Well, cheers for sticking with it anyway, I really appreciate it.

It's a one hour talk on the deficit in particular, and most of what she says is based on MMT principles that would add another 5 hours to her talk if she were to explain them. With neoclassical economics, you can sort of jump right in, given how they are taught at schools and regurgitated by talking heads and politicians, day in and day out. MMT runs contrary to many pieces of "common sense" and since you can't really give 10 hour talks everytime, this is what you end up with – bits and pieces that require previous knowledge.

I'd offer talks by other MMT proponents such as William Mitchell (UNSW), Randy Wray (UMKC) or Michael Hudson (UMKC), but they are even less comprehensible. Sorry. Eric Tymoigne provided a wonderful primer on banking over at NEP, but it's long and dry.

Since I'm significantly worse at explaining the basics of MMT, I'm not even going to try to "weave a narrative" and instead I'll just work my way through it, point by point.

@notarobot

"Let's address inequality by taking on debt to increase spending to help transfer money to large private corporations."

You don't have to take on debt. The US as the sole legal issuer of the Dollar can always "print more". That's what the short Greenspan clip was all about. Of course, you don't actually print Federal Reserve Notes to pay for federal expenses. It's the digital age, after all.

If the federal government were to acquire, say, ten more KC-46 from Boeing, some minion at the Treasury would give some minion at the Fed a call and say "We need $2 billion, could you arrange the transfer?" The Fed minion then proceeds to debit $2B from the Treasury's account at the Fed (Treasury General Account, TGA) and credits $2B to Boeing's account at Bank X. Plain accounting.

If TGA runs negative, there are two options. The Treasury could sell bonds, take on new debt. Or it could monetise debt by selling those bonds straight to the Fed – think Overt Monetary Financing.

The second option is the interesting one: a swap of public debt for account credits. Any interest on this debt would be transfered straight back in the TGA. It's all left pocket, right pocket, really. Both the Fed and the Treasury are part of the consolidated government.

However, running a deficit amounts to a new injection of reserves. This puts a downward pressure on the overnight interest rate (Fed Funds Rate in the US, FFR) unless it is offset by an increase in outstanding debt by the Treasury (or a draw-down of the TT&Ls, but that's minor in this case). So the sale of t-bonds is not a neccessity, it's how the Treasury supports the Fed's monetary policy by raising the FFR. If the target FFR is 0%, there's no need for the Treasury to drain reserves by selling bonds.

Additionally, you might want to sell t-bonds to provide the private sector with the ability to earn interest on a safe asset (pension funds, etc). Treasury bonds are as solid as it gets, unlike municipal bonds of Detroit or stocks of Deutsche Bank.

To quote Randy Wray: "And, indeed, treasury securities really are nothing more than a saving account at the Fed that pay more interest than do reserve deposits (bank “checking accounts”) at the Fed."

Point is: for a government that uses its own sovereign, free-floating currency, it is a political decision to take on debt to finance its deficit, not an economic neccessity.

"Weimar Republic"

I'm rather glad that you went with Weimar Germany and not Zimbabwe, because I know a lot more about the former than the latter. The very, very short version: the economy of 1920's Germany was in ruins and its vastly reduced supply capacity couldn't match the increase in nominal spending. In an economy at maximum capacity, spending increases are a bad idea, especially if meant to pay reparations.

Let's try a longer version. Your point, I assume, is that an increase in the money supply leads to (hyper-)inflation. That's Quantity Theory of Monetary 101, MV=PY. Amount of money in circulation times velocity of circulation equals average prices times real output. However, QTM works on two assumptions that are quite... questionable.

First, it assumes full employment (max output, Y is constant). Or in other terms, an economy running at full capacity. Does anyone know any economy today that is running at full capacity? I don't. In fact, I was born in '83 and in my lifetime, we haven't had full employment in any major country. Some people refer to 3% unemployment as "full employment", even though 3% unemployment in the '60s would have been referred to as "mass unemployment".

Second, it assumes a constant velocity of circulation (V is constant). That's how many times a Dollar has been "used" over a year. However, velocity was proven to be rather volatile by countless studies.

If both Y and V are constant, any increase in the money supply M would mean an increase in prices P. The only way for an economy at full capacity to compensate for increased spending would be a rationing of said spending through higher prices. Inflation goes up when demand outpaces supply, right?

But like I said, neither Y nor V are constant, so the application of this theory in this form is misleading to say the least. There's a lot of slack in every economy in the world, especially the US economy. Any increase in purchases will be met by corporations with excess capacity. They will, generally speaking, increase their market share rather than hike prices. Monopolies might not, but that's a different issue altogether.

Again, the short version: additional spending leads to increased inflation only if it cannot be met with unused capacity. Only in an economy at or near full capacity will it lead to significant inflation. And even then, excess private demand can easily be curbed: taxation.

As for the Angry Birds analogy: yeah, I'm not a fan either. But all the other talks on this topic are even worse, unfortunatly. There's only a handful of MMT economists doing these kinds of public talks and I haven't yet spotted a Neil deGrasse Tyson among them, if you know what I mean.

What the hell? This airport is in DETROIT?!? Well, it's good to see that they have their spending priorities in order.

This sounds like a place you'd either have to be retired to live at (i.e. Palm Springs), or otherwise have access to one of the nearby airfields/military bases.
If people can't commute into a city center for growing industries, ... Well, from that perspective this is just a pre-Detroit.

It really is only a limited time before we turn a city or state into a prison; I think Escape from Detroit might become a real sequel.

@radx

It all comes down to the figures behind it. I'm no expert in this matter but most of the reporting I have read about advanced ageing economies like Germany suggests increasing health care and pension costs will substantially dwarf existing costs. Germany is of course much better placed than say China or Japan which have very restrictive immigration policies to begin with. This is purely looking at the cost rather the distribution of other funds and how that affects the deficit.

Germany's budget seems to be relatively well managed, but I think you will see many countries postpone the issue until the last minute or have some kind of crisis precipitate the problem (I'm comparing countries to the likes of Detroit's bankruptcy after house prices and thereby property taxes collected collapsed after 2008). When you look at immigration having very limited costs but huge potential humanitarian, cultural and economic benefits it seems to me that it's almost necessary to defend the argument to not raise it rather than vice versa (although I know you're not arguing against it).

A fantastic lesson for all of us.

Always check the source.

and holy shit, Saddam did get the key to Detroit!
At least, he did according to everything I can google, although now I don't know who to believe.

I was a big fan of Boingo since the moment I heard "Stay" back in 1986. I drove from Connecticut to Detroit on a weekend to see them because my sister had an extra ticket. Check out their last song "Change" on their last CD, an epic 16 minute tribute to the Beatles and just about everything else.

Glad to see Elfman is still going strong.

Detroit is SO FAR BEHIND Silicon Valley. They don't (they can't) hire the best engineers and they can't imagine hacking culture.
So sad.

Yes, that's one of my problems with police, lax recruitment. They should do a better job screening applicants, far too many bullies make it through the process. The image they present only attracts the wrong kind of people, and even screens out better applicants (allegedly for anyone over 110 IQ for instance). The right kind of person wouldn't be accepted in the current cop culture (as this story illustrates clearly), and the right kind of people also wouldn't want to associate with them.

I think some officers do make that much on salary, but quite true it's not many. When you count the benefits they get though, they are not under paid in most cases. Most get free medical, life insurance, retirement, many other 'freebies', and incredible overtime, so looking at only base salary is not an honest assessment.
Where I live, $200000 is probably more than 5 times the average pay rate...in some areas it may be the average pay rate. In high cost of living areas, I agree, it would be right to pay them better, (but conversely, that means those in Detroit should be paid less for a more dangerous job...how to reconcile that?) but we should DEMAND better performance everywhere, with zero tolerance for abuse.

EDIT: It seems we could retrain ex-military for the job. They've proven they are willing to take MORE dangerous jobs for far less money ($20-30K last I heard). That's a possible win win, vets get a good job program, we get an improving police force...as long as the retraining and testing is thorough.

My motorhead's guess, no differential but instead a spool in the rear and still turning while adding power caused differing loads in the rear tires, causing a terrible wobble as the tires fought each other (and the suspension), ending by ripping out the rear suspension.
EDIT: That's why I use a Detroit locker in my Jeep, it's a spool when you add power, and a differential when you let off power.

I would include looking the other way as a trait of bad cops, but I still don't believe the numbers are that high. I do see your point though.

It's interesting that the riots in Detroit back in the 60's are very similar to what happened in Ferguson and Baltimore. Blacks sick of getting killed by bad cops and finally having enough of it. 40 years later same shit.

I like this guy. He was also on an Anthony Bourdain episode about Detroit.

@bareboards2
@newtboy



Answer this Why is Baltimore such a shit hole in treating inner city poor folks like dogs?


Like many failed cities, Detroit comes to mind, and every city besieged recently by rioting, Democrats and their union pals have had carte blanche to inflict their ideas and policies on Baltimore since 1967, the last time there was a Republican Mayor. In 2012, after four years of his own failed policies, President Obama won a whopping 87.4% of the Baltimore city vote. Democrats run the city of Baltimore, the unions, the schools, and, yes, the police force. Since 1969, there have only been only been two Republican governors of the State of Maryland. Elijah Cummings has represented Baltimore in the U.S. Congress for more than thirty years.”
..."the Democrat-infested mainstream media is treating the Democrat like a local folk hero, not the obvious and glaring failure he really is. Every single member of the Baltimore city council is a Democrat. Liberalism and all the toxic government dependence and cronyism and union corruption and failed schools that comes along with it, has run amok in Baltimore for a half-century, and that is Baltimore’s problem. It is the free people of Baltimore who elect and then re-elect those who institute policies that have so spectacularly failed that once-great city. It is the free people of Baltimore who elected Mayor “Space-to-Destroy”. From a recent Allen West post

http://allenbwest.com/2015/04/the-dirty-little-secret-no-one-wants-to-admit-about-baltimore/

Not to mention the $1.5Million /year federal dollars for education. Total 18.3 Million from 2001 and today..

plus the 1.8 Billion from Obama's Stimulus.

Peace/ love sharing and caring. Yep a Democrat Utopia.

If you're ever in LA, check out Jon Brion at the Largo. He's a film composer (Punch Drunk Love, I Heart Huckabees), record producer, who also happens to be a multi-instrumentalist that puts on a live layered loop show, doing everything from a traditional drum kit, to bass, all styles of guitar, and piano. I've watched him go from Mozart to honky tonk piano and then up into industrial noise, on into a Detroit rock medley, using only the music he recorded on stage. First time I saw the show in this little low lit club facing a small stage, I had the biggest hard on. I went to jerk off in the bathroom and Fiona Apple walked out. Sorry if I'm being a bit raw here, but it was THAT good.