I'm not sure this long post is OK.
Economics is at best a Social Science. And worse, it has been captured by the powers that be, i.e. the oligarchs. In a real science the ability of a theory to make accurate predictions about the future is the actual test of the theory. If a theory fails to be able to make accurate predictions then scientists will be looking for a better theory that can make good predictions. Economics has failed to make good predictions for a long time. It didn't predict the GFC/2008, it didn't predict the increase in the debt to GDP ratio in Europe that followed the use of austerity to cure the GFC/2008, it didn't predict the long running recession in the Eurozone since 2008, it did predict the crash or hyperinflation that will be caused by the mounting US national debt that has not happened for 30 years now, etc. Can anyone point out a prediction that did come true?

I have found a much better economic theory. It is actively suppressed by the oligarchs. It is laughed at and criticized with strawmen arguments. Prof. Steve Keen did predict the GFC/2008, it did predict the problems that Europe has had since 2008, it does predict that the national debt will not be a problem anytime soon, etc. Those creating it include --- Profs. Randall Wray, Bill Mitchel, and Stephenie Kelton. I also like a lot of what Prof. Mark Blyth has said.

The theory is called Modern Money Theory or MMT.

I will start off with the 2 main errors of mainstream or Neo-liberal economists. 1] It says that the US Gov. is like a family or a corporation and must someday pay off the national debt. So, growing the debt is just making the problem worse. However, all this is just leftover thinking from the time when the Gold Standard was in place. At that time it was necessary to keep the amount of dollars close to the amount of gold held by the nation. So, it had to borrow dollars from those who had them to deficit spend. However, now the US has a fiat currency and can just spend dollars into the economy without worrying about this draining the gold reserves. The only limit is the availability of real resources to buy with the increased dollar supply. If there are not enough resources then inflation is possible. However, default on the debt is *not* possible. Being held hostage by bond buyers is not possible. And the Gov. can set the interest rate it pays on all its bonds, if it doesn't care if this keeps interest rates too low for everyone.

2] Neo-liberal economics doesn't worry about the level of private debt in the economy. It worries instead about the amount of US Gov. debt. However, unlike Gov. debt private debt does have a risk attached. People and corps. can't create dollars to make payments. They *must* get dollars from someone else. Economists say that banks loan their depositor's money to their clients who borrow. But, in fact [proved by an experiment in 2014] banks make loans with dollars they create by making the loan and depositing that amount in the borrower's account at that bank. This does not create new Reserve Dollars, but when the dollars are spent by the borrower and deposited by their new owner into their bank account [at any bank] this does create new Reserve Dollars. These new Reserve Dollars are the same as dollars spent by the Gov. itself and so do allow banks to meet their Federal Reserve Bank required Reserve Requirements.

. . . Bank loan officers are under pressure to make loans and they get exuberant as a boom goes on and on. They make dumb loans to people who can't pay them back, then sell the IOUs to suckers. The loan dollars are spent into the economy and are the same as dollars of income. That is, they increase the GDP. But, when people can't make the payments eventually; this causes a contraction in new lending. This contraction reduces the GDP. This reduces someone's income, which reduces his/her spending, which reduces the GDP more. This is the process that caused the GFC/2008. Then the GFC got worse as the massive borrowing by the banks became known. This required the US Federal Reserve Bank to create [by some official Freedom of Info reports] over $26T, yes $26T to bail the banks out. and not just US banks but banks in Europe and the rest of the world too. Most of these loans have apparently been paid back, but not all. And QE has seen the Fed. buying poor quality assets as if they were AA rated assets, thus giving $$ to the big banks.

. . . So, Neo-liberal economics keeps the Gov. from being Keynesian and spending to keep the economy going so that everyone benefits. It instead relies on the banks making loans [this is profit for the oligarchs] to keep the economy going for a while. The theory doesn't see that this will always cause a boom and bust economy because sooner or later the people will not be able to make the required payments. Or maybe the oligarchs do see this but they see busts as a feature not a bug. Especially if the Gov. is going to bail them out.

. . . BTW --- the timeline shows that Neo-liberalism was (in part, at least) a response to the 70s which saw the US take the world off the gold standard and then the OPEC oil shock created a lot of inflation.

 

Mr., can you spare a dime..?

 

http://bilbo.economicoutlook.net/blog/?p=41542
By Bill Mitchell, an MMTer.
This blog post might explain why the main economics theory is so useless.
"The brainwashing of economics graduate students
I was reminded this week of an interesting studies published in 1987 by Arjo Klamer and David Colander on the influences that go into the training of a professional economist. This study was repeated by Colander in 2005. The results are rather disturbing although obviously I am an ‘insider’ in the sense I went through the process in one way or another myself (although not in a US graduate program). They demonstrate how far removed graduate students are from learning or being interested in the real world. They compete among each other for ‘technical excellence’ in mathematics so they can solve tricky technical problems but do not think it is important to know anything much about the real world economy nor about the economics literature and history of the discipline that has gone before them. They adopt classic Groupthink characteristics as they are moulded (socialised, brainwashed, choose your own word) by their professors (who then feed them into their own networks for employment etc). There is little wonder the profession has very little to say that makes any sense about the real world. It is largely a disgrace. ... "
Bill quotes a study that polled economics students and got these results. “Forty-three percent believed that a knowledge of economic literature was unimportant while only 10 percent felt that it was very important. Sixty-eight percent believed that a thorough knowledge of the economy was unimportant …” If the real world economy is not important then how well can they predict the real world economic consequences of a policy?
I put in a separate post in case it gets deleted for having a ink in it.

 

An article from MarketWatch.
Opinion: Billionaires haven’t earned all they have
Published: Feb 9, 2019 10:49 a.m. ET
"The very wealthy do produce some value, but most of them are rentiers, piggybacking on the work of others"
By definition, rentiers are people who gain control of something that already exists and use monopoly power to collect excessive profits from it. Like land for example. Some extend it to inventors who invent something and get their patent extended by lobbying, and others.

https://www.marketwatch.com/story/billionaires-take-more-than-they-make-2019-02-07

 

Gobbledygook
Longer than the theory of evolution and the theory of relativity combined ,
and so boring it doesn't even warrant reading to the end of the first paragraph.

 

Shooters economic theory
1) It is largely irrelevant how rich the rich are, and how poor the poor are, provided the rich earn their money legally and the poor have the same opportunity to earn money as the rich do.
2) Government debt matters. A balanced budget is key to economic health over the long term.
3) Government spending must regularly be adjusted, much as the stock market has to regularly adjust itself.
4) Any program intended to "spread the wealth" by taking from the haves and giving to the have nots must be approached with healthy skepticism and cynicism.
5) Regulation of business by government is necessary, as is regulation of government by the people is necessary.

 

Well, yours is the theory that has not let Europe recover after the GFC/2008. I say you are wrong on all counts. The world has tried your way for decades now and it has not been good for the mass of the people. We need to try something different. MMT makes a lot of logical sense. Other theories make assumptions that are plainly false, and then prove the ridiculous with them.

 

Well, Steve old pal, you're welcome to your opinion, and Shooter can only point out that while Europe continues to wallow in the aftermath of the 2008 KaBoom, the United States is doing fine just now.

And, the United States has done just fine following pretty much the Shooter economic theory since the mid 1700's.

We do need to reign in Government, including a balanced budget, get the fucking debt under control, and yes, have a "government budget reset" or two, but overall, things are doing just fine.

 

Spoken like an advocate for the one percent. Fortunately most Americans disagree with you about progressive taxation. We want more of it.

 

Oh, see, you can't get away with that nonsense.

Shooter never said hes against progressive tax schemes.

You made that up and you need to take it back!

 

Shooter, do private debt levels matter?
OTOH, do you agree that the US Gov. can always pay off the bonds as they come due, by creating dollars if in no other way? And further, do you agree that creating dollars to do so will always cause far less damage to the world's economy than defaulting on some bonds?
Then, why do you think US Gov. debt levels matter?

 

So, shooter are you going to reply?

 

shooter is a Trumpett, so of course he runs and hides as soon as he is confronted.
Recently I found the 6 mo. old Youtube video by the MMTer Dr. Stephanie Kelton. In it she explains in simple terms why the US national debt is not a problem because it is just the number of dollars that the Gov. spent in the past that the Gov. didn't take back from the people using taxes. It is the Private Sector's [of the economy] savings. Because that is what it is, there is no good reason to tax it away from the people in order to pay off the national debt. Viewed in this way it makes zero sense. It would make sense if we were on the gold standard but we are not on the gold standard any more, so this idea is obsolete thinking.



What do you think?

 

Today I found this 4 mo. old video by Prof. Steve Keen. He is a prof. of economics in Australia. He predicted the GFC/2008 in 2005.
He did this on the basis of seeing the exponential rise in Private debt in both Aust. and the US.
Since no one who worked for a central bank saw the crash coming and Dr. Keen did we ought to pay attention to what he says.
The video is 70 min. long, but the last 1/3 is about what Steve thinks about Bitcoin (no much). That leaves about 46 min. for his reasons most economics you have been taught is all wrong.

 

See, this argument was floated during the Obama administration. It ain't a problem, its just numbers on a spreadsheet. We just print more paper, not a problem.

Well, yeah, its a problem. Its spending money the government does not have and must at some point recover from taxpayers.

No government can just endlessly print paper and think that lets the spending go unchecked.

Anyone who thinks its OK to spend without limits should support a zero tax for everyone. If we don't need to worry about spending why worry about taxes?

 

Well, you sir just don't understand what MMT is saying. First, taxes are necessary to give the fiat currency its value. Taxes give you a reason to want at least some dollars so you can pay your taxes. Taxes give the rich a reason to want dollars also, so they will take your dollars when you want to buy something that their company had produced.
Second, there is a limit to how much paper money can be spent into the economy. This limit is not set by any purely financial consideration. Instead it is set by the availability of real resources like iron ore, factories and labor. When there are no longer enough resources, if the Gov. keeps deficit spending there will be inflation. Excessive inflation sets the limit. OTOH, Japan has been trying to get its inflation rate above 2% for over 20 years now and has not been able to deficit spend and use QE enough to do that. It seems creating inflation can be harder than you think.
Third, the US Gov. has had a nat'l debt since 1845 or so. For over 150 years now. So far there has never been a reason to pay it off. I suggest that you can't give a reason why it will need to be paid off now. The nat'l debt is just the dollars that the Gov. has deficit spent into the economy and has not collected back with taxes. It therefore is the savings of the 2 non-Gov. Sectors (Private & Foreign). In fact it is impossible to collect enough taxes to pay off even 10% of the $20T debt, because pulling $2T out of circulation would push the US economy into a deep recession or even a depression. People would have no money to spend and would stop spending, this would make comp. stop producing and layoff workers, this would reduce spending more and so comp. would layoff more workers, etc. Historically there are only 2 ways to end a depression; for the Gov. to deficit spend or start a war. For example, the Panic of 1837 lasted until the Mexican War started.
So, the Gov. is not like an ordinary family. It is more like a family that has a stock of special paper and a great color copier that can turn out $100 bills that would fool the CIA. This family can never be unable to pay a bill it owes. Every time someone compares the Gov. to a family he is either trying to fool you or just doesn't understand reality. Not understanding economic reality is hugely common because in College economics students are taught to always ignore reality and only think about the make up models that it assumes model reality but don't at all. For example economics assumes that every buyer and seller in the market have complete knowledge of what they are selling/buying. This is never true, so this assumption (like many, many others in mainstream economics) is false.
But, since you are a Trumpett, you will never understand. The only reason I reply in detail is in the hope that one lurker understands. To understand one must 1st ignore almost everything you have been taught about economics. I'm not the one telling you this, it is the Economics Professors of the MMT school of economics who are telling you this. See the videos above for some of them telling you how it is.

 

"Since Shooter is a trumpet he can never understand ........."

Typical despicable arrogance. The attitude that if you don't agree with my position 100% you're stupid, or corrupt, or genetically inferior or not white or all of the above.

More than anything else, this tells Shooter everything he needs to know about you.

Now, the idea that government overspending is good for the economy, good for America in the long term is nonsensical on its face.

Its an arguement for big government, nothing more, nothing less.

And yeah, war has a way of stimulating the economy. At what price though?

Had to snicker at your "taxes are an incentive" bullshit. Until he realized you were serious. That scared him. What the hell, dude?

This pile of shit was rejected once already. Give it up.

President Trump won't fall for this shit.

 

This blog post was made today by Dr. Bill Mitchell an MMTer, he is an Econ. Prof. in Australia. It is about the UK's austerity vs Brexit situation.
Everything between the quotes is cut and pasted.
"Britain’s austerity costs are larger than any predicted Brexit losses
Posted on Monday, March 4, 2019 by bill
On February 21, 2019, the British Office of National Statistics (ONS) released the latest fiscal data for the British government – Public sector finances, UK: January 2019. There was a lot of press reaction applauding the result and even progressive writers found it possible to misrepresent what the data actually is telling us has been happening. The fact that the British government recorded a fiscal surplus of £14.9 billion in January 2019 was touted in terms of creating a ‘war chest’ that the Government will be able to delve into when the next crisis arrives (which might be soon if the current Brexit mishaps continue). The reality, is, of course, totally different. There is no stored up spending capacity (stock) created when a government runs a surplus. What is actually happening is that the net flows out of the economy to the government squeeze an already over-indebted non-government sector for liquidity and destroy that much of its wealth portfolio. Moreover, while all and sundry, including the Euro-leaning Left are frothing at the mouth over Brexit, new data now allows us to compute the losses arising from the deliberate strategy of fiscal austerity that the Government has pursued. Guess what? They appear to dwarf all the Project Fear estimates of losses arising from Brexit (notwithstanding the flaky nature of those estimates). Where is the Guardian’s column Austerity Watch to match its hapless Brexit Watch column? Where is the relentless stream of articles from Guardian journalists and Op Writers about austerity? Sorry, that would take up space which is occupied by the relentless stream of articles about Brexit?

When the ONS published the data, various journalists were extolling the virtues of the fiscal surplus in a number of different ways – ‘creating savings’, ‘storing up future spending capacity’, ‘taking pressure of interest rates’, ‘reducing future tax liabilities’, and all the rest of the guff.

The commentary was generally disappointing from a Modern Monetary Theory (MMT) perspective.

Even the commentary by Larry Elliot in the Guardian (February 21, 2019) – Hammond will keep his powder dry over pre-Brexit windfall – was a bit disappointing.

Readers were told that:
. . . The chancellor will adopt a wait-and-see approach to talks before allocating his surplus funds …
. . . The size of the surplus recorded … means Hammond now has ample scope to do just that, should the need arise.
. . . In any event, Hammond is now in a better position than he was when he made his budget speech in late October.

1. A Chancellor does not allocate fiscal surpluses. They are flows and are gone the moment they occur. The tax revenue will be a number in an account. But that is a meaningless construct when assessing whether the British government can spend.

2. The size of the surplus (or even its existence as an accounting construct) doesn’t increase (or decrease) the financial capacity of the British government to spend tomorrow or the day after that.

In political terms, by misleading the public on what surpluses actually mean, the government might lie and claim it has more scope to spend.

But the UK Guardian should not be helping them with that deception.

Using terms like “better position” reinforces the lie that deficits are bad and surpluses are good.

Effectively, the real story is that the fiscal surplus which the Office of National Statistics recorded as having risen to £14.9 billion in January 2019 destroyed that much non-government wealth in January 2019.

That, in turn, further squeezes non-government sector liquidity at a time when households are carrying massive and unsustainable debt burdens and business firms are reluctant to invest given a range of uncertainties.

That is what a progressive media outlet should have reported.

Which then leads to a report published by the New Economics Foundation (NEF) (February 21, 2019) – Austerity is subduing UK economy by more than £3,600 per household this year.

The NEF analysis focuses on what impact the process of cutting net government sector spending has had on the prosperity of the British people.
...snip..."
There is a lot more to the article, so click this link:
http://bilbo.economicoutlook.net/blog/?p=41710

 

Well, Vice Pres. and Pres. Reagan both have said deficits don't matter. The Repid Party has repeatedly passed laws that added to th deficit without worrying about the deficit that much. They pass the bills into law and then fail to pass follow on laws to pay for them by cutting something like Soc. Sec. for example.
I have already argued with you in the past here and I already know how your mind seems to work. I think "this tells [Shooter, I mean] me everything he [I mean I] needs to know about you."
Claiming an idea is "nonsensical on its face" is not a very convincing argument. It only convinces those who are already convinced.

To the lurkers, if you are economically in trouble/pain, then you might want to consider what new things it will take to end your economic pain. I'm asking you to drop your preconceived notions and get down to the basics. The pain of Great Depression was not caused by any lack of resources, factories, or labor. So, what was missing? MMT claims what was missing was demand. In economics 'demand' is defined as people with money who want to have/buy something. People who have no money to spend do NOT create demand. So, in 1930 there were a lot of people who wanted to buy a lot of somethings, what they lacked was money. In practice, in that situation the ONLY source of money is the Gov.
Until the Gov. starts deficit spending hugely the people will not have more money to create demand that will get the factory owners to reopen the factory to make more stuff because their inventory is being bought. Short of war, this is the only way. This BTW is not just MMT telling you this, it is also the Keynesian School of Economics telling you this. Austerity has not worked in Europe for 10 years now. Don't make the American economy worse by doubling down on austerity here.

 

Yep.
Nothing more than an argument for big government.