They did this is Zimbabwe and the country fall apart (35 Trillion % hyper inflation over 15 year period )and begged whites to come back --- This will not work out


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

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.

I was surprised to hear John Oliver discussing the "Get Rid of the Penny" topic in the USA, not because the subject is uninteresting, but because he failed to point out the glaring anachronism that Americans still call their one cent coin a "penny".

Do they not realise that they started a revolution in 1765, declared independence in 1776, and started making one cent coins in 1793?

Why do they still call cents pennies? After more than 200 years, I would have thought that even the most parochial or remote American would have heard the news.

The Canadians aren't much better. The penny finally dropped there in 2012, when they stopped minting one cent coins. The first Canadian one cent coin was struck in 1858. One strange quirk is that the word penny in Canada used to refer to a two-cent coin, even though they never issued any 2 cent coins! It is possible they were referring to US 2-cent coins, which were issued from 1864 to 1873, but more likely because a French sous was worth approximately half a (British) penny, therefore a two sous coin was the near equivalent of a penny.

In Euroland, the Irish recently started to phase out the use of one and two cent coins, but most of their discussions were also about dropping the penny!

One solution could be to emulate Zimbabwe, where high inflation means that one US dollar is worth about 360 Zimbabwe dollars, or about 520 to a British pound. This neatly avoids the need for any fractional denominations.

Talking about fractional coins:
https://www.flickr.com/photos/lawrence_chard/7145393421/

...which also reveals a surprising etymological link between coins and anatomy, as does this:

https://www.flickr.com/photos/lawrence_chard/6390568191/

Perhaps the guy he mentioned getting a cent stuck in his anus was going for the closest alternative.

>> ^MilkmanDan:

If you watch high-level fencing, the participants are usually very aggressive. That is for a good reason -- high aggression usually results in more scored touches/points over time. But we're talking aggregate; over many many matches with many many participants, being more aggressive is usually better in terms of total points scored. However, that ignores the fact that if you participated in actual duels with non-blunted weapons with that same level of aggression, you might be slightly more likely to kill your first (, second, third ...) opponent, but you would also be more likely to get yourself killed. The tactics and approach are altered as a consequence of using blunted/nonlethal weapons as opposed to "shit gets real" tools of war.

I know next to nothing about fencing, but I watched it in the olympics out of interest, and I found myself thinking a lot of the strikes put the attacker in a really dangerous position if the swords were real. Good to know I was on the right track.

>> ^MilkmanDan:


As much as we might try to emulate the "real deal", I suppose that it can't be 100% authentic without authentic consequences (which is obviously impossible).


pffsh! Away with your defeatist attitude. Both participants sign waivers, we give them pointy swords and armour and hold it somewhere with a relaxed attitude to health and safety, like Indonesia, Zimbabwe or Texas.

Would be interesting in future to see combat sports eventually go virtual, with a matrix style environment that allows for no holds barred combat without an arbitrary victory condition.

>> ^papple:

Gravity is the same in Zimbabwe.


Are you kidding!? They can't afford our Good Gravity there!

She was falling for a good 3 seconds after the cord snapped. She weighs maybe 60kg? Someone work out the distance covered. Gravity is the same in Zimbabwe.

This advert is being pulled. From stranger blog:

Now Nandos, a fast-food chicken restaurant based in South Africa, has pulled the ad because it's afraid of reprisals to its employees in Zimbabwe, where making fun of the head of state is a crime.

BBC:

Nando's South Africa said it decided to act after receiving threats to its staff in Zimbabwe from a youth group loyal to Mr Mugabe...

"We've noted with concern the political reaction emanating out of Zimbabwe, including perceived threats against Nando's Zimbabwe's management, staff and customers," Nando's South Africa said in a statement.

"We feel strongly that this is the prudent step to take in a volatile climate and believe that no TV commercial is worth risking the safety of Nando's staff and customers."

Yeah, feel free to slap that video in the face of anyone who ever says Peter Schiff is awesome and/or infallible.

The Krugman predictions of stagnation and disinflation were right, crackpot predictions of Weimar/Zimbabwe-style hyperinflation were dead wrong.

I'm a bit curious how Schiff spins his utter fail.

In reply to this comment by dystopianfuturetoday:
Peter Schiff *Failboat.com.org

In reply to this comment by NetRunner:
Definitely one to mark down:

Schiff says we'll have a crash of our economy driven by hyperinflation by the end of the year, or maybe in 2010.

Krugman (who unlike Schiff is a Nobel prize winning economist) also predicted the problem we're having now, and says if we don't do something even bigger than an $800bn stimulus, we're in for a deflationary problem, just like the Great Depression.

Clearly, someone will be proven right, even if disaster ensues.

Flim-flam artists like Schiff should know better, if the problem now is because Greenspan made the interest rate too low in 2002 then the real problem is that our current 0% interest rate will cause a new asset bubble that will collapse, so he should allow for a much longer period of time for it to gestate, like say Obama's second term, 2014 or so.

But that wouldn't get him on the TeeVee machine to throw bricks at Democrats as often.

>> ^blankfist:

@NetRunner, what's stimulus money got to do with money supply? Are you serious? You must be trolling. For the benefit of others, I'll answer that question:
The Treasury Department borrows the money from the Federal Reserve. This money is printed new and is NOT already in circulation. So, once those trillions get circulated into the economy, what happens? It inflates the money supply. Presto!

Are you serious? You must be trolling. For the benefit of others, I'll correct you.

The Treasury Department borrows the money by selling Treasury bonds on the open market. Domestic investors and banks buy most of it, a big chunk of it is bought by other governments. Some might be purchased by the Fed using freshly printed money, but that's entirely based on what the Fed wants to do with the money supply, and has nothing to do with whether we did stimulus or not.

Not to mention, even if the Fed prints money and buys a treasury, there's no guarantee the buyer won't just hold the dollars as a reserve of some sort, and keep it out of circulation.

>> ^blankfist:
And you asked what happens to wages during inflation? Well, I don't know

An honest answer. Too bad you kept writing...

>> ^blankfist:
[L]et's look at history, shall we? There are plenty of examples in history (Rome, Germany, Yugoslavia), but let's look at Zimbabwe in the 2000s because it's really easy to google. According to wikipedia, Zimbabwe's "annual inflation was estimated at 6.5 quindecillion novemdecillion percent (6.5 x 10108%, the equivalent of 6 quinquatrigintillion 500 quattuortrigintillion percent, or 65 followed by 107 zeros – 650 million googol percent)."

Yes, inflation can happen. But looking at nominal price levels alone doesn't answer why inflation is bad.

>> ^blankfist:
But that's fine, right? Because they just increased the wages and everyone went back to happy Krugman land and ate marshmallows and played with bunnies. Oh no, that didn't happen at all, did it? No. In the end the Zimbabwean Dollar was destroyed, and the people were forced to adopt foreign currencies.

Well here's the thing, have you actually looked at what's happened to the wage level in Zimbabwe? Is the problem that wages never increased at all, and that inflation meant no one had any purchasing power at all?

Or was it something a little more esoteric like a collapse of market confidence that really buggered them?

>> ^blankfist:
It's not as easy to fix as "putting upward pressure on wages". In fact, the people who are first impacted are the people on the bottom, because ALL (and I mean absolutely ALL) inflation enriches the government first, the big businesses with government contracts second, the rich third, and ultimately it's the poor and retired who suffer through the adjustment phase.

Again, you're hamstrung by not actually understanding the underlying economic principles. If the main issue with inflation was really this confiscatory debasement you're talking about, then that would in large part be fixed by greater wage flexibility.

>> ^blankfist:
And what of the people with savings? Are you so willing to write them off with a big dildo shoved up their asses, because they're not currently "earning" a wage? What of those people who saved and saved because that's what society told them was prudent for their retirement? What does your precious Krugman messiah say of the grandmothers and grandfathers who see their savings diminish while their social security payments play catch up with the current cost of living changes?

The answer there is that inflation screws people with large amounts of liquid money (the rich), and helps people with debt (the not-so-rich), while making holding assets look more promising than holding cash in any form. People who saved for retirement by stuffing $100 bills into their mattress get screwed. People who put their money in a savings account may get screwed if the bank doesn't offer them competitive interest rates. People who invested in a mix of stocks and bonds will see those stocks go up in nominal value, while the bonds will likely become worthless (depends on the exact terms though).

People who rely on Social Security will be fine, so long as a) wages as a whole go up with inflation, and b) conservative morons don't come in and cut the COLA below inflation for no reason. It's part of why anyone who wants to privatize Social Security is pretty much a fuckwad.

In the end, the negative effects of stable but high (~10% or so) inflation wouldn't be so bad. There's basically no downside to inflation around 2-4%. And by the way, we're sitting somewhere around 1% right now, with not even the remotest hint of hyperinflation.

The only way for us to really trigger hyperinflation right now is if conservatives follow through on threats to make the US go into default on its debt. But that won't be hyperinflation because of the Fed printing money, it'll be because conservatives will have trashed our nation's credit rating because they're stupid.

@NetRunner, what's stimulus money got to do with money supply? Are you serious? You must be trolling. For the benefit of others, I'll answer that question:

The Treasury Department borrows the money from the Federal Reserve. This money is printed new and is NOT already in circulation. So, once those trillions get circulated into the economy, what happens? It inflates the money supply. Presto!

And you asked what happens to wages during inflation? Well, I don't know, let's look at history, shall we? There are plenty of examples in history (Rome, Germany, Yugoslavia), but let's look at Zimbabwe in the 2000s because it's really easy to google. According to wikipedia, Zimbabwe's "annual inflation was estimated at 6.5 quindecillion novemdecillion percent (6.5 x 10108%, the equivalent of 6 quinquatrigintillion 500 quattuortrigintillion percent, or 65 followed by 107 zeros – 650 million googol percent)." But that's fine, right? Because they just increased the wages and everyone went back to happy Krugman land and ate marshmallows and played with bunnies. Oh no, that didn't happen at all, did it? No. In the end the Zimbabwean Dollar was destroyed, and the people were forced to adopt foreign currencies.

I'm sorry, but inflation is bad. Very bad. It's not as easy to fix as "putting upward pressure on wages". In fact, the people who are first impacted are the people on the bottom, because ALL (and I mean absolutely ALL) inflation enriches the government first, the big businesses with government contracts second, the rich third, and ultimately it's the poor and retired who suffer through the adjustment phase.

And what of the people with savings? Are you so willing to write them off with a big dildo shoved up their asses, because they're not currently "earning" a wage? What of those people who saved and saved because that's what society told them was prudent for their retirement? What does your precious Krugman messiah say of the grandmothers and grandfathers who see their savings diminish while their social security payments play catch up with the current cost of living changes?

Un. Fucking. Believable.

No matter how well intentioned, I think military interventions nowadays that aim to dethrone an authoritarian regime are practically guaranteed to fail.

Modern combat is fought through surgical air strikes with a limited ground force. It minimizes invading state casualties but poor intelligence from limited local manpower inevitably leads to mass civilian casualties. This progressively undermines local support. Fostering a vibrant democracy or training a self sufficient military and police force, hell, let alone rebuilding the infrastructure from the initial invasion cannot be done quickly. As has been seen from Afghanistan especially, this allows insurgencies to organise and further air bombing simply adds to their recruitment numbers.

Removing totalitarianism also reveals long-held grudges and power imbalances such as how removing Saddam's minority Sunni Ba'ath Party fermented a civil war with the oppressed Shi'ite majority. Local revolutions on the other hand, without intervention create a sense of solidarity regardless of past differences. A foreign coup d'état does not.

States that have democracy thrust upon tend to squander them or relapse back into authoritarianism. Often this is from a lack of established and respectable candidates to choose from, haphazard transition to a market economy (e.g Russia) or a lack of consistent ground level demands from the people resulting in simple pandering by politicians to secure votes with no intentions of governance. Democracy is only able to work effectively when individuals with growing affluence over time begin to demand better infrastructure, services and generally representation of their interests.

Not to mention, especially in Africa, many countries were wished into existence by exiting colonial powers with no logical cultural, religious or ethnic links among them. There is simply no genuine sense of national unity. This is arguably what caused the violence in Kenya in 07-08 following the disputed election. Foreign interventions in ex-colonial countries also inevitably leads to the perception of renewed imperialism, not matter how pure actual intentions. This is why intervention in Zimbabwe to remove Mugabe is inconceivable unless it by the African Union, which is far too weak and unwilling. Even now, Mugabe has considerable support by his colonial independence credentials.

Other countries simply have never had a legitimate and effective government in generations. The Taliban did not so much rule Afghanistan as loosely impose Sha'ria law on individual tribes who otherwise had signficant autonomy. Now that representational democracy has been imposed, there is simply no willingness on the part of an individual tribe to work together to improve the livelihood of all, but merely their own people. Politicians and officials are not corrupt because they are immoral but because political survival means following this creed.

Point is, military interventions don't work in removing despotic governments simply because something can and will go wrong. The only place they are appropriate is preventing genocide or aggressor nations. NATO was correct to intervene in Kosovo, the UN was correct to prevent Iraqi aggression into Kuwait (ignoring Iraqi invasion of Iran was not). Intervention should have occurred in Rwanda and equally in Sudan.

The Powell Doctrine more or less sets out what I wrote above concisely. In short, intervention should occur only with mass popular local support, and be undertaken swiftly and effectively with overwhelming force with a clear exit strategy established.

Thanks to Bush though, the US is overstretched militarily and lacks the moral authority to incite other nations into intervening where necessary. More importantly it's lost the deterrence its successful interventions in Kosovo and Kuwait created.

>> ^bcglorf:

Hurray for anything bringing some attention to the situation over there, particularly in correctly referring to it as Burma and not the Myanmar moniker imposed by the military dictatorship.
RedSky said:
For countries that have essentially had institutionalised repression for a generation or more like North Korea and Burma, I honestly think that the best way forward is to encourage trade with some restrictions in the hope that some of it filters through to the people.
I completely agree with your feeling conflicted on how best to help the poor people imprisoned in these countries. Honestly, I think using a foreign military to remove the regime followed by a nation building program on the scale used in post war Germany and Japan is the best way forward. But no nation on Earth has any reason to spend that enormous amount of money and political good will on something that in essence gains them nothing in the end anyways.
I do dearly wish that when Burma was hit so bad by natural disasters a few years ago the world have reacted more appropriately. Instead of allowing the ruling military to refuse and block any aid from going in, the world should have come in by force with as many soldiers and weapons as needed to deliver the volunteered aid to the devastated areas by force, then simply withdrawn after the aid had been delivered and provided. Sure the military would come and take it all for themselves after anyways, but the people there could've seen for a few months that the outside world actually cares about them and would gladly treat them for better than the junta is. Maybe allowing a base of resistance and opposition to gain wider support.

(I've secretly replaced blankfists stats on capitalism with wikipedia's democracy index, let's see if he is as easily persuaded.)

Countries with Full Democracy (democracy index number)
82 -- Australia (9.22)
78 -- United States (8.18)
82 -- Japan (8.08)

Countries with a Flawed democracy
81 -- Israel (7.48)
80 -- Italy (7.83)
71 -- Philippines (6.12)

Countries with a Hybrid regime
66 -- Russia (4.26)
70 -- Honduras (5.76)
65 -- Pakistan (4.55)
59 -- Senegal (5.27)
30 -- Haiti (4.00)

Countries with Authoritarian regimes
47 -- Nigeria (3.47)
45 -- Afghanistan (2.48)
40 -- Zimbabwe (2.64)
64 -- North Korea (1.08)

From their website:

Current life expectancy in nations where capitalism has significant presence (abbreviated list)
82 -- Australia
78 -- United States
82 -- Japan
81 -- Israel
80 -- Italy

Current life expectancy in nations where capitalism has only modest presence (abbreviated list)
71 -- Philippines
66 -- Russia
70 -- Honduras
65 -- Pakistan
59 -- Senegal

Current life expectancy in nations where capitalism has little or no presence (abbreviated list)
30 -- Haiti
47 -- Nigeria
45 -- Afghanistan
40 -- Zimbabwe
64 -- North Korea

Don't worry about us. God said he wouldn't destroy the earth again. I'm sure our nukes are just for show.
>> ^Drachen_Jager:

We're not laughing. If it was Zimbabwe or Peru we might be laughing. But the country with the greatest economic and military influence in the world, not to mention the largest nuclear arsenal. Not very funny.

We're not laughing. If it was Zimbabwe or Peru we might be laughing. But the country with the greatest economic and military influence in the world, not to mention the largest nuclear arsenal. Not very funny.