The Guardian says this like it’s a bad thing

As Chesapeake was expanding at breakneck speed, natural gas prices were near $20 per million British thermal units, the benchmark for natural gas trading. But frackers like Chesapeake flooded the market with cheap natural gas, sending prices to well under $2.

The capitalists lose out, the consumer wins, cheap energy as well. Well, suppose they’ve got to think it a bad thing for it certainly goes against everything they believe about markets and capitalism, doesn’t it?

8 thoughts on “The Guardian says this like it’s a bad thing”

  1. entitled The Deficit Myth by American economist Stephanie Kelton.

    The book was dangerous even before coronavirus struck, but it is even more so now when governments are racking up huge deficits and the ratio of government debt to GDP is soaring. It appears to suggest that we shouldn’t worry about this debt and should just lie back and enjoy it. It would be very nice to believe that our concern was based on a myth. Unfortunately, in economics, if something is very nice to believe, you probably shouldn’t.

    In fact, the propositions espoused by Professor Kelton are a peculiar mixture of truths, half-truths and downright falsehoods. That’s precisely what makes the book so dangerous. Ready embrace of the bits that are true may seduce you into believing the bits that aren’t.

    The book is an exposition of what is known as Modern Monetary Theory (MMT). It has its adherents in many countries. Professor Kelton was economic advisor to Bernie Sanders, and MMT influenced those around Jeremy Corbyn when he was Labour Party leader. So this is not just an academic curiosum.

    At one point, Professor Kelton asserts: “MMT demonstrates that the federal government is not dependent on revenue from taxes or borrowing to finance its spending…” That sounds pretty radical. Yet there are some places where the book seems simply to be reasserting the precepts of Keynesian economics for the benefit of an audience that has never comprehended them before. I suppose that has some value. These Keynesian nuggets are propositions with which I wholeheartedly agree.

    At one point, she says that “increasing the deficit doesn’t make future generations poorer and reducing deficits won’t make them any richer”. That is a message I have repeatedly conveyed in this column. The interest paid on government bonds doesn’t disappear into a black hole. It is received by the bondholders.

    Mind you, this doesn’t mean that there aren’t potential problems for future generations as a result of fiscal largesse because, unless governments resort to inflation, other things equal, higher debt means higher interest payments that have to be financed somehow or other. In the end, they are financed out of reduced spending or increased taxation. Taxes distort and depress incentives and hence economic growth. So having a setup that implies more taxes in future is hardly to be recommended.

    Professor Kelton also says that it is misleading to think of the finances of the government in the same way that you would think of the finances of a household. This, too, is classic Keynesianism. There are options open to governments that aren’t open to households. What’s more, increased spending and borrowing by governments can, in the right circumstances, end up actually reducing deficits and debt ratios.

    It is also true, as the book says, that governments don’t necessarily have to borrow from the markets. Unlike households, they can finance themselves by printing money. Moreover, in some circumstances they should.

    Hope that’s what you want.

  2. Bloke in North Dorset

    BF,

    The Grumpy Economist, John H. Cochrane, has also done a review but he’s not allowed to put it on his blog for 30 days, he did write this, though:

    I read Stephanie Kelton’s book, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy,” and wrote this review for the Wall Street Journal. As usual I have to wait 30 days to post the whole thing here.

    I approached this task with an open mind. What I had heard of MMT has some overlap with fiscal theory of the price level, on which I work, and I hoped to see some commonality.

    I was disappointed. Short version:
    “Ms. Kelton…starts with a few correct observations. But when the implications don’t lead to her desired conclusions, her logic, facts and language turn into pretzels.”
    Full version in 30 days, if you can’t find a way around WSJ paywall.

    Should be worth keeping an eye on his blog are adding it to your RSS feed.

    He did a good podcast on MMT, debt, and perpetuities in which he discusses it and more importantly the flaws of MMT, not least that there is no one place that describes it, they communicate in blogs, Tweets etc.. Available on all podcast platforms.

  3. Stephanie Kelton is the left-wing economist who Richard Murphy hasn’t fallen out with (yet); or, as I am sure he would put it, “Stephanie Kelton agrees with me”.

    What Ms Kelton thinks about this distinction, or indeed whether she is even aware of it, is unclear.

  4. @BiND: I like the use of ‘pretzels’ to mean obnoxious twisty things. It could do with more use.

  5. All you need to know is that Spud rates the book. Positively splats over his keyboard writing about it.

  6. But cheap energyyyyy!!!! That means the plebs will be able to afford cooked food and foreign travelllll.

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