Hedges’ The Myth of Human Progress. I loved the illustration of Icarus’ feathers as dollar bills melting in a sky of global warming…

      Minsky says the very things that cause prosperity also destroy it. Steve Keen too. It is lore. And we’re wise enough to know these things. Old herbalist lore says that if a plant makes you sick, look close by – the antidote grows there.

      Well, “capital” has kinda made us sick. It is a weed, an opportunistic idea, but it does not live in a totally mindless vacuum – even though it mistook money for feathers long ago. We can replace it with an adjacent idea and cure the destruction. We need social capital. Which requires that we take care of the environment. It’s possible that we crashed to earth a good 12 years ago. And we actually are turning this thing around. Take heart, MMT is the only system that can process social capital.

      1. Ruben

        The article with the dollar Icarus was complete exaggeration.

        Humans tend to aggrandize themselves. First it was a god creating humans, putting the planet on the center of the Universe for us. When science developed, and specially because of Galileo and Darwin, the myth of great humanity got a serious beating. Now the myth has comically reshaped itself in the form of environmentalism, pretending that we are so important that we can take the planet with us. That’s bs.

        The biosphere will do just fine even if we tried really hard to destroy it, it’s just too much for us. We are just some kind of brainy simian, a speck of dust in the history of the Earth; for much that we try by burning all the fossil fuel on Earth we can only rise global temperature by a mere 0.5 degrees centigrades in the last 100 years! Psst! What a pitiful inconsequential wannabe marauder!

        The article was also poor because it made the pretense that the current civilization is another run of known cycles of boom and bust seen with the Romans, the Mayans, etc. This does not considering that there is ever increasing function in the background: scientific and technological advancement.

      2. They didn't leave me a choice

        So Hedges also decided to jump on the doom train to nowhere. I first noticed this same overly pessimistic way of thinking when reading archdruid report. (Even though he himself makes fun of it, “twidledeedum, twiddledeedoom of western civilisation” or something to that effect.) Basically it’s the overreaction in the precisely opposite direction from the mainstream “steady as she goes” status quo worship. One thinks that nothing needs to be done, our current way of life can continue for all eternity ahead of us, always expanding and growing, and the other states that we are all going to die because we are too stupid or ignorant to do anything else. Usually the unsaid portion is that because we are so stupid, we don’t NEED to do anything, because we’re doomed anyways.

        My perspective on this is that it’s a disease of having read too MUCH history, and then projecting this historical perspective and questionable wisdom into the future. It is annoying because of its childish determinism, it’s like the childs way of reacting to the parent telling they cannot do somehing and turning around to declare for all the world that nobody else can do anything either. The problem with this view is NOT that it is not correct about the dangers facing us so much as it is the fact that it dissuades people who actually /want to try to do something/ from doing anything. Because we are already doomed. Notice the feedback loop? Yeah.

        I’m NOT saying that we should all go outside, singing happily and forcing a smile, but at some point this doomcrying becomes a self fulfilling prophesy. And that is the worst kind of a prophesy out there.

        1. sarf

          You might want to note that the Archdruid does posit things for the individual to do that are, to him, meaningful and worthwhile.

          It is true, however, that he does not think that the current implementation of civilization can be kept as-is from a long-term perspective.

          He did publish some articles about getting organized and what that would entail, which were worth reading, IMHO.

    2. John M

      “Sovereigns with their own floating fiat are not constrained in purchasing power through debt, but rather through ethical principles.”

      “Ethical principles”? Oh, great. Just great. (Hopeless sigh.)

    3. diptherio

      I think people expect far too much from MMT. It is a description of how the macroeconomy actually functions. It is not a panacea for all that ails us. But just because MMT doesn’t tell us how to fix all our problems, doesn’t mean it’s worthless either.

      Folks really seem to go whole-hog one way or the other on MMT thing.

  3. Jim Haygood

    ‘Maybe [Aaron Swartz] was a case of a rogue prosecutor gone utterly berserk.’

    Dan Gillmor should do a little research before making such speculations. The world’s largest gulag isn’t kept filled by ‘rogue prosecutors’ going berserk. What was about to happen to Aaron Swartz is going down today and every day in federal criminal courts, which bear almost no resemblance to the quaint days of Perry Mason when the government actually had to prove its case in trial.

    As Justice Anthony Kennedy wrote last year, ‘Criminal justice today is for the most part a system of pleas, not a system of trials. The right to adequate assistance of counsel cannot be defined or enforced without taking account of the central role plea bargaining takes in securing convictions and determining sentences.’

    In 1997, Bill Moushey wrote a 10-part series for the Pittsburgh Post-Gazette about the federal conviction mill titled ‘Win At Any Cost,’ which today could serve as a mission statement for Holder ‘justice’ department.

    Nothing has changed, except for juicy new copyright, anti-hacking and anti-terrorism laws which would allow any competent federal prosecutor to successfully indict and convict a ham sandwich.

    1. optimader

      “What was about to happen to Aaron Swartz is going down today and every day in federal criminal courts”

      ABSOLUTELY, if anything a straight forward case. I dont recall reading (and maybe i’ve missed it?) that any of his family had been accused in shaggy kitchen sink felony charge indictments of incidentally contributing behaviour in order to pressure him into guilty pleas?
      Eg: Did he ever use his parents internet connection in their home to pursue his crimminal actiites? Confiscate it, used in the commision of a felony. And of course arrest and charge them w/ aiding and abetting a felon. Of course, we can make these charges go away….

    2. from Mexico

      Criminal justice in the United States is an abomination.

      In Lockdown America Christian Parenti talks about the long road to perdition, very much a bipartisan effort, which began under Johnson in the 1960s.

      Criminal justice may be better in the US than it is in Mexico, but not by much.

    3. Leviathan

      Yes, this happens every day, but it appears this 2 ton weight with Aaron’s name on it was something special.

      Ortiz got her start working for Holder and is being groomed for “bigger things.” To that end she is imitating her mentor by “going after” white collar crime and taking a few coins for the government coffers. This is known as a win-win. We used to have justice, now we have corporatist anarchy with a little something something for Uncle Sam.

      And just as we have after the fact bribery for a-wipes like Dodd (who pushed SOPA and then happened to get a sweet lobbying job in Hollywood–what a coincidence!) we have after the fact punishment for “wrong thinking.” Which is to say, Aaron played an open role defeating SOPA (not a crime) so he got knee-capped and sent to prison next time he parked in a tow zone.

      Please, friends in MA, see that Ortiz–your own Inspector Javert–does not get rewarded for perverting the law.

    4. The only way

      Jury nullification. The only curb on a judicial system run amok. Nullify it all, fuck their twisted facts, you cannot trust the state, every word’s a lie.

    5. Paul Tioxon

      Here is a spectacular record of judicial abuse, that used to be reported every few years, when ever a new eager beaver reporter tripped over it, their utter disbelief due to the “this kind of stuff doesn’t ever happen in America” I’ve got to do something about this, like report on it. …..

      Lawyer Is Released After Serving Over 14 Years on Civil Contempt Charge

      Published: July 11, 2009

      PHILADELPHIA (AP) — A Pennsylvania lawyer was released from prison on Friday after serving what was believed to be the longest imprisonment on a civil contempt charge in United States history.

      The lawyer, H. Beatty Chadwick, was released from a county prison in suburban Philadelphia more than 14 years after he was jailed for refusing to turn over millions of dollars in a bitter divorce battle. The case prompted dozens of appeals to county, state and federal courts, twice reaching the Supreme Court.

      Mr. Chadwick, 73, was jailed in April 1995, accused of hiding $2.5 million from his ex-wife during divorce proceedings. Mr. Chadwick maintained that he lost the money in bad investments.

    1. ambrit

      Bet that his friend, the Faceless Lawyer, does. He at least deserves a Purple Heart. “Unkle Dich’ deserves to end up like his predecessor, R. Halliburton did.

  4. optimader

    I forwarded “Dont Talk to Police” when I first came across it to my friends and relatives to pass along to their children. Not all get it I suspect, and thats to their own detriment.

    How many otherwise intelligent people have screwed themselves? incalculable. In theory you can start with Bill Clinton.
    1.) Understand you are always on the record.
    2.)Understand that anything you say to police/officers of the court will do nothing in your favor and everything to your liability…Period, full stop.

    1. RanDomino

      A firm line should be drawn between ‘member’ or ‘community’ co-ops and ‘worker’ co-ops. The latter generally seem to stick to their principles. The former pick up the vices normally associated with corporations.

  5. jsmith

    I’m glad the heteconomist has made an appearance here again as his thoughts on the utilizing MMT to threaten the very existence of the capitalist system need to be examined and discussed.

    Of course, there are those who are just terrified at the implications – usuallly misunderstood – of MMT in that it appears to offer unlimited free money for – the horror! – the vast majority of society.

    Resources utilized for the betterment of all of mankind?

    Welfare Queens!!!

    Without the vast majority of society not being in need, they quiver, how will I ever get to that manison in the Hamptons?

    What will it take these doubters – who usually haven’t done their homework – to realize that right now, at this very moment, our society is on a crash-course with catastrophe, that we really are witnessing in real-time the dissolution of capitalist society and the irreversible degradation of our natural world?

    Has the capitalist brainwashing reached such a point that we will continue to sh!t on any ideas that might potentially save us just because they go against our programming?

    Decades ago workers cheered on philosophies and economic ideas that painted accurate pictures of their plight and which gave them hopes of a better future.

    Nowadays propagandized minions do the work of their masters and help cripple any thoughts that might be of some assistance to their very survival.

    This capitalistic system cannot be saved and that is what one must get their head around.

    1. Bev

      More information regarding MMT…

      Click here for the PDF Version

      AMI’s Evaluation of “Modern Monetary Theory” (MMT)

      by AMI Research, with Steven Walsh; and assistance by Stephen Zarlenga

      Modern Monetary Theory (MMT) is a theory developed by a group of economists over the past 25 years or so. In the current crisis it has been receiving some wider attention from the prevailing economic community and politicians looking for a new direction.

      The American Monetary Institute (AMI) is sometimes asked about MMT and whether it fits in with monetary reform. We assess anything to do with monetary matters carefully.

      At the outset AMI enjoys a good, cordial relationship with some of the leading MMT economists, and we certainly wish to build on this relationship. But one thing we can’t compromise on is facts. MMT, like much of modern economic thinking, builds upon some erroneous assumptions and a definition of money that is not neutral and works to the detriment of the 99%. In addition MMT has its own specific problems between its claims and the facts which have bearing on the validity of MMT.


      MMT doubts its own validity

      To their credit, MMT economists like Wray question their own assumptions:

      “What if we have erred in our understanding of money, and in our analysis of government budgets? In this case, we must take [federal program] costs seriously.”26

      In this case, we must ask: What is MMT really doing? We ask because MMT literature sometimes admits something factual, but then reverts straight back to saying things that are completely contradictory to the facts just admitted; e.g., Wray says:

      “It is true that the Treasury transfers funds from the private banks to its account at the Fed when it wishes to ‘spend’,” but in the very next paragraph says: “Treasury cannot withdraw taxes from the economy before spending.”27

      As we’ve seen above, Treasury’s account is debited when it spends, so it must get funds from the economy (since the Fed can’t lend it funds). The funds transfer back and forth between Treasury and the economy; so it’s pointless saying which direction occurs first.

      What else – some other problems with MMT:

      5. Combining the Treasury and Fed together as though they’re both “the government”:

      In fact, the operational arms of the Fed, the 12 Fed banks, are stock-owned by member banks. It should be clear by now that the Fed exists to help banks, not society.28

      6. Saying money has value because of taxes, that’s why people want it, and government decides its value:29

      In reality, money has value because of what it can buy, we want it for many things, e.g., to buy food (paying taxes is much lower on the list), and sellers usually decide its “value” as such. What enables that value to be created in the first place is people living together in a supportive legal and social structure creating values for living, such as education, science, medicine, technology, the arts, etc.

      7. Ignoring the continuous transfer of wealth from poor to rich due to government debt:

      A big part of our taxes go to pay interest on debt, held disproportionately by the top 1%.

      8. Ignoring banks’ ability to counteract government’s effect on the economy at any time:

      Banks can shrink the economy by shrinking the money supply (e.g., Great Depression) or expand it with bubbles (e.g., housing) regardless of government deficits or surpluses.

      9. Ignoring the continuous theft from society due to private money creation:

      Society creates all economic value; private money acts as a private tax on that value.

      10. Accepting systematic injustice:

      Loaning money into circulation widens wealth and income disparities, as those with the most get the most loans and those with the least get the least; e.g., Wray says: “Clearly, large segments of the population are ‘quantity rationed’ … quantity rationing can even be irrational – perhaps discriminatory -” but then says: “We will not dwell on such issues.”30

      At AMI we do dwell on such issues, because not doing so is a morally bankrupt position.



      MMT economists are commended for at least looking at money creation, when almost all other economists don’t even consider it, but they look at it in such an inaccurate way that MMT is rendered useless in any practical sense.

      This is because MMT has embedded within it a mis-definition of money as debt, meaning the harder we work as a society, the more in debt we get, meaning we have to work even harder, use more resources, get into more debt, and so on, i.e., it’s a self-defeating system.

      Thus MMT fails to address the source of economic instability and the driver of the social and environmental degradation we see all around us. It proposes putting an ambulance at the bottom of the cliff whenever there’s a crash, instead of preventing them happening.

      This error comes from the mis-definition of money as debt. The mis-definition of money as debt is incompatible with the Chartal (legal) nature of money that MMT espouses, and history shows us that it is also incompatible with MMT’s stated goals of full employment and price stability. Therefore, MMT has to treat money as money: a necessary medium of exchange – without associated debt – if it wants our money system to reflect reality.

      Treating money as money is a pre-requisite for any realistic and sustainable solution. Only then can we enjoy the benefits of technology without endless toil and resource use. When economics is founded on reality, not theory, we’ll all be better off.

      1. jsmith

        Please see:

        I consider it a perverse injustice that, in online discussions, MMT sympathizers are frequently reproached for imagining that “we can print prosperity” when in fact it is us who constantly stress as a fundamental point that the only true constraints are resource based, not financial or monetary in nature. We are the ones insisting that if we have the resources, we can put them to use. It is the neoclassical orthodoxy and others who try to make out that we can’t use resources, even if they are available, because of some magical, mysterious monetary or financial constraint. Just who is it that believes in magic here?

        MMT shows clearly that if we have the resources, money is no obstacle to a government that issues its own flexible exchange-rate fiat currency. It is not saying that creating money magically creates goods and services. It is saying that it is nonsense – superstitious nonsense – to think affordability for such a government could be about money rather than resources.

        Obviously, anyone is entitled to disagree with the MMT position. But they are not entitled purposefully to misrepresent MMT as suggesting that it is oblivious to real resource constraints when it is alternative theories that attempt to obfuscate matters by conjuring up fictitious “financial constraints” (e.g. the neoclassical “government budget constraint” framework).

        1. JTFaraday

          I didn’t look at the links, but I don’t where the excerpts submitted here say what you say.

          There seems to be a lot of projection going on around here, where the fanboyz attribute to critics things the critics didn’t actually say in an effort to put these entirely flawed human beings with inevitably limited analyses beyond critique.

          I reject that on principle.

          I also think MMT as it comes out of UMKC is setting itself up to be the next gen lesser evil.

          That’s always been obvious from the way in which it tosses the public a well picked bone in the form of a minimum wage “job guarantee” while projecting a deeply conservative caricature of the unemployed, and not much more than that.

          I don’t know where you’re supposed go from there, frankly, but maybe that’s just me.

      2. jsmith

        “Thus MMT fails to address the source of economic instability and the driver of the social and environmental degradation we see all around us.”

        This is really a pathetic and dishonest statement as MMT has always maintained that it is apolitical.

        To answer these questions above I suggest you start here:

        And then this:

        MMT indicates that in those situations where it is deemed desirable to override the logic of capital, sovereign currency-issuing governments have more policy freedom than other governments. Yet, although fiscal policy can be used in the way advocated by many Keynesians – i.e. merely as a means of preserving what is, from a Marxist perspective, a despicable system – it is equally clear that fiscal policy need not be used in this way. It could instead be used to initiate economic activity along lines altogether different, for instance through the public provision of free goods and services, or for that matter the complete elimination of wage labor, or in fact any form of monetary economy that could be conceived. The fact such alternative social systems are not advocated or openly countenanced by modern monetary theorists means that such policy or systemic proposals are not ‘MMT’ – since, as we have learned in recent months (see here), MMT comes with a particular suite of reformist policy prescriptions – but, nonetheless, an understanding of MMT makes clear the potential sustainability of such social alternatives.

        It seems to me, then, that Marxism is compatible with the understanding of currency sovereignty that is provided by MMT. The differences in perspective are in what to do with that understanding when it comes to policy and/or choice of social system. On the latter question, I am very much in the camp of those who wish to overturn capitalism. However, the insights of MMT seem invaluable, because they make clear possibilities not only within capitalism but beyond it if and when we wish to take that step.

        1. JTFaraday

          “This is really a pathetic and dishonest statement as MMT has always maintained that it is apolitical.”

          I don’t see how anyone who reads Marx to the extent that you seem to, could ever parrot such a fatuous statement.

          Of course MMT is political.

          1. jsmith

            We have Marxists AND capitalists both claiming that MMT could be used to further each respective system.

            As others have noted here, fascist neoliberals could also abuse the constructs of MMT do to much damage.

            That sure seems as if that makes it more of a tool than a political philosophy, doncha think?

      3. Hugh

        MEGO. Just kidding, well mostly. I have written many times that the three great issues of our times are kleptocracy, wealth inequality, and class war. A good way to assess schools of financial and economic thought is by seeing how well and how directly they address these issues.

        The AMI people are correct that MMT has never made these a central focus. It has been to put it mildly ambivalent about them although it has made some progress. JTFaraday is correct below that the formulation of a monetary theory is an inherently political act. It is made more so by the fact that MMT incorporates both descriptive and prescriptive elements. Even if one sought to contest the political nature of the description on narrow grounds, it is virtually impossible to do so with regard to MMT’s prescriptions.

        That said, I very much liked jsmith’s citation of the heteconomist on resources because that is very close to my views. As I see it, MMT began as essentially a set of observations about how money actually operated in our increasingly neoliberal economy after we moved from the gold standard in 1971 to a fiat currency. Its practitioners then began expanding it into different areas and we might better talk not of Modern Monetary Theory but Modern Monetary Theories.

        MMT has become an unwieldy amalgam of descriptivist, prescriptivist, and remnant neoliberal elements. It really needs a systematic rethink. However, its practitioners have been highly resistant to this suggestion and generally bristle and become quite defensive when it is made. They do not understand the nature and importance of intellectual structure to both philosophy and political movements.

        In philosophy, whether political or economic, the place to begin is at the beginning, with first principles. If I had to diagram it, developing a political and economic philosophy would look like this:

        Social purpose > resources > money

        The social purpose defines the sociey we wish to build and live in. My idea for this is one which is fair, just, and equitable where everyone has the right to the basic building blocks of a good life: a good, stable job that pays a living wage, good communities, housing, food, healthcare, education, infrastructure, and retirements, and a sustainable industrial base. And beyond these, privacy for each, together with their families, to make of their lives what they will. Most members contribute to our society so I would not be adverse to something like the GDP sharing of which MLTPrimeBeef speaks.

        From social purpose, we pass to an inspection of the resources we have: people, knowledge, skills, industrial base, infrastructure, raw materials, and above all goodwill to build this society in which we would wish to live.

        It is only then that we come to money as a medium to effect the necessary distribution of resources to accomplish the social purposes we have set out. Intellectually, this is a far more coherent approach than what we have now with MMT. More importantly, it is motivated by and imbued with social purpose in each and every part and at each and every step.

        As things stand now, modern money has not only been completely divorced from its social purpose but it has been placed first rather than last in the chain of intellectual causality. Discussing all the machinations of money without reference to its intellectual antecedents results in a MEGO (My Eyes Glaze Over) experience for all but the most adept. But if instead you begin with the social purpose, pass on to the resources we have for it, and then come to how money through spending, taxing, legislation, and regulation creates the necessary distributions of resources to accomplish our goal, this is comprehensible I think to everyone.

        As long as the needed distributions are made, the math is secondary. In our current terms, a budget doesn’t have to be balanced. A deficit doesn’t create or destroy resources (a common charge against MMT). It simply creates a different distribution of the resources you have to accomplish the social purpose you want.

        Take an approach like this and you have not only a substantial and devastating critique of the system we have but most of the criticisms of a theory like MMT are avoided and it provides goals and methods not just accessible to all but ones which all but the 1% have a stake in and fighting for.

        1. jsmith

          This is a great post with some interesting insights by Kalecki and which ends with what JT and Hugh and I have been addressing.

          Sorry, for the extended links to hetero but his clarity saves a bunch of time.

          “By giving governments the fiscal capacity to overcome any tendency for the realized rate of profit to fall, fiat money opens up a variety of options for society. Some options will be preferred by those on the right, others by those on the left.

          If it is felt that the business cycle and capitalist boom and bust (connected to Marx’s tendency for the rate of profit to fall) is beneficial as a spur to innovation and restructuring, the private sector could be left more or less to its own devices. Right-libertarians or conservatives might prefer this approach. Depending on their preferences concerning the poor and unemployed, this approach could be combined with a job-guarantee scheme that pays minimum wage or a basic-income guarantee. This would allow the private sector to operate more or less without government involvement (or influence on the rate of profit), while cushioning workers from the worst effects of the business cycle. If the cost of the job-guarantee scheme or basic-income guarantee were matched by taxation (a balanced budget), there would be no impact on the rate of profit, and crises could be left to play their functional role of reviving the rate of profit. (In an open economy, the budget would need to be in deficit to the extent that there is a trade deficit, but small government could still be achieved by opting for a budget deficit that is low tax, low spend.) I do think there is a big challenge at the moment for those who want small government. The private-debt problem needs to be addressed before the private sector can sustainably become the engine for economic activity. One way to address this difficulty would be to arrange for an orderly write down of private debt.

          For liberals, moderates, social democrats, etc., that want a mixed economy with a bigger role for government, fiat money under a flexible exchange-rate regime makes it technically possible for the government to use fiscal policy to offset the tendency for the rate of profit to fall. The government would be boosting the rate of profit by adding to demand and capitalists’ revenue without increasing their capital costs. The smoothing of movements in the rate of profit would reduce the intensity of crises. Essentially, spurts of private investment that expanded the capital stock relative to non-investment demand would lower the rate of profit in ensuing periods unless other components of demand (which do not increase K) were stepped up to absorb the capacity increases brought about by the private investment. The government could use its fiscal policy for this purpose.

          Moving towards socialism, another option would be to start doing more things in the public sector rather than using government expenditure to prop up the rate of profit in the private sector. For instance, government expenditure could be used to provide ‘free’ goods and services to the general community (free in terms of access, not resource expenditure). Taxation would be necessary initially to create space for the public-sector activity. This would reduce demand for private-sector output. Over time, if people developed a preference for more public-sector activity, demand for private-sector activity would decline, as would private-sector income and tax revenue. If the means of production were owned in common, and the net product shared out, the motivation for crime, etc., would diminish, and the need for compulsion through police and military measures would be reduced.”

          I obviously gravitate towards the 3rd option yet it is instructive I believe for all to see that even in the face of a more accurate descriptive theory, there are great political debates/battles that need be waged BEFORE – as Hugh alludes to – we as a society begin to apply some of the theories at hand.

          Oh, yeah, and we’ll probably have to do something about the entrenched elite sociopaths who want nothing less than the system to continue on its doomed trajectory.

          1. Aquifer

            ” …. yet it is instructive I believe for all to see that even in the face of a more accurate descriptive theory, there are great political debates/battles that need be waged BEFORE – as Hugh alludes to – we as a society begin to apply some of the theories at hand.”

            No kidding! That’s what i have been arguing for some time, although, apparently, not as neatly as Hugh does here – we need to get our politics in order – we need to define the society we want, pick and choose the tools we need to get us there – “public” owned and controlled where necessities are concerned, “private” (within well defined limits) where it doesn’t really matter, for those who need to do the “individual competition” thing ….

            As i said elsewhere, let AMI and MMT stop nitpicking and get together – let there be a clear understanding that there must be a political arm to give a visible finger to the invisible hand massaging the political extremity we have in power now and let us support and promote that arm – we are running out of time, folks … let us get on with it ….

            Again – remember that whatever power you imbue your financial system with, is available for use by whatever power structure you choose – and in a democracy that can be rather unpredictable – do not give tools to your “friends” that you would not want your “enemies” to have ….

        2. Valissa

          Of course the problem with all well thought out ideas for making new sets of rules/policies to make the world a better/fairer place is that they don’t adequately consider all the people with this attitude.

  6. craazyman

    Yo! I met Chuck Shumer this morning. haha.

    Standing getting a vegie-juice breakfast from a food cart and some dude gets escorted out of a black car while talking on his cell phone — a basic phone by the way, where you actually talk into a mike not into the air like you do with those ridiculous smart phones that everybody thinks are so cool. What good are they? Why fill your head with such junk and spam that comes through those? How many of the 980,000 apps do anything but suck your soul out chur eyes? Can’t you control your web addiction? Can’t you think for yourself, just looking at a tree branch against the sky? No. Why ask. monkey monkey.

    Somehow our eyes met and he actually nodded toward me and said “hello”. Then I said “you look familiar”. I knew he looked like somebody I’d seen but wasn’t sure. Then he said “Are you from New York?”

    Then I got it and I said “Oh, You’re Chuck Shumer!” So he reached out and shook my hand and we both laughed.

    He’s a larger man than I expected. Also, I could feel the politician power vibe in his handshake and his aura (I usually can see those). Not at all like the Indian girl in Amsterdam back in the day. Like Adele sings in Skyfall:

    “A thousand miles and poles apart
    Where worlds collide and days are dark
    You may have my number, You can take my name
    But you’ll never have my heart.

    My brief introduction to Senator Shumer probably doesn’t give me any leverage on political issues of concern to the peanut gallery. But I’m using other psychological tactics — like thought beam projection and noouspheric mind wave massage — to support progressive causes and influence legislation. I have no skill as a political activist or a politician. That’s what Pacifex (TM) does to you. You’re just a disconnected zombie, wondering what’s what in a cloud of confusion until you fall asleep.

    1. Roger Bigod

      You didn’t tell us about his aura. I’d expect one of those monochrome egocentric auras with just a touch of shimmer. Any sense of his Sign? Definitely a fire sign, probably Sagittarius. One of these days we’ll be able to get retinal vessel patterns off a smartphone, and a whole new world will open up.

          1. Aquifer

            Valissa –

            Damn, you’re good! ..

            “If Turner is not careful, he may unintentionally change the course of his own history, causing, for example, something to go awry with his loving, happy marriage to Jane Fonda.”

            I had no idea – i just tossed that off … – I figured one good Turner deserved another …. LOL

  7. AbyNormal

    Sunlight Labs is an open source community of thousands dedicated to using technology to transform government. We focus on transparency- the idea that government can be more effective, more honest, and more accountable when it makes data about its process, operations, and influences available to the public. Our work revolves around opening up government data of all forms. Paid staff of Sunlight Labs are employees of the Sunlight Foundation a 501c(3) non-partisan non-profit organization.

    Sunlight is the best disinfectant.
    william o. douglas

  8. RanDomino

    “Mr Ashraf’s predecessor, Yousuf Raza Gilani, was forced out as prime minister last June after the Supreme Court convicted him of contempt for failing to pursue a corruption case against the president.”

    If only the United States had a government with as much integrity as Pakistan.

    1. Synopticist

      If you knew anything about Pakistani politics, you honestly wouldn’t say that.
      It’s probably the most dis-functional country on planet earth right now.

    1. AbyNormal

      i often find myself scrolling for your links.
      they lift my curiosities and broaden my smile(s).
      Thank You.

  9. JTFaraday

    re: Wal-Mart to Hire Any Veteran Who Wants a Job, New York Times.

    Yay! A minimum wage job guarantee.

    “So veterans can look forward to having to get food stamps to get by?”

    Oh, hell no. They’ll only buy bonbons with it.

    1. barrisj

      FoxNews was ALL over this announcement today, heralding “private enterprise’s” commitment to “our heroes”, and how the White House “tagged along” in order to obtain maximum news value from Wal-Mart’s own “breakthrough” policy. No one of course is saying that these “vet” hirings are going to pay anything over minimum-wage, right? And whatever benefits are part of the hiring package will surely exclude coverage encompassing death by suicide, right? Such a load of cobblers… only in America, surely!

  10. ambrit

    Is it just me, or is everyone else finding all the Google directs for the FT Netanyahu piece circling back around to the Dreaded FT Paywall?

  11. Hugh

    Re Ambrose-Pierce, he paints this horrific picture of Europe yet continues to endorse Draghi one of its prime architects. He continues to see “tragic policy error” and not criminality at work. He describes the destitution and devastation of Europe’s 99% but leaves out the 1% who benefit from this state of affairs, indeed who created it.

  12. Joel3000

    Get a flu shot? No thank you.

    Make sure to get enough vitamin d3 and you will skate through most flu seasons on the strength of your functioning immune system.

    It works. Google it yourself.

    1. Yves Smith Post author

      Please. I am the favorite customer of the dietary supplement industry and take 5000 IU of D3 a day. I also have God’s bloodwork. No joke, doctors get a weirdly admiring tone in their voice when they go over lab results.

      I got the bug from hell and had mono symptoms for 6 weeks. No mono (you can get it twice). It as a virus (someone had similar symptoms cleared up by antibiotics, meaning it was bacterial, but no luck for me when I took the meds either).

      I don’t like flu vaccinations, I think overstimulating your immune system is not a hot idea. But D3 is not a flu preventative.

    2. LucyLulu

      I’ve never had the flu shot. As far as I know, I’ve never had the flu, at least as an adult. Knock on wood. I had strep three times three years ago though, for the first time in my life. The first episode I thought I was dying. I caught it from the family I was working with, it rotated through different members. I was taking D3. I should still be on it but forgot all about until I read this post. I’m not good about compliance. I’ve been told I’m poster-child ADD. Since a traumatic brain injury, it is sooo out of control, I give up.

      But otherwise I rarely get sick. Knock on wood. I attribute it to my broad exposure to germs, growing up with long days around barns and horses, continuing into my 40’s. I never worried about what might end up in my mouth, and meals were often eaten on the go, alongside my equine friends….. much to the horror of my mother, who kept her carport floor clean enough to do surgery (and probably less likely to result in an iatrogenic infection than most hospitals).

  13. JEHR

    I was curious about the banking system in Canada so I sent Mr. Carney, Mr. Harper and Mr. Flaherty (the Minister of Finance) a message with the following questions:

    I have been wondering about the cause of the world financial crisis. At first, I believed, as you stated, that Canada had weathered the storm but now I find, as you admitted, that the Canadian banks were bailed out to the tune of $114 billion (more per capita than the TARP). I also read that the Canadian banks were obliged to use the Federal Reserve Discount Window to borrow billions of more dollars right after the financial meltdown in 2008.

    Here are my questions and I will be most happy to share the answers that you give me:

    1. As economists, would you give the Canadian people an explanation of how our Canadian monopoly monetary system really works and how the banks got into trouble?

    2. Canada has a sovereign currency and thus can afford to pay for whatever goods and services are available in that currency. So why are we now undergoing an austerity rogram? Are we being punished for a crisis that the banks caused?

    3. Private banks make money through issuing debt. Why have the banks been given this monopoly to create such debt when the government is capable of issuing interest-free debt, if it chooses to do so (and as it did prior to 1970)?

    4. The debt crisis of 2008 was brought to us by the banks partly from their speculating and giving loans to people who should not have been given loans. How can we be sure there won’t be another crisis because nothing has changed and the banks can still issue debt (i.e., money) beyond what the government issues? We were regulated but still had to bail out banks.

    5. The monopoly that the banks have to create debt (i.e., currency) helped cause the banking crisis. Is it a good thing for our banks to have a monopoly on creating money through debt?

    If you look at the video here you will see a discussion on the topic above. One of the solutions on the video is to have competitive currencies in one country like the Swiss have. The Swiss have the WIR which helped insulate the Swiss
    against the banking crisis. I understand that it is an alternative currency used by some businesses so that when the next banking crisis occurs, they will have a place from which to obtain money for goods and services, etc., from an institution that works without speculating.

    If anyone has ideas about the above questions, I would be more than happy to receive them. I’m sure all the Canadian people would be too.

    Anyone, feel free to comment.

    1. JEHR

      Here is the reply I received:

      Public Information on behalf of Mark Carney

      Dear Ms. R….

      I am responding to your email of 9 December 2012 regarding the financial crisis.

      Allow me to begin by correcting several factual errors in your letter: no Canadian bank was bailed out during the financial crisis; Canada is not in the midst of an austerity program; and neither the federal government nor the Bank of Canada has issued interest-free debt.


      It is important not to confuse a bailout, where the government injects money into a bank and becomes the owner-and which did not occur in Canada, with liquidity injections, where the central bank or government provides liquidity to banks against collateral. Canada did have temporary liquidity measures in place during the financial crisis. Those programs were meant to ensure that markets were operating properly. All liquidity facilities have been discontinued, the last one in April 2010. Detailed information on the Bank’s liquidity facilities is available at:


      In the area of fiscal policy, I defer to the federal Minister of Finance, since this is a matter that falls within his purview. I would simply state that, while the government has made efforts to reduce its deficit after years of stimulus spending, Canada is not in the midst of an austerity program similar to the one implemented in some European countries, for instance. Austerity means that a government reduces its expenditures and spending. As you can see in the following budget document, the Canadian government is not projected to reduce its spending, but will instead increase it at a slower pace (

      Money Creation

      It is important to distinguish between the right to “issue money,” which is the sole right of the Bank of Canada, and the ability to “create money,” which, through legislation and regulation enacted by Parliament, is largely done by commercial banks through the taking of deposits and the issuance of loans.

      Bank notes issued by the Bank of Canada represent only a small portion of all the money circulating in the economy at any one time. The bulk of the money supply consists of deposits that the public holds at financial institutions. The vast amount of money created in the economy is done so by banks in the form of loans made from people’s deposits. The Bank of Canada, as the nation’s authority responsible for monetary policy, does influence the pace of money creation in the banking system through its ability to adjust the policy rate. To slow the rate of growth of the money supply, the Bank raises its policy rate, which, through its influence on other interest rates, such as those paid by consumers for loans from commercial banks, makes borrowing more expensive, thus slowing down the demand for and supply of loans. To increase the rate of growth of the money supply, the Bank of Canada does the opposite, by lowering its policy rate, which then makes borrowing more affordable.

      The Bank’s objective in undertaking these actions is to keep the pace of money creation to a rate consistent with achieving its inflation control target of 2 per cent a year. Inflation control is not an end in itself; it is the means whereby monetary policy contributes to solid economic performance.

      Financial Reforms

      The G-20 leaders have mandated a series of reforms to place the global financial system on a more solid footing. The objective is to build a more resilient financial system, which means more capital and better liquidity management. It involves a series of structural changes to ensure that there are no institutions, globally and domestically, that are too big to fail. The reforms are being put in place methodically and in a way that will further enhance the leading position of the Canadian financial system.

      Canada’s inflation-targeting framework, prudent fiscal policy and a sound domestic financial system have helped to ensure that it has been one of the strongest-performing advanced economies during and following the global economic and financial crisis. Canadian banks fared much better than most of their international counterparts. We have learned a lot from the global financial crisis about what was wrong in other jurisdictions and, by and large, what is being done is bringing other jurisdictions up to Canadian levels, but Canadian levels also need to rise.

      There are two main approaches to the reform agenda: (i) to protect the banks from the cycle and (ii) to protect the cycle from the banks. Protecting the banks from the economic cycle means making each bank more resilient. This will require more capital, higher liquidity and better risk management, complemented by stronger supervision. Protecting the cycle from the banks means making the system as a whole more resilient. This requires building a system that can withstand the failure of any single financial institution. These measures (including contingent capital, better infrastructure for key markets and new resolution authorities) are new and will change how our financial system operates.

      The Financial Stability Board (FSB) has been mandated to coordinate and monitor progress in strengthening financial regulation. You can visit its website at:


      A great deal of information is available on the Bank’s website. You may find the following documents interesting:


      Mark Carney

      1. JEHR

        Do you like the difference between “bailout” and “liquidity” provision. And they didn’t answer me why the Canadian banks fed at the US discount window either.

        1. LucyLulu

          I found the careful explanation of how banks “create money” through making loans to be interesting. While this is true of course, somehow ISTM one would think they’d want to more discreet about their dirty little secret.

      2. Hugh

        I thought injections of cash against joke collateral was what most of the Fed bank bailout was about. Apparently north of the border this counts as a liquidity injection. Good to know.

        I was struck by this:

        “The vast amount of money created in the economy is done so by banks in the form of loans made from people’s deposits.”

        Doesn’t this describe a classic fractional banking system rather than the modern system of credit?

        Finally, doesn’t Canada still have something of a real estate bubble going? When that goes pop, all that collateral is going to be worth less and feed back through the system with the same destructive effects we saw in this country.

        Anyone know what level of securitization has occurred in Canada on this stuff, or if CDS has been written on it? I really do not follow the Canadian economy so would be interested to know.

  14. LucyLulu

    For the climate-change-challenged:

    2012 is the hottest year for contiguous US (average annual temp) since records began being kept in 1895. Sorry, it’s in French, Le Monde is where I caught this, see next link for English, but here note CO2 concentrations. I think one can interpret year and ppm CO2 without knowledge of French:

    En 1880, la concentration de CO2 dans l’atmosphère était environ de 285 parties par million en volume. En 1960, elle atteignait 315 parties par million, selon les mesures de l’Agence américaine océanique et atmosphérique (NOAA). Aujourd’hui (today), cette concentration dépasse 390 parties par million.

    Le Monde: NASA Reports 8 of the 9 Hottest Years since 2000

    For english info and more 2012 global weather trivia:

    NOAA State of the Climate

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