Tuesday, 28 February 2012

Savings - Explaining the Humpty Dumpty word

The main reason for doing the work on the Blue Book was to work out the relationship between the numbers and what they are called in 'National Accounts' terms. This can then be related back to what we talk about in MMT and hopefully reduce the amount of talking past each other that goes on.

The first saving relationship comes from how income is defined:
Gross National Disposable Income - Household Final Consumption - Government Final Consumption = Gross Saving.
So Gross Saving is most definitely Income that is not spent on Final Consumption.

The equivalent 'saving' figure for the external sector is called the Current External Balance.

In the National Accounts 'Net Saving' has a particular meaning, and refers to Gross Saving less the depreciation of fixed capital. This is not the same as the 'net saving' referred to in MMT, and it may be where some of the confusion creeps in.

If you go to the Capital Account, take Gross Saving and adjust for Capital Transfers between the sectors then you get the snappily titled 'Changes in Net Worth due to Savings and Capital Transfers'. (Clearly the national accounts people are running out of words too.)

Capital Transfers are investment grants and capital taxes like inheritance tax. Essentially it is a redistribution of value between the sectors and has no overall increase or decrease effect.

From the total 'Changes in Net Worth' you subtract Gross Capital Formation for the domestic private sector (which is the 'I' figure) and Gross Capital Formation for the government sector (part of 'G') and you will end up with the external sector balance (X - M).

The sector balances are called in the national accounts 'Net lending (or borrowing)'. This is the transfer of net-financial assets between the sectors. It is also the balancing item between the Capital Account and the Financial Account.

That is why sector balances are referred to as the 'accumulation of net financial assets' since on the Financial Account it is the balance between 'Total net acquisition of financial assets' and 'Total net acquisition of financial liabilities'. They are just different names for the same figure.

So for MMT in National Account Terms.

S is Gross Saving less Government Gross Saving = Gross Saving of the domestic private sector.

(S - I) is Total net acquisition of financial assets in the domestic private sector - Total net acquisition of financial liabilities in the domestic private sector. This is the Financial View.

(S - I) is also Gross Saving of the domestic private sector less Gross Capital Formation of the domestic private sector adjusted for Capital Transfers to the domestic private sector. This is the Capital View.

So if you are talking about saving now, you can be precise about which saving you are talking about.

48 comments:

Ramanan said...

While that seems right, it's no excuse for the vacuous Neochartalist claim that:

"Without a government deficit, there would be no private saving."

Neil Wilson said...

Neither is it an excuse for assuming what they mean by saving and then going around shouting about your out of context misinterpretation.

When it would have been just as easy to confirm the interpretation of both 'private' and 'saving'.

Because with a definition of 'private' as 'non-government' and 'saving' as 'net lending (or borrowing)' - both of which are reasonable - it is perfectly correct.

Hugo Heden said...

> "Gross National Disposable Income - Household Final Consumption - Government Final Consumption = Gross Saving."

How does these terms relate to the old

Y = C + T + S

?

paulie46 said...

Neil,

This just in from JKH over at MMR:

http://monetaryrealism.com/more-on-savings-and-investment/#comment-1860

PeterP said...

Ramanan,
"While that seems right, it's no excuse for the vacuous Neochartalist claim that:

"Without a government deficit, there would be no private saving.""

While it is the official definition, calling S "saving" is a misnomer, it is the accounting record of investment, nothing else. S can exist with zero accumulation of both financial and real assets, so it is nowhere near what normal people call "saving".

I found this very enlightening:
http://blog.andyharless.com/2009/11/investment-makes-saving-possible.html

If the economy consists of people selling and reselling investment assets, it will have plenty of S=I, yet no financial assets will be accumulated and the quantity and value of investment real assets will be constant too, accumulation is zero. So to get excited about S>0 is just unwise.

PeterP said...

In other words, instead of constructing the accumulation (net savings) from S and I, we could use Net Savings and I as the primary objects and then define S:

S = Net Savings + I.

Why would anybody assign any particular importance to this combination is beyond me. The first component is the money set aside (unspent income), the other is *spending* on investment so it is adding apples to oranges .

Dan Kervick said...

If the economy consists of people selling and reselling investment assets, it will have plenty of S=I, yet no financial assets will be accumulated and the quantity and value of investment real assets will be constant too, accumulation is zero.

The selling and reselling bit doesn't matter much, does it Ramanan? In the NIPA, purchases of financial assets aren't supposed to be counted, only final purchases of goods. If I have $100,000 in income, spend $10,000 on consumption and $10,000 to pay by taxes, and then buy a financial asset for $80,000 from A, who uses $70,000 to by an asset from B, who uses $60,000 to buy an asset from C ... until H uses $10,000 to buy a new fork truck for his warehouse - and if none of the intermediaries uses any of the cash for consumption or taxes along the way - then total C is $10,000, total T is $10,000 and total S is $80,000 - no matter how many intermediates buy and re-sell financial assets in between. In this case, total I is $10,000, so S - I is $70,000.

But if all of the financial intermediaries had sold and purchased financial assets in the same way, but H had just put the $10,000 in his safe instead of buying a fork truck, then S would still be $80,000, but I would be $0, so S-I would equal S.

And if I had just put the $80,000 in my safe after paying taxes and buying consumption goods, S would still be $80,000, and S-I would still equal S.

Finally, if the $80,000 had been passed through a chain of 100 intermediaries, each one using it to buy another $80,000 financial asset, without any subtraction, and the last person in the chain had purchased a eight fork trucks with the $80,000, then S would still be $80,000. But in this case I would also be $80,000, so S-I would be zero. There is no net saving from the original $100,000. All of it is spent on consumption, taxes or investment.

I agree with you that it seems weird to call S "savings." S just seems to be "income not spent on consumption or taxes." It seems strange to include money spent on a fork truck or a factory, "savings." But I guess you have to take this up with the people who developed the national accounting nomenclature.

But it doesn't seem weird at all to call S-I "net savings", since that quantity actually comes much closer to what we intuitively mean by "saving" income - we mean not spending it on anything. And in this latter, intuitive sense of saving, the private sector as a whole can't save unless at least one of the other sectors is in a deficit.

Neil Wilson said...

Hugo,

"How does these terms relate to the old

Y = C + T + S"

Y = essentially Gross National Disposable Income

T is taxation, which is the Gross Disposable Income of the Government Sector.

C is Household Final Consumption

S is Gross Saving less Government Gross Saving

So if you rejig that you get:

Gross National Disposable Income - Household Final Consumption - Government Disposable Income + Government Gross Saving = Gross Saving

which also gives the obvious:

Government Final Consumption = Government Disposable Income - Government Gross Saving

FDO15 said...

You MMTers are so smug thinking you have everything figured out when you so clearly don't. Here's Stephanie Kelton, one of your top experts making a basic accounting mistake. This is even worse than Randy Wray saying the Fed loaned out $29 trillion dollars. It seems that accounting isn't exactly the strongest element of MMT.

Kelton:

"Again, this is simply a property of the sectoral balance sheet identities. Whenever the government’s deficit is too small to offset a deficit in the current account, the private sector will experience a net loss. The result my ruffle your feathers, but it is an unimpeachable fact. "

http://www.neweconomicperspectives.org/2011/06/what-happens-when-government-tightens.html

Unimpeachable fact. Ha. The private sector experiences a "loss" when the deficit doesn't offset the current account? This is a professor of macroeconomics saying this? Do any of you even understand how ridiculous that statement is? S-I tells us nothing meaningful about the private sector's net savings position. Yet MMTers use it to give the impression that we experience a loss without government spending.

Neil, you owe Ramanan an apology.

Hugo Heden said...

Thanks Neil!

Neil Wilson said...

S-I tells us nothing meaningful about the private sector's net savings position.

Correct. It tells us about the domestic private sector's net lending (or borrowing) position.

The private sector comprises both the domestic and the external sector.

Please feel free to correct your error in understanding - which is precisely the same as Ramanan's.

Dan Kervick said...

Could we just sum this up in a way which, by now, should not be controversial:

S = Y - C - T

That is "S" refers to all domestic privates sector income that is not spent on consumption goods or tax payments.

And

(S-I) = Y - C - T - I

So, "S-I" refers to all domestic private sector income that is not spent on consumption goods, tax payments or to increase capital stocks.

These variables all refer to flows. S-I is a perfectly plausible measure of what the domestic private sector has saved during the time period in which the flows are measured. Certainly some people or firms in the private sector can have a individual S-I that is positive even if S-I for the whole domestic private sector is zero. But if S-I for the sector as a whole is zero, then the sector has not saved. And if S-I is less than zero, then the sector as a whole has decreased its stock of savings.

Also, I can't at all understand the claim that "savings is the accounting record of investment." Neither S nor S-I is in general equal to I.

Ramanan said...

"Please feel free to correct your error in understanding - which is precisely the same as Ramanan's."
[precisely bolded in original]

Ha!

Quoting another person to say I am erring!

Not even sure if FD015 is erring since he is pointing to the same confusions and it seems it is difficult to accept there is a mistake.

"The private sector comprises both the domestic and the external sector."

Look who's erring. Nice phrase "private sector" which in your terminology includes foreign governments with whom residents interact.

The phrase "domestic private sector" is used by national accountants because resident private corporations are both foreign controlled and national ones.

The external sector or the rest of the world may involve governments and corporations with which residents interact and which do not fall in this and a separate sector "rest of the world" is needed/used.

which is different from saying "The private sector comprises both the domestic and the external sector."

Neil Wilson said...

In the MMT analysis the private sector comprises the domestic private sector and the external sector. That is what we generally understand by it.

When they are being hyper-correct it is generally referred to as the non-government sector.

And it fits perfectly with the MMT analysis since 'everybody else' is in the horizontal circuit - a user of a non-convertible currency, whereas the government sector is the currency issuer.

That is the division and that is how MMT views things.

Criticising MMT by saying "if I use this other definition of 'private sector' that is wrong" is a just logical baloney.

The mistake is with the people who assume what the words mean without clarifying them, and find it difficult to see things from MMT's point of view.

In MMT even if you are a foreign government, or a foreign central bank you are in the private sector as far as the domestic government's currency is concerned.

That is the definition, and that is what Stephanie will have been referring to. If she'd have been speaking exceptionally clearly for the benefit of pedants then she would no doubt have used 'non-government sector'.

Neil Wilson said...

But if S-I for the sector as a whole is zero, then the sector has not saved. And if S-I is less than zero, then the sector as a whole has decreased its stock of savings.

Be careful with the terminology. The whole point of this post is to get people to use the right term rather than just 'save'

Gross Saving and Investment are not directly linked. That is the insight from endogenous money - the two are not tightly coupled together.

Banks buffer.

Therefore is it perfectly possible for there to be a very great amount of Gross Saving going off in that sector at the same time as an even greater amount of spending on Capital Formation


If (S - I) is less then zero then that sector has Excess Investment (net borrowing) and is reducing its stock of net financial assets wrt. the other two sectors.

Dan Kervick said...

Neil, right. I don't disagree.

But a lot of this debate goes back to the charge that somehow MMT is using "save" in some odd, biased or Pickwickian way to bamboozle to rubes.

And my feeling is that if we are going to identify which quantity matches the common sense notion of saving, it is precisely the S=I concept, which represents the amount of your income which was not spent on taxes, goods and services. And as you say, if you spend more on taxes, goods and services during some period than you received in income during that period, then you have to be depleting your net financial assets - possibly in the form of adding to your financial liabilities by borrowing.

For any individual part of the domestic private sector i, it is certainly possible for S(i)-I(i) to be positive, even if S-I is zero or negative for the sector as a whole. But that doesn't affect the basic conclusion that the domestic private sector as a whole can't save unless G-T+X-M is greater than zero, i.e., unless there is a net inflow of financial assets from the other sectors.

FDO15 said...

Oh stop it Neil. You're embarrassing yourself. Kelton did not make a mistake in terminology. She misunderstands the basic meaning of the accounting identity. There is no "net loss" when the government is running a surplus and the current account is in deficit. That is totally misconstruing the point.

This is a basic accounting error she made. It's not an "unimpeachable fact". In fact, she should be fired for writing something like that. This is a professor of macro economics at an American institution making basic errors? Unbelievable. Is that what you Americans have come to these days?

Stop defending it. You look foolish doing so.

Neil Wilson said...

"Oh stop it Neil. You're embarrassing yourself."

Really. I don't think I'm the one embarrassing myself.

If you want to comment on this blog, you'd better add something useful.

Ramanan said...

First you say

"The private sector comprises both the domestic and the external sector.

Please feel free to correct your error in understanding - which is precisely the same as Ramanan's."

and then when pointed about the right definition used by national accountants about what the actual terminology is and why it is used you say:

"Criticising MMT by saying "if I use this other definition of 'private sector' that is wrong" is a just logical baloney."

!!

Then you claim that supposedly your set of definitions or the MMT definitions make sense because apparently:

"In MMT even if you are a foreign government, or a foreign central bank you are in the private sector as far as the domestic government's currency is concerned. "

That is again weird. Sectoral balances are *sectoral* balances. The domestic private sector is also involved in trading with nonresidents in transactions denominated in their currencies in addition to the domestic currency.

According to your logic, then for these transactions (foreign currency), they should be counted in the private sector of the foreign nation and - not sure - not to be counted in national accounts??

Where do I record these transactions in this scheme of definitions which is different from what national accountants use?

So much inconsistency at all levels!

Neil Wilson said...

Ramanan,

Ideally they would be - the dividing line would be denomination of transactions. So that you could have accounts of a currency area, not just a national area.

If you do that then you can adjust accounting policy and do away with the external sector completely. Entities are either operating in your currency area or they are not.

And of course some entities work in multiple currency areas.

But we have to work with what we have - which is the national boundaries.

I don't consider that it materially alters the analysis.

And that's because economics is about being largely right rather than precisely wrong.

Anonymous said...

MMT and SFB ALWAYS split the foreign sector from the private sector.

The private sector is obviously understood to be the domestic private sector, because the SFB model is always centered on the choice of a (domestic) government.

You people don't seem to be very familiar with your own models.

Neil Wilson said...

"MMT and SFB ALWAYS split the foreign sector from the private sector."

No they don't. That's why we have the 'non-government sector' description for when we're talking about vertical to horizontal transactions.

There are very often discussions where that is generalised to 'private sector' depending upon the audience.

Sorry but quotes out of context based on misunderstandings of positions don't help.

They are at best a rhetorical device based on the 'doubt is the best weapon' technique.

And they are particularly amusing given that it is really simple to send a polite email to the author and ask 'what exactly do you mean when you say private sector?'.

Ramanan said...

"Ideally they would be - the dividing line would be denomination of transactions. So that you could have accounts of a currency area, not just a national area. "

Well that's fantasy because that is not the way they do it.

Neil Wilson said...

"Well that's fantasy because that is not the way they do it."

That's a bit like saying MMT is fantasy because that is not the way they do it.

Flawed systems can be fixed. That's what I do for a living.

Anonymous said...

This thread is a testament to why the field of economics is such disarray.

You guys are arguing over the meaning of such basic terms it makes me wonder do people just make this stuff up as they go?

In most (if not all) studied disciplines you can pull an authoritative guide that clearly defines and standardizes nomenclature.

In economics its a cluster f**k of egos, pundits, and self anointed experts.

Someone needs to take the study of economics and do a massive reset.

BT (London) said...

This thread is confused.

Neil is right and has helpfully pointed out the 'financial view' of S-I.

One would hope this would resolve things for people like Ramanan who think that Neil doesn't understand the horizontal credit/debt portion of the money stock.

Yes, horizontal credit can still expand while governments run surpluses and there is a current account deficit. But even though credit is growing, there is still a 'net loss' of credit relative to debt in the horizontal system.

You guys are arguing over the meaning of 'net'. Ramanan thinks 'net loss' means an absolute decline in the stock of credit relative to a previous time point. It doesn't. It means a decline relative to the stock of debt.

STF said...

Neil,

This is correct. Thank you. Perhaps we can end this ridiculous mountain made out of a molehill now, though my guess is it won't happen given the personalities involved.

Yes, some people get sloppy at times with terminology, particularly in blogposts, working papers, and such. Even in journal articles I've published that have been through several reviews I still find things here and there that I wish I could change.

Well-known Keynesians and Monetarists have been sloppy at times, too, but that doesn't invalidate Keynesianism or Monetarism.

Any reading of MMT would seem to make it obvious what S-I does and doesn't mean, and would seem to make it obvious that it doesn't mean "saving" in the traditional sense as it is defined. We've always said we are using Godley's framework, and it's clear that Godely understood this. Again, there is slopppiness here and there, but there is in every literature out there.

Saving being driven by investment spending is a well-covered topic in Post Keynesianism, some of it by Wray, Minsky, and some by endogenous money/circuitistes. This all pre-dates MMT/neo-Chartalism. One of my research papers in grad school went over this literature. MMT takes all this as given--there is no need to reinvent the wheel and there has been nothing in the recent discussions in this issue that strikes any of us as adding anything of economic significance to this literature. I'm glad many that didn't have much grounding in this literautre found the discussions useful, though.

Net saving builds on this by adding an indicator of Minskyan fragility. It is obviously not the same as saving. Domestic pvt sectors want to net save; this is borne out by data from many, many countries. And they can only do it via govt deficits or current account surpluses.

Yes, we can break down the pvt sector's net saving into household and firms (and financial sector); the data I send out quarterly to MMTers and friends includes this breakdown. I discussed this in my wp at Levy in December 2010 in Figure 2. Rob Parenteau and Yves Smith did a post a few years ago (??) on this, too.

The breakdown of the pvt sector is interesting to some degree because we see that the household sector is the traditional "hedge" financial unit in the economy until 1998 and then again after 2008. The firm sector moves between hedge and speculative/Ponzi (these are Minsky's well-known terms). But cyclically the two are very highly correlated, so the notion that firms can spend and reduce net saving in order to increase net saving of the household sector--while theoretically true and true in an accounting sense--doesn't hold up well empirically. Across business cycles (i.e., trend as opposed to cycles), firm net saving can and has fallen while household net saving increased (and a modest govt deficit). However, this leaves us with Minsky's dictum that stability is destabilizing (i.e., pvt sector led expansions in the cyclical or trend sense will end up creating fragility via debt accumulation, which is what happens when the household net saving is driven by firm net dissaving), and his prediction that this would be the result was largely correct in my view.

To end, let me again suggest that this whole discussion makes a mountain out of a molehill. There are many instances that are critics have been sloppy, as well. Indeed, one of them repeatedly argues that quantitative easing doesn't create "money," (http://pragcap.com/milton-friedman-misunderstood-quantitative-easing) when it certainly does if one defines money as the monetary base or deposits (which most everyone does, in fact, including the official statistics of "the money supply"). Does that mean these critics don't understand QE? Does it invalidate their entire understanding of the monetary system? No. It means there was some sloppiness. Nothing more. Who cares? Not me.

Scott Fullwiler

STF said...

BT is correct, too. "Net loss" was clearly intended to mean "net loss of financial assets," not "net loss" in another sense. It happens.

Similarly, there is no "Neochartalist claim" that there would be no pvt saving without a govt deficit. A govt deficit adds to pvt saving, but obviously is not the only thing (or even the main thing given investment spending) that does. 98% percent of the Neo-Chartalist literature and Godley are clear that the point is that "without a govt deficit there would be no pvt net saving." It's simply disingenuous to suggest the entirety of the literature suggests anything else.

And even then, it's obvious there can still be household net saving without a govt deficit (though, as I alluded to above, I would argue that encouraging firm dissaving to increase household net saving is not necessarily going to accomplish this).

STF said...
This comment has been removed by the author.
STF said...

In other words, OBVIOUSLY there can be an increase in financial assets without govt deficits if the former "net" to zero in that case, otherwise there would be nothing to "net" in the first place. Similarly, there can OBVIOUSLY be saving without govt deficits or a current account surplus, but not NET saving.

Cullen Roche said...

Scott,

By your own definition, in which the "moneyness" of bonds and deposits is negligible, the asset swap doesn't result in new "money". So since I am clearly the "critic" being "sloppy" I find it odd that I am in agreement with a position that you yourself have repeatedly stated. I could pull dozens of your comments on my site repeating this point....

I might add, the only reason this was made into a "mountain" in the first place was because MMTers are so sensitive to every critique of their work. Interestingly, this wasn't even a critique so much as it was simple clarification to a point that many readers said they were misinterpreting (because MMT doesn't always explain it very well. I made it very clear that MMT wasn't "wrong" about the point or misleading. But like always, MMTers got defensive and went off the rails arguing a silly point.

Lots of people are going to disagree with MMT and as it goes mainstream I think you guys need to stop attacking people who disagree with every little point and start accepting the reality that MMT doesn't have it all figured out.

As for us, I think we should figure out how to coexist without these little pissing matches. No one is going to win with us fighting all the time. And since we have so much in common I think it's defeating the purpose to get at eachother's throats over every little disagreement....

Best,

Cullen

Unforgiven said...

Cullen -

I think that you raise a fair point, as this was a tough issue on another site (a ponderous thread indeed) that I was involved in. In that context, it seems natural that we work out the bumps in the road in this manner. There's a lot of indoctrination to get over and getting to the truth about credit is such a wildcard along the way.

STF said...
This comment has been removed by the author.
STF said...

Seems to me and a whole lot of others (if messages my inbox from supporters all over are any indication) MMR's been the one doing the attacking. The suggestion that this was just a "clarification" is laughable--look at Ramanan's comments, for instance.

And note that I was pointing out that you DID understand QE--hoping to avoid more "pissing matches" while offering my own "clarification."

But yes, no further comment from me (which I think is my very first at any rate on this topic) as I know you'll trot out the Lavoie quote any time we say anything to clarify our position, as you already essentially did on cue.

Unforgiven said...

STF -

Any hard feelings aside, I think it's been a good spar and given the path ahead, an important one. It's going to come up and I think the gap in understanding here has been well represented. Certainly, SOME of those offering credit would like to see their market expand unfettered.

Cullen Roche said...

Scott,

You and I both know Ramanan is a horizontalist so it's beyond ridiculous to use his comments to defend your claim that MMR is doing the "attacking". The hilarious irony there is, this whole thing started when you called me an "ideologue" on Pragcap. That was literally the very first "attack" in this whole thing. And why? Because I said the JG involved risks that made me uncertain about its implementation and success? A position you later said to me and others that you "agree with" (before retracting that position and lashing out again!!). Talk about having your story mixed up!

I know how these conversations all end because I've seen how MMTers always treat people who disagree with them so maybe it's best to just part ways and agree to disagree.

I wish you guys luck. I've told you I think you're brilliant and my opinion hasn't changed even though we've had some petty exchanges. Either way the world will be a better place if MMT goes mainstream.

Cullen

Neil Wilson said...

"As for us, I think we should figure out how to coexist without these little pissing matches. No one is going to win with us fighting all the time. And since we have so much in common I think it's defeating the purpose to get at eachother's throats over every little disagreement...."

Alternatively Cullen, you could get behind Warren's very reasonable proposals and drop the fork.

Until then you are going to constantly get questioned, because what you have doesn't deal with the problem of 'effective demand' whereas MMT does.

Keynes demonstrated aggregate demand is not enough 80 years ago.

And that means your suggestions will leave up to three million people, and probably more, out in the cold. Literally unless they can find space alongside many others in the drain pipes under Vegas.

Anonymous said...

Cullen, I agree it would be better if everyone stopped with the nonsense. Maybe you could call off FDO15 with his endlessly pointless and pointlessly insulting remarks.

The problem however is that you yourself are very inconsistent in your approach. One moment you're saying MMT is great and we should all get along. The next you're saying the following: "MMT has turned into a big group think project with zero objective or independent thinking." (That's a direct quote from you). One moment you say you're "just trying to clarify things", the next you are stating that all the main foundations of MMT "are just wrong".

One moment you're saying MMTers should be less defensive, the next you're accusing MMTers of engaging in deliberate obfuscation so as to push forward their coercive statist (secretly socialist)ideology.

You say things aren't made clear enough by MMTers, but when they try to clarify them by quoting past papers or explaining what they mean by certain terms, you say they're overeacting and should calm down.

You make claims about MMT
(such as "a totally vertical system is MMTs 'base case'" - whatever that even means) and then blithely continue to repeat them even when people point out to you that, no, they're not true. Then you accuse them of being deceptive. When they get pissed off, you then turn around and accuse them of being too sensitive.

You can't have it both ways.

Neil Wilson said...

"You can't have it both ways."

It's classic politics. Always happens when somebody forks a project.

The most appropriate fix for that is to drop the fork and get back behind Warren's very reasonable proposals.

But that would require accepting that any progressive economic policy requires a solution to the problem of effective demand.

And when you have somebody who apparently believes unemployment is good for you that is going to be difficult.

Anonymous said...

I think it would probably be helpful to wipe the slate clean and start again on a more productive footing.

I was thinking of making a site in which critiques of MMT are posted alongside responses to the criticism by prominent MMTers.

It could be a reference point that would allow people to avoid having to go over the same arguments again and again.

You could look up a criticism, and next to it would be the MMT response, (perhaps with an archive of the ensuing debate if it took place on a blog), or an original paper which deals with the subject directly. Really good blog debates could be preserved for future reference, with all the nonsense and insults stripped out (i.e. FD015 nowhere to be seen). They could also be edited to make them more legible.

It might be a pain to compile at first, but it could prove valuable in future as a way of avoiding the sort of talking at cross purposes and the resulting animosity that occurred during this recent debate over saving.

Just a thought.

Anonymous said...

actually there's already a section a bit like that on the MMT wiki, though it could do with clearing up and updating.

Unforgiven said...

Anon-

That's a fantastic idea!!! It would save a LOT of keystrokes.

Tom Hickey said...

Anonymous, there is already a section on MMT debates at the MMT wiki, and I try to keep abreast of the debates at Mike's. But there is a lot in the blogs that slips by, too. There are many, many excellent exchanges in various threads that a lot of us have bookmarked for reference, I am sure. But I doubt it's possible to document all of this without serious funding. Since there is some much out there and more coming up everyday, it would be a full-time job probably for more than one.

vimothy said...

Scott,

there can OBVIOUSLY be saving without govt deficits or a current account surplus, but not NET saving.

Thanks for writing this!

Finally, somebody talking sense.

Anonymous said...

someone finally reading sense, more like.

Tom Bergbusch said...

Far too late (my comment, I mean), but very helpful to me, this discussion, with a fine bunch of heavyweights weighing in, as well as flyweight challengers like FDO15, Ramanan and Cullen Roche (I do not criticise them for that, as their misunderstandings constantly help clear up my own). What I take from this , and correct me if I am wrong, is:

1. For any sovereign, currency-issuing government, "private" can be thought of (in casual terms) as any party external to that government, whether it be the domestic non-government sector or a foreign government (from the accounting stance of the sovereign, that makes sense);

2. 'Net loss' does NOT mean an absolute decline in the stock of credit relative to a previous time point. It means a decline relative to the stock of debt. This is very helpful, as I think it clarifies for me a point in question 1 of Bill Mitchell's quiz, last week, in which he made a distinction between "saving" and "overall saving" which, unusually given Bill's habitual clarity, I didn't quite get.

Thanks!

Neil Wilson said...

Tom,

Correct, but bear in mind that 'government' in the MMT sense is the consolidated balance sheet of the Central Bank, the Treasury and other arms of government within a sovereign currency area.

So non-government is anybody other than that.

Anonymous said...

The whole concept of saving stinks of the quantity theory of money because saving is really a change in velocity and the quantity of saving only appears in accounts because accounting is a static model. This was made clear by Keynes. You shouldn't include any concept of monetary saving in any dynamic model, e.g. circuit theories.

On top of that, many people are using saving to mean a value surplus because that's what it means in the context of investment. The idea of a value surplus is a direct concept and measuring value surplus using an indirect measure such as money ties everyone in knots. The value surplus gained by buying a new truck cannot be considered to be the price of the truck because the value surplus is a use-value and the use-value cannot be known at the time of purchase. This is also one of the things that broke the labour theory of value because at the time of purchase, use-values are in the future and production costs are in the past. This problem also goes to the micro and macro split. Value surplus is a micro concept.