Tuesday, 24 February 2015

My thoughts on Guardian article on inflated Iran threat and my reply to a defender of such tactics

The Guardian: Read the article by click the link below


One person had this to comment about the article and the situation.

I'm not starting a fight and I want that to be clear, I'm only expressing my opinion on the matter.
"(War is) like the effect of a fog or moonshine. (It) gives to things exaggerated dimensions and unnatural appearance -Carl Von Clausewitz
"In war, truth is the first casualty"-Aeschylus

In order to get people to do things and take action, sometimes you need to create some mist of your own. You know damn well the EU doesn't do much as is, neither does Obama. Netanyahu wants to get them off their ass before it really IS too late to stop Iran. Of course they aren't 95% of the way done. Israel would be blowing them shitless if they were that close. But they need intervention and that's why they do it. I'm not saying if it's good or bad one way or another, all I'm saying is to see both sides and see that there is reason to exaggerating Iran's progress of a nuclear weapon. And now it may not be good because this may cause a boy who cried wolf scenario for Israel, though I fear it already has in some ways.

My reply to him.

Sure, I understand the reason behind such a tactic; that doesn't mean I agree with it. Especially since Israel acquired its military nuclear capabilities w/o approval of anyone. I don't see Iran as a military threat for Israel. I do see, however, Israel as a military threat for Iran, since the latter doesn't have a nuclear deterrent (nukes of its own). As for their respective secret services. Mossad is funding terrorists against Iran. And likewise Iran is doing the same thing against Israel.
As a side note, everyone can see the worthwhile logic behind Iran's nuclear civilian policy. One day they'll run out of oil. So better to export it in order to import other stuff, and ensure domestic energy requirements via alternative energy. Atomic energy is one of them, which they are engaged in. They are also engaged in wind, solar, hydroelectric, and geothermal.

Secondly, the iranian youth isn't hawkish. They too would want more western-like liberties and living standards; but you have a damn theocratic regime in power, which was made possible because of the UK and USA coup d'etat against Iran's first democratically elected president (who was a social democrat) because the man had the nerve to nationalize the nation's wealth (oil production) instead of letting BP screw them over. So the US installed the shah as dictator; and with him in power, support for the Islamic revolution grew and you had another regime change.
What's happening now with trade sanctions? They're in fact entrenching the government's hold over the people and it allows the government to point to the west (to foreigners) for the problems at home.

Rightist regimes in power benefit greatly from propping up (indirectly) other rightist movements in their neighboring regions - they are the perfect antagonists.

Then I proceed to quote a certain article that reinforces my view.

Let us not forget that it was Israel, which in fact created Hamas. According to Zeev Sternell, historian at the Hebrew University of Jerusalem, "Israel thought that it was a smart ploy to push the Islamists against the Palestinian Liberation Organisation (PLO)".
Ahmed Yassin, the spiritual leader of the Islamist movement in Palestine, returning from Cairo in the seventies, established an Islamic charity association. Prime Minister Golda Meir, saw this as a an opportunity to counterbalance the rise of Arafat’s Fatah movement. .According to the Israeli weekly Koteret Rashit (October 1987), "The Islamic associations as well as the university had been supported and encouraged by the Israeli military authority" in charge of the (civilian) administration of the West Bank and Gaza. "They [the Islamic associations and the university] were authorized to receive money payments from abroad."
The Islamists set up orphanages and health clinics, as well as a network of schools, workshops which created employment for women as well as system of financial aid to the poor. And in 1978, they created an "Islamic University" in Gaza. "The military authority was convinced that these activities would weaken both the PLO and the leftist organizations in Gaza." At the end of 1992, there were six hundred mosques in Gaza. Thanks to Israel’s intelligence agency Mossad (Israel’s Institute for Intelligence and Special Tasks) , the Islamists were allowed to reinforce their presence in the occupied territories. Meanwhile, the members of Fatah (Movement for the National Liberation of Palestine) and the Palestinian Left were subjected to the most brutal form of repression.
In 1984, Ahmed Yassin was arrested and condemned to twelve years in prison, after the discovery of a hidden arms cache. But one year later, he was set free and resumed his activities. And when the Intifada (‘uprising’) began, in October 1987, which took the Islamists by surprise, Sheik Yassin responded by creating the Hamas (The Islamic Resistance Movement): "God is our beginning, the prophet our model, the Koran our constitution", proclaims article 7 of the charter of the organization.
Ahmed Yassin was in prison when, the Oslo accords (Declaration of Principles on Interim Self-Government) were signed in September 1993. The Hamas had rejected Oslo outright. But at that time, 70% of Palestinians had condemned the attacks on Israeli civilians. Yassin did everything in his power to undermine the Oslo accords. Even prior to Prime Minister Rabin’s death, he had the support of the Israeli government. The latter was very reluctant to implement the peace agreement.
The Hamas then launched a carefully timed campaign of attacks against civilians, one day before the meeting between Palestinian and Israeli negotiators, regarding the formal recognition of Israel by the National Palestinian Council. These events were largely instrumental in the formation of a Right wing Israeli government following the May 1996 elections.
Quite unexpectedly, Prime Minister Netanyahu ordered Sheik Ahmed Yassin to be released from prison ("on humanitarian grounds") where he was serving a life sentence. Meanwhile, Netanyahu, together with President Bill Clinton, was putting pressure on Arafat to control the Hamas. In fact, Netanyahu knew that he could rely, once more, on the Islamists to sabotage the Oslo accords. Worse still: after having expelled Yassin to Jordan, Prime Minister Netanyahu allowed him to return to Gaza, where he was welcomed triumphantly as a hero in October 1997.
Arafat was helpless in the face of these events. Moreover, because he had supported Saddam Hussein during the1991 Gulf war, (while the Hamas had cautiously abstained from taking sides), the Gulf states decided to cut off their financing of the Palestinian Authority. Meanwhile, between February and April 1998, Sheik Ahmad Yassin was able to raise several hundred million dollars, from those same countries. The the budget of The Hamas was said to be greater than that of the Palestinian Authority. These new sources of funding enabled the Islamists to effectively pursue their various charitable activities. It is estimated that one Palestinian out of three is the recipient of financial aid from the Hamas. And in this regard, Israel has done nothing to curb the inflow of money into the occupied territories.
The Hamas had built its strength through its various acts of sabotage of the peace process, in a way which was compatible with the interests of the Israeli government. In turn, the latter sought in a number of ways, to prevent the application of the Oslo accords. In other words, Hamas was fulfilling the functions for which it was originally created: to prevent the creation of a Palestinian State. And in this regard, Hamas and Ariel Sharon, see eye to eye; they are exactly on the same wave length.
Article source: http://globalresearch.ca/articles/ZER403A.html 

Friday, 20 February 2015

Cyber-georgists enjoy the strawman as much as the cyber-libertarians

A few thoughts on online-georgists, from my experience with them.
Ok, basic point. I tell them that you can have any tax scheme in place, even just the LVT (land value tax), but if you don't have proper fiscal policy to back it up - you're still going to end up with problems like permanent and involuntary unemployment, inequality, downward pressure on wages, poverty etc.
The cyber-georgists? Man, they don't want to hear anything on that. They just go in to strawman you (willfully or not misrepresenting your argument), and claim that LVT correlated with full reserve banking is going to work miracles on their own - and the government can embrace laissez-faire and everything will be great.
I ask them, so what happens if the government imposes a tax obligation on the private sector via the LVT worth 1,5 trillion, and the government only spends 1 trillion. I add, for the ease of argument, that the foreign sector is neutral, there is no net incoming or outgoing of aggregate demand. Naturally, I also answer my own question - the result will be vertical unemployment.
What's the cyber-georgist's answer? "When did I say that I support deflationary monetary policy"
First of all, lol at the sintagm "deflationary monetary policy". Secondly, again, I explain that I wasn't talking about inflation or deflation and I point out that permanent and involuntary unemployment can occur in both cycles (upwards and downwards). Then I go on to explain the purpose behind the NAIRU (the unemployed buffer stock of labor), I explain to another one what money taxation creates, aka unemployment of money paying jobs.
For all of my efforts, no reply is directed on my actual statements. They're directed parallel to the debate - the cyber-georgist goes on to moralize about how the LVT is considered the 'gold-standard' of fiscal policy. As if we were debating LVT vs all other forms of taxation, lol.
The cyber-georgist returns that MMTers should leave their computers and step outside into the real world.
Meanwhile, I'm trying to make a modest and more than reasonable statement, pointing out that even if you get the micro policies right, if you don't get the macro policies right too - you're gonna fail to achieve your aims. And trying to solve microeconomic problems with macrosolutions and vice-versa won't work. But again, the cyber-georgist completely ignores such statements, despite the fact that I said it was true for all other tax schemes. I wasn't trying to single out the LVT or attack the purpose behind it. On the contrary, I'm all in favor of it; and at the same time, I understand the sectoral balance and what improper fiscal policy can do to an economy.
When I stated the question, "Show me a line in which Henry George says that government spending finances taxation", the cyber-georgist gets really personal and defensive and replies back, "Show me an MMTer before 1972. Go"
And I immediately reply back with a smile (^_^) Abba Lerner.
Do I get to hear back on this particular note? No. The bloke fell into silence, and after a while proceeded to block me on twitter. LoL.
This post is not meant to be critical on Henry George, from a political-economic-ideological-historical stance or what not. If you want something like that, you might want to learn what Karl Marx thought of him. And if you want some critical material on Marx that doesn't contain strawman views of his work, then check out Yanis Varoufakis' Erratic Marxist vid - it's quite beautifully presented. https://www.youtube.com/watch?v=A3uNIgDmqwI
You can tell by now that I don't like to create a fetish out of politicians or economists. Minsky for instance made some brilliant contributions in the field like 'destabilizing finance and capitalism'; but that doesn't change the fact that the man had some pretty fucked up views on social policy.
I can say that while I do consider Henry George to be a very important figure in the history of economic thought, I don't regard him too much of a progressive as a reader of Jacobin mag would understand the word. ;)

I recommend Bill Mitchell's posts on Henry George and MMT:
part 1 http://bilbo.economicoutlook.net/blog/?p=30215
part 2 http://bilbo.economicoutlook.net/blog/?p=30219

PS: No, I don't think that all georgists are like that. Let's be honest, all 'sides' have their more or less annoying trolls (on forums, comment sections, and even in real life).

Thursday, 19 February 2015

Common sense and fair play

A person's right to believe is not, in any way, more important than another person's right to disbelieve. Furthermore, more people should actually read the bible. After all, the clergy forbade the commoners for many many centuries to possess individual copies of the bible and read it on their own. They were afraid people might come up with their own interpretations (heresies) or dismiss the damned thing outright.


Friday, 13 February 2015

Mosler trolling Varoufakis with damn good arguments

@wbmosler: MY COMMENTS ON CAPS REGARDING THE NEW GREEK FINANCE MINISTER'S COMMENTS:


Mark Weisbrot has been arguing, for some time now, that Greece must try to emulate Argentina; that is, to default on its debts not as a bargaining strategy that yields a New Deal within the Eurozone but, rather, in the context of exiting the Eurozone altogether and going it alone. Recently, Paul Krugman has endorsed this position (see here and here). I think they are profoundly wrong.

There are two arguments against the recommendation that Greece and Argentina are similar enough to warrant an Argentinian road for Greece. There are those, like the Cato Institute and IMF diehards, who never forgave Argentina for having successfully escaped the clutches of the poisonous austerity (and internal devaluation) that the IMF had imposed upon the country so as to sacrifice a whole people’s prosperity in the interest of creditors, rentiers and assorted speculators who had flooded the country with dollars (during the era of the currency board). Believe me when I say that I am not one of them. Indeed, I salute the Argentinian people for having toppled a regime, and more than one government, that tried so desperately to sacrifice a proud people on the altar of IMF-led austerity. No, my criticism of the idea that Greece can ‘do’ an Argentina today stems from the view that the circumstances Greece is facing today are genuinely different to those of Argentina a decade ago.

The differences between the two cases, which render the analogy redundant, are three:

1st difference: The potential of exports to act as shock absorbers

SHOCK ABSORBERS FOR WHAT? THE IDEA IS TO SUSTAIN AGGREGATE DEMAND AT FULL EMPLOYMENT LEVELS WITH FISCAL POLICY.

Weisbrot and Krugman point out, correctly, that at the height of Argentina’s crisis, its exports (as a percentage of GDP) were not very different to those of Greece. Based on this argument, they dismiss the idea that Argentina managed to recover after its default-devaluation by means of export-led growth.

While it is quite true that Argentina’s export performance in 2001 was by no means better than Greece’s today, it is crucial to note that Argentina’s export potential in 2001 was vastly superior to that of Greece’s in 2012. By export potential I mean the degree of underutilisation of productive resources whose employment can, potentially, produce goods and services for which there is effective demand. In 2001, Argentina’s farms were woefully underproducing primary commodities that were, at that time, seeing their demand skyrocket. In sharp contrast, idle productive resources in Greece cannot produce much for which there is increasing demand.

Take for instance shipping and tourism, mentioned by Paul Krugman as two potential sources of Greek export growth: Both are in speedy decline! Additionally, whereas in the case of Argentina, its next door neighbour (Brazil) was entering a period of rapid growth, Greece’s neighbours are showing no such signs of vitality. Indeed, our traditional trading partners are also buffeted by recession (pushing down the demand for Greek tourism) while non-EU countries (such as Russia) cannot, and will not, make up the difference to any appreciable degree.

THAT DOES NOT MEAN GDP WILL FALL AS IT CAN ALWAYS BE SUSTAINED BY DOMESTIC DEMAND VIA APPROPRIATE FISCAL POLICY.

Lastly, on this note, Weisbrot and his co-author Juan Antonio Montesino argue that Argentina’s growth was not ‘export’ driven, noting that only 12% of its GDP growth during the 2002-8 period can be accounted for by exports. With all due respect, I fear that such a pronouncement cannot be made lightly. For it is impossible to separate neatly the effects on GDP of exports from the effect of internal aggregate demand when we take into account the fact that internal demand relies entirely on ‘animal spirits’ (i.e. on the optimistic expectations) of investors into goods intended for local consumption.

NOT TRUE, FISCAL ADJUSTMENTS CAN ALWAYS SUSTAIN DOMESTIC DEMAND AT FULL EMPLOYMENT LEVELS.

Put simply, the emergence of strong Chinese demand for Argentinian soy, beef etc., in conjunction with the growth of neighbouring Brazil, has had a major impact on the readiness of Argentinian investors to invest in activities that also generated internal demand. In short, that 12% quoted by Weisbrot is simply a gross underestimate.

SUSTAINING INTERNAL DOMESTIC DEMAND DOES NOT REQUIRE SAID 'INVESTORS'.
EVEN IF THE REST OF WORLD ENTIRELY VANISHED GREECE COULD STILL READILY SUSTAIN AGGREGATE DEMAND AT FULL EMPLOYMENT LEVELS VIA APPROPRIATE FISCAL POLICY.


2nd difference: Greece has no peg with the euro. It has the euro!

YES, THAT IS A DIFFERENCE, BUT NOT AT ALL AN OBSTACLE.

Analysts like Krugman, Weisbrot and Rubini make the utterly good point that Greece would benefit enormously from a devaluation of its currency.

HOW CAN A LARGE CUT IN REAL WAGES FROM CURRENCY DEPRECIATION BE CONSIDERED A BENEFIT BY PROGRESSIVES? INSTEAD IT BENEFITS EXPORTERS AS IT REDUCES THE REAL STANDARD OF LIVING OF THOSE WORKING FOR A LIVING.

Of course it would. Argentina does, indeed, provide a brilliant example of how a massive devaluation can help a country escape a debt-deflationary cycle.

IT'S FAR MORE PROGRESSIVE TO USE A FISCAL ADJUSTMENT.

As, for that matter, does Iceland. However, what they are neglecting is that it is one thing to break a peg linking your currency to some other hard currency (as in the case of Argentina), or to devalue your floating currency (as did Iceland), and quite another to have no currency but to have to create one from scratch.

In the case of Argentina the peso was in existence. All it took to devalue it was to announce that the 1:1 peg with the dollar was over. Suddenly ALL incomes and ALL savings were devalued by the same percentage. Overnight. End of story. It was not pleasant but it could be done.

TRUE, AND REAL INCOMES WITH REGARD TO IMPORTS FELL 70%, TO THE BENEFIT OF EXPORTERS.

In the case of Greece it simply cannot. And this makes a world of a difference. Why? Because of two important reasons. First, because of the crushing delay in introducing a new currency.

NOT NECESSARILY.

Secondly, because of what I call the bifurcation between the stock of savings and the flow of incomes. But let me take these one at a time.

Delay: Bank of Greece colleagues tell me that it will take months before ATMs are stocked with new drachmas once they get the go ahead to print them. Even if it takes weeks, an economy cannot remain un-monetised for so long, especially when already on the canvass of a deep crisis, without major civil unrest and an almost terminal effect on economic activity.

FIRST, DRACHMA BANK DEPOSITS, CREDIT AND DEBIT CARDS, AND CHECKS CAN BE AVAILABLE ALMOST IMMEDIATELY.
SECOND, EURO CAN BE USED FOR CASH EXCHANGES UNTIL NOTES AND COINS ARE CREATED, AS FACILITATED BY GOVT. POLICY AS FOLLOWS:
IF THE GOVT OF GREECE BEGINS TAXING AND SPENDING IN DRACHMA USING THE SAME NOTIONAL QUANTITIES AS IT DID WITH EURO, AND THE GOVT. DOES NOT FORCE CONVERSION OF EURO BANK DEPOSITS THERE IS SUDDENLY A LARGE SHORTAGE OF DRACHMA. THIS WILL BE EVIDENCED BY AGENTS TRYING TO SELL EURO AND BUY DRACHMA, AND THE GOVT. CAN ACCOMMODATE BY SELLING DRACHMA FOR EURO ON A ONE FOR ONE BASIS. THIS KEEPS THE DRACHMA STABLE AT THAT RATIO AND FACILITATES THE USE OF CASH EURO UNTIL DRACHMA NOTES AND COINS ARE AVAILABLE. AT THE SAME TIME THE GOVT. IS ACCUMULATING EURO WHICH ALLOWS IT TO SERVICE IT'S RESIDUAL EURO OBLIGATIONS AS DESIRED.


Bifurcation: Even ignoring the crippling effects of the delay, we must not forget that the ongoing crises has led Greek savers to withdraw oodles of their savings from Greek banks and either shift them offshore (London, Geneva, Frankfurt) or stuff them in their mattresses, or hide them in their freezers (in ‘bricks’ of 500 notes). This means that, by the time we come to an exit from the euro, the stock of savings will be in euros and theflow of incomes and pensions (once the banks re-open) will be in drachmas.

NOT TO FORGET THAT ONGOING TAX LIABILITIES WILL BE PAYABLE IN DRACHMA, AND GREECE IS CURRENTLY RUNNING A PRIMARY SURPLUS, WHICH MEANS THERE WILL BE A SEVERE DRACHMA SHORTAGE IN THE ECONOMY AND A STRONG DESIRE TO SELL EURO TO BUY DRACHMA.

So, unlike in Argentina, a Greek euro-exit will drive a wedge between stocks and flows, savings and incomes; with the former revaluing massively relative to the latter.

EXCEPT THE COUNTER EFFECT OF DRACHMA DENOMINATED TAX LIABILITIES WILL RESULT IN THE OPPOSITE EFFECT- CURRENCY APPRECIATION IF LEFT UNCHECKED.

Moreover, the very availability of such large quantities of ‘hard’ currency savings, in the hands of the average Dimitri and Kiki on the street, will ensure that the decline in the value of the new drachma will be precipitous (something that did not happen in Argentina since most savings were in pesos also).

NO, THE WIDESPREAD DEMAND FOR DRACHMA WILL RESULT IN DIMITRI AND KIKI SELLING EURO TO GET THEIR NEEDED DRACHMA.

In short, even if we neglect the devastation caused by the delay in the introduction of the new currency (something Argentina did not have to worry about), the new currency will be debased ever so quickly due to this bifurcation, leading to hyperinflation and the loss of most of the competitive gains we might have hoped for from the devaluation.

I DO NOT AGREE!!!

3rd difference: Greece is perfectly capable of poisoning the water it is swimming in (Europe)

When Argentina defaulted and broke the peg, the ill effects on its trading partners (China, Brazil etc.), as well as on the broader macro-economy in which it was functioning, were negligible. If Greece leaves the euro, however, the results will most certainly prove catastrophic for our ‘economic ecology’, and in a never-ending circle of negative feedback, will bite our struggling nation back.

NOT IF IT UNDERSTANDS HOW TO SUSTAIN DOMESTIC DEMAND VIA FISCAL POLICY, AND OF COURSE USE A TRANSITION JOB GUARANTEE FOR SUPERIOR PRICE STABILITY.

To begin with, Greece must exit not only the Eurozone but also the European Union. This is non-negotiable and unavoidable. For if the Greek state is effectively to confiscate the few euros a citizen has in her bank account and turn them into drachmas of diminishing value, she will be able to take the Greek government to the European Courts and win outright.

AS PREVIOUSLY DISCUSSED, IT'S CRITICAL NOT TO FORCE CONVERSION OF EURO BANK DEPOSITS TO ENSURE A STRONG DRACHMA AT INCEPTION.

Additionally, the Greek state will have to introduce border and capital controls to prevent the export of its citizens euro-savings.

WHY SHOULD THE GOVT. CARE WHETHER CITIZENS KEEP EURO IN GREEK BANKS OR IN BANKS OUT OF GREECE?

Thus, Greece will have to get out of the European Union.

MAYBE, BUT NOT FOR THOSE REASONS.

Setting aside the domestic ramifications over loss of agricultural subsidies, structural funds and possibly trade (following the possible introduction of trade barriers between Greece and the EU), the effects on the rest of the Eurozone will also be cataclysmic. Spain, already in a black hole, will see its GDP shrink by more than Greece’s current deflationary record rate, interest rate spreads will tend to 20% in Ireland and in Italy

NOT IF THE ECB SUSTAINS IT'S 'DO WHAT IT TAKES TO PREVENT DEFAULT' POLICY.

and, before long, Germany will decide to call it a day, bailing itself out (in unison with other surplus countries). This chain of events will cause a bitter recession in the surplus countries clustered around Germany, whose currency will appreciate through the roof, while the rest of Europe will sink into the mire of stagflation.

I DON'T SEE THAT AS THE LOGICAL PROGRESSION.

How good will this environment be for Greece? I submit it to you, dear reader, that the answer is: Not good at all!

NOR IS IT A LOGICAL OUTCOME.

In short, whereas Argentina’s and Iceland’s successful default-devaluation strategy did not have adverse effects on the overarching environment in which they had to exist after their bold move, a Greek euro-exit will be the equivalent to poisoning the pool in which we must swim.

I DON'T SEE IT THAT WAY IF DONE AS PER MY PROPOSALS.

Epilogue

Does this mean that Greece ought to grin and bear the massive and misanthropic idiocy of the bailout-austerity package imposed upon it by the troika (EU-ECB-IMF)? Of course not. We should certainly default. But within the Eurozone. (See here for this argument.) And use our readiness to default as a bargaining strategy by which to bring about a New Deal for Europe (in a manner that I have written about here).

THIS STRATEGY DOES NOT FOLLOW FROM THE PRIOR ANALYSIS.
EU AUSTERITY HAS BEEN AN EPIC CRIME AGAINST HUMANITY, AND, UNFORTUNATELY GREECE MAY NOT HAVE THE UNDERSTANDINGS NEEDED TO REVERSE IT.



Source: http://www.twitlonger.com/show/n_1skko14

Wednesday, 11 February 2015

Rare Yanis Varoufakis video, ants and grasshoppers...


One reason for inequality and austrian/neoliberal inspired fear in the public

So in the ars-regendi forum, I posted this vid... and people didn't get it.
One person asked,
Let's say that a public body, National Bank of Romania for instance, starts to "print" money in huge amounts and then transfers it somehow (by giving it out as social help or buying services from private sector, whatever) to the citizens. What would be the consequences?
I answered,
Well, the majority of that "huge" amount of money would be in electronic form, as bank accounts in the economy are credited when the government spends, and they are debited when the government taxes.The consequences would be a revival of sales, which would bring income and production up and unemployment down. As the multiplier effect kicks in as well, other sectors will benefit from the increased aggregate demand in the economy, aggregate demand being not just income but income + the change in private debt.As economic activity would pick up, the fiscal deficit would be reduced because of the automatic fiscal stabilizers which work counter cyclically.Fiscal deficits and unemployment rates being endogenous between themselves.So instead of the government paying interest to bankers *the government paying to rent its own money*, the government simply deficit spends without interest attached to its present and past debits.

Another person intervened saying,
... and you would have hyperinflation.

Of course, I had to call in for arguments as to why they believed what they believed. Arguments didn't come, only sheer faith in zombie a priori logic - debunked time and time again by history.
Here's a link to the thread.

My broad post on the matter...

Untrue, hyperinflation has been a carefully studied phenomenon by many economists and historians. And all the cases of history show that the overproduction of money is always the result and not the consequence of a crisis of hyperinflation.
Baring implacable supply side reasons, it's impossible to have hyperinflation when you've social and political stability and when the government is able to properly tax its own currency.
To claim that that would apply only for the US is to claim ignorance on history, recent and old. There have been many countries throughout the centuries which have practiced fiscal stimulus in order to achieve their various ends, either for peaceful/civilian purposes or for war purposes.
Here's a list of countries which engaged in fiscal stimulus and maintained growth and price stability:
Japan, France, Italy, Germany, China, Romania, the UK, Russia, Paraguay, Iran, South Korea, Ancient Rome (and it worked when they were able to maintain political stability and properly defend their boarders), Thailand, and there are many others.

The fact of the matter remains that the automatic fiscal stabilizers work counter cyclically to correct the economy. So when there's a shortage of AD, it works to enlarge the deficit, when there's a surplus of AD, it works to shrink the deficit. Private debt to GDP is always higher than government debt to GDP and fiscal deficit to GDP. Why don't you see hyperinflation when there's a private expansion? Because there's adequate spare capacity to be used. But you guys argue that when the government does it, in order to cover the private sector spending shortfall (because saving desire is so much higher as a result of the high cost of serving the private sector bank debt), that's going to be automatically and a priori inflationary.
And I explained, it can't be so long as the automatic stabilizers are there. Obviously, sound governments would want to target the GDP output gap and nothing more than that. If you reduce the marginal tax rate from where it is to 5% or 1% and keep spending as it is or increase it, you bet your ass you're going to have hyperinflation. But that's not what antiausterity people are talking about.

A crisis of insufficient or excess demand will ALWAYS be solved via fiscal policy, in the former case via increased fiscal deficit, the latter via lower fiscal deficit, balanced budget, or surplus. And in the times we're living in, we're living in a crisis of inadequate aggregate demand, not lack of resources, not lack of spare production capacity, not lack of labor.

Please reevaluate your stances; you're basically arguing that endogenous money creation at interest by the bankers is noniflationary, but exogenous money creation at interest or 0 interest by the government is inflationary. Please detail the reasoning for this outside of ideological beliefs. Why is it noninflationary when government pays billions and billions in interest on its debt to bankers? And why would it be inflationary if government where to pay those billions to households instead of bankers? Why is it noninflationary when a new loan creates a new deposit? And why is it inflationary when the government fiscal deficit spends? The vast majority of money is created by the private banking system, not by the government. The CB targets a specific price range and allows the quantity of money to fluctuate in order to maintain that price objective. All the money that goes to paying taxes and buying government securities (government debt) all of it comes from government spending.

Why didn't Poland have hyperinflation when it ran 7%+ deficit in '10 and '11?

Why didn't Romania have hyperinflation when it ran 9% fiscal deficit in '10?

So sometimes the relationship and money looks like this, from the best economics principles textbook: This is more about ‘inflation’ causing ‘money’ as defined.

But sometimes it looks like this: This is more about partially defining ‘money’ as reserve account balances at the Fed but not securities account balances (tsy secs) at the Fed.


More so, during the sovereign debt crisis in the EZ when the Periphery had higher fiscal deficits as % of GDP because of private spending shortfall caused by private debt deflation, why wasn't the euro devaluing or devaluing hyper-actively (hyperinflation)? Why is deflation (not inflation) threatening the Eurozone?

More so, why did 5 years of massive fiscal deficit spending and low interest rates in Nazi Germany between '33 and '38 saw the eradication of unemployment, real wage growth above 10%, economic activity, and all of this in a climate of price stability? Why wasn't there hyperinflation?