Friday, 14 July 2017

Friedrich List, railways, and MMT

The creator of the German railways, Friedrich List, spent 12 years in the USA, where he was able to experience the American System of Political Economy. List had to face the same aversion we see today in the mainstream and collective conscious - namely, 'how are you going to fund this?' - 'where will the money come from?' In response List wrote a treatise, ``On a Railway System in Saxony as the Foundation of a General German Railway System,'' which appeared in the year 1833:

"People say that we do not have, here in our region, any such an amount of capital, not so much ready money for undertaking such a gigantic national work.... As for the financial point, we need not fear any further objection from sensible people, once it is pointed out that the capital so used bears the highest interest rate of return in the country. With that as a premise, no expense can be found that is too great. Furthermore, Saxony, if it is serious about the undertaking, will have at its disposal more than a hundred times more capital and cash than required. That North America possesses more capital and more cash is not even true; most of the settling of accounts there is done with paper money, which we can create just as well here in Saxony. Here an amount of 4 to 6 million bank-issued bills of exchange make up one-third of the currency in circulation, while in North America, there are two and three times as many of these notes in circulation than ready cash.''

Right off the bat, List nails it by saying that the object of credit is to be an instrument for settlement payments - and that the success of the USA lies in recognizing this feature. Further on he makes the distinction between commodities (gold and silver) and money/credit/ (aka debt) by saying...

"People will probably ask me, where will Bavaria get the money to complete such giant works [railways]? I answer, that I have not yet seen any silver or gold in any of the canals or railways. To build them we use only consumer goods, steel, stones, wood, manpower, the power of animals. But is there not a surplus of all this in Bavaria? To the extent that we transform this surplus into canals and railways, which are not yet in existence, we create permanent and enduring value, we create an instrument which doubles the productive power of the entire nation. The money, however, does not leave the country, it only settles accounts.''

List was the leading promoter of railways in Germany. In 1841 he summed up the advantages of that technology.

-It is a means of national defence: it facilitates the concentration, distribution and direction of the army. 
-It is a means to the improvement of the culture of the nation.... It brings talent, knowledge and skill of every kind readily to market. 
-It secures the community against dearth and famine, and against excessive fluctuation in the prices of the necessaries of life. 
-It promotes the spirit of the nation, as it has a tendency to destroy the Philistine spirit arising from isolation and provincial prejudice and vanity. It binds nations by ligaments, and promotes an interchange of food and of commodities, thus making it feel to be a unit. The iron rails become a nerve system, which, on the one hand, strengthens public opinion, and, on the other hand, strengthens the power of the state for police and governmental purposes.
If List were alive today, he would endorse MMT.

Come on, get with the century

~Communists seeking to abolish labor in the pursuit of 100% unemployment, donning the hammer and sickle (labor-intensive tools). Stupid, no?~

The Strange Capitalist Embrace of Austerity Viewed in Terms of Marx’s Falling Profit-Rate Law

"Taking the views of Marx, Kalecki and Keynes into account, it may be that revival in the rate of profit is a necessary condition of capitalist recovery, but not sufficient. It seems that recovery of private investment will require the satisfaction of two conditions: both a revival in the rate of profit (Marx) and a sustained growth in autonomous expenditure (Kalecki, Keynes). For the global economy as a whole, currency-issuing governments are the only limitless source of autonomous expenditure." ~Peter Cooper

Read the whole thing at Heteconomist

Wednesday, 12 July 2017

Basic Income experiment at national level

Since we're hearing more and more on Basic Income, either from governments who are preparing experiments at local level or from influential business men, advertising it (for obvious self-interest, in my humble opinion), a point will come (I think) in which an experiment will be required at national level, in order to assess the metrics and scheme of a Basic Income (or UBI) proper.

I propose two ways to do this:

1) A UBI experiment that takes the form of basic food stamps for all, which would be issued one day before the beginning of every month in value as to cover a month's basic food basket. Food is a regenerating commodity. There is surplus production of food globally, with so many metric tons of unsold bread being turned into fodder each year or simply being disposed off, while people still go hungry, because they are not integrated with the monetary system (with their own's country's system, let alone those of other countries). The price of food, sadly, is another story, and several factors come into play - but that's a subject for another time.

2) A UBI experiment that takes the form of Government interest-free loans to its citizens. I'd levy a 20K loan (the figure is up for the debate, I'd say it can be even higher for the purposes of this experiment) for each adult citizen, extinguishable in 3 years, without any debt payment schedule. In other words, the citizen decides how fast or slow, given the time period, he or she repays the debt. In case the debt is not repaid, it shows up as a tax bill.

I'd be very curious to see private sector consumption patterns under both of these experimental schemes. Their impact on labor force participation & on output elasticity. An impact study will have to be made (obviously) for the schemes. As always, what's important is the impact on demand and supply, not on trivial Government deficit and debt to GDP ratios - unless the countries in question are currency users, and not issuers (in the sense that the Government spends and taxes either in a foreign currency or is working under a fixed exchange rate or metal standard).

BIG/UBI tests at local level will always yield net positive results for reasons which should be fairly obvious - idle capacity being available, and the extra income afforded to the region in question is far away from putting a strain on the economy's ability to adjust to increased demand. What every supporter & doubter of BIG/UBI should be looking for is - what I call - sustainable behavior patterns. Less stress. Less crime. Smaller drop-out rates. Lower hospitalization rates. Fewer cases of domestic violence. Smaller poverty rates. Increased worker solidarity at the workplace (i.e. more bargaining power for labor). And improved labor participation, whether this occurs in a formal job, or outside of a job (voluntarism).

Feel free to comment if you agree or disagree with the above. Thanks.

Important note: This is in no way an advocacy of BIG/UBI as a "silver bullet" solution or panacea to the myriad ailments afflicting our societies.

Deficit doves are so frustrating

Paul Mason is asked: Where is the Magic Money Tree? He responds: It's in the Bahamas where Amber Rudd has 2 accounts.

Completely misses the point. Rudd's accounts are the fruit of the magic money tree, not the tree itself. The tree is UK Treasury & CB.

Monday, 10 July 2017

Resolution of the Bitcoin experiment, by Mike Hearn

"If you had never heard about Bitcoin before, would you care about a payments network that:
-Couldn’t move your existing money
-Had wildly unpredictable fees that were high and rising fast
-Allowed buyers to take back payments they’d made after walking out of shops, by simply pressing a button (if you aren’t aware of this “feature” that’s because Bitcoin was only just changed to allow it)
-Is suffering large backlogs and flaky payments, which is controlled by China
-In which the companies and people building it were in open civil war?"

Read more about it here 

Sunday, 9 July 2017

Pope Francis is such a crododile

'Pope warns G20 against 'dangerous alliances' damaging poor, migrants: paper'

Read more here

LoL. It was a dangerous alliance BEFORE Trump. Who created the refugee crisis anyway + the mercenaries + the deaths? Sure as hell wasn't Russia, China, and North Korea. No mention of US insane foreign policy. No mention of Saudi Arabia, Turkey, Israel, UAE et co. You care about the poor, dear Francis? Then start attacking rent seeking, and begin first by attacking and ending the Catholic Church's position as a long time big-ass rent seeker (receptacle of unearned income, i.e. the rentier excess charge levied upon the real economy, which is a huge cost to production and consumption).

Wednesday, 5 July 2017

The North is booming

At a time when the US is trying to squeeze the Kim regime through new sanctions — pressure that is likely to increase as a result of the death of US student Otto Warmbier who was jailed in North Korea — the economy is showing signs of vitality that could make it even harder to exert leverage on Pyongyang.

Any analysis of the North Korean economy has to proceed with some caution. Reliable economic data for the isolated nation are scarce and estimates vary wildly. Forecasts for 2015 growth in gross domestic product per capita ranged between -1 per cent by the Bank of Korea in Seoul to 9 per cent from the Hyundai Research Institute.

“The challenges of accurately computing North Korea’s GDP are many and are derived principally from a paucity of credible macroeconomic data,” says Kent Boydston, analyst at the Peterson Institute for International Economics. But for close watchers of the reclusive nation, the signs of change are clear. Notably, wages have surged, as has the growth of a moneyed class known as the donju. “The changes are obvious when you go to Pyongyang. There is vehicular traffic and the city has a skyline like never before,” says a former US intelligence official, pointing out the growing use of previously rare items like solar panels and air conditioners……..

The result, according to North Korea watchers such as Prof Lankov, is “a significant improvement in living standards” and economic vibrancy, most evident in the flourishing number of restaurants and markets. Known as jangmadang, these markets — both official and unofficial — have proliferated rapidly in recent years and are now increasingly the norm for purchasing consumer goods.

According to a survey of more than 1,000 defectors by the Korea Development Institute, a state-run think-tank in Seoul, more than 85 per cent of North Koreans now use these markets for food, compared with 6 per cent who rely on state rations.

Wages have also appeared to increase exponentially in recent years. According to the institute, salaries in the official state sector have increased more than 250 per cent in the past 10 years to about $85 (more than 75,000 North Korean won) a month, while wages in unofficial “side” jobs, such as private enterprises, have boomed more than 1,200 per cent. Lee Byung-ho, then head of South Korea’s intelligence service, estimated earlier this year that 40 per cent of North Korea’s population is now engaged in some type of private enterprise.
Read more here

Monday, 3 July 2017

Something is rotten in the state of … Britain

"They cannot keep accumulating debt and reducing saving while income growth is flat and real purchasing power growth is negative.

The crunch will come and Britain will fall into recession unless the Tories end their obsession with austerity.

Of course, the recession will be falsely blamed on the Brexit choice, whereas, in fact, it will be the result of poor policy choices." ~Bill Mitchell

Read more here

Thursday, 29 June 2017

Trade and the Gains from Diversity: Why Economists Failed to Predict the Consequences of Brexit

In this brief article I explain why the expectation amongst economists that Brexit means Britain will experience significant economic losses, thanks to the reversal of the gains from specialisation, is incorrect. The background assumptions regarding comparative advantage are false and cannot inform real-world situations. However, this is not the same as to suggest Britain as a post-Brexit country will follow successful trade policies.
~Steve Keen

Tuesday, 13 June 2017

Top Cat joke

A great bit if you ask me from a GREAT '61 cartoon Dibble: "Why don't you guys ever go to work and earn money?" TC answers...