22 Jun 2011

Off to Porc Fest

Economics, Shameless Self-Promotion 84 Comments

I’ll be traveling most of the day to “Porc Fest.” Not sure how much blogging I’ll be doing over the next few days. In the meantime, some links:

* Lew Rockwell explains the “tragedy of immigration enforcement.”

* Steve Horwitz says that yes, we are in a police state, no hyperbole.

* Another good Horwitz post on the stimulus failure. This isn’t mere re-hash of the standard claims. Steve points out that what we have is worse than “disaster” as defined by (some) Keynesians before we went down this path, and he also brings in the CPI info. (Quick question from me: Is it totally fine for Keynesian models that both unemployment and price inflation went way up from the time the stimulus started?) Be sure to check the comments, where Mario Rizzo and I take the fight to Daniel Kuehn. Resistance is futile!

84 Responses to “Off to Porc Fest”

  1. Daniel Kuehn says:

    Running off I see! Ha!

    jk — have a good trip

  2. Bob Roddis says:

    Obviously, it’s not a coincidence that “we are in a police” that is coextensive with Keynesian-style “stimulus” because both reflect the collapse of cultural respect for privacy and private property based upon false historical narratives.

  3. Sleazy P Martini says:

    Let’s hope the ramifications of Rockwell’s open borders advocacy show up in Bob’s neighborhood.

  4. AP Lerner says:

    “Quick question from me: Is it totally fine for Keynesian models that both unemployment and price inflation went way up from the time the stimulus started?”

    Quick question from me: is it totally fine for Austrians to 1) continue hyperventilating about inflation, 2) continue to believe in neo-liberal myths like Ricardian Equivalence and the money multiplier, and 3) keep pretending the US government represents some sort of credit risk and suggest selling public assets to ward of upcoming default ,despite all the evidence that supports the contrary

    • Joseph Fetz says:

      1) It isn’t hyperventilation, it is based upon the fact that money is indeed a good, and that its increase in supply will eventually lead to an adjustment manifested in the exchanges for such.
      2) Sorry, you must be mistaking Austrians for the neo-classicals. We accept that the velocity of money is not something measurable or predictable, and we do accept that the government’s taxation and borrowing abilities aren’t limited in some respects (mainly public sentiment), that indeed the Fed can purchase other assets to increase money supply. Sure, due to statute and circumstance, it is far more convenient for the Fed and the government to engage in asset swaps (treasuries for FRBs), but that sure isn’t an implication toward Austrian theory. I really don’t know what you are driving at with this point, as it certainly falls upon the wrong crowd.
      3) A government, any government, is constrained by the fact that the produce of a nation is limited by what the private sector can provide. If the private sector is taxed heavily, or is heavily burdened by debt, then this will most assuredly have a great effect upon productivity. When the burden of government upon the productive sector of a nation becomes overly cumbersome, then the government has two choices: sell assets or print money. If they sell assets, then the burden doesn’t disappear, only there are less public assets on the Treasury’s docket. If they decide to print, then they run a real risk of wasting capital due to the misallocation of resources, as well as the detriment to the structure of production created by the unpredictable changes in the price structure.

      The economy is actors producing, exchanging, and seeking economy based upon their own subjective valuations. To print money or to increase the burdensome policies of the State (including it’s debts) only serve to further disrupt the most efficient means and uses of scarce resources. Those that are politically connect to the government apparatus will receive goods, services, and incomes farther in the timeline than those of the general economy. The Austrian economic basis of theory does not presume to know exactly what the results of such will be, only that the actions as such will further exacerbate any tendency toward the clearing of markets.

      I won’t even try to entirely dissect what inept theories or proclamations that you’re referring to, but I can say that they aren’t based upon how an Austrian views the economy or its processes. You appear to be barking up the wrong tree in this respect.

      • Beefcake the Mighty says:


      • Joseph Fetz says:

        *Edit- The line “incomes farther in the timeline” should read “shorter/closer/farther left of/in the timeline”. Essentially, the closer you are to the source of new/increased money supply, the higher propensity for spending, increased demand for specific goods, and/or diminished marginal utility of money.

      • Joseph Fetz says:

        Sorry, another edit. FRBs should be FRNs. In either case, I am sure that you knew what I meant.

      • MamMoTh says:

        1) Wrong. Only if the increased supply of money was spent in the economy beyond its capacity to expand would that be inflationary. Not when it is used to pay down debt, like in the current balance sheet recession

        2) Wrong. The government increases the monetary base by net spending. It has no control on the money supply which is endogenous for all practical purpose.

        3) Nonsense. The private sector is heavily burned by its own debt. Government debt is an asset of the private sector just like any savings account . .

        • sandre says:

          4. MamMoThs are extinct, because they were unfit to survive.

          • MamMoTh says:

            Just because we had overinvested in fur when the Fed rose the temperature. Anyway, we are back!

        • Joseph Fetz says:

          1) can this be measured accurately? Further, what is the net benefit to keeping the supply of money equal to the increase in productivity? I say both of my questions can only result in an entirely bankrupt reply.
          2) This assumes that the Fed is entirely independent, which I refuse to believe. Politicians don’t like to piss off the public, and the Fed (and its owners) don’t like to lose money; print more. Quit the charade, these two sides have been drifting through the “Love Tunnel” for quite some time.
          3) Yes, the private debt is quite heavy. Boy, I couldn’t ever conceive of private actor’s time preferences shifting due to low interest rates (sarcasm). The difference is that private debt is held by individuals or multiple individuals by contract. Government debt is held by everybody, and this BS about government debt being a savings account is getting quite old, if a nation owes money, then it must produce enough (or print enough) to pay those debts. Government debt does not represent a surplus of production.

          • Joseph Fetz says:

            Oh yeah, I forgot to add a further question under the first point (i.e. #1). How exactly is the “capacity to expand” or the increase thereof to be measured? Let me guess, your answer would be spending?

          • MamMoTh says:

            Government debt is just a liability to the government and an asset of the private sector, as much as cash and bank deposits are. But government pays interest on debt, that is, it is a savings account. Of course all these financial assets are subject to the same fluctuations in purchasing power.

            • Joseph Fetz says:

              “Government debt is just a liability to the government and an asset of the private sector, as much as cash and bank deposits are. But government pays interest on debt, that is, it is a savings account.”

              Ok, I have read Mosler’s 7 deadly sins (upon your suggestion), and I just cannot conclude that government debt (a liability of government) represents an asset to the private sector. Casting aside any T-account BS, what actual product or capital is created by this debt? The economy is not money, the economy is things for consumption. So, how does an increased government debt increase the productive capacity of the private sector so that all of us can consume better products, and more of those better products; or simply more stuff in the long run?

              Production is not based upon exchange, it is based upon the ability to produce and subjective utility. In order to create savings you must produce beyond one’s own consumption and/or utility. Creating more of an exchange medium does not create more consumption in the long run, sure in the short run it can (depending upon the production structure itself), but in the long run prices must coordinate from the lowest orders to the higher orders of production (thus determining the price of capital, labor, rent, etc) and these markets (spread over time) must clear.

              But, if I were to assume that Mosler’s theory were correct, that government debt represented a savings asset to the private sector, I must ask: What is the net benefit of this dynamic? How could a bureaucratized entity, made up of many players who have no direct interest in those funds, make a better judgement on the spending or borrowing of those funds than an individual utilizing his own judgement and valuations?

              I guess what I am really getting to, assuming that Mosler’s theory is correct, why would I want to have supposed savings that I did not choose to save myself? Further, if those debt of government really are savings, why would I want the rate of interest to decline due to those government savings if indeed the time preferences of the market did not deem it so (based upon private savings)?

              To what benefit does this obfuscated action of government action render to the private economy? What do we gain by the increased debt/savings of governmental action?

            • Joseph Fetz says:

              When it comes to MMT and Mosler, the only simple way that I can put it is to break it down to a city. Let’s say that there are 3 bookies in this city. Of course, to be a bookie, you need to weigh you assets with your liabilities. If the bookies are Jay, Bob, and Ricky, and they all make trades with each other in the debt market, they all have their clients (taxpayers), and then we begin to see a correlation to national trade and debt.

              Let’s say that Jay is up, and has more assets than debt. Bob has an equal amount of liabilities to assets, and Ricky has almost no assets, but has many liabilities. What Mosler’s theory says is that Ricky is the richest of the bunch with a great amount of client savings.

              Sure, Ricky’s debt does represent savings in this dynamic, but it is not as if they have it in their hands, it is a forced savings. But, what is missing is that he still must pay off his clients. If you have ever dealt with a bookie, then you would know that time plays heavy in the payment of owed money. Just because Ricky’s “account” represents deferred consumption to his clients, they can give two shits less, they want their money now.

              Basically, what I am trying to say is that MMT government policy IS Ricky. His clients paid in, he didn’t have the ability to pay out on par, so he instead gambled on credit and ran deeper into debt. Sure, he still owes them, and he attempts to say that his “debt” to his clients is merely a savings account, he is merely deferring their consumption. Sure, if you were to look at Ricky’s double-entry account, it would appear that he is holding “savings” for his client, but in reality he owes them big-time.

              If only we could add in a money printing press to Ricky’s operation, then we would have the model of modern monetary theory.

              • Joseph Fetz says:

                Shoot, you know, I forgot to mention Ricky’s debts to Jay and Bob. Yeah, he tried to make bets with them in order to make good with his clients, but wouldn’t you know, he got in deep with them too. Problem is that Jay and Bob don’t play, and if it get’s too deep, then they will just whack Ricky. Lights out, bye bye. Isn’t as if Ricky has too many friends around town, he owes everybody but his own mother. He’s dead fish.

              • MamMoTh says:

                I don’t get your analogy at all. A loan is an asset. not a liability.

              • Joseph Fetz says:

                From who’s perspective. That is quite an important question…

              • Major_Freedom says:

                A government loan is an asset to the lender. It is a liability to the taxpayer.

        • Beefcake the Mighty says:

          What, precisely, is the economy’s “capacity to expand”?

          • RG says:

            The economy is the trading and transformation of scarce resources. Nearly countless barriers have been erected to stifle both.

            The capacity to expand is the ability to remove these barriers.

            • Joseph Fetz says:

              RG, he was referring to Mammoth’s statement (above). Thus, the quotations.

              • RG says:

                Well we know MaMmoth doesn’t have a clue about what the economy is or what “capacity to expand” means, so two birds with one stone.

        • Major_Freedom says:

          1) Incorrect. Paying down debt with inflation increases the supply of money into the economy, by giving previous holders of debt newly created funds.

          2) Incorrect. The monetary base is also money.

          3) Rubbish. Government is debt is not a net asset in the market. The money that the government uses to pay it back comes from the market.

    • Major_Freedom says:

      Hey taxpayer funded parasite,

      When will you anti-economics MMTers show where all the stuff is going to come from to satisfy the government’s unfunded liabilities and why catallactics does not matter after 1971?

  5. Beefcake the Mighty says:

    Hey Bob, how would you like the ramifications of Rockwell’s open borders advocacy to show up in your neighborhood?

    • RG says:

      Not certain about Bob, but I’m all for anyone living in whatever locale suits them.

      I realize that nearly all immigrants to the US are murdering meth addicted horse rapists conspiring with a sleeper cell, but as long as they keep that business out of mine I’m fine.

      • Beefcake the Mighty says:

        How about inside your house? Is that a suitable locale?

        • Joseph Fetz says:

          RG quote, “as long as they keep that business out of mine I’m fine.”

          Beafy, he answered the question before you even proposed it.

        • RG says:

          Maybe he was talking about me renting a room or selling my home to an immigrant.

          No, I don’t have a room to rent to at this time.

          If you know one that would like to purchase my home, I’d be willing to listen to offers.

  6. MamMoTh says:


    Government debt is savings in the same way cash or bank deposits are savings. Their sum constitutes your stock of savings in terms of government IOUs. The only difference is the interest rate attached to them.

    People net save those IOUs when they spend less than their income, for whatever reason.

    Foreigners net save those IOUs when they run a trade surplus with your country for whatever reason.

    People decide how much to net save. However, they can actually decide how much to spend, but not how much to earn.

    The government does not force anyone to buy its debt. The only alternative is to leave the savings as 0% cash or a bank deposit.

    MMT emphasizes the fact that it is the desire to net save of the domestic private sector and the foreign sector that determines the financial balance of the government.

    • Joseph Fetz says:

      I know that you did not get my analogy above, because you probably haven’t dealt with people that will kill you over a debt. However, an IOU is merely a promise to pay a specific amount at a specific time, or on a time-weighted average (installments).

      Now, you state that government IOUs are a savings, but in reality they are nothing more than a promise to pay. Sure, the buyer of those debts is deferring their consumption over time to hold an IOW with a particular rate of interest specified. But, at the same time, you are attempting to say that the dilution of the purchasing power of that money is of no consequence. Sure, in accountancy, assets reconcile with liabilities. But, if one party is able to increase the amount of one side of the table without cost, then that represents a real problem.

      Sure, I will grant you that depending upon how you look at the ledger, that debts can equal savings. It isn’t a voluntary savings, it is a forced savings, but it can be looked upon as savings nonetheless. However, you are looking upon a contract as if it is only numeral units, rather than the actual value of those units at the time of the contract. In your mind, you think that you can engage into a contract at a certain parity, but then dilute that parity, just so long as the balance sheet reconciles, then everything is gravy.

      Guess what? That is not the way the real world works.

      If you superimpose this dynamic onto the national scale, the same conflicts arise. This is the shit that wars are made of, but you would have us believe that just so long that the balance sheets reconcile, that it is all on the up and up. Bullshit!

      If there were three bookies, each taking money from their clients, but each bookie had a printing press to create their own IOWs/issues, do you not see how this could create conflict? Sure, the debts owed to their clients could represent “savings” in some warped world, but the value of the debts owed to each other would be changed from their original value.

      If you, with your printing press, dilute the debt enough, then they will either sell off your debt to another sucker, or they will come hunting for your ass. In most cases, if you continue to dilute your debt, then you will not only have to with the secondary creditor, but the primary creditor will probably have his back (because you’ve shown you’re a POS).

      The MMT platform is nothing more than an invitation to war and conflict. Sure, you can point to your balance sheets and compare numbers to numbers, but the debtors know the score. You tried to rip them off, and they will eventually come to get you.

      Not only are MMTers Statists (etatists), but you also invite terror and aggression upon the average Joe taxpayer. Sure, you can point to the balance sheet and say, “no, no, we paid up”. But, the supposed aggressor knows the score, you were trying to rip him off. The rest of us would only have to be victims of your folly.

      If MMT ever gets any prominence in the US, then that is my cue to get the hell out of America, because I can be rest assured that the rest of the world will be itching to make a “hit”.

    • Bob Roddis says:

      Government debt is not savings. It competes with savings and impoverishes society. If government debt didn’t exist, people would have to look solely to investments with real entrepreneurs to earn interest on their real savings. These MMT guys are absolutely nuts and are bunch of liars and frauds to boot. They obviously understand nothing of Austrian theory (economics). They are nothing but a freakin’ cult for nitwits.

      Pursuant to their state theory of money, the government could declare 80 pound bags of chicken flickings as money and make people pay their taxes with them. That’ll work, fer sure.

    • MamMoTh says:

      No Joseph I didn’t understand it because I stopped reading when you considered loans a liability when they are assets. Your posts are too long to say nothing. At least Roddis says nothing in a concise way.

      Government debt is a savings account. Money gets moved from reserves to the T-account and then moved back, that’s all. The same that when you move money from a checking account to a term account in your bank, and the you move it back including interests.

      And it’s all voluntary as you like it.

      • Bob Roddis says:

        This forced moving around of purchasing power under MMT by the donut-eating fascist state is immoral and ridiculous. Further, it will fatally impair economic calculation. How can anyone plan for the future when the Fed-induced interest rate has no relation whatsoever to the natural rate of interest? How can people even locate the natural rate of interest or actual consumer demand under such an insane system? How can people know if buyers really want what they’re buying or are just spending “free” funny money?

        How can the MMT formulated money bureaucrats even think they know what they are doing when they don’t understand the first thing about catallactics or economics?

        How could anyone but a moron think that a government debt/financial asset is anything like a corporate bond of a well run and profitable business enterprise which can only pay interest from profits based upon real market demand?

        When does Congress ever change the tax rate to sop up excess purchasing power to “cure” inflation? How could economic actors ever plan for the future if Congress were to do this on a regular basis?

        Fiat money is counterfeit specie warehouse receipts. Government debt securities are counterfeit corporate bonds.

        MMT: Based upon fraud and theft for a dumbed-down society.

        MMT: Economic illiterates running a cult.

        • MamMoTh says:

          This time your standard tantrum was a bit too long , but still not as much as Joseph’s, moron.

          It’s really funny seeing you struggling to admit the government debt is just a financial asset of the private sector like banknotes, coins, and bank deposits.

          So you change the subject and start rambling about bookies, wars and inflation.

          Anyway, keep the good fun whilst I watch spinning faster and faster in your hamster wheel.

          • Bob Roddis says:

            As is always the case with you and your fellow cultists, smart guy, is that you don’t even know how to attempt to craft a substantive response. And you don’t even know that you have not.

            • MamMoTh says:

              No Roddis, that is what you and your fellow cultist do. You keep spinning in your hamster wheel screaming inflation! bookies! war! just because I clearly showed you that government debt is a savings account of the private sector. But it’s fun watching you, I really enjoy it.

              • Major_Freedom says:

                No Mammoth, you and your fellow MMT fetishists have not provided a single coherent rebuttal to Austrian criticism.

                Government debt is not a savings account for the private sector, because the financing of the payback has to come from the market itself, either through taxation, or theft of purchasing power through inflation. To claim that government debt is private sector savings is like claiming I am saving when I buy debt from you and you pay it back by taking my money first and then giving it to me.

                It’s hilarious watching you MMT yahoos rest your whole worldview on a fetishism for state power politically, and accounting tautologies economically.

                You have no clue how economics works. You have accounting identities, and you can’t even make sense of them.

              • Rick Hull says:


                Thank you for that. Succinct and devastating. I’m not holding my breath for a succinct, earnest response.

              • MamMoTh says:

                No Major, it’s just a financial asset like cash, and bank deposits. It’s so simple that your inability to get the only thing devastating. Is this short enough for you Rick? You should try Roddis’ wheel.

              • Major_Freedom says:

                No Major, it’s just a financial asset like cash, and bank deposits. It’s so simple that your inability to get the only thing devastating.

                No mammoth, it’s not “just a financial asset”. It is a claim on other people’s money that will be taken from them by government by force, either through direct taxation, or inflation tax. The “private market” is not in a net positive position.

                Your ignorance of basic economics, and focus on accounting tautologies, is preventing you from seeing the obvious truth.

                I am still waiting for you MMT yahoos to explain where the resources are going to come from to make good on the unfunded obligations, and explain why catallactics does not matter post 1971.

                All you morons have is an accounting tautology, and a brain cramp.

              • MamMoTh says:

                No Major, you shift money from one account to another when you buy government debt. It’s voluntary and no other people’s money is involved. It’s just a savings account.

                I know it’s too much for a hasmter to understand it, but so be it.

              • Major_Freedom says:

                No Major, you shift money from one account to another when you buy government debt. It’s voluntary and no other people’s money is involved. It’s just a savings account.

                No Mammoth, accounting shifting does not absolve you of having to understand the underlying economics. It’s not fully voluntary. The lending is voluntary, but the payback is not.

                The money the lenders give to the government is spent by government. The government has to acquire new funds to pay the debt back. That means either direct taxation or inflation tax from the market, the very source of who lent to the government.

                That means the net result is that the private market has to pay itself back what it originally lent to the government. Since not everyone lends to the government, there is wealth transfer from those who don’t lend to it, to those who do, but overall, the private market has shrunk in terms of productive saving and investment.

                It’s not just a savings account you moron. It only appears that way you vulgar MMTers who don’t understand the underlying economics because you’re fixated on accounting tautologies.

              • Major_Freedom says:

                Oh, and learn how to spell hamster you illiterate baboon.

      • Joseph Fetz says:

        I understand what you and the MMTers think with regard to accounts, but what you aren’t understanding is that that is not the way the public or the nation’s foreign creditors view it. The most important point that I am trying to make is that perception is everything, and if the perception of the public or foreign creditors is that they are getting screwed, then that represents a real problem and is the stuff that revolutions and wars are made of.

        If and when a war or revolution breaks out, good luck trying to pull out your ledger and convincing the parties involved that they aren’t getting screwed.

        • Bob Roddis says:

          Getting the public and the creditors to understand MMT would be a great victory for the good guys. I always insist that all we need to accomplish is to get the public to understand that fiat money is the cause of inflation. It’s not just “one of those things” or a force of nature. 97% of the public does not get that. Once (if) they get that, it will be easy enough to explain the illegality and theft of Cantillon Effects and malinvestment (which makes no sense without an understanding of the cause of inflation). So let the MMTers shout from the mountaintop: THE GOVERNMENT IS NOT REVENUE CONSTRAINED BECAUSE IT CAN JUST PRINT MONEY TO THE ENDS OF THE EARTH. Go for it.

          Keynesianism has triumphed because of its unfathomable jargon and the suggestion that one needs a PhD to understand it. With MMT’s explicit and simple explanation of the truly ghastly nature of the monetary system, average people might just come to understand it and be properly appalled.

        • MamMoTh says:

          No, I understand what you say about perception. Actually, one of the main goals of MMTers is just setting things straight explaining what government debt really is to stop all the nonsense that is going on, in order to focus on the real issues which could be inflation, war, you name it.

          And all this nonsense about the debt, and not raising the debt ceiling could very well mean the government unnecessarily defaulting on its debt, screwing bond holders including foreigners, which could trigger a war or a run on the dollar that will lead to imported inflation, etc.

        • Bob Roddis says:

          The public would quickly understand that “government debt” is a ghastly horrible thing as portrayed by the MMTers, worse even than what they currently understand it to be. Where is all the real stuff supposed to come from to satisfy the debt? The dingbat MMTer mind cannot even fathom the basic concept of the law of scarcity and the public would quickly see that.

          • MamMoTh says:

            I didn’t know hamsters lived that long. What’s your secret?

            • Bob Roddis says:

              Question to fellow Austrian:

              Has anyone EVER read a serious response from ANY MMTer regarding our various concerns with MMT, including, but not limited to, the law of scarcity, economic calculation, Cantillon Effects, catallactics, the justifications for statist actions etc….?

              I’ve never seen one. If you know of any, please direct me.

              • Joseph Fetz says:

                Nope, not as far as I have seen. The closest I have seen thus far are the comments from AP Lerner.

              • Bob Roddis says:

                Reply to Joseph Fetz:

                I’ve been specifically asking APL these questions at least weekly since last August without any response at all:


              • Joseph Fetz says:

                Hmm, that is quite interesting.

              • Bob Roddis says:

                Further, we’ve asked these questions every which way in the 400+ comments on Bob Murphy’s Mises.org MMT post where even King Mosler himself chimed in. There is never a serious response from MMTers to our questions or any evidence that they understand even basic Austrian concepts. Ever.

              • MamMoTh says:

                There is no evidence that you or your fellow hamsters understand even basic MMT concepts either, Roddis.

              • Major_Freedom says:

                Mammoth admits he doesn’t understand Austrian economics.

              • MamMoTh says:

                Major admits he doesn’t even understand the concept of evidence.

                No wonder he doesn’t understand that government debt is a savings account.

              • Bob Roddis says:

                I’m responding to this nonsense at the bottom of the page.

              • Major_Freedom says:

                Mammoth does not understand that the facts he thinks is evidence to support MMT, actually undercuts MMT.

                No wonder he believes government debt is a net savings account for the private market. In reality, the market is not net saving, because the private market ultimately has to be the source for the payback of the debt. Since the government has to STEAL the private market’s money, either through direct taxation or inflation tax, it means government debt is a net negative to the private market. It’s not net savings. The accounting tautology is misleading you moron MMTers to economic absurdity.

              • MamMoTh says:

                No Major, you still don’t get it. No payback of the debt is required. It is just an interest bearing account that turns into a non interest bearing account at maturity.

              • Major_Freedom says:

                No Mammoth, you still are not getting it. Payback of the debt is required. The money the government uses to pay back the debt has to come from the market, either directly via taxes, or indirectly via inflation tax.

                Yes, it turns from an interest bearing account into a non-interest bearing account at maturity, but the interest that is paid has to come from the market, and the principal that is paid has to come from the market. The government doesn’t keep the money it borrows as cash. It SPENDS it. It has to acquire NEW funds to pay back the debt.

                That this basic economic fact is above you MMTers is hilarious.

  7. Zack A says:

    Great post Joseph. One of the best demolitions of MMT I have seen on this blog. Really gets into the heart of the problem that MMT has with the ability of the U.S government to default in real terms, regardless of how the balance sheets match up.

    I have said in before and I will say it again. Having a printing press, or the ability to create accounting entries on a computer, does not absolve anyone, even a nation, from the possibility of defaulting in real terms. Issuing currency and thereby diluting the purchasing power of that currency through inflation is a form of default.

    For whatever reason, MMT does not recognize this. Creditors will not be happy when they get paid back in paper that cannot buy as much as they were originally promised. This may be one reason why countries like China and Japan are scaling back their treasury purchases, because their slowly realizing their being ripped off. Eventually others will follow

    Default through inflation, who knew?


    • MamMoTh says:

      MMT recognizes free floating currencies fluctuate. The yuan is basically pegged to the dollar though, so the Chinese have no reason to complain.

      If a country is so concerned about the future purchasing power of the foreign net financial assets they voluntarily accumulate, then they shouldn’t be running a trade surplus with that country to start with. If they do, it’s their problem.

      • Zack A says:

        Our currency is falling in value because of loose monetary policy and excessively low interest rates. It’s not just a random “currency fluctuation.”The dollar has been depreciating for the past ten years strait, and actually probably since the early 1970’s. The Chinese, or anyone holding dollar denominated assets has a right to be concerned about this.

        The Chinese voluntarily accumulated them because they probably though that the country with the world reserve currency would be responsible enough to not debase their currency. Boy how they were wrong.

        Sometimes people have a tendency to throw good money after bad. Doesn’t mean there necessarily stupid, but I have a feeling the Chinese are beginning to realize their being fleeced. Hence the comments that Chinese rating house made. Hence the fact that there scaling back their purchases of U.S treasury debt.

        Yes MamMoTh it is their problem. They would be better off letting their currency appreciate against the dollar which would allow a middle class in China to emerge which then it turn would enable Chinese citizens to buy much of what they produce. They could benefit from the fruit of their own labor, and raise their own standard of living.
        So yes, the Chinese will probably stop rolling over their short term paper, and may even stop buying U.S debt. This would be good for the Chinese, and of course bad for the U.S.

        The fact that they continue to prop up the U.S is there problem. However, people eventually learn their lesson and come to there senses, just like they did during the tech bubble and the housing bubble. I believe the Chinese are moving to this point.

        But by no means is the fact that the Chinese have voluntarily accumulated these assets is somehow proof that we are not, and have not, defaulted in real terms. Because we have.

  8. Bob Roddis says:

    Check out this Tom Hickey post on the Mike Norman World’s Greatest MMT blog. In the comments, AP Lerner chimes in to predict DEPRESSION from Ron Paul’s spending cut plan .


    I thought AP Lerner said MMT was just describing how the monetary system operates? Where did this “spending causes prosperity” economic theory come from? Why doesn’t catallactics demonstrate the insanity of such an idea?

    AP Lerner’s ideas are derived from that old commie Abba Ptachya Lerner.

  9. Bob Roddis says:

    This can’t be our MamMoTn, can it?

    MamMoTh said…
    @Mario I don’t see the author presenting MMT as pro-government spending. He just focuses on the MMT descriptive part of fiat currencies without going into any of its policy proposals.

    I am not really familiar with the Austrian school, nor with any differences within it there might be.

    But they actually oppose government spending because of its usage of real resources which they consider a distortive transfer of purchasing power from one group to another.

    And they are right. I think only Warren Mosler stressed that this is not a bug, but a feature of government spending in order to achieve public purpose, a concept that Austrians oppose.


    • MamMoTh says:

      Sure. Why not? There is only one MamMoTh left.

      • Major_Freedom says:

        I am not really familiar with the Austrian school, nor with any differences within it there might be.


  10. Bob Roddis says:

    Major admits he doesn’t even understand the concept of evidence. No wonder he doesn’t understand that government debt is a savings account.

    This is why MamMoTh’s head explodes when you try to explain capital goods in a barter economy on coconut island. He’s a fool or a liar. Or both.

    When someone foregoes immediate consumption and either hoards for the future or invests in the production of capital goods, that is SAVINGS. When the government sells securities, it takes the cash and blows it immediately on current consumption as a payoff to voters. There is no SAVING. It pays back the security plus interest with either extracted tax money or money dilution, its obligation usually reduced by it’s own money dilution program.

    The government security appears to the weak-minded to be similar to a real world security which represents real wealth owned by the security holder just like fiat money appears to the weak-minded to be similar to a warehouse receipt for real money. The similarity ends there.

    • MamMoTh says:

      In a monetary economy, when people spend less than they earn, they do so in order to save financial assets, mostly in the form of government IOUs (cash, bank deposits and Treasury securities). The composition of savings between those different assets is up to the person. No coconuts involved in a modern monetary economy. And my head never explodes.

      • Major_Freedom says:

        In a monetary economy, when people spend less than they earn

        That is impossible. In order for people to earn, others have to spend. Earning is thus synonymous with spending.

        they do so in order to save financial assets, mostly in the form of government IOUs (cash, bank deposits and Treasury securities).

        These are not net financial assets. They are merely claims on other people’s wealth against their will. The private market as a whole is not saving on net in this way.

        The composition of savings between those different assets is up to the person.

        No, it’s not. I am forced to pay for the payback money to lenders to government. It’s up to the individual to lend to the government yes, but that puts an immediate violence backed claim on others, making the private market as a whole not saving on net, but transferring of wealth.

        • MamMoTh says:

          Foreigners sell stuff to the US in order to obtain US$, and then spend less than they’ve earned in stuff from the US. They are net saving US government IOUs. That is a fact and it proves how wrong you are.

          You are not forced to anything to payback money to savers of Treasury securities. Removing the debt is equivalent to removing cash or deposits, and makes no sense per se, unless as a fiscal measure against inflation.

          • Major_Freedom says:

            Foreigners sell stuff to the US in order to obtain US$, and then spend less than they’ve earned in stuff from the US. They are net saving US government IOUs.

            And the money the government borrows is spent by government, which means the government has to acquire new funds to pay it back, which means they have to steal it from the market through direct or indirect taxation.

            You are not forced to anything to payback money to savers of Treasury securities.

            Yes I am. The taxes I pay are required to pay back the debt. The theft of my purchasing power through inflation is also used to pay back the debt. The private market is a net loser, because the money they lend to the government is spent by government, not wealth generators in the market.

            Removing the debt is equivalent to removing cash or deposits, and makes no sense per se, unless as a fiscal measure against inflation.

            Removing the debt means the debt is either rolled over (thus putting the burden of paying back on future generations) or it is financed by direct tax or inflation tax, both of which come from the private market.

    • Bob Roddis says:

      Any resource funneled into the government spendthrift spending system is a resource not truly saved or invested in the development of wealth-creating capital goods. Resources cannot be in two places at the same time.

      There is no justification for the EXISTENCE of such government “financial assets”. They and their promoters are liars and frauds.


      • MamMoTh says:

        You can spin in your wheel all you want, but the fact is that those financial assets exists and people are happy to earn them, spend them and save them as cash, bank deposits or Treasury securities.

        • Bob Roddis says:

          I’m also certain that the Germans were happy to get free houses that used to belong to Jews.

          And therefore, that approach to providing housing is EXACTLY THE SAME as someone saving one’s own money, foregoing immediate consumption and buying a house with one’s own money.

          I don’t really have a problem with MamMoTh’s answer because I think it is truly the essence of MMT.

          • MamMoTh says:

            Godwin’s law means it’s the end of the discussion. Thanks Roddis.

        • Major_Freedom says:

          but the fact is that those financial assets exists and people are happy to earn them, spend them and save them as cash

          Not those who are taxed directly and indirectly to pay it back.

  11. Bob Roddis says:

    Hayek certainly employed a form of Godwin’s law as the basis for “Road to Serfdom”.

    “Hayek analyzes the roots of Nazism in Socialism,[20] then draws parallels to the thought of British leaders:

    The increasing veneration for the state, the admiration of power, and of bigness for bigness’ sake, the enthusiasm for “organization” of everything (we now call it “planning”) and that “inability to leave anything to the simple power of organic growth”…are all scarcely less marked in England now than they were in Germany.[21]”


    That’s the main reason for our insistence upon the non-aggression principle, so that National Socialism can never happen (although that doesn’t stop statists from equating non-aggression with Nazis).

  12. Bob Roddis says:

    Re Godwin’s law

    I didn’t really equate MMTer’s with Nazis. What I intended to show was that just because the voters like getting some goodies from somewhere, that doesn’t make it right or efficacious.

    MamMoTh never explained why government securities are true savings, just that people seem to like them. I explained why people could like them.