Sunday, 28 February 2016

The Limits of understanding of MMT

I've got a good amount of time for LK's blog. It is my 'goto' blog for good sense on many a topic. But I have to say I'm somewhat disappointed at the latest missive on foreign trade. It still has the usual straw men in it. I really don't understand why PK people can't get their head around the dynamics of floating rate exchange systems and still stick to fixed exchange analysis based around apparent Kaldorian views.

Bill has already debunked the Kaldorian points in his post of a few weeks ago.

I'll take the points in LKs post one at a time.

Now MMT would work for the US, Western Europe, Australia, Japan, South Korea or Taiwan, but not for much of the Third World.

MMT works wherever it is used for the fairly obvious reason that it is a description of how a floating rate exchange system on a sovereign currency works. With the correct policy operations it is perfectly applicable to all nations.

But it is important to note that the fiscal space and the real space are separate entities. Each operates within its own sphere and the influence of the fiscal space on the real space is akin to an electrical induction circuit. Importantly there is no one-to-one relationship between the two.

As Bill's blog on world development shows, it is the real constraints on a nation that limit how prosperous it is. If you have a country with a small population and limited real resources then what it can create at full output may not be sufficient to adequately feed, house and clothe the population. No amount of financial wizardry can help sort that out and the country needs international gifts of real aid.

That is, MMT-style policies are best suited for advanced capitalist nations, not necessarily for Third World countries, because most of them face severe balance of payments constraints. Increasing aggregate demand would, for many Third World nations, simply cause a balance of payments crisis, as imports surged.

There isn't really such a thing as a balance of payments crisis in a floating rate exchange system.  For those excess imports to exist at all, the saving of the local currency must occur at the same time. Otherwise the financing of the deal would have failed and the transaction would never have happened.  And there would be no excess imports. The floating rate balances out the successes and failures automatically. That's its job.

Very simply imports cannot 'surge' unless the equivalent local currency savings by foreigners 'surges' at the same time. And if the savings don't surge then the exporter loses a sale and their economy shrinks as well - because there is nowhere else to export to in aggregate. Mars isn't open for business as yet.

Generally this entire misconception comes about by failing to analyse a transaction end to end,  and by failing to separate the transaction into a real and financial component. (Every transaction requires the real part and the financial part to be in place before they will complete). And in particular failing to model the transaction(s) coming in the opposite direction that allows the FX swap to happen in the first place.

Imagine a system where nobody in the world wants your tally sticks. You want a larger standing army which means freeing up some people from land work. So you impose a tax on the land and issue tally sticks to those who sign up to your army and those that make pointy sticks. Productivity is improved by division of labour and the army gets the spare manpower  and goods - which they then use to improve the water drainage and irrigation systems further boosting output.

Everybody is more fully employed by using the state's power to create money, but there is no 'surge' in imports because nobody wants your tally sticks outside your border. But inside the border there is a demand due to the taxation system.

Only when you have that 'reductio' clear in your mind can you get a grip on the dynamics within a floating system. Where you have drawn the border is an artificial device based on political boundaries. If you just have a dynamic border that encompasses everybody holding a denomination then it becomes much clearer to see what is actually happening.

But it boils down to this. The end buyer always gets to use the type of money they want and the end supplier always gets the type of money they want. Otherwise there will be no deal. It doesn't matter what the invoice is priced in. It doesn't matter what the currencies are. It doesn't matter where people are physically located in the world. The finance system has to make the finance channel tie up or it all stops and the deal chain collapses.

Statistics showing excess of imports or excess of exports are thus the result of successful end to end deals on both the real and financial sides. They can't be anything else in a floating rate system.

Moreover, a huge stream of imports from the developed world tend to cripple the development of a domestic manufacturing sector in developing world nations

That is simply bad policy. MMT makes the point that excess imports, if you can get them, increase the standard of living of the population. But primarily you have to maintain your domestic economy at maximum output. And that will require anti-dumping policies, equality policies and other policies along those lines to ensure that the development of your economy proceeds in a sensible manner. That would include sourcing imports from multiple competing nations to ensure diversity of supply.

As Bill's blog above also mentions: Selective import controls, if they can be effectively designed, can ensure that a nation with a limited export base can import goods and services that target the provision of benefits via imports to the poor in the first instance

There is no super powerful magic in a floating rate. It's one tool. You still have to do all the other stuff to develop an economy. But with a floating rate you will ensure that you have all your available resources fully occupied and the development should then proceed at a brisker pace. That is the key issue that always appear to get lost in these discussions.

Exports matter a lot even for some developed countries, because exports bring in foreign exchange if you can’t attract foreign exchange via the capital account

This is particularly confused in a floating rate setup. It doesn't matter which side of the fence the swaps get done on - the buy side or the sell side of the currency zone boundaries. They have to happen at the same time as the real transaction or there is no deal. The whole chain collapses.

You don't need to 'attract' anything. The process is handled via the FX system which is a swapping mechanism. Insufficient matches = no deal.

These processes all happen in parallel and in real time. Attempting to serialise the process in your mind leads to the wrong result.

Where is this idea that you don't export coming from? If you have an excess of coffee you will export it and import something more useful - like corn. Or you may export your fish and import beef - because basically you're not a fish kind of people.

I feel the missing part here is understanding the process from the other point of view. Again the focus on a particular economy rather than the world in toto leads to a skewed viewpoint. Let's look at it from the exporter's point of view.

When exporters export to excess (i.e. beyond what they buy back in imports) then they cease to be exporting in any generally understood sense. In reality they have started to import demand. And that is what a net import nation is selling - demand to a wider world that is short of demand due to export led policies. Since demand is in short supply, it is valuable in its own right.

Excess exporters simply take foreign currency, discount or swap it for their domestic currency in some way and then figuratively chuck the foreign currency in the back of a drawer - pretty much like most of us do after a foreign holiday. The whole process is in fact a way of injecting domestic currency into the excess exporters economy, but they have a foreign currency asset to make the books look better. It's that simple - and that stupid.

The feedback into the import economy is the same as any saving. A reduction in domestic flow that has to be accommodated or you get a paradox of thrift. That is rarely done due to neo-classical beliefs. So you can't use economies that are operating under neo-classical rules and have failed to support an argument against floating rate systems. That's like blaming the aircraft for crashing when the person piloting didn't know how the controls worked.

Finally, manufacturing matters – a lot.

Never understood the metal bashing argument. I work in software - which is a service business. I can license tens of thousands of copies all across the world with next to no distribution costs. That's a far more efficient way of exporting than anything real.

If you have to import your resources it doesn't really matter if you import the steel or the iron ore. You've still got a supply chain requirement. That's why I can't understand the argument for virgin steel works in the UK. We've had to import iron ore, and these days coal, for decades. In fact our steel plants can't even work on the remaining iron ore deposits in the UK because its the wrong type for the plants that have been built. So why bother importing the rock, when you can import the steel from multiple locations? UK steel works should be recycling plants.

(I understand the 'good jobs' argument, but that is similarly controversial for other reasons which are outside the scope of this post).

The secret is the same as any business resilience plan - diversity of supply. And definitely diversity across political groupings. Because the USA, Russia and China are never going to be on the same side in anything.

I certainly don't go for the comparative advantage nonsense however. You need a multi-culture.  If you can't get diversity of supply you need to create at home. There is always a trade off between resilience and efficiency to get a sustainable cohesive economy that has low-coupling with the rest of the world.

But I see little difference between manufacturing and services. It's an old fashion separation that really doesn't hold that well in a modern world.

It seems to me that effective demand is the real source of power.

If you think imports are only a benefit, look at the devastating de-industrialisation of large parts of the Western world
Again this 'only a benefit' is a strawman argument that nobody seriously looking at floating rate systems is proposing. Imports is an aggregate. What is in that aggregate? BMWs or food? What are the strategic issues of supply and creation outside your political borders vs. inside them. And similarly what are the 'beggar thy neighbour' impacts of changing the status quo? Do we really want our fellow humans in China back in paddy fields dying of starvation?

And note that this all came about because governments operated neoliberal policies that didn't understand net-importing causes a paradox of thrift effect that has to be compensated for by government action. Precisely my point above.

As Alex Douglas discussed recently, even the supposed Post Keynesians still don't seem to get the issue with savings desires.

The dynamics at the borders of currency zones is indeed complicated and there is much to learn about how to manage them more appropriately. But it would help if people stopped analysing aircraft flight as though they were driving a car. It gets a bit tiring having to point out all the time that yes you do have to pay attention to the Z axis as well.


originofspecious said...

It seems like what PKers should do to sort all this out is to build a Godley table for the whole trading zone (rather than just one nation), with flows of goods and services included as well as financial flows. Has anyone done that?

Neil Wilson said...

Not that I've seen.

That one nation view and RoW as a single entity acting as Deus Ex Machina is a powerful mental model that people seem to struggle to shift.

Footsoldier said...

Thanks for this Neil.

Very much appreciated.

Footsoldier said...

Bingo !

From Bill.

In a fixed exchange rate system, where the central bank has to manage its foreign currency reserves to maintain the agreed parity with other currencies, the balance of payments is a constraining influence on real GDP growth.

That is one of the reasons why the Bretton Woods system broke down. External deficit nations were forced to suppress domestic demand via higher interest rates or fiscal austerity to both reduce imports and/or attract capital inflow to alleviate their balance of payments problems.

The upshot was that these nations were prone to extended periods of mass unemployment, which was politically unsustainable.

A nation in this situation could not run persistent external deficits and peg its currency because it would soon run out of the foreign currency reserves and/or gold stocks that were necessary under the system to defend its parity.

However, in a flexible exchange rate system, no such constraint exists. Instead, movements in the exchange rate respond to balance of payments states.

A currency-issuing government can always use that capacity to ensure that all real productive resources in the nation that are for sale in the currency of issue – including all idle labour – are fully employed. Without exception.

The central bank has no necessary role to play in defending the currency and therefore has no particular need to amass foreign currency reserves as it did under the fixed exchange rate system.


We continually read that nations with current account deficits (CAD) are living beyond their means and are being bailed out by foreign savings. This claim is particularly potent in the current US-China context.

In MMT, this sort of claim would never make any sense. As noted above a trade deficit can only occur if the foreign sector desires to accumulate financial (or other) assets denominated in the currency of issue of the country with the trade deficit.

This desire leads the foreign country (whichever it is) to deprive their own citizens of the use of their own resources (goods and services) and net ship them to the country that has the trade defcit, which, in turn, enjoys a net benefit (imports greater than exports).

A trade defcit means that real benefits (imports) exceed real costs (exports) for the nation in question.

This is why the trade defcit signifies the willingness of the citizens to ‘finance’ the local currency saving desires of the foreign sector.

MMT thus turns the mainstream logic (foreigners finance our trade defcit) on its head in recognition of the true nature of exports and imports.

Subsequently, a trade defcicit will persist (expand and contract) as long as the foreign sector desires to accumulate local currency-denominated assets.

If they lost that desire entirely, then the trade defict gets squeezed down to zero. This might be painful to a nation that has grown accustomed to enjoying the excess of imports over exports. It might also happen relatively quickly. But at least we should understand why it is happening.

I get it now Neil........

Kristjan said...

Thanks Neil, It is a good one

Auburn Parks said...

Another interesting note about specific currency savings desires, The stock market cap of the USA is roughly 50% of the entire global stock market value. So if you want to invest in half of the world's stock market then you have no choice but to accumulate Dollars. So there's a feedback process going on here along with a chicken or egg dynamic.

The desire to hold save in US dollar stock market assets results in a relatively huge US stock market cap


The desire to save\invest in a huge stock market results in a strong foreign demand of US dollars.

IOW You couldnt have this large of a stock market relative to the rest of the world unless you run large and pervasive trade deficits. And you cant run large and persistent trade deficits unless you have a large and deep financial savings vehicles. (e.g. stock market)

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

Unfortunately it's very common to see straw man arguments against MMT.
Here's another post keynesian critics on the same topic: Neochartalism, Balance Of Payments And Mainstream Economics

Random said...

Neil I am confused over "majority" needed. How large a majority do the Tories have?


"Although 326 MPs are needed for an overall majority in the 650-strong Commons, in practice the figure is 323 because Sinn Fein, which had five MPs in the last Parliament, does not take its seats at Westminster and the Speaker does not vote."

That makes no sense! Wouldn't that be 320?

Random said...

Telegraph propaganda or true?

The Labour leader said the ex-Greek finance minister has already met with John McDonnell and will advise the party 'in some capacity'

Neil Wilson said...

There are 4 Sinn Fein MPs, a speaker and three deputies. So the total vote is 642. Therefore you need 322 MPs to prevail. (The other side would then have 320).

Always remember that one up on the government side also causes one down on the opposition.

Random said...

The Conservatives have 330 I think. So they only have an NINE SEAT majority? What is the chance of that falling apart? It is less than Major and they seem so certain and arrogant in what they are doing! Unless they get say the ulster unionists or lib dems to go into coalition.

Deputy speakers are odd:

"Deputies have the same powers as the Speaker when presiding. Akin to the Speaker, they do not take part in partisan politics, and remain completely impartial in the House. However, they are entitled to take part in constituency politics, and to make their views known on these matters. In general elections, they stand as party politicians. If a Deputy Speaker is presiding, then he or she holds the casting vote instead of the Speaker."

How are they chosen? Wouldn't the Tories be better off choosing three labour MPs so to increase their majority?

And what if they did? By election?

Neil Wilson said...

"The Conservatives have 330 I think. So they only have an NINE SEAT majority?"

It's more like 17. Remember for every Tory there is, there is one less opposition. So 330 Tories and 312 on the opposition benches.

It's also why voting against the government has more impact than just abstaining. Voting against scores 2 whereas abstaining scores 1.

The Speaker and the Three deputies come equally from the main parties AFAIK. Two each.

Random said...

"Always remember that one up on the government side also causes one down on the opposition."

Wait, they have an 18 seat majority then as it is 330 vs 312. But if a Tory votes with Labour they only need 9 Tories to do that to bring down the government?

I thought majority was no of Tories - 321

Neil Wilson said...

The majority is the number of Tories less the active number on the opposition benches.

As described here

jrbarch said...

I like your more human explanations, sans economic gobbledegook Neil. Thanks!

Typo(?): "So you can't really [pray] in aid economies that are operating under neo-classical rules and have failed".

Neil Wilson said...

"pray in aid" is a legal term here in the UK. Obviously it doesn't travel well.

jrbarch said...

Apparently not, after searching under .au In Aus. it would be a combination of Christendom and Santa Claus ....

Nick Edmonds said...

originofspecious - "It seems like what PKers should do to sort all this out is to build a Godley table for the whole trading zone (rather than just one nation), with flows of goods and services included as well as financial flows. Has anyone done that?"

If you want a PK analysis of how the world economy works, maybe check out the CAM world economy model developed by the brilliant Francis Cripps. Some details here -

Neil Wilson said...

Thanks Nick. That's very useful.

However €2.5m spent and I can't even play it!

It's better than a lot I've seen, but still incredibly primitive in execution. Is this really the state of the art in economic modelling?

Footsoldier said...


Ive been reading Frank Newman's book.

He says that the US Debt is just about equal to what is in the treasuries account.

Is UK debt equal to the total in BOE savings accounts ?

Neil Wilson said...

Probably not. QE has distorted the balances.

The whole idea behind Gilts is to run with a very small amount of base money - because of the belief that base money is somehow special.

It isn't. It just doesn't pay interest to rich savers and foreigners.

Random said...

More Brexit

"Brexit campaigners demanding access to the other side’s game plan are being unreasonable. They need to play by the rules and get on with making their case"

Neil Wilson said...

The case is simple.

Do you want politicians able to make decisions in Westminster based upon what is best for the citizens of the UK, or do you want Westminster closed down and handed over to Branson to turn into a kids play gym.

That's it.

Footsoldier said...

He was saying the you have to take into account the currency that is in the reserve accounts as well that has not been moved to the savings accounts.

He also kept quoting the total dollar financial assets.

Even after QE it can't be far off because all that did was lower the long term rates.

If after all the national debt just represents the wealth of everyone else who owns £'s to the penny.

There has to be a way to prove it with figures surely ? Or is it not static enough to get a proper measurement.

andy blatchford said...

Northern trains need some investment! The line between York & Harrogate was like going back in time, proper bone rattler, rolling stock must have been about 40 years old. 40 minutes to do 22 miles.

Neil Wilson said...

The ones on our Caldervale line are a disgrace. I've heard people say they've been on better trains 'back home' in Pakistan.

andy blatchford said...

They are probably right. Went HS1 into St Pancras, across street into Kings X & up on the East Coast mainline, so all in all 250 miles in 2 hours 7 mins (+10 for the wait between trains) from Ebbsfleet Int'l to York, walked around the corner to the platform and my jaw dropped. There's a shovel ready job that needs doing...Won't hold my breath with this shower though who only seem interested in commuter based or grand projects down here.

Random said...

Little gem in Warren Mosler post:

"China considers itself bound by that treaty too??? Good luck to them. 4% isn’t near high enough to replace the lost private sector credit growth needed to sustain output and employment:

China could raise budget deficit to 4% of GDP:central bank official

Feb 25 (China Daily) — China could raise its budget deficit to 4 percent of GDP or even higher to offsetthe impact of reduced fiscal revenue and to support broader reforms, a central bank official said. In an article published by “The Economic Daily,” director of the central bank’s surveys andstatistics department Sheng Songcheng said the deficit increase would not incur biginsolvency risks for the government. China raised its budget deficit to 2.3 percent of GDP in 2015, up from 2.1 percent in 2014. A3-percent deficit ratio, as stated in the 1992 Maastricht Treaty, is normally considered a redline not to be crossed."

Random said...

"The whole idea behind Gilts is to run with a very small amount of base money - because of the belief that base money is somehow special."

Eric Lonargan says:

"There's an explicit fact: Greece can issue debt but not money."

"If reserves and T-Bills were the same, Greece wouldn't have a problem (it can issue T-Bills). Which precisely illustrates the difference between liabilities & money. Consider my substantive point: Why do you think people buy corporate bonds? And why do they hold dollar bills?"

Neil Wilson said...

Eric is getting himself in a terrible bind defending something that is simply wrong, and he won't give in. It's starting to get very silly and a bit dull now.

They are the same as long as you are the issuer of both or control the conversion process via fiat power. Similarly UK Gilts and US Treasuries are not the same. Greece can't convert its bonds into US treasuries or UK gilts either.

The only reason a commercial bank deposit is the same as the state's money is because there is a controlled conversion between the two. Without that the two sets of liabilities are different sorts of money.

UK Gilts and Sterling are the same because the GEMMs have a permanent bid in the market back by the Treasury with ultimate access to the central bank. You can't get squeezed on liquidity like the Greeks can.

If the hellenic central bank is nationalised, becomes a subsidiary of the Greek treasury and is therefore told what to do, then it can swap Greek bonds for Euros at will. The ECB then either accommodates that or closes the ECB account of the HCB - at which point Greece has its own floating rate currency.

The other alternative is to start accepting bonds as tax payments, or issue TANs and have controlled conversion that way.

Neil Wilson said...

"There has to be a way to prove it with figures surely ?"

You can find the total in the national accounts - because obviously Gilts are held by people and they show up on the asset side in the financial account. The difference is that Gilts can be held by anyone, whereas bank reserves can only be held by those entities with a central bank account.

Gilts are like cash in that sense - a direct link between an entity and government without a bank in the way. Specifically they bypass the central bank. That's kind of the point of them.

Net Government borrowing and Financial Liabilities in the WGA summary roughly represents the total amount of Gilts and reserves. Although I'm not sure what anybody thinks that proves.

acorn said...

Neil, have you considered comment threading? It is getting tricky aligning replies, now you are getting more comments.

Also, your replies to others' comments, give explanations that add significant understanding to your main post. When do you think you will be able to consolidate all into a book; or, have you done that already?

Neil Wilson said...

What we need is a good old fashioned bulletin board forum, rather than these stupid blogs that litter discussions in a link-less fashion across the internet.

Neil Wilson said...

"Also, your replies to others' comments, give explanations that add significant understanding to your main post. When do you think you will be able to consolidate all into a book;"

If you knew how long it takes me to compose the few words above, you'd expect a book at around the time of the heat death of the universe.

I'm actually a terrible writer. I marvel at how Bill can knock out his blogs every day, write books and everything.

Footsoldier said...

I suppose it just can't be done then.

I'm always trying to think outside the box and come up with new things to throw at the doubters.

Even in JD Alts diagrams and dollars book he says the US national debt equals treasury bonds savings account to the penny. In the same way Frank Newman does.

Yet we don't seem to have any pie charts or graphs here in the UK to prove it. Which is disappointing.

If the goverment spends X and then taxes Y in any given year. Then what is left over is not debt but non govermental savings in that year.

I would like to be able to show where those savings are to the penny as it should match the yearly deficit to the penny.

I think if I could do that then the doubters would not have a leg to stand on.

Because we can then turn round and say how on earth can you call that debt. It is not debt it is national savings. So why are we trying to destroy savings by balancing the budget.

It just annoys me we can't back up the theory with real numbers.Bombarding the doubters with theory just switches them off. We need real numbers that backs up what we say.

Footsoldier said...

I thought we all save with the Bank Of England and not with commercial banks ?

Therefore Our savings are either in the commercial banks reserve accounts at the BOE or in their savings accounts at the BOE ?

What MMT teaches us is that these commercial banks reserve and savings accounts can move and change around as they can borrow and lend from each other. But the system as a whole can't. As the liabilities of the commercial banks reserve accounts show up as the number of total reserves on the BOE side.

Unless the BOE changes their side of the balance sheet the number of the reserves the commercial banks hold will never change. All that changes is the ammount of reserves each commercial banks hold but it always equals to the penny what is on the BOE side of the equation.

So why can't we show that the bank reserve balance at the BOE equals all of our savings to the penny ?

What is stopping us from doing that ?

Neil Wilson said...

"I thought we all save with the Bank Of England and not with commercial banks ?"

No. The offset of loans not repaid is similarly financial savings.

You have to be careful not to confuse net savings (savings less loans) with financial savings.

Footsoldier said...

What is also really frustrating is there are some brilliant things coming out of the US. Almost every day.

Take Scott Fullwiler: Quantitative easing (QE) can't cause inflation on you tube.

The analysis is superb.

Then Bill In Australia and we have you in the UK.

Where is everyone else ? Where is everybody ?

Why is their not more analysis here in the UK that matches what is coming out of America ?

It would be so much easier for us to get our message across if it was about the BOE and the £.

Doubters in the UK just switch off if they have to watch something that shows $'s and talks about treasuries and the FED. They don't get it.

Why has nobody from the UK for example taken JD Alt's presentation and changed it to represent the UK ? I'm sure he wouldn't mind.

There must be enough MMT'rs in the UK that understands it all that could have done this.

I know the US has the Levy institute and UMKC that produces most of the stuff because it has the time and is funded.

Maybe it is simple enough as If they want to reach more people here in the UK. Then they need to start producing more stuff that can be taught in the UK.

Bill always talks about the UK in his blog.

New Economic perspectives rarely do.

You can't do everything yourself Neil.

Footsoldier said...

So I can get it.

What is the difference on the accounts ? is one a stock and the other a flow ?

Where do the these two types of savings show up ?

Plus if net savings show up on commercial banks balance sheets how are they stopped from being swamped into their reserve accounts at the BOE ?

Do they not enter the reserves until the loan is repaid and thus destroyed ?


Random said...

The one thing I've noticed is austerity types NEVER actually make a straight argument. They just use euphemisms all the time. What the hell is "trust in national accounts"?

All of this is irrelevant. The UK issues its own currency, Greece does not. Have you noticed article that "stitch" together irrelevant facts becoming more and more common Neil?

"What was Varoufakis defending? And how did Greece get to the point where it boasted the largest national deficit in the EU?"

"The answer makes sobering reading for those who claim that austerity is never justified. Post-war, and particularly post-military rule, Greece encouraged one of the most corrupt and inefficient states on the continent. The constitution actually made it illegal for the vast majority of public sector employees ever to be sacked. The daughters of deceased army officers, provided they stayed unmarried, could claim their fathers’ pensions for the rest of their lives. Hairdressers, because of their job working with “hazardous” chemicals, could retire on full pension from the age of 50; police officers the same from the age of 45.g"

"For Labour’s opponents, this plays into a familiar narrative extremely well. Ever since the humiliation of the IMF bailout of Jim Callaghan’s government in 1976, Labour has traditionally trailed the Conservatives when it comes to economic credibility. Thanks to Gordon Brown, Tony Blair and John Smith, the party managed to reverse that perception, and won three general elections as a result.
And now, having lost the last two elections, mainly due to a return of that familiar and inevitable scepticism about Labour’s ability to be trusted with the nation’s accounts, it is further from government, arguably, than at any time in its 116-year history. A large part of the reason for this appalling state is its leader, an unreconstructed Marxist and peacenik, elected in a grotesque act of self-indulgence by a middle class membership elevating the “building of a movement” above the winning of elections."

It's simple: don't take out loans in foreign currency!

Random said...

Is this BS?

"Foreign investors are increasingly shunning UK government debt as international confidence in sterling has been hit by the currency’s recent weakness.

The pound has fallen steadily this year, hitting a seven-year low against the dollar last week, amid concerns over the forthcoming vote on membership of the EU and the UK’s current account deficit."

Neil Wilson said...

Pretty much. Some will be shunning it. Some will be getting a deal. It has to go somewhere.

Random said...

Any idea what the hell any of this means?

"On HM money and interest rates, there is of course the standard and very basic point that in a market you cannot control both quantity and price, still less move them in opposing directions. So if we want to think about a market for money, you cannot raise the supply of money and raise its price - the interest rate - at the same time."

"The second confusion is that helicopter money in some way precludes undertaking countercyclical fiscal policy. It does not. Right now, for example, governments could and should announce large increases in public sector investment (where I am using investment in the economist’s sense to include investment in human capital, rather than in a national accounts sense). This would negate any immediate need for HM. Monetary policy adapts to fiscal policy.

When people ask me which we should have, helicopters or fiscal expansion, I'm tempted to say I would love to have the choice! If I did have that choice, right now I would take additional public investment over a helicopter drop, because the micro case for investment is in many cases (and countries) very strong, interest rates are low and investment improves the supply as well as the demand side. In any future severe recession where the interest rate lower bound was likely to be hit [1] I would also advise bringing forward public investment. However I do not see this as a competition (countercyclical fiscal action vs HM) for two reasons."

Neil Wilson said...

Yes. He's thinking that government spending isn't helicopter money. It is. But it is targeted by those elected.

They are the same thing. But this desperate desire to see them as somehow separate for reasons he never mentions means he can't see the equivalence.

Additional you can't invest in human capital of you are balancing the current budget. If you want to invest in human capital you have to have an unbalanced current budget.

At which point why are you trying to differentiate two things that are exactly the same?

Tom Hickey said...

He thinks the interest rate and yield curve bind the government, when what is happening is that government as the currency monopolist is setting its own rate as the policy rate and managing the yield curve off of that. These are the benchmark rates for the economy.

He also doesn't get that currency and government securities are munnie because the government that issues says so and makes them interchangeable at par. Governments that are sovereign in their currency can always redeem issues coming due and ensure that the markets always clears for bond issues.

As Warren says, the big mistakes economists that are out of paradigm make come from failing to understand sovereign currency as a monopoly of the issuer and what this implies.

On top of that, they don't understand how the financial system operates and don't take accounting into account so they don't know when they are not stock-flow consistent.

Reading these fools is a waster of time. They are lost in their own heads.

Random said...

Pensions is always a current production issue!

The review will be led by the former head of the Confederation of British Industry John Cridland in his new role as the independent reviewer of the state pensions age, and will report in time to allow any changes to be made by 2017.

The government said it would “help ensure that the state pension remains sustainable for generations to come” by determining what a suitable state pension age was, and whether the “current system of a universal state pension age rising in line with life expectancy best supports affordability, fairness, and fuller working lives objectives”.

The government said it would not cover the existing state pension age timetable, which includes everyone who is retiring before April 2028. However, it would look at whether the age of 67 was right for men and women who retired after that.

The government had already announced it would review the state pension age every five years, but this study so soon after the general election suggests ministers are looking to make changes faster than expected.

Owen Smith, the shadow work and pensions secretary, said: “People are right to worry that the terms of this review may suggest that the Tory government is set to speed up rises in the state pension age, throwing into chaos the retirement plans of millions of British workers.”

Paul Green, the director of communications for retirement specialists Saga, warned the pensions minister, Ros Altmann, not to make the mistakes of the past.

“Reviews to the state pension age are understandably very emotive,” he said. “Whilst many people recognise the need to extend working lives for those that are able, there has been repeated criticism of the speed in which previous changes have been introduced.

“Many people, particularly women, had made plans for their retirement and felt that they weren’t notified of the changes early enough – leaving them with little to no time to make alternative plans to fund their retirement.”

He urged Lady Altmann to promise that any changes would not affect those within 10 years of their current expected retirement age, to allow people time to plan.

Tom McPhail, the head of retirement policy at the financial services firm Hargreaves Lansdown, said: “We fully expect state pension ages to go up faster than currently planned, and those joining the workforce today are likely to find themselves waiting until their mid-70s to get a payout from the state system.

“This is simply a function of the big jumps we continue to see in life expectancy, which the state pension can’t hope to support without costs spiralling out of control.

“Whatever decisions they make, the government needs to make sure they communicate them very, very clearly so individuals can plan their retirement savings with some certainty about what they will get from the state, and when they will get it.”

Aka screw over young men and redistribute to older women. Nothing new here.

Altmann, who used to run Saga and was an independent pensions campaigner before being made a Tory minister, said: “As our society changes, it is only right that we continue to review state pension ages and take into account the relevant factors to make sure that the state pension is sustainable and affordable for future generations.”

Like these people care about "future generations"!

Neil Wilson said...

Why isn't Labour complaining about the pension age rising if they are 'looking at' basic income?

Random said...

"Why isn't Labour complaining about the pension age rising if they are 'looking at' basic income?"

Same reason Blair introduced ASBOs and Theresa May has policies that are aimed at ensuring that the "victim" spouse always "wins" divorces. These policies delight the hang-and-flog middle aged and older women swing voters needed to become the "elected" dictatorship in the UK.

From the The Times, 2011-09-17, by Janice Turner:

"The C2 women who voted Conservative last time did so because they, in low to middling-paid roles such as nurses, secretaries and carers, believed welfare had grown too generous, that benefits rewarded the do-nothings while they toiled. They hoped the Tories would crack down."

And the government have cracked down, especially on the Northern disabled and unemployed who lived the high life on benefits in mansions with many unused bedrooms, or funded their luxuries by collecting welfare well in excess of average family earnings, while poor bankers in the City struggled to make ends meet with reduced bonuses due do the fall in mortgage fraud.

Random said...

Job Guarantee is extremely important. Without it "excess" men not seen as "pulling their weight" are absolutely screwed.

The principal reason why women have children is as investments, to be cared for in their old age by at least some of them. This actually leads them to have many, because the more they have the higher the chances some will survive and support their old age mother.

When women think that they can get care for their old age from a pension account, children switch from being investments to being luxury consumption, and they have a lot less and rather late. Because there are many competing luxury consumption options that compete with them (bigger house, better car, more exotic holidays, etc.) This has had a very large effect in that the resources corresponding to pensions are *actually produced* by their children in the aggregate.

Simple way to persuade yourself: all women have pensions and no children. They all retire. What happens? Resources will be actually produced only by the children of women who have invested in having and raising them, but they will be shared by women who did not. Try to imagine the situation with the women: both have the same pension rights, the first had 2 children, the second had none. Both retire. Now both the children of the first woman produce for both women. Of course this has given many women a strong incentive to have no children or just one, as they will be provided for in any case by the resources produced by the descendants of women whose chose to have children, and childless women will actually have a better pension because they did not waste any of their income in having children, so they could have saved more.

As another point, in some countries, including China and India, women abort as many female children as they can, either before or after birth (usually leaving one female child live last to care for them in old age).

This is mothers themselves choosing freely to abort most of their female children. The reason is purely economical: female children are a net disinvestment, because to marry them away they must be accompanied by a dowry, in addition to the cost of raising them, while male children are a better investment, because they receive a dowry on marriage. Put another way, female children contribute to some other mother's nest egg (the dowries to her sons), male children are their own mother's nest egg. Also, male children can be made to work harder and longer and starting earlier, and that matters a lot in a poor society, especially an agrarian one.

andy blatchford said...

"What we need is a good old fashioned bulletin board forum"

Yep we do, I did get permission to set an email group up on as I mentioned in the pub, but shelved it as it was great for notifications of meetings etc but hopeless for discussions (bit like old alt groups for any oldies) as just got chatter from party members so migrated discussions over to the GP forum.

Probably need an MMT UK site with a forum attached.

Random said...

BTW most of this stuff is considered "politically incorrect" i.e you don't mention it in "polite society" ;)

If it is turning people away from your blog I am happy to delete comments.

Random said...

"EU may have to limit migrant benefits like UK, says Hamburg mayor
Olaf Scholz says other 27 member states must review their approach to access to welfare after UK agreed emergency brake"

Cameron has won ;)

Neil Wilson said...

"BTW most of this stuff is considered "politically incorrect" i.e you don't mention it in "polite society" ;)'

I'm happy to hear thoughts where they are honestly held and there is an attempt to argue why. What I don't like is yah boo sucks you're wrong because says so. Those I already delete :)

I don't think people respond in quite the reasoned way you put forward. There are too many other competing issues. But at least it is a proposal that can be tested sociologically and some evidence collected to see if it stands up strongly, weakly or not at all.

There's too much thought police already trying to control what is acceptable to discuss - even to the point where discussing people having jobs gets your invites to parties withdrawn.

Random said...

Paging PR (and possibly malware) from quick google search "forum creator blogger" :)

"Creating a free forum is easy and fast. A discussion board is the best solution to build your own community and discuss online. Forumotion offers free hosted forums with complete and customizable forum system. Change the version of your forum at any time to make your forum unique on the Internet: phpBB2 • phpBB3 • punBB • Invision.
Create your forum now!"

"Not only does Lefora offer free forum hosting, there is nothing to download and nothing to setup. You just have to choose a name to start your discussion forum and we'll do the rest. "

"Would you like to join a forum, or do you wish to start your own? Maybe you're just looking to share some pictures or start a blog. No matter what you're looking for, Forumer can help you achieve your community and communication goals.

Starting a forum does not cost anything, and our free version offers everything you need. However, if you don't like ads in your community, you can choose to have them removed for an affordable fee"

Random said...

"You are part of the new middle class; your income is rising; you want a small family. But traditional mores hold sway around you, most important in the preference for sons over daughters. Perhaps hard physical labour is still needed for the family to make its living. Perhaps only sons may inherit land. Perhaps a daughter is deemed to join another family on marriage and you want someone to care for you when you are old. Perhaps she needs a dowry.

Now imagine that you have had an ultrasound scan; it costs $12, but you can afford that. The scan says the unborn child is a girl. You yourself would prefer a boy; the rest of your family clamours for one. You would never dream of killing a baby daughter, as they do out in the villages. But an abortion seems different. What do you do?"

Random said...

"Female infanticide is more common than male infanticide, and in some countries, particularly India and China, is likely to have serious consequences on the balance of the sexes in the population.

The reasons behind it are almost always cultural, rather than directly religious.

The causes:

Anti-female bias

Societies that practise female infanticide always show many other signs of bias against females.

Women are perceived as subservient because of their role as carers and homemakers, whilst men predominantly ensure the family's social and economic stability.

Family economics

Girl babies are often killed for financial reasons.

Earning power: Men are usually the main income-earners, either because they are more employable or earn higher wages for the same work, or because they are able to do more agricultural work in subsistence economies. Since male babies have a greater income potential, they are less likely to be killed.
Potential pensions: In many societies, parents depend on their children to look after them in old age. But in many of these cultures a girl leaves her parental family and joins her husband's family when she marries. The result is that parents with sons gain extra resources for their old age, when their sons marry, while parents with daughters lose their 'potential pensions' when they marry and move away. This gives parents a strong reason to prefer male children. Some parents (particularly poor ones) who can't afford to support a large family, will kill female babies. Girls are considered a drain on family resources during their childhood without bringing economic benefits later on.
Dowry: Some girl babies are killed so that the family doesn't have to pay a dowry when they get married. In Indian society it is tradition for the parents of the bride to give a dowry to the groom and his family. The dowry consists of large amounts of money and valuable goods. For families with several daughters this can be a serious financial burden.
Government policy

Governmental policies have also increased female infanticide as an unpredicted side-effect. For example, when the Chinese Government introduced a One Child per Family Policy there was a surge in female infanticide. Families needed to have a son because of their higher earning potential, so a girl baby was an economic disaster for them, and there was a strong motive to ensure that girl babies did not survive.


Some female infants are killed because they are regarded as being lower in the caste hierarchy than males."

Random said...

"The People's Republic of China and its predecessors have a history of female infanticide spanning 2000 years.[2] Worldwide, the practice of infanticide has been practiced since antiquity for the purpose of population control.[2] It is an unsanctioned method of family planning that has been condoned for centuries in the area until recent times. The phenomenon is also referred to as female gendercide; however, the word gendercide can be used for both sexes."

"Killing baby girls, or allowing them to starve to death, is something most of us cannot imagine. But it occurs even today. As shocking and disturbing as this behavior is, however, we must look at in within its cultural context. According to Scheper-Hughes (1987), neglect or killing of children may reflect a “survival strategy” that the family adopts. Parents might decide to invest more heavily in their “best bets” and neglect the rest. In some cultures, the best bets are often male (Scheper-Hughes, 1987). Families in these cultures may decide to kill their female children either outright, or passively, through abandonment or starvation to increase the likelihood that their families might survive (Miller, 1987).
Most of us have no trouble labeling infanticide as “wrong.” A trickier issue is sex-selective abortion. Sex-selective abortion poses a genuine conundrum for those who support reproductive choice. On one hand, proponents of choice do not want to see a discussion of abortion in a chapter on victimization. On the other hand, many people who support reproductive choice are uncomfortable when it is applied selectively to females. Even the World Health Organization lists sex-selective abortion as one type of violence against women (1997). I have witnessed some spirited, and at times heated, discussions of this issue among my colleagues at the University of New Hampshire. I have included sex-selective abortion in this chapter, but acknowledge that not everyone agrees that it belongs here.
Below I describe two cultures where both sex-selective abortion and female infanticide have been documented: China and India. While infanticide occurs for different reasons, the cultures have similarities. In both cultures, the survival of the group is
weighed more heavily than the survival of any individual. Both cultures also count on their sons to care for their aged. Daughters marry out and are no longer members of their families of origin. For this reason, daughters are considered more a liability than a blessing."

Footsoldier said...

You have to be careful not to confuse net savings (savings less loans) with financial savings.

What is the difference on the accounts so I can get it.


Neil Wilson said...

"Probably need an MMT UK site with a forum attached."

The simplest way is a Google Group. They have a format called 'Q&A' that allows questions to be asked, answered and rated. And it would automatically show up in internet search results.

We can then categorise posts - banking, job guarantee, etc and people can up vote the best answer.

Neil Wilson said...

"What is the difference on the accounts so I can get it."

When people save in bank accounts that is financial savings. Some of it comes from prior commercial loans created by banks and some comes from government spending (which ends up as reserves/Gilts which are, effectively, forced loans to the central bank and Treasury).

So you have financial saving on one hand that includes the deposits created by commercial loans, and net savings on the other which is net of those commercial loans - leaving just the offset created by Gilts and reserve based loans.

acorn said...

Does anyone know which is THE MMT University in the UK? Some are telling me Cambridge and Manchester are a little bit. Who are the MMT Professors that get anywhere near a Bill Mitchell or any of the UM Kansas City people like Randall Wray etc? I am pretty sure it is not Oxford, if "mainly macro" is an exemplar.

Neil Wilson said...

I don't think there is one.

Leeds is a disaster because of the continuing influence of Malcolm Sawyer. Even though he is a Kaleckian he still won't push for a Job Guarantee. It's still all 'investment' - as though everybody can be employed simply by doing 'green investment'.

They can't of course. Quite why people refuse to acknowledge the matching problem is beyond me.

My other half went to Leeds and considered Sawyer to be another one of those people who like Wren Lewis uses bluster and prestige to appear impressive rather than any solid arguments. Point out that the emperor has no clothes and they get very irritated with you. They are very fond of the summary dismissal Krugman style. You'll note they all have the obligatory economist beard.

Neither is Kingston. Kingston is a very odd place full of very unusual people. Heavily Marxist, but the sort of marxists who won't discuss their positions when you ask them questions. Englebert Stockhammer is there as well as Steve Keen - and that is where Phil Pilkington got his masters. But I didn't get any sense from them that they wanted to talk about issues - like floating rate exchange systems and how to manage them. They just want to push their ideology.

The other thing to note is that pretty much all the economics departments in the UK have been merged into business schools. That tells you the direction of travel - towards corporatisation and support of corporatism.

andy blatchford said...

The only Brit Professor I know teaching MMT is Stephen Hail (no beard either) but he is currently down in Adelaide.

Ah a Google group, good idea will set one up, probably at the weekend.

Random said...

"HM (Helicopter Money) is best seen as altern. to QE rather than as altern. to fiscal action"


Random said...

W Lewis

"OK, try looking at it this way. We got fiscal austerity rather than stimulus because of government debt phobia. The obvious way out of that is for governments to undertake money financed stimulus i.e. stimulus without more government debt. But independent central banks rule that out. You cannot have a money financed fiscal stimulus when one body controls fiscal policy and the other controls money creation.

One solution is to get rid of independent central banks. Instead HM gives the central bank a fiscal instrument. Thinking about balance sheets is irrelevant!"

Neil Wilson said...

Why does giving the monetary authority a fiscal tool not cause Armageddon but the monetary authority giving the fiscal authority an overdraft does. Totally inconsistent. It says that the monetary authority is better at spending money including mailing cheques to millionaires than the fiscal authority is. Even though the fiscal authority is elected and the monetary authority isn't.

It's total bullshit. There is no magic in independent central banks. What WL thinks was stability was actually a dangerous private debt bubble that blew up.

It's like saying the trees on the top of Vesuivius is what caused 400 years of prosperity in Pompeii

Random said...

"But the central bank does HM as part of its demand management/inflation control responsibility. All the government has to do is set up the mechanism for this to happen. In this sense it is best to think about HM as an alternative to QE."

Random said...

"The proposal is that the Treasury authorises the CB to undertake HM at some point, and the CB chooses that point. It has got nothing to do with balance sheets."

Neil Wilson said...

There is considerable difference between repaying a savings account and handing out free money to rich people. One doesn't increase the wealth of the private sector. The other does.

Neil Wilson said...

"The proposal is that the Treasury authorises the CB to undertake HM at some point"

Totally unnecessary. The Treasury can do the spending directly via the DWP based upon DWPs assessment of the state of effective demand. DWP already has the capacity to pay people directly via the universal credit and PAYE integration architecture. The CB can continue being limited to bond reversals as required - i.e. the existing QE. That way the monetary authority remains solely concerned with the interest rate curve and the banking infrastructure.

That is a far more efficient way of operating - since it uses existing payment infrastructure - and is more directly governed by parliament. Plus, importantly apparently, separation is maintained.

Random said...

"Because of implementation lags, a fiscal response to an impending deep recession should not wait until nominal interest rates actually hit their lower bound. If that fiscal response involves investment, used in an economists rather than national accounts sense, then there is no great loss if the deep recession does not happen, because it is wise to invest when real interest rates and wages are relatively low."

I wonder what it is in "economics terms"? The inconsistent thing is he objects to PQE but supports Helicopter Money. WTF??

"In the proposals put forward in Portes and Wren-Lewis (2015), the central bank would directly tell the government the probability of the lower bound being hit. "


"I think the argument that the amount of public investment cannot be adjusted to match macro conditions is often overstated. We are not talking HS2 here (the proposal to build a high speed train line between London and Birmingham and beyond), but improving flood defences, repairing roads and schools etc. "

Random said...

Rolls Royce to employees - "vote Brexit or else." Another reason for Job Guarantee is stuff like this!

Neil Wilson said...

There is no lag when the DWP does it. Pensions, tax credits, benefits and ancillaries scale automatically based upon requirements, and they scale back automatically as people earn more income. That's the whole point of having the RTI system in Universal Credit. It is part of the auto-stabiliser system that has worked perfectly since Keynes' day.

You can't use 'investment' in the economist sense if you are balancing the current budget because the current budget is in 'national accounts' sense. You don't get to choose you categorisation. In any case all spending crowds in private investment to handle the demand.

Random said...

This is brilliant. Labour are going to create a bunch of conservative voters who want asset prices to keep rising.

Random said...

"The simplest way is a Google Group. "

Please create one :)

Does someone have to moderate comments etc?

I'll put up a link on reddit mmt too.

andy blatchford said...

I did create one last night, didn't have much to mess about with it though Random, will post a link here tonight.

Neil Wilson said...

I would suggest we need a closed/moderated one for various reasons - largely so email addresses don't leak everywhere.

Perhaps a discussion group and a more open Q&A forum that is searchable.

andy blatchford said...

Modern Monetary Theory UK if someone could request to join so I can make I sure set up correctly as a Q&A forum.

Neil Wilson said...


Random said...

Can I have a link for that?

Neil Wilson said... and search for the group 'Modern Monetary Theory UK'

Random said...


Random said...

What topic should we create? A "general discussion"? It is empty at the moment? I'll continue discussion on there.

Random said...

Has "new question" ah so just FAQ then?

Random said...

I have posted a question is that OK? It has been moderated I think. Or is the group being setup still? If not I think I can discard it if posted or Andy can discard as admin.

Random said...

Analogy on Billy Blog:

"I think of the central bank fiscal function in the way i think of a software compiler.
I never doubt the ability of the computer to make a call to address space/make a pointer, i can make infinite calls for address space to implement an algorithm/solve a problem. Ultimately what constrains me is the physical memory environment of the computer itself. In this way its like a central bank it neither has/does not have funds it is an instantiation of address space/currency."

Random said...

BTW MythBusters AMA Apparently!

Neil Wilson said...


Probably better with a conventional unmoderated/post-moderated forum if it is a closed group. If you can throw disruptive people off the list, there's no sense adding to the moderation load.

Moderating groups is a tough business.

Neil Wilson said...

When I say conventional. I mean not the Q&A style for the closed group. Just normal threaded conversations.

andy blatchford said...

Yes I am going to take it off moderated later, pretty much know most of the people who will join anyway.

Neil Wilson said...

Can you change the type as well. This forum needs to be more than just Q&A/FAQ.

andy blatchford said...

All done, web forum style now, there are tags and no moderation.

Random said...

Wow scary comment:

"To be clear, I also think it is an unacceptable risk to leave the EU - and not only for economic reasons. As I argued in the Scottish debate, there is something demeaning about telling people to vote against 'sovereignty' because it might cost them a few hundred pounds a year. Much more honest and, in my view, effective to insist that sovereignty does not really exist: that we cannot have free trade and unfree borders; that regulations are an essential part of an interconnected life; that the consensus of a larger group is better protection against extremism than the pressures in a small group and so on."

The people who read Wren-Lewis' blog are totally nuts. The man himself says:

"For the record, as some will ask, I will be voting Remain. Apart from the economic arguments, in my own experience interventions from Brussels have more often been positive than negative. I also have an instinctive feeling that in today’s globalised world the UK should be part of Europe, for the reasons John Harris gives for example."

I'm through with them.

Neil Wilson said...

The are centralist who believe in a technocracy. Very similar to the construction of the old Soviet empire - highly coupled, centralised and brittle.

The alternative model is highly devolved, decoupled and internally cohesive within each domain. It should be perfectly possibly for cohesive socialist environments to operate alongside near libertarian zones without conflict or eating each other's lunch. The buffer is a correctly managed floating rate currency.

And that is the model that we need to promote. Localised power vs. centralised power in the hands of (generally bearded) technocrats.

Random said...

"perfectly possibly for cohesive socialist environments to operate alongside near libertarian zones without conflict or eating each other's lunch. "

See this is what I do not understand. Why do libertarians constantly try to defeat "socialism" all over the world, want to open borders in socialist nations? It is contradictory to their own ideology.

From a libertarian perspective, whether *you* allow a State to hold a gun to your head is your "personal choice".

Payment of taxes is entirely voluntary in the UK and most other states: all you have to do is TAKE PERSONAL RESPONSIBILITY and live in another State.

If you don't like the price that the UK State asks you to pay for its services, get out of the UK and buy services from a State that offers you a better bargain you are willing to take. Shop around! There is a market in State membership.

It is like with housing - classic example being "condos" in USA/Canada: you don't like yearly fees for the condo? Shop around and buy an apartment in another condo. If you *choose* to stay in that condo but you refuse to pay the yearly fees, you are STEALING THEIR PROPERTY.

Living in a *first-world* state and paying whichever level of taxes are agreed for its services is purely a VOLUNTARY BARGAIN OF MUTUAL ADVANTAGE, with NO COERCION whatsoever, because you can leave that State anytime you want, respecting any contractual exit clauses, just like in any voluntary bargain of mutual advantage, just like you can leave that condo.

A State can only force you to pay for its services by holding a gun to your head when you try to leave. If they are not holding a gun to your head to prevent you from leaving, then staying is a voluntary bargain of mutual advantage. It may be not one you like, but it is still voluntary you may feel paid too little by working at McDonalds as a server, but it is still a voluntary choice.

If you can leave a State and thus refuse to buy the services it offers, there is simply "no coercion" (under libertarian loony logic.)

Almost all countries allow you to buy a citizenship, and most have pretty clear price lists. You can’t afford the price? Well, buster, why should other countries offer you a deal that is not of mutual advantage? If you were a productive, creative hero of UK wealth creation, you would have the money to buy a Monaco or Dubai citizenship. Losers who want free handouts need not apply.

Just like how "nobody forces you" to shop at Asda or work for McDonalds: if you don't like the voluntary bargain of mutual advantage that you are offered by them just TAKE PERSONAL RESPONSIBILITY and leave their premises without buying or selling anything.

From a libertarian perspective only moochers and looters refuse to TAKE PERSONAL RESPONSIBILITY and instead of walking away from bargains that don't suit them and instead blame the party who offered them a bargain that they can quite easily reject by leaving the vendor's premises and going to make a voluntary bargain in another one.

The libertarian argument is that the jackbooted thugs of UK property owners held a gun to your parents for all 18 years of your minority to force them to reside in the UK with you, imposing on them residence in the UK without their consent?

Not only were your parents forced to reside in the UK but the same jackbooted enforcers of UK property rights put a gun to your head on your 18th birthday to force you to be a resident in the UK and you were made to use the services of the UK like universal healthcare, education, police, army protection, roads, etc. without your consent?

Your parents and you absolutely refused to buy the residence product being sold by the UK, but you were both forced to buy it, gun to your head, for decades?

Random said...

Interesting comment from Tom Hickey. Gold = central bank "fiscal policy"

"Actually, the Central Bank of Russia buying gold makes sense in that Russia is a gold producer. The mining companies sell their output to the banks (the biggest one is state owned) for rubles, and the the banks sell the gold to the Central Bank of Russia, which pays in rubles, thereby creating "debt-free" munnie. It's a way of getting rubles into the economy off-budget and without increasing private debt.

The cb just expands its balance sheet by creating rubles as a liability and adding gold as an asset.

Gold is also a reserve that always a cb to "save" in a real asset that is quasi-financial instead holding a reserve currency.

CBs use gold operationally."

Random said...

Extremely funny:

"UK membership of the EU increases foreign investment in the UK economy, and investment creates better paid, higher value jobs. Being in the European Union is one major reason why we export so much to the rest of Europe, and the bigger our export market is, the more jobs there are in those industries. Jobs in exporting industries pay more than the average, and are more skilled. At the same time, membership of the EU has produced cheaper imports, which raise real wages by reducing the cost of living for everyone."

"The likely impact on the value of the pound if the UK left the EU would not affect what Harold Wilson used to call “the pound in your pocket”, but as everyone now knows, devaluing your currency actually makes us all poorer because the foreign goods we import become more expensive. Britain already has a long-established trade deficit, and it is higher in goods than in services, so everyday purchases on the high street (as well as holidays abroad, for people who can afford them) would immediately cost more, thus reducing the value of the wages we earn."

Anonymous said...

Isn't the fundamental problem with this "money as veil over barter"

"If we take the thing exchanged to be dollars, then we could potentially take log2s→log2mlog2⁡s→log2⁡m where mm is the size of the money supply (monetary base). This would allow you to get a really good estimate of the potential market size d by looking at the price (or at least changes in the price) while knowing the size of the money supply."

Tom Hickey said...

Money is a veil over barter, which is what most monetary exchange is about. The mistake comes from concluding that money is JUST a veil over barter. It isn't JUST a veil. It is also a crucial causal economic factor for the reasons that Keynes pointed out.

Keynes did not totally disagree with the Walrasian model. He thought it needed to be tweaked by including finance (which includes accounting).

See Money is not a Neutral Veil.

Random said...

W. Lewis engaging in populist demagogy on Twitter:

"Creating money to give to the financial sector - no problem. Creating money to give to the public - a No No. Hmmm... "

Anonymous said...

The Basic argument for Independent Central Banks. Judge by yourself:

"The basic flaw with my strong argument against ICBs is that the ultimate problem (in terms of not ending recessions quickly) lies with governments. There would be no problem if governments could only wait until the recession was over (and interest rates were safely above the ZLB) before tackling their deficit, but the recession was not over in 2010. Given this failure by governments, it seems odd to then suggest that the solution to this problem is to give governments back some of the power they have lost. Or to put the same point another way, imagine the Republican Congress in charge of US monetary policy."

Then chuck out the Republican Congress?

More arguments:

"ICBs have at least been trying to get us out of deflation, while governments have been acting against them. My earlier case against ICBs did not rest on their competence, both rather that the institution took away an instrument.

As I said in an earlier post, helicopter money does not preclude using fiscal policy in a more sensible way. Think of it as a way a government can commit itself not to screw up the economy at some later date after a recession. Or as the government giving the ICB the instrument it needs when the ZLB arises."

"To see the flaw ask the following question: in the absence of ICBs, would our deficit obsessed governments actually have undertaken a money financed fiscal stimulus?"


"That question gives rise to another and related question: how come economists manage to get to the top of their profession without understanding the above sort of “basic”. "


"I'm not sure who the 'economists' you have in mind are. All the economists I can think of, plus the OECD and IMF, are arguing for higher public investment now. The problems is that economists are being ignored."

Random said...

Democracy in Action :)

"EU referendum: Mark Carney warns Brexit is biggest risk to Britain's financial stability
The Bank of England's Mark Carney faces the wrath of eurosceptic MPs as he announces banks will be offered billions of pounds of extra liquidity to avoid a post-Brexit financial crisis"

Anonymous said...


"helicopter money does not preclude using fiscal policy in a more sensible way. Think of it as a way a government can commit itself not to screw up the economy at some later date after a recession."

Of course it does! Do you think your readers are dumb? If the central bank hands outs free money there is less fiscal space without causing inflation. Combined with high interest rates will mean your project cannot be funded. Much better low interest rates + no free money.

Couldn't ICBs blackmail governments by refusing helicopter money? Or conversely government pressures CB to introduce HM?

"ICBs have at least been trying to get us out of deflation, while governments have been acting against them."

Sure the Conservative government has, but the opposition has supported "money financed" PQE or at least did until it was dropped for "CB Independence."

Anonymous said...

Ultimately basic income can't work as counter stabilisation too well.

Anonymous said...

Hehe this is fun.

"Another possibility is that the government (in its saner moments) gives ICBs the power to undertake helicopter money."

Disagree. I think the government should give me the power to create money to buy chocolate and have my own theme park. That is a far superior suggestion.

Anonymous said...


I think I've found the Link Warren is always going on about.

Mosler says It is no coincidence that approx $15 trillion in govt securities outstanding is roughly equal approx to the $15 trillion in pension funds.

Take a look at this report from Kings College London

Page 2

Then compare that figure with the national debt clock

They both are approx £1.6 trillion.

What do you think ?

Anonymous said...

money does not change hands as commodities are... The string theory of money

Random said...

Ramanan vs Sanders

Random said...

"What Kaldor is saying that because of balance of payments constraint of economies, the world as a whole has a slower growth because surplus nations do not expand domestic demand to the level needed. He is also saying that import controls raise imports rather than reduce them (this because of higher national income) and the exporters’ exports will also increase (even though their share is reducing.).

So the world as an built-in deflationary bias in the way it works."

"In the absence of such measures all countries may suffer a slower rate of growth and a lower level of output and employment, and not only the group of countries whose economic activity is ‘balance-of-payments constrained’. This is because the ‘surplus’ countries’ own exports will be lower with the shrinkage of world trade, and they may not offset this (or not adequately) by domestic reflationary measures so that their imports will also be lower. Provided that the import regulations introduced relate to import propensities (i.e. to the relation of imports to domestic output) and not to the absolute level of imports as such, the very fact that such measures will raise the trade, production and employment of the ‘constrained’ countries will mean that the volume of exports and domestic income of the ‘unconstrained’ countries will also be greater, despite the downward change in their share of world exports.3"

Random said...

W. Lewis has a new post explaining his reasoning:

He also says in a comment:

"It is not my rule, but Labour's proposed rule."

Random said...

BTW I have got Wren Lewis to admit debt to GDP ratio is essentially meaningless:

He says -

"Genuine answer - we do not really know. The general feeling is that current debt to GDP ratios are too high, but no one has a good idea of what the optimum level might be."

This comment

Something that might be made use of in debate ;)

Anonymous said...

BTW another link here in case other does not work: :)

Neil Wilson said...

I don't think he quite understands how politics works.

He's working with Labour. It's his rule. And it makes no sense whatsoever.

Anonymous said...

BTW PQE are banned from Information Transfer Economics blog (Jason Smith.) He has quite a chip on his shoulder:

"It is with some reluctance that I've decided to enable comment moderation due to abuse, ad hominem attacks, and terminal fools.

Since this is my blog, I can do what I want. And since I'm an elitist bastard, I'm going to go a bit further than others do and ban stupid comments, failures of reading comprehension, and the rather baffling inability to Google something before you post (you're on the Internet already).

Additionally, all pro-"Post Keynesian" comments are also banned. This school of thought apparently consists of terminal fools. The determination of Post Keynesianism will be made via a very sophisticated machine learning algorithm so it might be some time before sufficient data has been accumulated. Please stand by.

Furthermore, out of spite, I am now a Market Monetarist. While they are also wrong, they are a much better class of people.

They also don't think economics is "just accounting"."

When have PQE claimed that? Where does this weird claim come from? It's a strawman.

And apparently market monetarists are Forex experts?

"This post isn't going to be about market monetarism per se, but rather about what it means to predict things -- what it means to get things right. Let me illustrate with two examples that take on the same two subjects: low trend growth and interest rates and the Swiss Franc. One example is Scott Sumner (conveniently in a single post) ...

On low interest rates and lower trend growth:
It wasn’t expected by everyone, but MMs have been predicting this for quite some time (although they are even lower than I expected) ... Of course Summers was a latecomer to this idea; I’ve been talking about slower trend growth and low interest rates as the new normal for many years.
And on the Swiss Franc:
And as predicted by MMs, the Swiss decision to revalue the franc has backfired. Now that markets understand that the Swiss are willing to let the SF appreciate over time ... The pro-revaluation crowd thought that the SF would no longer be expected to appreciate, if speculators could be placated with a revaluation upwards.

"In both cases, we have essentially correct predictions. In one case, it is for qualitatively lower growth and lower interest rates (even lower than Sumner expected), and qualitative changes in expectations resulting in the non-realization of a counterfactual path (Swiss Franc).

In the other case we have quantitative prediction (in an easy to find location -- see the link to this page on the sidebar) of specific variables over a specific time period using a well-documented model -- alongside direct comparisons with other models and/or theories.

Now some economists and econoblogosphere commenters out there say economics isn't really about quantitative predictions. And that's fine when both the specific qualitative and quantitative forecasts turn out to be wrong (see above or e.g. here). Maybe it is too difficult to make specific predictions for a complex nonlinear system.

And the choice is obvious when either the qualitative or the qualitative approach is right and the other is wrong (i.e. the right one).

But both the qualitative and non-specific as well as the quantitative and specific predictions above were right. And they represent entirely different models. What should you think in that case?"

Um , it is about market monetarism full stop.

Comment on it. Oh wait , you can't. You are the wrong type of person! Someone has and says:

"The first one isn't a prediction but rather the claim that he predicted it. Maybe he did but that isn't evidence he did."

Neil Wilson said...

Just another "private business should be allowed to do what it wants" person. I've never rated the 'woo' he come up with. Far too fond of mathematics and treating people like Boron Atoms.

And he refuses to accept that models predicting what a patient in a strait jacket will do are self-confirming. He's missing the feedback into policy from the essentially monetarist mainstream.

Neil Wilson said...

Are you on the google group?

Footsoldier said...

What is the google group ?

Neil Wilson said...


Modern Monetary Theory - UK

Anonymous said...

D Cameron on Twitter

"Leaving the EU and doing a deal similar to Canada could mean seven or more years of uncertainty - with key businesses badly damaged."


Neil Wilson said...

"Leaving the EU and doing a deal similar to Canada could mean seven or more years of uncertainty"

Only if we're daft enough to allow Cameron to be the negotiator.

Cameron couldn't negotiate his way out of a paper bag.

Anonymous said...

Neil another point 're gender differences
A relatively recent topic is that for almost the entirety of the existence of the human species our competitive advantage has been as “cursorial” (“endurance running”/”jogging”) hunters: that is hunters that chase their prey for a long time outlasting it and then reaching it when it is tired.

That is there are prey that are much faster than humans, but for shorter times, and prey who can outlast humans, but are slower. Men apparently have a fairly unique advantage in a combination of being able to run at medium speed for medium times, and being able to track prey running away, until they catch the faster prey who have tired, or the longlasting prey who are not fast enough.

This advantage of men in “cursorial” hunting is multiplied because men have learned to be “group cursorial” hunters, that is to work in groups to bring home the bacon (literally!). The reason probably is that *some* big game like buffalo, horse, bear, large boars may be eventually caught up with by “cursorial hunters” but then if they have been tired down dealing with that big game as you write takes more than one man.

Note: it is little known that over long distances men can outrun horses.

That men have been for hundreds of thousands of years “group cursorial hunters” is still pretty much evident in our behaviour today: most business, army, science, … “teams” are in effect “group cursorial” hunting teams, whether the “prey” is closing sales, or software products, or finished gadgets, or “hill 39”, …

I wrote “men” in the above because a rarely made point (I have never found a source making it explicit, but probably someone did) is that it is a very gender specific history: women just have not been (AFAIK) “group cursorial hunters”.

Note: my impression is that women’s history is one of domestication of animals and men, and that women do not have a history of communal endeavour, except strictly within their genetic line, but one of ruthless competition among individual women in different genetic lines (thus “tiger moms” and “sharp elbows”).

Anonymous said...

My personal observation of patterns of child caring (that means protection from death) in traditional society is:

* The first choice is grandmothers. One explanation is that they are heavily invested genetically in their grandchildren, almost as much as the mothers.

* The second choice is older siblings, often older daughters. Perhaps because they share a lot of genetic investment with their siblings.

* Only further down maternal aunts, that is usually sisters of the mother. They don’t share as much genetic investment because their own children and their sisters’ children have different fathers.

* I have rarely seen paternal aunts invest in their nephews, except when childless themselves. I suspect because paternity is always suspect.

I guess that paternal aunts being women themselves know a lot better than most men how “suspect” paternity is in general; the other group who are aware of that is the small minority of *sexually attractive* men, the “panty wetters” who are the genetic fathers of a disproportionate share of children)

"women do not have a history of communal endeavour, except strictly within their genetic line, but one of ruthless competition among individual women in different genetic lines"

As to this another thing that most men are not aware of is that in women-only environments, such as girls only schools, lesbian couples, nun convents, feminist groups, almost-all-women industries, there can be and usually there is a lot more bullying, physical violence, poisoning, outright cruelty, backstabbing, nasty politics and general viciousness among those women than in a men-only environment.

Most men don’t realize this because many women tend to be on their best behavior around men (except brutal catfights when a really juicy one is at stake), perhaps to give men an impression of being “weak, meek, nice”.

To the point that the losers in intra-women vicious conflicts keep quiet about them as it is in their interest too to maintain the “weak, meek, nice” image. Until they file for divorce of course :)

Anonymous said...

The desire to have and look after children in the future will definitely be genetic - parents in the future may be able to genetically select particular traits in their offspring including a trait to want to have.

It is probably both genetic and memetic (cultural) already. What's happening is that women who for whatever reason don't have a strong desire to have children are choosing to become extinct. Only those who have a higher desire to have children will remain. It seems to me a classic prey/predator cycle.

Children for women *in first world countries* are now durable consumer good instead of investment capital.

Many women currently look at children as a hobby (luxury consumption), a hobby that takes time and money, and competes with other spending decisions.

Should she buy a better car or have a child? Well, can always have a child next year. Should she get a larger house or have a child? Well, a larger house will be nice for the child too, and she can have the child later. And so on.

But the key determinant is the "investment capital" angle.

Once upon a time women were utterly dependent on Male Parental Investment for raising children, and then they invested a lot in raising children because they were utterly dependent on the expectation that at least some of the children would support them in their old age, when the husband had died, and there was no alternative.

Currently most women know they can support themselves by working, and in their old age with the state and work related pensions both their own and their husband's (if any), and they think that they don't really need children to support them later.

If my arguments above are correct there are say two types of women: those with a weak reproductive instinct that were having sons because of pension investment reasons as pushed onto them by their grandmatriarchs, and those who had children because they had a strong reproductive instinct regardless. Currently all the women who are not overwhelmed by their reproductive instinct are choosing extinction via having no children or having less than replacement numbers, and only those who have difficulty resisting it are having lots of children, and that kind of reproductive urge is likely inheritable.

So there may well be a HUGE natality surge in a few decades.

Anonymous said...

And that surge is combined with something else...

A friend who worked in agricultural research once told me she had seen that toxic pesticides used on apple tree are absorbed into the flesh of apples down to 1/2-1 inch, so washing them and peeling them helps but only partially.

Never mind airborne and waterborne contaminants, and our general lack of resistance to man-made contaminants because we haven’t evolved yet.

But there is a much worse point, and it is about models of population dynamics. Most of them erroneously are based on simple minded prey-predator (people-food) mathematics, where the population has an S-shaped trajectory where the flattening happens when prey (food) capacity is reached.

But these models are wrong, because there are two limits to population growth, one being food production, and the other being waste production, as the population not only consumes food but also produces waste, something which is non negligible in closed systems. Most waste being useless or toxic and persistent, that is it accumulates.

Eventually waste accumulation leads not to an S-curve trend with a flattening after the peak, but to a precipitous decline of population after the peak, as the waste released into the environment by the population kills it off directly by poisoning its members or indirectly by poisoning or displacing food sources.

There is a crude qualitative description here:

Note that population-food-waste models apply generally, and probably describe also what has happened to the financial system in the past 30 years: population being property speculators, food being credit, and waste being unrepayable debt (appropriately called “toxic”)

We are screwed.

Anonymous said...

BTW these problems have around for a while :)

Hunter-gatherers had an easy, healthy life. Lots of free capital, low population density, very little illness, long lives.

Some people think that human life became short, brutish and nasty with agriculture: since it allowed a minority to live without working at all, it gave that minority he means and an incentive to regard the majority as cattle and sword/cannon fodder, an attitude that persists to this day in the plantationists aka 'neoliberals.'

Cattle to be penned into sties called 'towns', with high density, unsanitary conditions, working hard for their daily feed, while their betters lived in splendid mansions in the countryside in the 95% of the rest of the land that they had reserved to themselves.

An opinion as to this:

In general height is often assumed as a proxy for health. An old article and a common quote of mine:

"According to a recent study by the US Federal Reserve, if your parents are rich, the likelihood of your being rich is as high as the probability of your being tall if your parents are tall."

Anonymous said...

Confused debate here. Please add a comment.

"Govt debts are repaid out of taxation = agreed.

There is a limit to how much governments can raise in tax.

Therefore a heavily indebted country has less room for manoeuvre than a lightly indebted one.


acorn said...