Forum Post: Lets go Krugman
Posted 11 years ago on Jan. 14, 2013, 5:01 p.m. EST by john32
(-272)
from Pittsburgh, PA
This content is user submitted and not an official statement
Why won't you debate already? 81,000 for charity.....that's a good chunk of cash.
This is moot point to debate; the monetary system itself is a broken, horribly wrong idea.
This system is devised on money being debt, and the insane proposition of ENDLESS growth. We live on a finite planet with limited resources, the oil is currently running out (getting dirtier and harder to get), the fish are depleted, hell,. wood is getting scarce. GROWTH is not a measure of stability, growth just makes the skim better for the pyramid system's masters the 1% banksters who endlessly pull in wealth from every use of money. The endless interest is what causes the wealth disparities in our society and the world, the monetary system that forces us to "invest" in the stock market or loose savings to inflation is the key to this trap of a pyramid system.
The 'economists' in these two supposedly competing camps are perpetuating the same lie.
There should be no inflation, money should be based on value not debt, and there should be no built-in skim system for the wealthy to generate endlessly more wealth.
Other systems are not only possible they are now required to see any growth of human dignity. Slow Money, Degrowth, Permaculture, Relocalize; these are ways forward for humanity.
I agree with you. With a world that has limited resources - designing an economic system that requires growth to prosper seems a little jacked up when you look at it over the long term....it's doomed to fail eventually.
"There should be no inflation, money should be based on value not debt, and there should be no built-in skim system for the wealthy to generate endlessly more wealth."
I agree with you on that as well.
I'm not sure this guy Murphy can really simplify Austrian Economics and Keynsian Economics this way. He has simplified the message too much ...and educated us too little. We have several interesting period in our economic history where we have needed government intervention to get money flowing, to get more loans made to small businesses, and in the depression the confidence of full employment under FDR went a very long way until the banking act of 1936 resulted in higher interest rates or tighter money policies again.
That said, the high interest rates under Jimmy Carter are also cited as a clear case for lower interest rates. Today, I say there is a cost to savers and to our future after 4 years of low interest rates in the USA. I say we should raise interest rates to protect Pensions and Retirements. But I say we need to keep money flowing in the economy and come up with polices to increase money flows. For instance big banks are not lending to small businesses. And TARP releif never went to home owners from 2008-2012.
I fall into line with William K. Black on Economic Policy. If we cut federal spending we go into austerity recession. MMT Economics is a step better than Keynsian and Austrian Economics. I'm not an expert, but we have to keep a certain money velosity in the US Economy so that money flows through the economy.
So what policies can help money flow, how can we get more small business loans going? Break up TBTF Banks. Initiate more small business loans from government sources or guarentees say below $1 M each to start to keep things cheap. Bring troops back from South Korea and germany causing building in the USA for Barracks and Training facilities and Maintenence facilities to stimulate US Workers and add dollars flowing in the USA.
The Austrians point is that the very reason you wind up with situations where it is believed you need stimulus is because of the stimulus that was injected which caused the recession you're trying to get out of. The great depression is an excellent example of this. The money created during the "boom" (the teens of the 1900 but more so in the roaring 20s) via fractional reserves is what caused the Depression (as per the austrians view). Rothbard layed this out and showed how the Fed expanded the money supply during this time period which increased leverage via fractional reserves and lowering reserve requirements. You can read his book for free online:
http://library.mises.org/books/Murray%20N%20Rothbard/Americas%20Great%20Depression.pdf
Murphy did simplify his statement on the website simply because it was a 3 minute quick overview....there's no way to sum up Austrian economics in that short of a time period.
I think that more loans and increased money flow is exactly what we don't need....as this is what fuels the process that sows the seed for the inevitable bust as businesses misallocate resources during this boom...as adequate savings haven't taken place in the market to justify the projects the businesses enter into during lower interest rates.
If interest rates aren't tampered with it creates a balance of savings and loans in an economy. When interest rates drop - they should drop because of adequate savings in the banks which allows the banks to drop rates and entice borrowers. Rates drop with adequate savings which spurs businesses to invest in projects which can later be utilized with the massive amount of savings that have taken place which allowed the drop in interest rates.
By artificially lowering interest rates (by printing money and pushing it into the market) you're bypassing the fact that savings need to have taken place in the market so that the people have money to buy what businesses are creating with the low interest rates. When the fed artificially does this it sends the message to businesses that they should be creating projects....but there isn't the savings in the market place to purchase these projects. It's a misallocation of resources by business because they've been sent artificial market conditions.
Not only that but artificially low interest rates are always created by injecting money into the economy...creating inflation and bubbles. Inflation steals from the people without taxation....and it generally hurts the little guy more than others. quick 3 minute video of how this works
http://www.youtube.com/watch?v=hx16a72j__8&feature=player_embedded
My explanation is pretty simplified as well...but goes a little more in depth than the website did.
More detailed overview but still in laymens:
http://hmscoop.com/
The problem with your explanation is that it makes sense to anyone familiar with financial management and some reasonable level of intelligence; there is no intelligence in government. The office of politician - political employment and all the perks it commands - will fade into obsolescence if they do not lend the false impression of affordable debt.
I hear ya....much easier to just pump a bunch of cash into the economy to create the short term benefits and boost your parties standing with the american people. People reading this will get pissed thinking I'm bashing Obama...republicans have done the same thing while in office...so all the Obama lovers out there can settle down...both sides of the coin do this crap.
I have no problem with attracting the ire of Obama supporters - he's a perpetual liar and a no-good dirty politician; I see no real significant difference between Democrat and Republican, except for the fact, that the Republicans were always far more successful at selling us the false impression of acceptable debt and good governance.
Okay, looks like I have to spend more time looking into this. I'll try to get back to you this morning. I was going to add ... we might be talking about jobs or maybe we should be talking bout jobs ... in order to put different economic schools into perspective.
In that
1 Small Business is the heart or core of US Economy, but they have been losing jobs and businesses to large agriculture, large retail, and other large corpoations (of course defense industry has gotten huge transfer of taxpayer dollars since 2001)
2 Federal Investment in the Economy covers a lot of ground, the biggest bang is noticed in security and defense applications which also has probably influenced Universities.
3 Does Austrian School say anything about where to invest in R& D or education or publics works projects ... sort of takes us into municipal planning doesn't it.
4 Does Austrian school look at investment and protection of Industry as the old german merchatilism did or ... as everyone knows our federal government is privatizing everything and heavily advocates big corproate interests.
Here is a video about how the federal government went after the US Post Office to privitize it.
http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=9478
Oh, maybe you are saying keep the federal reserve away from adjusting interest rates or get rid of the central bank actions regarding that... Let me dig into you links on this.
Bank operations are difficult to summerize. banks individually can tighten up lending policy when the economy needs it most. This is probably a central arguemnt of the Keynsians. Throw in the Central bank manipulation of interest rates ... Individual banks act differently.
1) Large TBTF Banks are now both commercial and Retail (home mortgages). They act globally and nationally. They have little incentive to risk loans to small guys far away who they don't know and don't know their place in the economy.
2) Small regional Banks supposely are the most efficient according to Stacy Mitchell on recent Ted Talk. They are close enough to the customer to understand him.
3) Small local banks can serve either mortgage or commercial market and may focus on customers and be more willing to loan.
Austrian School would have to address modern factors of International Corporations and Banks ... and how responsive they are to small businesses which I posit as being the core of the economy.
Nice to actually have a convo with someone who will look at stuff and be open to reading things they might not read under normal circumstances.
To get into your jobs discussion i would break Austrian school down into two areas:
1.) The money supply (interest rates etc.) and their theory of the business cycle which i think nails just about all of the booms and busts over the years.
2.) Government expenditures and jobs etc
So dealing with the second area -the austrians do believe in privatization to a large extent which might not agree with your views. They don't do it to be evil however...which most people think. They do it because they think that when government becomes involved in supporting the private industry - private industry ends up taking over the government....and hence the government now works for the corporations and not the people (Monsanto, Banking industry, Halliburton, The pharmaceutical industries, the military industrial complex which you referred to, big agriculture are all examples of this).
I'm on the fence with this somewhat...as i do think there are legitimate areas for government in which the private industry wouldn't perform on its own (such as a post office that was discussed in your video). I just think digging through how this process is done needs to be refined so as to avoid government takeover by private industry. So i'm back and forth on this point.
Austrians also believe that full employment and prosperity for people can be achieved when the monetary system isn't manipulated (point 1) which leads to the boom/bust cycle which is a source of much of the unemployment....as not many people have jobs during the recessions. Thats why i break austrian down into two areas..because i think a lot of people just see privatization and then their red flags go up and they don't look at anything further....missing out on their whole theory of the business cycle.
You said:
"Bank operations are difficult to summerize. banks individually can tighten up lending policy when the economy needs it most. This is probably a central arguemnt of the Keynsians. Throw in the Central bank manipulation of interest rates ... Individual banks act differently. "
Yeah definitely...they can act individually....but there are some key things that are controlled by the fed. The fed can raise or lower reserve requirements for banks which can expand and contract the money supply....and the fed can also inject or directly increase the money supply giving banks reserves to allow them to lower their interest rates. The fed does this by buying government bonds with newly created money.
This is one of the ways that austrians have been able to predict the many crisis over the years...they follow where this artificial money that was created is heading into the economy to spot the bubble before it bursts.
"small businesses which I posit as being the core of the economy"
I too agree with you on this point. That small business is the heart of the economy and needs to be given all the help it can get. This delves into point two from above again. Austrians i think would believe that when there is that corporate takeover of government that happens - small businesses get screwed...as government is run by the corporations which have the interest of keeping competition out of the market place to further their own interests. A great example of this is in the movie "farmegeddon" which you used to be able to watch online for free but they took it down...preview for it though which gets the point across without having to watch the whole movie:
http://farmageddonmovie.com/see-the-movie/
Basically what happened is local small mom and pop farmers are getting harassed by the FDA through big agra's biddings....trying to force them out of the market.
I understand you might not agree with these other areas...but don't let that persuade you from the logic of their theory on the business cycle. It's very interesting.
The great depression book on the mises website.....i think it really starts to get into the depression on page 55. The beginning is overviews and critiques. Page 85 is where it really goes into the expansionary phase which the austrians believe led to the Great Depression. Shows how the money was created in the economy etc.
Yeah, I pretty much agree with what you are saying. I did check some of the interviews of the director of Farmageddon just the other day. Right now I am reading slowly the intro of the PDF. The references to the Depression and recessions have me searching websites. Rothbard calls 79-83 a depression, but guess that is question. So far I like the statements he is making in the intros. He is making conclusions that make sense in light of the Reagan Administration policies. The expectation of Inflation is interesting, but is now complicated since our government data is so fouled up with it's basket of goods. We have inflation in Health Care, education, Houses, Autos, beef, bread, gasoline, and many things, but you would never know based on statements from Ben Bernanke.
I don't have a problem in principal with privateization, but have seen a lot of it in the military with contracting out all of the logistics almost. We know that contractors cost twice as much in the military. If third world employees are used on bases, we can guess the contracts are still very expensive even if employees are working for few dollars.
The other thing is the bankers influence in federal government, revolving door, regulatory capture ... is another kind of privitatization. There was story of an OMB analyst that could not do her job since a bank had been given the task and the responsibility. In the long run if you have core government jobs and you give them to private tech companies ... government employees lose the knowledge, skills, and control over the functions. Like if the bank took all the data processing and report generating for OMB. Then the computers are located at a banks, the system is a bank maintained system, the employees become dumber over the years and can't refute anything the bank says.
Anyway, there are so many ways the our government is being taken over by lobbyist and corporate interest. A typical employee doesn't want to give away tax loopholes to the wealthy... but those decisions are made far above.
And David Cay Jouhnston writes about how the congress has influenced the IRS to focus on the poor and middle classes. Few wealthy get audited, but the system isn't really structured to pull the data that would flag the wealthy on their income tax. No flags.
And War. What a waste of money. The Post Office was hit with this new requirement in 2006 long into the current wars. Express Air Mail is a big part of military logistics. Everyone wants a part of the logistics contracts or pieces of the US Military. It is obvious that privitization of the USPS is only because it was recognized as a market that was untapped. Money laying on the table. Does anyone think FEDEX or DHL is cheaper that USPS???
Anyway, a central difference between MMT and Austrian might be about keeping money velocity going in the economy. The fear of a European Austerity in the USA leading to deeper recession or depression. I think Warren Morse and Randy Wray along with William K. Black represent the MMT side that cutting federal spending in a recession can be the wrong move.
However, reading the intro of the PDF, the conclusion that cutting spending is the only way to proceed is compelling.
"The expectation of Inflation is interesting, but is now complicated since our government data is so fouled up with it's basket of goods. We have inflation in Health Care, education, Houses, Autos, beef, bread, gasoline, and many things, but you would never know based on statements from Ben Bernanke. "
Completely agree with you there...most people don't know that...or understand how the equations to calculate the CPI have been manipulated over the years.
"The other thing is the bankers influence in federal government, revolving door, regulatory capture ... is another kind of privitatization. There was story of an OMB analyst that could not do her job since a bank had been given the task and the responsibility. In the long run if you have core government jobs and you give them to private tech companies ... government employees lose the knowledge, skills, and control over the functions. Like if the bank took all the data processing and report generating for OMB. Then the computers are located at a banks, the system is a bank maintained system, the employees become dumber over the years and can't refute anything the bank says. "
I had never really thought about it like that but that does make a lot of sense. I know there are certain areas in the world where governments don't want to bring in foreign private companies - but they have to because of lack of technologies to utilize the oil reserves that they have. Perhaps just another example of what you're talking about.
"And War. What a waste of money. "
Absolutely.....massive waste of money. The right claim to be fiscal conservatives but have no problem shelling out trillions for foreign wars and dubious causes...while the country crumbles at home.
"Anyway, a central difference between MMT and Austrian might be about keeping money velocity going in the economy."
Yes, i agree with you here as well...although Austrians prefer looking at the money supply vs velocity of it. While MMT claims it's the only way to get out of recession....the Austrians agree you see temporary short lived benefits...but they believe at the expense of the inevitable bust that comes as a result of all the malinvestment and inaccurate business decisions that are made during the injection of money.
Murray Rothbart is a compelling figure given his brand of anarcho capitalism. I mean it should be obvious to everyone ... that we have a kind of corporate government that needs rescue from the influences of wealth ... AND that government controls used by the USA and the Central bank probably are benefiting those that want inside deals.
https://en.wikipedia.org/wiki/Murray_Rothbard
I'm still getting to page 15 in your link to Mises Institute....
they are both wrong. we need an anarcho syndical resource based economy.
May be so...but they aren't talking about a different system...but why the economy is jacked up in the one we have.
who says it is jacked up? this is how it was designed to work.
NO! we need a franscal tholianic economy
Did you mean Fiscal Colonic? Sorry had so make a joke.
join the club!
we need more!
Krugman likes the $1,000,000,000,000 coin idea - so do I - so where is my Nobel prize?
OR
use the 14th Amendment
as per 14th - constitution gives the congress the ability to coin money....not the president.
the 14th has nothing to do with coining money
these are two completely different solutions to the Rs blackmail
Despite what the Rs and faux noose claim, raising the debt ceiling spends no money at all. It tells the world that we will pay the bills PREVIOUSLY passed by congress.
President Obama should IMMEDIATELY invoke the 14th Amendment to hike the debt ceiling unilaterally to prevent a government default. House Minority Whip Steny Hoyer & Nancy Pelosi agree. “It’s his power to do so,” Hoyer told MSNBC. “Very frankly, if it came down to his looking default in the eye or taking this action, as President Clinton said, better to take the action and find out later that perhaps he went beyond his authority but at least protected the credibility of the United States of America.”
“The Republicans, through their failure, have given you license to do whatever it takes to not let the American family go down into the abyss,” Rep. Xavier Becerra (Calif.), vice chairman of the House Democratic Caucus said.
The republiclans are looking forward to using the threat of a default and worldwide financial disaster to blackmail the President and the Senate into cutting Medicare, Medicaid, and Social Security. This WORKED in August 2011! The Rs, after gerrymandering districts, suppressing the vote, cheating with voting machines and telling endless lies – still could not resume their wealth transfer plans from the 99% to the 1% using normal political power.
So their primary weapon is blackmail.
Many observers of the debt-limit debate have said the 14th Amendment which states that the
“the validity of the public debt … shall not be questioned”
empowers the president to raise the debt ceiling without ANY congressional input.
The Secretary of the Treasury is legally (not in the constitution)
impowered to issue any size platinum coin in a ny denomination. So he can create a $1T one ounce platinum coin & deposit it in the Fed. Obama can then use that money to pay the bills that congress already authorized - IT DOES NOT SPEND ANY MONEY.
You go into a restaurant and pay with a visa card.
Who pays for the meal?
visa? or you?
" IT DOES NOT SPEND ANY MONEY"
It actually does spend money....but just in a sneaky way that most people dont' realize. It spends money through inflation. If you just add a trillion dollars to the economy (increase the money supply by a trillion dollars)...goods and services will increase in price to reflect that trillion dollars that wasn't in the market place before. So all of us shmucks on fixed incomes get majorly screwed.
Great little video to show how that hurts you and me:
http://www.youtube.com/watch?v=hx16a72j__8&feature=player_embedded
Yeah i know the 14th doesn't talk about coinage of money .....article 1 does.