To progress we need a revolution. MMT will be at its core because it, alone, is saying another form of democratic politics is possible

And there are some of us out here who rather like the old economics of government. Because tellin’ ’em they can only spend what they can screw out of us does at least put some limit on how much of our lives they try to bugger up.

You know, actual democracy, revealed preferences? We’re only willing to have as much government as we’ll pay for?

12 thoughts on “Mebbe so”

  1. another form of democratic politics is possible

    So there will be a political party campaigning for it then. The MT Party I suppose.

  2. Dennis: Oppressor, Warmonger, Capitalist and Consumer of Petroleum Products

    Not that Richard is going to get off his fat ass and revolt, mind you. Model trains don’t play by themselves, you know.

  3. “Because tellin’ ’em they can only spend what they can screw out of us does at least put some limit on how much of our lives they try to bugger up.”

    It is the non-government sector that determines the government’s fiscal balance. If the non-government sector desires to net save, i.e., save in excess of investment, and the government does not run a deficit, then the economy will enter into a recession. In a recession, tax revenues fall and welfare payments rise, and the government deficit rises that way. Either way you get a deficit but the deficit is larger in the latter case, plus unemployment, higher crime rates, etc.

    “Net saving” means that the non-government sector desires to save more than the amount of investment that has taken place in a given time period. Because saving must always equal investment, an identity true by definition, then a portion of the investment here would be unplanned inventory investment. That leads to workers being laid off and a recession ensues.

    What MMT calls for is right-sized deficits in just the amount necessary to offset that non-government sector’s net saving desire.

    As an aside, MMT points out that there is nothing unique about the government’s ability to overspend and create inflation. The non-government sector can also create inflation.

  4. @john77

    “Have you ever heard of the word “export”?”

    The non-government sector includes both the private domestic sector and the foreign sector. The foreign sector is imports and exports. Here is the sectoral balances equation:

    (G – T) = (S – I) + (M – X)

  5. I do wonder if he did stand as an independent in Ely whether he’d get more than 50 votes? No wonder they barred him from the pub in Downham Market….

  6. “The non-government sector can also create inflation.”
    Indeed it can, for example when it stops producing stuff because the incentives have been taken away, price controls preventing profit-seeking come in and/or economic freedom reduced. So fewer goods.
    Same amount of money chasing fewer goods – – > inflation.

    It does amaze me people saying that the US example proves that their version of MMT can work better than the neo-liberal version of it, when the US has by a small amount reduced regulation and increased economic freedom in the last 4 years.

  7. Leaving the external trade to one side, you’re left with
    (S-I)=(G-T)or otherwise

    S+T=G+I

    Which says that where the government runs a deficit, it crowds savings away from investment which is a)relatively unconducive to growth because G is current spending and b) doesn’t address the money-printing policy at the heart of MMT or Capt.Potato’s five eyes of Ely Intelligence.

  8. @The Meissen Bison

    Saving does not fund investment.

    Investment is funded by credit creation. Here is Keynes:

    “For example, [the reader] might naturally suppose — for anything the Committee say to the contrary — that the right way to prepare for an increase of investment is to save more at an appropriately prior date. But the corollary shows that this is impossible. Saving at the prior date cannot be greater than the investment at that date. Increased investment will always be accompanied by increased saving, but it can never be preceded by it. Dishoarding and credit expansion provides not an alternative to increased saving, but a necessary preparation for it. It is the parent, not the twin, of increased saving.” —Keynes

    Government deficits are self-financing. The government spends first and borrows back its own spending. As such, there is no financial crowding out. The only limit is real resources, which is why MMT advocates for right-sized deficits. This from Stephanie Kelton:

    “DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS… —Stephanie Kelton

    https://twitter.com/stephaniekelton/status/1044313733600874496?lang=en

  9. Investment funded by credit creation can only be true of investment that is funded by debt not equity…..

  10. @Mr. Worstall

    Yes, that’s true. I was referring to the general case where credit creation is how funding takes place.

    It’s important to note however that when a corporation uses equity to fund investment, its equity remains unchanged. While cash leaves the balance sheet, a new capital asset is added to the balance sheet. Equity remains unchanged, only the corporation’s asset mix changes.

    At the same time, the cash that has left the corporation’s balance sheet shows up on private sector balance sheets as new savings that did not exist before. This in the amount of investment that has taken place.

    This still makes the point that investment does not require savings but rather brings forth its own savings. What we call savings is always the record of past investment. When savings move around, we are in effect changing the ownership claims on past investment. New investment always gives rise to new savings, those new savings being the ownership claims on that new investment.

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