Hy Minsky, Low Finance: Modern Money, Civil Rights, and Consumer Debt

Yves here. This post is the write-up of one of the presentations at the first international MMT conference in Kansas City in September. Over 200 people, including your humble blogger, attended. We’ll be writing much more about this conference over the coming weeks as the conference organizers post videos and complete transcripts.

Jamie Galbraith gave one of the keynote speeches and he summed up the sense of the conference in saying that MMT had arrived as a political force. The conference had an impressive range of people, including young economists who had traveled some distance to attend, people with real jobs (one I met runs one of the three biggest harp manufacturers in the world and is active in local and state politics), and a union official.

The MMT thinkers are increasingly serving as part of a broader progressive effort, as the breadth of the panels at the conference shows.

What I found to be the most exciting and important initiative is the way the Modern Money Network, a law-school focused group, has grown. The MMN explicitly intends to counter the law and economics movement, which was a well-orchestrated campaign starting in the 1970s to make the legal system more business friendly. As we wrote in ECONNED:

The third avenue for promoting and institutionalizing the “free market” ideology was inculcating judges. It was one of the most far-reaching actions the radical right wing could take. Precedents are powerful, and the bench turns over slowly. Success here would make the “free markets” revolution difficult to reverse.

While conservative scholars like Richard Posner and Richard Epstein at the University of Chicago trained some of the initial right-leaning jurists, attorney Henry Manne gave the effort far greater reach. Manne established his “law and economics” courses for judges, which grew into the Law and Economics Center, which in 1980 moved from the University of Miami to Emory in Atlanta and eventually to George Mason University.

Manne had gotten the backing of over 200 conservative sponsors, including some known for extreme right-wing views, such as the Adolph Coors Company, plus many of the large U.S. corporations that were also funding the deregulation.

Manne is often depicted as an entrepreneur in the realm of ideas. He took note of the fact that, at the time, the University of Chicago had one of the few law schools that solicited funding from large corporations. Manne sought to create a new law school, not along conventional brick-and-mortar lines (his efforts here failed), but as a network. He set out to become a wholesaler, teaching law professors and judges. However, although Manne presented his courses as teaching economics from a legal perspective, they had a strong ideological bias:

The center is directed by Henry Manne, a corporate lawyer who has undertaken to demolish what he calls “the myth of corporate responsibility.” “Every time I hear a businessman acknowledge public interest in what they do,” Manne warns, “they invite political control over their activities.” At Manne’s center in Miami, interested judges learn how to write decisions against such outside political control couched in the new norms of market efficiency.

Manne approached his effort not simply as education, but as a political movement. He would not accept law professors into his courses unless at least two came from a single school, so that they could support each other and push for others from the law and economics school of thought to be hired.

The program expanded to include seminars for judges, training in legal issues for economists, and an economics institute for Congressional aides. A 1979 Fortune article on the program noted that the instructors “almost to a man” were from the “free market” school of economics. Through 1980, 137 federal district and circuit court judges had finished the basic program and 56 had taken additional “advanced” one-week courses.

It is hard to overstate the change this campaign produced, namely, a major shift in jurisprudence. As Steven Teles of the University of Maryland noted:

In the beginning, the law and economics (with the partial exception of its application
to antitrust) was so far out of the legal academic mainstream as to be reasonably characterized as “off the wall.” . . . Moving law and economics’ status from “off the wall” to “controversial but respectable” required a combination of celebrity and organizational entrepreneurship. . . . Mannes’ programs for federal judges helped erase law and economics’ stigma, since if judges— the symbol of legal professional respectability—took the ideas seriously, they could not be crazy and irresponsible.

Now why was law and economics vantage seen as “off the wall?” Previously, as noted above, economic thinking had been limited to antitrust, which inherently involves economic concepts (various ways to measure the power of large companies in a market). So extending economic concepts further was at least novel, and novel could be tantamount to “off the wall” in some circles. But with hindsight, equally strong words like “radical,” “activist,” and “revolutionary” would apply.

Why? The law and economics promoters sought to colonize legal minds. And, to a large extent they succeeded. For centuries (literally), jurisprudence had been a multifaceted subject aimed at ordering human affairs. The law and economics advocates wanted none of that. The law and economics advocates wanted none of that. They wanted their narrow construct to play as prominent a role as possible.

For instance, a notion that predates the legal practice is equity, that is, fairness. The law in its various forms including legislative, constitutional, private (i.e., contract), judicial, and administrative, is supposed to operate within broad, inherited concepts of equity. Another fundamental premise is the importance of “due process,” meaning adherence to procedures set by the state. By contrast, the “free markets” ideology focuses on efficiency and seeks aggressively to minimize the role of government. The two sets of assumptions are diametrically opposed.

Hopefully this extract helps you understand why this legal campaign that has grown out of MMT is so important.

MMN has chapters all over US law schools, and is getting more support and participation from academics, as some of the panels will demonstrate. Another testament that they have a law school textbook coming out next year.

By Raúl Carrillo, an attorney and a former member of the Consumer Financial Protection Bureau and the California Attorney General’s office. Originally published at New Economic Perspectives

I delivered the remarks published below at the First International Conference on MMT on September 22nd, 2017. The panel, entitled “Modern Money, Courts, and Civil Rights — Against Legal Predation”, explored the interplay between the cycle of crisis, austerity, and privatization, and the concomitant loss of rights for the public. I was joined by two esteemed law professors and friends of MMT: Angela P. Harris, formerly of UC Davis School of Law, and Martha McCluskey, of the University at Buffalo School of Law. The panel was moderated by Danny Sufranski, MMN Harvard Chapter President.

These remarks were delivered solely in my capacity as a director of the Modern Money Network and do not reflect the views of any past or present employers.

Good morning, everyone. My name is Raúl Carrillo and I’m a director of the Modern Money Network (MMN), a student-driven interdisciplinary organization promoting public understanding of money, law, finance, and the economy (obviously embracing MMT as a foundation). By day, I’m an attorney specifically focused on consumer financial protection or as one notorious predator, Capital One, would say, “What’s in your wallet?” Perhaps a better way to put it is that, in the Minskian sense, I help people manage their “survival constraints.” 

I’ve been digging in this space for about ten years now. As a college student, I bailed on orthodox macro after Lehman fell, as many of us did, and sought intellectual refuge in the law. After graduation, I worked for then-Attorney-General, now-Senator Kamala Harris during the multi-state mortgage fraud settlement. After meeting Rohan Grey, and helping get MMN up and running at Columbia Law, along with many of our other colleagues who are here this weekend, I served at the Consumer Financial Protection Bureau as Special Counsel to the Enforcement Director, mostly focused on litigation strategy and policy for a range of issues…from debt collection itself, to the rules of payday lending, student loans, auto loans, medical debt, you name it…all the way to payments access, credit reporting, and the broader surveillance system that circumscribes everyday lending in this country. While I was at the Bureau we started to take on Wells Fargo, Navient, Equifax, all the companies it’s cool to hate now.

Currently, I’m a Staff Attorney at New Economy Project, an economic justice non-profit in New York City. In terms of practice, my major role there is monitoring something called the “Financial Justice Hotline”, where any low-income New Yorker can call for free legal assistance. Policywise, I’m especially focused on helping immigrants navigate the financial system, helping build generative rather than extractive sources of credit, and keeping an eye on how technology is changing the debtor’s rights landscape. I’m not here representing New Economy Project, but I mention these issues because I’m going to touch on some of them as we move along. But first let me provide a map of where I’m going.

Today, I have the unusual luxury of leaving descriptions of MMT and arguments concerning Fed rates, transmission mechanisms, and monetary policy impact on consumer lending in the hands of experts. In fact, there’s another panel at 3:50 today on “Modern Money, Interest Rates, and Credit” and another on Sunday: “MMT, Finance, and Interest Rate Policy.”

So, I have two personally refreshing goals this morning:

(1) First, I’d like to impress upon folks a theme that I’ll be stressing throughout the conference: when it comes to the economy, law is not merely a governing force (as many on the right would have economists believe) nor a reflective force (as many on the left are inclined to think). It is also a constitutive force. What I mean by that is that the law doesn’t just intervene into the economy on the back end, and it doesn’t merely reflect deeper forces in the economy either. Rather, a lot of the economic concepts we talk about not only have a particular meaning in the context of specific legal parameters, but they only exist given the deeper architecture of legal regimes, in the sense of systems design. I’m going to do my best to articulate what that means and what that looks like when it comes to consumer finance. 

(2) Second, I’m going to talk about how people actually experience the government’s failure to sufficiently spend money for public purpose. People don’t experience the absence of MMT-insights as policy failures in a grand sense. They experience it as personal pain. Over time, that pain can become chronic, but at first, it’s acute. For some of us, it’s devalued assets, houses, cars, etc., but most people in this country live paycheck-to-paycheck — or no-paycheck-to-no-paycheck — and thus experience the survival constraint pain on the liability side, where their debt is expounded, compounded, and sometimes straight-up fabricated. And within this group…there is what we call “disparate impact” in the legal world. As Sandy Darity, Darrick Hamilton, and other fellow travelers consistently point out, for many folks on the periphery, especially people of color who lack intergenerational wealth, the lack of MMT informed-policy means permanent austerity and perpetual depression. 

With that in mind, we must cultivate a way to talk about Modern Money from the bottom-up and from the outside-in. We have to draw maps from people’s suffering to the macro failures. I personally think we can do this best by talking about (1) consumer debt, (2) criminal justice debt (which Prof. Harris is going to cover), and (3) taxes (which Prof. McCluskey will discuss).

So, first, MMT, and consumer finance systems design. MMTers like to tell a very important story about how public debt is not a problem, but private debt might very well be. We often do this by talking about the Clinton Administration, sometimes about Japanese experiences, but usually about the Clinton Administration. We say the Clinton budget surpluses and the trade deficit meant that private consumption (decreased household savings and increased household debt) had to compensate for the drag. Because the private sector cannot survive in negative territory in the way the public sector can…we got a crisis.

This is not the full story of course, and how could it be? I don’t think any of us pretend it is and oftentimes we can’t afford to go that deep into detail. But we’re at a point as a group where we have to grapple with further granularity frequently. We have to remember that people don’t experience private debt in the aggregate or in a vacuum, so we shouldn’t consistently talk about accounting identities without accounting for identities, that is, people’s specific experiences, as social groups and classes and as individuals. Underneath the sectoral balances, people experience austerity and crisis through very detailed, sharp legal machinery that’s often built to exploit them: not only at the level of bad legislation and bad regulation, but through the courts themselves.

For example, the Clinton surpluses ultimately led to the mortgage crisis. But the mortgage crisis was, of course, just as much a legal phenomenon as a macroeconomic phenomenon. There’s a lot to say about how what Legal Realists like Robert Lee Hale would call the “background rules” that allows for something like the mortgage crisis to occur. But even more directly, this particular private debt crisis manifested first via the manipulation of law….obviously on the “high finance” side with respect to securities and derivatives, but necessarily also on the “low finance” side, principally through the use financial technology, like MERS, which was used to circumvent centuries of precedent concerning titling and recording, from both Anglo-American and Hispano-American traditions of property law (which were problematic to begin with).

Second, as my MMN colleague, Nathan Tankus, has stressed consistently, the aftermath manifested in what was essentially a slap on the wrist in response to a grand fraud perpetrated upon the American public. Having been there in the moment, I’m quick to note that this was a situation of titanic complexity and a good number of good people tried to do the right thing. That being said, what ultimately manifested under the Obama Administration’s banner, with a stamp from the courts and a slew of administrative agencies, was utterly insufficient and unjust, and compounded many of our broader macroeconomic and social problems.

I think we all know at least parts of this story and many MMTers have occasionally written about it. So why am I repeating it here? Because again, we have to stress the systems design aspect and the rules that filter how people deal with sectoral-balance issues, because that’s what people see in front of their faces. People experience austerity and crisis through the legal grinder: through foreclosure, garnishment, forced arbitration, tax interception, imprisonment, etc.. And some people filter all that through additional layers of oppression.

The crisis aftermath demonstrated in spades that law is elastic at the apex and rigid at the periphery, as Katharina Pistor at Columbia Law has argued. Understanding this is a necessary complement to understanding Minsky’s Financial Instability Hypothesis. As the saying goes, “poor people are constantly bumping into sharp legal things,” but the skewers cut extra deep during a bust and fully entrap poor people of color in the Hedge stage. Orthodox economists and regulators absolutely fail to see this or willfully ignore it. As Professor Harris’ co-author Georgetown Law Professor Emma Coleman Jordan highlighted in her recent article, The Hidden Structures of Inequality, a search of the Federal Open Market Committee (FOMC) transcripts from 2007-2008 fails to reveal a single mention of race – not one within the entire 1,800 pages. That’s not merely a monetary policy oddity, that’s a cognitive and ideological failure that ultimately caused unprecedented disparate impact. The Fed did not understand how much Black and Latino wealth was tied to housing value and this in turn exacerbated how badly they underestimated the severity of a potential crisis. As a result of this specific failure, from 2005 to 2009, white household median wealth fell by 16%, but Black median wealth fell by 53% and Hispanic median wealth fell by 66%. From 2010 to 2013, white household median wealth increased by 2.4%, Hispanic median wealth fell by 14.3%, and Black median wealth fell 33.7%.

This has to be part of our MMT story. Many of these folks were reaching for, essentially a middle class life, and a legal-economic design problem that could have been rectified by MMT insights pushed them back down. We have to connect those dots for people. I’d argue most people understand the status quo is unjust on a visceral level, but it’s up to us to supply macro analysis in narrative form. People are trying to manage their survival constraints, mostly on their own, against forces far more powerful than themselves. We have to demonstrate how in lieu of an “MMT world” we live within consumer credit markets, designed and governed by corporate creditors that reflect their political and legal interests rather than anything “natural” in the economic world.

As economic thinkers who claim to be hardheaded about operations and coercion, we should assert this is true at the most basic level. For example, let’s consider interest rates on small-dollar loans. Again, other folks throughout the conference will discuss the strained, delayed, and slow relationship between Fed rates and the rates consumers ultimately see. But whatever that relationship is, actual lending also occurs within qualitative legal parameters, in the context of power. I like to say I belong to the Frederick Douglass School of interest rate theory. Douglass said, “Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them.” In this vein…”Find out just what [rates] [debtors] will quietly submit to and you have found out the exact measure of what will be deemed a [“natural”] or [“reasonable” interest rate]…” and that is what will be imposed upon them. May seem a bit silly, but when you consider the white supremacist history of predatory lending in this country, maybe not such a stretch. 

The point is, the Fed can do whatever it wants, but when it comes to transmission of credit terms to the public, on the financial periphery, at least, we’re not just talking about what markets will bear in relation to monetary policy changes. We’re also talking about what the public and the state will allow and what we will not. People on the peripheries, get credit on whatever terms pawn shops, check cashers, payday lenders, or whomever happens to have financial power on their block happens to dictate. Big banks aren’t much better, especially since banking supervisors aren’t always wielding the Community Reinvestment Act and other fair lending laws aggressively. It’s so bad right now, low-income consumer advocates can usually predict the APR on clients’ loans before we even see a contract: it’s .01% under the state usury cap, simply because that’s how high we let them go. That’s all that’s preventing a race to the bottom.

Right now is a particularly important time to talk about all this and connect these dots. Consumer finance, in general, is becoming increasingly complex and moving faster and faster, meaning it’s becoming harder for people to see the forest through the trees. Today, in the current environment of federal deregulation, the American Bankers Association is trying to get banks back into balloon-payment payday loan. Subprime mortgages are coming back, auto finance is a total racket, healthcare woes will churn medical debt until we fix that system, and student debt is just going to get more abusive under Betsy. Additionally, there’s a debt crisis for living expenses in many major cities. I’ve encountered mattress debt, sewing machine debt, and puppy dog debt. Then, on top of all this, and this is for other folks on the panels, people are taking out loans so they can pay their debts to courts, municipalities, prisons, and other entities other folks on the panel will talk about.

And that’s only half of this whole process. Debt collection itself has become such an abusive industry that Human Rights Watch is covering it. In the United States. Since the crisis, we’ve seen an explosion of “debt buyers” — companies that purchase allegedly delinquent accounts for pennies on the dollar and then go after low-income folks for all that they’re worth. The claims are often false and there is frequently no evidence that defendants owe anything at all. But courts consistently enter judgments in favor of debt buyers, many of them default judgements because debt buyers engage in something called “sewer service” — they falsely claim to have notified defendants of lawsuits but instead essentially throw the summons in the sewer. People are being defrauded and fleeced in new and “innovative” ways. In her empirical work, UConn Law Professor Dalié Jiménez has found that “in many contracts, sellers disclaim all warranties about the underlying debts sold or the information transferred.” They’re not even trying. The originate-to-distribute-to-collect business model relies on fraud. Moreover, it relies upon violations of our constitutional rights to due process and our right to have our day in court. 

This is not the world we want to live in and it’s a world MMTers should fight tooth and nail. Many orthodox economists and financiers argue this is not only necessary, but desirable. They like this world and some are starting to disguise what they’re doing, as usual, with new technology. In a keynote lecture at a Post-Keynesian Conference in Denmark in 2011, Jamie Galbraith asserted that high finance has “nothing to do with the real world of things, of exchange. It is a world of technology, of factory-produced contracts, of uncontrolled legal complexity.” This is becoming more and more true for the world of “low finance,” as well. Technology, in particular, threatens to turn consumer finance into a predatory lending hellscape. In his recent testimony before the U.S. Senate Banking Committee, MMN Friend and Maryland Law Professor Frank Pasquale argued we’re moving toward a world of artificial-intelligence-based underwriting and regulators can’t keep up. We’re in the dark about how new algorithms are judging us and what they’re doing with our data, which is principally financial data. As the Equifax breach showed, we have no idea if corporations can protect our privacy and civil rights.

Innovation” can very well just be a cloak for not only usury and redlining, but profitable violation of our civil rights. Some might say that’s ultimately the point. As Bob Hockett & Saule Omarova argue in The Finance Franchise, the online lending models aren’t even that “disruptive” to begin with: for example, the “peer-to-peer revolution” is actually just a reactionary return to the orthodox “one-to-one” intermediation model of finance. The “innovation” part is nonsense. Yet many bad regulators, including economists, are ready to give the fintech firms everything they want. For example, The Office of the Comptroller of the Currency wants to give Special Purpose National Bank Charters to online lenders. Although they say this is to level the playing field and take lending into the 21st Century, a national charter’s chief function isn’t promoting competition, it’s allowing non-bank predatory lenders to circumvent state usury caps simply by moving their business online and getting approval from…the Trump Administration.

These new threats aren’t merely promoted as “innovative,” but beneficial. They’re cast as services because they offer the neoliberal holy grail: “ACCESS TO CREDIT” or “FINANCIAL INCLUSION.” It’s considered “woke” and “socially responsible” to leverage technology to “bank the underbanked.” These principles sometimes arise from good intentions. Credit is important. It’s crucial. But I don’t think have to tell this audience that bank credit and small-dollar loans are not solutions to structural problems in our economy. Exploitative credit can just make things worse, again, especially for immigrants and communities of color that don’t have intergenerational assets. More importantly, we shouldn’t live in a world where people have to survive on private credit. And if people do need credit, they should be able to get it from a trusted source, like a postal bank or a municipal bank, or a neighborhood institution like a Community Development Credit Union (CDCU).

MMTers need to differentiate ourselves from the orthodox folks here and push back against the shallow “Access to Credit” rhetoric. It’s especially important for us to do this because many of the people who push this stuff, happen to also be fiscal hawks at both the state and federal levels. In the Administrative Law world, there is something called the Bootlegger-Baptist strategy. Silicon Valley and Wall Street have paid a lot of fiery preachers to say government spending is bad, wasteful, etc.. Who knows if they truly believe this? Their actual aim is to make room in the temple for the money changers. They are opening up space for the “bootleggers,” for predators to come in and do the profitable dirty work in the absence of economic security.

So what do we about all this? MMTers already have the answer: we spend money for public purpose on things that actually make people’s lives better as whole people. We can’t just throw money at people. (I mean this in the context of lending, obviously, but if you’ll indulge me a minute, I’m also talking about some approaches to Basic Income here. If you’re just receiving a check, but you don’t have any increased, structural power over other aspects of your life, the money is just going to go down the drain. Forget income, people are in debt up to their eyeballs, and they’re being plundered. The way things are going now, if we get UBI without transforming the underlying structure of the economy, people are going to get their UBI money on prepaid Chase debit cards loaded with fees, their financial data is still going to surveilled by anyone who can check a consumer reporting system, and they’re going to lose their checks on the back-end to abusive, fraudulent debt collectors.)

MMT’s ultimate contribution to Consumer Finance is showing a world beyond the “Let Them Eat Debt or Let Them Eat Cash” approaches by actually spending public money not only for public purpose but for public power. If you subscribe to MMT and believe in some form of social justice, we don’t have a choice. Without sufficient federal financing, people aren’t just left without certain goods and services; they’re going to left at the mercy of predators without their biggest defense, the public purse-strings, which by Article I, Section 8 of the Constitution belongs to them by right. We need a Black Lives Matter budget. We need Fiscal Feminism. We need to stop balancing budgets on the backs of people who break their own backs, regardless of where they’re from. We have to give people jobs, healthcare, education, due process, safe streets, safe water, safe air, etc., — all the good stuff. I hear people say this will be messy, complicated, and difficult. I tell those people to get a load of the status quo. We have an economy that eats people’s fundamental rights for breakfast. MMT can show how to change this and in doing so, we can give people a real say in the broader forces that pull at all our survival constraints incessantly. In short, I see MMT as enabling real, deep economic democracy, across the board, and I’m excited to be here to talk about that with you all for the next three days.

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  1. Jim Haygood

    MMTers like to tell a very important story about how public debt is not a problem, but private debt might very well be.” — Raúl Carrillo

    Here is the other side of the story, from John Mauldin. It’s probably posted on his site, but I received it in an email last night:

    Look what we’re trying to do. We think people can spend 35–40 years working and saving, then stop working and go on for another 20–30–40 years at the same comfort level – but with a growing percentage of retirees and a shrinking number of workers paying into the system.

    I’m sorry, but that’s magical thinking. And it’s not what the original retirement schemes envisioned at all. Their goal was to provide for a relatively small number of elderly people who were unable to work. Life expectancies were such that most workers would not reach that point, or would at least live just a few years beyond retirement.

    When Frank Roosevelt created Social Security for people over 65 years old, US life expectancy was about 56 years. If the retirement age had kept up with the increase in life expectancy, the retirement age in the US would now be 82. Try and sell that to voters.

    Worse, generations of politicians have convinced the public that not only is a magical outcome possible, it is guaranteed. Many politicians actually believe it themselves. They aren’t lying so much as just ignoring reality. They’ve made promises they aren’t able to keep and are letting others arrange their lives based on the assumption that the impossible will happen. It won’t.

    While debasing the currency can and will be used to “soft default” (as Mauldin hisself admits), it cannot change structural factors such as a rising elderly population versus a shrinking youthful population.

    Money illusion works for awhile. Bigger numbers on your paycheck or pension check look good, even when prices of necessities are rising at the same rate. But as we learned in the 1970s, when inflation reaches double digits, it becomes grossly unpopular.

    What to do, what to do? MMT is the intellectual equivalent of checking out into Coleridge’s stately pleasure dome, to raft Alph the sacred river down to the ice caves. Mind you don’t overdose.

    1. Mel

      Not at all. MMT states that the limits on government action (on anybody’s action really) are set by real resources. Can people live 20 years past the end of their working lives? Well, is the stuff there? Is there food, clothing? Are there apartments, houses? These things create the ability to retire. They give the answer.
      Finance is just a language. It’s there to say whatever persons (natural or legal) want to say with it.

      1. JuneZ

        To expand on Mel’s point, what determines our ability to support those not working is not only their number and the number of workers, but the productivity of the work force. And this depends on their health, their tools, and technological improvements. If our social arrangements have taken care of these, we’ll have the real resources to support retirement. Compared to the New Deal era, each worker can support more retirees.

    2. Neil Wilson

      I really need to write a piece on this. But the helicopter view is this.

      About 1% of the population work in agriculture and perhaps about 10% work in manufacturing. Beyond that the rest of us are largely redundant. If any more worked in those areas we wouldn’t be able to move for stuff.

      The problem we have is one of work allocation. Why should 11% of the population work all hours God sends to produce stuff for the rest of us? Why don’t they just produce for themselves, go home on Tuesday and have the rest of the week off?

      So we have a problem. We need to gain the Adam Smith benefits of the pin factory in agriculture and manufacturing, but we need to make sure that those who are working hard in agriculture and manufacturing (and the machine makers that make them so productive) don’t feel like they are being ripped off and enslaved. And beyond that we need to make sure the rest of us have something to do so that others don’t feel they are being ripped off and enslaved.

      That is why Basic income will always fail. The problem isn’t the money or the stuff. The problem is that you end up with resentment from a slave class that you need to keep strapped to the wheel to keep it all turning.

      That’s the challenge for the 21st century. We’re actually too damn productive and it is impossible to ‘share it out’ without ending up like Zimbabwe (since that was the real reason it collapsed – trying to get people who couldn’t farm to farm).

      So instead we create public health, public education, public entertainment, public infrastructure so that the hard working manufacturers feel they are getting something in return.

      1. vidimi

        the rest of us aren’t so much redundant as working to prop up the empire in one way or another. we extract tribute through our work for multinationals.

    3. JTMcPhee

      Maybe if our rulers were not creating money to fund a vast, largely incompetent, destructive military-“security” (STASI) Moloch, that is only in service to the racketeers of “trade and commerce and extraction,” and of course the giant blimp of FIRE that floats above us mopes and whose captains wish they could cut their inconvenient tether to the world of constrained physical resources altogether, https://en.m.wikipedia.org/wiki/Elysium_(film), there might be a chance to arrange and pay for a decent life for all. If a lot of other changes and conditions (other than the implicit “kill off the useless eaters” theme that can be sensed in this discussion among people who are “comfortable”) are also dealt with in some way other than more of what’s called the neoliberal solution… Stuff like FIRE looting, and oligarchic rule, and a combusts-consumption-based “economy,” and the Jetson lifestyle complete with flying self-driving vehicles (for which set of “us”?) and all that.

      Of course, given human nature and our drive to self-pleasing and domination, there’s small to zero chance of “coming together” on a definition of what constitutes a decent life, a “modest competence.” And who is going to pay, in the US context, for all that medical care (often necessitated by the self-destructive or decimated lives that workers and the “useless eaters” are forced to lead — including toxic exposures, non-nutritive “food” and the rest, all part of the rentier looting structure”)? And how about that human induced climate change? Responding to that will offer vast new opportunities for the looters and rulers to take “more” for themselves.

      Maybe if “we” just put all the “money” that is out there as some kind of debt to the Social Security Class into the Stock Market, all will be well, eh?

      But the “comfortable” (and by what pathways of fortuity and looting and rentier success have they gotten to that point?) have more “say,” just like the Constitution originally provided, and are more equal than others, so what’s the chance of people treating each other more uniformly in a manner that tracks that silly Golden Rule notion of society and might move the species into a niche that corresponds over the long haul with the carrying capacity of the planet? “We,” or those of “us” who decide how the social order and political economy actually run, for sure are not going to stand easily for any policies that lead to any reduction in their “say” and holdings and “take.”

      How much public wealth will it take to fund Musk’s Mission to Mars? And pave the pathway for the looters and “successful” to move their act to a different planet?

      1. JBird4049

        The Founders certainly believed in an elite class that would guide the rambunctious lower classes, who they were afraid of; they were also afraid of tyranny and of the people not having any say in their government. They were not in favor of a hereditary ruling class.

        What we have today is almost a textbook example of what they were afraid could happen. All you would need is someone declaring themselves King of the United States of America to match their fears.

    4. cnchal

      . . . Worse, generations of politicians have convinced the public that not only is a magical outcome possible, it is guaranteed. Many politicians actually believe it themselves.

      That is the reality for politicians. In Canada, federal politicians only need to get elected twice, and golden pensions are theirs. There are no better or softer feathered nests than a politician’s. All extracted from the wealth creating side (making stuff) of the economy, which continues to shrink, while the wealth absorbing side (service sector) get’s bigger.

      I put the blame squarely on globalization. Wealth creation was outsourced, and the Chinese peasants that work in the slave shops have that wealth stolen and then split between the Chinese elite and the elite here.

      Politicians are almost all lawyers, where their personal wealth creation activity is bleeding their victims dry at the rate of $500 per hour. They seem unable and disinterested in looking at in any other way.

      One of the saddest things I have read here was Clive’s description of where he works. It’s all skim all the time and everyone there hates their jawb and their boss, but they do it for the money, because obligations.

      Will their pensions be there at the end? Was it worth a lifetime of misery?

      1. HotFlash

        In Canada, federal politicians only need to get elected twice, and golden pensions are theirs. There are no better or softer feathered nests than a politician’s.

        Dunno how to think about this. Perhaps it is done this way to discourage the ‘revolving door’ and speeches ‘worth’ what is 10 years pay for most of us? I understand that one of the reasons to pay civil servants — and politicians — well is so they don’t need to take bribes. Examples abound, eg Mexico, US (ex-presidents and ex-secretaries of state), India, the list goes on.

    5. Kevin

      Except arguing that the creators of social security were unaware of changes to life expectancy is dumb. They had accurate actuarial tables in Jefferson’s time let alone the 40s so they would have been aware of the steady increases in life expectancy when they created social security. That’s also ignoring that a life expectancy of 56 years in 1945 includes the 5% infant mortality rate, in other words if you made it out of childhood you had a decent chance of lasting past your 50s. You also ignore that the size of the US economy is huge compared to the 1940s, and that each individual is vastly more productive. As others point out, it’s a resources question, but you have to do better than cite life expectancy from the 40s to argue such a doom and gloom view.

    6. ChrisAtRU

      I got two links for ya:

      Stephanie Kelton’s tweet today that breaks down what the budget and the deficit effectively constitute.

      Randy Wray’s article on “What The Government Ought To Do”.

      The only illusion is folks who see “welfare queens” and “over-entitled seniors and retirees” but don’t see trillions of waste on the military and the FIRE sector.

      I’ll finish with this question: How badly did QE debase the currency?

      1. Chauncey Gardiner

        Excellent comment, Chris. I’m sure those here who consistently voice their opposition to Modern Monetary Theory will maintain their ideological consistency by registering their opposition to any individual federal income tax cuts, corporate tax cuts, or inheritance tax cuts which would, of course, increase the federal budget deficit. … It’s actually kinda funny how that works, isn’t it?

        Suggest being careful about ideological straitjackets. They can constrain one’s consideration of constructive alternatives.

        1. ChrisAtRU

          Did you even look at the links I posted? Or are you more upset about my comment regarding illusion?

          I suspect the former, so let me spell it out again:

          From Kelton’s tweet:
          “A budget is a document that reveals GOVT priorities. A deficit is the financial surplus GOVT leaves to others. The issue is *for whom*”

          Do you understand what she means?

          It’s about whom government policy chooses to inherit (pun unintended) the private sector surplus its (the government’s) deficit creates. If it’s more important for financiers and the ultra wealthy to benefit from this surplus, we get the kind of policy we’ve seen – where inequality is widened by constantly providing tax cuts for corporations while “tightening the belt” of the middle class in forms of cuts to services and benefits.

          Is this an ideological straight-jacket to you?

          From Wray’s MMP article:
          “Just Because Government Can Afford to Spend, Does Not MeanGovernment Ought to Spend.

          Understanding how government spends leads to the conclusion that affordability is not really theissue—government can always affordthe “keystrokes” necessary to make expenditures as desired. But that does notmean it should. We can list several legitimate reasons for constraining government spending:
          too much spending can causeinflation
          too much spending could pressure the exchange rate
          too much spending by government might leave too few resources forprivate interests
          government should not do everything—impacts on incentives could be perverse
          budgeting provides a lever to manage and evaluate government projects”

          MMT does not posit that just because a government is not constrained in its spending by revenue, it should just spend on anything. This is understood, especially in the context that the real purpose of taxes is to control inflation.

          So I’m not sure what ran afoul of your sensitivities here.

          1. Chauncey Gardiner

            Your comment was well written and did not run afoul of my sensitivities. I agreed with you, but evidently did not communicate that well.

            1. ChrisAtRU

              Oooops! Well, that would make me the sensitive one … ;-) Thanks for agreeing. I’ll chalk my misunderstanding up to gettin’ back in the saddle after a while (in terms of engaging about MMT online).

              Here a bonus for your kindness (in case you don’t have it bookmarked):

              Ben Bernanke 60 Minutes interview where he admits taxes did not pay for QE (keystrokes!):

              “Is that tax money?”

              Good night!

    7. Harold

      This is not entirely accurate, as I understand it, because until the invention of antibiotics and other modern modern medical treatments, vastly more people died used to died as infants, children and/or young people and never reached retirement age. But if they lived until age fifty without being killed off in their youth by disease, poor safety, and sanitation, people’s life expectancy was not all that different than today.

      The average 50-year-old woman in 1930 could expect to live until 73, the average 50 year old in 2009 can expect to live until about 83. That’s a 10-year increase, not a 20-year increase.

      It’s true, longer lifespans mean we do have a greater population of old people, but we also have a much, much larger population of young people and old people, too, working and paying taxes. The real difference is that the cost of medical care has increased astronomically — 600 percent since 1980 alone.

      1. Code Name D

        True. But SS is not a launch and forget program. When new trends are observed, its finacing can be modified to compensate. When the baby boom generation started filling up hosbital nurseries, they adjusted the taxation to build up a suprplus so that they would have money when the baby boom retired.

        The current recoomondation is to remove the pay cap, which will alow the wealhy to pay more into the system, and forstal exosting the suerplus.

  2. Andy S.

    For the sake of argument, I’ll stipulate that everything MMT proponents say regarding fiscal accounting is true.

    That being said, even if policy makers accept MMT accounting principles, it does absolutely nothing to change poor policy decisions. In fact, one could argue might make poor policy decisions worse.

    Not enough money to fund more troops in Afghanistan? Don’t worry, deficits don’t matter anymore!

    How is Trump going to pay for his wall? MMT to the rescue!

    You say the NSA wants to double its top secret budget? No problem!

    MMT is bacically a set of accounting rules for sovereign fiscal budgeting. In absent of real, long term political change, these rules can and will be gamed by entrenched special interests. Absent political change, these interests will clamor to be the beneficiaries of government largesse and regulations while aggressively lobbying to avoid its cost in taxes and unfavorable legislation.

    MMT is just a tool, and as a tool it can be wielded for good or ill.

    1. Mel

      You don’t mention the times it can make poor policies better. I mean, congress is looking again to shut down the government in December because of the Debt Limit. Really!
      You can’t get all your problems, political ones for instance, solved with money, unless you’re rich. Money only solves rich people’s problems.

      1. Andy S.

        Worry not – in an MMT world, Congress will certainly be able to find other reasons to justify exercises in brinkmanship.

    2. swendr

      Even if policy makers accept MMT accounting principles, it does absolutely nothing to change poor policy decisions.

      But MMT accounting principles already govern our existing poor policy decisions. There’s just an extra layer of bullshit about austerity slathered on for effect. Being honest about the mechanisms that are currently abused for massive private gain allows the realm of the politically possible to expand to include spending for broad public benefit.

      1. Andy S.

        Being honest about the mechanisms that are currently abused for massive private gain allows the realm of the politically possible to expand to include spending for broad public benefit.

        So are you suggesting that the power players will not be able to find other, and at least as effective, ways to be dishonest in an MMT environment? I don’t think you give them near enough credit.

        1. swendr

          Not suggesting that at all. If enough people call bullshit on bad faith fiscal debate and make political gains against that agenda, a hypothetical “at least as effective” dishonest other argument will have to be debunked when it arises as well. You bring up a good point though. Why seek political gains if they will need to be defended? I dunno, maybe because the political gains are worth defending?

    3. Norm

      Your points about the MMT’s potential for abuse are well taken. Corruption and greed will always undo any efforts to set things right by replacing a bad set of understandings with better ones. That being said, absolutely nothing in this country (good old USA) can get better as long as the regnant mythologies are:

      1. There a limited amount of money and all debts must be paid.
      2. While national security makes military expenditures
      (and the borrowing and debt accumulation that go with it)
      imperative, all other expenditures (e.g., for education, infrastructure
      social justice, nicer lives generally) are beyond our capabilities
      because there ain’t enough money and we can’t borrow anymore.

      These myths make so many constructive initiatives impossible. As long as people buy into these myths, all notions of addressing real needs are off the table and convincingly characterized as naive leftist pipedreams.

      The recognition of MMT by itself certainly won’t wean us from our militaristic neoliberal obsessions, but it would be a good first step toward reframing the conceptions of what is possible.

      1. Jeremy Grimm

        What he – Norm – said –
        And … more troops in Afghanistan, Trump’s Wall, NSA budgets … these expenditures are made without any MMT justifications. They are “necessary”. Other expenditures are shutdown using “kitchen-table budget” arguments. Expenditures to benefit the common good are shutdown by arguments like there is no common good and besides the Market can best address these concerns since the government cannot do anything efficiently or well. — So – I agree with you Andy S – if I understand you correctly – MMT does not address the political or ideological underpinnings of neoliberalism. Indeed should the “kitchen-table budget” arguments lose their traction the economic arguments of MMT can support expenditures for more troops in Afghanistan, Trump’s Wall, NSA budgets … quite as well as they might support expenditures for universal health care. There are plenty of other scams to shutdown expenditures that benefit the public.

        As an economic theory MMT provides a most reasonable explanation for how my handling my household “kitchen-table budget” is completely different than budgeting for expenditures for a sovereign government. But as a theory of politics, law, philosophy – it says nothing. It tells us what our government could expend public money on but tells us little or nothing about what our government should expend money on. I guess addressing this shortfall may be a major purpose of the MMT conference.

  3. Jack Lifton

    Perhaps the least understood aspect of magical thinking in our time is how it determines the planning of long term capital allocation for societal changes that are just fads. Global cooling was the last generation’s Newsweek cover type of infotainment through fright generation, but it quickly passed away as the hucksters and pseudoscientists could not sell any interest in living after a nuclear war caused “cooling.” Then (same people) it was anthropogenic global warming. The neoliberal economists loved this one, because it could drive speculative investment (gambling) and of course, proprietors of the house (banks, funds, stock “markets”) would always win. But, unfortunately, a decade of no warming, ordinary weather variation, and the financial collapse caused by the shift to financialization from wealth creation took its toll of the global warming meme. Today “climate change, ” a true statement of what is occurring if one is describing the variation over time of the climate anywhere and for any length of time, is what’s left of the cooling/warming deindustrialization driver of financialization, and of course the neoliberal approach to “combatting” ( tilting at) climate change is to deindustrialize and de-energize our society, so that we cannot have the tools to combat climate change. We would need an immense amount of energy to extract, refine, and fabricate the raw materials we have access to into the tools and structure of a non-fossil fuel energy generation and use world. if one believed that humans could influence climate in any direction and if one really wanted to change that then EVERYONE would need to accept that we would first need MORE FOSSIL FUELED ENERGY GENERATION to effect such a change over a multigenerational period while we changed over our society into a NON INDUSTRIAL one. Mining, Refining and Manufacturing require amounts of energy at any given time that no alternate source to fossil fuels except nuclear could provide. Just to effect the changeover from fossil fuels to electricity as the power source for personal and land based cargo transportation would require 20 to 100 times the current annual new production of critical and scarce metals and materials and this level of production would not need to be sustained after production/recycling equilibrium were reached! To do such a thing will require a large increase in fossil fuel generated electric power, most of which will not be needed after that equilibrium is reached. This means a large allocation of capital and a global industrial plan must be put in place RIGHT NOW for a non (monetary)-profit making purpose. But this would mean old fashioned investment in capital equipment not in derivatives of derivatives. I suspect that within a few years neoliberal economics will say of the “global warming” issue, “NEVER MIND.”

    1. Tom_Doak

      Let me see if I can understand your argument: stop the magical thinking, we can’t have nice things. But maybe, if we promote nuclear power and more mining? I could swear I’ve heard that first part somewhere before..

    2. Jeremy Grimm

      Parsing your comment and tackling your assertions one-by-one:
      – Magical thinking based on fads directs our long term capital allocation for making societal changes.
      I have a few problems with that assertion. Some long term capital allocations are indeed a result of fads and magical thinking – tying in with your Nuclear Winter theme I would point at missile silos. Investments in aircraft carriers might also fit. On a commercial side capital investments in the fracking craze might also fit. However – overall I think the lack of long term capital allocations for making societal changes is a critical problem challenging our polity.

      You allude to Global Cooling – related to the Nuclear Winter – followed by Global Warming – which then devolved to the anodyne [and you suggest more apt] “Climate Change” – as exemplars of drivers for fad based long term capital allocations for making societal changes. For me – your argument becomes a little twisted at this point. You seem to be saying long term capital allocation to respond to “Climate Change” fueled and bolstered “the neoliberal approach to “combating” (tilting at) climate change ” [which] “ is to deindustrialize and de-energize our society, so that we cannot have the tools to combat climate change”. If I understood your assertions correctly – they are contrary to my impressions of the neoliberal approach to climate change.

      As I understand the neoliberal approach to Climate Change – following the analysis made by Phillip Mirowski in a lecture I could point you to on youtube – assuming youtube hasn’t removed it – evolves in three steps. Step 1 is blanket denial supported by purchased expertise. Step 2 admits there is a problem and proposes various market based solutions like cap-and-trade or carbon futures. Step 3 suggests market based solutions – on a global scale with appropriately large monetary investments – applying various schemes for achieving geo-engineering of the climate. Neoliberals want to extract as much oil and coal as possible, build as many nuclear power plants as possible and build as many solar farms and wind turbines as possible in addition to anything else that profits them.

      Given my understanding of neoliberals – such as it is – I cannot agree with your assertion that a neoliberal response to Climate Change was the driver for the deindustrialization of our society. There are other more compelling – and to me more convincing – arguments to explain the deinstrialization of our society. These arguments have been explained at length in numerous posts at NakedCapitalism.

      The notion that any group is making efforts to de-energize our society is difficult for me to comprehend. In my opinion you are misinterpreting a family of arguments and motives predicated on the near term exhaustion of our current sources of energy. If the energy sources maintaining our economy have reached their maximum supply, and that supply is slowly drying up – then what should we do about?

      I find little to contend with in you concluding assertions. I do believe humans can and have influenced the climate. We will indeed need considerable energy to respond to Climate Change [I usually hold on to Global Warming as more apt but defer to your preferences in terminology]. I cannot agree with your assertion that nuclear power could replace the energy we obtain from oil, natural gas, and coal [unless you intend building a lot of breeder reactors – which to me is a very scary idea.] Your assertion about the critical materials and scarce metals required for storing electricity was recently discussed at length here at NakedCapitalism. I agree with your assertion that a large allocation of capital and a global industrial plan must be put in place RIGHT NOW to address Climate Change and Peak Oil. Making use of the MMT arguments in the post you are commenting to – given the tremendous slack in our economy – there is plenty of capacity to make the needed large allocation of capital as part of a global industrial plan and I would add – the United States should be leading in such an effort.

      If you are earnest in your concerns you have come to the right place. You might begin by reading or re-reading the post above.

      1. Jack Lifton


        My “expertise” is in “resource production, refining, and fabrication” into end-user forms (not consumer or military end-products). In order to replace ICPVs our society would have to commit to producing much, much more new metal each year for perhaps a generation. The market cannot do this. It has to be, as in China, a governmental mandate with as much funding as possible. China has already managed to gain control over ALL of the raw materials, refining, and fabrication facilities it needs for its first 5,000,000 BEVs. The entire rest of the world has not got any near term plan to accomplish this, and the rest of the world is fragmented and divisively competitive. To produce new meatl requires immense amounts of energy that can only come NOW from fossil fuels. Please read the book, “Thanatia,” for the details of the energy problems arising from trying to move to alternate energy sourcing.
        The bureaucrats in Washington and Brussels do not understand why China is building so much “excess” capacity for metals production and processing. The Chinese laugh when they are confronted as “dumpers.” They are in fact preparing for a specific future. Capitalism with Chinese Characteristics believes in long term planning.

        1. Jeremy Grimm

          I think we are on the same sheet of music as far as the final conclusion. I tried to point out where your initial comment — as I read it — made assertions better replaced by other similar but less incendiary assertions. You started off sounding like yet another Climate Change [I much prefer Global Warming] denier. [You also seemed to conflate the Nuclear Winter scares with the New Ice Age scares from the 80s(?).]

          I believe we are riding a fast train toward a brick wall and only the planned and concerted efforts of a government still offers hope for slowing the train and/or mitigating the aftermath of the crash. I don’t need to read “Thanatia” to agree with your assessment of the high costs of slowing the train and dealing with the crash [although I will probably read it to find out what I might do to take care of myself and my family and get us through the wreck — but do it without adding to the harm]. I think I might be less optimistic than you in my fear we are already past the point where enough energy and resources remain for even government action to make things better. I hope you are right about the Chinese preparations but it looked to me more like a play for cornering the supply of the rare earth metals used in so much of our commercial and military technology — including much of the alternative energy technology — batteries, displays, the steel for turbines, high tech ceramics ….

          [I recall John Kenneth Galbraith making the point in one of his books that whenever a country faced a threat like a major war the government commandeered the national economy. No sane government would trust its war efforts to the tender mercies of the Market.]

      2. UserFriendly

        He actually has a point. It takes about a year before a solar panel or wind turbine has generated more power than it took to manufacture it from raw materials. The amount of carbon we would need to release to build enough solar and wind to power the globe is truly daunting and I am not at all optimistic that we will accomplish it before 2C.

  4. Henry Moon Pie

    Thanks, Yves, for that reminder about “Law and Economics” as an integral part of the execution of the Powell Memorandum. I took the first offering of “Law and Economics” at UVa Law School in the spring of 1976. I had taken a few Ec courses in college that included some Keynesian macro, but I quickly found out that what I had learned about Keynes was unwelcome in L&E. It was quite clearly an exercise in indoctrination.

    1. Carla

      I’ve just been reading about Manne in Nancy MacLean’s “Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America.” Other NC devotees may want to check it out.

  5. dcblogger

    Are there Afro-American MMT bloggers? Or even people on Twitter? I am thinking of people we could promote to the Afro-American press.

  6. notasweeper

    I find mmt very interesting but somewhat confusing. Could somebody recommend some further reading for me? I think it’s time I figure out how this theory works.

    1. Carla

      It seems to me that the “theory” in MMT is really a misnomer. MMT describes the way money actually works — whether we like it or not.

  7. kate

    Just to add to harold’s comment, I read something similar in the BMJ
    comparing now with dickensian times. It was years ago, but from memory It said that
    a great many deaths resulted from
    childbirth, both mother and child, and infant death. And that brings the average down very considerably, if those types of deaths are removed from the stats, the life span was the same or even longer than today it said. This seems the case with my own family tree, shocking to see how many died in childbirth, now a very rare event here in the west.

    1. Harold

      Maternity death rate (which used to include, at any rate, deaths from amateur abortions, don’t know how it is now computed) has recently started to rise again in the USA. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5001799/

      An American woman is three times more likely to die during the maternal period, a span that includes pregnancy and up to a year post-pregnancy or termination, than a woman in Canada.

      She’s six times more likely to die than a woman living in Scandinavia.

      This number is on the rise, too. From 2000 to 2015, global maternal death rates fell by half. In the United States, they increased by nearly 27 percent.

      It seems hard to believe but I am reading that the state of Texas now has the highest maternal death rate in the developed world

      1. VietnamVet

        This is what the political party that is out of power should run on. Fixing healthcare. But, they can’t. They support the for profit medical system that is an extraction tool to transfer wealth from the bottom 90% to the top 10%.

  8. Jim

    Raul states “In short, I see MMT as enabling real, deep economic democracy, across the board.”

    Lets see, a powerful State was responsible for creating historically the deeper architecture or “systems design” of our present legal/economic regime. The construction of a national market in the United States between 1865 and 1900 (immense grants of gov. land for the construction of a railroad network, sales of railroad bonds and stock, and the judicial construction of national market through Supreme Court decisions centered on the commerce clause, which then generated a trend in American law that allowed increasing freedom to private corporations acting in harmony with an increasingly centralized State, to do as they pleased in the market place.

    Again, trying to connect the dots, exactly how will MMT, through once more using the power of a highly centralized State, overcome this historically constructed system architecture, that at this point of conceptualization, seems to only magically culminate in real economic democracy for the average American citizen?

    The populists through the creations of a cooperative movement and a sub-treasury plan many times more imaginative and democratic than anything suggested by the so-far centralized technocracy advocated by MMT–failed, when push came to shove in the late 1890s.

    Today we are faced with an even more difficult situation, with the leading coalition member of our modern ruling political structure(that emerged since 1947), being the national security State, acting in concert with even more powerful multinational firms and Silicon Valley linked with the covert muscle of the Special Operations Command and apparently having complete control over the allocation of any revenue for public purpose.

    At this point the primarily opposition from the left, the Sanders wing of the Democratic Party is seemingly ready to make the necessary compromises with the National Security State to potentially gain power and then perhaps somehow work jointly with a highly centralized MMT band of monetary experts at a newly merged Federal Reserve and Treasury to genuinely deliver democracy– all supposedly from the bottom up!!

    It will be interesting to hear from the recent MMT conference their suggestions for self-generated democratic forms that can take on this modern structure of power and win.

  9. Synoia

    MMT is very powerful, but, and this is a big but, a sovereign’s debts need to be in their own currency.

    This works for the US, but does not work for example, Costa Rica or Argentina, because their debtors want their trade debts denominated in US dollars.

    Consequently the US dollar denominated trade debt counties have to manage exchange rates, and either run a export surplus, or sell assets. All countries cannot run trade surpluses, there has to be a mixture of deficits and surpluses.

    There needs to be a mechanism to recycle the surpluses and settle deficits, just as there is in the US and Canada, and not in the EU, where Germany practices beggar-thy-neighbor policies.

    Until that “balance trade surpluses and deficits mechanism” is included in MMT, there are only possibly three MMT areas, the US, China and the EU. All others must submit to the power of the MMT.

    Floating exchange rates might be a such a mechanism, if so, please state examples where floating exchange rate has turned a country from trade deficit to trade surplus.

  10. Siggy

    Deficits matter, especially when aggregate debt is greater than 150% of nominal GDP. The current trend of Debt to GDP is that each new dollar of debt buys $0.30 of new nominal GDP which means that $0.70 of each new dollar of debt is being used to service existing debt.

    At some point the economy will look at the fiat currency and say that the greenback may well be legal tender for all debts public and private, but that greenback is a promissory note printed by the Bureau of Engraving and issued by the Federal Reserve System. Notably that note does not say what it promises to pay when presented to the Federal Reserve System.

    Whether fiat or redeemable, money is only worth what it will buy. As Federal Reserve notes promise to pay nothing; when will the market say that a greenback has no purchasing power?

    1. TroyMcClure

      What’s special about 150% of GDP? What happens at that moment? Will we finally be allowed to crack each other’s heads open and feast on the goo inside?

    2. Grebo

      when will the market say that a greenback has no purchasing power?

      When the last IRS employee has been fired.

  11. Jeremy Grimm

    I am skeptical of MMT as a sword for slaying the Neoliberal hydra. I view Neoliberalism as a formidable opponent embedding economics, politics, law, philosophy, and I’ll add religion – just for fun. The interplay between economics and the law is important but economics and law are far from sufficient. The pain and suffering Raúl Carrillo describes – the injustices – the slant of exploitation toward exploiting those already most exploited – the forging of laws and the legal system to benefit those who can buy laws for their benefit … I fail to see a clear link between these concerns and MMT economic theory. I do not see how the post establishes that link or a basis for establishing that link in the later discussions.

    The grab bag of remedies for progressive economic and legal concerns all sound good but what do they have to do with MMT and how does Carrillo propose to bind them to the economic theory. I am especially troubled by the notions presented at the end of this post that we need “a Black Lives Matter budget. We need Fiscal Feminism. What does that even mean? What and how can such notions be soldered onto MMT theory? I’m not opposed to any of these things. I just don’t see how they are logically connected and addressed.

    1. Sound of the Suburbs

      See how it is going wrong to work out the problems.

      Neo-liberalism runs on neoclassical economics and it’s a bit of a dog.

      What’s missing from neo-liberalism’s, neoclassical economics?

      1) The effect of debt on the economy. Leading to Japan 1989, US 2008, Irish and Spanish real estate collapses, Greece’s collapse with austerity and the new normal of secular stagnation.

      Today’s neo-classical economics was around in the 1920s and it had exactly the same problem. Debt based consumption and speculation led to the roaring 20s and the debt deflation of the Great Depression.

      The build up to 1929 and 2008.

      2) The difference between “earned” and “unearned” income. Leading to parasitical rentier economies, now spotted by one of today’s Nobel Prize winning economists “Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might” Angus Deaton.

      A flawed model of global, free trade that doesn’t consider the minimum wage is set by the cost of living. Western labour is priced out of global labour markets by the high cost of living in the West exacerbated by rentier activity.

      3) Bank credit should be directed into productive investment in business and industry, not blowing asset bubbles (e.g. real estate) and other financial speculation.

      The experts are:

      Steve Keen – Minsky moments and affects of debt on the economy

      Richard Koo – After the Minsky Moment, studied 1929, Japan 1989 and 2008.

      Richard Werner – Money and debt, bank credit and how it must be allocated for economic success, studying Japan around 1989

      Michael Hudson – The history of economics, the difference between earned and unearned income

      1. Jeremy Grimm

        I guess I need to write more plainly. Having read the post by Raúl Carrillo I didn’t see a case made for why the many injustices he identifies SHOULD be addressed. Are neoliberals concerned about inequality? The neoliberal answer is that the Market produces inequality and so what’s the problem with that. Neoliberal economic theory is not the same as neoclassical economics. Neoliberal economics has no problem dealing with all the problems identified by the experts you listed. Those problems — if they are problems are a result of the Market — so maybe the Market needs to add some more markets to take care of the problems.

        We are in the ashes of a major failure of economic theory — neoliberal economic theory. The crash and aftermath served big money interests as opportunities for looting the Federal coffers, theft and confiscation of the properties belonging to a large proportion of the 99.9%, the further ongoing consolidation of Industry and Finance, … further consolidation and co-option of our legal system — as Yves reviewed at the top of this post — our government. Efforts to take control of the political and economic systems of the world through “Trade” treaties has quieted but remains very much alive.

        Do you believe Raúl Carrillo’s “Black Lives Matter budget” or “Fiscal Feminism” will trip up the neoliberal juggernaut? I don’t. I’m concerned by how much they ring like sound bytes for the next Presidential campaign:
        “I worked for then-Attorney-General, now-Senator Kamala Harris during the multi-state mortgage fraud settlement.”
        They don’t sound like an answer to the core belief of Neoliberalism that the Market “knows” things no human being can “know” and the Market is an an all-knowing computer for solving all problems facing society. [I even remember efforts at a market based theory of resource allocation for managing communications bandwidth — not sure how well that worked since it quietly disappeared along with the program funding and was not heard from again].

        Just to be very clear — I do NOT espouse Neoliberalism. I think Neoliberalism is dangerously insane. But our betters, who own our economy, our government, our country, and much of the world seem very much committed to this tool as means for taking the last little bit of what’s left before the whole system collapses.

    2. pslebow

      You are totally correct. MMT is purely aspirational. If you want to see clear paths to a solution, look at the research done by the American Monetary Institute and the culmination of that work in the 2012 National Employment Emergency Act, sponsored by Dennis Kucinich. It not only answers the “why” but the “how”.

  12. Roger C

    In September 2006, the federal Judicial Conference adopted a policy requiring disclosures when judges attend privately funded seminars. http://www.uscourts.gov/judges-judgeships/privately-funded-seminars-disclosure/log-privately-funded-seminars-disclosure I understand that this was at least partly a response to a concern that the George Mason University law and economics seminars were not balanced and did constitute indoctrination and that litigants should have access to information that a judge had participated.

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