[lbo-talk] on Doug's latest show, Galbraith

Shane Mage shmage at pipeline.com
Sat Nov 24 19:14:04 PST 2012


On Nov 24, 2012, at 8:24 PM, Doug Henwood wrote:


>
> On Nov 24, 2012, at 3:52 PM, nathan tankus <somekindofheterodox at gmail.com
> > wrote:
>
>> okay I just listened to that section. guys, he's talking about basic
>> reserve accounting. I'm surprised I have to explain that here.
>> People need to read volume three of capital more carefully:
>
> No he's not talking about that at all. The passage from Marx is
> about short-term cyclical stuff, not structural deficits of close to
> 10% of GDP. This is MMT la-la land, where you can just print money
> without bad consequences. The U.S. government is running a deficit
> of something like $1 trillion a year. This will shrink as the
> economy recovers, assuming it does, but it's still facing years of
> vast deficits. The Fed could print the money if it wanted to, but at
> some point it'd end up like a Latin American country in the 1970s
> with a 1,000% inflation rate. We're nowhere near that now, of
> course, but you can't do that shit forever. When half your deficit
> is financed from abroad, you actually do have to worry about what
> your creditors think.

This is just Austrianism. Why should financing socially desirable expenditure without regard to debt or deficits lead to that inflationary nightmare when the political authority can tighten money (through the Fed's overnight rate target) and constrict demand (through taxation) whenever the economy reaches a state of overcapacity? Meawwhile, as long as the economy is deeply under capacity, deficit-financed demand necessarily raises real incomes without pressure on costs and prices. Moreover, with even a minimally rational tax structure, approaching full employment raises the public revenues to surplus, not deficit, levels. And of course the reality is that what creditors want is, above all, safety of money capital. And they are creditors through financing their own foreign trade surpluses, without which they would be in deep shit. What your creditors really think is--do whatever you can to keep importing from us, credit is no object. What MMT does is to strip away all the "economic" arguments against full- employment politics, arguments that this scoffing post implicitly assumes.

Shane Mage "Thunderbolt steers all things." Herakleitos of Ephesos, fr. 64



More information about the lbo-talk mailing list