Sandpit

Comments seem to be veering off-topic, so I’m opening a new sandpit for long side discussions, idees fixes and so on. In particular, this includes MMT-related discussions. I’m planning a post which will address some of the arguments raised by MMTers and others as to when, if at all, the government’s budget constraint is binding.

62 thoughts on “Sandpit

  1. On one point in particular I argue that MMT is holding to a rhetorical position rather than a real position and I have what I believe is a neat and simple logical proof of that fact.

    That is exactly the value of the insight of MMT.
    It is the only way to get the emotions out of the way to get to the truth. Rhetorics.
    What the real position will give you (real as in what you presented as goods and services) ?
    It will give you only Who owns what.
    Money or nominal terms will give you who can potentialy get what if someone else is ready to give it away for money. What is real? Money or Goods and Services?
    So, money is not real, only what you can get for it is real.
    So, money is just a notion of what you can get. Rhetorics
    Untill you get free of emotions about money, you will not see it as what it is and MMT is doing that trough accounting sense.
    I would always stop at “but that is taking away from …” and did not understand MMT untill i crossed over such thinking and embraced only the nominal sense of money. Now i understand that it acctually means “but that is giving more to …” without taking it away from anyone.
    Or taking it away from everyone in very small ammounts, not even measurable ammounts (low inflation as a perfect progressive tax).

    Untill you understand that G&S are real and money is not you can not understand that imports are free goods from the country that is willing to give their resources for non-real money. It is accounting matter.
    So Australia is giving away their rescources for non-real stuff, other thing is that it gets other stuff for that non-real thingy.

    But other point is more important; savings funds for retirement.
    Imagine a generation with a great savings for retirement in financial assets. Now imagine that it is a last generation on the earth, no newborns for 60 years. Can those retirees take retirement and live off of saving funds? No, they can’t. Who is going to make stuff that they need?
    Retirement funds are useless in a real sense, they are only a meassure of claim on future productive capacity. Accounting meassure.

    Btw, year 1 is 1862 with “greenbacks” or United States Note

    http://en.wikipedia.org/wiki/United_States_Note

  2. Does paying taxes destroys money? yes, it does, but only electronic money.
    Is there a storage for electronic digits?

  3. The MMT-ers insist that their view that the taxes destroy all the fiat monies so taxed is the only valid view and they actually seem to insist that accepting points like that are crucial to accepting and understanding the entire edifice of MMT. I say, yes, you can look at it that way and you can also look at it the other way. It makes no functional difference to the budget outcome or to substantive questions about the GBC. Even if the National Accounts are done that way as an accounting convention it matters not. The National Accounts could be done the other way (showing tax receipts as income). Conventions are exactly that… conventions.

    Jordan, if one takes the (acounting) position that taxes destroy the fiat monies thus taxed then the form of the fiat money tax receipts makes no difference. They are indeed all destroyed. Their form at the beginning of the tax payment process, as “paper money” or electronic data representing money makes no difference.

    What determines whether the tax receipts are to be regarded as “destroyed” or “re-circulated” is how the other part of the national accounts is done. If the govt (Treasury plus Reserve regarded as one entity) make a book-keeping entry that says all exenditure is new fiat money then ipso facto the tax monies are destroyed. If the govt (Treasury plus Reserve regarded as one entity) make a book-keeping entry which says total expenditure (in a deficit budget) is some new fiat money plus tax monies (taken as income and now in account) then ipso facto the tax monies are re-circulated.

    The only numbers which essentially matter to the real economy in this context are the total amount of high powered money (M0) in circulation and the year on year change in that base. Though “what matters”in this context might extend up to at least the M2 supply but a real economist would know that better then me.

  4. @Ken Fabian

    “Ikonoclast, the chess vs go cultural difference is almost certainly overly simplistic.”

    I agree, it was just a lead-in to my little analysis of Chinese grand strategy. However, I think my contentions that “Strength is developed not through expeditionary force movement but through civilizational occupation of territory.” & “Resort to incremental occupation and consolidation is patient, indirect and defensive militarily. To achieve expansion whilst fighting an essentially defensive campaign is almost a paradox yet this is the Chinese way.”, are contentions that gel very well with the Art of War and the notion of “winning without resort to battle”.

    However, winning without resort to battle might require an opponent wise enough to know that he (the opponent) cannot win. It can mean being intimidating and impressive enough to drive consideration of battle out of the opponent’s calculations. It can further mean being adriot enough and deep enough in strategy that you can manouvre the opponent to defeat without fighting a single battle. The crisis point comes when the opponent is in zugzwang or compulsion to move or make a decision. He cannot simply sit. A military commander in zugzwang finds he has no good options left. Such a commander has a force which is surrounded, trapped or exhausted in some manner. It is cut off from supply and reinforcement and has inadequate forces for a breakout. Further defence leads to defeat. A breakout attempt would lead to a worse defeat. Like Mack at Ulm against Napoleon. At that point it might be wisest to surrender without a battle depending on the mercy and honour of the ascendant commander. It it’s Khengis Khan you might was well attempt the hopeless breakout and die!

    Also, a key misunderstanding is that it is only armies that defeat armies. Many times in history it has been disease or starvation or winter or a desert that has defeated an army. The other commander sometimes through luck and sometimes through design has “enlisted” these natural forces to defeat the enemy without having to give significant battle with his own army. Of course definitions matter too. Winning without “battle” does not necessarily mean winning without skirmishes and minor encounters. A “battle” is a major encounter.

  5. @Ikonoclast

    What determines whether the tax receipts are to be regarded as “destroyed” or “re-circulated” is how the other part of the national accounts is done.

    Exactly. Full stop.

    But in order to explain that fact MMTers use the metaphor “destroy” money. Effectivly or in real terms it does mean the same.
    Only way to know how much tax is paid is by looking at ballance sheet. There is no ill effect from not knowing. Deficit is a number, not a real ill effect for sovereign currency with floating exchange rate, like in US, AUS, UK, Japan.
    Surplus is also a number when looking at the national macro.

    Yes, it is important to look at Treasury and FED as one entity: Government. There is a law that all profit FED makes from holding Treasuries is returned back to Treasury without accounting entry.
    So deficit is a number that Treasury owns the FED, and they are the same entity, right?

  6. I ment, Treasury gets the funds from FED for deficit spending and gives Tresuries to FED in exchange. Fed then sells Tsys to banks who whish to replace their requierd cash reserves (requierd in US, not in AUS) that do get interest for, but which is lower then interest Tsys provide.
    To lower the interest rate, FED buys back Tsys from banks or other investors.
    Do you see circular arangement there? So, efectively Treasury owes funds to FED at maturity of the Tsys, which is the same entity, government.

  7. Another point.
    Bank reserves are at the FED. Which are used to buy Tsys, which are used for deficit spending.
    Amount of credit determines bank reserves.
    Amount of loans is always growing, hence bank reserves is always growing hence the need for more and more Tsys.
    Only difference in paying off or not the government debt is in the different interest banks receive for their reserves.
    But FED wants to have Tsys in circulation so it can implement monetary policy easier and quicker. Without Tsys there is only Overnight window with which FED can do monetary policy, and not all banks need to borrow by Overnight window.

    Everything is just accounting.

  8. @Jordan

    I think we are in broad agreement. In the national accounts everything is just accounting. There is still a real economy out there. It’s the relationship between the accounting and the real economy that is the real issue. MMT and good Keynesian counter-cyclical economics both, in my view, view that relationship reasonably realistically.

    The point is not to fetishise money, not to fetishise surpluses and so on. But it might be best to leave this discussion until the GBC sandpit is posted.

  9. Thanks to only nominal value of government accounting, MMT is important in showing that governments can painlessly and positively affect the real economy when needed.
    Of course there is also a strong chance that not knowing the facts government can also negatively affect and even abuse MMT knowledge and crash the economy.
    “Fiscal cliff” is a present example of not knowing the facts. Chasing surpluses by AUS gov is another example.

  10. Actually the correct way to macro is well known but as in AGW there is a whole denialist industry manufacturing false scholarship, false perceptions and doubt. The purpose of this approach is to create a small mega-rich oligarchy and put the rest of the global population onto breadline wages and under control of the national govt and armies which the oligarchs have in their pockets in most countries.

  11. Going on about how climate science is settled and the debate is over is bad tactics for climate alarmists.

    Attempts to close the debate in this way just provoke suspicion among those who expect some attempt to persuade rather to instruct them from on high.

    Presumptuousness is never a good influencing strategy nor is dismissiveness. Listen here you stupid dupe of corrupt corporate lackeys converts few and leads others to suspect you have no real arguments to offer.

    A defining feature of the growth of knowledge is knowledge grows through critical discussion and that is often by displacing the received wisdom. We do not know it all.

    These instincts about interpreting the world with an open mind came well before any knowledge is required of the philosophy and sociology of science.

    Biologists spent great effort over the many decades to rebut creation science in a polite methodical manner designed to change minds through facts and reasoned arguments.

    Biologists do not act smugly, nor insult their opponents or question their sincerity. Biologists simply said that they would benefit from better information.

    Darrow’s careful cross-examination of Bryan, and the play and movie Inherit the Wind caused millions to reject religious-based opposition to the theory of evolution.

  12. JR:

    “Biologists spent great effort over the many decades to rebut creation science in a polite methodical manner designed to change minds through facts and reasoned arguments.”

    Stop making stuff up JR. Certainly the most famous debate between evolutionists and obscurantists was at Oxford between Wilberforce and Huxley.

    In this debate, the most memorable exchange featured a fine example of Huxley’s ad hominem invective. According to one eye witness:

    “In the Nat. Hist. Section we had another hot Darwinian debate… After [lengthy preliminaries] Huxley was called upon by Henslow to state his views at greater length, and this brought up the Bp. of Oxford… Referring to what Huxley had said two days before, about after all its not signifying to him whether he was descended from a Gorilla or not, the Bp. chafed him and asked whether he had a preference for the descent being on the father’s side or the mother’s side? This gave Huxley the opportunity of saying that he would sooner claim kindred with an Ape than with a man like the Bp. who made so ill a use of his wonderful speaking powers to try and burke, by a display of authority, a free discussion on what was, or was not, a matter of truth, and reminded him that on questions of physical science ‘authority’ had always been bowled out by investigation, as witness astronomy and geology. A lot of people afterwards spoke… the feeling of the meeting was very much against the Bp.”

    Never underestimate the power of ridicule.

  13. Jim Rose, I see you’ve used the phrase climate alarmists. So far I don’t know anyone whose used that phrase who wasn’t confused about gobal warming. So I was wondering, do you think the following:

    1. Carbon dioxide is a greenhouse gas.
    2. Human activity has raised the level of carbon dioxide in the atmosphere by about a third or more since the start of the industrial revolution.

    If you just want to answer yes, no, or I don’t know, that will do to satisfy my curiosity.

  14. @Jim Rose

    Basically, no strategies or tactics of logical and scientific debate work to persuade AGW denialists, science denialists and religious-ideological funadmentalists.* It’s been tried countless times and it does not work. When minds are closed and impervious to empirical evidence because they are walled up behind religious and ideological dogmatism such minds can never be changed; not by empirical evidence and not by anything else. It is quite hopeless. Such people must be ignored, pitied but left behind in debate terms. A new, better educated generation is the only hope.

  15. Scientific research underpins the modern world. Tens of thousands of studies are completed each year, and trillions spent on adapting industry and society to the results of that research.

    Every field of human activity is in a constant state of adjustment to new scientific evidence, yet only two areas of enquiry cause a breakout of scientific criticism on the political right: evolution and climatology.

    It’s a bit hard to take accusations of alarmism seriously when they emanate from groups that only take an interest in science when it threatens the interests of churches and corporations.

  16. @Jim Rose

    Going on about how climate science is settled and the debate is over is bad tactics for climate alarmists.

    It’s always about the tactics fo you isn’t it Jim? A little while back you were concerned about my debating skills. Needless to say, you reach immediately for the ‘alarmist’ meme, which is de regeur amongst the enemies of effective policy on GHG abatement and protection of the ecosystem.

    Attempts to close the debate in this way just provoke suspicion among those who expect some attempt to persuade rather to instruct them from on high.

    No they don’t — not at the margins. ‘Suspicion’ is for people open to persuasion which in turn presumes a capacity and willingness to reason, apprehend salient data and so forth. There’s no basis at all for thinking the majority of those appealing against public policy action on this matter have these attributes. To the extent that they anticipate efforts to ‘persuade’ them they most likely see these as attempts at chicanery and flim flam, assuming they are not simply disingenuous enemies of the science on the basis that they prefer the interests of the polluters or the elite or are suffering from pervasive angst at the threat from socially or geographically remote authority.

    Biologists spent great effort over the many decades to rebut creation science in a polite methodical manner designed to change minds through facts and reasoned arguments.

    They did, but they haven’t been entirely successful. Even as these lines are being written, the GOP has nominated to the US Senate Science Committee a man who thinks evolution and the old Earth are ‘lies from the pit of hell’.

    Georgia Rep. Paul Broun said in videotaped remarks that evolution, embryology and the Big Bang theory are “lies straight from the pit of hell” meant to convince people that they do not need a savior. {…} “God’s word is true,” Broun said, according to a video posted on the church’s website. “I’ve come to understand that. All that stuff I was taught about evolution and embryology and Big Bang theory, all that is lies straight from the pit of hell.

    Although these are cranks, they are far from cultural oddities, especially in the US.

  17. Interesting:

    Fox Paints Birther’s Climate Change Antics As Serious “Dissent”

    Fox News portrayed the dismissal of British politician Christopher Monckton from the UN climate conference in Qatar as evidence that there was legitimate “dissent” against climate change being quashed. In fact, Monckton, who is known for incendiary antics and remarks, was expelled for violating the conference’s code of conduct, and protesters on the other side of the issue were also expelled for similar violations.

    Monckton was removed from the 2012 UN climate talks in Doha, Qatar, after impersonating a delegate from Myanmar in order to misleadingly claim that there has been “no global warming at all” for 16 years, obscuring the clear warming trend. He was subsequently barred from all future UN climate conferences.

  18. I’ve been subtly reminded on my definition of “modern” in modern money is incorrect and they’re quite right. Modern as in the last 5000 years would be closer to the mark. That is if I’m to be factually correct.

  19. @Fran Barlow

    I know it’s simplistic but I sometimes divide people into two camps based on my observations of them. These camps are;

    (1) Those who have respect for objective truth, value it and seek it; and
    (2) Those who want to grasp and win at all costs and care nothing for truth.

    There’s a rather clear difference between these two basic type, IMO.

  20. Fran Barlow, on tactics, was describing action on global warning as the great moral issue of our time wise?

    Pre-commitment are usually good as Schelling showed, but when you back down, you look very weak and insincere. Backing down because you are down in the polls suggests that you were insincere. Who backs down on great moral issues?

    Monckton’s latest publicity stunt is an example of robust non-violent direct action.

    Finally, see Why I A m Not An Environmentalist: The Science of Economics Versus the Religion of Ecology Steven Landsburg for this:
    “Suggesting an actual solution to an environmental problem is a poor way to impress an environmentalist, unless your solution happens to feed his sense of moral superiority.”

  21. @Jim Rose

    You jumped from the craven behaviour of politicians to a childish insult about environmentalists without once considering the widespread popular support for effective pro-environment policies.

    I’m actually quite happy for you to continue along that path. The recent US election demonstrated that a whole lot of ideas and principles that the Right routinely ascribes to a minority of leftist caricatures pulled out of the 1970s are in fact mainstream.

    The Australian Right will suffer the same losses as the US Republicans if it fails to realise that an ardent environmentalist who wants meaningful action on climate change is just as likely to be wearing a suit and working in a bank as selling homemade patchouli oil at a craft market.

    I’m okay with that.

  22. My approach to denialists has long been a simple question:

    What is the minimum evidence you require to accept that human activities are driving global warming?

    This is a question that any person committed to scientific scepticism must ask herself.

    However, no denialist has ever dared to answer this question.

    One may conclude, therefore, that those declining to provide an answer to this simple question are not interested in, or perhaps feel threatened by, scientific thinking. Were denialists mere sceptics, they would answer these questions. Their refusal to answer these questions identifies them as denialists.

    To be fair to denialists, I should provide the minimum evidence for me to cease to give credence to AGW:

    1. That CO2 is not as potent a greenhouse gas as mainstream scientists have measured and have reported in refereed journals.

    2. That human contribution to terrestrial CO2 concentrations are much less than has been measured by mainstream scientists, as reported in refereed journals.

    Care to take up the challenge, JR?

  23. @Katz

    It’s a mistake to think of this as a debate about science. The conservative instinct is to defend the ruling classes, which in this era are the business tycoons.

    There’s no minimum evidence they’ll accept as proof of AGW because they won’t accept any diminution of corporate power, in the same way right-wing Christians won’t accept any science that doesn’t correspond with a fundamentalist reading of the bible.

    Cory Robin’s written quite a lot about this stuff. Check out his blog and the book “Reactionary Minds”.

  24. @Katz

    A-hem, I’m reliably informed that so-called ‘peer-reviewed journals’ are just a lucrative line of grift for commie nihilists who are committed to enriching themselves with our money while condemning the world economy to stagnation. As such they can, nay, must be ignored.

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