Hypothecated taxes are designed to undermine the NHS

[Le Baron]

Again, I did not claim that Job Guarantee was like Workfare - my comment contrasted the two. I said that I could not see how any system of automatic government employment that was not Workfare could bring down prices.

Well you actually did say that when you said:

I also don’t see how guaranteeing employment can prevent inflation in any way that doesn’t boil down to the bad old neo-liberal “Workfare” idea

The beginning assumption is the obsession with inflation like the neo-liberals. And I answered it by showing that it (1) increases output and (2) increases participation; and that artificially keeping wages down, on the assumption this is the best way to control inflation, is addressing a problem that doesn't exist and addressing the fear of it by destroying people's lives. We should first acknowledge that the government tax levy to drive currency also creates initial unemployment, so that leaving people unemployed when the private sector can't/won't take on that capacity is a structural (and moral) failure. It's also stupid to release resources like that, then not employ them.

Increasing of output while artificially suppressing wages (workfare) is not a useful inflationary control it is just nonsensical. They'd be better off just getting benefits.

The Government paying people normal wages to do normal work is fine, but I do not see the mechanism by which this would reduce prices in an economy.

Why do you so desperately want to reduce prices? The prices are what they are given two factors: the wage floor and the prices government pays. The offsetting of market prices to protect profits (inducing price-wage spirals) is a political problem, not strictly an economic one.

The principles of 'classical' economics are naive. This thing where price level and money wage level are determined by the stock of money (fixed money supply as assumed) controlled by the bank is just erroneous. It assumed the larger the money stock relative to output equals a higher price level. It also assumes no unemployment, even says it is impossible due to wage flexibility and claims any unemployment is due to 'regulation rigidity'. They failed to understand simple things like the separation between sale and purchase as motivations; that producing output and having the means to buy them doesn't mean they will automatically be purchased (since they live in a crazy world of equilibriums and instantly clearing markets).

It's absurd that this system still holds sway since Keynes had already swept it away it theoretically; in fact Marx had already formulated the theory of effective demand before Keynes and destroyed Say's Law by showing it was simplistic and flawed (and that it only even applied to the principles of a barter economy, of which there is no evidence throughout history anyway). It has been resurrected as a smoke screen of 'theory' by monetarists.

In such an environment, private-sector employers would have to offer more money than the Government does in order to attract employees (I have no problem with this),

Neither do I and that is precisely the aim of a JG. To set a wage floor the private sector can't fall under if it wants to attract labour.

but given that there’s no penalty for leaving a job, there can only ever be upward movement of wages.

Who says there is no penalty? That's a problem to be dealt with as in any case of employment. What are most employment penalties given for in real life? How many people working for a fair wage + benefits and training are likely to screw that up? This criticism is looking for tiny details and inflating them as though they comprise the greater part.

As wages in general rise, the Government needs to up its “normal wage” too, and we have more money flowing around, and the same amount of stuff to buy, which leads to... ?

No they don't. There's no reason for that to even occur as some sort of permanent ongoing process. You still think 'the market' drives this, they don't, they are an effect, not a cause. Plus you must factor in taxation or other cooling mechanisms.

Do you, by any chance, contribute to EU-funded academic and scientific research programmes?

I don't follow?

 

[laughingboy]

Imports are a benefit because they are goods for mere currency. The point of domestic activity is that the money issue (purchase of goods and services) mobilises domestic resources for domestic consumption and Gov UK is not doing that properly, plus it is importing.

Thanks for this. It prompted me to do a bit of reading (MMT and the external sector - Bill Mitchell).

My initial takeaway is that when it comes to external current account deficits ('balance of trade deficits'), MMT is not in denial of the risks, which are much the same as most economists would describe them. This should have been obvious because MMT doesn't change the components in play (floating exchange rates, possible 'panic' by external holders of currency).

The fact that MMT is more descriptive rather than prescriptive about what a balance of trade deficit represents for an economy may mean that trade deficits are more likely to be allowed to persist, but it does not mean that MMT views them as risk-free. That makes sense to me:

...if a country’s spending pattern yields no long-term productive gains, then its ability to service debt might come into question.

Therefore, the key is whether the private sector and external account deficits are associated with productive investments that increase ability to service the associated debt. Roughly speaking, this means that growth of GNP and national income exceeds the interest rate (and other debt service costs) that the country has to pay on its foreign-held liabilities.

 

[ks.234]

Very grateful for the academic detail, it adds a great deal that I’ve been struggling with, notably, inflation.

But having delved into the detail, the more intuitive broad brush also tells us that MMT is a description of what actually happens, and our household economic model, a model Thatcher said every housewife can understand, is wrong.

Economic crashes are held up and waved around as red flags against inflationary spending on public services, but apart from the fact that the flags are not waved when it comes to spending on right wing projects like wars, the biggest consequence on peoples lives of those crashes is the unemployment, not the inflation. It was only by addressing the unemployment that the such crashes have been tackled. To focus on the inflation rather than the unemployment is to put the cart before the horse.

In this country the so called post war consensus was towards full employment. Thatcher famously broke that consensus to focus on controlling inflation. The consequence of that was rising unemployment that has been mitigated to some extent by massaging the figures and the new phenomenon of under employment.

Unemployment and the more recent ill of under employment has been with us longer and had a much more damaging effect than inflation caused by economic downturn ever has

The deprivation and misery caused by under employment is a political choice, a cruel and unnecessary political choice

 

[KrisW]

@Le Baron You are still misrepresenting what I wrote regarding workfare. The sentence you quoted does not equate one with the other, and I have made it clear— now for a third time—that I do not equate the two ideas, nor do I consider Workfare in any way desirable.

I am also not pre-occupied with inflation. When I wrote, “I am not arguing for or against inflation” I was not lying; why would I lie?

I try use plain English, so when I talk about “price”, I really am referring to “the amount of something that has value that is needed to get something else that has value”. I think we can agree that “money” has no value of its own, and the amount of real value that it represents changes over time, so put “my labour” and “your labour” into that sentence as appropriate if it helps (it doesn’t cover everything, of course). I trust you accept that there is a limited amount of production, regardless of how much “money” is available to procure it, and that the amount of “money” required to procure production increases as you approach that limit, despite the “thing that has value” (one unit of production) not changing. This last one is a big failure of free-market economies: paying someone more money really does not make them more productive, but everyone believes it does because that way they get paid more.

Who says there is no penalty? That's a problem to be dealt with as in any case of employment. What are most employment penalties given for in real life? How many people working for a fair wage + benefits and training are likely to screw that up? This criticism is looking for tiny details and inflating them as though they comprise the greater part.

There is a greatly reduced penalty. If I have a job, and someone needs my skill-set for their own activity, they must offer me greater reward than I have now in order for me to move. There is a risk, however, that if I accept that offer, the job may be short term and leave me unemployed. That’s a barrier to movement, despite the greater reward available to me. If the other option is not “unemployment” but rather “a modestly-paid job for the government”, then I will be much more likely to take the chance.

Note: when I speak of reward, it has nothing to do with a number of units of currency, so taxation is irrelevant.

The reason I bring up currency at all is because economies do not exist in isolation. Price inflation doesn’t matter at all if all activity occurs in the same currency - you get bigger numbers on price-tags, but output and productivity are unaffected. Great. But there is such a thing as trade between economies: I have not seen a plausible explanation of how MMT-based policies can gain traction in an environment where trade with more traditionally-regulated economies continues. Exporters are always paid in their currency, not the currency of the buyers. (The USA is the exception to this, which is why I said that the USA could make this idea work, but not other countries).

Are the two models even compatible? This is the question that I haven’t heard good answers to.

Imports are a benefit because they are goods for mere currency. The point of domestic activity is that the money issue (purchase of goods and services) mobilises domestic resources for domestic consumption and Gov UK is not doing that properly, plus it is importing.

Ignoring again that you do not buy imported goods with your currency, how do you classify emigration?

 

[laughingboy]

The Government paying people normal wages to do normal work is fine, but I do not see the mechanism by which this would reduce prices in an economy. In such an environment, private-sector employers would have to offer more money than the Government does in order to attract employees (I have no problem with this), but given that there’s no penalty for leaving a job, there can only ever be upward movement of wages. As wages in general rise, the Government needs to up its “normal wage” too, and we have more money flowing around, and the same amount of stuff to buy, which leads to... ?

That's not how I understand a Job Guarantee to work. A Job Guarantee in itself isn't anti-inflationary - it is merely a store of labour at minimum wage, after all. So what is the purpose of a JG in MMT? It is to enable the government react to inflation in wages in the private sector by raising taxes. It also sets a floor below which wages cannot fall.

Unlike the present system where interest rates do the job of dampening demand, MMT advocates that the government control inflation with taxes. But wouldn't this create unemployment? So how does that accord with the central idea of MMT that the government is not fiscally constrained? Couldn't the government employ these people, if the private sector cannot do so at this time without creating inflation? Well, yes. The idea of the JG is to absorb any resulting job losses, offering non-profit, sustainable work (at minimum wage) for anyone who wants it. When the economy recovers and people take up more private sector jobs, the numbers in the JG reduce.

So, instrumentally, a Job Guarantee's role is to allow governments to act fiscally rather than monetarily via interest rates. In theory it allows the government to maintain price stability, via tax rises.

 

[Le Baron]

@Le Baron You are still misrepresenting what I wrote regarding workfare. The sentence you quoted does not equate one with the other, and I have made it clear— now for a third time—that I do not equate the two ideas, nor do I consider Workfare in any way desirable.

Then why mention it? You drew a comparison. It was the wrong comparison to draw and I think you made it in order to imply that it somehow leads to the same and may be inflationary. I didn't invent this reading, it's implicit.

I try use plain English, so when I talk about “price”, I really am referring to “the amount of something that has value that is needed to get something else that has value”. I think we can agree that “money” has no value of its own, and the amount of real value that it represents changes over time, so put “my labour” and “your labour” into that sentence as appropriate if it helps (it doesn’t cover everything, of course). I trust you accept that there is a limited amount of production, regardless of how much “money” is available to procure it, and that the amount of “money” required to procure production increases as you approach that limit, despite the “thing that has value” (one unit of production) not changing. This last one is a big failure of free-market economies: paying someone more money really does not make them more productive, but everyone believes it does because that way they get paid more.

Yes there is always a resource limit, which is why is why where is the necessity you use fiscal tools (e.g. taxation) to create fiscal space. Money does have some value though, because people need and want to procure it; if it had no value people would not accept it. Its value is just different and reflective of resources. The mistake I observe is the view that people think fiscal injection means aimless injection with no return (revenue) to destroy a portion of it. Fiscal targeting is bizarrely seen to be 'anti-market' by ideologues; as if aiming your hosepipe onto the roof and hoping it runs off and effectively water all the plants is somehow more efficient. Values of production are not static though, things really do alter in ebb and flow, to do with resources or changes in society.

There is a greatly reduced penalty. If I have a job, and someone needs my skill-set for their own activity, they must offer me greater reward than I have now in order for me to move. There is a risk, however, that if I accept that offer, the job may be short term and leave me unemployed. That’s a barrier to movement, despite the greater reward available to me. If the other option is not “unemployment” but rather “a modestly-paid job for the government”, then I will be much more likely to take the chance

I don't see why this is a problem. The assumption is that this situation applies to every employable person. Imagine this, that the reserve of people otherwise idle are employed and that these are people who prefer long-term employment (since they may also move between different jobs/skills in a JG rather than some static task). Then you eliminate the unemployment buffer stock, replacing it with an employment buffer stock; which is people ready-skilled and trained and in a working frame of mind to take on tasks. You have to accept that the private sector, being "dynamic" and also capital constrained, tends to not want to use a lot of people beyond the task. So if you are highly employable, you just move on, this is your choice. Also if you take a short-term job the end of that contract is the choice of the private sector and your improved choice of remaining in work in a JG job, assuming you really have nothing else, is vastly better than being unemployed, which is not a pool from which the private sector wants to recruit. They seek people who are known to be diligent, turn up and do the job. JG is keeping people properly active, not in stagnancy. It takes up employment where the private sector can't/won't. Which is correct since the monetary system and government tax liability creates unemployment in the first place. This is point of sound logic.

The reason I bring up currency at all is because economies do not exist in isolation. Price inflation doesn’t matter at all if all activity occurs in the same currency - you get bigger numbers on price-tags, but output and productivity are unaffected. Great. But there is such a thing as trade between economies: I have not seen a plausible explanation of how MMT-based policies can gain traction in an environment where trade with more traditionally-regulated economies continues. Exporters are always paid in their currency, not the currency of the buyers. (The USA is the exception to this, which is why I said that the USA could make this idea work, but not other countries).

Exporters are not always paid in their currency. They are paid in the currency of the importer, providing it is acceptable (which is usually yes if the currency is sovereign and on top of resources). They are paid in currencies they know they can spend elsewhere. This is why imports are actually more beneficial than exports on the whole: a currency for goods exchange. Let us note that a lot of 'mainstream' (aka wrong) economics actually thinks trade is largely none-monetary but a goods exchange. It's a complicated theory that is worth having a look at just for amusement purposes. This view that the U.S. is in a special monetary position allowing them monetary sovereignty that cannot be enjoyed elsewhere is non-factual. The Yen is sovereign, so is the Pound and the Euro (centrally), the Canadian and Aussie dollar, New Zealand's currency, South Africa's, Russia's...and on and on. The only question is: what resources can it mobilise?

Ignoring again that you do not buy imported goods with your currency, how do you classify emigration?

You do buy them with your currency. If e.g. GovUK buys 20 million pairs of wellies from China it doesn't go about trying to acquire a lot of Chinese currency to effect the purchase. These things are mere asset swaps.

 

[ks.234]

But there is such a thing as trade between economies: I have not seen a plausible explanation of how MMT-based policies can gain traction in an environment where trade with more traditionally-regulated economies continues. Exporters are always paid in their currency, not the currency of the buyers. (The USA is the exception to this, which is why I said that the USA could make this idea work, but not other countries).

Are the two models even compatible? This is the question that I haven’t heard good answers to.

Ignoring again that you do not buy imported goods with your currency, how do you classify emigration?

I think this might show a misunderstanding about what MMT is. It isn’t very Modern, it’s not really about Money, and it sure as hell isn’t a Theory. What it is is a description of what actually happens in a country with Monetary Sovereignty. What it says is that the UK government can buy whatever it wants in Pounds. That it cannot run out of Pounds and that spending in those Pounds is created at the moment they’re spent and not dependant on a piggy bank of stored Pounds from tax.

Therefore to talk about the failure of MMT to address problems between Sovereign Currencies is bit of a non question. International trade is a different question with different complications and is more about adding and deleting numbers from one currency spreadsheet to another, or trade deals, or in the case of Russian gas, bribery and corruption

 

[KrisW]

@Le Baron -

Then why mention it? You drew a comparison. It was the wrong comparison to draw and I think you made it in order to imply that it somehow leads to the same and may be inflationary. I didn't invent this reading, it's implicit.

You think? I have told you three times what I meant by that comparison. I have long experience writing technical and engineering specifications; as a result I don’t do “implicit” when I write, in any circumstance.

I suggest that if you find yourself in a similar situation in future, try this useful phrase: “I am sorry, I obviously misunderstood you.”

 

[Le Baron]

It isn’t very Modern, it’s not really about Money, and it sure as hell isn’t a Theory.

Don't let Bill Mitchell catch you saying that though, it makes him livid! It was first written in a critique by Paul Krugman and was meant to portray MMT as a rehash of post-Keynesian economics, plus some other bits.
There are actually some new ideas which are a lynchpin, notably Warren Mosler's definition of what bonds are for and why they are issued. Before this both Mitchell and Randy Wray hadn't posited this and it has important consequences with regard to the concept of borrowing, which even people who recognised currency sovereignty hadn't worked out. Mosler also defined the state of unemployment in a monetary economy. It's a tricky one that because there are hints of it elsewhere (Minsky, Lerner), but it wasn't stated as such

I think it is about money and that it is a coherent theory. Also that it is modern because it describes economies since the international dismissal of the gold standard in 1971, which wasn't recognised and was obscured by monetarist claptrap.

 

[Le Baron]

@Le Baron -


You think? I have told you three times what I meant by that comparison. I have long experience writing technical and engineering specifications; as a result I don’t do “implicit” when I write, in any circumstance.

I suggest that if you find yourself in a similar situation in future, try this useful phrase: “I am sorry, I obviously misunderstood you.”

I didn't misunderstand you. You made a comparison and now try to wriggle out of it - three times. If you think they are in no way the same it doesn't make sense to have mentioned it. Don't try to offload your failure to understand a simple concept onto me.

 

[ks.234]

Don't let Bill Mitchell catch you saying that though, it makes him livid! It was first written in a critique by Paul Krugman and was meant to portray MMT as a rehash of post-Keynesian economics, plus some other bits.
There are actually some new ideas which are a lynchpin, notably Warren Mosler's definition of what bonds are for and why they are issued. Before this both Mitchell and Randy Wray hadn't posited this and it has important consequences with regard to the concept of borrowing, which even people who recognised currency sovereignty hadn't worked out. Mosler also defined the state of unemployment in a monetary economy. It's a tricky one that because there are hints of it elsewhere (Minsky, Lerner), but it wasn't stated as such

I think it is about money and that it is a coherent theory. Also that it is modern because it describes economies since the international dismissal of the gold standard in 1971, which wasn't recognised and was obscured by monetarist claptrap.

Yes, thank you. I do tend to get a bit slap dash when applying my broad brush strokes. You should see some of my paintings!

 

[Le Baron]

Yes, thank you. I do tend to get a bit slap dash when applying my broad brush strokes. You should see some of my paintings!

Perhaps it's allowed in paintings. I don't know I'm not a painter. I've tried, but it's perhaps not my forte. What kind of paintings do you do?

 

[flatpopely]

Let's try to remember not to get personal! It's heading the way of 'You are an idiot' and it won't end well!

 

[Le Baron]

I understand the moderator position, though could we also remember not to stifle a fairly hot and delicate topic with with worries about feelings getting hurt. I've called no-one an idiot and I don't think anyone has called me an idiot (just falsely claimed I didn't understand something, but I can manage that).

 

[ks.234]

Perhaps it's allowed in paintings. I don't know I'm not a painter. I've tried, but it's perhaps not my forte. What kind of paintings do you do?

Having been a freelance illustrator and then an art teacher, I am now enjoying free expression, or throwing paint around as some people call it. Mostly based on landscapes and my observations of the New Forest while walking the Mad Beast

But to go back to MMT, I do take your points about the M and the M, but my thinking on the ‘theory’ part was very much in line with the Theory of Evolution. The ToE accurately describes what actually happens in the real world, but to ask why the ToE doesn’t address the question of say, climate change, as KrisW did when asking why MMT doesn’t address international trade, is a bit of non question. An understanding of the Theory of Evolution is absolutely essential to addressing the need to address climate change, but it is not in and of itself an answer to climate change. Likewise an understanding of MMT is essential to addressing the need to change current economic thinking and under employment, funding public services, and, er, climate change, but it not in and of itself an answer to such things

 

[Le Baron]

But to go back to MMT, I do take your points about the M and the M, but my thinking on the ‘theory’ part was very much in line with the Theory of Evolution.

Yes I get the point you make completely, though a theory doesn't have to be just a mere proposition. The theory of the internal combustion engine is not in dispute, but it is required as a representation of how it works. It's the accepted one. The 'intelligent design' gang have hijacked this by saying natural selection is just 'one theory', it's true, but it also the one theory that explains the phenomenon better than any quackery those people have put forward and thus takes the position as 'the' theory.

Nice dog btw.

 

[ks.234]

Yes I get the point you make completely, though a theory doesn't have to be just a mere proposition. The theory of the internal combustion engine is not in dispute, but it is required as a representation of how it works. It's the accepted one. The 'intelligent design' gang have hijacked this by saying natural selection is just 'one theory', it's true, but it also the one theory that explains the phenomenon better than any quackery those people have put forward and thus takes the position as 'the' theory.

Nice dog btw.

Yes, you put it very well. My only dispute is that in the common parlance ‘theory’ is a description of something that might be, among all sorts of other might be’s, rather than a verified description of what actually is. Intelligent design is non verifiable, the Theory of Evolution is. I guess what I’m trying to say is that the Theory of Evolution is a Theory, it just f*cking is. Same with MMT.

And yes, she is. No theory, she just is.

 

[JensenHealey]

I can’t be the only observer here that comes to the view that most economic argument and theory is incomprehensible rollocks?

 

[ks.234]

I can’t be the only observer here that comes to the view that most economic argument and theory is incomprehensible rollocks?

When you vote, don’t you essentially vote on what you want the government to spend money on? If so, do you believe that government spending is dependent on tax? It seems to me that these are fundamental questions that go to the heart of democracy.

 

[KrisW]

I understand the moderator position, though could we also remember not to stifle a fairly hot and delicate topic with with worries about feelings getting hurt. I've called no-one an idiot and I don't think anyone has called me an idiot (just falsely claimed I didn't understand something, but I can manage that).

I do not believe that you are an idiot.

I won’t be engaging with you any further, because I expect at least some level of civility in any debate, and your replies to me on this thread have fallen short of that level. If you want to consider this as a vindication of whatever your argument actually is, I give you my blessing to think that.