Jelly Bean Economics

Imagine you find yourself in one of those underground malls, where they design it such that you never have to go above ground. Now, instead of just the mall, your living and working space is also underground. It is an underground community that is like a small town, except everyone is stuck there, unable to leave the mole utopia. You know, however, that there is a world outside and that people live above ground. It’s a not prison, just a system that is complete, so you have no reason to leave the mole utopia.

In your world, everything works like it does in the world of today. People have jobs, socialize, conduct commerce, and have families, all the stuff we associate with normal human society. The one difference between the mole utopia and this world is their economy is based on jelly beans, the little candies given to kids at Easter. Each color has a different value and people treat them in the same way you would treat coins or bills. When you get paid, it is in jelly beans. When you buy stuff, it is in jelly beans.

No one knows where the beans come from or who is responsible for making sure the supply of beans is correct. There’s some vague notion of a jelly bean consortium and people who spend their days keeping track of all beans in circulation. There are people, who police the bakers to make sure they are not making fake jelly beans. Otherwise, the beans are just the thing that is there, taken for granted by everyone. The jelly beans used in commerce are as much a part of reality as the air people breathe.

Now, there are people in charge and they do control the supply of beans. At first, when they set the system up, they figured the goal was to keep the supply of beans constant, as beans are fragile and people will tend to eat them. The best bean counters in mole utopia were recruited to keep track of the flow of beans in order to determine the overall supply and rate of bean decay. They would order up new beans to be introduced into the supply to keep the supply of beans steady, so there could never be a shortage.

At first they would just have people hand out beans under the guise of charity, but before long the people doing that started cheating. They would keep the beans or only give them to friends and family. The next scheme was to have the government of mole utopia disperse the new beans, by hiring people and buying stuff. This worked pretty well until government started cheating and ordered up beans whenever it needed to buy votes or reward friends of the government. This caused people to lose faith in the jelly beans.

Finally, the bean counters landed on a scheme where they would lend the new beans to banks at extremely low interest. The bean banks, flush with new beans, would then lend beans to people at very low rates. This got the beans into the economy, without anyone stealing them or using the supply to corrupt the system. The one flaw is the bankers got rich from the scheme, but bankers are always rich, so no one really noticed much of a change. It also made the bankers dependent on the bean counters.

The bankers could lend to anyone, including the government. Since rates were so low, the government could borrow vastly more than under the prior arrangements. That meant they could spend vastly more than in the past. The bankers were never worried about the government repaying, because ultimately they controlled the supply of beans, so they could always order more beans. That meant it was the safest type of loan, because the government would always make its payments and make them in full.

The only constraint on the government spending was how fast they could increase spending. Too fast an increase and too many beans would enter the economy of mole utopia, lowering the value of each bean. This could distort markets in unpredictable ways, by increasing demand unexpectedly in some areas, but not in others. This would also raise prices and force lending rates to increase. Therefore, inflation became the only check on spending. As long as inflation remained low, spending was unlimited.

This description of mole utopia may sound simple and ridiculous, but it is how the modern American economy is run by the Federal Reserve. Modern Monetary Theory is the economic argument that government spending is only constrained by inflation, as long as the government has control of the money supply. Here is a short video lecture on the topic from Professor Stephanie Kelton of Stony Brook University. Here is a much shorter version in the form of a post that appeared on Zero Hedge last week.

The basic argument of the MMT people is that as long as there are resources not being utilized by the private sector, the state has a duty to step in and put those resources to use through government spending. That’s a moral argument, not an economic argument or a factual observation. The economic argument is that spending and debt is meaningless, as long as the state is not crowding out the private sector and the spending is not driving up retail inflation. Otherwise, the government can spend as much as necessary.

To many people, this sounds like a version of the old joke about the stranger who comes to a small town looking for a room. He plops down a few hundred dollars and the inn keeper tells him to wait while his room is prepared. In the meantime, the innkeeper rushes out to pay his vendors, who then rush out to pay their vendors. Eventually, that new money reaches the town’s prostitutes, who use the inn for their clients, renting rooms on credit. They rush in with the new money and pay the innkeeper what they owe.

In that old gag, the stranger changes his mind about a room, takes his money back and leaves town, but everyone that was owed money is now paid. That’s the joke. The lesson, of course, is that as long as everyone is getting paid, especially the prostitutes, the system keeps spinning and everyone is happy. That’s the moral theory of MMT in a nutshell. As long as productive resources are being utilized and everyone is getting paid, the system keeps spinning. Just as important, the society remains stable.

The critics will instinctively shoot back that this sort of economics is inherently unstable and the apparent stability is short lived. In the long run, the accumulation of debt becomes untenable and the system collapses. The response to that is no one, especially government, lives in the long run. More important, MMT answers the question as to how government should respond to automation. As robots eliminate jobs, more people become idle. How does the state address the problem of fewer jobs for a growing population?

There’s another way to look at this. The custodial state runs on the same premise as a prison. The first job of the warden is to maintain control of the prison. He does that by making sure the prisoners are always kept busy in ways that work toward his goal of maintaining control of the prison. One mechanism for doing that is controlling the supply of goods and services in circulation in the prison. Prisons have an economy based on items from the commissary and that commissary is controlled by the warden.

What MMT seeks to do is make the sovereign state, by which is meant the issuer of currency, the commissary of the American economy. By controlling the supply of goods and services, via currency manipulation, spending and debt, the state can keep an increasingly useless population busy. It can always reward activities that enhance control of the system and punish activity that creates disorder. Inevitably, the communications companies, banks and technology firms become the prison guards of the system.

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Mcleod
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Mcleod

The question has always been: what is wealth? Mr. Smith would make the claim that currency isn’t wealth, but it still doesn’t answer the question. Gold? Silver? Land? Gems? Certain groups of people concern themselves with portable wealth because they don’t have a nation. Portable wealth (gold, jewels, art, fiat currency) is one sucker looking for a bigger sucker. That being said, a reformed thug biker once told me that there are only two things you can walk into any pawn shop in the world and walk out with cash. Gold and guns.

Saml Adams
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Saml Adams

Have often joked various “business continuity” exercises I’ve had to participate in over the years that in some of the more dire scenarios it’s all pointless since we’ll be in the “guns, gold and food’ stage. Nobody will give a shit about their insurance policy…

Member

The question has always been: what is wealth?

Labour.

Mcleod
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Mcleod

Wealth is a thing. My nail clippers sitting in front of me at this moment is wealth. The $s I used to purchase the nail clippers are not wealth. Labor may create wealth and, it may not. What we are really talking about here is wealth storage. I own a farm and I spend my weekends there. On the farm I have a large garden and an orchard. The rest of the farm is row crops. In an total economic meltdown what would I accept in trade for food? A gun pointed at my face? Most assuredly. Diamonds? Likely no.… Read more »

Member

My nail clippers sitting in front of me at this moment is wealth.

Only if you live in a world where people have nails.

My reply was a bit tongue-in-cheek though, a suggestion to your list. The labour theory of value is on a slightly different subject, namely what drives wealth creation, rather than about the nature of money.

The value of your nail clippers is not in the implement itself, says the LToV, it’s in trimmed nails, and you don’t get to have trimmed nails unless somebody is operating the nail clippers.

SidVic
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SidVic

Labor, likely you would take. Those vegetables don’t pick themselves.

Member

Nope. Labor is something people trade for wealth by barter, or for money which can be exchanged for wealth. Those who trade labor for fiat currency run the risk that inflation with destroy the value of their labor over time.

Calsdad
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Calsdad

The definition of wealth is something the commies and socialists can never get straight in their head. Ask them to define it – and what you’ll typically get in a response is a bunch of yelling and screaming and an effort to change the subject. They don’t want to actually define and acknowledge that which they’re trying to steal and redistribute. What I’ve noticed is that (as Zman has pointed out) they sure seem to be a religious cult – because it seems the underlying problem most of the lefties have – is that they think that wealth just “exists”… Read more »

Al from da Nort
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Al from da Nort

Cal; Excellent exposition. I would add that wealth is the product of *labor properly directed by information*. Labor all by itself is not necessarily productive (though, obviously, it can be). If I give you a pile of sand and a few ounces of rare earths, you couldn’t make a smart phone out of it (nor could I) no much how much labor you added: We both lack the specific information (and the applied energy) to transform those materials into anything of value. The Labor Theory of Value remains the lynchpin of economic Marxism. It is darkly amusing how easy it… Read more »

calsdad
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calsdad

Agreed. Just because you apply labor – doesn’t necessarily make something valued. That’s what the market is for. One “farmer” sits around polishing rocks all day. Another farmer plants potatoes. Both of them setup a stand at the market in a town full of starving people. Which one do you think is going to get paid? Apparently the Commies think all labor is the same – it is not. That information you referred to – is what the market is for. The market feeds back the information to the producers as to where they should PROPERLY apply their labor. Absent… Read more »

JR Wirth
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JR Wirth

JP Morgan had a great quote: “Gold is money, everything else is credit.” Credit is vastly superior as a unit of exchange, but gold is vastly superior as a unit of value. You need both. So, ideally, any money you want to save more than three or four years should be in gold, while any short term funding you may need should be in dollars. Gold is perfectly safe as the Fed (as of right now) does not possess a neutron star to make more of it. Paper gold is not gold however. It’s a claim to gold, once again… Read more »

Mcleod
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Mcleod

I don’t doubt you. If you were to dig up gold roman coins from 2000 years ago it would still, at the very least, be worth the value of the gold. Does anyone believe that if you dug up a box of perfectly preserved crisp dollars two thousand years from now that they would be worth anything?

JR Wirth
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JR Wirth

Not even in 20 years. Watch the State of the Union tonight, preferably drunk, take a hard look at the people “leading us” then pull the paper out of you wallet and stare at it, and say to yourself “I own a share of this.” I would rather own a pink sheet penny stock.

calsdad
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calsdad

comment image?v=1527184620

Go lookup how much it’s worth on Ebay.

Member

Wealth is simply access to capital. Wealthy people can obtain money (a form of capital) pretty much at will and usually in the amounts they need. Wealthy people can store their capital in the form of assets like real estate or equities or even a mattress. That’s why wealthy people do not talk about their paycheck. A paycheck is a source of capital, but it is not the only source of capital, which is why the truly wealthy are compensated with assets which increase their wealth. They may also collect a “paycheck”, don’t get me wrong, but the paycheck is… Read more »

Smack MacDougal
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Smack MacDougal

What is wealth? That is easy.

Wealth is property (right of ownership) at the moment of trade of one thing for another. A gold bar to man dying of thirst in the desert is not wealth.

A new bicycle and the credit traded for it in a purchase and sale are wealth, but only in the moment of trade. For that bicycle if left to rust with bent wheels and flat tires likely could not be sold again and would not be wealth (excepting of course, if it could be sold for scrap metal).

Oh and Adam Smith was a bad plagiarist.

Redbeard
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Redbeard

Wealth is what anybody is willing to pay for.

Member

Wealth is the sum total of everything man has extracted from the earth and has converted to something of value. War is the ultimate destroyer of wealth. Fiat currency has no intrinsic value except as toilet paper when people perceive it has no convertibility to objects of wealth.

LineInTheSand
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LineInTheSand

I hope Mike Enoch and other MMT advocates take Z’s allegory to heart. I guess that Mike’s response would be, “If our people control the economy, how can MMT go wrong?”

I instinctively believe that, just like there are natural physical laws, there are natural economic laws. And just like there is no perpetual motion machine, there is no perpetual money machine. To believe otherwise it to break from reality and reality eventually wins.

Mcleod
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Mcleod

If you assume human nature is a constant then how humans respond economically would also be a constant. Laffer curve anyone?

Calsdad
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Calsdad

This is a point that Martin Armstrong makes over and over again:
https://www.armstrongeconomics.com/blog/

Human nature is a constant. Every dumb thing that we see in the current age – has been tried before.

Armstrong sees no good coming from the current trajectory of where things are headed

Apex Predator
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Apex Predator

““If (((our people))) control the economy, how can MMT go wrong?””

Fixed that for ya, and it answers itself once you correct the statement.

Bruno the Arrogant
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Bruno the Arrogant

One of the more disappointing features of dissident right is that they’ve basically turned out to be New Deal Democrats. The only distinction is that they think that busting the trusts and throwing the billionaires under the bus in the interests of Da People will work better if all the people are white.

Unfortunately, when your politics revolves around catering to Da Little Guy, there’s always going to be the temptation to throw open the borders and admit ever littler guys.

And then you’re right back where you started.

Member

Yep, you can see this in the financial markets. The Fed hinted at faster rate hikes, and the Dow lost 25%. Gravity always wins. They have barely enough room when another (inevitable) financial crisis hits. In 2008 the prime rate went from 5.45% to ZIRP. Same thing today? They’ve only got 2.5% to play with. Gravity is winning.

SidVic
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SidVic

At least you can eat jelly beans. Hell, with some vitamin supplementation you could prolly live off them. Ever try eating a dollar? On a serious note, i would love to read an analysis of the practical consequences of the dollar losing its reserve status. I assume toyotas will become more expensive, but will it be Armageddon for us in america? I also assume huge distortions have developed because the world takes our fiat for hard goods. Better buy some heirloom seeds just in case.

LineInTheSand
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LineInTheSand

In my heretical moments, I imagine that it would be a blessing for our country, in the long term, if the dollar was to lose its reserve status.

Mcleod
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Mcleod

What does the United States HAVE to trade for? Energy? No. Food? No. Minerals? No. If the dollar lost its reserve status it might be worse for the rest of the world than for the United States.

SidVic
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SidVic

Well, it’s not as bad as all that. We are a net energy exporter, especially if you count coal. We also have strong minerals, agriculture and aerospace. It would be interesting to see how it would shake out, but i fairly sure that i wouldn’t like to run the experiment.

Federalist
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Federalist

I may not really understand your point, but the U.S. has a lot of energy and food to export. It’s the biggest food exporter in the world.

Mcleod
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Mcleod

I should have worded as import. The United States does not have to import anything. It does import, but it doesn’t have too.

Federalist
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Federalist

Thanks. I see your point. I was reading it wrong.

SidVic
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SidVic

Ditto what Fed said.

Larkin Lover
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Larkin Lover

You could burn dollars for their warmth. Or to cook food with. They could be fed to weevils which you could then eat.

JZs
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JZs

The federal govt runs on the MMT principle in practice. Feds have printed virtual money by computer keystrokes to the tune of a $20 trillion plus deficit and yet we still have a functioning economy, absent hyperinflation. Not saying it’s good or bad, just saying it’s the reality staring us straight in the face of everyday money creation-commerce.

Hoagie
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Hoagie

Money is only printed to maintain the illusion for us Dirt People that the government has some sort of control. Today’s real money is virtual. Don’t exist except on account balances.

My question is since $1,000 in 1950 would be worth about $9,000 today why did they have thousand dollar bills then but not now? It’s been said to made it harder for drug dealers but anybody knows that BS.

Nunnya Bidnez, jr.
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Nunnya Bidnez, jr.

Actually, $1000 from 1950 would be worth about $50,000 now.
In the mid 1960s, a NYC school teacher made ~$4000/year,
now it’s about $70,000.
If you’re looking for a nine to one ratio, you only have to look back as far as the 1970s: a brand new Ferrari … $11,000.
brand new VW ~ $1500. NYC subway ride.. 25cents (currently $2.75).

Member

Zman: “Modern Monetary Theory is the economic argument that government spending is only constrained by inflation, as long as the government has control of the money supply. Here is a short video lecture on the topic from Professor Stephanie Kelton of Stony Brook University.” . . . Obviously inflation (theft) hasn’t been much of a constraint, though the lack of constraint hasn’t reached Zimbabwean levels… yet. . . . I watched Kelton’s performance, and it was dumb as rocks. Her bete noir was people who think the government won’t be able to send out Social Security checks because the SSA… Read more »

JZs
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JZs

BTW, if we eliminate the national debt vis a vis taxation, we would literally destroy the economy, which is why it hasn’t been done, nor will ever be done.. However what taxation does on a yearly basis is remove money from the economy to reduce the yearly deficit ( not eliminate it) thereby reducing purchasing power while also restricting any possibility of hyperinflation. But the federal deficit is not a financial boon to the individual as much as it is to government itself, which is why liberals — and not a few conservatives— love it to death.

DeBeers Diamonds
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DeBeers Diamonds

The EU took the path that conservatives wanted, forcing through unwanted austerity plans, and actually did reduce debt-to-GDP. Similar policies were rejected here, and arguably were implemented undemocratically over there. That said, the ratio is still 20 points higher than it was pre-recession.

Dutch
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Dutch

The EU forced selective austerity, but has MMT waiting in the wings as a less odious response. The danger for them is that the Yellow Vests have moved beyond policy prescriptions, and now wholly dwell in the “fart in your general direction” mode. There is likely no policy appeasement that will work now. Interesting times.

Dutch
Guest
Dutch

MMT, with its “vertical government spending” and “horizontal private transactions” structure, does a good job of showing how the system actually functions today, and why a balanced budget, as things are currently constructed, would crush the system. Like so many other things, it’s ability to describe how things actually are is better than its ability to make policy prescriptions. Take a look at Hayek’s “Road to Serfdom”. The second part is a decent theoretical defense of free markets, but the power is in the first half of the book, which demolishes socialism as it sat on the ground in the… Read more »

Member

“we still have a functioning economy, absent hyperinflation”

…still…

“There’s a lot of ruin in a country” – Adam Smith

Something that can’t continue, won’t. It’s only the timescale that’s in question.

DeBeers Diamonds
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DeBeers Diamonds

Among unmarried women without children, a largely left-wing class, there is no pay gap vis-a-vis men. But that doesn’t stop these people from being progressively angrier that they are not getting theirs.

That may be the future of the economy, and our envy based politics. Empirical truth could follow the path of revealed religion into the closet. The question of automation is whether or not an economy without beta males is possible.

Hoagie
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Hoagie

As Occasional-Cotex said: facts don’t matter because she’s morally right.

BTW, it’s the “privileged left-wing class”

DeBeers Diamonds
Guest
DeBeers Diamonds

Well, in her defense, there is a debt gap, even if the wage gap is largely a partisan myth. Women hold something like 2/3rd of the student debt, while being 3/5ths of the students. In economic terms a lot of that debt is only getting paid back if they are getting married. When Mr. Beta goes his own way, retribution at the ballot box ensues.

Compsci
Guest
Compsci

66% vs 60%. Doesn’t seem like a big gap. What I suspect is a bigger gap are the majors taken in school. That is to say, STEM degrees vs worthless degrees—like feminist studies, sociology, etc. Hard to pay back that college loan on a job that pays a couple of dollars over min wage.

DeBeers Diamonds
Guest
DeBeers Diamonds

The interest on the loans is rather high, and they can’t be discharged in bankruptcy without considerable difficulty. The usurious compounding is what trips many up, as many expected to be earning far more than what is actually commanded in the market.

DeBeers Diamonds
Guest
DeBeers Diamonds

And from their perspective, two thirds of the debt is unfair. It must be divided 50-50, so it is a big difference. Usually no one says anything about their being too many women in college, but eventually they will complain about that too.

Educated.Redneck
Guest
Educated.Redneck

Sure it’s six percent, but it’s 6% of $1,400,000,000,000. That’s 84 Billion in extra personal debt, amongst a cohort of a few million people – probably >$10,000 more debt for your average gogrrrl v. average Joe. That’s a powerful motivator for political action- a large, visible burden on a small group. That’s why we don’t have IQ tests for employment anynore.
So Debeers is right, something bad comes from that statistic.

Member

$84B is still 6%, which is nothing and probably explained by men dropping out faster as well as starting out as a minority.

Who is this “small group”, btw? Women going to college isn’t a “small group”.

Member

Clearly, MMT is what is being taught for an “economics degree”…

Alzaebo
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Alzaebo

Bean counters! *chortle*

karl Mchungus
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karl Mchungus

Doesn’t the first part of your essay negate the last part? If the feds were going to build their continental prison, they should have done it while the beans were working. how will the feds build it now that the game is almost up? The world is moving towards the opposite of the prison camp model…

Educated.Redneck
Guest
Educated.Redneck

Opposite of the prison camp model? Your Google App has alerted the federal secret police of your subversive thoughts, while your iPhone has recorded your every conversation, spoken word, financial transaction, and reported them to the NSA, IRS, and DHS. Your social media apps have alerted all of your banks and credit cards to unperson you as well for FaceCrime.
Now, you were saying something about prison environments?!?

Apex Predator
Guest
Apex Predator

You don’t get out much do you? The continental prison is BUILT. Just because it is an open air prison and you are allow nominal freedom of movement doesn’t mean it doesn’t exist. You are monitored 24x7x365 on any piece of tech you engage with. Any traffic you light you happen to spot in front of at a major intersection, when moving down the highway past various cameras. Spotshotter microphones record everything in any Bluetopia city. Shall I continue? Just because the razor wire isn’t up yet doesn’t make it any less restrictive. The illusion of ‘freedom’ is just that,… Read more »

Karl McHungus
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Karl McHungus

If you believe what you write, why are you speaking so openly about things that would cause you to be arrested? And why haven’t you been arrested and this blog shut down? No, this prison thing is just another example of Chicken Little’s running around clucking

Vegetius
Guest
Vegetius

I’ve heard this described as magic money trees.

It’s sort of a neo-chartlalist argument against the two big lies that sophisticated parties tell dirt people about the economy:

(1) that it is just like a household budget only bigger and,

(2) God Money is a jealous and vengeful god and will smite any economy which sins against Him by angering the Bond Market.

Maybe it would be better to handle our current situation in the venerable European manner: liquidate the debts by liquidating the creditors.

Calsdad
Guest
Calsdad

Dirt people better than anybody – should know that wealth originates from the dirt.

Member

I’m not sure what “this” is. The video by MMT guru Kelton that Z links to makes a big point of debunking the idea that the Fed budget “is just like a household budget only bigger”.

S. Bishop
Guest
S. Bishop

Good start! It is a challenging job to educate the population on economics and personal finance. Reducing it to simple terms is worthwhile, but necessarily limited. Maybe we need to ‘explain’ it beginning with comic books in elementary schools followed by a test for recieving a high school diploma. Then we would need someone to police the perpetual attempts to corrupt the textbooks and comic books to avoid what the Left has already done with history, gender and sexuality.

TomA
Guest
TomA

In this scenario, as time goes on, idleness in the population increases, eventually becomes a habit, and then ultimately some people lose the ability to fend for themselves. This transition is slow and bears no cost to the individual so long as government continues to provide the basic necessities of survival. In time, society bifurcates into producers and parasites, with government providing the strong-arm pressure needed to accomplish redistribution of wealth. Venezuela is what happens when the plates stop spinning.

Compsci
Guest
Compsci

Tom, very Randian. 😉

TomA
Guest
TomA

Rand was an idealist. Ask the starving Venezuelans if they can eat idealism or if it has defended them against tyranny.

Member

So is Jerome Powell the Easter Bunny?

DeBeers Diamonds
Guest
DeBeers Diamonds

I’m only a few steps above being an economic illiterate, despite minoring in it and reading about it over the years. But Powell is the first Gentile to be Chairman since Volcker. And Volcker did a good job, high inflation never explicitly returned.

Yves Vannes
Member

As Zman and others have pointed out, you first need to get the biology right… If we got the biology right would MMT have even evolved to this point? How could it have manifested differently? At a very fundamental level, the only way to make widespread diversity even marginally functional is by getting everybody into the hamster wheel to buy buy buy – produce produce produce. By its very nature this requires MMT to keep that wheel spinning. After a while everyone forgets about other things like community, culture, even family : the kids move across the country, the old… Read more »

SidVic
Guest
SidVic

Yeah but one could imagine (and maybe we are approaching this) a world where the ai and robots produced material prosperity. I guess you would need a few robot repairmen but what do you do with all the excess people? Pay them to make art and join bowling leagues? Dystopia.

Educated.Redneck
Guest
Educated.Redneck

Yeah, this is exactly why consternation about “falling fertility” is a globalist misdirection. Lessening fertility is a self-correction for increasing automation and mechanization.
Falling fertility is only a problem in a democracy that is being invaded by alien parasites and is trying to fight at the ballot box.

Yves Vannes
Member

The quality of life in Japan for the average Japanese has, with a decreasing population – mechanization – no foreign invasions, improved.

A.B. Prosper
Guest
A.B. Prosper

Depends on how long it continues. If it goes on for a while than stabilizes, its a net good. If it goes on for so long that modernity itself comes to an end, not so much As an example, the US has had 42 years of constant below replacement fertility which if a biologist saw this in a species would result in the species being thought in serious danger This amount of time is 1/4 of the amount of time required to have the majority of the US population be Amish at current fertility rates . This is obviously not… Read more »

Yves Vannes
Member

Left alone, free of foreign influence, many of us would find purpose. And by purpose I mean something noble and challenging. Some, maybe many would become slothful. But in a civilization run by us bowling would be a Wednesday night out with the guys, not a meaning life pursuit.

Member

There’s one key component missing from your parable: jelly beans is the only thing that will buy you water. Or rather: oil. The US dollar is not really a fiat currency, more like a specie currency with oil (and other minerals) as a base. Its reserve status is maintained by aircraft carriers.

SidVic
Guest
SidVic

Which makes a new aircarrier buster particularly worrisome. One of the scariest stories i’ve read lately is the decline in the competency of our blue water navy and its’ vulnerability to new weapon systems.

Member

The supercavitating torpedo keeps the Pentagon up at nights.

Apex Predator
Guest
Apex Predator

They did 10 years ago when they were the latest and greatest. The Shkval (et. al) are old tech now. They are still carrier killers in the right window of circumstance but they pale in comparison to the hypersonic cruise missile or even the hypersonic glide bomb (kinetic kill vehicle, KKV). Either can make handy work of sending a carrier to Davy Jones Locker.

The Chinese have their fake railgun on the front of their ship but the Russians have the REAL hypersonic weapons on standby.

Member
Member

I read that story too. And saw the photos of the implicated: something like 3 pocs, 2 girls, one white man, one mystery meat. You go figure, but at the end of the day, it’s really the nukes that count. I saw a video about a Canadian icebreaker, where there was a change of watch: a girl was taking the helm. So they go on about this icebreaker: a trillion horse powers, made of solid titanium with a vibranium ram in the prow, it can part tectonic plates with ease. Thirty seconds after the woman takes the con, she manages… Read more »

Range Front Fault
Guest
Range Front Fault

Ha! It’s a shame that women won’t see nor acknowledge how their chick brains work. Example: I left water treatment to advance to water distribution because I noticed my brain was not quick enough to handle emergencies in in-line treatment plants in which the water was in and out in about 10 minutes and into the system, or a conventional plant in which due to heavy rain incoming raw water would turn to mud and a ton of coagulant is then thrown at the sediment basin. I hated rapid fire emergencies. Most guys were quick and good under fire. Women… Read more »

Range Front Fault
Guest
Range Front Fault

Also modern young women don’t take time to cultivate A Beginners Mind. (Was certified in Tai Chi Chih short form)
In the beginners mind, there are many possibilities.
In the experts mind, there are few.
—-some Zen smartass

Alzaebo
Guest
Alzaebo

A young woman on Heartiste pointed out that while men can move on, a woman’s mistakes can be permanent (kids), so it pays no dividends to imagine what they might’ve done differently.

Member

I’m fine with deriding feminism when it gets out of control, but Krull misrepresented what happened.

Member

Member

“Video unavailable This video contains content from Discovery Communications, who has blocked it in your country [USA] on copyright grounds.” But it’s available on DailyMotion. You misrepresent what happened, of course, It’s at about the 10 min mark. The Canadian Coast Guard captain has a female navy captain on board for training and gives her the helm (it’s not a “a change of watch”). She’s supposed to run into an ice sheet and does, and it’s not due to any mistake on her part that the sheet is too thick for the two engines that they are running. So they… Read more »

Member

And it doesn’t really have a trillion horse powers either, and no, it can’t cleave through tectonic plates.

it’s not due to any mistake on her part that the sheet is too thick for the two engines that they are running.

So what? She takes the helm, the vessel gets stuck, period. That’s the joke.

Apex Predator
Guest
Apex Predator

We are rapidly reaching the point where the other team simply has to “show up”. The home team will panic themselves into indecision, collisions, and retreating to ‘Safe Spaces’ somewhere aboard the ship. May not even require a single shot be fired before long. Which may be a good thing depending on how invested in this failed experiment called the FUSA / USSA you are.

Want your kid sent to the bottom of the sea or home missing limbs to protect people that would like nothing more than to see you under their boot heel for the next century? Pass…

Member

-deleted-

JR Wirth
Guest
JR Wirth

It’s interesting that Saddam Hussein was removed after wanting to price his oil in Euros. Gaddaffi was removed after wanting to go on a gold standard and price his oil in that, Iran is being sanctioned after trading oil for gold, Russian sanctions tighten after they use currency swaps and create a new transmission network for currencies, and Venezuela is currently feeling heat after wanting to tie oil to a cryptocurrency. It’s almost like there’s a pattern. It’s almost like countries are playing currency frogger with the U.S. It’s also interesting that we were told to go to the mall… Read more »

Dutch
Guest
Dutch

Money used to be a physical medium of exchange (gold and silver coins) for goods and services. Now it is pixels on a screen, but the function of payment of the pixeled entries for goods and services provided is still the norm. That is because there is still the illusion of scarcity involved. Ledgers, spreadsheets and all. The insidious danger of MMT is how it encourages the thinking that government is the rich uncle parsing out the family savings to the good boys and girls. It is the EBT card thing, you get for showing up, not for actually doing… Read more »

Rob
Guest
Rob

“communications companies, banks and technology firms”

Reading this I thought “wow, you have basically described the Canadian economy, save natural resources”. Probably why we have such a plantation mentality up here.

Maus
Guest
Maus

The USD isn’t going anywhere soon because so many are held by other countries either as a reserve currency or because of trade imbalances. Those dollars can only be retired by repatriating them to the US in exchange for tangible goods, land, or intangible assets like corporate stock or intellectual property. China is betting its future on creating a robust enough middle class that it can unleash significant demand for American consumer goods and capital assets to soak up all its dollar reserves. But its GDP growth is slowing and may eventually stall, frustrating that plan.

SidVic
Guest
SidVic

Why couldn’t they burn the dollars and start using their currency to buy their own output. Also building military can run you plenty. Why not use those excess dollars to build kick ass military (i hear russia is sellin)? I think you are using a variation of the-you owe bank 100k -it owns you, if you owe it 1 billion, you own it argument.

Fred Zeppelin
Guest

“tangible goods, land, or intangible goods…” Tangible goods the Chongs don’t need, and intangible goods like IP they can steal with ease. Nope, it’s land, and the Chongs are busily hoovering it up all over the planet. And you better believe they’re buying up America, at an epic pace. They can’t believe their luck: how stupid this all is, and how they’re on the right end of it. They give us useless plastic crap, and in return we give them worthless green paper, but we tell them that the paper can be used to buy our country, which is the… Read more »

Member

Explains why the Japs still own Pebble Beach.

Not. https://www.cbsnews.com/news/group-buys-pebble-beach/

Maus
Guest
Maus

If the USD were to lose reserve currency status, it would be more difficult to moderate inflation within the domestic economy. Interest rates would rise to tighten money supply by reducing credit availability and foreign consumer goods (cell phones and toothpaste) would cost more. The real problem with our mole economy is that no one saves jelly beans and exchanges them for productive assets. The entire economy is predicated on hyperconsumption. We buy real estate to live in a house that requires constant upkeep, not to grow food or manufacture value-added widgets. We buy depreciating vehicles as status markers rather… Read more »

Fred Zeppelin
Guest

I’ve got a different fable for ya. Beehives only work because they’re filled with bees. If you fill the beehive with ants and hornets, who don’t know how to make honey, the beehive is just a funny-looking hut where lots of insects live, but no honey gets made. Let’s say there was a beehive, full of bees busy scouting and gathering plant nectar, taking it back to their hive, then turning it into honey. The only measures of wealth are: a) honey, which is the end-product, b) nectar, which is necessary for making honey, c) the knowledge of where to… Read more »

Apex Predator
Guest
Apex Predator

I especially like in this obvious allegory that you choose Weevils in particular because they have rather prodigious and long proboscises. So that insect like nose conjures up a certain comical image in my mind. Well played…

Member

Weevil rhymes with evil.

https://www.youtube.com/watch?v=440l8poSQiA (0:53)

Range Front Fault
Guest
Range Front Fault

Great allegory! Well done. Hair on the back of my neck stood up. You said it all.

Redbeard
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Redbeard

Always try and choose the lesser of two weevils.

Din C. Nuffin
Guest
Din C. Nuffin

Thought about this listening to the SOTU last night. I didn’t see any representatives or senators, just weevils everywhere.

JR Wirth
Guest
JR Wirth

Great post. As a side note, the bean counters can create their own bureaucracy by self funding with as many beans that they would like to make. A perk of being responsible for the beans. Also, there are rumors that the executive bean counters get private shares of the vast bean watching/counting/manufacturing outfit, but those rumors are unsubstantiated because this bean counting concern, in its 100+ year history has never been audited. The government is too afraid that a bad audit will put the whole concern into question and destroy the confidence on which it rests. Also, there is a… Read more »

Member

Nailed it.

Smack MacDougal
Guest
Smack MacDougal

It figures that a female would be the big voice behind MMT. Females always seem to be looking for ways to get hold of high-limit credit cards paid by someone else. MMT is claptrap, of course. It is yet another Free Lunch Theory (FLT). Of all of the lies told, needing UBI because of automation is one of the biggest. If 100% of everything were to be automated, whoever owned the automation could not sell anything to anyone. Prices will adjust downward from what is automated so that people can buy, because, otherwise, again, no one could sell anything if… Read more »

Dutch
Guest
Dutch

Stephanie Kelton is an educator. She may or may not understand what she is saying, but she is doing a good job of protecting her own financial grift. Follow the money, always follow the money (VA governor Northam got $2 mill from Planned Parenthood, of course he stands where he does. Selling baby parts for big bux needs to buy advocates inside the system.)

Member

“…as automation grew, every car factory worker became much richer precisely because he became ever more productive.”

And here I thought a government-protected union racket had something to do with it, with the result that the productivity of the native US auto industry cratered.

JR Ewing
Member

The part that MMT enthusiasts leave out – or the part that they purposely ignore – is that all of this is all fine and dandy because the US has the world’s reserve currency. There is no inflation because people all over the word want to hold dollars. If the “only constraint is inflation” and there is no inflation, well, their little theory works out pretty well. But they don’t seem to get that the reason the world wants to hold dollars is monetary discipline. Give up the monetary discipline and there goes the reserve currency and then here comes… Read more »

JR Wirth
Guest
JR Wirth

By order of magnitude. The monetary deluge from dollar inflows will be incredible.

BadThinker
Guest
BadThinker

The thing is, the rest of the world continues to have *worse* monetary discipline than the USA. Until that changes (and there’s not a lot of indications that it will), we can print for a very, very long time. It’s about being better than the rest, even if we’re bad. Our welfare state is run on the backs of the middle class all over the world. Most countries are only able to run it on the backs of their own people. Check out Steve Keen. Guy’s one of the best economists out there right now and is onboard with (some)… Read more »

JR Ewing
Member

Agreed. It’s all relative and it’s why we didn’t tank very much when our debt rating got lowered a few years ago. The grade my look objective and be claimed to be objective, but to the actual users of the grade it’s all on a curve. You don’t have to be perfect, just better than the other guy and the game can keep on going.

Member

This stuff doesn’t bother me as much as it used to. Yes, there is a big machine pulling all the levers and acting in its best interests. No, it does not care one bit about me or even notice I exist. It has always been this way. Governments used to hoard gold too. It’s not like the Europeans 400 years ago plundered South America for gold, and then when the ships docked in London or Venice they started throwing it to eager citizens standing on the pier. Money is just a platform to transport value around. There will always be… Read more »

TomA
Guest
TomA

The only asset that survives a severe financial collapse is the ability to produce something of value to others and the concurrent ability to defend your life and property. Allies are an important force multiplier, but that is best accomplished in a small town setting. In large cities, roving plundering gangs will be the norm and life will be cheap. Plan ahead.

Member

Holy Ginormous Black Pill, Zman. MMT: An economic perpetual motion machine encased in a vacuum tube behind barbed wire, to keep the dirt people from poking their dirty thumbs into the works and bringing it all crashing down. With the USD as the reserve currency and the petrodollar, this can go on without necessarily collapsing. All other countries subsidize the MMT policy and find it in their interest to keep the economic perpetual motion machine going. Current economic theories are bad enough for a middle class mercantile republic, but MMT is absolute poison. Dirt people absolutely can not be allowed… Read more »

Dutch
Guest
Dutch

The MMT card will be played until it is played out, and then there will be something else. As usual, Monty Python got it right. In the “Holy Grail” movie, it was just one thing after another until the cops busted everyone and the fourth wall fell at the end. Trump isn’t breaking down the fourth wall, but it is getting some cracks in it.

Chazz
Guest
Chazz

As soon as Stephanie said “we need to have this discussion”, there was no longer a reason to hear more from her. You know damn well she has no intention of including you in the “we” and “discussion” is just another code word for freedoms that will be taken from you by Stephanie and her lefty pals. As long as she can define inflation, her fantasy works. If inflation is determined by the price of a dozen eggs, it doesn’t.

Al from da Nort
Guest
Al from da Nort

An amusing allegory Z Man. I may have read the comments too fast but I didn’t see very much talk about *production*. Somebody is feeding and watering the naked mole rats in the story, after all. Who is it_? They must Iive above ground and really, really like jelly beans. Seriously, I don’t think I’m being profound or radical to say that, ‘wealth is the ability to call in the production of others for your own private use at times and places of your own choosing.’ Money is the token of exchange used to make this call. All the rest… Read more »

Member

I thought this was going to be about how the Jelly Bean printers used to their control over the supply of Jelly Beans to enrich their friends and impoverish their opponents (us), to the point where they own everything and we own nothing.

Cabron
Guest
Cabron

Who owns the Fed? Anyone know? Who has rights to create our money from nothing? That’s a hell of a gig…

Sean Detente
Member

Serious question: I’m a yuuuge book reader, because I’ll autisticslly consume anything I can get my hands on; including texts scripted in blood. But are there any truly solid authors on MMT? Blogs are all right, too.

Member

Economic theory is over my head. So I only enjoyed the first part of this post, and took it literally. I love jelly beans. The first 3 paragraphs read in a Burl Ive’s Christmas Special voice is delightful. “Mole utopia”, wow. I was hoping it would continue like a children’s story but then it got all serious.

MayhemMaestro
Guest
MayhemMaestro

What is Wealth?….Knowledge converted into Labor, of some type, or skill that is passable to a following generation. Knowledge is the only thing all of us have, at one level or another, that no one else can “own”. Typically, the more knowledge we have as individuals who can convert it into a more valued labor for a desired product/solution, the more desirable our time is worth in trade. Time for currency. However, that ability to apply our knowledge is also valuable to us as individuals as it can save us currency if we can “do” for ourselves. As I was… Read more »

Al from da Nort
Guest
Al from da Nort

M.M.;
You are absolutely right that it is knowledge/information that makes labor valuable. That’s even true if the labor is done by robots.

This insight is one big reason why Marxism is stupid, evil and destructive. Being ignorant materialists, Marxists of any stripe, economic, cultural, sexual, etc. cannot admit of there being immaterial factors of production/wealth such as knowledge/information. It would mess with their atheism: Might have to bend the knee….

Member

Wealth is “fuck off it’s mine and there’s nothing you can do about it.”

Member

The problem with Modern Jellybean Theory is the fact that it is convoluted with a lesser known population of graham crackers which are a stand-in for future jelly beans. People who manage and naniipulate graham crackers are often paid in jellybeans or sometimes other graham crackers. Many people know this and pretend that the amount of graham crackers, not counted in J1, J2, or J3 measures of jelly beans, are not a problem. The charade is that the government cannot possibly have enough jellybeans to redeem all the graham crackers but everyone assumes would be redeemed in small enough numbers… Read more »

Alzaebo
Guest
Alzaebo

Thank gosh somebody finally mentioned graham crackers!

I plan to dabble in forex and commodities (eurodollars, DAX) a bit, just so I can understand what Zerohedge and Dutch are talking about.

(Bonds are too illiquid, out of my range, to do more than watch.)

Member

Wow, that “economist” you link to is a nut job. When the government spends money, there are three ways it can pay for it: taxes, borrowing, or printing money (inflation tax). Let’s take a look at what happens when the government can’t or won’t raise money via taxation. First, they borrow. Then, they continue to borrow. At some point creditors realize that there is no way the money can be paid back, and the government gets cut off. Then the government starts “printing money” (massive open market operations by the central bank). This is a tax on money holdings, and… Read more »

M. Friedman
Guest
M. Friedman

“In the long run, the accumulation of debt becomes untenable and the system collapses. The response to that is no one, especially government, lives in the long run.” You got it exactly backwards. In the long run nominal variables like inflation have no effect on prosperity. In the long run, what determines living standards is the productivity of real capital (i.e. the global level of technology) and labour productivity (i.e. the education and inherited ability of the domestic population). It’s only in the short run that nominal stuff like a debt crisis – which amounts to nothing more than numbers… Read more »

Linda Fox
Member

I may forward this to the Social Studies teachers I know – this is the most understandable explanation of the Fed that I’ve ever seen.

Sam J.
Guest
Sam J.

What bothers me is not a single person noted that the whole entire money system in the US, and most everywhere else, is based on debt. This is inherently unstable. All money must be created with debt. So say the treasury needs a million dollars they borrow it from the FED plus interest. When they pay it back where do they get the interest money? They must borrow it too. Over time the compounding of interest crowds out all money. There’s only interest left. The people who own the FED give us nothing and in turn we pay then for… Read more »

Sam J.
Guest
Sam J.

There’s an article on Zero Hedge about this also. https://www.zerohedge.com/news/2019-02-07/mmt-sounds-great-theory It seems to me that the people with big belly laughs about MMT forget that the FED has been doing exactly this but the money all goes to the banking class. There’s no way to defend this, unless you’re a banker and want to shit on everyone else. There’s no doubt that too much money printed by the government will cause inflation but there’s also a reasonable assumption that if they balance the money printing to the expansion of the economy that the money supply will be stable. It’s also… Read more »