Comments on: Debtwatch No. 42: The economic case against Bernanke http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/ Analysing the Global Debt Bubble Sat, 31 Jul 2010 00:30:05 +0000 hourly 1 http://wordpress.org/?v=3.0 By: BrightSpark1 http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-21113 BrightSpark1 Tue, 16 Feb 2010 04:34:55 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-21113 Lyonwiss and QuantitativeEasing My argument is not that people are looking at different parts of a beast and reaching different conclusions but that they are looking at one or two photographs taken at different times and coming up with different explanations as to how the changes took place. Around 1680, 330 years ago Sir Isaac Newton realised that to gain an understand of the physical world he would need to create a mathematical equation which would describe not just the position of an apple before and after it fell from a tree but also the for entire time for which it was falling. He would also need to consider other effects the velocity of the apple and the acceleration of the apple. With this he made the major contribution to the science of physics and went on to develop (in parallel with Liebnitz) the branch of mathematics know as calculus. Thus kicking off the enlightenment. My point is that his work though 300 years old is relevant to economics in a big way. However the first economist to apply this and later mathematical, engineering, and scientific work, to economics is Steve Keen 300 years late (obviously not Steve's fault). Neoclassical economists have not even tried the first step, defining economic parameters as a function of time, that is what I mean by dynamics. Neoclassical economics is a refuge for the greedy and intellectually lazy. Cheers Brightspark Lyonwiss and QuantitativeEasing

My argument is not that people are looking at different parts of a beast and reaching different conclusions but that they are looking at one or two photographs taken at different times and coming up with different explanations as to how the changes took place.

Around 1680, 330 years ago Sir Isaac Newton realised that to gain an understand of the physical world he would need to create a mathematical equation which would describe not just the position of an apple before and after it fell from a tree but also the for entire time for which it was falling. He would also need to consider other effects the velocity of the apple and the acceleration of the apple.

With this he made the major contribution to the science of physics and went on to develop (in parallel with Liebnitz) the branch of mathematics know as calculus. Thus kicking off the enlightenment.

My point is that his work though 300 years old is relevant to economics in a big way. However the first economist to apply this and later mathematical, engineering, and scientific work, to economics is Steve Keen 300 years late (obviously not Steve’s fault). Neoclassical economists have not even tried the first step, defining economic parameters as a function of time, that is what I mean by dynamics. Neoclassical economics is a refuge for the greedy and intellectually lazy.

Cheers Brightspark

]]> By: Choices, Choices | b.y.o Lawnchairs http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-21041 Choices, Choices | b.y.o Lawnchairs Fri, 12 Feb 2010 18:13:42 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-21041 [...] about to unfold, because the ability of both individuals and governments to absorb debt has ceased (see this).  Having reached a point where debt service costs become too great, coupled with the fact that [...] [...] about to unfold, because the ability of both individuals and governments to absorb debt has ceased (see this).  Having reached a point where debt service costs become too great, coupled with the fact that [...]

]]> By: Lyonwiss http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-21038 Lyonwiss Fri, 12 Feb 2010 11:36:52 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-21038 QuantitativeEasing Great imagery. Economists are all blind men feeling different parts of beast, thinking that they are the only ones who know what it is! QuantitativeEasing

Great imagery. Economists are all blind men feeling different parts of beast, thinking that they are the only ones who know what it is!

]]> By: QuantitativeEasing http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-20970 QuantitativeEasing Tue, 09 Feb 2010 19:21:43 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-20970 mahaish, I agree the debate so far has been enlightening. However, it has not helped to answer my lingering doubt about chartalism: does the idea that “government spending will [only] approach an inflation barrier as the economy approaches full employment of resources” make any sense in a dynamic, disequilibrium economy? I couldn’t follow the debate over electrical engineering between Brightspark and Iconoclast, but I’m guessing that’s what it was about. Sadly, my answer may have to wait until Steve can "put an agreed Chartalist position into an accepted dynamic model of the economy and see how it functions." I look forward to seeing it. But in the meantime, I can attempt to resolve another area of dispute. If there's errors in this interpretation, it's because my formal training was in botany, not economics. Sorry. Steve Keen has made it clear that the GFC is rooted in an imbalance between debt and income, and that the US, UK, and Australia can no longer borrow their way out of recession. The horizontal avenue for money creation has reached its limit. He and Michael Hudson have limited their recommendations to discussing the distributional aspects of debt reduction, bailouts, and taxes, arguing that Wall Street not Main Street should take the hit. This is extremely important for both justice and economic recovery. But what about the vertical avenue emphasized by chartalism? <b>Can governments print their way out of recession?</b> The indisputable accounting of MMT says that governments “print money” by spending in excess of their tax revenues. By accounting necessity, if the domestic private sector has too much debt and the foreign sector is unwilling to run a larger surplus, the only way to improve the private sector’s net nominal balance sheet is for the government to run a large enough deficit. The rest of us are unimpressed by this epiphany. Yes, an expansionary monetary policy can increase employment. Yes, you can pay off debts by printing money. But how will this affect the real purchasing power of my income or savings? Even if the overall price level is unaffected, how will a drop in the exchange rate influence the relative price of oil, food, and other necessities? Chartalism has a surprisingly good answer. Let’s consider the United States, with its giant and worrisome imbalance between debt and income and between imports and exports. US private debt, especially mortgage debt, is too high relative to wage income. The Finance, Insurance, and Real Estate sector has sucked the life out of the real economy. I’ll even go so far as to quote James Howard Kunstler and say that the so-called service economy was merely “the final blowout of the cheap oil era: the hypertrophic build-out of suburban sprawl and the furnishing and final accessorizing of it. In other words, our living arrangement essentially became the remaining basis of our economy, in the absence of any other purposeful creation of value or wealth, such as manufacturing things.” The price of real estate must fall relative to wages. AIG should go bankrupt and there should be fewer jobs for real estate agents, stockbrokers, tract home builders and other professionals who can no longer ride the speculative boom. The US will need to rebuild its manufacturing sector. Fine, but why should the overall price level fall, keeping down wages and sales in industries that did not gamble on home prices? Do neoclassical economists need to be punished with unemployment, or might it be better for the government to hire them at minimum wage to build roads? Then they’d learn some skills that would benefit society. Quantitative easing could limit the damage of the financial collapse and speed recovery. The trick is spending it in the right place, boosting the manufacturing economy rather than propping up the FIRE sector. Japan did some of both. Zero interest rates benefited foreign speculators in the yen carry trade more than domestic borrowers, but fiscal stimulus boosted aggregate demand by making some construction jobs building (presumably) useful infrastructure. People with a conservative or libertarian bent hate the “socialist implications” of chartalism. “Government is big enough already. You want bigger deficits!?” MMT is silent about how government should spend, or how much it should tax. If you want to slash taxes and spending in order to reduce government’s role to enforcing laws and the borders, MMT will not argue. MMT only specifies the size of the deficits needed to overcome the deflationary effects of private debts and savings. If you think that the government can produce nothing useful by hiring the unemployed, or that ELR is a somehow a slippery slope to a command economy, then the deficit could be dispersed as a tax credit for industry, or as a per capita citizen’s dividend. But if you’re at all concerned about unemployment, it’s worth taking a second look at the Employer of Last Resort proposal—-by pegging the currency to the minimum wage, it provides full employment with labor market flexibility, a check on inflation, and an automatic stabilizer of the business cycle. What about the trade deficit and national debt? China is weaning itself off the US export market and diversifying its reserves. It will probably buy fewer treasury bonds. That’s what chartalism says it should do—-print its own money to develop its domestic economy, rather than holding worthless dollar reserves to defend its exchange rate. Will the US be the next Argentina? No. Hyperinflation is only a concern for countries that borrow in a foreign currency (see Steve Zarlenga’s The Lost Science of Money). The US borrows in its own currency, from foreign central banks with political reasons to avoid a sudden crash of the US$. The more likely scenario is what Eric Janszen calls Argentina Lite, the slow fall of the dollar as foreign creditors manage down their reserves, leading to a rise in import prices (including oil) and moderately high inflation (or recession) like the oil shocks of the 1970s. Conventional wisdom suggests smaller fiscal austerity to raise interest rates to reassure bondholders and support the exchange rate. A dozen currency crises in the developing world show us that this strategy does not always work; bondholders are skittish. Furthermore, high interest rates put a strain on the domestic economy and do not address the underlying imbalance. At some point, the US needs to rebuild its local economies and reduce its dependence on foreign oil. Tight money can buy time to make the transition, but the people who advocate balanced budgets are the same people denying global warming, peak oil, and the problems with globalization. The better policy is to run deficits to invest in alternative energy and support those who are hurt by high energy prices. I think chartalists and circuitists are developing separate parts of a largely complementary analysis of the monetary system. If Steve Keen’s model of the horizontal dimension doesn't look stock-flow consistent to Bill Mitchell, it's because it leaves out the government and foreign sectors (whose net surplus would have to balance out the private sector net deficit) and because it speaks of "money" as a financial flow rather than a stock. For example, the broadest measure of the US$ "money supply", M3, is a cash flow position, not a balance sheet variable. But Mitchell and Keen are describing the same proverbial elephant. Which reminds me… A group of economists are examining the business cycle in the dark. "It's like a snake" says the circuitist, feeling its trunk. "It's like a tree trunk" says the chartalist, feeling its leg. "It's like a rope" says the behavioral economist, feeling its tail. "I have no clue what it is," says the Austrian school economist, "but stop poking it, you’ll make it angry!” The others agree and back away, except for the neoclassical economist, busy removing its chains. "Don't worry," he insists. "It's perfectly tame." The elephant gores the neoclassical economist and runs off, depressed. "Told you so," say the others. "It's just a flesh wound," says the dismembered neoclassical economist. mahaish,
I agree the debate so far has been enlightening. However, it has not helped to answer my lingering doubt about chartalism: does the idea that “government spending will [only] approach an inflation barrier as the economy approaches full employment of resources” make any sense in a dynamic, disequilibrium economy? I couldn’t follow the debate over electrical engineering between Brightspark and Iconoclast, but I’m guessing that’s what it was about. Sadly, my answer may have to wait until Steve can “put an agreed Chartalist position into an accepted dynamic model of the economy and see how it functions.” I look forward to seeing it. But in the meantime, I can attempt to resolve another area of dispute. If there’s errors in this interpretation, it’s because my formal training was in botany, not economics. Sorry.
Steve Keen has made it clear that the GFC is rooted in an imbalance between debt and income, and that the US, UK, and Australia can no longer borrow their way out of recession. The horizontal avenue for money creation has reached its limit. He and Michael Hudson have limited their recommendations to discussing the distributional aspects of debt reduction, bailouts, and taxes, arguing that Wall Street not Main Street should take the hit. This is extremely important for both justice and economic recovery. But what about the vertical avenue emphasized by chartalism? Can governments print their way out of recession?
The indisputable accounting of MMT says that governments “print money” by spending in excess of their tax revenues. By accounting necessity, if the domestic private sector has too much debt and the foreign sector is unwilling to run a larger surplus, the only way to improve the private sector’s net nominal balance sheet is for the government to run a large enough deficit.
The rest of us are unimpressed by this epiphany. Yes, an expansionary monetary policy can increase employment. Yes, you can pay off debts by printing money. But how will this affect the real purchasing power of my income or savings? Even if the overall price level is unaffected, how will a drop in the exchange rate influence the relative price of oil, food, and other necessities?
Chartalism has a surprisingly good answer. Let’s consider the United States, with its giant and worrisome imbalance between debt and income and between imports and exports.
US private debt, especially mortgage debt, is too high relative to wage income. The Finance, Insurance, and Real Estate sector has sucked the life out of the real economy. I’ll even go so far as to quote James Howard Kunstler and say that the so-called service economy was merely “the final blowout of the cheap oil era: the hypertrophic build-out of suburban sprawl and the furnishing and final accessorizing of it. In other words, our living arrangement essentially became the remaining basis of our economy, in the absence of any other purposeful creation of value or wealth, such as manufacturing things.”
The price of real estate must fall relative to wages. AIG should go bankrupt and there should be fewer jobs for real estate agents, stockbrokers, tract home builders and other professionals who can no longer ride the speculative boom. The US will need to rebuild its manufacturing sector. Fine, but why should the overall price level fall, keeping down wages and sales in industries that did not gamble on home prices? Do neoclassical economists need to be punished with unemployment, or might it be better for the government to hire them at minimum wage to build roads? Then they’d learn some skills that would benefit society.
Quantitative easing could limit the damage of the financial collapse and speed recovery. The trick is spending it in the right place, boosting the manufacturing economy rather than propping up the FIRE sector. Japan did some of both. Zero interest rates benefited foreign speculators in the yen carry trade more than domestic borrowers, but fiscal stimulus boosted aggregate demand by making some construction jobs building (presumably) useful infrastructure.
People with a conservative or libertarian bent hate the “socialist implications” of chartalism. “Government is big enough already. You want bigger deficits!?” MMT is silent about how government should spend, or how much it should tax. If you want to slash taxes and spending in order to reduce government’s role to enforcing laws and the borders, MMT will not argue. MMT only specifies the size of the deficits needed to overcome the deflationary effects of private debts and savings. If you think that the government can produce nothing useful by hiring the unemployed, or that ELR is a somehow a slippery slope to a command economy, then the deficit could be dispersed as a tax credit for industry, or as a per capita citizen’s dividend. But if you’re at all concerned about unemployment, it’s worth taking a second look at the Employer of Last Resort proposal—-by pegging the currency to the minimum wage, it provides full employment with labor market flexibility, a check on inflation, and an automatic stabilizer of the business cycle.
What about the trade deficit and national debt? China is weaning itself off the US export market and diversifying its reserves. It will probably buy fewer treasury bonds. That’s what chartalism says it should do—-print its own money to develop its domestic economy, rather than holding worthless dollar reserves to defend its exchange rate. Will the US be the next Argentina? No. Hyperinflation is only a concern for countries that borrow in a foreign currency (see Steve Zarlenga’s The Lost Science of Money). The US borrows in its own currency, from foreign central banks with political reasons to avoid a sudden crash of the US$. The more likely scenario is what Eric Janszen calls Argentina Lite, the slow fall of the dollar as foreign creditors manage down their reserves, leading to a rise in import prices (including oil) and moderately high inflation (or recession) like the oil shocks of the 1970s.
Conventional wisdom suggests smaller fiscal austerity to raise interest rates to reassure bondholders and support the exchange rate. A dozen currency crises in the developing world show us that this strategy does not always work; bondholders are skittish. Furthermore, high interest rates put a strain on the domestic economy and do not address the underlying imbalance. At some point, the US needs to rebuild its local economies and reduce its dependence on foreign oil. Tight money can buy time to make the transition, but the people who advocate balanced budgets are the same people denying global warming, peak oil, and the problems with globalization. The better policy is to run deficits to invest in alternative energy and support those who are hurt by high energy prices.
I think chartalists and circuitists are developing separate parts of a largely complementary analysis of the monetary system. If Steve Keen’s model of the horizontal dimension doesn’t look stock-flow consistent to Bill Mitchell, it’s because it leaves out the government and foreign sectors (whose net surplus would have to balance out the private sector net deficit) and because it speaks of “money” as a financial flow rather than a stock. For example, the broadest measure of the US$ “money supply”, M3, is a cash flow position, not a balance sheet variable. But Mitchell and Keen are describing the same proverbial elephant.
Which reminds me…
A group of economists are examining the business cycle in the dark. “It’s like a snake” says the circuitist, feeling its trunk. “It’s like a tree trunk” says the chartalist, feeling its leg. “It’s like a rope” says the behavioral economist, feeling its tail. “I have no clue what it is,” says the Austrian school economist, “but stop poking it, you’ll make it angry!” The others agree and back away, except for the neoclassical economist, busy removing its chains. “Don’t worry,” he insists. “It’s perfectly tame.” The elephant gores the neoclassical economist and runs off, depressed. “Told you so,” say the others. “It’s just a flesh wound,” says the dismembered neoclassical economist.

]]> By: mahaish http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-20866 mahaish Sat, 06 Feb 2010 15:12:43 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-20866 "Rather, it seems to argue that tight money (with its side effect of mass unemployment) is a poor tool for controlling inflation, better addressed with banking regulations, tax reform, reducing wasteful government spending, reduced dependence on imported food and fuel, and other structural changes" you missed one of the most important aspects of their arguement, quantitative easing, relating to the monopoly power of government in the prices it pays for labour and other goods and services as a means of controlling inflation. as far as this whole debate over chartalism, well i dare say it has a few more followers than it did say 12 months ago on this blog stf(scott), and i include myself as one of its admirers, just like i admire steves ideas. you might say with friends like this who needs enemies :). the point is chartilism is forcing us to confront some of our predjudices and long held belief systems about how the financial system works. and when we join in battle with our predjudices, rumour and inuendo are part of the spoils regardless of whatever may have been read on the matter. blogs arnet just about about what is said or what is read, its sometimes about the meaning behind what is said. its a broadcast to the world about how we percieve the world from our own instinctive and habituated point of view, to quote bertrand russell "If a man is offered a fact which goes against his instincts, he will scrutinize it closely, and unless the evidence is overwhelming, he will refuse to believe it. If, on the other hand, he is offered something which affords a reason for acting in accordance to his instincts, he will accept it even on the slightest evidence" so the moral of the story is that we could be more circumspect in our praising or condemnation of caeser, but i say let the debate rage on, its all part of our individual and collective enlightenment i dare say we will have learned a thing or two about who we are and what we are discussing in such a often troublsome process, even though there may be still much to resolve in our own minds. some of us may not be convinced about mmt or for that matter steves prognossis on certain matters, but all of us are aware of the long shadow they cast. every debate we have about mmt on this blog im sure leads many of us to go and read further on these matters, and hense awareness grows, whether we believe it or understand it is an alltogether different proporsition awareness is the first step, we are there understanding, well that still has many battles to be won the cynical view of blogging suggests its like the UN, its a forum for dissunity, one upmanship and venting ones spleen, :). luckily we have had the good sense to conduct such affairs on this blog in a generally cordial manner. my knowledge of affairs economique has grown considerabley since ive joined this blog, to the extent, that ive become a sort of expert to my friends and work mates, poor unsuspecting fools that they are. :) if the criterion for posting on this blog was getting ones facts straight or knowing what you were talking about most of the time , it would be a more exclusive gathering than the havnt slept with paris hilton club, :) which at the moment consists of me and the pope i think :) but in all seriousness, i think the last thing we should be doing is stifling discussion however ill informed, and thus destroy the dialectic process on matters economic on this blog, we should let the forces of one upmanship with his trusted ally curiosity, wend their merry way through this blog, and in the long run , not the short run, witness the general increase in the level of economic enlightenment “Rather, it seems to argue that tight money (with its side effect of mass unemployment) is a poor tool for controlling inflation, better addressed with banking regulations, tax reform, reducing wasteful government spending, reduced dependence on imported food and fuel, and other structural changes”

you missed one of the most important aspects of their arguement, quantitative easing,

relating to the monopoly power of government in the prices it pays for labour and other goods and services as a means of controlling inflation.

as far as this whole debate over chartalism, well i dare say it has a few more followers than it did say 12 months ago on this blog stf(scott), and i include myself as one of its admirers, just like i admire steves ideas.

you might say with friends like this who needs enemies :) .

the point is chartilism is forcing us to confront some of our predjudices and long held belief systems about how the financial system works. and when we join in battle with our predjudices, rumour and inuendo are part of the spoils regardless of whatever may have been read on the matter.

blogs arnet just about about what is said or what is read, its sometimes about the meaning behind what is said. its a broadcast to the world about how we percieve the world from our own instinctive and habituated point of view,

to quote bertrand russell

“If a man is offered a fact which goes against his instincts, he will scrutinize it closely, and unless the evidence is overwhelming, he will refuse to believe it. If, on the other hand, he is offered something which affords a reason for acting in accordance to his instincts, he will accept it even on the slightest evidence”

so the moral of the story is that we could be more circumspect in our praising or condemnation of caeser, but i say let the debate rage on, its all part of our individual and collective enlightenment

i dare say we will have learned a thing or two about who we are and what we are discussing in such a often troublsome process, even though there may be still much to resolve in our own minds.

some of us may not be convinced about mmt or for that matter steves prognossis on certain matters, but all of us are aware of the long shadow they cast.

every debate we have about mmt on this blog im sure leads many of us to go and read further on these matters, and hense awareness grows, whether we believe it or understand it is an alltogether different proporsition

awareness is the first step, we are there

understanding, well that still has many battles to be won

the cynical view of blogging suggests its like the UN,

its a forum for dissunity, one upmanship and venting ones spleen, :) . luckily we have had the good sense to conduct such affairs on this blog in a generally cordial manner.

my knowledge of affairs economique has grown considerabley since ive joined this blog, to the extent, that ive become a sort of expert to my friends and work mates, poor unsuspecting fools that they are. :)

if the criterion for posting on this blog was getting ones facts straight or knowing what you were talking about most of the time , it would be a more exclusive gathering than the havnt slept with paris hilton club, :)

which at the moment consists of me and the pope i think :)

but in all seriousness, i think the last thing we should be doing is stifling discussion however ill informed, and thus destroy the dialectic process on matters economic on this blog,

we should let the forces of one upmanship with his trusted ally curiosity, wend their merry way through this blog, and in the long run , not the short run, witness the general increase in the level of economic enlightenment

]]> By: QuantitativeEasing http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-20801 QuantitativeEasing Thu, 04 Feb 2010 20:26:12 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-20801 For the Chartalist reading list, I nominate Randall Wray's <a href="http://www.cfeps.org/pubs/wp-pdf/WP51-Wray.pdf" rel="nofollow"> "Understanding Policy in a Floating Rate Regime"</a> This is a 2006 working paper (30 pages) for the Center for Full Employment and Price Stability.  It explains Modern Monetary Theory without resorting to the accounting identities that many of us find confusing or meaningless, and gives examples from several countries to show how different ways of structuring your Treasury and Central Bank amount to the same thing.  It makes the case for running deficits to cover an "Employer of Last Resort" program, and addresses the concerns about wage-price inflation and exchange rate driven cost-push inflation that many of us brought up. Ultimately, it does not argue that pursuing full employment WILL NOT cause inflation.  Someone else can recommend a work that does. Rather, it seems to argue that tight money (with its side effect of mass unemployment) is a poor tool for controlling inflation, better addressed with banking regulations, tax reform, reducing wasteful government spending, reduced dependence on imported food and fuel, and other structural changes. Framed this way, I find MMT very persuasive, find it consistent with Dr. Keen's analysis, and think it is even compatible with an ideological aversion to big government, but Steve would probably rather we didn't get into that on this forum. This paper does not discuss banking crises (the horizontal dimension) or destabilizing international capital flows. Anyone know some chartalist works that do? For the Chartalist reading list, I nominate Randall Wray’s “Understanding Policy in a Floating Rate Regime”
This is a 2006 working paper (30 pages) for the Center for Full Employment and Price Stability.  It explains Modern Monetary Theory without resorting to the accounting identities that many of us find confusing or meaningless, and gives examples from several countries to show how different ways of structuring your Treasury and Central Bank amount to the same thing.  It makes the case for running deficits to cover an “Employer of Last Resort” program, and addresses the concerns about wage-price inflation and exchange rate driven cost-push inflation that many of us brought up.
Ultimately, it does not argue that pursuing full employment WILL NOT cause inflation.  Someone else can recommend a work that does.
Rather, it seems to argue that tight money (with its side effect of mass unemployment) is a poor tool for controlling inflation, better addressed with banking regulations, tax reform, reducing wasteful government spending, reduced dependence on imported food and fuel, and other structural changes.
Framed this way, I find MMT very persuasive, find it consistent with Dr. Keen’s analysis, and think it is even compatible with an ideological aversion to big government, but Steve would probably rather we didn’t get into that on this forum.
This paper does not discuss banking crises (the horizontal dimension) or destabilizing international capital flows. Anyone know some chartalist works that do?

]]> By: Steve Keen http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-20729 Steve Keen Wed, 03 Feb 2010 19:19:55 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-20729 Re #335 Ramanan, My model began as an attempt to put Basil's ideas into a mathematical framework, using the Circuitist vision of a pure credit economy as a foundation. I have always found Basil's work inspiring and I do recommend that everyone here read his "The Endogenous Money Supply", "Unpacking the Black Box" and "Horizontalists and Verticalists". For my part I feel that most commentators here who are critical of Chartalism do appreciate this credit money perspective--certainly I have seen very little in their critiques (misguided or otherwise) of Chartalism that also breaches Basil's insights about endogenous money. The one issue where that might be perceived to be happening is in regard to restraints on government spending, where their objections could be seen as being grounded in a "gold money" perspective. From my reading, this is not the source of most objections--they rather seem concerned about feedback effects that they feel (rightly or wrongly) are not being considered within MMT. Again I return to my suggestion above--let's get a "reading group" on Chartalism going here, and refer to key references there when critiquing. Until that is done, I would appreciate both sides giving this topic a break. Re #335 Ramanan,

My model began as an attempt to put Basil’s ideas into a mathematical framework, using the Circuitist vision of a pure credit economy as a foundation. I have always found Basil’s work inspiring and I do recommend that everyone here read his “The Endogenous Money Supply”, “Unpacking the Black Box” and “Horizontalists and Verticalists”.

For my part I feel that most commentators here who are critical of Chartalism do appreciate this credit money perspective–certainly I have seen very little in their critiques (misguided or otherwise) of Chartalism that also breaches Basil’s insights about endogenous money.

The one issue where that might be perceived to be happening is in regard to restraints on government spending, where their objections could be seen as being grounded in a “gold money” perspective. From my reading, this is not the source of most objections–they rather seem concerned about feedback effects that they feel (rightly or wrongly) are not being considered within MMT.

Again I return to my suggestion above–let’s get a “reading group” on Chartalism going here, and refer to key references there when critiquing. Until that is done, I would appreciate both sides giving this topic a break.

]]> By: stf http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-20728 stf Wed, 03 Feb 2010 19:18:31 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-20728 Agreed. Thanks. Will get back to you on the readings. Agreed. Thanks. Will get back to you on the readings.

]]> By: Steve Keen http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-20727 Steve Keen Wed, 03 Feb 2010 19:11:00 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-20727 Re #334 Scott, I think it's fair to say that people here have not read the Chartalist case as closely as they have read mine--and it's certainly correct that I have not read key Chartalist arguments in detail. I have however read a variety of Chartalist works, and there are elements that I find unpersuasive for a range of reasons. But I have refrained from comment because I do not wish to misrepresent an argument and then criticise a misprepresentation. So I have a suggestion: could you provide a list of what you see as essential readings in the Chartalist tradition--ones that provide as thorough as is possible a statement of the Chartalist position? I will then insist that people address these works when they comment on Chartalism on this site. Now a bit of levity please: this is starting to sound like a dispute between the Judean People's Front and the People's Front of Judea. Remember the Romans, guys: it's neoclassical economics that is the main "enemy" of logic in economics. Both Circuit Theory and Chartalism originated in critiques of neoclassical thinking on money. This debate which has become very doctrinaire on both sides has tended to lose sight of that. Re #334 Scott,

I think it’s fair to say that people here have not read the Chartalist case as closely as they have read mine–and it’s certainly correct that I have not read key Chartalist arguments in detail.

I have however read a variety of Chartalist works, and there are elements that I find unpersuasive for a range of reasons. But I have refrained from comment because I do not wish to misrepresent an argument and then criticise a misprepresentation.

So I have a suggestion: could you provide a list of what you see as essential readings in the Chartalist tradition–ones that provide as thorough as is possible a statement of the Chartalist position?

I will then insist that people address these works when they comment on Chartalism on this site.

Now a bit of levity please: this is starting to sound like a dispute between the Judean People’s Front and the People’s Front of Judea. Remember the Romans, guys: it’s neoclassical economics that is the main “enemy” of logic in economics. Both Circuit Theory and Chartalism originated in critiques of neoclassical thinking on money. This debate which has become very doctrinaire on both sides has tended to lose sight of that.

]]> By: Ramanan/superpoincare http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/comment-page-13/#comment-20726 Ramanan/superpoincare Wed, 03 Feb 2010 18:49:01 +0000 http://www.debtdeflation.com/blogs/?p=3124#comment-20726 Steve, There is one thing I have seen about the commenters (you have stood for). They may have opinions about transactions which change settlement balances (reserves) and their economic consequences, but I am not sure that they appreciate the transactions which need not change the settlement balances -the "horizontal" transactions, either!. I remember you frequently praise Basil Moore but I am not sure if the commenters understand the credit money part well. I am supercomfortable with mathematics and the fact that they are trained well in mathematics does not impress me too much. I wrote to Prof. Moore to got his permission to quote the starting paragraph of his great book. I find it inspiring. I hope the commenters appreciate it. <em> The central message of this book is that members of the economics profession currently operate with a basically incorrect paradigm of the way modern banking systems operate and of the causal connection between wages, prices, and monetary phenomena. The standard paradigm treats the central bank as determining the monetary base and hence the money supply. The growth of the money supply is held to be the main force determining the rate of growth of money income, wages, and prices. … This book argues that the above order of causation should be reversed. Changes in wages and employment largely determine the demand for bank loans, which in turn determine the rate of growth of the money supply. Central banks have no alternative but to accept this course of events. Their only option is to vary the short-term rate of interest at which they supply liquidity to the banking system on demand. - Basil Moore, Horizontalists and Verticalists: The Macroeconomics of Credit Money </em> Steve,

There is one thing I have seen about the commenters (you have stood for). They may have opinions about transactions which change settlement balances (reserves) and their economic consequences, but I am not sure that they appreciate the transactions which need not change the settlement balances -the “horizontal” transactions, either!. I remember you frequently praise Basil Moore but I am not sure if the commenters understand the credit money part well. I am supercomfortable with mathematics and the fact that they are trained well in mathematics does not impress me too much.

I wrote to Prof. Moore to got his permission to quote the starting paragraph of his great book. I find it inspiring. I hope the commenters appreciate it.


The central message of this book is that members of the economics profession currently operate with a basically incorrect paradigm of the way modern banking systems operate and of the causal connection between wages, prices, and monetary phenomena. The standard paradigm treats the central bank as determining the monetary base and hence the
money supply. The growth of the money supply is held to be the main force determining the rate of growth of money income, wages, and prices. … This book argues that the above order of causation should be reversed. Changes in wages and employment largely determine the demand for bank loans, which in turn determine the rate of growth of the money supply. Central banks have no alternative but to accept this course of events. Their only option is to vary the short-term rate of
interest at which they supply liquidity to the banking system on demand.

- Basil Moore, Horizontalists and Verticalists: The Macroeconomics of Credit Money

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