“Because this is to be asserted in general of men, that they are ungrateful, fickle, false, cowardly, covetous, and as long as you succeed they are yours entirely; they will offer you their blood, property, life, and children, as is said above, when the need is far distant; but when it approaches they turn against you.”— Machiavelli
Marx was a Victorian-era philosopher whose ideology has proven to be remarkably durable. Like Keynes, he was a fierce critic of the status-quo and a fastidious writer: in addition to Communist Manifesto and Capital (with Friedrich Engels), Marx wrote essays about economics, political science and religion, a novel, poetry, a play, articles for various newspapers including the New York Daily Tribune, a torrent of letters, philosophical and mathematical treatises. This was never enough: by the time he died at the age of 64, there was more being made of Marx and his ideas than what he made himself.
This being the true character of genius, and there is much of Marx that can be found in Schumpeter, Michal Kalecki or Hyman Minsky and post-Keynesians; for example, Marx’ observation that economic processes bear within themselves the seeds of self-destruction over the longer term which hints at Minsky’s financial instability hypothesis.
Of the complaints against Marx, two stand out; the first being being the crimes committed by nominally Marxist regimes in the years following World War I, the second being Marx’ advocacy of David Ricardo’s ‘Labor Theory of Value’.
Marx did not invent or endorse the totalitarian single party police state which is essentially a quasi-business cartel that deploys military- and police force. In Marx’ time, ‘rational’ workplace management or Taylorism was part of the process that alienated labor from the means of production, which Marx opposed. Totalitarianism is Taylorism expanded outside the factory to include every aspect of life within the state. Prior governments certainly had tyrannical impulses but the necessary means were not available to give these impulses form. Industry and fossil fuels allowed for large surpluses, technology and management techniques that made the totalitarian regime functional and affordable at the same time.
As the costs associated with these surpluses became burdensome, communistic states either modified themselves to efficiently distribute these costs (China) or else they fell apart (USSR). This permitted Marx’ reputation to emerge from the shadows. Put simply, the labor theory suggests the worth of goods and services depends on the amount- and quality of labor needed to provide them. This seems sensible and does conform to some degree with observation, but critiques of the labor theory began to pop up among economists and others over and over and over and over; the frequency of the complaint is suggestive. Perhaps there is something to the labor theory after all …
Comparing Different Schools of Economics (from Chang)
CATEGORY | NEO-CLASSICAL | MARXISM | DEBTONOMICS |
The economy is made up of … | Individuals | classes | a) firms, and b) everything else |
Individuals are … | selfish and rational | selfish and rational, except for workers fighting for socialism | a) advantage seekers, and b) those being taken advantage of |
The World is … | certain, with calculable risk | certain (‘laws of motion’) | deterministic and ruthless |
The most important domain of the economy is … | exchange and consumption | production | borrowing and debt |
Economies change through … | individual choices | class struggle, capital accumulation and technological progress | resource exhaustion and periodic crashes |
Policy recommendations; | free market or interventionism, depending upon the economist’s view on market failures and government failures | socialist revolution and central planning | a) restructure, or b) crash, then restructure if possible |
– | – | – | – |
Wealth is created by … | innovation and speculation | labor, as residual added value | Wealth is not created but is first made accessible then destroyed |
Value is … | relational: the utility of a good or service divided by its money cost | the characteristic added to a good or service; social usefulness | solely the characteristic of capital, it does not exist elsewhere |
Prices are determined by … | marginal utility | labor component of goods and services | marketing, access to credit/creditworthiness of borrowers and lenders |
Capital is … | human-created means of production including money, infrastructure, intellectual property | money, specifically money intended for speculation | non-renewable natural resources or renewables exploited to the degree they become non-renewing |
Criticism here tends to settle around the difficulty of teasing out a universal labor component from the different varieties of products and services. Marx himself fell into the muddle; in attempting to qualify the labor component he burst it into fragments and contradictions. Yet the labor theory is important. Marx’ revolutionary aims emerge from it: to return wealth to labor where it properly belongs and do so by way of central planning, elimination of private property, graduated taxation, etc. It’s also important because of current controversy over income disparity; returns to labor vs. returns from investment in line with increases in workplace automation, robots and continuing shift of investment funds away from labor: Criticism from economic historian ‘LK’:
John Maynard Keynes, for example, said that Marx’s theories were founded “on a silly mistake of old Mr Ricardo’s” – namely, the labor theory of value. For Michał Kalecki and Joan Robinson the labor theory of value was “metaphysical” (Brus 1977: 59; Robinson 1964: 39), and for Piero Sraffa it was “a purely mystical conception” (Kurz and Salvadori 2010: 199). If the labor theory of value is unsound, then the whole Marxist edifice constructed on it cannot but fall and collapse. Moreover, the classical Marxist idea of historical determinism is also incompatible with the Post Keynesian idea of the fundamental uncertainty of the future.
The future is always uncertain but modernity as it has evolved is no less deterministic: the relentless and annihilating tyranny of progress. Here’s more …
It can be seen that Marx’s argument for the labor theory is a non sequitur. It is not obvious at all that commodity exchanges constitute an equality in the way Marx sees them … It could be that labor value as Marx defines it is non-existent. Marx’s argument was shoddy and commits a straightforward logical fallacy. Later, Marx admits that labor value cannot be completely separated or “abstracted” from use value, so that the whole argument contradicts itself …
The logical fallacy cuts both ways: Marx created a simple model with only a few actors: worker, industrialist, capitalist. According to our critics, if something in the model is non-specific it cannot exist. This leaves economics itself in a bit of a bind as the entire endeavor is itself non-specific and self-contradictory; filled with paradoxes of all kind. The criticism here is reductive and leads nowhere in particular. If labor is non-determinate than what else is? A: “it depends … ” Embedded labor is one component of the cost of any good or service along with capital (inputs), infrastructure and marketing: the most important factor is availability of credit for both the buyer and the seller, who is always more dependent upon credit than the buyer.
The neoclassical answer to the price puzzle is marginal utility (or satisfaction); this is a kind of cop-out, it places marginality in the wrong galaxy in the universe of transactions and suggests the critic is desperate the let the air out of Marx by any means necessary. The creditworthiness of buyers or sellers cannot be teased from the worth of goods nor can speculative interest, which allows the mispricing of anything that can be considered an asset. Labor theory has faults and inner contradictions but no more than any other price discovery regime.
Neo-classical economics can be built around the ‘Transaction Theory of Value’: JW Gilbert (1834) as quoted in Capital observed:
“whatever gives facilities to trade gives facilities to speculation. Trade and speculation are in some cases so nearly allied, that it is impossible to say at what precise point trade ends and speculation begins.”
… the neo-classical transaction theory is a non sequitur … transaction value as conventional economists define it is non-existent, ‘metaphysical’, a ‘purely mystical construction’; the entire argument is shoddy … a straightforward logical fallacy. Labor component is elusive but can be deduced by observing the private equity takedowns of businesses such as Toys ‘Я’ US and cost of resulting layoffs, or headcount reductions due to M&A activities where worth of the labor component is spelled out by management to justify share price increases. Also see, ‘capital-labor ratio’ (Solow)
The better criticism is that Marx did not analyze industrialization to determine whether it offered any returns at all. Like Keynes and the boatloads of ‘Brand X’ economists who came after, Marx presumed industry was productive, based on the mountains of junk spewed from the factories. He then constructed his analysis on that presumption. Marx favored labor over bourgeois speculators and industrialists, he and the rest wanted to keep the industry itself and edit out the ‘bad parts’ by changing management and making other trivial adjustments.
In debtonomics, all individuals are either advantage seekers and those being taken advantage of: as soon as one brigade of rotten managers is overthrown replacements slither out of the woodwork to take their places. Without changing the man there is no changing the management: rottenness can only beget more rottenness.
The actual ‘job’ or purpose of labor in debtonomics is to act as a sink for First Law costs arising from expanding surpluses … This was true in Marx’ time (or Adam Smith’s) as it is now. In debtonomics, labor does not have to ‘produce’ anything (the product of labor is entropy), he/she has only to be underpaid for whatever efforts they might make! That is, the difference between what a worker actually earns and what would be earned under ideal circumstances (labor/productivity parity and competitive workplace) is creamed off to meet surplus management costs wherever they arise, especially debt service. What is The First Law?
The cost of managing any surplus increases along with it until it ultimately exceeds the surplus’ worth.
What is a surplus? It can be anything produced in quantity in nature or by business: coconuts, automobiles, single-family tract houses, foreign currency reserves, debt (particularly), crude oil, leather belts, gold, uranium, dental floss … even workers, surplus managers, baseball players, industry itself! The first-law cost of the surplus of automobiles is traffic, pollution, resource wars, climate change and a million deaths and more annually; the cost of China’s dollar-reserve surplus is the bankruptcy of China. Marx recognized the disruptions associated with industrial production and tsunami of goods; he had only to go a little bit farther toward recognizing costs. He also didn’t recognize the intertemporal mismatch of costs and benefits: costs tend to be permanent while benefits are transient or imaginary.
In Marx, labor and commerce are considered to be irreconcilable adversaries: one class vs. the other. In debtonomics, labor and management, industry and commerce differ only in outline, all of them are categories of consumption; except for certain types of creative workers, labor and the firms that employ them are unable to produce any value at all! The best labor can do is to make capital available by way of their efforts, then destroy it.
Marx’s views on money are not as controversial as his views on (shortchanged) labor: capital is money, but divided as to intentions. ‘Money’ is what people use to buy things, ‘capital’ is money deployed toward returns; it is the means of production, specifically money circulated with the aim of increasing itself:
If we abstract from the material substance of the circulation of commodities, that is, from the exchange of the various use-values, and consider only the economic forms produced by this process of circulation, we find its final result to be money: this final product of the circulation of commodities is the first form in which capital appears.As a matter of history, capital, as opposed to landed property, invariably takes the form at first of money; it appears as moneyed wealth, as the capital of the merchant and of the usurer. But we have no need to refer to the origin of capital in order to discover that the first form of appearance of capital is money. We can see it daily under our very eyes. All new capital, to commence with, comes on the stage, that is, on the market, whether of commodities, labor, or money, even in our days, in the shape of money that by a definite process has to be transformed into capital.
The circulation of money as capital is … an end in itself, for the expansion of value takes place only within this constantly renewed movement. The circulation of capital has therefore no limits.
Marx expanded his money thesis to include credit and the money markets: in ‘Grundrisse’ and in notes that became the 3d volume of ‘Capital’. Here Marx describes the money market, its dangers and the laugh-out-loud schemes and swindles as well as consequences:
The other side of the credit system is connected with the development of money-dealing, which, of course, keeps step under capitalist production with the development of dealing in commodity. We have seen in the preceding part (Chapter 24) how the care of the reserve funds of businessmen, the technical operations of receiving and disbursing money, of international payments, and thus of the bullion trade, are concentrated in the hands of the money-dealers. The other side of the credit system — the management of interest-bearing capital, or money-capital, develops alongside this money-dealing as a special function of the money-dealers. Borrowing and lending money becomes their particular business. They act as middlemen between the actual lender and the borrower of money-capital. Generally speaking, this aspect of the banking business consists of concentrating large amounts of the loanable money-capital in the bankers’ hands, so that, in place of the individual money-lender, the bankers confront the industrial capitalists and commercial capitalists as representatives of all moneylenders. They become the general managers of money-capital. On the other hand by borrowing for the entire world of commerce, they concentrate all the borrowers vis-à-vis all the lenders. A bank represents a centralisation of money-capital, of the lenders, on the one hand, and on the other a centralisation of the borrowers. Its profit is generally made by borrowing at a lower rate of interest than it receives in loaning.
The increase in merchant receipts (bills traded at a discount) represents the expansion of credit …
“The bills of exchange make up “one component part greater in amount than all the rest put together. This enormous superstructure of bills of exchange rests (!) upon the base formed by the amount of bank-notes and gold, and when, by events, this base becomes too much narrowed, its solidity and very existence is endangered. If I estimate the whole currency … and the amount of the liabilities of the Bank and country bankers, payable on demand, I find a sum of £153 million, which, by law, can be converted into gold … and the amount of gold to meet this demand” only £14 million.”
In 1847, the consequence of the rapid and ill-advised expansion of credit was a finance crisis, the trigger was food shortages across Europe. As the crisis revved up, fictitious wealth turned out to be worthless. Marx’ views on money are useful, (Ramaa Vasudevan):
But while a line can be drawn from the banking (credit) school through Marx, to Keynes, Hyman Minsky and the Post-Keynesians, Marx went much further than the banking school in his analysis of the role of money in hoarding and as a means of payment by embedding his analysis in his conception of money as a universal equivalent, even before he addresses monetary circulation and the formation of hoards in the process of reproduction of capital. Critical in his “correction” of the banking school’s argument is the starting point of his analysis in money’s role as a measure of value. His approach illuminates a logical relation between money and credit, but also affirms the contradictory character of this relation by postulating a monetary theory of credit as distinct from a theory of credit-money.
The narrative that runs through industrial economics is increase. Business activity, speculative or otherwise leads to the increase in money-profits leading to the increase in capital leading to more activity, more profits, general expansion, greater complexity, technical innovation, all of this leaving aside disruptions in the cycle, inventory imbalances, money-panics. Marx theorized an increased in capitalization leading to a secular decline of profits, Conventional economics insists on perpetual growth, or if growth winds down take steps to maintain our current lifestyle.
Money becomes in the truest sense a proxy for expansion, the concept of capital (and capitalism) is a three-dimensional narrative myth of human effort to gain something from nothing. Capital expands as money supply increases, but it is never that simple …
Figure 1: the Debtonomic theory of Money: what is it a proxy for, exactly? It does not matter how much you can buy but rather what you can buy!
We’ve become what we are today because of the ability of our myths to motivate- and direct us. We underestimate our myths’ compulsive power. Our forebears scooted along forest floors picking up- and eating figs. We ate those figs day-after-day for hundreds of thousands of years. We are genetically predisposed to do so; evidence can be seen by looking in a mirror. We have scooting feet, grasping hands and fig-eating mouths. The figs taste delicious to us no matter how many we eat. We are not predators, we don’t have the equipment. Since we aren’t lions or wolves we can only fake it. In the place of DNA sequences we have crafted a defective ideology that misunderstands fundamentals, that proposes a kind of lion that destroys all the other animals. Our myths made us into hunters two million years ago, but only to a point. Our behavior changed but not our natures. We are still fig-eating monkeys, scurrying around, pretending to be gods but falling far short. To become more god-like we must adopt new myths, jettison our bankrupt culture … and learn something new rather than repeat what we already know to be false.
Modern thinkers hold that industrial society is productive because they are allergic to subtraction. It is quite easy to believe in infinite growth if one pays no attention to a number of factors brought up by the soft hearted: exploited labor, biodiversity loss, ocean acidification, climate change, and, oh yes, debt levels.
Too late, Steve. The more “productive” the system is, the more debts are generated. The debts are never paid back, because, as you say, if industry were productive, it would have long ago retired its own debts.
That nobody stops this speaks to a complete intellectual bankrupty, a selfish abandonment of the world, a worm at the core of global civilization that can only be resolved by collapse. You know this to be true. No system can survive by enslaving all future generations to come in unpayable debt. In fact, a careful review of history shows this to be at the center of every religious and revolutionary movement.
@dolf “No system can survive by enslaving all future generations to come in unpayable debt. In fact, a careful review of history shows this to be at the center of every religious and revolutionary movement.” That sounds right but I have not made such a careful review of history. Can you provide support for that claim earlier than the adoption of the monotheist desert religions?
@steve: Lots to think about here. Wish I had more time and/or a better brain. I think it is very important to talk about Marx and to then get over some parts of him (with many thanks to his incredible contributions.) It is clear that he did not get thermodynamics or biology or chemistry or any of that good stuff. Scarcity to him is artificial because there is plenty of stuff in the material world. But a lot of his insights are amazing.
Philosophy of History: You have mentioned Marx’s assertion that every system contains the seeds of its own destruction. Eventually, the quantitative changes in the ‘substructure’ where the seeds are presumably growing, yield qualitative changes in the superstructure. So if a productive system is based upon ownership of land, then the political superstructure will have the characteristics of an aristocracy. I think that the relationship between politics and economy should get more attention.
Moral Philosophy/Human Nature: Man is a tool making animal (homo faber) rather than a rational animal (Aristotle.) In producing/creating (things, not money) he gives part of himself to the material world. If he is part of a commercial economy where his products are commodified and taken away and used against him his very nature is alienated from itself. That is a moral outrage.
I think Marx would disagree that man is basically a fig-eating animal. The fact that most of us are giving up on humans as a failed species would be viewed by Marx as the final expression of massive alienation brought about by the circulation of capital and the commodification of everything. Nihilism = extreme alienation.
It is important to talk about this stuff. Thanks so much.
Steve – I know that debtonomics has been around a long time but do you have a feel for a transition period or specific reason or action for when capitalism die and debt/moneyism was ramped up?
Thanks for you comments on humanity Ellen. I too feel that a lot of the bad behavior we see is more a symptom of what is happening and not the other way around. People do not see a very welcoming world to project themselves into so they get angry, greedy, suicidal, etc.
Unfortunately it seems we have two options; either things get worse or we take back humanity and help one another through this.
Thanks for another great article, Steve. A lot of food for thought here.
Naked Capitalism linked yesterday to an n+one magazine article about Ed Sadlowski, Jr., who was a prominent member of the Steel Workers Union back in the 70s, and who apparently shared the view that so much of modern industry was nothing more than waste, and who said, “Enough with the car!”.
“Sadlowski embodied the wish for organized labor to wake from its postwar slumber and again throw its weight behind a great movement for a different country, as it had done in the 1930s and before. The AFL-CIO had shamefully backed the Vietnam War; Sadlowski opposed it and denounced the growth of “the weapons economy”—of which steel was very much a part. Many of the unions in the federation, including the USWA, had dragged their heels at best on racial integration of their workplaces; Sadlowski called for strengthening the union’s civil rights apparatus, attracting the support of Jesse Jackson and members of the Coalition of Black Trade Unionists. Much of organized labor met environmentalism with hostility; Sadlowski dissented. “It’s one hell of a thing for me to say—we just don’t need any more steel mills. We don’t need that kind of industrial growth, at the expense of what the environment should be.” He followed the thought where it led: “Enough with the car!” What more radical claim could a blue-collar worker make about postwar society than to doubt the automobile? ” . . . .
“Organized labor’s postwar success had rested on the bargain of wages for productivity. To question this productivist logic—the idea that hard labor deserved reward because it built the country—was pure blasphemy for hard-pressed blue-collar workers in a moment when steel jobs were starting to disappear. Still, he said it. “I never met anyone in his right mind who loved working in the steel mill,” said Sadlowski. “Working forty hours a week in a steel mill drains the lifeblood of a man. There are workers there right now who are full of poems and doctors who are operating cranes. We’ve run the workers into the ground. Ultimately, society has nothing to show for it but waste.”
https://nplusonemag.com/online-only/online-only/workers-full-of-poems/
I remember Sadlowski. RIP and good for him!
I also remember the unions who fought the citizens who were trying to stop highways from going through their towns and forests. Then they voted for Reagan. Now their kids have no jobs. And they think that Trump is going to put things right. Ha ha ha!
Marx thought that the revolution would put decisions about production into the hands of the producers. Industrial techniques in the hands of the producers would allow them to spend most of their time outside of a factory and so there would be plenty of leisure time. I laugh when I hear those awful factory jobs described as “good jobs.” Those are horrible jobs. We have sent those jobs and the accompanying pollution to China. I can’t believe the Chinese are willing to put up with all that. My guess is that they won’t much longer.
The corporations seized control of our narrative after the WWII mostly through the use of TV and endless advertising. When we did get some leisure time that is how we used it. It is a miracle that a guy like Sadlowski came as close to winning as he did.
Anyone listening to the RFK Tapes podcast? How about the Sy Hersh interview with Jeremy Scahill on The Intercept? Really good stuff out there! Chickens cautiously coming home to roost? (Mine are all in their coop for the night. It is raining and the dogs are curled up snoring lightly. All good. )
According to Michael Pento, an inverted yield curve has predicted nine out of the last ten recessions. The two to ten year curve has fallen from about 2.4 percent to less than .3 percent in the last five years. When the next depression begins to hit, probably in the next year. they will likely have to go back to zirp and money printing, which he says that the markets
will evaluate as a loss of faith in the currency. A further ramping up of the fiat regime would be to outlaw cash, and charge negative interest rates on personal cash savings, thus forcing one to spend money. Have a good day.
Creedon, “When the next depression begins to hit, probably in the next year. they will likely have to go back to zirp and money printing, which he says that the markets will evaluate as a loss of faith in the currency, ” is the part I just don’t buy into.
So the first $21T of money printing was just fine and dandy, but the next $40T of money printing will be the straw that breaks the camel’s back? Since it all goes into buying bad assets to bury the bodies, why? Obviously, there is already a monumental willful desire to keep the system going at any cost, so why won’t everyone just continue to play along, just as they have been? Its a Tinkerbell system and all of the rich children are screaming that they do believe, they do believe at the top of their lungs.
Unless and until governments start putting money directly into the little people’s accounts, so that the new money is used for the everyday rather than asset purchases, I don’t see why an additional 20-40T of more asset purchases is going to cause this lack of faith that ppl like Pinto bandy about. In any rational universe, that would have already occurred, but goosing the asset prices is just too good to turn down!
Harry Dent and Michael Pento are both predicting a 40 to 50 percent drop in the stock market. Admittedly we have not yet seen such a drop, which means that we still believe in the system. Today the 6th of July the difference between the two year and ten year bond yield is .28 percent. This is my new method of tracking the failure of the system. The yield curve may be something they cannot manipulate.History says that we have not seen a large stock market drop after a ten year period of the federal reserve making loads of debt easily available. We are in new territory. Sane people say that debt bubbles cannot last forever. You are buying into the belief that they can make it last forever. They can’t.
Michael Pento is pointing to three things to bring the debt bubble to a halt. 1 The trade war reaching a crescendo. 2 The yield curve inverting. 3 Corporate debt; he says that corporate debt is 50 percent of GDP and that 45 percent of that debt is rated BBB. He says that zombie companies are borrowing to pay interest on the money that they borrowed. He says that when the yield curve inverts the banks will no longer be making money on their investments. He has check marked October for stock market failure. Obviously, we have had ten years of central bank manipulation. You should read Doug Nolands latest issue at Credit Bubble Bulletin; he goes over the Bank of International Settlements take on the last ten years of Central Bank Manipulation.
Creedon
Pls don’t make inferences beyond what i wrote. I am not buying into the idea that They can keep this going forever. That would be absurd
My sole point related to pento’s argument that, upon the next iteration of QE, the markets “will” evaluate that as a loss of faith in the currency. “Will,” as, it is certain. He is talking about a psychological reaction – um how does he know this? It’s not like predicting the course of billiard ball collisions with Newtonian physics.
My sole point was that he doesn’t know that the markets will take the next iteration of QE as a loss of faith in the currency. No one can know that. People have ALREADY acccepted QE 1, 2 and 3, sat back and enjoyed the rising stock index ride. Hoo-rah! All that i was saying is that loss of faith in the currency upon the very next QE is NOT a given.
Pento would have been wiser to say that that might happen. After 10 years of that kind of hyperbole and nonsense, i despise the prediction business.
Tagio; point taken on the prediction business. I’m still going to watch the yield curve for a while.
Anybody have any thoughts on why Steve was right on gold and FOFOA and other goldbugs were wrong?
Even with interest rates near zero, falling living standards, and instability in the other markets, people are either not putting their savings in gold, OR they are but it’s having no impact on the fiat price. It simply refuses to go much beyond the cost of a production of a new ounce.
Speaking for myself, I have some gold but I’m really tired. I’m not going to be buying for awhile, and in fact have started liquidating. It’s not worth it, not if you don’t see the gain in doing so.
When the debt system deflates, gold will to. I have no confidence that in a true collapse environment, there would be a great market to pay lots for gold.
On a day that the stock market is pushing back above 24,900 the 2 to 10 is under 26 basis points and the 10 to 30 is under 10. In the world of financial instrument movement, that’s actually pretty fast movement.
Steve, perhaps you can recommend a good book explaining MMT. I just listened to a 23 minute video with Professor Kelton and came away with the thought that MMT is a redistributive policy (like Keynesians and Austrians etc). But it too doesn’t address that the machines don’t pay for themselves. Rather, it is still infinite growth on a finite planet.
I’m not completely sure why this line of thinking is called ‘Modern Monetary Theory’ instead of more logical Modern Fiscal Theory. The basic ideas have been around for a long time – middle of 19th century. There are many economic analysts including Minsky, Schumpeter, etc. and now Bill Mitchell and Randall Wray. I think the whole business is overly finicky/complex for its own sake, maybe that’s me.
Here’s one: https://www.amazon.com/Modern-Money-Theory-Macroeconomics-Sovereign/dp/0230368891/
When I read about MMT, I think, the leftists are getting uppity, aren’t they! They insist money can simply created out of thin air by the government, so we have unlimited money to do whatever we want. Employ everyone! Pay the workers a living wage!
Yes and no. To me, money is simply a symbolic token that in our world represents the tight relationship between government and private business which is mediated by debt. Money is debt and debt is money. It is inbuilt into our system. MMT would just be a way for the government to take over all of our ruinous institutions, stealthily admit the debt=money is invalid, and finish off the natural inflation of the money faster than otherwise might happen. All monies tend to inflate over time, as we are incapable of limiting money when its free issuance appears to be a panacea.
You all talk of MMT as if it is legitimate economic theory that can be put in a text book. It is not, at least to my thinking. It is perversion, lying and corruption. It can only be talked about by investigative reporters.
“It is perversion, lying and corruption. It can only be talked about by investigative reporters.”
And speaking of investigative reporters. Steve – I read your tweets and I am confused. Do you disagree with Illargi? Tweets are so short and cryptic but it seems that you do.
https://www.theautomaticearth.com/2018/07/julian-assange-and-the-dying-of-the-light/
I have been listening to the Sam Harris podcast a bit. It seems all the intellectuals think we have infinite energy and infinite debt. So, I wonder, what is the purpose in listening to it?
Entertainment!
Absolutely true. I am waiting for someone to say that debt can increase faster than income forever. But in a contracting world, a lot of “hot” topics are of little relevance.
I have not read the Randall Wray book you suggested, but I did view an hour long lecture by him.
I don’t see how MMT is compatible with the triangle of doom. In MMT world, we are a long way from an economy performing at capacity. Debt can rise faster than income and likely not cause inflation until full employment. He accepts government inflation figures. Energy isn’t a problem and China is the model to emulate. He is betting that trend is destiny. MMT has no place in a post-industrial world.
I am currently working my way through Chris Martenson’s Crash course at Peak Prosperity. I highly recommend it. It is 26 short topics that totally explain the predicament that we are in. By the way, Chris is predicting an increase in the price of oil followed by shortages in the next five years.
I like Chris Martenson but he’s been saying the same thing for 10 years, much like others.
Let us be honest…the only people who have been right so far have been those who said business as usual would continue. Let’s give them their due. We overreacted and it’s not that they are all knowing, but they saw something which we didn’t, which was the productivity of the system.
Now, of course eventually we will be right, and they will be wrong, but that is meaningless. That’s like saying, “eventually I’ll be 80 years old” True, absolutely true, but I have to live my life right now when I’m 37.
Anyone who said it would be business as usual has been dead wrong.
Some of us back at YOD did say that TPTB understood that peak oil means everything gets more and more expensive so all they have to do is cut out all restrictions and regulations in banking/finance so that everyone can get rich enough to deal with PO. This is exactly what is happening except it won’t work. All the money ends up in the hands of 1% with just enough trickle down to keep all the rest of the people busy collecting all the pennies. Hardly business as usual.
All they ultimately accomplished is making the Seneca cliff collapse steeper.
Consistency is a good thing. The peak oil community has been saying the same thing for ten to fifteen years. The model of the future that they project is one of gardening, poultry, energy conservation, less fossil fuel use, a more rural lifestyle with smaller communities and cities. That will likely be the model for the second half of this century. I am sensing in the world a desire to live once again in harmony with nature.
The eternal madness of a zillion cars driving in and out of subdivisions will begin to end once the fuel shortages start in a few years. In the mean time the masses will be dealing with the rising costs of everything while the mainstream news tells them that the economy is flourishing and that they are getting richer. I have been making slow methodical adjustments to my lifestyle for the last ten to fifteen years. The believers in BAU are slowly getting poorer, except for the top one percent and God help them. The rest of us just keep doing what we do.
Further thoughts; I don’t think that Steve’s model of debt explains 30 years of declining interest rates. As a matter of fact, I don’t think that modern economists explain well thirty years of declining interest rates. The standard explanation is that there is more demand for the debt then supply. I have a real hard time believing this. I would more easily believe Martenson’s explanation that the Federal reserve and all Central bank’s world wide are issuing the debt, (bonds), out of thin air. That is why the interest gets less and less over time because there is so much of it increasing at an exponential rate that they don’t want to pay a lot of interest for it. Quite frankly, the idea that interest rates will eventually go up is likely hogwash. It appears that what will increase is inflation, which is already greater than we are told and increasing. I for one am tired of being lied to. Simple explanations of the world economy that are truthful are what is needed. The hole in the main streams economic model is that the economy will get stronger and we will pay the debt back.
Steve, have you read this author? http://michael-hudson.com/2007/08/why-the-miracle-of-compound-interest-leads-to-financial-crises/
Charles Hugh Smith is saying that since 2008 the central banks of the world have been buying up zillions of dollars of worthless assets that at some point, as the future unfolds, will have to be marked to market.
Why fetishize debt/GDP? Because it is a trend that never ends. It is chronic, not some temporary fluke.
Modern nation survive through debt. Credit issuers that issue credit backed by oil seem to do the best. Turkey’s debt becomes worthless, while American debt does not destroy the dollar because we control the world’s oil. Russia who has oil that we do not control becomes our enemy.