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Wednesday, December 28, 2022

2022-12-28

*** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic and Market Fare:

Pozsar:  War and Commodity Encumbrance (pdf)


Keen: Using accounting to prove the core propositions of MMT and Endogenous Money

............... Conclusion

Frankly, none of this should be controversial: it is, as shown in this post, simply a matter of accounting. The controversy comes from mainstream “Neoclassical” economists—aided and abetted by Austrian economists, gold bugs, and the like—not understanding how the monetary system works, because they don’t understand double entry bookkeeping—let alone. think in terms of it when modelling the economy.

Instead, thanks to their ignorance, we have endless “crises” over debt ceilings, too much private credit money creation thanks to too small government deficits, austerity crippling economies as it results in governments not investing sufficiently in infrastructure and welfare, and “puzzling” low growth rates for economies that thought that austerity would unleash private sector creativity, when in fact it hampered it by reducing the growth of the money supply. 

Will the collective We ever understand this? Frankly, I doubt it. I’ve witnessed decades of delusion on these issues, and I reckon I’ll witness years more, despite the success of MMT in getting good sense on money creation into the public debate. 



Modigliani was right

In 2000, Italian economist, Franco Modigliani, who was a co-author on a paper that introduced the term NAIRU (Non-Accelerating-Inflation-Rate-of-Unemployment) into the economics lexicon, seemed to reflect on the damage that adherence to the NAIRU concept among central bankers and other policy makers had done.

Reflecting on what central bankers had done in his name, he wrote:
Unemployment is primarily due to lack of aggregate demand. This is mainly the outcome of erroneous macroeconomic policies … [the decisions of Central Banks] … inspired by an obsessive fear of inflation … coupled with a benign neglect for unemployment … have resulted in systematically over tight monetary policy decisions, apparently based on an objectionable use of the so-called NAIRU approach. The contractive effects of these policies have been reinforced by common, very tight fiscal policies


Quotes of the Week:

Gayed: BREAKING: THE BOND MARKET IS SMARTER THAN THE STOCK MARKET AND IS SAYING WE FUCKED.
Now go enjoy returning all those gifts you never wanted to begin with when all you really needed was to pay down your debt.



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