Opinion james k. galbraith is there a better model to explain economics in the trump era – the boston globe gas national average 2013


A specter is haunting mainstream economics. It is the specter of . . . modern monetary theory? So recent essays from Harvard luminaries Kenneth Rogoff and Lawrence Summers attest. For Rogoff, MMT is “just nuts,” “folly,” and “nonsense.” For Summers, MMT adherents are “fringe economists”; their ideas are “voodoo,” or what is worse, “supply-side economics.” The flood of invective suggests that the list of electricity usage by appliances two professors feel a threat. Probably not to themselves, but to the orthodoxies they represent and uphold.

There are what are the 4 gas giants in the solar system reasons for worry. As Rogoff tells us: interest rates today are “far below Fed and [IMF] forecasts.” And “[at] the same time, inflation has also been far lower for longer than virtually any economic model would have predicted, given current robust US growth and very low unemployment.” Despite Trump’s deficits and many mainstream warnings, the dollar has been amazingly solid. Is something, perhaps, wrong with the mainstream’s models?

MMT is built on the work of John Maynard Keynes and Hyman Minsky. A core power outage houston zip code insight is that money in “modern States” — meaning, as Keynes wrote, for the “past four thousand years at least” – is defined by government. Money is created (mostly) by public spending and bank loans. Money is not something “out there” that the government must borrow from the public in order to function. It is created as government functions; only afterward, those who take payment may then trade the cash for a bond.

For example, Japan has a debt-to-GDP ratio of 236 percent (in 2017 gas news australia), with a large share held by the central bank. The yen has not collapsed. During the great financial crisis, the United States Federal Reserve Bank “monetized” both the public and even more (in trillions!) the private debt, a policy known as quantitative easing. The dollar did not collapse. Why not? MMT explains: Countries with effective tax systems can support the value of their money. It is countries electricity origin without effective tax systems that cannot.

Summers objects that since government today pays interest on bank reserves, deficits are not cost-free. But MMT points out that government pays interest (as well as for everything else) by the electronic version of writing a check. This actually doesn’t cost anything: Again, money is created when you deposit the check. You can’t do this, but governments can. I once said this at the Council on Foreign Relations in front of former Treasury secretary Robert Rubin. He did electricity sources uk not dissent.

Summers and Rogoff claim that doing too much of this will lead to hyperinflation. Perhaps. But hyperinflation is hard to arrange. Today public debt-to-GDP ratios have risen toward or above 100 percent in many countries, but no advanced country has seen it. In fact, as Rogoff admits, we have hardly seen inflation in the advanced world in nearly 40 years. It is possible (barely) for a very large country to run a policy electricity generation by source by state so expansionary that it will drive up the world price of oil, food, and labor. MMT does not favor this; quite the opposite, as Stephanie Kelton has explained.

What MMT does favor is a a “public option” for employment, also called the job guarantee. The job guarantee would eliminate involuntary unemployment gasbuddy near me. It would require more federal spending – around 1 to 2 percent of GDP, or half the military budget. But it would not raise spending beyond what is strictly necessary to bring about full employment, efficiently and without giveaways to the rich.

I am not a contributing modern monetary theorist. I was raised in older traditions at Harvard, Cambridge (Britain), and Yale. The scholars of MMT know their underlying ideas are not new; they are congenial with what I learned, especially from Keynes’s followers at Cambridge more than 40 years ago. They are supported, as statements of how the world actually works, by many current practitioners of high finance. So I admire and support the MMT group, which p gaskell is voicing a powerful common sense in the face of grumpy resistance.

What, then, is the threat? Simple: if the mainstream’s weaknesses and the power and electricity 2014 truths of modern monetary theory were ever admitted, it would become necessary to cite the work — even giving names such as Kelton, Tcherneva, Mitchell, Wray and Mosler — and to describe their ideas in classrooms and in textbooks. It would even be necessary to make places for MMT scholars in economics departments, even at universities like Harvard. Control over the paradigm, over the training of future economists, over the minds of the young, might begin to slip away.