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Old 11-29-2012, 11:08 AM   #161
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Originally Posted by JasonC SBB View Post
Oh so you agree with the Keynesian "gov't spending during recessions good"...
To be more accurate, I agree with the Godley-based sectoral balances understanding of macro-economics. That is, you cannot intelligently discuss a federal government sector balance of payments without also understanding the balance of payments of the foreign and private sectors.

I would link you to some reading material, but refer to my comment below.

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Here's food for thought. The 1920-1921 recession was deep, but was followed by a quick recovery. Austrians say that it's because the gov't and the FedRes didn't intervene (no stimulus, no spending, no bailouts). Compare this with all recessions since.

Here is Tom Woods' take on it:
"Warren Harding and the Forgotten Depression of 1920"
Warren Harding and the Forgotten Depression of 1920 by Thomas E. Woods, Jr.
A) I can't quite figure out the right term for you always posting links to reading material and expecting others to read but refusing to read anything that doesn't fit in to your own personal echo chamber. I have read through most of the things you post (related to economics) as I feel it is always important to see multiple perspectives and my own understanding is a blend or synthesis of multiple views.

However, as far as I know, you made it about 5 paragraphs in to the most simple piece I put up and then stopped after finding something that triggered a knee jerk ideological rejection to one thing.

B) Your link (which I read) oversimplifies, conflates and potentially misconstrues a few things about the 1920-1921 period as I understand it. It also makes what I would assert is a false analogy in assuming that 2007-2009 and 1920-1921 are roughly equivalent. I would also be interested in seeing the source he is citing for the 17% drop in GNP as most sources I've read put that number between 2% and 7%.
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Old 11-29-2012, 11:57 AM   #162
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Scrappy, FWIW, I don't see (yet) a conflict between MMT/Chartalism's theories on how the current fiat-monopoly currency systems work, and Austrian theory of the business cycle and of markets. It is when MMT'ers believe said system is the best system without considering the POV of Austrians and/or other non-gov't-monopoly currency systems, that I have an issue with. Re: the latter, it's not to say that I can't agree to disagree with anyone who has spent *some* time looking at multiple sides.
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Old 11-29-2012, 12:19 PM   #163
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Originally Posted by JasonC SBB View Post
It is when MMT'ers believe said system is the best system without considering the POV of Austrians and/or other non-gov't-monopoly currency systems, that I have an issue with.
Help me understand what you mean by "when MMT'ers believe said system is the best system." Specifically, what do you mean by the term "system?"

Depending on your answer to that, it might go a long way to explaining some of our trouble communicating productively.
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Old 01-11-2013, 04:10 PM   #164
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A monopoly fiat-debt monetary system.

So, what are the Chartalists' opinion on the trillion dollar coin idea?
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Old 01-11-2013, 06:47 PM   #165
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Originally Posted by JasonC SBB View Post
Scrappy, FWIW, I don't see (yet) a conflict between MMT/Chartalism's theories on how the current fiat-monopoly currency systems work, and Austrian theory of the business cycle and of markets. It is when MMT'ers believe said system is the best system without considering the POV of Austrians and/or other non-gov't-monopoly currency systems, that I have an issue with. Re: the latter, it's not to say that I can't agree to disagree with anyone who has spent *some* time looking at multiple sides.
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Originally Posted by Scrappy Jack View Post
Help me understand what you mean by "when MMT'ers believe said system is the best system." Specifically, what do you mean by the term "system?"

Depending on your answer to that, it might go a long way to explaining some of our trouble communicating productively.
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Originally Posted by JasonC SBB View Post
A monopoly fiat-debt monetary system.
I would tell you that any student of the modern monetary system in the USA that asserts the current system is the best system has considered Austrian perspectives, pegged currencies, etc.

Not all of them would agree our system is the best system, though. I would suggest most would argue with the premise that the current system is the best option. Those on the left would argue for more direct self-funding without the use of anachronisms like debt securities and those on the right would argue for more explicit constraints and some in the middle would argue for using various explicit counter-cyclical automatic stabilizer functions (i.e. both in downturns and "overheating" phases).

Pretty much all of them have some level of criticism with the Federal Reserve system, either in application or premise.

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So, what are the Chartalists' opinion on the trillion dollar coin idea?
A founder of Monetary Realism (an evolution of Warren Mosler's Modern Monetary Theory) came up with the concept and first cited the applicable law during the past debt ceiling debate. Some left-leaning proponents think it should be used to self-fund the government entirely and skip the whole debt securities market, issuing only 3-month T-bills for commercial liquidity.

Others more in the center or to the right think it's a terrible idea to actually implement but not as terrible an idea as a Congress that is willing to refuse to pay the invoice for things that were already approved... by Congress. They are proponents of discussions on reducing the size of government or pushing for greater efficiencies, but voluntary default is absolutely not a viable or in any way reasonable way to get there.

I've seen one person suggest a trade: close the platinum coin seniorage "loophole" in exchange for doing away with the debt ceiling.
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Old 02-13-2013, 12:47 PM   #166
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Another way to look at the national debt - The Washington Post

A worthwhile read for those interested in the subject. I'd consider it a "center right" perspective with decent historical context.
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Old 03-02-2013, 01:51 PM   #167
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Old 03-02-2013, 04:19 PM   #168
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Thanks for the heads up.
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Old 04-01-2013, 12:35 PM   #169
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Old 04-01-2013, 02:21 PM   #170
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This should be better than when Warren was interviewed by Schiff on Schiff's own radio station. I have to agree with a comment on the Norman site* that said Mosler "is a humble guy and sets the bar for polite public discourse." That it should be a relatively neutral setting should be a benefit.

Where I see Warren having trouble is that his perspective is least mainstream and least intuitive. Murphy will sway a lot more people with his Robinson Crusoe coconut barter metaphors than Mosler is likely to with a fact-based description of modern banking.

Still, if Mosler can reach a few more "Austrians" and open their eyes to new ideas, you could end up with a few more Edward Harrisons and that's not a bad thing.


We will see if it ever actually goes down, though.



* I find Norman to be as grating, obnoxious and distasteful as Schiff. He just happens to have a more correct understanding of modern money. :-/
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Old 04-01-2013, 04:25 PM   #171
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It would seem to me that, if Mosler is to do well, Murphy will have to give him the opportunity to ask several questions in a row -- to lead Murphy to a conclusion. If they end up going back and forth with questions, then I think Mosler will have a hard time building his argument. Like you said, Murphy's position lends itself better to pithy responses in a debate format.
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Old 06-03-2013, 02:38 PM   #172
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Old 01-22-2014, 03:22 PM   #173
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Old 01-22-2014, 07:17 PM   #174
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Haha. Nice. On a more real-world note:

ART LAFFER: I Was Wrong About Inflation And The Fed

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“Usually when you find the model this far off, you’ve probably got something wrong with the model, not that the world has changed,” [Laffer] said. ”Inflation does not appear to be monetary base driven,” he said.
Arthur Laffer Interview - Business Insider

Kudos to him for dropping some of the dogma and realizing that being consistently wrong might mean it's time to re-examine your economic framework.
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Old 02-05-2014, 08:13 PM   #175
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Alright, Scrappy. I'm curious to hear your thoughts here. Obviously, this is a pie-in-the-sky proposal, but even on those terms...something doesn't make sense. I have a problem with a critical part of the argument.

From Edward Harrison:

Quote:
This post is about three different topics, Bitcoin and e-Payments, the Minimum Wage, and consumer spending and Walmart. There has been a lot of discussion about all three and I believe I have an innovative way to attack all three issues that will satisfy most reasonable people. The idea is simply to for Walmart to conduct a de facto minimum wage increase of all of its minimum wage workers’ salary by giving them extra salary in e-payments usable only at Walmart and transferable securely via a payment algorithm similar to Bitcoin’s.

The Minimum Wage

Here is the issue. During the Great Depression, the United States created a minimum wage law under the Fair Labor Standards Act of 1938. The US Department of Labor chronicles it this way:

Quote:
On Saturday, June 25, 1938, to avoid pocket vetoes 9 days after Congress had adjourned, President Franklin D. Roosevelt signed 121 bills. Among these bills was a landmark law in the Nation’s social and economic development — Fair Labor Standards Act of 1938 (FLSA). Against a history of judicial opposition, the depression-born FLSA had survived, not unscathed, more than a year of Congressional altercation. In its final form, the act applied to industries whose combined employment represented only about one-fifth of the labor force. In these industries, it banned oppressive child labor and set the minimum hourly wage at 25 cents, and the maximum workweek at 44 hours.
Now, this $0.25 per hour wage was increased steadily over time in both nominal and inflation-adjusted terms until 1968 when it hit $1.60 per hour, which would prove to be the highest level in inflation-adjusted terms at $10.71 per hour in 2013 money. Afterwards, the minimum wage did not keep up with the level of inflation, such that workers earning a minimum wage of $7.25 per hour today can buy 32% less of the standard basket of goods than an equivalent worker could in 1968.

There has been a vocal campaign to raise the minimum wage closer to the 1968 level in real terms. US Senator Tom Harkin and US Congressman George Miller introduced the Fair Minimum Wage Act of 2013, to raise the minimum wage to $10.10 per hour hour by 2015, with the rate increasing each year to keep pace with the cost of living. This bill never made it through Congress. But the minimum wage remains a critical political issue in the US.

Supply and Demand

The problem with the minimum wage on a micro level is that in terms of supply and demand, a minimum wage raises the cost of supply of labor. Basic economics would dictate that the increase in cost would be met with a lower demand for labor. And so opponents of the minimum wage increase have warned that increasing the minimum wage would cost jobs. Companies, unable to pass through their costs to customers, would reduce US employment in some fashion, perhaps by offshoring workers. Some companies would either cease to exist or never be formed, with the cost of labor being the limiting factor.

The supply and demand framing of the minimum wage makes sense on a micro level. But on a macro level it suffers from a fallacy of composition problem. Clearly, workers earning a minimum wage, by all accounts often living paycheck to paycheck, have a high marginal propensity to spend. And that means that nearly every dollar they earn will be recycled into the US economy as consumer spending. The increased costs for some employers due to the increased wages becomes increased revenues for the retail outlets where these workers spend.

Moreover, higher wages can sometimes be beneficial to productivity by reducing turnover. For example, Henry Ford famously doubled wages at his automobile factory in 1914 to $5 a day under that premise – and had success. The Ford website explains it this way:

Quote:
After the success of the moving assembly line, Henry Ford had another transformative idea: in January 1914, he startled the world by announcing that Ford Motor Company would pay $5 a day to its workers. The pay increase would also be accompanied by a shorter workday (from nine to eight hours). While this rate didn’t automatically apply to every worker, it more than doubled the average autoworker’s wage.

While Henry’s primary objective was to reduce worker attrition—labor turnover from monotonous assembly line work was high—newspapers from all over the world reported the story as an extraordinary gesture of goodwill.

Thousands of Workers Flock to Detroit

After Ford’s announcement, thousands of prospective workers showed up at the Ford Motor Company employment office. People surged toward Detroit from the American South and the nations of Europe. As expected, employee turnover diminished. And, by creating an eight-hour day, Ford could run three shifts instead of two, increasing productivity.

Henry Ford had reasoned that since it was now possible to build inexpensive cars in volume, more of them could be sold if employees could afford to buy them. The $5 day helped better the lot of all American workers and contributed to the emergence of the American middle class. In the process, Henry Ford had changed manufacturing forever.
This is why research on the minimum wage issue is inconclusive regarding its effect on employment. And, according to the Center for Economic and Policy Research, the minimum wage is one of the most well-researched economic issues in the United States (pdf link here).

Walmart

From my perspective, I like Henry Ford’s concept that an increased salary means greater demand for one’s products. It makes good business sense too if you can capture a large percentage of your employees consumer spending. That’s when I hit on Walmart.

Here’s a company that has over 10,000 stores and employs over 2 million people. Revenue was $469 billion in fiscal year 2013. If Walmart were a country, it would rank 27th in the world for GDP, behind Argentina and ahead of Austria.

And in a sense, Walmart is like one big closed system. Some towns are dominated by Walmart. There is almost no other employer of significance. Employees can – and unfortunately often must – buy their groceries, their clothes, their toys, their electronics, their Christmas, Halloween and Birthday presidents —literally everything — at the local Walmart. This is why Walmart has become a lightning rod of criticism during the minimum wage debate.

According to the OurWalmart, Walmart workers average 8.81 per hour in wages, a figure only slightly above the minimum wage whereas Walmart says an “average full-time hourly associate” makes $12.83 per hour.Either way, the sums are close enough to the $10.71 bogey that the 1968 inflation-adjusted minimum wage set to make Walmart, as the largest private employer in the US, a target for critics.

From a business and public relations perspective, Walmart should want this issue to go away in a way that doesn’t cause it to have to raise prices, lose revenue or decrease profitability. This is where my idea comes in.

Bitcoin

Two weeks ago, in writing why Bitcoin matters, the Internet icon and venture capitalist Marc Andreessen wrote the following:

Quote:
Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.

What kinds of digital property might be transferred in this way? Think about digital signatures, digital contracts, digital keys (to physical locks, or to online lockers), digital ownership of physical assets such as cars and houses, digital stocks and bonds … and digital money.
..,.and — crucially in my idea— Walmart digital money. Lets call it Walbucks.

Walbucks

Here’s how it works.

Walmart decides to go on a PR offensive and raise the salary of all its employees with salaries below $10.50 per hour to $10.50 per hour, regardless of whether they are full-time associates temporary or part-time. The key, however, is that Walmart doesn’t actually raise the cash portion of each worker’s salary. Instead, Walmart gives each employee Walbucks – credit to be used only at Walmart stores or Walmart’s website – in an amount equivalent to the difference between the worker’s average hourly wage and $10.50.

Walbucks are simply a specific form of digital money, credit usable only in the Walmart universe. And because they are secured with a Bitcoin type of algorithm, Walbucks are freely and securely transferable to anyone outside of the Walmart employee universe. This is the crucial point here. Walmart is essentially creating a local digital scrip, if you will – usable only in the local Walmart universe but freely transferable like cash but, unlike cash, secure in terms of transferability.

From a Walmart employee perspective, she has just received a raise to a Walmart-specific minimum wage of $10.50 per hour because she can use the extra money she receives as Walbucks to buy anything at Walmart. And to the degree she doesn’t want to buy items at Walmart, she can transfer her Walbucks to someone else and cash out of the Walbucks system and have dollars to spend at another place.

The difference between Walbucks and bitcoin is that while Walbucks uses the bitcoin payment transfer algorithm, the creation of Walbucks are not limited. Walbucks are created by Walmart for use at Walmart. Moreover, this is a centrally-planned environment, meaning that Walmart would be the only Walbucks payment solution provider. Think of Walbucks as PayPal using the bitcoin algorithm to ensure transferability. All cash to Walbucks and Walbucks to cash transactions must clear through Walmart. But Walbucks are freely transferable to anyone in the Walbucks universe. Walbucks are not a currency per se, though you could see them as a digital scrip inside the Walmart universe. Walbucks are more of a digital payments adjunct to existing fiat currencies.

What are the benefits of Walbucks to Walmart?
  1. First, it solves the minimum wage issue. Instantly the Walmart minimum wage is $10.50.
  2. Second, Walmart can raise its cost basis without it having an adverse impact on revenue or net income. It proves the fallacy of composition in assuming a wage hike will mean fewer jobs. BY keeping the money within the Walmart Universe, Walbucks assures Walmart of more revenue and that revenue will fall to the bottom line after costs as increased net income.
  3. Third, by instituting a more secure payments system than credit cards, Walmart is decreasing payments charges while simultaneously decreasing payments fraud. Every transaction that occurs via Walbucks is a secure and fee-less transaction that decreases costs for Walmart, increasing net income.
  4. Fourth, Walbucks will make Walmart an instant player in the e-payments system. Because Walmart is so big and indispensable for many, Walbucks has instant value as a payments platform for other payments outside of the Walmart world. To the degree Walmart wants to extend the platform on a dollar-for dollar-basis as non-employees pay into the system it can do so without losing revenue. Moreover, Walmart could charge fees for using Walbucks in other venues – increasing revenue.
  5. Fifth, for the unbanked at Walmart, this solves a payments problem. Rather than cashing checks for high fees atcheck cashiers, Walmart employees could ostensibly receive their entire income in Walbucks and cash out of the system at no cost.
I am a believer in bitcoin’s algorithm as a breakthrough in digital payments that will reduce fees and enhance internet security. By marrying bitcoin-style e-payments with an increased minimum wage, Walmart — or any retailer —has the opportunity to change the retail landscape forever.


Any guesses as to my objection?



Okay, it's in this section:

Quote:
Second, Walmart can raise its cost basis without it having an adverse impact on revenue or net income. It proves the fallacy of composition in assuming a wage hike will mean fewer jobs. BY keeping the money within the Walmart Universe, Walbucks assures Walmart of more revenue and that revenue will fall to the bottom line after costs as increased net income.
How does this ensure that the money stays "within the Walmart Universe?" Money in fungible; in fact, this proposal specifically ensures that these Walbucks are entirely fungible, much more so than, say, EBT funds, for example.

What will really happen is that these Walbucks will be used for those purchases that would have been made at Wal-Mart anyway, and the resulting savings will allow the employee to use their non-Walbuck income outside of Wal-Mart.

Even if you give the employee more Walbucks than they would normally spend at Wal-Mart, those Walbucks are fungible, so they can exchange them at some marginal discount to someone else who can use the Walbucks for purchases they would already make at Wal-Mart.

As such, the idea that giving employees Walbucks means that those Walbucks will be spent in Wal-Mart at a level above and beyond their normal Wal-Mart purchases is wrong. If I normally spend $200 at Wal-Mart on groceries, and then someone gives me a $100 gift card to Wal-Mart, I'm not going to conclude that I should spend $300 at Wal-Mart. It is obvious that now I can use the gift card on my normal purchase and shift the $100 savings to other parts of my budget.

Am I wrong?
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