Thursday, February 10, 2022

Spending Us into Inflation Oblivion

As I write this, we all await, with bated breath, the latest inflation numbers. We have been led to believe that inflation, that tax on everyone, is continuing to rocket up. So, we are expecting bad news from the inflation front.

Bad news for everyone but one Stephanie Kelton. According to an embarrassing puff piece in the New York Times, all of this inflation is her doing. If you ask why things are so dismal in the normally dismal world of economics, the reason seems to be that government officials, especially those of the Democratic persuasion, have decided that deficits do not matter, and that they can spend as much money as they want. They need but print it.

As for where they are going to find suckers who will buy all of the bonds they are selling, the answer is clear: the Federal Reserve prints counterfeit money and buys all of the bonds. 

And you were wondering why cryptocurrency is all the rage. And, the markets haven’t even gotten to gold yet!

As  you might have guessed, I am far from being competent to discuss such matters, so I will emphasize a different aspect of this boondoggle.

According to the New York Times, the guiding spirit behind this madness is a Stony Brook professor named Stephanie Kelton. You see, according to the Times, Kelton is so brilliant that she is attaining celebrity status. That means, as the government spends us into inflation oblivion, she is taking a victory lap.

Now, the Times is obviously using this puff profile to enhance the reputation of a woman economist. And naturally, however well it notes the problems with inflating the currency, it is promoting feminism more than it is promoting sound monetary policy. As the value of your money disappears down a rathole, feel consoled by the fact that it is advancing a great cause-- more women in economics.

Of course, you start wondering whether the Times is perhaps on to something. Perhaps the world is prostrate at the feel of the great Kelton because she is a woman. Perhaps feminist identity politics is ruining the value of money. 

Note the way the Times presents her, in very girly terms, though mixed with a weak-minded dismissal of all claims that counter her theories:

The sun was sinking low over Long Island Sound as Stephanie Kelton, wearing the bright red suit jacket she had donned to give a virtual guest lecture to university students in London that morning, perched before a pillow fort she had constructed atop the heavy wooden desk in her home office.

The setup was meant to keep out noise as she recorded the podcast she co-hosts, a MarketWatch production called the “Best New Ideas in Money.” The room was hushed except for Ms. Kelton, who bantered energetically with the producers she was hearing through noise-blocking headphones, sang a Terri Gibbs song and made occasional edits to the script. At one point, she muttered, “That sounds like Stephanie.”

Trust me, if the economist had been  male you would not be reading about her singsong approach to economics, and to the aberration called Modern Monetary Theory:

Ms. Kelton, 52, is the most familiar public face of Modern Monetary Theory, which posits that if a government controls its own currency and needs money — to make sure its citizens have food and places to live when, say, a global pandemic pushes many out of work — it can just print it, as long as its economy has the ability to churn out the needed goods and services.

In the M.M.T. view of the world, “How will you pay for it?” is a vapid policy question. Real-world resources and political priorities determine how much lawmakers can and should spend.

Paying for things is a vapid question, the lady tells us. In what world is that a vapid question? In the world where governments can print money to their heart’s content? Do the examples of Weimar Germany and Zimbabwe come to mind? And, by the way, someone who possesses as little knowledge of these matters as your humble blogger understands that the American money printing mania resides on the fact that the dollar is something called a reserve currency. If you think for a minute that other countries do not know that the dollar is our Achilles heel, and that they are trying to replace it as a reserve currency, you are seriously underinformed. If it the dollar ceases to be a reserve currency, we are in deep shit.

Nonetheless, the Times keeps puffing away:

The good news: The government has had no trouble selling bonds to fund its spending, contrary to the direst projections of deficit scolds.

The bad news: Some economists blame big spending in the pandemic for today’s rapid price increases. The government will release fresh Consumer Price Index data this week, and it is expected to show inflation running at its fastest pace since 1982.

Naturally, Kelton has no real interest in inflation and calls it a good problem, especially if it accompanies a strong economy. Besides, being a beneficiary of diversity programs she takes no responsibility for the consequences of MMT:

Last summer, Ms. Kelton called inflation a temporary sign of “growing pains.” By the fall, she painted it as a good problem to solve, compared with a continued weak economy. As it lingers, she has argued that diagnosing what is causing it is key.

“Can we blame ‘MMT’ for the run-up in inflation?” she tweeted rhetorically last month, just hours before her podcast recording.

For a breath of sanity and of economic literacy we turn to Lawrence Summers, Harvard professor, lifelong Democrat, and one of the few Democrats to predict the current inflation a year ago.

By his considerable lights and his unimpeachable integrity Modern Monetary Theory is just plain stupid. He has no problem debating strange and even discredited economic theories, but he draws a line at stupid.

He tweeted this:

I am sorry to see the @nytimes taking MMT seriously as an intellectual movement. It is the equivalent of publicizing fad diets, quack cancer cures or creationist theories.

— Lawrence H. Summers (@LHSummers) February 6, 2022

I greatly admire @jeannasmialek's reporting but I was very disappointed this time out. She was also victimized by an egregiously misleading headline, if the goal of her story was to point out MMT’s weakness.

— Lawrence H. Summers (@LHSummers) February 6, 2022

This is not about politics or agreement with me. I deplore the @nytimes and economic journalism in its general neglect of Marxist and post Keynesian scholarship, most of which is very critical of my views and policy choices.

— Lawrence H. Summers (@LHSummers) February 6, 2022

Serious leftist scholars submit their work to peer review, are willing to engage in public debate with their critics and carry out empirical work that others can try to replicate. Not the MMT movement.

— Lawrence H. Summers (@LHSummers) February 6, 2022

I trust you get the picture. The American government led, by progressive nitwits, is all-in for spending money that we do not have and cannot reasonably ever to be able to pay back. Because it advances the feminist cause.

Summers is not alone in noting that MMT is mindless tripe. Economist Noah Smith agrees:

…there was no conceivable state of the Universe in which MMT people would not have taken a victory lap. They always take victory laps, all day long, rain or shine. When you have an unfalsifiable meme complex instead of a concrete and falsifiable theory, it’s easy to claim that your ideas cannot fail, they can only be failed.

But to the rest of the world, inflation gave a reason to be skeptical of MMT’s constant advocacy of yet more deficit spending.

Naturally, Kelton’s defenders point out that she is a woman being criticized by men. Thus, sexism, of course. And yet, the real issue is whether her blather would ever have been taken seriously without the anti-sexist bias in the academic world. At the least, the feminist propaganda machine marches on. As of now, it has produced some very bad policies that are costing all Americans dearly. 


370H55V said...

What happens when women run things: the truth is whatever they believe it to be.

Anonymous said...

MMT apparently proves the intelligentsia can be as dumbed down as the hoi polloi.

Skwab said...

The phots shows that she is at 52, still attractive.
If she looked like Golda Meir, I doubt there would be so much fawning. Feminists like most of their spokespeople to be at least basically attractive, lest it scare away the men, who they rely on to do their work for them.

Anonymous said...

Banks that have survived for centuries have never repaid their outstanding debt. This is because the bank is a financial intermediary and as long as it can keep payments flowing on its own books of account it remains a going concern. In the same way the United States only has to keep payments flowing in the international dollar banking networks and the evidence is clear that the Sovereign Battery, Fed and Treasury, have the power to keep payments flowing when the credit markets freeze or pandemic causes a large recession, etc. The MMT view of economics has its roots in Functional Finance by Abba Lerner. Events such as World War II finance, the post-war finance, and modern finance prove that functional finance is how the world evolved to operate since the invention of the Treasury by Alexander Hamilton and the authorization of the Fed by the Congress in the wake of the 1907 banking crisis. Unfortunately only the government can make efforts to stabilize the currency against rampant deflation or rampant inflation in a modern industrial credit society. The markets have no hope to stabilize the currency. That means we can always blame the government for its fiscal and/or monetary policy especially if we worship "free market" economics as a kind of religious belief system.

370H55V said...

And if you don't believe me, check this out: