Saturday, September 16, 2017

Zero Hedge — Even Bernie Sanders Thinks "Medicare For All" Would Bankrupt America


This is an illustration of the political cost of Bernie not understanding and embracing MMT. He should have paid closer attention to MMT economist Stephanie Kelton when she was his economic adviser.

1. A currency sovereign cannot "go bankrupt." A currency issuer can always issue currency to cover its obligations in the currency of issue. In this case, default is a political choice rather than a financial necessity.

2. The only actual constraint on a currency soveriegn is the availability of real resources. This implies a financial constraint if effective demand created exceeds the capacity to supply real resources to meet it. Then accelerating inflation could result.

3. The United States government is a currency soveriegn. Affordability is never an issue.

4. A sovereign currency issuer has a monopoly on the issuance of the currency and can exercise this monopoloy by setting the prices the government will pay, including the interest rate.

37 comments:

Unknown said...
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Unknown said...

Tom, They are quoting him from 1987 - this is not what he currently believes. This was before he went to Congress - when he was still the Mayor of Burlington VT.

Andrew Anderson said...

1. A currency sovereign cannot "go bankrupt." A currency issuer can always issue currency to cover its obligations in the currency of issue.

Yes but by paying welfare proportional to account balance*, a currency sovereign can foster run-away wealth inequality including real wealth inequality.

*I.e. positive yields on inherently risk-free sovereign debt.

Noah Way said...

Zero Hedge ... BUY GOLD NOW!

LOL

Tom Hickey said...

Tom, They are quoting him from 1987 - this is not what he currently believes. This was before he went to Congress - when he was still the Mayor of Burlington VT.

That's true but everything someone has said gets thorwn against them. Then they are distracted explaining themselves.

OK if it gives an opportunity to educate the public, which what explaining MMT would do. Bernie is not going there yet, that I have seen anyway.

Dan Lynch said...

If he goes all MMT and says "money is no object," he will be ridiculed by the establishment.

If he proposes a regressive tax increase, as he has done, he will be criticized for raising taxes on the working class.

The winning strategy is to go Huey Long and say "we'll pay for it by taxing the rich." Which is not a bad policy, anyway.

Alternatively he could go Marriner Eccles and answer the question with another question: "how do we pay for endless foreign wars?"

Tom Hickey said...

Raising taxes is a non-starter.

I like the last option. But I would rephrase it as, "How do we pay for endless foreign wars and high tech military expansion without raising taxes or borrowing to finance them?"

But at some point, the elite discussion needs to turn to the obvious, that a soveriegn currency issuer is only constrained in the present and future by the availability of real resources. The nation needs to use its real resources as effectively and efficiently as possible in the present while ensuring that real resources will be available for future need and as many wants as possible.

This is the basis for a national discussion based on reality rather than nonsense.

Dan Lynch said...

Right, but it has to be someone with power and credibility. The Fed Chair or the Prez or a powerful congresscritter (Bernie has zero power).

Tom Hickey said...

Rihgt, at least one significant person really needs to step forward. Janet Yellin, are you listening?

Tom Hickey said...

BTW, the US actually cannot presently afford universal health care in terms of real resources.

We are already drawing on highly qualified immigrants that are needed in their own countries by paying them more.

The US needs more public investment in educational facilities to train the personnel required for universal healthcare.

NeilW said...

The way you pay for it is to stop private healthcare completely. If you want to work in medicine in the US then you have a Medicare contract.

That way the 'tax' is paid by removing the ability to jump the queue from the rich - without changing any rates at all. And where there is an overall shortage, by paying with time not money. The time of the rich is allegedly more valuable than the poor, so if you put them in the same queue the rich get taxed more by waiting six months for non-urgent work than the poor do

There is more than one way of reducing the power of money.

NeilW said...

"The winning strategy is to go Huey Long and say "we'll pay for it by taxing the rich." Which is not a bad policy, anyway."

That's what everybody on the left says - since they think being Robin Hood is cool.

Then they lose the election.

Then they double down on the strategy and lose the next election. And that keeps going because when it boils down to it those on the Left are far more interested in socking it to the rich than making sure poor people don't die due to lack of healthcare.

It's the obsessive jealousy and anger with the rich that drives the Left. Hence why they latched onto the Piketty narrative like limpets. And it drives them right over a cliff.

It is the strategy of failure that has led the Left nowhere for generations.

One of the lessons that comes out of Modern Money is that you can reach an accommodation with the rich. You let them accumulate and exclude access to their coins but you don't let them accumulate or exclude access to real stuff. That neatly solves the capital accumulation problem inherent in capitalism while allowing the real system we want to continue to function.

Forget about taxing the rich. Let them keep their coins. Let them keep 'ownership' of everything. Instead reduce the power of exclusion.

AXEC / E.K-H said...

MMT ― the economics moron as problem solver
Comment on Zero Hedge on ‘Even Bernie Sanders Thinks ‘Medicare For All’ Would Bankrupt America’

MMTers do not know how the profit- and price mechanism works but they offer a one-size-fits-all solution for all economic problems: A sovereign currency issuer has, as a matter of principle, a monopoly on the issuance of the currency and can exercise this monopoly through unrestricted deficit spending for any chosen purpose from basic income to healthcare to warfare.

This, of course, is trivially true and just another wording for what sovereignty entails. Sovereignty, though, is the pivotal concept of political science and NOT of economics. The subject matter of economics is how the economic system works and NOT how the political system works.

Fact is, to begin with, that economists do NOT know how the economy works. Economists cannot until this very day tell the difference between profit and income. And these mentally retarded folks, who do not understand the foundational concepts of their subject matter and the elementary mathematics of accounting, tell their fellow citizens how best to organize the economy.

Economists have NOT produced anything of scientific value since Adam Smith but award themselves each year a prize for their non-existing scientific achievements: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

Economics is a failed science, and MMT is NO exception:
• MMT’s sectoral balances equations are mathematically false,
• because the formal foundations are false the whole analytical superstructure is false,*
• because MMT is materially/formally inconsistent, MMT policy guidance has NO sound scientific foundations,
• because MMT has no scientific content whatsoever it is nothing more than brainless political blather,
• because it holds public deficit = private profit MMT is a straightforward program for the unabated enrichment of the one-percenters,
• to claim that MMT delivers a scientific underpinning of the political program of Bernie Sanders or Jeremy Corbyn is just one more absurd/fraudulent claim in the long history of the fake science called economics.

Egmont Kakarot-Handtke

* See cross-references MMT
http://axecorg.blogspot.de/2017/07/mmt-cross-references.html

Matt Franko said...

Sanders and his cronies are not qualified/competent to redesign the acquisition process for the US healthcare system...

They are competent/qualified to point out that the current arrangements are unsatisfactory... that is all...

Matt Franko said...

"drawing on highly qualified immigrants "

LOL! They are getting head of the line privileges for diversity in the academe... try being an in-state white male and getting in...

Then they are here for 4 years undergrad and ofc dont want to go back to their turd world hell holes...

Andrew Anderson said...
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Andrew Anderson said...

You let them accumulate and exclude access to their coins Neil Wilson

Not quite. Fiat is a creature of government and users, beyond, say, a $250,000 individual citizen exemption, should have to pay for the use of it with the shortest maturity fiat (account balances at the central bank and physical fiat, aka "cash") costing the most. IOR (interest on reserves) is thus backwards from what should be.

... but you don't let them accumulate or exclude access to real stuff. Neil Wilson

The Bible said this about 3500 years ago wrt to land; see Leviticus 25.

Let them keep 'ownership' of everything Neil Wilson

Taking a cue from the Old Testament, every citizen should own a place to live and work. If this calls for redistribution of land then so be it.

One of the lessons that comes out of Modern Money is that you can reach an accommodation with the rich. Neil Wilson

No one, including the rich, can properly resist arguments based on ethics and/or their religious heritage. So when are the MMT folks going to start making them? Instead, like the Left, you seek to fight wrong with wrong. No one respects that approach, you should know.

Matt Franko said...

"but you don't let them accumulate or exclude access to real stuff. "

They get their coins from creating and operating the real stuff in the first place...

Tom Hickey said...

I have an anecdote that is still unfloding, which I am told is pretty representative.

I have a friend from abroad who is a nurse. She came with her husband who has a student visa for a PhD program. He has graduated and they would like to stay. The simplest way is for her to take a nursing job since nurses are in high demand in the US. Not training enough to meet needs.


She has a nursing license in Iowa but they are planning to move to California. Califormia has a dire shortage of nurses and there is no lack of job offers, but she has to go through the paperwork of getting a CA nursing license and green card. The hospital that wants to hire her is working on this, and she has an immigration lawyer on it from her side too. It takes months to do all the paper work and get approval. There are bureaucratic obstacles to navigate, and both the hospital and the appliant have costs.

So it is not like this is any kind of pushover where Americans are getting pushed to the back of the line. Moroever, her pay offer is above the average starting offer in CA in that region (rural).

If there were qualified Californians there would not be the level of vacancies there are. Hosptials are desperate for qualified help and the pay is very good. People from other states are not applying in numbes sufficient to meet the demand either, even though California is considered a desirable place to live. A problem is the disparity in costs, with RE values and rents being relatively high nationally. But the higher pay make up for that.

So the hospitals are looking outside the US for staffing.

Dan Lynch said...

The shortage of doctors and nurses is artificial, Tom. Admissions to nursing schools and med schools are tightly controlled, not to mention expensive.

Meanwhile most H1B visas are for coding or engineering, even though there is no evidence (JOLTS) of a shortage in those fields.

There is an exodus from California due to its gun laws as well as its high cost of living.

Tom Hickey said...

You let them accumulate and exclude access to their coins

I agree that saving is a substitute for taxation as far as neutralizing spending power is concerned.

But.

1. Saving doesn't destroy money (M1) the way that taxation does, so there is still a threat that may affect expectation of inflation.

2. The flow of saving increass the stock of wealth and the distribution of the stock of wealth results in social, political and economic asymmeteries that can become a negative externality when high inequality becomes disruptive, as it has now.

So I think the use of saving as a substitute for taxation needs to be qualified, even though it is technically.

Andrew Anderson said...

They get their coins from creating and operating the real stuff in the first place... Franko

Only partially true but regardless an ethical economy would have produced at least as much material progress and without destructive wars and revolutions.

Ryan Harris said...

When people say that we are out of munnie, some mean it literally, but I think most mean it figuratively, in the sense that the government in Washington and it's leaders either do not have the knowledge or the capabilities to design effective systems to deliver healthcare like other developed nations. A failure of the education system at some level needs consideration but also we also need a very real analysis of the monstrous system we have and how it is metastasizes to always consume more financial and real resources to deliver less and less over time while the economists productivity models report medical & finance productivity are at all time highs.

A problem arises in a democracy where a negative feedback loop happens when a significant portion of the population is employed in, depends on and benefits from a dysfunctional healthcare industry and command a majority of leadership who want more resources at the expense of the rest of society.
The reason we can't get anything done politically can't be solely blamed on education system or medical lobbying, there are probably a 100 million voters who vote against Medicare-for-all type changes out of self-interest and preservation of their lavish lifestyles. Go into any medical facility and look at the staff and how many actually provide medical care and how many feast on the billing, paperwork, IT, endless construction, streams of muni-bonds and finance and insurance, and other aspects that do little to nothing to increase the productivity, safety or efficiency of health care delivery. To me it suggests there is no bottom up competition on price and second there is no top down focus on efficient system design. It's a pretty insane way to run a country and health care system.

Tom Hickey said...

They get their coins from creating and operating the real stuff in the first place...

Not with the amount of financialization.

And a lot of the "real stuff" is military or military related.

Matt Franko said...

We've needed the expansion in healthcare facilities Ryan due to the boomers getting older and the development of new procedures and pharma, etc...

I think it is a good thing for us to work on... I can think of worse things...

"When people say that we are out of munnie, some mean it literally, but I think most mean it figuratively,"

Its a BIG libertarian bias operating, its a libertarian utopia these days... the libertarian bias does not allow them to see the govt institution as possessing the authority...

libertarians are at core anti-authority... so for most people (not technically qualified), the philosophical bias prevents them from seeing the govt institution this way... they literally think the govt is "out of money!"....

NeilW said...

"Saving doesn't destroy money (M1) the way that taxation does, so there is still a threat that may affect expectation of inflation."

Has had no effect in Japan. So that's just pure monetarism. You can have all the expectation of inflation in the world, but if you can't make your price rises stick because of competition then it's irrelevant.

The wage price spiral is broken at the moment due to the threat of unemployment. There is no reason why that can't be spun around to the capital side with the threat of nationalisation or anti-trust - if labour gets control of the wheel.

Inflation doesn't happen by magic. It happens because somebody puts a price up and somebody else pays it rather than shopping around.

"the distribution of the stock of wealth results in social, political and economic asymmeteries"

I'm not sure it does.

Technically The Queen owns all the land in England, and commands the currency but she no longer has any power over it. So there is a difference between having supreme wealth and having the power to do anything.

The whole basis of the 'inequality' literature is on the basis that there is a one-to-one relationship between money and stuff. Since there isn't the entire conclusion is false.

It is entirely possible, even desirable, to let the asymmetry in the financial sphere persist while equalising in the real circuit. Because that's the game that is being played. Capitalists are interested in financial wealth. If you make real stuff harder to exclude they'll shift to Crypto-coins or something. All of which can be created at will.

Matt Franko said...

"Has had no effect in Japan"

They have had the risk free rate at zero there since the late 90's... I believe it is actually NEGATIVE right now...

They won't get meaningful general price increases as long as they keep the risk free rate at zero or negative...

Matt Franko said...

Here Tom it's been going on for decades:

https://twitter.com/anncoulter/status/909510423657041920

Matt Franko said...

This is why the alt-right exists...

Matt Franko said...

Spencer probably got passed over for some foreigner in his Doctoral program at Duke....

Matt Franko said...

Now he is going all "white European!"....

Joe said...

"MMT’s sectoral balances equations are mathematically false"

So 1-1 does not equal zero?
Say you have one car, and you give it to me. Do you still have one car? Not exactly complicated stuff regardless of contradictions in set theory or whatever.

Matt Franko said...

Joe,

Egmont doesn't understand Basis of Accounting... he probably never took an Accounting course... there can be and are diverse Bases of Accounting

https://en.m.wikipedia.org/wiki/Basis_of_accounting

Egmont is asserting that the Basis of Accounting that he prefers is the only legitimate one .... it's an absurdity...


AXEC / E.K-H said...

Matt Franko

The title of my post is ‘MMT ― the economics moron as problem solver’. This, obviously, means you.

You say: “Egmont doesn’t understand Basis of Accounting” and refer to Wikipedia’s entry about the difference between cash basis and accrual accounting.#1

You overlook that this difference plays NO role in the present context because, for a start, both accounting methods are synchronized in order not get distracted by the technicalities of shifting profit between periods. So, both accounting methods lead to the SAME result in the present context. The term monetary profit Qm makes it explicit that profit, as it appears in accrual accounting and profit as it appears physically in the cash box, are numerically identical.

If you were not so stupid you would have realized that wage income as it accrues in the period under consideration is actually paid in this period.#2 The same holds for consumption expenditures. Hence it does NOT MATTER AT ALL whether accrual accounting or cash accounting is applied.

Fact is that MMTers got the macro accounting provably wrong#3 and this means that they are either morons or fraudsters. Take your pick.

Egmont Kakarot-Handtke

#1 Basis of accounting
https://en.m.wikipedia.org/wiki/Basis_of_accounting

#2 Economists: just too stupid for counting
https://axecorg.blogspot.de/2017/07/economists-just-too-stupid-for-counting.html

Money and time
http://axecorg.blogspot.de/2017/07/money-and-time.html

A tale of three accountants
https://axecorg.blogspot.de/2017/07/a-tale-of-three-accountants.html

#3 Rectification of MMT macro accounting
https://axecorg.blogspot.de/2017/09/rectification-of-mmt-macro-accounting.html

Kristjan said...

"The MMT sectoral balances equation violates the rules of accounting.#1 What should be self-evident is that macroeconomic profit is entirely missing."

Show me the violation condition "there is no profit, therefore it is a violation of accounting" anywhere other than in your head.

Kristjan said...

"MMT’s sectoral balances equations are mathematically false"

Which ones?

Kristjan said...

"because it holds public deficit = private profit MMT is a straightforward program for the unabated enrichment of the one-percenters,"

It doesn't hold that. I've looked into your "theory" about MMT for 5 minutes and I am already finding flaws in It.