Steve Keen's Debtwatch

Discussion (36) ¬

1. 
   Steve Keen

   December 6, 2012, 1:36 am | #

   Very cute! We need some lev­ity on this blog–and the planet.
2. 
   Steve Hummel

   December 6, 2012, 2:44 am | #

   Baskara II,

   (Caps are for empha­sis only, not to be inter­preted as yelling)

   Thank you for the excel­lent exe­ge­sis of account­ing, and the short com­ings of MMT.

   “When real things are trans­acted between enti­ties these MMT blog­gers have left that out. Most newly cre­ated cur­rency or cred­its are cre­ated to pur­chase goods, ser­vices, peo­ples time, and real things. To count the cre­ation of cur­rency but to omit the pur­chases made is poor account­ing and might be con­sid­ered dishonest.”

   Quite cor­rect and of course this is an effec­tive definition/description of cost account­ing whose effects ON THE INDIVIDUAL AND CONSEQUENTLY ON THE SYSTEM.….are what they are, no more and CERTAINLY no less for every dol­lar actu­ally enter­ing, re-entering or remain­ing in the economy.

   To quote from one of my above posts:

   These are a few of the con­ven­tions of cost account­ing:
   1) Labor costs (wages and salaries) are never the total­ity of costs
   2) All costs must go into price

   This convention/rule if graphed would show two upward slop­ing lines the bot­tom one labeled total incomes, the top one labeled total prices and as the lines moved hor­i­zon­tally through time they would diverge, in other words there would be a con­tin­u­ally increas­ing gap between incomes and prices or a dic­tio­nary def­i­n­i­tion of price inflation.….IN THE NORMAL OPERATION OF THE ECONOMY.

   And so we see that the NATURE of the sys­tem ITSELF is price infla­tion­ary. Now depre­ci­a­tion can mit­i­gate this prob­lem FOR BUSINESSES, BUT NOT FOR INDIVIDUALS, AND CONSEQUENTLY EVENTUALLY THE ENTIRETY OF THE SYSTEM ITSELF.

   Veloc­ity of money of course does not apply to the indi­vid­ual because money does not just drop from the sky it comes to the indi­vid­ual almost entirely via commerce/businesses in the form of pay for work or loans which of course always incur an addi­tional cost to the individual.

   And so we see that the con­ven­tions of cost account­ing enforce price infla­tion. THIS IS A FLAW IN THE ACCOUNTING SYSTEM WHICH PREVENTS “FREE” MARKET ECONOMIC THINKING FROM ACTUALLY BEING FREE.

   Fur­ther­more, no injec­tion of money by gov­ern­ment or pri­vate Banks can com­pen­sate for these flawed effects BECAUSE as these monies actu­ally enter the econ­omy cost accounting’s con­ven­tions are imme­di­ately enforced and reinforced.

   So what IS the solu­tion to this conun­drum? Why a sup­ple­ment of income directly to the indi­vid­ual which bypasses the nor­mal com­mer­cial route where the rules of cost accounting.…..RULE!!! And then of course an addi­tional mech­a­nism at retail sale of a gen­eral dis­count to con­sumers to alle­vi­ate any pos­si­ble cost push or demand pull infla­tion, and the totals of which retail­ers are com­pen­sated for so that they can remain whole on their margins.

   This changes the cur­rently inad­e­quate con­sumer finan­cial par­a­digm of work for pay and loan ONLY, to Div­i­dend AND work for pay and/or loan if desired and cred­itable. It also changes the entire psy­chol­ogy of the econ­omy and money sys­tem from halt­ing and aus­tere scarcity to free flow­ing ade­quacy. And of course the tremen­dous abun­dance of pro­duc­tiv­ity that tech­nol­ogy bestows upon us is thus avail­able tech­ni­cally with­out restric­tion, and increas­ingly so with inno­va­tion and increas­ing efficiency.

   Grace, the free gift, as an addi­tional monetary/financial pol­icy IS the answer. This may be anath­ema to the 800 lb. gor­ril­las of the too big to fail Banks whose biggest mar­ket con­sumer finance will undoubt­edly be cur­tailed by such a pol­icy, poor things, but it will be free­dom in fact instead of merely words.…for the individual.
3. 
   Bill Wilson

   December 6, 2012, 7:05 am | #

   Steve,
   There is a debate going on in NZ at the moment about bank prof­its.
   to wit: “In 2011, Aus­tralian banks made a pre-tax return of 1.19 per­cent on assets, com­pared with a global aver­age of 0.36 percent.”

   http://www.3news.co.nz/Reserve-Bank-governor-misled-Parliament-say-Greens/tabid/1607/articleID/279101/Default.aspx#ixzz2EI6qydlQ

   I was won­der­ing whether these “assets” of a bank are a real, or are they just this book-keeping entry you talk about and there­fore a fic­tion.
   If the actual assets were sub­stan­tially less than reported, the prof­its would be much higher per­cent­age wise.……no?
   Thanks
4. 
   mahaish

   December 6, 2012, 10:50 am | #

   mmt is try­ing to explain the finan­cial rela­tion­ship between the con­sol­i­dated gov­ern­ment sec­tor and the bank­ing sys­tem bk,

   and the con­text of this, is there attack on the igbc(inter tem­po­ral gov­ern­ment bud­getary con­traint par­a­digm thats pre­v­e­lent these days,.

   all these other debates may be impor­tant, but i dont think they effect the valid­ity of the argue­ments mmt are push­ing, in regards to the mon­e­tary system.

   there pri­mary focus is on the finan­cial rela­tion­ships, and they defer to oth­ers when it comes to other things
5. 
   Bhaskara II

   December 6, 2012, 6:51 pm | #

   Pro­fes­sor Keen,

   “Very cute! We need some lev­ity on this blog–and the planet.”

   I’m glad the car­toons pro­vide some lev­ity. I got a good laugh out of some of them and hope some one else would get some enjoy­ment out of them too.
6. 
   Harry Smith

   December 20, 2012, 10:38 pm | #

   Pred­i­ca­tion result:

   This was my com­ment:
   >Wed, 17 Aug 2011 10:05:55 +1000
   >
   > Gov­ern­ment will run out of money very soon. Because high inter­est rate makes
   > most of our com­pa­nies less prof­its, ATO will get less tax from those
   > com­pa­nies. At mean while com­pa­nies will axe more employ­ees and ATO will get
   > less per­sonal income tax. Gov­ern­ment has to get more tax from other sources.
   > That is in a neg­a­tive cycle, it can­not run for long until crash.
   >

   This is today’s (20 Dec 2012) news:

   Swan dumps bud­get sur­plus pledge
   By chief polit­i­cal cor­re­spon­dent Simon Cullen | ABC – 4 hours ago

   The Fed­eral Gov­ern­ment has all but dumped its promise to deliver a bud­get sur­plus this finan­cial year, argu­ing the move will help pro­tect the econ­omy and jobs in the face of falling tax rev­enue.
   Trea­surer Wayne Swan made the announce­ment after new fig­ures showed a $4 bil­lion write down in tax rev­enue dur­ing the first four months of the finan­cial year.
   “Obvi­ously, dra­mat­i­cally lower tax rev­enue now makes it unlikely that there will be a sur­plus in 2012–13,” he told reporters in Can­berra this after­noon.
   “It’s not because the Gov­ern­ment is spend­ing too much, it’s because we didn’t col­lect the amount of taxes that we expected to collect.
7. 
   Harry Smith

   December 22, 2012, 5:32 pm | #

   21 Decem­ber 2012, I pro­vide a Global Finan­cial Mar­ket Alert to you.
   Please check the result in the next sev­eral weeks.