Some propositions for chartalists (wonkish)

I’ve been asked quite a few times about chartalism and its recent rebadging as modern monetary theory (MMT). My answer has been that I really should get around to looking into this. However, the issue came up again at Crooked Timber following my post on hard Keynesianism. Looking around, I drew the conclusion that an attempt to define and assess the various versions of MMT would take more time than I had available. So, instead, I thought I would draw up a set of propositions bearing on the claims I made about hard Keynesianism and invite comment from MMT advocates and others as to whether they disagree.  Here they are

1. Except during the period since the GFC, money creation has not been an important source of finance for developed countries

2. Except under extreme conditions like those of the GFC, money creation cannot be used as a significant source of finance for public expenditure without giving rise to inflation and (if persisted with) hyperinflation

3. Government deficits must be financed primarily by the issue of public debt

4. The ratio of public debt to GDP cannot rise indefinitely, since governments will ultimately find it impossible to borrow

5. The larger the deficits governments want to run during deficits, the larger the surpluses they must run in booms

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Two billion examples of innumeracy


In the leadup to the recent British Royal wedding, it was repeatedly suggested that the event would be watched by 2 billion people worldwide, that is, about 30 per cent of the world’s population. It says something for the quality of the news media that none of those reporting this estimate offered a source or the most elementary checks on plausibility, and hardly any tried to check afterwards. So, now that we are relaxing after Mother’s Day lunch, I thought I’d do the numbers.

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US Radio Interview

Ian Masters, who’s the US representative of the well-known Australian clan (Chris, Roy, Sue and Olga are all prominent figures here) has interviewed me for this radio program Background Briefing, broadcast and podcast on KPFK-LM, in LA, about my book Zombie Economics. Interview should go to air about noon Sunday Pacific time, and the podcast will be available almost immediately, and also, a bit later at Ian’s own site.

Quick update on torture

In my post on bin Laden’s death, I noted the spin in a New York Times story suggesting that torture had helped to extract the clues leading to bin Laden’s location, even though the facts reported suggested the opposite. This analysis, also in the NYT, confirms both the spinning and the fact that the evidence produced under brutal torture was deliberately misleading. Given the failure of the Bush Administration to get anywhere near bin Laden, it seems likely that they were in fact misled, deluded by the ancient belief that evidence extracted under torture is the most reliable kind.

It’s noteworthy that the URL for the story is “torture”, but the article itself doesn’t adopt that description and doesn’t even use the word until well after the lede.

After OBL

The death of Osama bin Laden has inevitably produced a gigantic volume of instant reactions, to which I’m going to add. Doubtless I’m repeating what others have said somewhere, but it seems to me that most of the commentary has understated the likely impact, particularly as regard US politics. That impact is by no means all favorable – while the Republicans are the big losers, Obama will also be strengthened as against his critics on the left, among whom I’d include myself (admittedly as a citizen of a client state rather than the US proper).


Looking first at the impact on the Islamic world, I don’t differ much from what I see as the conventional wisdom – Al Qaeda was already struggling for relevance in the light of the democratic upsurge in North Africa and the Middle East, and the death of bin Laden will weaken them further, even if they manage some terror attacks in reprisal[1].

As regards the political impact in the US, comparisons to GHWB and Gulf War I are beside the point. Hardly anyone in the US cared about Saddam or Kuwait before his invasion, and most of them promptly forgot about them once the cheering died down after Desert Storm. Even in GW2, it was clear that Saddam was just another nasty dictator of whom the Bush Administration had decided to make an example. By contrast, bin Laden was unsurprisingly, the object of more national fear and hatred than any figure since Hitler or Stalin.

Equally importantly, bin Laden and 9/11 were central to a Republican narrative about foreign policy as a crusade against Islamofascism and its liberal dupes/fellow-travellers/ineffectual resisters that has now collapsed almost completely. The story had been unravelling ever since the Iraq/WMD fiasco, but the contingent fact[2] that Obama has succeeded where Bush  failed has left the Republicans with almost nothing to say on an issue they expect to own.

That won’t wipe out the impact of bad economic conditions, but I suspect that the lack of Republican credibility on foreign policy (and for that matter, the birther issue) will encourage critical analysis of their fraudulent claims on economics as well.

Coming to the bad news, the success of the US intelligence machine in locating bin Laden is obviously going to strengthen Obama’s position in claiming that he has special knowledge that justifies suspending civil liberties. Reading the accounts in, for example, the New York Times, it’s clear that their sources are trying to make claims for intelligence extracted under torture  even though (on my reading) they didn’t actually get anything useful from these sources (the NYT quotes an intelligence source as saying that the value was in what was not said, which could justify just about anything).

There’s an outside chance that, having secured his standing on the issue, Obama will return to the policies he campaigned on. Failing that, as the fear of terrorism fades, there may be a gradual return to the rule of law, although the precedents set in the last ten years are likely to remain.

Finally, like most people in the world, I’m glad bin Laden is dead. I would have preferred to see him face trial for his crimes, but he was (assuming the official account to be correct) given the chance to surrender, and didn’t take it.

<strong>Update 4 May</strong> The parenthetical qualification in the last sentence turned out to be a sensible precaution, reflecting past experience of these announcements. As <a href=””>almost always seems to happen</a>, the revised account from the government is very different from the original one. Whereas the original story suggested a gunfight with bin Laden using a woman as a human shield, the new version has an unarmed bin Laden shot when his wife (also unarmed) ran at the assault team and was herself shot, though not fatally. That doesn’t preclude a call to surrender, but it certainly seems that he wasn’t given any time to think it over.

fn1. BTW, has there been any statement from AQ confirming or denying OBLs death?

fn2. It’s interesting to ask how history would have changed if the military had done as good a job with the Iran hostage rescue ordered by Carter as they did in the present case.

May Day

It’s the evening of May Day, though as it falls on a Sunday we will (in Queensland at least[1]) celebrate it with that great Australian institution, a long weekend. Last year, I went on the march, this year I ran a triathlon instead[2]. My somewhat confused attitude is, I think, pretty characteristic of the position labour movement more generally.

Updated below

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