Over the years I've said I'm fascinated by something called MMT (Modern Monetary Theory). I don't want to give the impression that I buy it all lock, stock and barrel. While I have no more than a rudimentary understanding of economics in general I became much more interested after the housing bubble burst and the subsequent economic collapse and malaise that followed. This week we learned that the U.S. economy contracted in the first quarter of 2014. No matter what excuse the current regime wants to cite (like bad weather) it's clearly bad news. The malaise continues.
MMT seems to me to be a version of classic Keynesian economic philosophy that factors into the equation the reality of fiat currency. They seem to want to follow the Keynesian prescriptions for government reaction to economic downturns, namely having the central government pump money into the economy to stimulate and reinvigorate demand. That is to say growing aggregate demand is the key to economic turnarounds. However, the part that fascinates me the most is their take on debt and deficits. To be clear MMT is talking about central government debt, not personal debt or local government debt. This is crucial because neither the public nor the local government can create money out of thin air, but the issuer of the currency can.
It is of course absolutely true that the U.S. Federal government can just create money by either printing it outright or selling bonds. They also regulate the banks that can create money out thin air by writing loans. The question is then: what is the "real" effect of this activity and at what level?
This is where reality separates from theory. I don't know enough to even venture a semi-intelligent answer. There are some things that seem pretty clear or fall under the rubric of common sense. To hear the Republicans/right-wingers carry on about debt and deficits you wonder how we've gotten this far without complete economic collapse and another Great Depression. Even I, and center-right guy, think a Federal balanced budget is a fool's game. Clearly sky high Federal debt is not the death knell of the economy. But then neither is it the savior. Since Obama has been president the yearly deficits are the highest in history and the aggregate national debt has grown exponentially to levels never seen before, yet this economy totally sucks. Clearly just pouring in gobs of Federal cash doesn't bring about economic heydays.
In a dynamic society and equally dynamic economy there are so many factors that make up the trajectory of economic trends it's impossible to put your finger on any one thing. Things like war, taxes, regulation, trade and immigration are all factors that are within the Administration's wheelhouse and can have profound impact on the economy if for no other reason than the potential for breeding of uncertainty. This has been a constant complaint about this regime since 2009. Things like automation, M and A, outsourcing/off shoring, natural disasters and bad weather can wreak havoc on the economy and those things can't be directly laid at the feet of a president. We've seen these things too.
So, what to do? Do they do something constructive? Or play the blame game?
The Administration and their sycophants (particularly the national media) have let loose a strategy with a goal of pinning this horrible economic malaise on income inequality. Scripted and in lockstep the plan was set into motion to coincide with the start of the 2014 mid term election campaign. For the faithful it's like selling ice cubes in the desert - who the hell likes rich people. What are the Republicans to do? Defend ultra-billionaires?
So along comes Thomas Piketty a French economist with his new book, a book I've not read, called Capital in the Twenty-First Century that has the nerdy economic world all atwitter. The MMT guys love this book. Since I haven't read it I can't say two hoots about it, but there are finally some counterpoints being printed that take the superstar Mr. Piketty to task.
The premise that I can gather is that Piketty plays right into the hands of the income inequality squawkers, the 1% vs the 99%. Again I'm not smart enough to know the real effect this so-called inequality has on normal people like me and my peers, though I'm sure it has some, both positive and negative. I am smart enough to know that ideology has everything to do with the numbers game guys like Piketty play. Essentially you can make the numbers say what ever you want. It seems that's exactly what Piketty does in this book.
For progressives and their Marxist brethren it's all about stealing the wealth of the rich and the mechanism to do that is government. The way to do it is scapegoating the wealthy and the best way to to breed this hatred and envy is to cook the numbers. Recently the Financial Times published a challenge to Piketty's numbers that compelled him to respond in a letter to Bloomberg News. Does anyone lash out when criticized if they are secure in the facts they put out? Again, I'll back down here because I don't have the facts myself.
In general the progressives treat economics as a knowable and demonstrable science, that if you just create the right formula (one that doesn't presumably have income inequality) you will get the perfect economic outcome. Sounds like communism to me actually. While the the Austrian School of economics likens economics to climate science - unpredictable and chaotic, a product of billions of individual transactions/interactions whose outcome can't be planned only ridden like surfer rides a wave.
I have gotten to the point of disbelieving everything the progressives say primarily because their track record is so poor. On the other hand the conservatives and market capitalists betray their own belief systems at every turn, as if they don't believe in them anymore than their sworn enemies.
The key it seems to me is the fact of income inequality. One: it is a fact. Two: it will always be. Therefore; Three: learn to live with it. The effort it takes to destroy it destroys everything.
Ugh
2 comments:
You know, Craig, one must wonder who is better to have around; the one percent who must please the general public since there are so few of them or the 99% who have nothing restraining them from taking whatever - and from whoever - they please. Frankly, I would rather face the 1%.
It wasn't the 1% who fomented the Reign or Terror in France, nor the Russian Revolution.
Also, it should be pointed out that the 1% are the guys who underwrite charities and the like.
It is a sticky wicket - When you look at the numbers it seems so black and white. The 1/10th of 1% hold such a huge share of the wealth that your heart says something's wrong with that. But the brain knows nothing is that easy. The very processes the left puts in place to destroy inequality tends to destroy everything but. The rich have done fabulously in the Obama era - the middle class not as much.
Your point about the charities is right on. Lot's of ultra billionaires give away billions.
The mentality of the mass accumulation of wealth for the sake of wealth and to hell with the rest of society needs an incentive to change. It can't however be forced by government edict. It's mentality shift. Shareholders bear some responsibility too. Charity doesn't necessarily have to be simply for foundations it could be for the good society in general in the form of preserving the middle-class (jobs) and the health of cities and communities. The bottom line isn't always just the raw numbers. But how to get the 1% to see that when they are constantly staving off attack???
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