Professor Joseph Stiglitz: Debt does matter, both economically, and, perhaps even more, politically. Let me first try toexplain MMT, the modern monetary theory, which has argued that it does not matter at all. I also want to make it clearthat the view held by many people, that it is the most important thing, is wrong. I am not at all worried about the level ofdebt in the United States. So the view that we face an existential crisis because of the debt is wrong, but the other view, that we do not have to think about it, is also wrong.
The origin of the view that it does not matter at all goes back to the 2008 financial crisis, where we expanded the basemoney supply enormously—by fivefold in the US and Europe—and there was no inflation. That led people to believe that you could increase the money supply enormously without any inflationary consequences. There was no inflation, because the money went from the Government into the banks’ coffers and they did not lend it, so it did not have any inflationaryeffect, but it did not have any benefit either.
If that money had gone into the banks, the banks had lent it, and the people to whom it had been lent had spent it, wewould have had enormous inflation, but we would not have needed to increase the money supply that much. We kept doing it, because we hoped that increasing the money supply would stimulate the economy, but it had a very weak effect.That is the fallacy in MMT: if you increase the money supply and nobody spends the money, it does not cause a problem, but it does not solve a problem, either.
That’s Joe Stiglitz, Nobel Laureate.
No, he is not saying it because I did, not did I because he, both because that’s actually correct. As everyone was in fact saying back then.
Here in a retired acciountant from Wandsworth on the subject:
So we have to conclude that Stiglitz did this deliberately. I stress, that I really would not mind if Joe Stiglitz had offered an honest critique of MMT to this committee. He is, of course, entitled to do so. Economics is full of disagreements. But he did nothing of the sort. He did three things.
First he revealed his ignorance, not just of MMT, but also of banking, the role of the national debt, and the fact that there is such a thing as double entry so that when discussing that issue we also have to consider the preferences of those who own wealth and their desire for safe places to save.
Second, he misrepresented the truth, and I am really not sure that this is what anyone should do before a parliamentary committee.
Third, as a consequence, he might have served his purpose but he made himself look stupid in the process. He might, like many economists, think that a worthwhile thing to do, but I would have thought that he had by now reached a sufficient stage of maturity to get over playing such silly games.
Who to believe, eh, who to believe?
With such a profound grasp of economics that dwarfs Nobel Prize winners, he should have been able to make some very good investment decisions over the years. By now he should be extremely rich so have no need to hunt for funding.
I wonder if and how he rationalizes this anomaly with himself.
BTW – he reaches state retirement age on Thursday. Perhaps he will retire.
Pretty strong stuff from Murphy here. He’s suggesting deliberate lying to Parliament .
I would have thought there could be grounds for a libel action if Stiglitz happens to be an avid reader of Murphy’s blog or otherwise becomes aware of this and is bothered by the gnat biting his arse.
Harsh stuff coming from Spud here, but you can understand his fear.
The core of Spud’s grift is that you can spunk away money from the Magic Money Tree without consequence, whereas if the consequence (as anyone with half a brain can understand), is massive inflation then that’s rather going to undermine his grift.
So having a Nobel prize-winning economist explain that to our idiots in Parliament in the most simplistic terms must have been heartbreaking for Spud.
As for who to believe, the Nobel prize-winning economist or a retired accountant from Ely with delusions of grandeur, I’m going to go with the first one.
This is really funny. In his mind, Murphy’s now a better economist than Joe Stiglitz.
I’m starting to get the sense that within 12 months or so, Murphy will announce he’s perched on the right shoulder of God, giving Him useful tips on how to do things properly.
Dennis
I think he jumped that shark probably a decade ago.
@AndyF
per the next article Spuds idea of a good investment is one that does not increase in value, which might explain his funding shortfall.
He submitted his own evidence to the committee but hasn’t (yet) been summoned to appear before them, which may explain why he’s irate.
The evidence is enormous so will require considerable time to Fisk but here is a flavour
4. Although the call for evidence refers to the sustainability of the UK’s so-called national debt this is inappropriate. The UK government does not have a national debt. Instead, it provides savings facilities for banks, pension companies, life assurancecompanies, foreign governments, and, if they wish, individuals. Those savings facilities include Treasury bonds, or gilts, Treasury Bills and the products offered by National Savings and Investments (NS&I). The balances on NS&I accounts have risen as follows since 1998, providing evidence in support of the suggestion that these facilities are attractive to consumers:
I think anyone issuing bonds will be delighted to know they aren’t actually debt. The LCF investors pursuing the founders should just have their case summarily dismissed?
There’s more in this vein but basically even more than his £190 billion a year ‘series’ this is not so much a ‘Greatest Hits’ as one of those fake ‘Hits’ albums you used to get in the early 1980s in Woolworths. A poor pastiche of the original.
Coming soon from Spudco – Now That’s What I Call Grifting Volume 236.
Including unforgettable hits like “Tax The Poor”, “Candidly Neoliberal”, “Spend Spend Spend”, “Eleventeenthly”, “Your Time Here Is Done” and many more.
He’s the Hyacinth Bucket of 21st century British finance and politics.
It won’t get published by Spud, but there’s a post with a supposed retort from Joe Stiglitz which reads simply ‘Richard who.?!”
“Dennis, Noting The Bright Light Emanating From Ely
I’m starting to get the sense that within 12 months or so, Murphy will announce he’s perched on the right shoulder of God”
Spud is the “God agrees with me” type.
Stiglitz : “….The new technologies have highlighted the importance of basic R&D that has to be done by the Government.”
Hmm. Really?
If you are reading this on a cellphone, there are a number of technologies in it that wouldn’t be there without basic government R&D. Most of the chips in your phone came from the government’s need for high performance in weapons. The commercial market might have produced them over a much longer timeframe. So the government funds basic research on iffy technologies because when you find a good one, it’s worth going down a few blind alleys. Once proven, the commercial market can the run with it.
Once proven, the commercial market can the run with it.
sort of, MG
The rapid advance of internet speed, memory and graphics cards was inspired by porn flicks and computer games, not by traditional businesses.
We ran a natural experiment a while back where some countries had effectively 100% investment in research by governments and others didn’t.
Results suggest that commercial research delivers better results.
Even now almost all “government research” is either via companies (e.g. defense) or via stand alone universities that actually are looking at commercial applications for themselves.
How much is being developed by government funded researchers in government labs? CERN and some astronomy. Bugger all else.
“No, he is not saying it because I did, not did I because he, both because that’s actually correct.”
Tim you are losing it.
@Philip
That Internet speed increase, for example, would have been much slower had the government not already developed the infrared emitter and detector technology for missile seekers.
@Chester
The government funding and labs take a university laboratory curiosity and turn it into something practical, but expensive. Industry then figures out how make it cheaply for the mass market. I have seen this path happen several times for various technologies. Maybe it is US specific, so I’m not sure what you were referring to with the natural experiment.
This would be the speed increase using infra-red emitters and detectors over copper for ADSL/VDSL?
That would be the bandwidth increase given by infrared emitters and detectors using fiber optic cables first developed for wire guided weapons.