Financing Economic Solutions to Unemployment and Accompanying Social Problems

workesafe_mini

This is a response to various economic posts here and elsewhere. We should all be tired of the hand wringing. 80% of our social and economic problems would disappear in a few months with a:

      •   Federal Job Guarantee, as part of a      
      •   Full Employment Fiscal Policy     

 
Here’s how:

Step One:   Rename your Political Party: “The No Excuses – Get to Work Party”.  Tag Line: “We want YOU to get to work!”  (No handouts will be involved.)

2)   Make the first plank: Full Employment: A Job Guaranty: “You want a job, we’ll give you a job, come hell or high water. No Excuses”

3)   Revise Federal Reserve Act so Federal Reserve Bank reports to the Treasury.

4)   Execute on national “To-Do List” (infrastructure; alternative energy; high speed rail; rehire every teacher, fire fighter, cop laid off in last 8 years; quintuple trade school and community college staff – free tuition, free elder and child care.) Fund through Treasury securities purchased by the Fed – either as loan or just have Fed “gift” it to the Treasury. Hiring people directly or through contractors. Minimum guaranteed wage: $10/hr with benefits. (40 hours or 20 hours per week.) Eliminate private sector minimum wage.

Added spending by newly employed workers, producing public sector goods and services, induces business people to hire MORE workers to produce private sector goods and services.

5)   Track wage inflation monthly, If it starts getting out of hand (say, approaches 4%), take action: increase taxes or decrease spending – only if necessary.

A Job Guarantee law should include automatic across-the-board tax increases that kick in automatically when certain monthly wage inflation targets are hit – say for 6 months in a row. These can include:
a) Income Taxes,
b) Sales / VAT Taxes
c) Asset Value Taxes (or Wealth Taxes)
That’ll cool things off pronto.

Inflation should not be an issue since newly issued money is offset by both public sector and private sector goods and services produced.

6)    Result: Everyone’s working and income inequality will diminish.

  •  Expenditures for unemployment insurance: zero;
  •  food stamps: zero;
  •  Medicaid: virtually zero;
  •  all sorts of welfare for this or that: zero.

If we really want to be punitive, cut welfare benefits for able-bodied folk not taking guaranteed job.

7)   What’s for dessert? “Now let’s get to work!”

Not that hard kids!!

“HOW DO YOU PAY FOR IT!!!!!??????” In order to implement a Federal Job Guaranty and Full Employment Fiscal Policy, it’s important to understand a few points of how the economic system works.  Perhaps it’s time to consider a model that reflects the ways things are as opposed to the way things were before 1971.

Modern Monetary Theory is: first i) an examination of how our monetary and fiscal economy works, and second, once that is understood, ii) the implications of policy prescriptions for solving our economic problems. In terms of our monetary system, four assertions are made:.

1) The US government is unlike a:

a. state,
b. municipality,
c. business, or
d. household,

in that it can issue its own currency.

2) A sovereign (Treasury combined with the Federal Reserve Bank), like the US, that:

a. issues,
b. borrows in, and
c. floats

its own currency, can NEVER run out of cash.

3) The sovereign, like the US, can:

a. issue currency to spend and buy anything the economy produces,
b. up to the productive capacity of the economy (adjusted for turnover/velocity),
c. without creating inflation.

In other words the US government can issue currency and hire any and all unemployed and underemployed folk. The constraint is the productive capacity of the economy, as measured by wage inflation. If prices do rise above an acceptable level, they can be controlled by i) raising taxes across the board (on income, sales/vat, and asset values), or ii) a cut in spending, but the Job Gty is always maintained.

4)   The US government debt is not a problem in any way, shape, or form. In fact, it can be repaid tomorrow without a negative repercussion. That would simply involve replacing government bonds with deposits at the Federal Reserve Bank with similar interest and maturities. The similar or even better risk/reward terms assure no change in investor savings/spending preference or desire to hold dollars.  Not recommending this course of action, just pointing out that it is possible.

Private Debt, by the way, can be a problem and is largely responsible for many of our recessions.

The policy implications of these assertions are many.  So what to measure?  What to manage?  2 things:

   a)  Unemployment – as in keep it at ZERO at all times, and

   b)  Inflation – as in measure monthly and keep it at a low manageable and comfortable level at all times.  (3% to 4%?)

Easy Peasy!

Here are some resources to learn about Modern Monetary Theory (MMT is a name that stuck with this field of study. It’s a misnomer, however, in that it’s not necessarily Modern – it’s been around since the 1940s; it’s not just monetary – it involves both monetary and fiscal operations; and it’s not just a theory – it involves an explanation of how our monetary system works since we went off the gold standard in 1971.) YouTube some intro lectures from:

–  Bill Mitchell:  Demystifying Modern Monetary Theory

–  Stephanie Kelton – The Angry Birds Approach to Understanding Deficits in the Modern Economy

–  L. Randall Wray – Modern Money Theory: Intellectual Origins and Policy Implications

–  L. Randall Wray — MODERN MONEY: the way a sovereign currency “works”

–  Modern Money Network

–  Warren Mosler’s Soft Currency Economics

Some helpful blogs / twitter feeds:

–  Bill Mitchell – Billy Blog

–  New Economic Perspectives

–  Twitter – Stephanie Kelton

–  Real Progressives

The foundations of MMT are John Maynard Keynes, Abba Lerner, Wynne Godley and Hyman Minsky. Recent proponents are: Randall Wray, Stephanie Kelton, Warren Mosler, Jamie Galbraith, Bill Mitchell, and Steve Keen. Stephanie Kelton was appointed to the Senate Budget Committee by Bernie Sanders in late 2014 and she and Jamie Galbriath and Bill Black advised Sanders during his campaign. Collectively, they are a New Hope!

Recent books you can read are: The Deficit Myth (Prof Stephanie Kelton) and Modern Money Theory, A Primer on Macroeconomics for Sovereign Monetary Systems (L. Randall Wray) It’s a little technical but very clear.

There is considerable pushback from the mainstream on MMT. Folks can’t wrap their brains around it. (I’m talking the vast number of mainstream economist, including so-called “liberal economists”.)  I attribute it to people not being able to unlearn stuff they learned in their 20s. Especially if you based your career on it.

Hope that helps.

factoryworker

39 thoughts on “Financing Economic Solutions to Unemployment and Accompanying Social Problems

  1. Pingback: The Kids are NOT Alright! The Truth about The Federal Debt and Intergenerational Equity | fflorescpa

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  3. CryptoGoldBug

    This will lead to hyperinflation! Debasement of the currency! Wheelbarrows of currency for a loaf of bread! Zimbabweeeee!!!! Weimer Republiccccc!!!!!!

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    1. fflorescpa Post author

      Inflation is a variable that needs to be managed but the key is that if there is excess capacity in the economy (unemployed folk) the goods and services they produce after getting hired (both by public sector and private sector) offsets whatever new currency is issued. So if inflation is too much cash chasing too few goods, the amount of goods increases to offset the increased currency issued to hire them. So no added inflation.

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      1. fflorescpa Post author

        Inflation is too many dollars chasing too few goods and can come from different mechanisms. For example, it can come from:
        1) an external shock in a commodity that an economy needs to import – such as the oil embargo in the 1970s, causing a price increase in gasoline -> fertilizer -> food -> and labor through union cost of living contracts.
        2) excessive borrowing in an external currency or commodity and then a rise in that commodity and falling into a spiral as the country prints in order to make ever increasing payments (Weimer Republic making payments in gold, Venezuela, USSR, Argentina borrowing in dollars),
        3) a catastrophic supply shock in the production of a key output/export product coupled with foreign currency debt or import requirements (Weimer Republic – > France took over their steel making capacity when they fell behind in gold payments; Zimbabwe –>Mugabe expropriated farms from experienced white farmers and giving it to his inexperienced urban cronies resulting in a 40% drop in grain production, swinging the country from grain exporting to grain importing.
        – Its actually kind of hard to induce inflation (see: Japan in last 20 years and US in last 8 years

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      2. Nathan Towne

        Inflation is an increase in price level caused (principally) by an increase in the total quantity of money, per unit of output (so, accounting for productivity and demand).

        The inflation of the 1970’s was caused by too rapid an increase in the quantity of money, relative to output. The oil shocks were a negligible factor. Both Germany and Japan were importing almost all of their oil in the late 1970’s, yet they were running wildly divergent rates of inflation. The UK, meanwhile, was running over 20% inflation. The policies instituted in Britain and in the United States in the early 1980’s, which rapidly reduced the rate of increase in the quantity of money, successfully broke inflation, where everything else had failed.

        We had a huge global oil shock in the mid to late 2000’s and it had a limited effect on price level, as well. So, your conclusion is not accurate.

        As far as generating inflation is concerned, we have means upon which we can always generate inflation if we so choose to do so. There will never be a situation in which that is not the case.

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      3. fflorescpa Post author

        RE: ” avoided the obvious reality that inflation does not only occur at full employment. Inflation, concurrent with high unemployment is what is today called stagflation. …”
        • The 70s inflation was the result of a series of events triggered by the Yom Kippur War and resulting oil embargo and quadrupling of oil prices. This caused: i) sharp increases in the price of oil/gasoline/fertilizer/ and union wages which were tied to inflation; ii) massive recession/unemployment caused by huge quantities of money/spending power leaving the economy to sit in oil exporter bank accounts; iii) combined resulting in the odd stagflation; and iv) govt response of maintaining interest rates low, yes injecting money into the economy, following the ending of Bretton Woods.
        • So yes, if you want to boil down this complexity to “ caused by too rapid an increase in the quantity of money, relative to output”, then yes you might be right!

        RE: ” The policies instituted in Britain and in the United States in the early 1980’s, which rapidly reduced the rate of increase in the quantity of money, successfully broke inflation, where everything else had failed…. … …”
        • I can’t speak for the UK, but they were running larger current account deficits and greater reliance on imported oil at the time than the US. The inflation was largely a two/three year event in the US and would have tapered off by itself but the misguided and extremely damaging Fed response caused untold misery.
        • The US inflation was uncomfortable but not damaging to the economy as a whole. Wage inflation peaked at 7% and overall inflation, including the commodity spike never got over 13% (AAAAaaahhhhhhh!! Zimbabweeeeeeee!!!!! Wiemer Republicccc!!!)

        RE: “. We had a huge global oil shock in the mid to late 2000’.. .”
        • Not sure what you mean by “We”. The US was already becoming energy independent, although the spike probably contributed to the inevitable popping of the real estate bubble. (The UK also I understand.)

        RE: ” As far as generating inflation is concerned, we have means upon which we can always generate inflation if we so choose to do so. There will never be a situation in which that is not the case…. .”
        • Yes. Inflation is easily managed through fiscal policy, as I pointed out above:
        • “A Job Guarantee law should include automatic across-the-board tax increases that kick in automatically when certain monthly wage inflation targets are hit – say for 6 months in a row. These can include:
        a) Income Taxes,
        b) Sales / VAT Taxes
        c) Asset Value Taxes (or Wealth Taxes)
        That’ll cool things off pronto.”

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      4. Nathan Towne

        Also, again, you have avoided the obvious reality that inflation does not only occur at full employment. Inflation, concurrent with high unemployment is what is today called stagflation.

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      5. Nathan Towne

        Furthermore, you have to answer the question, under your theory/view, what is it that broke inflation in the early 80’s? Can you explain what you believe happened?

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      6. Nathan Towne

        Sigh.

        Everything that you just wrote is completely wrong, on literally every point. The assertion that inflation would have simply disappeared had the Fed and the Bank of England not crushed it is truly beyond words. Taxes do not remove money from the system and therefore are not significantly anti-inflationary. Fiscal Policy does not actually involve money printing, at least as a general rule, this is a silly far-left talking point. Your non-justification for differing inflation rates by country and time period is, well, non-existent. Your comment that the inflationary problem in the United States was a “two/three year event” is completely and utterly wrong factually and beyond silly.

        Absolutely unreal. Why are the least informed often the most sure in their positions? Incredible.

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      7. fflorescpa Post author

        RE: “The assertion that inflation would have simply disappeared had the Fed and the Bank of England not crushed it is truly beyond words. ….”
        • You are obviously of the monetarist stripe which probably means you’ve been wrong about everything in the last 20 years or so. (see: Scott Sumners)

        RE: “Taxes do not remove money from the system and therefore are not significantly anti-inflationary…..”
        • Your model of how the monetary/fiscal system works is deeply flawed. Fiscal policy is the most effective tool on modulating economic activity. (Monetary policy is highly ineffective. It’s like pushing on a string.) Of course taxation takes money out of the economy, and importantly the private sector. Modulating economic activity is best through fiscal automatic stabilizers with a Job Gty and automatic tax levies if inflation increases.

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      8. Nathan Towne

        Everyone, from Monetarists to New Keynesians agree today that the Fed was responsible for bringing inflation down in the early 1980’s and for controlling inflation since, excepting the issue surrounding the ability of the Fed to expand the money stock via money injection, including QE, at the zero lower bound.

        Taxation doesn’t take money out of the system. After being taxed it shows up as output in the form of government spending.

        Yes, I would refer to myself as a classical Monetarist. However, there are plenty of Keynesians, today, who would say that I fit the definition of a Keynesian. I disagree with this, but not for the reasons which we are discussing. Most of the issues which we have discussed are ones that Monetarists and Keynesians are in general agreement on today.

        I don’t know why you think that I have been wrong for the last twenty years. That is a bizarre comment. Far from it.

        I am not sure why you are referring me to Larry Summers?

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      9. fflorescpa Post author

        RE: ” Everyone, from Monetarists to New Keynesians agree today… that the Fed was responsible for bringing inflation down in the early 1980’s and for controlling inflation since … Most of the issues which we have discussed are ones that Monetarists and Keynesians are in general agreement on today. …”
        • This may be true and both are wrong and represents the flaw in thinking responsible for the inadequate economic management of the last 40 years, where millions, and sometimes tens of millions of people are perpetually unemployed. Good job Monetarists and New Ks! That’s why MMT is clear that the tools best suited for managing economic activity are fiscal and interest rates can be set at zero or near zero and maintained there.

        RE: ” Taxation doesn’t take money out of the system. After being taxed it shows up as output in the form of government spending…”
        • More flawed thinking in the Monetarist playbook. No wonder they are always wrong. Taxation takes money out of private sector. It’s spending that injects money into private sector. And govt is fully capable of modulating this via the Job Gty.

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      10. Nathan Towne

        Well, you just shifted the discussion. Notice how you said that MMT states that fiscal policy is best means of controlling economic activity. What we were discussing was the control of inflation and prices, not for “managing economic activity.” That is a different issue than purely the question of controlling price level and inflation.

        You then, after stating this, shift back to monetary policy in stating that the optimal policy is to indefinitely hold interest rates at zero, or near zero. Why do you keep moving all over the place? Furthermore, what do you mean by that? Are you referring to real interest rates, or nominal interest rates?

        As for the second comment, taxes and borrowing raise money for the government which is utilized in the form of government spending. Unless you are running a fiscal surplus, in which there is an additional dimension involved, the two are directly linked to one another. It is dollar in, dollar out. What is the government going to do, tax the money and stuff it in safe deposit boxes? Furthermore, if taxes “took money out of the system,” why wouldn’t the same be true for borrowing money from Americans? Why do you emphasize taxes and not borrowing? If one performed that function, so does the other.

        A jobs guarantee which can be relaxed to modulate inflation? Again, inflation can occur regardless of employment level! You do not need to be at full employment to generate inflation. We keep going around in circles on this.

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      11. fflorescpa Post author

        RE: “What we were discussing was the control of inflation and prices… .”
        • Inflation are key variable resulting from managing economic activity.

        RE: “Why do you keep moving all over the place? Furthermore, what do you mean by that? Are you referring to real interest rates, or nominal interest rates?…”
        • Because all of these factor are interrelated; something that perhaps you don’t appreciate and hence continue to cling to a flawed model. Nominal rates.

        RE: “As for the second comment, taxes and borrowing raise money for the government which is utilized in the form of government spending…..”
        • If you are running a deficit, the govt is injecting more money into Private Sector than it is taking out.

        RE: “why wouldn’t the same be true for borrowing money from Americans?…”
        • Borrowing may indeed take money out of private sector. But if interest rates rise, then the Fed buys securities and injects money right back in. (Which is the same as the Treasury selling securities directly to the Fed.) So I’m focusing in on the activities which affect private sector spending and prices (economic activity).

        RE: “A jobs guarantee which can be relaxed to modulate inflation?….”
        • You can have a BUFFER STOCK of unemployed people or a BUFFER STOCK of Job Gty workers working producing goods and services.
        • As I explained to you above, inflation can have different sources. So you can have different tools to modulate. These can include: automatic tax levies and the Job Gty program as I explained above, but also margin requirements on security purchases and down payment requirements on real estate purchases, as well as national programs to develop alternative energy sources for example. The key is to develop an action focused on the source of the inflation.

        • You should probably pick up Prof Kelton’s book: The Deficit Myth for some background: https://www.youtube.com/watch?v=mAONzH3qfWQ

        • Bill Mitchell also has a nice blurb on the applicability of MMT on Japan: http://bilbo.economicoutlook.net/blog/?p=46569

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      12. Nathan Towne

        Is that what you mean to say? Are you saying that inflation can be modulated by withdrawing money from the system via taxes (but not borrowing) and then controlling how much of it is utilized as government spending? The rest will essentially be hoarded? Or are you denying that government spending then re-injects those dollars into the economy?

        If you are denying that the money supply influences inflation, then what would the point be of “withdrawing money from the system,” as a means of controlling inflation?

        Maybe you could clarify?

        I don’t understand what you are saying.

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      13. fflorescpa Post author

        RE: ” Are you saying that inflation can be modulated by withdrawing money from the system via taxes (but not borrowing) and then controlling how much of it is utilized as government spending?…”
        • Borrowing does take spending money out of the economy but interest paid on bonds are a net addition of net financial assets into private sector. Ab although yes money is taken out, for all practical purposes, anyone who owns govt bonds and wants to spend can simply sell them and have a party. So monetary policy is highly ineffective in modulating private sector spending. On the other hand, taking money out of the hands of private sector folks will leave them with less to spend and will curtail spending and prices.
        • Govt spending does indeed reinject money into the economy.

        RE: ” If you are denying that the money supply influences inflation…”
        • It’s not money created that affects inflation. Its money spent. Taking money out and /or putting it back in affects spending propensities. Buying and selling securities (monetary policy) has less of an effect outside of real estate through mortgages.

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      14. Nathan Towne

        Okay, but again, inflation can still occur regardless of output level.

        As for holding nominal interest rates indefinitely at the zero lower bound, I honestly am not entirely sure what to say. I am not even sure whether that is possible. Remember, sustained low nominal interest rates mean that money is tight. Sustained high interest rates signal that money is easy. In order to sustain low nominal interest rates indefinitely, I would suspect that you would have to drive them up first, by withdrawing the availability of money from the system, inducing contraction of the money stock and then have them be dragged down to zero via deflation. I am not sure what else would hold them indefinitely at the zero bound. I mean, I would have to think hard about it, but I don’t even understand how it is possible.

        No, if you are running a fiscal deficit, that means that government is spending more than it is raising in taxes, which means that the difference has to be paid for via borrowing.

        Alright, so now in your next comment, you noted that borrowing does in fact require that money be lent to the government. As for the implication of the rest of the comment, I am completely confused. You seem to be implying that there is, at all times, a certain deficit level which is consistent with full employment and price stability. However, you have stated numerous times that taxes “withdraw money from the system” and are therefore anti-inflationary. So borrowing doesn’t “withdraw money from the system?” Yet, now it does? You say that taxation takes money, which could be spent, out of the hands of those who would spend it and that that is therefore anti-inflationary. What does borrowing do? Also, what about when the government then uses it via government spending?

        You then conceded that government spending does, in fact, re-inject that money into the economy. In other words, taxes and borrowing didn’t take that money out of the system after all? You seem to be saying that the issuance of government bonds is really money printing, so borrowing is net neutral that way. So, our fiscal policy from 2020 should result in an explosion of inflation in the next several years, per your theory, no?

        Are you saying that monetary policy does not play a role in controlling inflation? How about output? Rather, fiscal policy controls inflation and output? Is monetary policy irrelevant then? If so, why do care about the Fed’s control of interest rates? Also, how is that consistent with your earlier statement that the Fed’s actions in the early 1980’s brought unnecessary misery to the economy?

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      15. fflorescpa Post author

        RE: ” Remember, sustained low nominal interest rates mean that money is tight…. … …”
        • No. Interest rates are maintained at zero by not paying interest on reserves and the Fed standing ready to buy bonds if interest rates creep up. This injects money into private sector  not tight.
        • Having said that, low interest rates means less money injected into private sector through interest on govt bonds  somewhat tighter.
        • Having said that, raising rates to say 20% is extremely tight as real estate prices plummet as does business investment and consumer spending  tight. But it represents a mixed bag as the high rates means billions injected into private sector  not tight.
        • Bottom line: Mixed bag. That’s why monetary policy is extremely ineffective tool in modulating economic activity.

        RE: “.Sustained high interest rates signal that money is easy. In order to sustain low nominal interest rates indefinitely,.. I would have to think hard about it, but I don’t even understand how it is possible. … …”
        • You’re definitely not understanding things.

        RE: “you noted that borrowing does in fact require that money be lent to the government…. So borrowing doesn’t “withdraw money from the system?” … what about when the government then uses it via government spending?
        …”
        • Yes, borrowing does withdraw money from private sector, but the Fed is part of the govt and at any time can buy the bonds and inject the money right back into private sector.
        • Govt spending injects money right back into private sector.

        RE: “a certain deficit level which is consistent with full employment and price stability…. … …”
        • True, but you don’t really know the amount without a Job Gty which forces spending to exact right amount. BUT: if inflation develops, taxing kicks in that takes money out of private sector. (If you have an automatic taxing scheme as I described previously.)

        RE: “So, our fiscal policy from 2020 should result in an explosion of inflation in the next several years… … …”
        • The deficit spending was offset by issuance of got bonds. But that in of itself will not necessarily curtail spending and potential inflation. There is a risk of inflation with the stimulus going on. But inflation is easily managed through different mechanisms, taxation being the most effective, although automatic cuts in outlays with increased private sector spending will also offset. The amounts seem large (wow) but when the pandemic is gone, folks go back to work producing more goods and services  offsetting increased spending. So not that worried, and certainly no risk of hyperinflation.

        RE: “Is monetary policy irrelevant then?… … …”
        • No. But highly ineffective.

        RE: “If so, why do care about the Fed’s control of interest rates?… … …”
        • I don’t care that much. Just hold steady at a low rate, preferably zero, nominal.

        RE: “unnecessary misery to the economy… … …”
        • The Fed went ape shit, interest rates at 20%. When you go to extremes, you cause unnecessary misery. Real estate and manufacturing came to a grinding halt. Dum.

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      16. Nathan Towne

        Also, if deficits simply result in money printing, what is the effect on interest rates? Do deficits initially drive down interest rates through the creation of more money and then later drive them up via inflation?

        If this question is conducive to other factors, why is that at the end of 1990’s, running a fiscal surplus and with slightly higher taxes and unemployment was inflation at the same level as in 2019, when we were running a massive deficit and had slightly lower taxes and unemployment? No oil shocks were present to account for this. I don’t see what supply side constraints can account for this. Why is that? Productivity growth?

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      17. fflorescpa Post author

        RE: ” Do deficits initially drive down interest rates through the creation of more money and then later drive them up via inflation? …”
        • Interest rates are whatever the Fed says they are. Period. They have the printing press. And they can sell bonds to mop up excess cash and drive rates down.

        RE: ” at the end of 1990’s, running a fiscal surplus and with slightly higher taxes and unemployment was inflation at the same level as in 2019,… … …”
        • 90s: Surplus -> deflationary, interest rates held low -> stimulative, but bubbles forming, driving strong economy -> stimulative. Mixed bag.
        • 2019: Economy still weak, weak labor market -> deflationary, deficits, large but not large enough, offset by large trade deficit. That’s the diff. In 1990s, China not most favored nation yet. (See Sectoral Balance analysis/graph).
        • Economy is a lot of moving parts. That’s why the key to modulating is AUTOMATIC STABILIZERS. The Job Gty is the ultimate automatic stabilizer.

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      18. Nathan Towne

        Sustained low interest rates means that money is tight, not easy. Sustained high interest rates means that money is easy, not tight. Notice the key word in both sentences: sustained. From 1929 through March of 1933, the money stock collapsed by a third. In the 1970’s rapid growth in the money stock induced inflation and dragged up interest rates. Disinflation in the 1980’s ultimately brought down interest rates.

        As for the interest on government debt, it is paid off of the top of the tax revenues. That is a transfer payment.

        As for monetary policy, overall, I think that the evidence is simply overwhelming that stability of underlying monetary aggregates and of rate of change in price level is one of the essential components of economic stability. This is what the Fed has done since the 1980’s and it has ushered in the era of The Great Moderation.

        As for the coronavirus deficit spending, you said that the inflationary implications of the spending were offset by the issuance of government bonds. I thought that that is why you thought that it was inflationary? That deficit spending is akin to money printing which can modulated by taxes and a jobs guaranty which can be relaxed when appropriate? So, now deficit spending is no longer inflationary anymore because of the issuance of government bonds? So, deficit spending is no longer money printing? Now it is inflationary because it is spending, but that inflationary effect is mitigated by the issuance of government bonds? So, by implication, taxation is no longer anti-inflationary because it takes money out of the system, now it is anti-inflationary because it reduces private spending, again? Or, is it anti-inflationary only if it is taking money out of the system which would have otherwise been spent?

        I give up, unfortunately. You are certainly correct in saying that I do not understand. Take care.

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      19. Nathan Towne

        I have spoken with Mrs. Kelton before. I have seen her book, but I have never read it.

        As for your question as to whether I am a CPA, are you asking in order to lay out in accounting terms why deficit spending is really money printing?

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      20. Nathan Towne

        Re: “You’ve spoken to Prof Kelton?????”

        I have spoken with her online, yes, but never in person.

        Re: “You are privileged!!! She’s a rock star.”

        Well, that is one way to put it.

        Re: “I highly recommend her book.”

        I will certainly check it out at some point.

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    2. Jacqueline S. Homan

      STAAAAHP!!!! As a monetarily sovereign nation that issues its own currency that’s not pegged to a commodity or to any other nation’s currency, this is not going to happen w/ the FJG and m4A. The THREE main causes of hyperinflation are:

      1) Government loses the ability to enforce taxes (which is what happened to the Confederacy states during the Civil War)

      2) Large foreign denominated debt (the Weimar Republic being economically crippled by conditions imposed by the Versailles Treaty where France forced the Germans to pay reparations for WW 1 in French franks instead of Germany’s own currency)

      3) Severe shortages of goods (Zimbabwe, Venezuela)

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    1. fflorescpa Post author

      – A sovereign does not have to tax or borrow in order to spend. And hiring otherwise unemployed folk should not increase inflation as the pie of goods and services increases to offset the added money.
      – Are these “make-work” jobs?: pulling your children out of a burning building, forming the thin blue line between your wife and getting raped, building and repaving the roads and bridges you drive over, cleaning the toxic waster dump left by some failed job creator, bringing our infrastructure up to snuff, making sure most folks on the road know the rules of the road and can see straight, winning WW2, making sure your kids are educated and can be functioning adults? …infrastructure; alternative energy; high speed rail; rehire every teacher, fire fighter, cop laid off in last 8 years; quintuple trade school and community college staff – free tuition, free elder and child care

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    1. fflorescpa Post author

      Valuing public sector tasks is tricky but in calculating the marginal cost of a Jog Gty task, you have to subtract the savings from currently supporting unemployed workers, since with implementation of the program, these costs could conceivably approach zero. By reducing these costs ($10/hour) by the overall savings (unemployment insurance payments, Medicaid, Food Stamps, some disability payments) the hurdle for a public sector Job Gty program is probably pretty low.

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  4. CryptoGoldBug

    The government expenditures are taking resources/capital away from private sector and “crowding out” private investment.

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    1. fflorescpa Post author

      In terms of the real economy: What are resources? What is capital? Both consist of PEOPLE and DIRT. And when there are unemployed folk in the economy, there are plenty of both. So the fact that they are unemployed – by definition – means they are not being taken away from private sector. So there is no “crowding out”. In terms of money: there is always enough money in the bank, available to be invested if business people think there is demand for a product or service they can produce. And if there isn’t, banks can create it out of thin air by making loans.

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    1. fflorescpa Post author

      If you want to get into the weeds: they can definitely get fired from the Job Gty program. If they do, they can reapply, but they wouldn’t be entitled to another JG job until they wait 30 days with no benefits. If they get fired a second time in a 12 month period, they have to wait 60 days. If they get fired a 3rd time, they have to wait 90 days, but at this point they are assigned a counselor to suss out the problem. Nobody likes getting fired and having to start a new job. If they wait or work a year, they’re back to 30 days.

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