Bernanke Does Not Understand The Depth Of His Powers [View article]
Correct Charlie. There's nothing there I disagree with. Fed policy always tries to control inflation up or down. That's one of their two mandates. So yes, Fed policy always has consequences.
The issue you speak of (currency collapse) is essentially a hyperinflation scenario. I've long predicted that hyperinflation would not result from the Fed's policies and thus far been right. Perhaps see my primer section on hyperinflation to better understand where I am coming from. Some of my views are pretty unorthodox here...
The Burden We Leave Our Grandchildren [View article]
Sounds like many here are not quite understanding the modern monetary system and the perspective from which I am working. Maybe read this and shoot me an email if you have questions.
The Trouble With Modern Monetary Theory [View article]
You know, I must admit that I am confounded why this article is so often sent to me. It is, no disrespect to MT, a very weak refutation of MMT. I would recommend the Lavoie refutation if you're looking for one (which still has many holes in it).
This article makes SEVERAL blatantly false points in its argument ultimately leading to resoundingly incorrect concusions. The most reckless of which is the "deficits don't matter" argument. Nonsense. There is an entire section in my MMT primer devoted to this in which I SPECIFICALLY state that "Deficits most certainly do matter." The fact that you repeatedly build an argument on this statement is purely misleading and frankly, proves that you have not put in the required effort to understand the MMT position. This is a basic building block in the MMT positions. But hey, even Krugman said this about us so I guess we can't blame you. Perhaps we communicate the position poorly even though I do state this several times in my primer.... http://bit.ly/vMXZmh
We cover the entire inflation situation quite thoroughly. And I am well aware that a nation's currency users can reject its currency. I've written mountains of work on hyperinflation. And once again, my primer is VERY clear about the currency value and its three linkages:
"The value of these notes is ultimately determined by three key linkages:
The 5th dimension comment is silly. Of course govts don't live in a 5th dimension. As Minsky said, the problem of money is not creating it, but getting it accepted. MT can go make mercenary bucks, but no one will use them. So you're glossing over a rather important point there. We use the USD because, as a society, we acknowledge the common bond it creates in our every day activities. Austrians try to remove the linkage between govt, society and its money as if we are all independent people with no interdependence. This misunderstands the origins of money, govt and our societal interconnectedness. It's basically the old Crusoe Island argument which quite frankly, is the biggest bunch of bunk in economics. Where are all these Crusoe Island societies? That's right. They don't exist.
As for productivity - who glosses over it? I am a serial entrepreneur. A conservative. A red blooded capitalist. I've written mountains of work on how important it is to have a productive economy. After all, without a productive society you have no economy. And you have no demand for currency. See Zimbabwe. I talk about this ALL the time. I always discuss the real economy and real living standards. Again, you seem unfamiliar with my actual work. Here's a recent taste of my writings on this for anyone interested: http://bit.ly/scbnxl
As for all the end of the empire talk - I don't deny that the USA could be on the decline. But are we really so arrogant and self important to believe that this is occurring before our very eyes? It took 400 years for the Roman Empire to decline. We have been around a mere 230 years and in that brief period we have accomplished more than any society ever in the history of man. Do you really think that is all going to come crashing down in our lifetime? I don't. I see great corporations. I see hugely productive people. Sure, we've gone astray to some extent and I've been against much of the govt spending, but this article reads like one huge fearmongering piece that is typical of Austrians. I know you claim it is nothing of the sort, but in reality your article boils down to one thing - all empires end. Yeah, tell us something we don't know...
For those interested in trying to make an honest assessment of MMT I would recommend seeing more of my work on it:
First of all, I continue to be disappointed in how SA changes my titles. I have not been a deflationist for a very long time and I am not forecasting it. I specifically titled this post "DISINFLATION" on my website. If your editors don't know the difference then don't change the titles!
Mark, living standards, unfortunately, usually drop during a recession and I do believe we're in one long balance sheet recession. You might be interested in the following post I wrote a month or so ago: http://bit.ly/tlZkkP
Best,
Cullen
PS - I don't stop in here too often. I just don't have the time. I wish I did so I could answer more questions, but I tend to focus more on the discussion at pragcap so if you ever need to find me just pop over there or shoot me an email. I always try to respond and help people out with any questions they might have. I know I cover things from a pretty unorthodox angle so I do my best to be responsive.
U.S. Sovereign Debt: Pulling Down GDP [View article]
Seth,
You clearly haven't taken the time to try to understand MMT. Maybe I can help a little bit. It's not easy to learn. It took me several months in fact. Think about this comment logically for one moment:
"Sovereign debt is very real and must be paid back either by taxes or the "tax" of inflation."
This implies two things: 1) that the govt can "pay off" the debt by taxing the citizens enough to extinguish it. And 2) That inflation is always a harm to the pvt sector.
So let's work through this with some basic logic. First, have you ever heard an elderly person say "Gosh, I wish Uncle Sam would pay off his debt so I could get rid of my savings bonds!" No, you haven't because the govt's debt is merely the non-govts savings. To "pay off" the debt would involve removing pvt sector savings and replacing it with non-int bearing notes. Theoretically, the Fed could QE all outstanding govt debt and Tsy could stop issuing bonds altogether. We could eliminate the debt over time and we'd be left with a world where the pvt sector cannot save in risk free govt notes. It would instead hold nothing but pvt debt and cash. People like yourself would argue that the govt is suddenly better off because they have no debt. But are they really? Of course not. The govt didn't pay anything off. It merely changed the composition of its balance sheet while also harming the pvt sector by removing a risk free asset from its balance sheet.
Point 2 is easily debunked. I don't know if you're an Austrian, but I have an inkling that you lean that way. Their standard argument is that the Fed has destroyed our world via the printing press. They claim the dollar has fallen by 90% since 1913 and that our way of life is collapsing due to rising inflation. There's just one huge hole in that argument. Since 1913, the American standard of living has not merely risen, but it has soared through the roof into the stratosphere. So, despite a persistent rising CPI the American std of living seems to overcome this mythical burden.
Not all inflation is bad so we have to be more careful in our generalizations. The monetary system is complex. It is not correct to assume that it can be dumbed down and simplified to a point where the simplest answer is the right one. In fact, in this case, the right answer is damn complex and requires an enormous amount of work in getting there. If you take the time to review my paper I think you'll find that we probably agree on more than you think.....
U.S. Sovereign Debt: Pulling Down GDP [View article]
Hi everyone. This excellent conversation was sent to me via email. Glad I have the opportunity to pop in.
Seth, you might be interested in reading the following piece. It outlines my view of the way a fiat monetary system works and will help you in your refutation of MMT. I would urge you to focus on the difference between the govt as currency issuer and the non-govt sector as currency users. This is the key distinction. When you understand it you will recognize that there is no such thing as a sovereign govt "paying back" its debt because it is "borrowing" from its own bottomless pit of fiat money. In fact, the term "borrowing" is quite misleading because govt debt is not debt at all. But that's another discussion. The point is, a sov govt is never constrained in its ability to create currency. It is merely constrained by the inflation it generates. So the role of govt is to maintain the money supply and size of govt in a way that does not impose financial hardship on the non-govt sector who is a currency user and must always obtain currency before it can utilize it.
I hope this helps a bit. Sorry for being a few days late to the conversation. Happy thxgiving everyone. I hope this paper doesn't ruin your weekend. It's quite laborious!
10 Reasons Not To Be Short Ahead Of The Fed [View article]
This analysis was from David Rosenberg....I never recommended not to short in front of the FOMC. FYI....Not sure why SA edits the article in a way that is different from how it appears on my site where it's VERY clear that this is not my commentary....
We should have forced more defaults. No doubt about it. I was in favor of crushing the banks when we had the chance. But the Fed wouldn't let it happen and they convinced the US govt that it was in the best interest of everyone not to force cramdowns. I think that was a big mistake as it left the US economy with an excessive level of debt that still needs to be worked off. We never should have rewarded those who should have defaulted.
But that doesn't mean the entire economy should be left to get dragged into a depression just because of a few bad actors. I was in favor of stimulus geared towards Main Street and not Wall Street. We can stabilize the pvt sector via tax cuts and other policies while also allowing the de-leveraging to occur. But the policy implementation over the last few years has been a complete debacle.
It's very important not to think that I believe deficits don't matter. They most certainly due. They just don't impose a solvency constraint on the US govt in the same manner that they do in Greece.
If you haven't read my treatise on the monetary system you might be interested.
Paul Ryan: Not Qualified to Chair the House Budget Committee [View article]
Argentina and Russia were very different. Russia had foreign denominated debts and a currency peg. I believe Argentina also ran a currency peg. Both also suffered bouts of very high inflation leading up to their insolvencies. They essentially suffered hyperinflation before deciding to just scrap the whole thing. See my discussion here on hyperinflation and why it's highly unlikely in the USA;
Paul Ryan: Not Qualified to Chair the House Budget Committee [View article]
The inflation comments are dead right! But that's not what Ryan is saying. He is saying we can really face a default. That's complete and utter nonsense. If he were arguing about inflation or hyperinflation he'd have a good point.
And on that note, I still don't see the big issue. Where is the high inflation that all of these people have been calling for? 3.5% is the historical average. And the hyperinflation calls have been so wrong that it's not even worthy of mention.
If you want to argue that the country is being destroyed via high inflation then the onus is on you to prove that we have high inflation. And no, Shadow Stats doesn't count.
But more importantly, let's have discussions about our reality and stop using the debt ceiling to try to scare Americans into a default that isn't happening....Paul Ryan is playing a nasty game of political fearmongering. He should be ashamed and called out for it.
America Cannot Go the Way of Greece [View article]
Let's be realistic. I am not saying that these future obligations cannot cause inflation, but they cannot cause the USA to "run out money". There is simply no such thing. If we wanted to print $50T tomorrow we could do it. There's no such thing as implying that we can't do that. Would it be disastrous? Yes. But we need to be more specific in what that ultimate problem is. There's a difference between high inflation and not having the means by which to meet your liabilities.
America Cannot Go the Way of Greece [View article]
You're not understanding the fact that there is no such thing as the USA having or not having money. It's entirely wrong to refer to future spending as "unfunded". There is simply no such thing.
Again, if you think we're becoming bankrupt via inflation then the onus is on you to prove to me that we have a major inflation problem. I don't see it and the data corroborates this argument....
America Cannot Go the Way of Greece [View article]
Dave,
The two monetary systems are not remotely comparable. There is no such thing as the USA having to face its insolvency reality. We could have to face our inflation reality at some point, but we've been hearing the fearmongerers scream about hyperinflation for years now. Where is all this horrid inflation? I have shown to you that there is no solvency crisis in the USA. If you're arguing that there is a hyperinflation or high inflation problem in the USA then the onus is on YOU to prove that....
Bernanke Does Not Understand The Depth Of His Powers [View article]
Bernanke Does Not Understand The Depth Of His Powers [View article]
The issue you speak of (currency collapse) is essentially a hyperinflation scenario. I've long predicted that hyperinflation would not result from the Fed's policies and thus far been right. Perhaps see my primer section on hyperinflation to better understand where I am coming from. Some of my views are pretty unorthodox here...
http://bit.ly/I7la31
Thanks for the good comment.
Cullen
The Burden We Leave Our Grandchildren [View article]
Happy new year everyone.
http://bit.ly/oTJ9Bn
The Trouble With Modern Monetary Theory [View article]
This article makes SEVERAL blatantly false points in its argument ultimately leading to resoundingly incorrect concusions. The most reckless of which is the "deficits don't matter" argument. Nonsense. There is an entire section in my MMT primer devoted to this in which I SPECIFICALLY state that "Deficits most certainly do matter." The fact that you repeatedly build an argument on this statement is purely misleading and frankly, proves that you have not put in the required effort to understand the MMT position. This is a basic building block in the MMT positions. But hey, even Krugman said this about us so I guess we can't blame you. Perhaps we communicate the position poorly even though I do state this several times in my primer.... http://bit.ly/vMXZmh
We cover the entire inflation situation quite thoroughly. And I am well aware that a nation's currency users can reject its currency. I've written mountains of work on hyperinflation. And once again, my primer is VERY clear about the currency value and its three linkages:
"The value of these notes is ultimately determined by three key linkages:
Productivity
Currency management
Taxes & regulation"
You've misrepresented these points egregiously.
The 5th dimension comment is silly. Of course govts don't live in a 5th dimension. As Minsky said, the problem of money is not creating it, but getting it accepted. MT can go make mercenary bucks, but no one will use them. So you're glossing over a rather important point there. We use the USD because, as a society, we acknowledge the common bond it creates in our every day activities. Austrians try to remove the linkage between govt, society and its money as if we are all independent people with no interdependence. This misunderstands the origins of money, govt and our societal interconnectedness. It's basically the old Crusoe Island argument which quite frankly, is the biggest bunch of bunk in economics. Where are all these Crusoe Island societies? That's right. They don't exist.
As for productivity - who glosses over it? I am a serial entrepreneur. A conservative. A red blooded capitalist. I've written mountains of work on how important it is to have a productive economy. After all, without a productive society you have no economy. And you have no demand for currency. See Zimbabwe. I talk about this ALL the time. I always discuss the real economy and real living standards. Again, you seem unfamiliar with my actual work. Here's a recent taste of my writings on this for anyone interested: http://bit.ly/scbnxl
As for all the end of the empire talk - I don't deny that the USA could be on the decline. But are we really so arrogant and self important to believe that this is occurring before our very eyes? It took 400 years for the Roman Empire to decline. We have been around a mere 230 years and in that brief period we have accomplished more than any society ever in the history of man. Do you really think that is all going to come crashing down in our lifetime? I don't. I see great corporations. I see hugely productive people. Sure, we've gone astray to some extent and I've been against much of the govt spending, but this article reads like one huge fearmongering piece that is typical of Austrians. I know you claim it is nothing of the sort, but in reality your article boils down to one thing - all empires end. Yeah, tell us something we don't know...
For those interested in trying to make an honest assessment of MMT I would recommend seeing more of my work on it:
http://bit.ly/ttAnSh
http://bit.ly/sRG26v
http://bit.ly/nNpT5R
http://bit.ly/vQTCS7
Signs Of Deflation Grow [View article]
Mark, living standards, unfortunately, usually drop during a recession and I do believe we're in one long balance sheet recession. You might be interested in the following post I wrote a month or so ago: http://bit.ly/tlZkkP
Best,
Cullen
PS - I don't stop in here too often. I just don't have the time. I wish I did so I could answer more questions, but I tend to focus more on the discussion at pragcap so if you ever need to find me just pop over there or shoot me an email. I always try to respond and help people out with any questions they might have. I know I cover things from a pretty unorthodox angle so I do my best to be responsive.
U.S. Sovereign Debt: Pulling Down GDP [View article]
You clearly haven't taken the time to try to understand MMT. Maybe I can help a little bit. It's not easy to learn. It took me several months in fact. Think about this comment logically for one moment:
"Sovereign debt is very real and must be paid back either by taxes or the "tax" of inflation."
This implies two things: 1) that the govt can "pay off" the debt by taxing the citizens enough to extinguish it. And 2) That inflation is always a harm to the pvt sector.
So let's work through this with some basic logic. First, have you ever heard an elderly person say "Gosh, I wish Uncle Sam would pay off his debt so I could get rid of my savings bonds!" No, you haven't because the govt's debt is merely the non-govts savings. To "pay off" the debt would involve removing pvt sector savings and replacing it with non-int bearing notes. Theoretically, the Fed could QE all outstanding govt debt and Tsy could stop issuing bonds altogether. We could eliminate the debt over time and we'd be left with a world where the pvt sector cannot save in risk free govt notes. It would instead hold nothing but pvt debt and cash. People like yourself would argue that the govt is suddenly better off because they have no debt. But are they really? Of course not. The govt didn't pay anything off. It merely changed the composition of its balance sheet while also harming the pvt sector by removing a risk free asset from its balance sheet.
Point 2 is easily debunked. I don't know if you're an Austrian, but I have an inkling that you lean that way. Their standard argument is that the Fed has destroyed our world via the printing press. They claim the dollar has fallen by 90% since 1913 and that our way of life is collapsing due to rising inflation. There's just one huge hole in that argument. Since 1913, the American standard of living has not merely risen, but it has soared through the roof into the stratosphere. So, despite a persistent rising CPI the American std of living seems to overcome this mythical burden.
Not all inflation is bad so we have to be more careful in our generalizations. The monetary system is complex. It is not correct to assume that it can be dumbed down and simplified to a point where the simplest answer is the right one. In fact, in this case, the right answer is damn complex and requires an enormous amount of work in getting there. If you take the time to review my paper I think you'll find that we probably agree on more than you think.....
Best,
CR
U.S. Sovereign Debt: Pulling Down GDP [View article]
Seth, you might be interested in reading the following piece. It outlines my view of the way a fiat monetary system works and will help you in your refutation of MMT. I would urge you to focus on the difference between the govt as currency issuer and the non-govt sector as currency users. This is the key distinction. When you understand it you will recognize that there is no such thing as a sovereign govt "paying back" its debt because it is "borrowing" from its own bottomless pit of fiat money. In fact, the term "borrowing" is quite misleading because govt debt is not debt at all. But that's another discussion. The point is, a sov govt is never constrained in its ability to create currency. It is merely constrained by the inflation it generates. So the role of govt is to maintain the money supply and size of govt in a way that does not impose financial hardship on the non-govt sector who is a currency user and must always obtain currency before it can utilize it.
I hope this helps a bit. Sorry for being a few days late to the conversation. Happy thxgiving everyone. I hope this paper doesn't ruin your weekend. It's quite laborious!
http://bit.ly/oTJ9Bn
You Need To Pay Higher Taxes So We Don't Become Greece Or Italy [View article]
10 Reasons Not To Be Short Ahead Of The Fed [View article]
Deal Agreement Avoids Default [View article]
We should have forced more defaults. No doubt about it. I was in favor of crushing the banks when we had the chance. But the Fed wouldn't let it happen and they convinced the US govt that it was in the best interest of everyone not to force cramdowns. I think that was a big mistake as it left the US economy with an excessive level of debt that still needs to be worked off. We never should have rewarded those who should have defaulted.
But that doesn't mean the entire economy should be left to get dragged into a depression just because of a few bad actors. I was in favor of stimulus geared towards Main Street and not Wall Street. We can stabilize the pvt sector via tax cuts and other policies while also allowing the de-leveraging to occur. But the policy implementation over the last few years has been a complete debacle.
It's very important not to think that I believe deficits don't matter. They most certainly due. They just don't impose a solvency constraint on the US govt in the same manner that they do in Greece.
If you haven't read my treatise on the monetary system you might be interested.
Best,
CR
pragcap.com/resources/...
Paul Ryan: Not Qualified to Chair the House Budget Committee [View article]
papers.ssrn.com/sol3/p...
Paul Ryan: Not Qualified to Chair the House Budget Committee [View article]
And on that note, I still don't see the big issue. Where is the high inflation that all of these people have been calling for? 3.5% is the historical average. And the hyperinflation calls have been so wrong that it's not even worthy of mention.
If you want to argue that the country is being destroyed via high inflation then the onus is on you to prove that we have high inflation. And no, Shadow Stats doesn't count.
But more importantly, let's have discussions about our reality and stop using the debt ceiling to try to scare Americans into a default that isn't happening....Paul Ryan is playing a nasty game of political fearmongering. He should be ashamed and called out for it.
America Cannot Go the Way of Greece [View article]
America Cannot Go the Way of Greece [View article]
Again, if you think we're becoming bankrupt via inflation then the onus is on you to prove to me that we have a major inflation problem. I don't see it and the data corroborates this argument....
America Cannot Go the Way of Greece [View article]
The two monetary systems are not remotely comparable. There is no such thing as the USA having to face its insolvency reality. We could have to face our inflation reality at some point, but we've been hearing the fearmongerers scream about hyperinflation for years now. Where is all this horrid inflation? I have shown to you that there is no solvency crisis in the USA. If you're arguing that there is a hyperinflation or high inflation problem in the USA then the onus is on YOU to prove that....