The Guardian has a heavily pro-MMT editorial this morning, albeit offering a pragmatic mix of Randy Wray and QE in a way I entirely approve of.
I recommend it be read, but thought the conclusion worth sharing:
The inequality, financial instability and ecological crises have multiple causes, but their existence is built on radical, free-market economics. It is not the case that the government's ability to spend is temporary while interest rates remain low, as Mr Sunak claimed. Bond-purchasing programmes can control yields. A system that benefits private finance but subordinates the state and threatens to expose it, post-pandemic, to austerity and elevated levels of unemployment must be resisted. Only those unable or unwilling to believe the evidence of their own eyes would say otherwise.
I, of course, agree with this. I read it after writing another post this morning, in which I suggest that the risk of downturn after the pandemic itself is over is very real without government intervention.
There is not the slightest shred of evidences to suggest that markets will drive any post-coronavirus recovery. MMT shows that governments can. This has to be our direction of travel.
But where is the political party that will say this?
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Hi Richard,
Please reflect on the phrase “after the pandemic is over”? The Covid disease will have to be managed for a long while, both nationally and internationally. There is an impression from Govt and media that The Pandemic will end [soon] with a return to the good old ways.
Please listen to Richard Horton’s (the editor of the Lancet ) dissection of the pandemic https://novaramedia.com/2021/02/02/covid-19-the-biggest-state-failure-since-suez-interview-with-richard-horton/
I thought I had made it clear I do not think it will be over any time soon?
And that the implications will last even longer?
I agree, Richard Horton’s interview with Aaron Bastani really explains the whole Covid flasco. The fact that Covid is 100 times as lethal as influenza is not really pointed out in main stream media. Unless there is almost complete suppression of Covid to below 20 cases per 100,000 as Melbourne Australia did, then any relaxation is not effective. Horton also points out until the whole world has suppressed the virus no one country can feel safe. His advocacy of a WHO policy of Universal Health Coverage – getting every country to have an equivalent of the NHS plus a permanent organisation dealing with preventive health measures and planning for future pandemics we cannot feel safe.
Well, there are suggestions that the “Russian flu” that killed about a million people in 1889 and 1890 was caused by coronavirus OC43, which nowadays is one of the constellation of different viruses that cause mild symptoms that we describe as a “common cold” (most are rhinoviruses, with the rest variously attributed to influenza viruses, adenoviruses, coronaviruses, and some others).
The hope has to be that SARS-CoV-2 either dies out entirely, or the symptoms weaken so it becomes just a mild respiratory infection.
One day….
So reminiscent of the 1920s and 30s when the Labour Party refused to accept Keynesian economic policy and ended up standing shoulder to shoulder with the Tories and ramming through austerity, the burden of which fell mainly on its own voters. They were frightened of appearing “irresponsible” or “too radical”. It was only when the 2nd World War effectively meant that the UK had run a Keynesian economy for 6 years that Labour timorously accepted that reality and ran with it. I see no chance whatsoever that a timid focus-group-pleaser like Starmer will take a risk with anything let alone embrace a radical new way of accounting for govt spending. So just like last time he’ll nod through policies that will just drive the forces of anger and resentment among Labour’s natural voters. There will be a horrible political price to pay eventually.
@ John Hare
I suppose we can only hope it will dawn on the British people they’ve been “experimented” on to their detriment as far as Conservative and Labour policies are concerned that have had a monetary bearing on their lives. It seems reasonable to say the motives for these policies have been a mixture of corruption and ignorance.
“I suppose we can only hope it will dawn on the British people they’ve been “experimented” on to their detriment as far as Conservative and Labour policies are concerned”….. and experimented on without any direct or significant consequence to toryscum or labour politicos, apart from loss of office. There, sorted.
There has never been any consequences to either set of politicos with respect to their “experiments” on a largely “groomed” population. 120,000 dead due to austerity? at best a shrug. Slo-mo destruction of NHS – shrug. Brexit disaster – shrug (or “don’t worry it will get better”). Shrug/no consequences politics.
“But where is the political party that will say this?” – well with a set of dolts in charge of Labour-B.Liarite I would say absent. There are similar problems in the Euro zone (where there are imilar levels of brainlessness). Starting with something positive:
https://www.euractiv.com/section/economy-jobs/opinion/cancel-the-public-debt-held-by-the-ecb-and-take-back-control-of-our-destiny/
I did a btl – mostly agreeing. Summarising the article states: “you can’t owe yourself money.
& here we have Mrs Perma-tan saying the exact opposite: https://www.euractiv.com/section/economy-jobs/news/ecbs-lagarde-says-cancelling-covid-debts-unthinkable/
extract:
“Cancelling that debt is unthinkable, It would be a violation of the European treaty which strictly forbids monetary financing of states blah blah ,” She was reacting to a call Friday by more than 100 economists for the ECB to further boost the economic recovery of eurozone members by forgiving their debts.
Thatcher & her dead sheep Howe responded in roughly similar fashion, in response to a letter to the Times from massed ranks of economists in the early 1980s as the toryscum twosome eviscerated UK industry with 14 – 15% interest rates. History, repeating itself 1st as tragedy & then as a perma-tanned farce.
On a positive note Dover Port today announced ..
“A month on since the end of the Brexit transition period, the Port of Dover is pleased to already be welcoming over 90% of the freight traffic volumes typical of this time of year following the significant stockpiling experienced before Christmas.”
So fingers crossed Brexit might not be the impending barrier to trade suggested by many.
10% down is still significant
And the number of empty trucks is thought to be significantly higher
I’m very pleased about the Guardian editorial it’s a good step forward and hard to retreat or lapse from. Highly appropriate too for a paper that tries hard to be progressive in its thinking in so many other areas outside of government finance. Here’s what I posted on Richard’s other article on Bank of England accountability that also I think helps reinforce the Guardian’s editorial:-
On pages 2 and 3 in the Introduction Chapter of her book “Making Money: Coin, Currency and the Coming of Capitalism” Christine Desan states that after the establishment of the Bank of England the following occurred:-
“Over the next several centuries, the level of cash irrigating daily exchange in England increased enormously. The money stock that individuals were willing to hold grew something like 65-fold, corrected for inflation.”
(She gives several references to support her statement in Note 1 on page 2.)
Randall Wray in his “Re-examining the Economics of Costs of Debt” testimony to the House Budget Committee in November 2019 explained at great length how money creation and retirement processes affect an economy in the case of the United States. Part of his testimony used a Sectoral Balances Accounting graph on page 9 to show what happened to the United States between 1960 and the Second Quarter of 2019:-
https://www.congress.gov/116/meeting/house/110240/witnesses/HHRG-116-BU00-Wstate-WrayL-20191120.pdf
Richard Vague in an article published in Evonomics showed that rapid increases of money supply in 47 world economies, including that by government money creation, over a time period 1960 to 2015 didn’t cause abnormal inflation:-
https://evonomics.com/moneysupply/
The prime reason in my view hyper-inflationists are able to generate concern amongst voters about their government not balancing its books is the assumption by voters that productive capacity within the economy remains static with an imbalance. This isn’t so if they made the effort to think more carefully. The extra demand generated by government money creation draws down inventory, increases the output of existing machinery, creates demand for more capital investment and encourages the growth of new competitive enterprises often with better productivity than the existing and importantly also creating brand-new products and services.
From what we now know of the effects of Parliament issuing a charter in 1694 that allowed the Bank of England to create paper banknotes and later the Country Banks if Andrew Bailey and the leaderships of both Conservative and Labour parties had been in charge the Industrial Revolution would never have happened!
Thanks
Still think the sovereignty ghost of Charles II no longer exists in terms of matters that affect the well-being of the country including monetary related matters? Think again:-
https://www.theguardian.com/uk-news/2021/feb/08/royals-vetted-more-than-1000-laws-via-queens-consent
“There is not the slightest shred of evidences to suggest that markets will drive any post-coronavirus recovery. MMT shows that governments can. This has to be our direction of travel. But where is the political party that will say this?”
Put another way it’s not to hard to envisage that if Rishi Sunak and Andrew Bailey had been in charge Britain’s Industrial Revolution would never have happened but hard to accept that the current leader of the Labour Party would join them. Even worse wouldn’t be able to understand the arguments why anyone would think that!
‘But where is the political party that will say this?’
Waiting to be invented I’d say.
It’s hugely ironic that the Labour Party claims to be the party of The People and therefore they are Sovereign in Parliament (a democracy system) and yet they have absolutely no understanding that the creation of money originated as a democratic project:-
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3557233
(For even more detailed argument see the Introduction and Chapter One of Christine Desan’s book “Making Money: Coin, Currency and the Coming of Capitalism”)
This failure to explore all aspects of democracy is akin to what’s just happened in the United States with the attempt by Donald Trump and the Republican Party to undermine democracy. From an early age children are taught to recite the Pledge of Allegiance which goes like this:-
“I pledge allegiance to the flag of the United States of America, and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all.”
It’s the last part “with liberty and justice for all” that all those supporters of Trump and the Republican Party have their ironic difficulty with just like the UK Labour Party. How do you have those two things liberty and justice without a parliamentary democracy system or Constitutional Democracy as the Americans call their version?
Of course a parliamentary democracy depends upon other agencies being in place a judiciary and a free press to ensure parliaments do pursue liberty and justice on behalf of the people.
The lesson both the British and American people’s need to learn is they must study and understand democracy in depth and not merely give it the lip service they do today!
Where is the party you ask Richard? Wait for the ISP’s manifesto to come out closer to May’s Scottish election. More there than just MMT I can promise you. We have a fiscal guru in the party.