Posts by BenWilson
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Hard News: #JohnDotBanks and all, in reply to Ian Dalziel,
Gets the message across.
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Hard News: The Base, in reply to Angus Robertson,
As a means of operation doesn't MMT mean the same thing "lets devalue our currency to that of the 3rd world, so that we can compete with the 3rd world"?
I don't feel qualified to answer, my understanding is that MMT isn't a single policy, but rather a recognition of the tools that can be used and how they interact, and it rejects the idea that some of them must never be used. I guess I should ask why it is that you think that is what would happen, and consider the advantages and disadvantages if that is what would happen. A high currency is not an obviously good thing - exporters are constantly hoping for it to go lower. It could counterbalance the effect of putting up the OCR, which seems to push up the dollar - then the OCR might be a useful tool again - when it's stuck at near zero it loses all power. A raising OCR would do a lot to cure our property inflation problem. By adding one tool the bag, we can get out of this trap. We could cool property inflation, do as we please with the dollar, and balance books, all in one move.
But I'm guessing here. Another consequence of having a non-simplistic economic model and theory is that there are multiple strategies that are possible, just as doubling the number of swords one is holding more than doubles the skill required in wielding them. I expect there are different ideas amongst the main MMT theorists, depending on the conditions that they find, and the exact nature of the economies that are being managed. It's not one size fits all, that's another neoliberal lie.
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Inflation seems fairly benign from here, but that hasn’t always been the case- and it’s the obvious reason Govt’s power to print money isn’t unlimited.
I don't know who has ever proposed that it isn't. It's a tool, that can be used within constraints to produce inflation and control unemployment, in a far more direct way than using debt as an intermediary. When Bernanke recently attempted to use it to prevent the recession caused by the deflation of the property bubble, he increased the money in print from $850 billion to $2.15 trillion over a year and a half, and managed to move inflation from -2.1% to 2.7%, which goes to show how much we overrate the amount of printed money in circulation as the key driver of inflation. More than doubling the supply of money contributed 4.8% to inflation. What people often don't realize is that the main source of inflation is debt, and the multiplier effect, which is not at all reliable. Doubling the money supply could have meant 100% inflation if the banks had done what Bernanke wanted and cranked out more debt. But they didn't do this - they had become risk averse and just kept the money. He would have got a much more pronounced effect from printing that money and just giving it to Americans to spend, or putting it straight into balancing the budget.
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Hard News: The Base, in reply to DexterX,
I won't presume to reply on Kiwi Nomad's behalf. I assumed the problem he was talking about was that private deleveraging as an economic solution means prolonged recession until that process is complete, because spending money paying down debt means not spending money on other things, such as goods and services from NZ businesses that rely on people buying their goods and services to remain in business. If the government is also doing the same thing, paying off debt by cutting back on expenditure, then they are fueling the same problem. As a solution, it is pretty much "let's push the economy into a Great Depression, because after that, things can only get better". Which is true, but it's obviously not the only solution. As a nation which still has actual sovereignty, we could expect more from our leadership than allowing the place to become Third World as an answer to our inability to compete with the Third World.
As I understand MMT, they are not against issuing fiat money to pay government bills as a way of taking control of inflation, because they believe that the currently popular method of lending money to banks directly and relying on the money multiplier theory is foolish. They believe the theory is false, dangerously so, banks are under no obligation to do anything good for the economy with the money they are effectively gifted and the government is thus completely hamstrung when it comes to controlling inflation - banks can issue debt or not, and charge what they like for it, depending on what is most profitable for them. It puts the entire economy in their hands, ultimately, because tinkering with taxation is politically hard and takes a long time, and because the tax take fluctuates as the economy fluctuates, the political power ends up going in reverse, the banks end up dictating all fiscal policy.
They are already able to do this to individuals - my bank can raise or lower the biggest factor of my cost of living, my mortgage, over a reasonably short amount of time. I have no real options if interest rates rise but to make cutbacks in my expenditure so as to manage the mortgage, and if it becomes unmanageable they can foreclose me.
I think Kiwi Nomad was suggesting (and if he wasn't then I'm suggesting it) that the major parties have fallen for the big economic fallacy of presuming that the government is in the same kind of situation that I am, powerless in the face of banks to do anything other than make cutbacks in fiscally tight times.This is a classic and massive mistake in neoliberal economic thinking. Governments interact in an entirely different way with the economy to the way individuals, or households, or even companies do. I can't levy taxation on other people, nor can I print money. The government therefore has an entirely different set of options to deal with the economy than I do - they can use both of those powers to balance the books at any time. The idea that they must rely on private debt and expenditure control to do so is a vast fallacy that would appear to go unchallenged by any major party. It ignores half of the possibilities and creates a problem which suggests that it is actually possible to bankrupt the government the same way an individual can be bankrupted, with the only solution being to sell off government assets. This is false, a huge lie which is so pervasively and widely believed that it takes me writing this kind of post to cover it when the twenty words I gave in the previous post should do, and even then, few people are convinced because ... I speculate ... it's a lie that's got so big that it has its own momentum.
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Hard News: The Base, in reply to Kiwi Nomad,
It's not rocket science!
No, it's not at all. In fact, it's the mainstream stuff that seems like rocket science. If making broken rockets is your bag. The idea that the government can't fix the economy takes years of indoctrination to accept, because it relies on outlawing practically everything that would work.
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Hard News: The Base, in reply to Angus Robertson,
Give us the skinny on this in 100 words or less.
I'll do it in 20. The money quote from the wiki article
...responsibility for avoiding inflation and depressions lay with the state because of its ability to create or tax away money.
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Yes, Key has always been smarmy, but opposition tended to go for a higher level of insult, accusing him of being outright evil. The lesser flaw can often be much more believable and telling as an attack.
Alternatively, the explanation -- and it seems much more likely -- is that he does indeed have a weakness in relationships with his colleagues.
Rather than them having a weakness in relationship to him? I really can't judge which is more true. All I can clearly see is their weakness in relationship to me, and his strength. But sometimes it's better to have the really strong players not in the leadership - sports teams are often very well captained by people who aren't the most outstanding players. Hadlee, for instance, was never a contender for captain.
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Hard News: The Base, in reply to Russell Brown,
My mum thinks he's arrogant and smarmy. So there's that to work on too.
Mine too. Exact same words were used. "Smarmy" became a drumbeat, I think. It's a lovely word for that purpose, because its meaning is not that clear, but it has a negative connotation. It's one of those ones people tend to remember only by exemplars rather than definitions. Taps us all right on the tall poppy, bringing back visceral associations of times we've been bested by people who were smoother than us. I think most successful lawyers would be considered smarmy by their enemies.
I'm not entirely sure how Cunliffe could overcome this one. I guess the main thing is for enough people to feel that he's on their side, at which point smarm is exactly what you want.
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Hard News: The Base, in reply to Bart Janssen,
It would be a pity if these speeches were basically a leadership coup in the making. I'd really like the Labour Party to start working on winning an election rather than having individual party members focussed on winning a seat on the front bench.
Totally. I'd go with the charitable reading - economic development is a plenty ambitious enough portfolio for Cunliffe's talent, and it's not like Shearer has said his mind is made up on everything and there's no room for any of his colleagues to have opinions.
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Hard News: The Base, in reply to Russell Brown,
To be fair, it was billed as the first in a series of speeches. I'm genuinely interested to see what he presents.
Yes, his quoting of Bernard Hickey was very interesting. Hickey has diverged substantially from the neoliberal consensus in some of his suggestions, and Labour even looking at some of them is incredibly heartening, if that is what is happening.
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