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2019-08-10 07:00 by Karl Denninger
in Monetary , 160 references Ignore this thread
The MMT Lie
[Comments enabled]

If you wanted to accelerate the collapse of America and bring on a Civil War you could hardly do it better than by advocating for and managing to enact this nonsense.

A key figure in the “Modern Monetary Theory” economic camp, her assertions that the federal government could spend freely for things like a jobs guarantee or Green New Deal without risking runaway inflation, a debt default or a clubbing by global creditors have been Twitter-bombed by mainstream economists as left-wing free lunchism.

Well that's because it is -- but not really much different than the free lunchism that has been going on for the last 20 years.

Let me remind you that in real terms there has been no economic growth of substance since 2000 and only one positive year -- under 2% at that -- since 2007!

 

This is in a world where interest rates (since 2008) were indistinguishable, on government debt, from zero in real terms.

Therefore we've already had our experiment and it has failed.  We can fail it harder and more-seriously, and walk right down the road into a literal destruction of our nation, by continuing this crap.

The basic argument made by the MMT "theorists" is that since "inflation is low and contained" we can simply "print" the money we want, spend it, and that's constrained only by inflation, of which there is none of seriousness at present.

The problem isn't the claim of where the constraint comes from -- it's that the claim of "low and and constrained inflation" over the last two decades is a lie.

The cost of medical care has skyrocketed over the last 20 years.  So has post-secondary education.  So has actual housing expense; witness the housing market meltdown in 2008 and the resulting re-inflation of said bubble, which has done exactly nothing in terms of price compared with salaries.

Ditto for a whole host of other mandatory spending.  Property taxes in many jurisdictions have more than doubled in the last 20 years.

Your salary hasn't doubled over that period of time.  In fact quite to the contrary.

The number of households that pay more than half of their income in rent has skyrocketed in the last decade -- it is up by about 50%.  Clearly, they don't think inflation is "low and controlled."

Indeed that's the problem and it's not just rent; it's total cost of basic needs.

It's extraordinarily misleading to cite numbers like "GDP per-capita" as justification for this sort of nonsense, since there's not even a passing shot at reasonably-even distribution of same.  Believing that one can somehow "print" one's way to prosperity is a complete crock; all that emitting more money into the system does is raise the price level, and since you cannot and will not make sure that everyone gets the same amount (not a percentage of their income but in gross dollars) from federal deficit spending the accrual simply screws those on the left side of the curve.

Of course there have always been poor people -- here and everywhere else.  But what's happened over the last 30 or so years in this country is outrageous.  Technological advancement means you can do more with less; that is, it takes fewer hours of labor to produce the minimum requirements for living in a reasonable manner.  Rather than have that outcome on a continuing basis, however, we've seen the opposite over the last 20 or so years in America.

Why?

It's not because there is an insufficient amount of money around.

It's because people collude and either screw you, forcing you to pay more for less, or just flat-out steal it.

At its core MMT is simply a means to steal more and faster.  It's entirely possible for the United States to run a budget surplus, as I've pointed out, simply by taking on the medical monopolists.  In addition were Congress to demand that The Fed stop running interest rates below the federal deficit level as a percentage of GDP then Congress couldn't spend in deficit at large scale without rates going up dramatically and immediately.  This in turn would force the fraud out of the system and it is that fraud and unpunished felony that has hosed everyone in America on the left side of the bell curve and is now reaching well into those on the right side!

A restive population eventually revolts -- one way or another.  It does so at the ballot box if it can effectively do so but if prevented from doing so, say, if every candidate that can be and is elected makes the problem worse for those on the left side then eventually you wind up with the destruction of that government and often destruction of the society itself.

MMT, in short, is a fraud.  It is simply an attempt at extending the frauds that allow "professors" to sit in their ivory towers while their students are butt****ed within an inch of their lives with $100,000 student debts.

The correct answer to people running crap like this, no matter who they are, is to force them into said refrigerator box as their best and highest place of residence -- complete with rats and drug-abusing homeless individuals, many of the latter who are there precisely because of the policies they promoted.

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Smacktle
Posts: 1948
Incept: 2009-01-20

Texas
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People have no commen sense.

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The faults of the burglar are the qualities of the financier.
- George Bernard Shaw
Mickey
Posts: 88
Incept: 2014-05-19

Chic
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Karl, for reference, property tax in Deerfield is 25-35k for nice but not great homes.

Now, as a senior, when i was planning, I used 5% for CD income, and 3-4% for inflation.

Did not think 7% inflation and 2% CDS and i bet nor did others.

The kids are also getting screwed since we are told inflation is 2% so they get 2% raises in a 7% or more inflation era.

This is with 225 Fed PHDs losing control. How can progressives blinded by new spending programs they want not accelerate the problem
Tickerguy
Posts: 158547
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A True American Patriot!
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@Mickey -
Quote:
Karl, for reference, property tax in Deerfield is 25-35k for nice but not great homes.

I know. I used to own a house there and bailed before it went insane; I still track my previous residence from time to time.

What I don't understand is why the people haven't gone outright medieval on the County and City commissioners with that level of confiscation. IMHO any community that hasn't long ago done exactly that is one that I would NEVER put my life on the line to defend -- even from a literal FOREIGN invasion.

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Winding it down.
Quik49
Posts: 6028
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25kto 35k.... good grief! That's 10x here. GTFO

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Long Vaseline....

Click
Posts: 534
Incept: 2017-06-26

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We can ignore reality, but we cannot ignore the consequences of ignoring reality."- attributed to the Libertarians' poster girl, Ayn Rand.

It is true that as a rule of thumb humans tend to ignore reality. And in most cases the longer reality is ignored by the ignorant masses the more profound the consequences become. Think how compound interest from a loan shark adds up over time. Ignoring reality eventually leads to total bankruptcy --- political, social, economic and moral --- and even genocide.

Americans have been ignoring reality for a long, long time, because they can --- until THEY CAN'T. Think: FDR's Socialist Security, Military Industrial Complex, Medical Pharmaceutical Complex, Stock Market Bubblegum Machine, Transnational Offshore Slave-Trade, et al...

One thing that has been absolutely proven beyond any doubt is that reality can be ignored on a massive scale during an industrial age powered by oil and high technology. There has never been a time in history whereupon hundreds of millions of humans lived in such an artificial world which is so metaphorically temperature controlled. "Money" has actually become a complete abstract completely untethered from "reality". This abstract unit of confidence motivates what Ludwig von Misses called, "Human Action". If only he could see this **** now!

How significant is it that the world reserve currency is nothing more than an abstract?

All of the financial math, all standard accounting methods, all banking account balances, everything associated with money doesn't mean bull spit when money in and of itself has been rendered a meaningless unit solely based on "confidence". And that's all "money" is based on, i.e., the confidence that it will be accepted by your loving government to pay your taxes. Calling something "money" or even a "coin" is all it seems to take nowadays to completely bamboozle the ingenuous public..... "Bit(coin)" is the supreme example of that. What is supposed to make Bitcoin valuable? Mining? How do you mine it? Oh! Really? You use gobs and gobs of electricity to power an expensive computer to calculate meaningless math problems that have no real value and don't really solve anything in the real world. And for this you are rewarded a "coin". Hells bells! That's about as useful as digging a hole in the ground and covering it back up and getting paid an IOU with somebody's **** smeared on it..... Talk about "ignoring reality". Bitcoin is it.

And just think that I actually own that crypto-**** myself. Why? For the very same reason I have a bank account; for the very same reason I trade stocks; for the very same reason I trade "paper", for the very same reason I speculate on anything, because I cannot escape the fact that I must live and survive in Diversity Empire America where a socioeconomic matrix has been built and especially designed to ignore reality... In this wonderful place you can even ignore the gender you were born with! What a country? Yes Diversity INC is the place where you plug in and be whatever freak you want to be.

How long before the day of reckoning happens and the "consequences" finally catch up to the ignorant masses and their Marxist leaders? Perhaps I'll express my opinion on that subject another time. Right now I'm pretty busy stockpiling my hunting/fishing camp. But suffice to say that nobody can time the collapse of Diversity INC....Just keep in mind the collapse will probably be much more significant than the Bronze Age Collapse or the Collapse of Rome... So start making a plan and aquire tangible supplies ( e.g., food, water, self defense) as an insurance policy.
Drifter
Posts: 310
Incept: 2016-02-11

Pacific Northwest
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All this **** will go on until it won't.

Acquaintances: divorced couple-- teacher and librarian-- are sending their kid to GA Tech for college instead of the local colleges. He will be borrowing $50k/year, for probably five years. Insanity, selling your child into slavery for the rest of his f'ing life.

A buddy did Ivy league all the way through law school, racking up more than $300k in debt in the 90's. He will never, ever pay it off.

I've told my 17 y/o: you don't get to go to an expensive school for your undergrad. You will get your degree locally, which means zero debt. That is the only way you will survive the ****show coming down the pike. If anybody can survive. Besides, as an employer, I'm actually prejudiced against anybody coming from 'prestigious' schools.

Had to get my kid some antibiotics yesterday. Pharm tech says that will be $55. My eyes popped and said, 'what would that be without insurance?'

Realizing I had insurance, after some number crunching she said, 'That will be $4.80. What a racket.

I'm about ready to get to know Med Inc up close and personal soon-- just developed a hernia. Might as well do the colonoscopy too, give the ass-reaming I'm going to get.

Oh sweet meteor of death, hear my pleas...

Stee_man
Posts: 134
Incept: 2011-12-08


Online
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While it's not a free lunch out there is a lunch nobody wants to talk about. If welfare stops, the inner cities burn. The chicagos and baltimores have their violent crime. But when those residents lose their food stamps everything burns.

Some people obviously need the social safety net... for a while, like it was intended. But the long term unemployable are being paid to leave the rest of us alone. Here at Karl's house we like to call things what they are. Let's call this a bribe or reparations.

Didn't the Romans try paying off some of the invaders?
Asimov
Posts: 111714
Incept: 2007-08-26

East Tennessee
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Stee_man: Danegeld.


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It's justifiably immoral to deal morally with an immoral entity.

Festina lente.
Oliver1655
Posts: 179
Incept: 2012-08-02

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@Drifter

"Realizing I had insurance, after some number crunching she said, 'That will be $4.80. What a racket."

More of the PBM racket.

Did you inform pharmacy tech that this was a violation of the Robinson Patman Act and that you were reporting it to your state AG as a violation of 15 USC ?

Charging 2 different prices for the same prescription at the same location for the same amount ?
Mickey
Posts: 88
Incept: 2014-05-19

Chic
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Back to property taxes:

Its been 18 years since we moved from Cook to Lake County, Il.

Back then we saw Lake county taxes noticeably higher Cook and Cook caught up and passed Lake.

Lake is still high but I had a similarly priced home in AZ, and the taxes were 25% of Il.

That said, Lake County taxes are high but the money is not soaked up by paying obligations, as there are great forest preserve systems tied together for the most part with bike paths, and even better do not have to go to jury duty in cook cty.



Tickerguy
Posts: 158547
Incept: 2007-06-26
A True American Patriot!
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Oh blow me

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Winding it down.
Asimov
Posts: 111714
Incept: 2007-08-26

East Tennessee
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Quote:
the money is not soaked up by paying obligations, as there are great forest preserve systems tied together for the most part with bike paths


I think I missed something. I never had me no economy classes, but the relationship between taxes and forest preserve bike paths is WAY over my head.

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It's justifiably immoral to deal morally with an immoral entity.

Festina lente.
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