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A new sandpit for long side discussions, idees fixes and so on.
John Quiggin 
Interesting to note that Gillard’s Howard like tactics in promoting a conscience vote in order to ensure failure of any marriage law changes may well be snookered by Tony Abbot himself being out Howarded and also allowing a conscience vote. The whole conscience business is also interesting. Are we lead to believe that our fearless leaders regularly vote contrary to their consciences or, alternatively, that they have consciences at all?
If you look at the things which have and have not been “conscience” votes you’ll see it’s not about conscience, it’s about various pollies being pussy-whipped by the Pope.
Some might argue that all votes should be conscience votes in the true essence of a democracy, others might argue that all “moral” or laws based around ethical standards should be conscience votes and others might argue there shouldn’t be any.
It’s interesting that both major parties have members (representing their constituents) of left, center and right philosophies and persuasions but finish up voting along the “party lines” from a elite consensus arrived at some backroom powwow.
Others might argue that the true essence of representative democracy is that parliamentarians should never have conscience votes, and so when this issue arises they should use popular referendums.
Usually what journalists tag as party lines, actually reflect backroomers understandings of what the silent majority is actually thinking (right or wrong). The different “party lines” only arise because this referral to a silent majority is often biased.
@Chris Warren
Yup, good point Chris.
not-het bonding contracts aside.
the poor old fin didn’t take long to descend into murky territory.
from the malign to the ridiculous.
todays offering from the slapped about,we-wuz-robbed,mad as hell,we’re gunna sue youse incompetent socialist shamblers.
an editorial.
a two page try-hard.
a smaller bit.
a warning of a KGB take over.
the very idea that the current collectors,editors and purveyors may just possibly have a vested interest in controlling public perceptions to their own benefit is rejected with a snarl.
the statement”people aren’t stupid they will stop buying”
news flash…….newspaper sales falling
news flash………finding in USA that foxnews watchers are less informed and more stupid that people who watch no news.
(is this called bias reinforcement?)
still,the ABC (the board top dog is who?)is par for the course in non info news with the
“farmers group imploding”item.
who are the groups?
what are they on about?
when did the implosion start?
how did the implosion come about?
why is there an implosion.
does this concern the buying and selling of Australian grain by overseas groups?
rant over.
but
is it incoherant enough?
sir edu 1
Meanwhile, a half-world away: Europe’s Transition From Social Democracy to Oligarchy
may mentions ‘farmers groups’ be careful you don’t confuse these with unions or even employer’s groups. The VFF and NFF are run by political wannabes and organisations like MLA are run by investors dabbling in agriculture rather than agriculturalists or even farmers. Policies are are made dependent on individual aspirations and like the F1 car races are fair, representative and democratic inasmuch as the bloke with the most money wins
great article jrbarch.
Surely countries like greece and italy will see it’s in their best interests to leave the union and control their own currency. Hearing technocrats/pollies harp on continually about austerity measures based on magnitudes of public debt is simply bizarre when all data shows inflation is low with no sign it is going up, and unemployment is in double digit territory. Clearly this would suggest these economies are operating below productive capacity, and measures to reduce public debt will merely suck more money out of the private sector and exacerbate unemployment and falls in output, which would further increase govt deficits. What these countries need is not austerity, they need to monetary sovereignty.
@adit
I (from the peanut gallery) would generally agree with that, although that does come with its fair share of pain, especially if that sovereign currency is devalued to junk so careful measures are required to control inflation. No doubt though that some austerity was in order. I’ve been told by a Greek friend that Greece’s public service pension system worked on a 75% of salary pension system. If that’s true, surely that’s only sustainable in economies with extremely high productivity and very low welfare rates.
Changing currencies, politicians or technocrats(whatever they are) is not even sniping around the edges. All of this attempts to solve the problems of the rich by creating more problems for the poor. In the end all of these measures will fail because they are conceived and promoted by the people who created the problems in the first place. Furthermore good pension systems will cost far less than armaments and defence contractors.
@jrbarch
Great reference.
The article by Michael Hudson, “Krieg der Banken gegen das Volk” (the bankers’ war against the people), Frankfurter Allgemeine, is a US economists’ contribution to the list of articles by several German authors in the Sueddeutsche Zeitung on the topic of democracy versus financial markets. Similar articles are in the French press. The depth of the debate is often not reflected in local newspaper articles.
It might also be useful to mention that the Heads of Government of Euro countries more or less forced private banks to write off their bad loans in stages, they called for a Tobin tax (effective if the USA and the UK join), Switzerland at one stage vowed to peg their currency to the Euro, the latest threat of the rating agencies is politely ignored, and there are talks on how to change the various treaties such that the ECB can act but only in exchange for changes of the rules of the game, including bank regulation and taxation as well as book-keeping. It is actually the Euro countries, particularly France, Germany, the Netherlands that are putting up a fight against the proverbial Wall Street banker’s dictatorship.
As for predicting the GFC, it might be useful to compare the history of the rating agencies (the head sheep(s) of a segment of financial markets) with those of the ECB. As can be seen from the following web-site, the ECB issued warnings in 2005 at the time when rating agencies were busy rating junk bonds (paper that should be classified as equity at best) as investment grade securities.
http://www.ecb.int/press/html/crisis.en.html
@Troy Prideaux
GDP growth in greece was relatively stable until the GFC hit in 07, where it fell sharply and hasn’t recovered since.. the unemployment rate is nearly 20%. This to me would suggest there is little risk of inflation. Why would the sovereign currency be devalued to “junk”? I admit I don’t fully understand the mechanics of how the transition would take place – for e.g. would dismantling the euro, or at least certain countries breaking away from the euro mean a writing off of debts denominated in that currency? You would think it would. Japan has public debt level 200% of gdp, there is no hyperinflation risk in japan -though mild inflation would actually help their position. That 200% is not making headlines though because Japan conducts its own monetary policy, so it doesn’t have a risk of insolvency while Greece does.
Austerity measures of any kind as i said will suck money out of the private sector by definition – further dampening growth. It will ensure they keep missing debt ratio/deficit ratio targets.
@adit
And why is the UK not utilising its own currency to fight unemployment and poverty? And why is the USA not utilising itw own currency to fight unemployment and poverty?
Exiting the Euro will not help Greece much. If Greece say converted Euros into Drachmas at a rate of 1:2, prices and the money supply would increase in proportion to the devaluation and the real exchange rate would not fall.
To push down the real exchange rate, Greece would have to convert Greece’s share of the european central banks assets into Drachma denominated assets, and persue a deflationary policy by selling off these assets. Not an appealing policy with Greek unemployment at 20%.
@adit
“the unemployment rate is nearly 20%. This to me would suggest there is little risk of inflation.”
adit, I’m not an economist or any sort of expert in this area, but my impression of what happened in places like, say, Zimbabwe was very predictable from conventional economic modelling (if there is such a thing). My understanding of the central mechanism that lead to massive inflationary pressures wasn’t obviously from full employment, but more a trade valuation of the currency and obviously the trade sanctions enforced by western leaderships. Argentina is probably a better example of unemployment and inflation rising hand-in-hand to uncontrollable levels due to influences more related to politics, trade and financial sentiment than supply and demand pressures.
@adit
“the unemployment rate is nearly 20%. This to me would suggest there is little risk of inflation.”
This looks like university undergraduate dogma echoing the Phillips curve.
Do you have any arguments to show that if Ue is 20% that inflation is low?
There real behaviour is that politics will make one variable benign but only by making others worse in the long-run, and periods for which the Phillips Curve, are just occasions amidst many others.
All of these examples are of limited systems trying to achieve unlimited expansion. In order to not only fuel growth and the rate of increase of growth, economies tend to overvalue components, such as properties as in the GFC. In Australia’s case if you want to see the future of minerals led growth have a look at Nauru, or perhaps the moon ….
Hate to sound anti American but they do seem to live in their own limited world. The latest example is pepper spraying by police of a team performing the haka at a US football game in Utah. A month or so ago Halloween was the night before our Melbourne Cup I believe. I saw kids dressed in costume going door to door. Not reading the form guide as proper Aussie kids should do. Oddly one US TV show on mega buildings uses the metric system but another show on busting myths uses feet and pounds. Hint; metric is simpler.
@Ernestine Gross
Sounds like you know the answer so why don’t you tell us?
I don’t think I’ve suggested that a country simply needs to issue its own currency to be able to solve its problems. Have I? What I suggested was that EU nations not being able to issue its own currency is the FUNDAMENTAL hindrance to those nations tackling problems of unemployment – more relevant to the case of greece and the sovereign debt crisis, it compromises their ability to manage business cycles and once in a lifetime depressions.
If nations issue their own currency, there is no solvency barrier to conducting fiscal policy – which is what they effectively need.
Are you contesting this?
Troy Prideaux: My point regarding unemployment was to illustrate that the fundamentals of the economy show that it is underutilised – hence there are no ‘real’ inflationary pressures – i didn’t make that clear. So if Greece is issuing its own currency at a floating exchange rate, it has no problem is financing its fiscal policy, and a depreciated currency helps its competitiveness. You cite the Argentinian case; argentina defaulted, moved to floating exchange rates, then started growing at 9% prior to gfc.
Chris Warren: as above. Forget the phillips curve, I didn’t say increase inflation and greece will have less unemployment. You’re missing the central point I was making re currency sovereignty.
Tim: after Greece converted euros to drachma, couldn’t it simply start printing drachma, e.g. deficit spend to finance welfare, public works etc etc.. This would have the effect of depreciating the currency. No selling of public assets required.
@Ernestine Gross
The UK: Because they are run by a hard-right loony who doesn’t understand the fallacy of composition and thinks if everyone cuts spending, the economy will grow.
The US: Because their government is held hostage by a bunch of hard-right loonies who don’t understand the fallacy of composition and think that if everyone cuts spending, the economy will grow.
Hi, just caught some of the 7:30 report on Solar and subsidies. Given Barry O’Farrell’s promise/threat to add a ‘solar levy’ to everyone’s power bills, the swing against small solar on rooftops from the NSW Right looks like a firm anti-solar strategy ie create a burning resentment amongst those without for those with, purely for political purposes.
A question that’s bugging me about the blow out for feed in tariffs and rebates for rooftop solar – How much of it was taken up by home owners (so called well off greenies and yuppies) and how much by government bodies such as schools, local councils, community centres etc?
When I look around there are lot’s of homes with PV on them, true, but the really big installations mostly look to be those government owned buildings. Is there any breakdown of where most of the takeup has been? How does that reduced energy costs for the latter impact their budgets? Does is free up money that then goes to better services?
@adit
Your whole comment is meaningless because you either you forgot that inflation exist or you don’t understand mass money printing’s effect on inflation. When you print money the money supply of the economy increases and it will cause inflation, whether or not the unemployment rate is at 20%. It doesn’t even matter how low the economy’s demand is at any mass money printing will just be Weimar or Zimbabwe. When that level of inflation happens the first thing it will affect is the economy’s international competitiveness furthermore rising unemployment rate, THEN the currency depreciates like junk as firms tries hard to sell off their product along with creditor nations charging interest rates tens and hundreds times higher than loan shark; which then forces the central bank to print more money and it ends up in a money printing cycle. Foreign debts will not in real term be serviced in this case as the exchange rate depreciates the value of the loan increases as well. Local price level will rise so fast that deficit spending will not keep itself up as the increase welfare level and labour incomes generated by this money printing will be gone in days and labour price will be so high that the central bank will have to print more money to afford labour. No economy has successfully printed money out of their foreign debt trap in history and I don’t think Greece will be the first if it tries to do so. Germany’s exchange rate in Weimar era was 4 trillion:1 USD, Hungary had a 41.9 Quadrillion inflation rate for the year ended July 1946, and Zimbabwe? There are also tonnes of hyperinflation examples you can check for yourself although they are not as serious as the above three it’s more than enough to prove money printing solves nothing.
Argentina never had a growth rate of 9% after the default and until the GFC.
@Tom
That’s a theory Tom, but there’s no evidence in practice, monetarist theory was discredited long ago.. Look at Fed quantitative easing – bernanke grew the money supply at unprecedented levels, the USA is not experiencing hyper or even high inflation as a lot of alarmists were predicting – and let’s be honest, that’s what matters, not low to moderate inflation. Your example of Weimar germany bears no relation. Its debts were denominated in a currency it was not the issuer of. Hyperinflation is more than just a monetary phenomenon. Weimar was operating on gold standard not a fiat system which is what i’m saying Greece needs, not to mention its productive capacity had been completely destroyed by the war. Zimbabwe, as i said i don’t know enough about it to comment but i’ll have a read as it keeps coming up, but i’ll hazard a guess and say that similarly the root causes there was not money printing but rather systemic problems that lead to money printing – i’ll do some research here.
So can i bring it back to the point. I’m talking about Greece’s inability to issue its own currency being a constraint on operating the necessary fiscal policy for the downturn it is experiencing. Bizarre that everyone is worried about inflation, even though the world is in a debt-deflation. Some inflation is good because it will reduce the magnitude of debt. Nowhere have I said countries must spend their way out of it though (excessive spending would indeed be hyperinflationary) I’ve said countries need to be able to exercise fiscal policy. The US did it, although in a stupid manner where funds were given to banks who sat on it as reserves – We did it here with Rudd’s handouts and it a real effect on the economy because it was given to households who used it to pay down their debts; it certainly wasn’t hyper-inflationary. the US and Aus have no solvency constraint on conducting that fiscal policy, even though US debt is 99% of gdp.
So do you think that if Greece conducted its own monetary policy via its own central bank issuing the drachma its level of public debt denominated in its own currency would be a problem, and austerity measures would be required? It wouldn’t, on both counts; Greece would still have problems but it could go about solving them using considered fiscal policy based on what Greece deems appropriate and not technocrats at ECB and not germany.
re: argentina; 8.8% gdp growth in 2003, 9% the yr after, and steady until 08/09. i just checked the figures on google, i suggest you do the same.
Hi Ernestine Gross – there is a very generalised discussion of the MMT approach to modelling over at Heteconomist if you are interested: The General and the Specific in MMT
Regards,
jrbarch
@adit
I learn about Greece by listening to Greek Australian people in addition to listening to senior economists, particularly those with a math-econ background (including the owner of this blog-site) and I benefitted a great deal from studying Professor Geanakopolos work.[1]
There are a few bits of information I’d like to pass on to you:
1. Greece has a sustained ‘primary budget deficit’. A ‘primary budget deficit is defined as deficit before interest. True, if Greece would still have the drachma, the shortfall of revenue over expenses could be met by ‘printing money’. True, this would not be a major problem if it would be a once-of or a once in a decade event – the exchange rate might move. But what if it goes on and on and on? Sooner or later the value of a drachma in terms of say the euro would be difficult to express in the fourth decimal place. And, we haven’t even talked about interest rates, assuming all debt would be held domestically and assuming there would be a banking system. In which currency unit would international trade of goods and services take place?
2. It is the Greek government who revealed that there is (and has been for a long time) a serious record keeping problem in the national accounts (I understand this to be a different problem from that of often substantial quarterly revisions in say the data issued by the ABS). This means decisions have been based on false information.
3. A Greek Australian told me that ‘inflation’, as experienced by people, started in Greece with the adoption of the Euro. She made an interesting suggestion. In her opinion, Greece should have first had an internal devaluation (say 10 ‘old’ drachma’ = 1 ‘new’ drachma) and then convert to Euros. In a purely arithmetic sense, this would not make a difference. But it is clearly easier for people to mentally convert 2DM = 1Euro when checking prices then to compute say 105.701 = 1 Euro. (My numbers are made up to illustrate the point.) Profiteering might have been a problem from day one.
3. The memo of ‘the northern Europeans’ consider ‘the southerners’ as lazy is, if I may say, stupid. Surely it is obvious to everybody that Greek immigrants to Australia or to Germany or to the US are working just as hard and are just as intelligent as the people in these countries. Could it be that the quality of the ‘technocrats’ differs? Could it be that there are some special interest groups in Greece who seek to preserve their privileges? I don’t know but it has crossed my mind.
4. Debt introduces the risk of ‘discontinuities’ in market economies. A discontinuity occurs when default occurs. If relatively small defaults occur more or less at random then the system (together with social structures such as family support and social welfare payments) seems to cope with these ‘little’ discontinuities. But what if the value of the default is ‘big’? Well, this is where we are at in Greece regarding goverment debt – a ‘crisis point’. Those who say that Greece has already defaulted are correct in the sense that the writing off of debt by those banks who bought it in exchange for cash loans constitutes a default on a fraction of the total debt. The latest write off may not be the last one. The way I see it is that the EU ‘technocrates’ (to use your term) consider a managed default to smooth the effects of a major discontinuity. But then I appreciate that some people have a big and sensitive ego that overrides technical skills.
5. Your data on Argentinia’s gdp growth rates are meaningless out of context. Moreover, Argentina can hardly be compared with Greece in terms of natural wealth per capita.
6. The need to help the Greek population is, I understand, very much in the mind of the so-called EU technocrats as well as in the mind of people in the EU. Stirring nationalistic sentiments, by contrast, is not helpful.
2. The primary deficit in Greece
http://en.wikipedia.org/wiki/John_Geanakoplos
Please deleat “2. The primary deficit in Greece ” in post #27
@jrbarch
I am afraid, time is a limiting constraint for me to read on discussions and assertions as to methodological differences. But I’d very much appreciate notification of a formal (math econ type) theoretical model of MMT.
@Abhoth the Unclean
The idea that possession of a conscience is widespread on either side of the aisle is remarkable. But then I suppose they can fake that as they manage to fake everything else.
Does anyone have any thoughts on the new US base that slipped so quietly through the news while Obama was here?
Also, did you here about rats having more empathy than humans?
here
http://arstechnica.com/science/news/2011/12/rats-show-empathy-will-come-to-the-aid-of-other-rats.ars
http://www.livescience.com/17378-rats-show-empathy.html
i wonder what rat conversations will be like a few million years in the future when we are gone and they have evolved into the dominant mammal:
“yes son, humans were nasty vicious creatures that preyed upon each other and often tried to wipe us out”
“why dad?”
“well son, we think it’s because they systematically eradicated the humans that showed signs or caring for each other – somehow they thought that caring was not natural”
“wow dad that’s amazing. Can i go play with the cockroaches now?”
“sure son, have fun”
pop
http://thepeakoilpoet.blogspot.com/2011/11/model.html
@Freelander The only thing they can’t fake is their fakeness. I wont even be able to vote green anymore since since Bob suppored the useless carbon tax. Anyone with the faintest tinge of green knows that new technologies and taxes are useless – we need to stop using using old king coal
@adit
If Greece were to devalue its currency in two stages, with the first stage being the conversion of Euros to Drachmas and the second stage, eg, being a float and depreciation, it would cause runs on Greek banks as people hurried to convert their Euro deposits to currency which they could convert into Drachmas at the later, more favourable rate.
@adit
I generally agree with your arguments, but I think using the US as an example of growing the money supply whilst not affecting inflation is a bad example to use as a generic one. The US is a very special case as it’s a benchmark currency and is less prone to serious devaluation. If a sovereign currency is devalued, the cost of imports must rise surely? These costs must be passed on right through the economy, even to a non-trivial percentage of the export value given the magnitude of importation in most global economies?
I also agree that a well managed economy can mitigate the inflationary pressures imposed from a heavy currency devaluation, but wouldn’t that also increase the potential for foreign acquisitions and takeovers of private and even public assets?
Aboth, he who dwells beneath great Voormithadreth, how is it possible for the carbon tax not to cut coal use? It makes burning coal to generate electricity more expensive and so less coal will be burned, as electricity suppliers like money more than they like not having icecaps.
@Troy Prideaux
The key thing about the US is that short term interest rates are at their zero lower bound. This makes money a very close substitute for short term securities, and decreases the velocity of circulation of money, meaning that the money supply (or in this case monetary base) can grow a lot without effecting nominal income or inflation.
Exchange rates do not have much impact on inflation. For example the big depreciation of the US dollar in 1985-88 did not cause inflation to rise. And that was when the output gap was small. Now with a large output gap, the US dollar exchange rate could fall dramatically without generating much inflationary pressure.
@Ronald Brak Just take a look at Europe’s carbon tax and get back to me. It’s too late to increase the churn and the bulldust. Consider the money given away a few years ago for people to spend on flat screen tv’s as a lost opportunity. Just imagine a concerted effort to develop solar in central australia to sell into se asia. selling a renewable, free resource make more sense than digging holes in the ground. Anyway dig far enough and you will find me with the Great Old Ones and then look out …
@adit
Actually you are right abour Argentina’s growth rate, my apology. However the point about inflation, there is one problem as it will decrease the spending power of consumers which means the demand level of the economy will decrease. To inflation out of debt deflation the first thing you need is that the income level of the economy rises to keep up or above inflation rate otherwise it will have no effect or worsen the actual demand level of the economy. Rudd’s stimulus is different because it is used to in an attempt to increase the output gap to keep growth rate at average annual growth rate, unless Greece starts off aiming little improvements in output gap like Rudd’s stimulus package then it wouldn’t cause much inflation; if not any large stimulus will have inflationary pressure which reduces the effects of the stimulus overtime and may make things much worse. In a free market economy where labour wages are not regulated the only way to do this is via government cash handouts similar to Rudd’s to keep up with inflation (if firms give wage rises close to inflation a lot of problems nowdays won’t exist). But the problem are the banks (local and foreign), when inflation rate is high the banks will charge higher interest rate to cover the cost of inflation. Local bank interest rates can be regulated (deliberately making the banks lose on old loan, no banks will issue new loans in this case however) if the government are not being held hostage by the banks (political problem which made US where it is now), but the government can’t control foreign loans. A well managed economy can manage local demands, inflation and print money but those requires hard regulation such as price control and interest rate control etc which kills off the free market ideology; do you believe the Greek government can toss all the neoliberals out of politics and power when they are the ones whos holds the most power in the modern Western Societies?
Like what Tim said in #34 nominal income of the US didn’t really get a benefit from the increase in money supply which is also one of the reason why US doesn’t currently have an inflationary pressure. Also please don’t forget the low interest rate on US foreign debt mainly because their currency is being used as reserves by many countries including China.
@The Peak Oil Poet
Yes, whilst rate do have some work to do, mostly on their personal hygiene and their perceived public personae, they, unlike most humans, are intelligent, innovative and caring. They have also been observed in experiments elsewhere, organising drug cartels, prostitution and food monopolies. Food for thought eh?
Aboth the unclean, looking at the EU carbon tax makes me think that putting a price on carbon works. It also makes me think our system is much better organized. Of course, a good part of that is probably because Australia is not a mishmash like the EU. And I think selling solar power to South-East Asia would be a bit of a hard sell:
SALESPERSON: Have we got a deal for you! Solar power stright from the beautiful central Australian desert delivered straight to your homes!
SOUTH-EAST ASIA: Using solar panels that you bought from us?
SALESPERSON: That’s right!
SOUTH-EAST ASIA: And just how do you plan to get the electricity to us?
SALESPERSON: With a vast undersea transmission infrastructure built on a scale the world has never before seen!
SOUTH-EAST ASIA: You do realize the sun shines in Asia?
@Ronald Brak Ok so I let my typing fingers run ahead of my brain a little but there is no received wisdom stating that all innovation and manufacturing has to be from Asia, it is just that we have positioned ourselves so that this is the case. Having the sunshine is not the point, having the clean energy is. I still insist that environmentalism is not just about replacing one set of technologies with another or making laws that are essentially compromises. What is it about the EU carbon tax that makes you think it is working in this year of unprecedented carbon emissions? Technological change is important, but it will protect the biosphere only if we also tackle issues such as economic growth, consumerism and corporate power. Carbon trading, like carbon sequestration, is the “Fat-free Hamburger” solution. In order to find a solution you just string together some popular aspirations but you have to be careful not to try and explain how these fit together.
Don’t forget the context. There are those who maintain that we will save the biosphere by adopting nuclear energy, GM crops and geo-engineering, and the world will run like clockwork on these new technologies. Without a critique of power, techno-utopianism is pure fantasy. Nuclear electricity and carbon taxes may indeed be part of the solution, but the real climate challenge is not getting into new technologies, but getting out of old ones. This means confronting some of the world’s most powerful forces.
Reading blogs has led me to increasingly ponder the way that people’s minds actually operate. One incentive to this process was Ernestine G. expressing her reasonable desire for ”a formal (math econ type) theoretical model of MMT”. I have never seen one other than as a depiction of the sectoral balances, or some work on the intemporal budget constraint by Scott Fullwiler! Ernestine, if I recall correctly, elsewhere referenced John Quiggin’s formal model (which I have never seen cited as predicting the GFC) as a comparable or perhaps exemplar; MMT on the other hand without modelling, predicted the GFC twenty years ago! One could begin an inquiry just on these two simple externalities.
A bridge for example can be described in a series of formulae; perhaps even one master equation. But as everyone knows, there are layers of meaning in a bridge, and layers of significance. In the end, human beings are involved whose appreciation and experience of the bridge cannot be formalised or formularised. Therefore any formal model is a tool with limited scope – no problem when part of the analysis; a mathematical tool just as handy as a psychological, artistic expression, philosophical tool or cartoon character if used correctly.
However, the mind builds up layers and layers of ‘learning’ that over time, we may come to see and experience reflected in the world around us as incomplete; or perhaps veiling more than is revealed. From age 4 or onwards, the ego too is under construction. Many people identify so closely with their minds, that if one dismantles a favoured conception, they feel personally under attack. The ego reacts because it is one of the most deeply ingrained ‘waves in the mind’. I don’t know of any university that trains its students to regard the mind as an external tool, imperfect in its operation and limited in production. Or explains ego as a vortex of energy within the mind that actually produces nothing. Instead ego (especially the academic variety) is placed on high horses or pedestals; much to the amusement of ordinary folk. People ignore (= ignorance) how vulnerable and comical a human being can be, and the vagaries of mind! Mind as the inefficient tool that is the creator of all of the world’s problems, is also held out to be the only solution? Mind (to my mind) is lost without the human heart to guide it.
Everything one does in this world sums to zero (that’s my idea of maths)! The breath is a vertical transaction ….!
Thinking about thinking, I have paraphrased this contribution of a Tibetan monk below:
* A word on paper or an uttered sound is a Symbol that masks or reveals Meaning – meaning, in turn, masks or reveals Significance;
* Meaning and significance are held in the mind of the creator of the symbol – but not necessarily the observer – therein lies both art and inconsistency in communication and a prime source of much confusion in the world;
* "The basis of correct knowledge is correct perception, correct deduction, and correct witness (or accurate evidence)". [Patanjali];
Applying these constituents of significance, meaning, symbol and correct knowledge to, for pointed example, the IDEA of perpetual Govt. solvency; and whether or not it is actually true (TINA) that Govt. must borrow and tax in order to spend a pre-existing commodity money, acquired from markets – (or indeed to any concept using any tool): effective contemplation is only possible when the mind is sufficiently concentrated, free of memory and ego, and Intellect is allowed to function without previous modifications of the mind controlling.
Confusion is complete when a whole society believes something to be true: e.g. the belief of the Aztecs that without human sacrifice the World would stop (Austerity) – or, the earth is flat and at the centre of the universe (TINA). Firmly believing in the evolutionary capacity of human kind’s moral nature as well as its physical, mental and emotional nature, I see no reason why Capitalism should not be relegated one day to another disquieting chapter in human history such as the old slave economies or days of animal warfare.
Often one meets on the blogs egos crossing swords, or minds fighting it out with concepts. On the other hand, there are IDEAS out there being tested and that is a good thing, thoroughly pummelled to make sure they withstand the ravages of time. That is why MMT should never be dismissed outright, when the originators of MMT are universal in their declaration that all such dismissals to date have been based on confusion, and not any discovery of disparity in their theory. They seem quite eager to find some real fault in their theory, and are after all, in possession of the same mental faculties as everybody else, for better or worse. There is no harm in being open minded! And there is no harm where East meets West in understanding mental discipline, or questioning the nutrient of products on the tertiary supermarket shelves.
jrbarch,
You may wish to consider a much simpler reason for me asking for a econ math type model of MMT than the words your mind has come up with. My reason is simple. An econ math type model allows the reader to ascertain very quickly what it is that distinguishes the so-called ‘modern monetary theory’ from existing monetary theories.
Incidentally, this approach facilitates ‘East meeting West’ and reducing the risk of confusion.
As you say, there is no harm in being open minded. I assume this also applies to you.
jrbarch, I agree that the west would benefit significantly from understanding more fully the wisdom of the east. There is far more to Buddhism than the Dalai Lama.
Surely the solution for the problem of ego, is to understand, as Eastern philosophers do, that individuals are essentially a part of a whole? Our minds are not purely individual; we evolved as part of a group and in the context of a functional group the individual ego takes its rightful place and derives maxium fulfillment when maximising the group outcome. Whereas in the search for individual freedom, ego becomes a problem for the individual as well as the group.
jrbarch
Well, if i had not had such a great education i’d almost be taken in by all of that.
But I wasn’t because I have had a great education and am up on just about all of the terms and concepts you craft together.
I will give you top points for artistic merit though even if it has been used to mislead.
🙂
As for MMT – there big elephant in that room is a centralised government – one has to assume that such is a good idea. MMT basically defines a system of control through money. I’d rather not have that thanks. I’d rather be free with all the down sides that might entail.
pop
@jrbarch
I challenge the MMT crowd to come up with any regression model that shows that the NAIRU/natural rate of unemployment is 2%, and passes all of the standard diagnostics for serial correlation, heteroskedasticity, cointegration and so forth. Even with all of the data mining in the world I doubt that one could obtain such a result.
Econometric analysis that is done carefully, without data mining (eg using the Akaika information criteria to select the lags on dependant variables) , is much more likely to put the NAIRU in the 4%-5% band. Not ideal, but it means that programmes like job training or wage subsidies for the long term unemployed and so forth need to be used to lower unemployment below this level, rather than demand managament.
Profr Quiggin is right about monetary financing of even fairly small deficits. With monetary base at 0.5% of GDP it would be a recipe for galloping inflation.
@Ronald Brak
Given that coal at the minehead is $US15 to $40 per tonne and the sale price is currently over $110 I expect the fossil fuel based industry can absorb a lot of carbon tax @ $AUD23 as well as resource rent tax and remain very profitable.
And it’s not even a carbon tax that applies to exported coal – ie most of the coal that Australia mines. But even the minimal amount on the mining processes themselves is fiercely opposed. They aren’t stupid. Greedy, immoral, selfish, shortsighted, egotistical… sure, but not stupid.
It’s more that it’s the thin edge of the wedge, to be strongly opposed on that basis, because, at some level, they know the climate problem is real and the BS denial campaign is only going to delay things so long. That wedge will have to be hammered hard and relentlessly to ever turn the fossil fuel juggernaut from an accelerating monster that will eat our future into an industry in serious decline.
@Tim Peterson
Please have a look at “Full Employment Abandoned” W. Mitchell and J. Muysken E. Elgar 2008
That book contains a critique of the concept of NAIRU and a proposal of an alternative full-employment policy which is not crude demand management leading in some cases to inflation.
Inflation is exactly what is required in Greece. That would be the whole point of going back on the drachma.
Their major problem is one of competitiveness in that real wages are too high. There are two ways of lowering real wages. Lowering nominal or money wages (deflation) or lowering real wages via inflation. Neither is costless but history and logic suggest deflation imparts greater costs on an economy.
@MMT
http://pragcap.com/why-i-became-an-mmter-this-year
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