Not All Economists are Fools!

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QUOTE: I have just returned from Rimini, Italy, where I experienced one of the most amazing spectacles of my academic life. Four of us associated with the University of Missouri at Kansas City (UMKC) were invited to lecture for three days on Modern Monetary Theory (MMT) and explain why Europe is in such monetary trouble today – and to show that there is an alternative, that the enforced austerity for the 99% and vast wealth grab by the 1% is not a force of nature.

Stephanie Kelton (incoming UMKC Economics Dept. chair and editor of its economic blog, New Economic Perspectives), criminologist and law professor Bill Black, investment banker Marshall Auerback and me (along with a French economist, Alain Parquez) stepped into the basketball auditorium on Friday night. We walked down, and down, and further down the central aisle, past a packed audience reported as over 2,100. It was like entering the Oscars as People called out our first names. Some told us they had read all of our economics blogs. Stephanie said that now she understood how the Beatles felt. There was prolonged applause – all for an intellectual rather than a physical sporting event.

The basic thrust of our argument is that just as commercial banks create credit electronically on their computer keyboards (creating a bank account credit for borrowers in exchange for their signing an IOU at interest), governments can create money. There is no need to borrow from banks, as computer keyboards provide nearly free credit creation to finance spending.- MICHAEL HUDSON is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC),

Full article here: http://www.counterpunch.org/2012/02/27/our-very-own-oscar-night-in-rimini/

Perhaps the ancient truth about U.S. colonial prosperity is being re-discovered:

."Benjamin Franklin is asked by officials of the Bank of England to explain the prosperity of the colonies in America. He replies,

"That is simple. In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay no one." - Benjamin Franklin

http://www.iamthewitness.com/DarylBradfordSmith_Bankers.htm

Our colonial governments simply spent money into existence to fullfill the needs of the economy ....they didn't borrow it into existence as we do today.

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 3:01 pm

Comments

But the problem of Europe is not just the money grab. There are other forces one must recognize. There is no mechanism to adjust the economic differences between Greece and Germany since both are tied to the same Euro. This is what happened to Argentina, Chile, Mexico when the money was locked to the US dollar. thus Brady bond.

Simply put, there is no mechanism to deal with variations seen in Greek economy against German economy. When Greek economy was going through inflationary period and at the same time German economy had low inflationary period, had the two economy had floating exchange rate, the exchange rate of two currency would maintain "equilibrium" between the two economy. But when Euro was created, this "natural" means of maintaining the equilibrium was lost. Argentina economy collapsed because of locking their currency to US dollar for this reason. And it is happened to Greece, Spain, Italy Portugal etc. It's not just the money grab!!

Another similarities is state finance within USA. California by itself is a sixth largest economy in the world. An idustrial powerhouse in its own right. Meanwhile places like Kentucky, Alabama, Mississippi are not. If we did not have wealth re-distribution through federal tax system whereby federal tax collected from each states is returned not one for one. California pays, uncle sam $1.00 and gets back only portion of it while states like Ala. and Miss. pays uncle sam $1.00 and gets back more than a $1.00. A re-distribution. Without this re-distribution, because there is no other mechanism (we all use the same $) to adjust the economic difference between Ca. and Ala. or Miss., the poor states would have gone bankrupt.

This I think is just as big as the 1% money grab.

Seeing how I get Dr. Econ all confused with my butchered English, I hope my rambling is understood in a way I meant.

Your thought would be much appreciated.

smilingcat
Joined:
Sep. 23, 2010 8:14 am

The whole European Union with its Euro currency was created to gain control of the economies of these nations, and to lock them into a legal agreement where they have "no right" to create their own money and prosper, right? I can't help noticing that Britain did not relinquish its "pound" to the "Euro." London had no plans of being the European California, I suppose, as the others who did not adopt the Euro. Did the econmists in the countries who went for the Euro not forsee what was going to happen? Or were these economists and bankers part of the "corporatization" club, as opposed to the patriots party?

Greece needs to go back to the drachma, before more tragedy takes more lives. It is pure evil that the European banks warn that if countries start to drop out of the European Union, it will be viewed as a declaration of war.

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Karolina
Joined:
Nov. 3, 2011 6:45 pm

The promises of the European Union was that they would invest in the poorer partners to bring them up to the level of the richer. That would have been a great idea and sound economics. The problem for California is self-inflicted Rightwing property tax legislation and the end of free public college education, etc. If the receiving states were not run by GOPimp fools, they would use the equalizing funds to invest in their people instead of continuing to be examples of "low tax" poverty zones.

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DRC
Joined:
Jul. 31, 2007 3:01 pm

Smiling cat wrote:

But the problem of Europe is not just the money grab. There are other forces one must recognize. There is no mechanism to adjust the economic differences between Greece and Germany since both are tied to the same Euro. This is what happened to Argentina, Chile, Mexico when the money was locked to the US dollar. thus Brady bond.

poly replies: That's pretty accurate. In Argentina, dollars and the Argentine Peso were interchanageable. You could go shopping with either.

When Argentina's profitable national assets were privatized and sold to foreign interests, it was done on credit through banksters. The money owed to the foreign banksters from selling Argentina's state oil co., railroad, etc. on credit became a part of Argentina's national debt..Contracts stated payment to the foreign banksters be in dollars..., not Pesos. Like all monetary transfers between nations, it had to, ultimately be done through the Central Bank. Argentina didn't have the dollars in its Central Bank tto ship to foreign banks tp pay for the privatization that would supposedly enrich the people.. In part, that's what led to Argentina's collapse in 2001.Outsourcing, privatization, enriching finance and regressive tax structures all had their role.

In other words, they followed U.S. economic policy. Before that, the Argentine economy was on a par with many ot those in Western Europe. It was a pretty prosperous country.Video/Documentary. The Argentine Collapse.

http://www.youtube.com/watch?v=rH6_i8zuffs

Had Argentina not tied their currency to the dollar, and not sold their assets for dollars,, they could have simply/printed the currency... peso's... and paid the debt...Privatizaton isn't all it's cracked up to be.

Greece/Argentina are similar, though not identical. Argentina did still maintain its own currency that it could ultimately fall back on when it renounced its fraudulent debt....much of it caused by paying through the nose to sell off its assets. Greece didn't maintain the drachma...

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 3:01 pm
Quote DRC: The promises of the European Union was that they would invest in the poorer partners to bring them up to the level of the richer. That would have been a great idea and sound economics.

And what, exactly, happened? Why is Greece being bought by people from the countries that are not a Euro of part Europe?

The Euro nations were bamboozled.

Karolina's picture
Karolina
Joined:
Nov. 3, 2011 6:45 pm

Yup, but had they stuck to their first principles, it would have been a good thing for the Northern countries too. The banksters have earned their moniker. They are wrong in every way. When will we ever learn. When our money is blowing in the wind?

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DRC
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Jul. 31, 2007 3:01 pm

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