Modern Monetary Theory

[Elvis]

For anyone who hasn't seen it, here's that blockhead Paul Ryan getting schooled in federal spending, by Alan Greenspan, in his Greenspan's inimitable way:

Greenspan:
"There is nothing to prevent the government from creating as much money as it wants."

https://www.youtube.com/watch?v=DNCZHAQnfGU

Greenspan doesn't let the whole cat out of the bag, but he's obviously weary of Congress people asking him ignorant questions about fiscal policy, which is their fucking job.



:

[Elvis]

Here is a decent summary of Abba Lerner's theory of "Functional finance" which has been a foundation of MMT (but see PDF paper below).

Links of course at source:

https://en.wikipedia.org/wiki/Functional_finance

Functional finance
From Wikipedia, the free encyclopedia

Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principles and chartalism. It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth, and low inflation.[citation needed]

Contents

1 Principles
2 Rules for fiscal policy
3 History of use
4 See also
5 Notes
6 References
7 External links


Principles

The principal ideas behind functional finance can be summarized as:[1]

— Governments have to intervene in the national and global economy; these economies are not self-regulating.

— The principal economic objective of the state should be to ensure a prosperous economy.

— Money is a creature of the state; it has to be managed.


Fiscal policy should be directed in light of its impact on the economy, and the budget should be managed accordingly, that is, 'balancing revenue and spending' is not important; prosperity is important.

The amount and pace of government spending should be set in light of the desired level of activity, and taxes should be levied for their economic impact, rather than to raise revenue.

Principles of 'sound finance' apply to individuals. They make sense for individuals, households, businesses, and non-sovereign governments (such as cities and individual US states) but do not apply to the governments of sovereign states, capable of issuing money.


Rules for fiscal policy

Lerner postulated that government's fiscal policy should be governed by three rules:[1]


— The government shall maintain a reasonable level of demand at all times. If there is too little spending and, thus, excessive unemployment, the government shall reduce taxes or increase its own spending. If there is too much spending, the government shall prevent inflation by reducing its own expenditures or by increasing taxes.

— By borrowing money when it wishes to raise the rate of interest and by lending money or repaying debt when it wishes to lower the rate of interest, the government shall maintain that rate of interest that induces the optimum amount of investment.

If either of the first two rules conflicts with principles of 'sound finance' or of balancing the budget, or of limiting the national debt, so much the worse for these principles. The government press shall print any money that may be needed to carry out rules 1 and 2.


History of use

Lerner's ideas were most heavily in use during the Post-World War II economic expansion, when they became basis for most textbook presentations of Keynesian economics and the basis for policy. Thus when Keynesian policy become under fire in the late 60's and early 70's it was Lerner's idea of functional finance most people were attacking. During the post-war period, U.S. unemployment reached a low of 2.9% in 1953, during the Korean war,[2] when the inflation rate averaged at 1.1%.[3] Both rose dramatically over the next 25 years.

See also

Government success
Government failure
Market failure
Modern Money Theory

Note that the attack on Functional Finance coincided with implementation of the neoliberal economy. None of this is by accident; we've been brainwashed about government spending, deficits, national debts, "sound money" etc. for generations. Ignorance can be a legitimate excuse after a lifetime of being rewarded for accepting the imposed othodoxy and being offered no alternative.

But here's a recent paper by Wray, who credits Lerner less and says Hyman Minsky is the more important pillar... 40pp:

Functional Finance:
A Comparison of the Evolution of the Positions of Hyman Minsky and Abba Lerner

L. Randall Wray*

Levy Economics Institute and Bard College

January 2018

[Grizzly]

FASAB 56 BLACK BUDGET REVEALED! In this breakthrough episode Dark Journalist welcomes back Former Assistant Housing Secretary Catherine Austin Fitts to outline the new Goverment Accounting Practice called FASAB 56 that allows their agenices to hide transactions and take the entire Federal Budget Black. Fitts shows that the Missing Trillions research she has done with Professor Skidmore of Michigan State University that revealed 21 Trillion missing from the Department of Defense and HUD, has triggered the covert elements inside the Goverment to push FASAB 56 which was passed by a bi-partisan vote between the Trump administration and Congress.

DARK JOURNALIST & CATHERINE AUSTIN FITTS: THE MISSING MONEY DEEP STATE FASAB 56 REVEALED!

Where da $$$$?

[JackRiddler]

Unless the Pentagon has a secret Federal Reserve of its own allocating funds out of nothing, a full 21 trillion never existed as cash that was lost and might still be found. What can be found won't be in one place or in one main project. Their books are a chaos universe. One book estimates values of given assets (movable and not). Some other book elsewhere values the same assets as some other amount, with no information passed between the two books. Then someone elsewhere still can't find the assets at either value. It's 40 or 50 or 70 years of discrepancies that cannot be and will never be reconciled. They can't and obviously they don't want to figure these out, because this allows them to hide shit. A galactic-sized bullshit storm of bad accounting, largely intentional, conceals constellations of ops, crimes, financial frauds, graft, incompetence.

[Elvis]

^^^^ Agreed with Jack on the missing trillions.


Meanwhile, I've started watching an old TV series of which I recall seeing at least one episode—J.K. Galbraith's 1977 series (which also aired on public TV in the US), The Age of Uncertainty. Much later, I read the book of the same title (still have it), and the TV series is as good as I remember, and, of course, 40 years of lay inquiry later, I'm getting new and better relevance from it. By a happy coincidence(?), I'm just finishing Galbraith's book from two years earlier, Money: Whence It Came and Where It Went (1975) which is excellent, as Galbraith always is (I've read a few of his books).

If nothing else, gotta love his voice:

The Age of Uncertainty Episode 1 - The Prophets and Promise of Classical Capitalism

https://www.youtube.com/watch?v=KGSID_Uyw7w

The Age of Uncertainty is a 1977 television series about economics, history and politics, co-produced by the BBC, CBC, KCET and OECA, and written and presented by Harvard economist John Kenneth Galbraith.

Galbraith acknowledges the successes of the market system in economics but associated it with instability, inefficiency and social inequity. He advocates government policies and interventions to remedy these perceived faults

The content of the series was determined by Galbraith, with the presentation style directed by his colleagues in the BBC. Galbraith began by writing a series of essays from which the scripts were derived and from these a book by the same name, emerged which in many places goes beyond the material covered in the relevant television episode.

I found the series online here, an economics site that looks promising as a resource; The whole series The Age of Uncertainty is there with some added comments:

https://www.exploring-economics.org/en/ ... omise-cla/

Galbraith gives an overview of economic history from the 18th century until the end of the 19th century covering issues such as the industrial revolution, the enclosure of the Scottish highlands, the Irish famine and the colonization of North America. Additionally, the ideas of economists such as Smith, Ricardo, Malthus, the Physiocrats, and Leontief, which were developed throughout this period are discussed.

[Elvis]

Here's an idea that's come up before: money with an expiration date.

Galbraith reports that some of the American Colonial currencies had expiration dates. It was successfully tried—as I recall—in the 1920s(?) in a town in Austria(?); I could Google, but the upshot is that the central bank was pretty quick to put the kibosh on that local money.

Think about it: much less painful than taxes, and serves the same function of redemption. And you have to spend it or lose it: yippee!—shopping time!

If all the money had an expiration date, that would preclude any accumulation—or would it? I expect it could be determined how much of the money supply should be date-expirable and thus anti-inflationary. In any case, maybe savings could be in Treasury bonds (which are not considered to be money); Mosler has proposed that Treasury bonds should be sold in smaller amounts with a shorter duration. Also some arrangement whereby all citizens would have a personal savings account at the Fed sounds like a good idea.

[Elvis]

I just had a first look at the site, "Rethinking Economics." So far just read this entry and like what I hear. I haven't yet read the debates, linked at original, that this essay addresses. Annoyingly, it's undated, but evident enough it was written this year.

http://www.rethinkeconomics.org/journal ... pluralism/
Deliberate Misunderstandings in Economics: What Pluralism Really Means

Words by Leonardo Conte, University of Lugano

Article written by Leonardo Conte from Rethinking Economics Lugano in response to the debate between Diane Coyle, which can be found here and Howard Reed, which can be found here.


When you explain to your professor what Rethinking Economics does, it is common for them to say: ‘I agree on certain things, but not on others’. The issue is that the things they don’t agree with are rather fundamental. The first thing they find fault with is concerned with pluralism. According to them, economics is already pluralist enough in the sense that it already deals with different kinds of issues: from health, education, agriculture and development to wars, politics and elections. Many argue that the range of topics covered is becoming broader and wider over time, reflecting its well-established pluralism. As the Bloomberg View columnist Noah Smith puts it, ‘Economists study gender relations in the workplace, racial gaps, changes in labour contracts, early childhood education, minimum-wage policy, regional opportunity gaps, automation and the future of jobs, and a vast array of other highly important, immediately relevant topics’ (Smith, 2018).

Also, the benefits of railroads in 19th century India, the effect of modern technological change on jobs, and the effect of sugar taxes on obesity rates in the UK are some of the studies you can come across while reading recent research journals in economics (Coyle, 2018). According to some, ‘these examples should be enough to convince people that a lot of modern economic research is going in the right direction’ (Moran, 2018). However, I am sorry to tell you this is not what pluralism actually means. Epistemologically speaking, pluralism is the coexistence of different statuses, qualities or characteristics of an object of analysis. For instance, the presence of multiple points of view on a single topic as well as substantially diverse theoretical apparatuses for an area of analysis can be considered a pluralist approach. Therefore, that is something profoundly different from what Noah Smith, Diane Coyle and many other mainstream economics’ advocates claim. Thus, it is also far removed from the reality of economic research today, both in terms of theory and methodology.



The big concern with the theoretical framework, I argue, is that the sub-disciplines of economics actually apply the same bunch of theories to their particular issues. That is, health economics, development economics and environmental economics are nothing more than neoclassical economics applied to health, development and the environment. Thus, they pursue the aim of “pluralism” just by masquerading themselves with a thin layer of applied science. However, most of these disguised disciplines do not have anything new or different from what the standard mainstream approach claims. And I am not referring to the ‘libertarian caricature of economics’ cited by Mr. Smith. In fact, ‘mainstream economists are emphatically not all laissez-faire libertarians’, although ‘the textbook they are working from allows thinkers and commentators with an atomistic worldview to commandeer a privileged position in the debate’ (Reed, 2018).

But the debate here is not free market versus government intervention. Instead, it is about using the same theoretical apparatus to explain different issues. That is, in mainstream economics textbooks everything dealing with the economy is forced into one of the following: supply and demand, general equilibrium, moral hazard, information asymmetry, externality, perfect competition, marginal productivity, utility etc. In such a framework, there is no room for critical thinking on these subjects. When there is, it is still constrained within the narrow bounds of the mainstream (Moran, 2018). In fact, most of the “reforms” occurred in economics education have been about ‘adding modules to the basic template, leaving the core of the old discipline essentially intact’. As Reed continues, ‘this is insufficient, and treats the symptoms rather than the underlying malaise’ (Reed, 2018).

Economics’ narrow views are affecting not only the way it is taught, but also and particularly its research. A vicious circle takes place when only a certain kind of research is done, as it soon becomes the only one that is actually financed. This is often the case because the panel of reviewers of the top journal’s boards are often mainstream economists. As a result, both in economics classes and papers, adopting different views or approaches from other schools of thought than the mainstream one, becomes hasty and insufficient. Moreover, taking into account considerations drawn by other social sciences is usually prohibited in economics research. Instead, one single approach – the one reflected by the so-called neoclassical theory – is presented as the only framework of analysis for all of the outlined themes. Therefore, remember that when economics sells itself as “pluralist” by treating a broad range of topics, there is actually nothing more monolithic than the assortment of axioms used to analyse them.



A similar argument can be made about methodology, however requiring more subtle considerations. Economists often promote themselves as the most scientific of the social scientists, due to their massive use of advanced quantitative methods, often derived from the natural sciences. That is, economics is “scientific” because it uses the methodologies of physics, while other social sciences like psychology, sociology and political science focus more on the “social” aspects, preferring ‘a theoretical lens which looks at social and legal structures over individual choice, and an empirical method which focuses on qualitative details over statistical techniques’ (Moran, 2018). To reach the aim of scientific status, economists started to utilize mathematics extensively. Some argue that the models used by economists ‘are written with mathematical notation as a shorthand and to enforce logical consistency’ (Coyle, 2018). Well, maybe we ought to start debating what ‘science’ and ‘scientific’ really mean, exploring the forefront philosophy of science and applying principles derived from Popper, Kuhn and Lakatos to economics. But we won’t have time to do that. Also, we don’t really need to.

For our purposes, it is enough to make two precise points about the relationship between economics and physics. First, the use of mathematics does not imply logical consistency. Instead, logic is a branch of philosophy, which does not always use mathematics to express its statements and does not need it in order to develop consistent arguments. Among the other social sciences, there are totally consistent theories that do not use mathematics and are often more logical than the ones developed by economists. Secondly, it is sufficient to explore some basic history of physics to understand why economics does not really use its “rigorous” methodology. For instance, physicists are able to study the behaviour of gases without necessarily knowing about theirs parcels’ position and velocity. That is, they use macroscopic laws to understand the behaviour of macro units of analysis. However, economists are not able to do that at all. Instead, they prefer to base all of their knowledge about the economy on the so-called ‘micro-foundations’. As a result, economists still lack a proper understanding of many macro issues (The Economist, 2018).

Having totally neglected the macroscopic approach might be one of the reasons for the serious failings of modern macroeconomics, and the weakest aspect of economists’ methodology.* Unfortunately, quantitative modelling has become so fundamental that any theoretical insight have to be put into an economic model in order to be accepted by economists. Nonetheless, this approach leads to the paradox where the methodology is considered to be more important than the content itself, so that standard economic methods are often used to say something that is basically already known (Moran, 2018). This necessarily stifles creativity and the production of new knowledge overall. As Cahal Moran argues, ‘research incentives typically mean adhering to at least one of these techniques, despite the plethora of other techniques available’. As a result, ‘mainstream economics papers often deal with what seem like exciting questions, but give ultimately disappointing answers because they follow the same old methods’ (Moran, 2018).



Another important issue is the conception of value judgments (or lack of) within the mainstream approach. In this regard, there are two points to be raised. Firstly, some claim that ‘neoclassical economics pretends to be ethically neutral while smuggling in an individualistic, anti-social ethos’ (Reed, 2018). The ‘awry, malign and psychopathic’ mainstream approach based on the neoclassical architecture certainly ‘airbrushes out the negative consequences of a destructive behavioural mind-set–selfish individualism’, regarding such behaviours ‘not only as inevitable, but desirable’ (Reed, 2018). In fact, economics does not make any difference between normative and positive analysis. For instance, ‘profit-maximisation in mainstream economics becomes not merely a description of what does happen in a capitalist economy, but a template for what should happen’. As a result, students acquire that ‘mental virus’ embedded in mainstream economics, ‘behaving more in line with its selfish predictions that those who have studied other topics’ (Reed, 2018).

The second point recalls what I already mentioned in the previous paragraph. That is, most of the economists believe that using objective “scientific” mathematical models exempts them from value judgments. However, they miss the point that the choice of model you make strongly affects the conclusions you draw, both by determining what to model and by modelling it in a certain way (Moran, 2018). Therefore, choosing a model is an implicit way to give value – meaning importance – to certain variables rather than others. As a result, economic models only deal with phenomena that can be quantitatively measured, completely neglecting that which cannot. Thus, default frameworks (rational choice models, linear regressions etc.) actually do represent a choice – a very precise one – which highlights some variables disregarding others that – even if not measurable – are often fundamental to understand the evaluated issue.

On top of that, some argue that economists’ core work has recently become much more empirically grounded and data based (Coyle, 2018). However, this tendency might even be worse for the development of the discipline. Firstly because the lack of grounded theory is the pillar for any science to be considered as such. Secondly, an increase of empirical work on a broad range of topics actually reflects a systemic crisis that economics is currently facing. Every discipline has a specific set of topics that represents the “object” of its studies. This is true for the natural sciences as well as for the social ones; while physics studies the laws of the nature, psychology studies the mind and human behaviour. However, the same cannot be said for economics where studies on money, employment and wealth are only a fraction of economists’ work. This only proves the deep identity crisis that economics has been going through for decades.



Summing up, some recognize the shortfalls of the discipline in addressing its issues and blame the economists, not economics (Rodrik, 2009). Others, instead, state that the problem is economics, not economists (Moran, 2018). While the former are often well-established economists unwilling to expose their research to criticism, the latter are typically students, tired and annoyed by modern economics’ narrow approach where the ‘reliance on a single framework is hamstringing the research of capable, conscientious and critical economists’ (Moran, 2018). As Noah Smith also recommends, grounded preparation in epistemology and ethics would be necessary – if not fundamental – to economists’ education. While the former would be useful in order to assess the meaning and validity of models, the latter is rather relevant for systematic discussions of many economic problems (Smith, 2018). In conclusion, econ critics are not ‘stuck in the past’. It’s economics that needs to be fundamentally changed.

* see upthread Paul Krugman's criticisms of present-day macroeconomics thought and teaching—and the limited usefulness of "hard math" in macroeconomics

Regarding "economic models only deal with phenomena that can be quantitatively measured, completely neglecting that which cannot," W. Edwards Demiong (see upthread) noted: "Education has a specified cost; the benefits, you can't measure them."

[Elvis]

Leaving the rarified air of the Open Market Committee boardroom and entering the open spaces where the antelope roam, or once roamed. As long as we're remaking the world, let's remember it's the world. Bedrock ideas here.

At the 2013 Climate, Mind, & Behavior Symposium, Rebecca Adamson of First Peoples Worldwide illustrates alternative economic systems modeled after indigenous worldviews and the power they have in pushing us towards a more sustainable existence.

https://www.exploring-economics.org/en/ ... nce-to-th/

https://www.youtube.com/watch?v=Av2dU9xRWLQ

To learn more about the Garrison Institute's Climate, Mind & Behavior Initiative:

Visit our website: https://www.garrisoninstitute.org/what- ... -behavior/

Follow us on Twitter: https://twitter.com/climatemind

[Elvis]

Let's begin with capitalism, a word that has gone largely out of fashion. The approved reference now is to the market system. This shift minimizes — indeed, deletes — the role of wealth in the economic and social system. And it sheds the adverse connotation going back to Marx. Instead of the owners of capital or their attendants in control, we have the admirably impersonal role of market forces. It would be hard to think of a change in terminology more in the interest of those to whom money accords power. They have now a functional anonymity.

—J.K. Galbraith
"Free Market Fraud", The Progressive (January 1999)

[Elvis]

These measures were on the side of increasing spendable income, though unfortunately they were largely without effect. The tax reductions were negligible except in the higher income brackets; businessmen who promised to maintain investment and wages, in accordance with a well-understood convention, considered the promise binding only for the period within which it was not financially disadvantageous to do so.

Nothing is so admirable in politics as a short memory.

—John Kenneth Galbraith

[Elvis]

Musa I (c.1280–c.1337) or Mansa Musa, the tenth Mansa ("emperor") of the Mali Empire in Africa, could deserve his own thread, but aspects of his reign apply here. (This was around the time Marco Polo described the fiat money of the Yuan Dynasty in China). I just got into this so anyone who know more please chime in.

You might have heard of Musa, he's famous as "the richest man in history," a mark of great distinction in any culture, but especially exalted in ours.

Musa should, rather, be famous for building schools, accumulating vast libraries, funding scholarhip, bringing Arab intellectuals and architects to Africa, raising the culture and beautifying the cities.

https://en.wikipedia.org/wiki/Musa_I_of_Mali

During his reign, Mali may have been the largest producer of gold in the world; it was at a point of exceptional demand for the commodity.

Gold was a currency, accepted everywhere Musa went. And everywhere he went—he spent.

Musa made his pilgrimage between 1324 and 1325.[20][21] His procession reportedly included 60,000 men, all wearing brocade and Persian silk, including 12,000 slaves,[22] who each carried 1.8 kg (4 lb) of gold bars, and heralds dressed in silks, who bore gold staffs, organized horses, and handled bags. Musa provided all necessities for the procession, feeding the entire company of men and animals.[19] Those animals included 80 camels which each carried 23–136 kg (50–300 lb) of gold dust. Musa gave the gold to the poor he met along his route.

Musa's generous handouts of "cash" turned out to be inflationary, but even more must have been spent on building:

Musa not only gave to the cities he passed on the way to Mecca, including Cairo and Medina, but also traded gold for souvenirs. It was reported that he built a mosque every Friday.

Early jobs program? Apparently Musa adopted Islam for his empire not because he had religious fervor, but because Islam was "an entry into the cultured world of the Eastern Mediterranean."

Anyway, I'm trying to separate 'fiscal' and 'monetary' policies here. but I'm not sure they apply.

Musa's generous actions inadvertently devastated the economies of the regions through which he passed. In the cities of Cairo, Medina, and Mecca, the sudden influx of gold devalued the metal for the next decade. Prices on goods and wares greatly inflated.

And what did he do?

To rectify the gold market, on his way back from Mecca, Musa borrowed all the gold he could carry from money-lenders in Cairo at high interest.

So, Musa effectively sold "Treasury bonds" to counter the inflationary effects of his spending. He "drained excess reserves" like a pro.

And he gave people work building mosques and school and universities and other public works.

Musa embarked on a large building program, raising mosques and madrasas in Timbuktu and Gao. Most notably, the ancient center of learning Sankore Madrasah (or University of Sankore) was constructed during his reign.

In Niani, Musa built the Hall of Audience, a building communicating by an interior door to the royal palace. It was "an admirable Monument", surmounted by a dome and adorned with arabesques of striking colours. The wooden window frames of an upper storey were plated with silver foil; those of a lower storey with gold. Like the Great Mosque, a contemporaneous and grandiose structure in Timbuktu, the Hall was built of cut stone.

During this period, there was an advanced level of urban living in the major centers of the Mali. Sergio Domian, an Italian scholar of art and architecture, wrote of this period: "Thus was laid the foundation of an urban civilization. At the height of its power, Mali had at least 400 cities, and the interior of the Niger Delta was very densely populated."

I'm curious about the "Hall of Audience"; was this where Musa was the audience?—hearing out the issues of the day, getting data from his 'constituents'?

Economy and education

It is recorded that Mansa Musa traveled through the cities of Timbuktu and Gao on his way to Mecca, and made them a part of his empire when he returned around 1325. He brought architects from Andalusia, a region in Spain, and Cairo to build his grand palace in Timbuktu and the great Djinguereber Mosque that still stands today.[27]

Timbuktu soon became a center of trade, culture, and Islam; markets brought in merchants from Hausaland, Egypt, and other African kingdoms, a university was founded in the city (as well as in the Malian cities of Djenné and Ségou), and Islam was spread through the markets and university, making Timbuktu a new area for Islamic scholarship.[28] News of the Malian empire's city of wealth even traveled across the Mediterranean to southern Europe, where traders from Venice, Granada, and Genoa soon added Timbuktu to their maps to trade manufactured goods for gold.[29]

The University of Sankore in Timbuktu was restaffed under Musa's reign with jurists, astronomers, and mathematicians.[30] The university became a center of learning and culture, drawing Muslim scholars from around Africa and the Middle East to Timbuktu.

In 1330, the kingdom of Mossi invaded and conquered the city of Timbuktu. Gao had already been captured by Musa's general, and Musa quickly regained Timbuktu, built a rampart and stone fort, and placed a standing army to protect the city from future invaders.[31]

While Musa's palace has since vanished, the university and mosque still stand in Timbuktu today.

By the end of Mansa Musa's reign, the Sankoré University had been converted into a fully staffed University with the largest collections of books in Africa since the Library of Alexandria. The Sankoré University was capable of housing 25,000 students and had one of the largest libraries in the world with roughly 1,000,000 manuscripts.

This all seems to tie in with a lesson from Galbraith: the government can make easy money available (what the Fed does) for private interests to borrow, invest, hire and produce, but private interests don't always take advantage of that and unemployment persists. The government can instead directly spend money on goods and workers, assuring the money is spent—not waiting around for the self-named "job creators" to create jobs when it suits them.

[Elvis]

A mixed post, beginning with the Social Security Trust Fund fraud.

Next time someone says that Social Security is saddling our grandchildren with debt, show 'em this (downloadable PDF):

"It is indeed ironic that the one thing that the Baby Boomers did not ruin is now widely viewed as the most potent symbol of our failure."

https://scholarship.law.cornell.edu/cgi ... text=cjlpp

Cornell Journal of Law and Public Policy
Volume 27 Issue 2 Winter 2017 Article 1

Social Security Is Fair to All Generations: Demystifying the Trust Fund, Solvency, and the Promise to Younger Americans

Neil H. Buchanan
George Washington University

The Social Security system has come under attack for having illegitimately transferred wealth from younger generations to the Baby Boom generation. This attack is unfounded, because it fails to understand how the system was altered in order to force the Baby Boomers to finance their own benefits in retirement. Any challenges that Social Security now faces are not caused by the pay-as-you-go structure of the system but by Baby Boomers' other policy errors, especially the emergence of extreme economic inequality since 1980. Attempting to fix the wrong problem all but guarantees a solution that will make matters worse. Generational justice and distributive justice go hand in hand.

[. . .]

The technical question addressed in this Article is whether the Social Security system has altered the balance of economic benefits between the Baby Boomers and the generations that will follow. I show that the Baby Boomers allowed themselves to be overtaxed, relative to what would have been necessary to fund the Social Security system, for more than three decades.

[. . .]

...the economy that future generations are inheriting will in fact be much less prosperous than it should have been—but not because of any problems with Social Security. Inadequate public investments combined with the rise in inequality have made future financing of retirement more difficult than it needed to be. They are manifestations of our (many) failings in other areas of policy.

After describing the mechanics (and overall financial health) of the Social Security system, I will confront the argument most often invoked to justify changes to Social Security's finances: justice to future generations. Notwithstanding the popular belief in the selfishness of the Baby Boomers, the fact is that the Baby Boom generation and its parents sacrificed significantly in order to make it possible for the generations that follow to be able to afford to support the Baby Boomers in their retirement.

The "generational contract" that Social Security represents, therefore, justifies continuing to guarantee promised levels of benefits to retirees through the next several decades, rather than being an excuse to undermine the system now in an effort to prevent future generations from supposedly being cheated. Younger generations will be trying to clean up the messes that they are inheriting for decades to come. Understanding that the Social Security system is not the cause of any of those problems will have two beneficial effects on future policy. First, it will prevent post-Baby Boomers from undermining Social Security in a way that would damage their own future prospects. Second, it will allow them not to waste time on a political fight to undermine or privatize Social Security, and instead to put all of their energies into fixing the very real and important problems that will define their lives for decades to come.

[. . .]

Are older generations of Americans using Social Security to enrich themselves at the expense of their children and grandchildren? To listen to the public debate in the United States, one could be forgiven for thinking so. Derogatory labels for older people, such as "greedy geezers,"7 have become common in the American political debate, with news commentators, politicians, and even the popular culture chiming in with claims that older Americans are the cause of otherwise-solvable budget problems, and more generally that they are a cohort of selfish retirees and near-retirees who refuse to give up their excessive government-provided benefits, which will inevitably lead to disastrous outcomes for thegenerations to follow.8 This narrative is completely false.

The author, Neil H. Buchanan, is a pretty interesting dude, apparently not afflicted by his abundant education in economics and law. I just hope this stuff is sinking in with his students at George Washington University Law School, where he's professor of law.

Buchanan's Wikipedia page is flagged with "multiple issues"; to be expected for a heterodox thinker? https://en.wikipedia.org/wiki/Neil_H._Buchanan

He seems to be 'MMT' without explicitly saying so (career cautions?). But an important difference: as MMT exponent Rohan Grey suggests (see below), Buchanan almost seems to say "yes the government creates money, but for God's sake don't let the general public know that!" His apparent worry? Faith in the system, faith in the fiat currency, would collapse; of course fiat means faith. In any case, Buchanan advocates higher federal spending and higher deficits. He writes at, among other places, the "Dorf on Law" blog, here, suggest starting with this (comments too): http://www.dorfonlaw.org/2013/01/if-you ... osing.html — the article in question.


I discovered Neil Buchanan when he was referred to in this MMT conference panel on paying for the GND, from May 2019—worth viewing, starting at around 1:50:00 (it's a recorded nine-hour stream) with Stephanie Kelton. So far, I've watched the first three speakers and their joint Q&A. Start at around 1:50:00 for the first lecture:


https://www.youtube.com/watch?v=J1oGvGujPPQ

Much of the same ground as always, but expressed in different ways and with more data, new angles of unpacking the subject and countering MMT's opponents. I took a few pages of notes:

— "We don't want a ticket to Disneyland, we want a public park!" (speaker quote)

— "the shortest distance is a straight line"... fiscal policy/gov't spending is the shortest and quickest path to full employment etc. Monetary policy is a waiting game to see what happens, hoping the job destroyers will take the easy money made possible by the Fed, invest and hire everybody. ("any time now, we promise... mind you, these things take time." I still hear that old line, "supply side takes time to work," but after 40 years? middle incomes still stagnant? while worker productivity rose? GND would do the job now.)

— "We have a 'volunteer' economy"...we hope employers will 'volunteer' to hire workers even when it doesn't suit employers' immediate interests. We wait around for a desired effect (jobs e.g.) to kick in.

— People pay more for essential things like healthcare, education, housing, transportation etc; consequently the GDP number goes up, and this is celebrated in the media as "growth."

— healthcare, education, housing rising prices are the drivers of inflation; other sectors are deflating; they average and appear as steadily low inflation, but the rising prices are filling insurers' and lenders' pockets. Quality of life is literally devalued.

— a chart was displayed that showed GDP steadily rising over the last 50 years, while quality of life index remained stagnant.

— Kelton uses a graphic comparing the economy to a sink that represents full productive capacity, and explains what happens when you under-fill or overfill it with water (federal spending), and how to manage it. (I recently used the sink analogy with a friend, with limited success; he cannot disconnect from the notion that money itself must have some intrinsic value, and anything doesn't is suspect).


— This was really interesting: Kelton mentions the Irish economist Philip Pilkington* (deserves a separate post) whose calculations show that the U.S. economy could absorb direct federal spending of between $500B to $600B—without offsetting taxes and without rising inflation. Repeat: without taxes.

— Later, the very engaging Fadhel Kaboub added up, using 'liberal' estimates, the cost of a full-on first year of Green New Deal: about $593B. A theme of Kaboub's talk was, we have the "fiscal space"—what are we waiting for?

— main theme of Kaboub's talk was how the US "paid for" WWII and how those lessons can be applied today. The whole history of the US money system(s) has been experimental; it's all a big experiment and we learn more with each test of the going ideas of the time.

— The third speaker, Rohan Grey, covered earlier American Colonial and Civil War experiments. He brought out so many good points, some of them things I would have brought up r asked about. His condemnation of the crooks is more direct, and refreshing (some MMT advocates shy from excessively blasting the greedy overlords, which alienates some.)

— we should not worry about the "budget deficit"; we should worry about the jobs deficit, the healthcare deficit, the education deficit and so on.

— framing MMT in ways so that when you tell people about it, they don't think you've lost your mind.

— expect the fiercest kicking and screaming from the interests who stand to lose the most from MMT-oriented policies. Their objections must be answered, corrected, neutralized. It is explained how in truth, GND will benefit everyone.

— the important fact that "money doesn't grow on rich people" was stated, and we are again urged to stop connecting taxes on rich people with public federal spending. The public doesn't need their money and they can basically go to hell.

---

* an Irish economist!

For some reason, I actually wrote this down a couple weeks ago after hearing J.K. Galbraith say it in The Age of Uncertainty (see upthread) :

"All races have produced notable economists, except the Irish. They're too artistic—or possibly too civilized."

This crazy Irishman must be stopped! "Pilkington has provided a basis on which the student movements protesting the current curriculum can build."

[Elvis]

This cartoon was used in one of the presentations (Kelton) in the video above.

dinos GND.jpg

[Elvis]

Jack, you'll be there? I'm going to try to attend! I assume laypersons/non-students can go. I have a friend in WA working with climate change scientists and GW awareness in general; I think I can get him to go too. I could possibly volunteer in some mundane fuction.

The Third International Conference of Modern Monetary Theory

Sept 27-29th

Stony Brook University, NY

https://mmtconference.org

[JackRiddler]

I will have to tell you later but I am hoping to be there.