Monday, July 7, 2014

by sammo request
chartalism it used to be called
this guy is one of the so called new chartalists
or modern monetary theorists

consequently he hasn't a worry about peak debt
a sovereign state with debt payable entirely  in its own costlessly augmentable  un gold tied currency
can never go bankrupt if it don't want to
this means he hasn't idiotic long run burdens of short term gaping deficits to drag down his mind
as it does even the best non party line non neo liberal/neo classical poli econs ie the new post samuelson eclectics  like joe stiglitz
chumps that  still retain unexamined attachments to prudent fiscal finance for uncle

mostly out of inflation fear of course

but he hasn't much else on  his mind either on that front
he's a one trick pony
"The greatest lie—endlessly repeated by neoliberal economists and uncritically echoed by the mainstream media—is the claim that if governments cut their spending, the private sector will “crowd in” to fill the gap. British Prime Minister David Cameron’s austerity campaign and President Obama’s foreshadowed budget cuts are built around these lies."

true enough but ...
oh ya there's this line you've seen  else

"In the past, real wages grew in line with productivity, ensuring that firms could realize their expected profits via sales. With real wages lagging well behind productivity growth, a new way had to be found to keep workers consuming. The trick was found in the rise of “financial engineering,” which pushed ever increasing debt onto the household sector"

that begs the question why not use uncle's transfer system as is done now ??

behind this is a notion of greed pushing ever higher the rate of exploitation
as if that itself is a cyclical animal spirit
some how subdued by the great depression the world at war and the subsequent  pax americana
i think it had more to do with changes in the global structure of capitalism
but that's for another day

i'll add
in the ike ewra rads claimed the chronic shortage of investment against nominal "acc\umulation"
 was relieved by kold war military budgets
that were nice  employment builders and effective demand maintainers

but no more that cry not after say 1975

this  type of  magic bullet crusader  usually fails to notice open systems like national economies
are operating in a web of trading nations and even if their currency is still taken in exchange for products
their foreign exchange rate and their inevitable  trade gap  creates another set of macro problems
often called de industrialization

 solving domestic under employment by simply stimulating demand thru massive deficit financing
 can often make this problem far worse

in fact you notice he does have inflation and possibly exchange rates in the back of his head
as he  pops in that pinko favorite

"I would introduce an open-ended public employment program—a Job Guarantee—that offers a job at a living (minimum) wage to anyone who wants to work but cannot find employment. These jobs would “hire off the bottom,” in the sense that minimum wages are not in competition with the market-sector wage structure. By not competing with the private market, the Job Guarantee would avoid the inflationary tendencies of old-fashioned Keynesianism, which attempted to maintain full capacity utilization by “hiring off the top” (making purchases at market prices and competing for resources with all other demand elements). Job Guarantee workers would enjoy stable incomes, and their increased spending would boost confidence throughout the economy and underpin a private-spending recovery. There is no reason the government could not afford this program. The labor is available for work, and the government can easily supply the jobs. There were no questions asked when the government, in the early days of the crisis, instantly provided billions for the banks. Let me repeat: the government has no financial constraint on its spending and should immediately allocate funds to a massive job-creation program."

yup ...the uncle job gulag

despite not needing it according to pure MMT
err in a closed system mate
but open -ness
it comes from a back door limit on market driven employment created here not by import explosion
 but by high job demand by firms leading to a wage price spiral ala the infamous  70's
birth place of the mass adherence to the nairu line taboo
which is buried in this bit of fandango

the gulag is kool because

" minimum wages are not in competition with the market-sector wage structure"
oddly he fails to notice making that gulag wage a living wage would indeed lift all market earned wages right ??

" By not competing with the private market," dubious point
" the Job Guarantee would avoid the inflationary tendencies of old-fashioned Keynesianism"

here it comes
" which attempted to maintain full capacity utilization by “hiring off the top” (making purchases at market prices and competing for resources with all other demand elements)."
this  conflates demand pull inflation something impossible  with the type of capacity slack thst would trigger macro policy in the first place
with wage push inflation which happens because of corporate price cost pass thru power
he is buying into the nairu gig
without admiting it if he even clearly understands it
nairu woulsd keep the market the rate of unemployment just high enough to prevent an acceration of wage rates
now as a good rad matey
billy boy here wants to soak up  the reserve army so he offers them a iron floor wage rate job
that he flat out guarantees won't set of a wage explosion
cause he's drawing form the bottom not the top

instead of injecting enough  purchasing power into the system thru the transfer system ala 12 cylinder macro ala wild bill vickrey
letting tight markets pull wages where they may thhis plan has uncle's contrived  jobster gulag soak up the surplus labor pool
wpa a go go
and all i repeat without triggering a wage boom

how ??
its possible but only by  making sure the jobster gulag is no place any one wants to be
both wage rate wise and i suspect  conditions wise

obviously the diect necessity here
is to design and imlement a mechanism with the ability to regulate inflation set the price levl quarter by quarter
as a key and essential  part of the full  advanced solution that this guy tries to run from
enter the mark up market along with the trade balancing dollar exchange rate

neither semms to be arrows in his quiver

 solve  the fear of run away inflation and de industrialization
 that  lurk like ghouls  in the hearts of white hats like joe stgilitz and paul krugman
and is why they never get to bill vickrey land