Always approaching
I ll start with the short version here: if you re having trouble understanding sectoral Net Lending/Borrowing (the stuff of sectoral balances), try renaming it: Net net accumulation of financial assets. Net accumulation of financial assets (accumulation net of disaccumulation, broken out by types of assets) Net incurrence of liabilities (new borrowing net of loan payoffs [and [...] Related posts:…
I ve spent like eighteen months trying to figure out how to think about and understand this question, in a way that lets me make what seem like sensible, everyday decisions. I think I ve gotten there, or close. I m sharing here in case it s helpful to my gentle readers. I m fully vaxxed. Here s a typical, day-to-day [...] Related posts: Pubs Love Catastrophic Coverage. Too Bad the Free Market…
I wrote this as a comment response to Ryan Avent s great post on his Substack blog. (You should subscribe. I did.) I thought I d share it with my gentle readers here. Lightly edited, including one additional paragraph at the end. ================= Hi Ryan. Great piece, thanks. A few responses: 1. authors of published papers are [...] Related posts: Peggy Noonan s Right: It s Over Government is Not…
Origin stories and creation myths pack a pretty hefty weight of import in human understandings of the world. Examples are too numerous to mention. What I ve noticed in the field of economics is that such origin stories are often taken (mistakenly) to fully explain the current state of affairs. I m going to discuss two examples [...] Related posts: All Currency is Fiat Currency Platinum Currency:…
The big coronavirus stimulus programs are helicopter-dropping trillions of dollars in assets into households (and firms ) accounts, onto their balance sheets all those assets created ab nihilo by government deficit spending. But as many are pointing out, households aren t turning over many of those assets in spending, buying things transferring the assets to firms in [...] Related posts: Swimming…
The bottom (visible) blue line is the top 10% of households. Source: gabriel-zucman.eu/files/PSZ2017AppendixTablesII(Distrib).xlsx Table TE3 Related posts: The Poor Get Poorer Fake News from the CBO? Some Very Dicey Numbers in the New Income Inequality Report Meritocratic Opportunity: On the Decline The Global Capital Glut Can Rich People Provide all the Necessary Demand?
The megabillion-dollar corporate bailouts raining down in the coronavirus response are giving new urgency to voices on the left excoriating corporate stock buybacks. How can we pour money into these firms, even as they pump gushers of money out the other end that could be spent on hiring and investment? Much of the pushback against [...] Related posts: Why Libs and Cons Should All Love Milton…
Our standard measure of production, GDP, doesn t even come close to explaining the accumulated wealth of nations. How productive are we? How much stuff do we produce for every hour we work? It s one of the central questions of economics, and per many economists, productivity growth is the ultimate determinant of our world s [...] Related posts: Is GDP Wildly Underestimating GDP? Wonky: More on…
The teams at Rethinking Economics and Doughnut Economics have launched a contest for entries, asking What s the 8th Way to Think Like a 21st Century Economist? It builds on Kate Raworth s seven ways, here. Here s my entry: 8. Widespread prosperity both causes and is greater prosperity: From false tradeoffs to collective well-being. Okun s Tradeoff†[...] Related posts: Taxes: Equity versus…
Matthew Klein and Mayank Seksaria had an interesting Twitter conversation yesterday in response to a Stephanie Kelton tweet. Read it here. Here s my understanding of the financial mechanisms they re talking about. Government deficit spending deposits fixed-price securities ( money, checking and money-market holdings) ab nihilo onto private sector balance sheets. These are perfectly safe assets in…
Economists /monetarists use of the term Money Supply†reveals multiple levels of deep confusion. 1. Supply implies a flow. But they re clearly referring to a stock†of money: what s tallied in monetary aggregates. 2. Even if you re think of a stock of money: Supply is not a quantity, an amount, a numeric measure. It s a psychological/behavioral [...] Related posts: Lending, Velocity, and…
I m thinking this headline will raise some eyebrows in the MMT community. But it s not really so radical. It s just using the word money very carefully, as defined here. Starting with the big picture: You can compare the magnitude of these asset-creation mechanisms here. (Hint: cap gains rule.) The key concept: money here just means a [...] Related posts: Safe Assets, Collateral, and Portfolio…
It didn t take long to realize that something was very wrong. The Congressional Budget Office just released its new report on The Distribution of Household Income, updated to cover 1979–2015. One thing in particular looked very dicey right off (source xlsx): Household Capital Gains (per household, average) 2007: $8,800 2008: $4,400 2009: $2,200 Wait a [...] Related posts: Taxes: Equity versus…
My gentle readers who have followed me over time will have seen this graph and statement far too many times by now: Since 1970 in the U.S., (almost) every time you saw a year-over-year decline in real household assets or net worth, you were either just into or about to be into a recession.* It s [...] Related posts: Do High Marginal Tax Rates Kill Economic Growth? Again: No Predicting Recessions…
I received some very interesting comments from Yaneer Bar-Yam to my recent Evonomics post Capital s Share of Income is Far Higher than You Think. He pointed me to his very interesting paper, Preliminary steps toward a universal economic dynamics for monetary and fiscal policy. I m using this space to reply with with some stuff that can t [...] Related posts: Yeah, Right, The Recession s Over…
I just noticed with pleasure that Martin Sandbu, whose work I much admire, has posted a response to a thread of posts between me and Matthew Klein. Here in chronological order: Me: Why Economists Don t Know How to Think about Wealth (or Profits) Matthew: The virtues and pitfalls of putting capital gains into the national accounts Me: [...] Related posts: MMT and the Wealth of Nations, Revisited…
In my previous post, I replied to Martin Sandbu s interesting response to my (and Matthew Klein s) previous posts on holding gains, income, saving, and wealth. Here some more (accounting-dweeby) thinking on the subject, which I post here to avoid clogging the previous and making it even more overlong. Another way to explain this issue: I [...] Related posts: What s All Our Stuff Worth? Tobin s Q…
I just had occasion, in replying to a correspondent, to reiterate much of the thinking in my recent MMT Conference presentation. I thought it might be a useful and apprehensible form for some readers, so I m reproducing it here. I ve also explained this at somewhat painful length here. Correct me if I am wrong but [...] Related posts: The Giant Logical Hole in Monetarist Thinking: So-Called…
I m both abashed and delighted that the truly stand-out econ writer Matthew Klein has offered wonderfully fulsome praise of one of my pieces, Why Economists Don t Know How to Think about Wealth, and some very interesting discussion as well. Some responses here. Please excuse me if I repeat some of the points from the first article. His [...] Related posts: Where MMT Gets Its Accounting Wrong And…
Jan Kregel presented a great dinner speech at the recent Modern Monetary Theory Conference, touching on some of the fundamental ways we think about money and economics. (Sorry, no recording or transcript available.) I had a brief conversation with him afterwards, and we followed up with a few emails. The quotation in the title of [...] Related posts: MMT and the Wealth of Nations, Revisited…
This Twitter thread between Ryan Cooper and Joe Wiesenthal prompts me to do full-spectrum explanation of some thinking that I ve been meaning to get to for a while. (Thanks for the inspiration.) This is good from @ryanlcooper on why taxes are too low. https://t.co/opACPlEX5e Joe Weisenthal (@TheStalwart) October 25, 2017 Though I'm not sure [...] Related posts: Safe Assets, Collateral, and…
Ralph Musgrave, who knows a thing or two about modern economic thinking, perfectly articulates the giant logical hole in monetarist thinking in a recent comment (emphasis mine): If the private sector s stock of saving is what it wants at current rates of interest, then additional public spending will push savings above the latter desired level, which [...] Related posts: MMT and the Wealth of…
I ve been quite troubled lately by voices I ve been hearing from my compatriots on the Left discussing the Job Guarantee especially in relation to an alternative, Universal Basic Income. A new Jacobin article by Mark Paul, William Darity Jr., and Darrick Hamilton displays several of the aspects that make me uncomfortable. Get the Math Right. Right off the bat, [...] Related posts: Job Satisfaction…
The Fed data portal, Fred, just posted a blog item that I take exception to, suggested by Christian Zimmermann, Assistant Vice President of Research Information Services. Here s my response. Dear Mr. Zimmerman: I m pleased to see that this post focuses on the interest burden of the federal debt. It s an important measure that doesn t get [...] Related posts: It s No Wonder People Don t Understand…
The half-century story of Democrats abdication and decline By Steve Roth. Publisher, Evonomics On January 1, 1964, John F. Kennedy posthumously initiated the half-century decline of the Democratic Party, beginning its descent into this moment s dark and backward abysm of slime. His massive tax cuts for the rich, implemented in 64 and 65, were the turning point and [...] Related posts: Engineering…
In recent posts on the Integrated Macroeconomic Accounts, I ve highlighted that we have two market estimates of what America s capital is worth the cumulative sum of net investment (roughly, book value ), and total household wealth ( market value ). I got curious: how to they compare over the decades? What s America s market-to-book ratio, or Tobin s Q? [...] Related posts: Wonky: More on Martin…
A friend and I were discussing Brooks recent column about Anthony Kronman s new book, “Confessions of a Born-Again Pagan.” I thought I d share my thoughts here. Full disc: I haven t read Kronman s book, only Brooks column. Some good stuff in there. Love the focus on books and writers. (Though Brooks [and Kronman s?] barely-concealed dog-whistle adulation [...] Related posts: Are Conservatives…
A quick note in response to recent twitter thread, and to a widespread usage that I find to be deeply problematic. You constantly hear very smart thinkers about money saying that money is debt. I strongly disagree. It s not a useful way to think about money. Quite the contrary. Balance-sheet assets designating the value of claims may [...] Related posts: The Global Savings Glut Is Conceptually…
In 2013, economists Alan Blinder and Mark Watson no wild-eyed liberals, they asked a very important question: Why has the U.S. economy performed better under Democratic than Republican presidents, “almost regardless of how one measures performance”? Start with their performed better assertion: it s uncontestable. While you can easily cherry-pick brief periods and economic measures [...] Related…
Noah Smith asks what seems to be an interesting question in a recent post: what leads to big recessions: wealth or debt ? But I d like to suggest that it s actually a confused question. Like: is it the heat or the (relative) humidity that makes you feel so hot? Is it the voltage or the amperage [...] Related posts: Predicting Recessions The Easy Way: Monetarists, MMT, and the Money Stock What…