Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[John A Imani via Marxism]

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<>

Don't think so.  I wrote:  " after an initial pre-inflation wage boost
(most important are a rise in the minimum and the guarantee of
employment).  True.  Did not specify how many hirees to this or that
industry but what was offered was the general proposition that all who want
work should have it and at a living wage.  Maybe the respondent has a
detailed plan as to where these jobs will be located and what they are to
do.  I would like to see it.

As for the snide against Marx and use of his quotes, I am after all a
Marxian on a Marxist listserve and, for the life of me, there is no one
that I would ever want to quote more.

JAI


On Mon, Apr 20, 2020 at 7:32 PM MM  wrote:

> On Apr 20, 2020, at 9:59 PM, John A Imani via Marxism <
> marxism@lists.csbs.utah.edu> wrote:
>
> JAI
>
>
> What’s missing from JAI’s response — but is dealt with at length in the
> interview I posted, and runs throughout the MMT literature — is what the
> newly printed money is put to use to do.
>
> Unless comrades are willing to start dealing with the details of specific
> national contexts and industrial strategies, this is all sound and fury,
> signifying nothing. Pick a country — any country — and start dealing with
> the numbers. But for Christ’s sake stop with the fucking Marxian scriptural
> references.
>
>
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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[MM via Marxism]

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> On Apr 20, 2020, at 9:59 PM, John A Imani via Marxism 
>  wrote:
> 
> JAI

What’s missing from JAI’s response — but is dealt with at length in the 
interview I posted, and runs throughout the MMT literature — is what the newly 
printed money is put to use to do.

Unless comrades are willing to start dealing with the details of specific 
national contexts and industrial strategies, this is all sound and fury, 
signifying nothing. Pick a country — any country — and start dealing with the 
numbers. But for Christ’s sake stop with the fucking Marxian scriptural 
references. 

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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[John A Imani via Marxism]

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Why must revolutionaries worry about inflation? That cannot be answered
without a simultaneous worry about wages. Even in a capitalist system, if
wages rise with inflation then that is of benefit to borrowers as they pay
back the advance (home, auto, credit cards, etc.) with ‘cheaper’ dollars.
The key is the ratio of inflation to the wage. Indexing the wage to the
rate of inflation, i.e. say a wage of $20 per hour is increased 100%, to
match the 100% rate of inflation, leaves the real purchasing power of the
wage the same but devalues debt by 50%. But more to the point here is that
inflation, properly used, deliberately induced inflation, can be a monetary
tool that we can use as one method of aiding the transition from a
capitalist system to a socialist system-- which itself ought be
transitioning in its role as a precursor of a communistic economy and
society.

Inflation. Inflation as a transitional device. Deliberately induced
inflation. Created by a printing press ‘bazooka’, initially, to give to all
a GAI (UBI) .
Then, after an initial pre-inflation wage boost (most important are a rise
in the minimum and the guarantee of employment), the creation of new
currency, perhaps a la the Mexican nuevo peso in 1993, and at the same time
an indexing to the rate of inflation of wages, pensions, welfare, bank
accounts (up to a limit of say, e.g., the FDIC limit of $100,000), even
shareholdings and bonds (to that limit) held by individuals, perhaps in
401Ks.  All these would again be protected by being indexed to the rate of
inflation. Limits for housing ownership, subject to socially set limits.
Savings, incomes, capital gains above this or that limit (or any limit that
society sets) would be subject to being devalued by the deliberately
induced inflation. Expropriation through inflation.

Where's the money for this?" Well jobs don't cost they pay. Ask any
capitalist hiring any worker. But w/o going into that question there's a
simple answer to the first question about "Where the money?" The answer is
'print' it. They did it ($750bill) for the banks. Twice. Bush and Obama.
Paulson's 'bazooka'. They (then We) can print as much as 'needed' to fund
this. The Fed Res has such power to transfer purchasing power (which is all
that this is) as real purchasing power is created only through work. Such a
transfer by inflation reallocates the purchasing power by making
accumulated dollars worth less through inflation. Individuals with modest
savings can be protected by indexing these to the rate of inflation. Same
with wages. Pensions ditto. Etc. Those with larger fortunes would see these
reduced by as much as the working class has the will to do it:
Nationalization through redistribution of the ruling class' liquid assets
by inflation.

This, and all of this could be accomplished, I am certain with a tiny
portion of the computing power already extant. See almost anything by W
Paul Cockshott.  Information is essential as production goals need be
tailored to consumer needs and desires.

"Book-keeping, as the control and ideal synthesis of the process, becomes
the more necessary the more the process assumes a social scale and loses
its purely individual character. It is therefore more necessary in
capitalist production than in the scattered production of handicraft and
peasant economy, more necessary in collective production than in capitalist
production...” Marx. “Capital. Vol 2.  Chap VI.”
https://www.marxists.org/archive/marx/works/1885-c2/ch06.htm#1.2

“…after the abolition of the capitalist mode of production, but still
retaining social production, the determination of value continues to
prevail in the sense that the regulation of labour-time and the
distribution of social labour among the various production groups,
ultimately the book-keeping encompassing all this, become more essential
than ever.” Vol 3. Chap IL.
https://www.marxists.org/archive/marx/works/1894-c3/ch49.htm

JAI
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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[MM via Marxism]

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> On Apr 20, 2020, at 9:09 PM, Louis Proyect  wrote:
> 
> I'd be willing to read something written by an MMT proponent.

I’m almost sure you don’t realize how that comes across. Almost.

> I used to be in contact with Nathan Tankus but lost touch.

I posted the link to Nathan’s new substack website earlier; it’s here: 
https://nathantankus.substack.com/

> Much of what I've heard about MMT seems geared to G7 nations. 


The first thing you say here is a nearly universal misunderstanding based on a 
simple failure to use Google. The podcast I posted is the best single source I 
know of, and frankly I don’t have a lot of patience with anyone who isn’t 
willing to listen to it. Fadhel is incredibly busy — he gave more than 400 
presentations last year alone, in dozens of countries. 

> If it was so easy to lift a country up by its own bootstraps, it seems made 
> to order for the global South. Right? 

Who said it was easy? This is a stupid, ignorant comment. It’s beneath you.

> So, why hasn't it been adopted universally?

Believe it or not, we’re working on it. This is from South Africa, less than 24 
hours ago:

Former Treasury official Donaldson says Bank can buy up to R20bn of bonds a week

Current shocks to global and domestic demand mean inflation is not an immediate 
concern, says former Treasury official

BL PREMIUM 
20 April 2020 - 05:10 Lukanyo Mnyanda
The Reserve Bank should scale up its bond purchases to as much as R20bn a week 
to help reduce borrowing costs for the government as it seeks to fund emergency 
measures to deal with the Covid-19 crisis, according to one of the economists 
briefing advisers and officials in the presidency. 

That would be a major escalation in the use of the Bank’s firepower after 
deputy governor Fundi Tshazibana 

 told Business Day on April 7 that it had bought about R1bn of government-debt 
securities the month before, a relatively modest number in a market valued at 
about R2.5-trillion. The Bank announced its programme on March 25, after 
identifying market dislocations that pushed bond yields to record highs. 

Such an aggressive show of force, mirroring actions by central banks in 
developed economies that have exceeded interventions during the great recession 
a decade ago, would reduce market stress and shift market expectations towards 
lower long-term yields, according to a paper written for the government by the 
University of Cape Town’s Andrew Donaldson.

Current shocks to global and domestic demand mean inflation is not an immediate 
concern despite the sharp depreciation by the rand in 2020, he said. The rand, 
which started the year at about R14/$, has slid about 25% to nearly R19/$, 
though the potential effect on inflation has been countered by the collapse of 
oil prices and economic activity.

Donaldson spent 20 years at the Treasury before retiring in 2017. The group of 
economists supporting efforts to come up with measures to mitigate the economic 
impact of the coronavirus outbreak includes another former official, Michael 
Sachs, who has headed the Treasury’s budget office and is now an adjunct 
professor at Wits University. Sachs has argued for fiscal stimulus to deal with 
the health and economic crisis arising from Covid-19.

The Bank, which has slashed its repo rate by 200 basis points in two meetings 
since March, has resisted pressure to undertake wide-scale money printing to 
help reduce government borrowing costs at a time when already elevated 
borrowings costs were raising questions about its ability to fund itself.

The Bank entered the bond market after 10-year yields spiked to close to 13% 
late in March, though it insisted this was not quantitative easing as it was 
not meant to influence prices but rather to restore market liquidity and 
efficiency to ensure sellers could easily find buyers. Yields have since eased 
back to about 10%, a level that is still seen as severe and unsustainable given 
that inflation is well within the 3%-6% target range.

After the Bank cut rates on April 14 governor Lesetja Kganyago rejected 
suggestions that it follow its counterpart in the UK and fund the state 
directly through so-called monetary financing. That step was unnecessary 
because the government has no trouble funding itself in open markets, he said. 
It would also be illegal and in breach of the Bank’s legal mandate.

Even before the coronavirus outbreak government borrowing costs were heading 
higher due to a weak economy and failure to consolidate spending to arrest a 
deterioration that was set to push the deficit 

Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[Louis Proyect via Marxism]

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On 4/20/20 8:41 PM, MM wrote:


Just to say a little more: The key is how the new money is spent, and 
specifically whether it is spent on developing the kind of productive 
infrastructure that any good socialist government would build: public 
transport, hospitals, schools, local farms, factories to produce basic 
consumer goods, etc.


Yeah, but that's exactly what was happening in Nicaragua. I was 
president of the board of Tecnica that had close relations with Paul 
Oquist, Ortega's chief economic adviser. The government printed money 
and it was like Germany in the 1920s. I'd be willing to read something 
written by an MMT proponent. I used to be in contact with Nathan Tankus 
but lost touch.


Much of what I've heard about MMT seems geared to G7 nations. If it was 
so easy to lift a country up by its own bootstraps, it seems made to 
order for the global South. Right? So, why hasn't it been adopted 
universally?


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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[Louis Proyect via Marxism]

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On 4/20/20 8:13 PM, MM via Marxism wrote:

Alternatively, maybe the “so-called theory” deals with them in considerable 
detail:

https://urpe.wordpress.com/2019/02/07/fadhel-kaboub-on-monetary-sovereignty-colonialism-and-independence/


I can't deal with podcasts. If you can recommend an article, I'd read it.

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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[MM via Marxism]

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> On Apr 20, 2020, at 8:13 PM, Louis Proyect via Marxism 
>  wrote:
> 
> I have not really bothered reading anything about MMT but I do have to wonder 
> whether it could have done anything to relieve the terrible economic crisis 
> that the FSLN had to deal with in the late 80s and that eventually led to the 
> election of Violetta Chamorro.
> 
> Nicaragua certainly printed money like it was going out of style but it led 
> to an inflationary spiral as bad as 1920s Germany. It had to pay soldiers who 
> were out in the field trying to end the contra war. The money that was put 
> into circulation had consequences:
> 
> Nicaraguan Devaluation
> Reuters, January 5, 1989
> 
> Nicaragua devalued its currency by 54 percent today, the seventh drastic 
> reduction in a year, and cut subsidies on transportation and military 
> spending to combat an economic slump and soaring inflation. The central bank 
> said in a statement that the cordoba was now fixed at 2,000 to the United 
> States dollar, down from 920 to the dollar. President Daniel Ortega said 
> Sunday that prices rose 21,742 percent in 1988, and he promised a severe new 
> round of austerity. Some independent economists have warned that inflation 
> could exceed 100,000 percent this year.
> 
> So, what is it that I am missing?

I’m not familiar with the Nicaraguan economy, but I think you’ll probably find 
the interview with Fadhel Kaboub that I just posted in response to John at 
least suggestive of how to go about answering the question.
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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[MM via Marxism]

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> On Apr 20, 2020, at 8:25 PM, MM  wrote:
> 
>> So, what is it that I am missing?
> 
> I’m not familiar with the Nicaraguan economy, but I think you’ll probably 
> find the interview with Fadhel Kaboub that I just posted in response to John 
> at least suggestive of how to go about answering the question.

Just to say a little more: The key is how the new money is spent, and 
specifically whether it is spent on developing the kind of productive 
infrastructure that any good socialist government would build: public 
transport, hospitals, schools, local farms, factories to produce basic consumer 
goods, etc. The money thus spent into existence continues to circulate, 
becoming the lifeblood of local economies: bodegas, book stores, hair salons, 
jazz clubs. But very few people on the left have been willing to even engage 
with this body of thought enough to be able to move beyond the fundamentally 
reactionary phrase “printing money,” and begin think about how any of this 
actually works in concrete terms — hardly a shining testament to the legacy of 
historical materialism.

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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[Louis Proyect via Marxism]

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On 4/20/20 7:34 PM, MM via Marxism wrote:

John, Where do you think a future socialist government’s money supply would 
come from?


I have not really bothered reading anything about MMT but I do have to 
wonder whether it could have done anything to relieve the terrible 
economic crisis that the FSLN had to deal with in the late 80s and that 
eventually led to the election of Violetta Chamorro.


Nicaragua certainly printed money like it was going out of style but it 
led to an inflationary spiral as bad as 1920s Germany. It had to pay 
soldiers who were out in the field trying to end the contra war. The 
money that was put into circulation had consequences:


Nicaraguan Devaluation
Reuters, January 5, 1989

Nicaragua devalued its currency by 54 percent today, the seventh drastic 
reduction in a year, and cut subsidies on transportation and military 
spending to combat an economic slump and soaring inflation. The central 
bank said in a statement that the cordoba was now fixed at 2,000 to the 
United States dollar, down from 920 to the dollar. President Daniel 
Ortega said Sunday that prices rose 21,742 percent in 1988, and he 
promised a severe new round of austerity. Some independent economists 
have warned that inflation could exceed 100,000 percent this year.


So, what is it that I am missing?

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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[MM via Marxism]

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> On Apr 20, 2020, at 7:57 PM, John Reimann <1999wild...@gmail.com> wrote:
> 
> I asked around about whether the advocates of this theory say it applies to 
> underdeveloped countries - in fact any country aside from the US, any country 
> whose currency isn't the world currency - and nobody can answer me. Now, 
> maybe all those other people are just as dumb and uneducated as I am. Or 
> maybe they don't know because the so-called theory simply doesn't deal with 
> these questions concretely.

Alternatively, maybe the “so-called theory” deals with them in considerable 
detail:

https://urpe.wordpress.com/2019/02/07/fadhel-kaboub-on-monetary-sovereignty-colonialism-and-independence/

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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[John Reimann via Marxism]

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I actually did read some of the "ideas" of modern monetary theory. Most of
it, I couldn't make head or tail of. I know I'm not the smartest person in
the world, but I'm not the stupidest either. In general, I figure if I read
some theoretical piece carefully and still can't understand it, that's
because it's simply gobbledygook. I've asked around about what's the
difference between this "theory" and Keynesianism and nobody has been able
to give me a straight answer. Maybe it's the idea (as far as what I can
make out) that governments should simply print more money rather than go
into debt. If that's the case, then it's simply reformist nonsense and in
practice, as far as the effect of expanding the money supply without an
equal expansion of production, there is no practical difference. I asked
around about whether the advocates of this theory say it applies to
underdeveloped countries - in fact any country aside from the US, any
country whose currency isn't the world currency - and nobody can answer me.
Now, maybe all those other people are just as dumb and uneducated as I am.
Or maybe they don't know because the so-called theory simply doesn't deal
with these questions concretely.

John

On Mon, Apr 20, 2020 at 4:34 PM MM  wrote:

> On Apr 20, 2020, at 6:31 PM, John Reimann <1999wild...@gmail.com> wrote:
>
> In many other countries around the world, extremely high levels of
> government debt led to devaluation and high inflation. The US is in an
> exceptional situation because of the global role of the dollar. That role
> is based on the military and economic power of the US internationally.
> However, just as that power of US capitalism is being challenged so,
> contrary to what some comrades seem to think, the international role of the
> dollar may not last forever.
>
> So, we will see.
>
> John Reimann
>
>
> John, Where do you think a future socialist government’s money supply
> would come from?
>
>

-- 
*“In politics, abstract terms conceal treachery.” *from "The Black
Jacobins" by C. L. R. James
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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[MM via Marxism]

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> On Apr 20, 2020, at 6:31 PM, John Reimann <1999wild...@gmail.com> wrote:
> 
> In many other countries around the world, extremely high levels of government 
> debt led to devaluation and high inflation. The US is in an exceptional 
> situation because of the global role of the dollar. That role is based on the 
> military and economic power of the US internationally. However, just as that 
> power of US capitalism is being challenged so, contrary to what some comrades 
> seem to think, the international role of the dollar may not last forever.
> 
> So, we will see.
> 
> John Reimann

John, Where do you think a future socialist government’s money supply would 
come from? 

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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

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In many other countries around the world, extremely high levels of
government debt led to devaluation and high inflation. The US is in an
exceptional situation because of the global role of the dollar. That role
is based on the military and economic power of the US internationally.
However, just as that power of US capitalism is being challenged so,
contrary to what some comrades seem to think, the international role of the
dollar may not last forever.

So, we will see.

John Reimann

On Mon, Apr 20, 2020 at 2:29 PM Michael Meeropol  wrote:

> 90% of that WAPO article is garbage  corporate debt is another problem
> but government debt is not (Japan's government debt reached 200% of GDP)
> --- with interest rates so close to zero in nominal terms that they are
> probably negative in the long run, government borrowing can be much higher
> than it is even now ---
>
>
>

-- 
*“In politics, abstract terms conceal treachery.” *from "The Black
Jacobins" by C. L. R. James
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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[MM via Marxism]

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> On Apr 20, 2020, at 6:31 PM, John Reimann <1999wild...@gmail.com> wrote:
> 
> In many other countries around the world, extremely high levels of government 
> debt led to devaluation and high inflation. The US is in an exceptional 
> situation because of the global role of the dollar. That role is based on the 
> military and economic power of the US internationally. However, just as that 
> power of US capitalism is being challenged so, contrary to what some comrades 
> seem to think, the international role of the dollar may not last forever.

And those cases have been analyzed at length in the /extensive/ literature on 
modern money systems that’s been produced over the past couple of decades. All 
this proves is that Reimann still hasn’t read any of it. 
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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

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90% of that WAPO article is garbage  corporate debt is another problem
but government debt is not (Japan's government debt reached 200% of GDP)
--- with interest rates so close to zero in nominal terms that they are
probably negative in the long run, government borrowing can be much higher
than it is even now ---
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Re: [Marxism] WA Post: "Record government and corporate debt risks tipping point"

[MM via Marxism]

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> On Apr 19, 2020, at 9:59 AM, John Reimann via Marxism 
>  wrote:
> 
> From the Washington Post
> https://www.washingtonpost.com/us-policy/2020/04/18/record-government-corporate-debt-risk-tipping-point-after-pandemic-passes/
>  
> 
> 
> The United States is embarking on a rapid-fire experiment in borrowing
> without precedent, as the government and corporations take on trillions of
> dollars of debt to offset the economic damage from the coronavirus
>   
> >
> pandemic.

There’s a fundamental misconception in this piece. US government debt is 
nothing like debt for the private sector, or at the state or municipal level. 
Virtually all USG debt is denominated in dollars, and the US is the sole issuer 
of dollars. The US Government doesn’t have to “earn” US dollars in order to pay 
off its dollar-denominated debts, and its debt is for all practical purposes 
“owed” to itself: it “borrows” from itself when it expands the money supply. If 
people think the US government needs to “raise” dollars in order to meet its 
obligations, then surely they should be able to explain where those dollars it 
is ostensibly going to get from someone else — taxpayers, China, whoever — 
could have come from in the first place.

Nathan Tankus is almost certainly doing the best analysis of what’s happening 
with the bailouts — and the mainstream press is rapidly recognizing that fact:

https://nathantankus.substack.com/

It really would be helpful if the left would get up to speed on how central 
banking works, because the scales are very rapidly falling from the eyes of 
those members of the capitalist class who didn’t already understand this stuff, 
and they’re quite happy to use it against us while we continue to wallow in our 
ignorance.

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[Marxism] WA Post: "Record government and corporate debt risks tipping point"

[John Reimann via Marxism]

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From the Washington Post
https://www.washingtonpost.com/us-policy/2020/04/18/record-government-corporate-debt-risk-tipping-point-after-pandemic-passes/

The United States is embarking on a rapid-fire experiment in borrowing
without precedent, as the government and corporations take on trillions of
dollars of debt to offset the economic damage from the coronavirus

 pandemic.

The federal government is on its way this year to spending nearly $4
trillion more than it collects in revenue, analysts say, a budget deficit
roughly twice as large relative to the economy as in any year since 1945.

Business borrowing also is setting records. Giant corporations such as
ExxonMobil and Walgreens, which binged on debt over the past decade, now
are exhausting their credit lines and tapping bondholders for even more
cash.

To support such borrowing, the Federal Reserve has dropped interest rates
to zero and added more than $2 trillion of loans to its portfolio in the
past six weeks — as much as in the four years following the Great Recession.

All this borrowing is required to plug the gaping hole the novel
coronavirus has punched in the economy, as unemployment reaches levels not
seen since the Great Depression. Few, if any, prominent economists or
lawmakers opposed opening the government’s fiscal taps amid the current
economic emergency. The Senate last month approved $2 trillion of crisis
spending with a vote of 96 to 0.

Yet high debt loads already are straining many corporations, which may be
forced to choose between skipping loan payments and laying off workers.
Millions of consumers, too, face sizable monthly bills for student loans
and credit cards, a burden that could weigh on any economic rebound.

The reliance on so much debt also will leave scars after the pandemic
passes, economists say, making it difficult for policymakers to withdraw
support and leaving the economy more vulnerable than before this crisis
began.

“We should be very worried,” said Atif Mian, an economics professor at
Princeton University who has written widely on the subject. “We are talking
about a level of debt that would certainly be unprecedented in modern
history or in history, period. We are definitely at a tipping point.”

On the eve of the pandemic, the U.S. economy was humming, thanks in part to
a jolt from the 2017 tax cut and the subsequent end of congressional
spending limits. But Congress took those actions without any plans to pay
for them.

Governments and companies often turn to lenders during times of unexpected
duress. This new wave is different because it follows an era of heavy
borrowing.

For President Trump, debt is a familiar tool. The former real estate
executive once bragged that he was “the king of debt” and suggested
haggling with holders of U.S. Treasurys over repayment terms using hardball
techniques he had honed in the business world.

Treasury Secretary Steven Mnuchin said last month that the government must
spend freely to help workers and businesses hurt by official shutdown
edicts. “Interest rates are incredibly low, so there’s very little cost of
borrowing this money,” he told reporters. “In different times, we’ll fix
the deficit. This is not the time to worry about it.”

Some argue that even more spending is needed to save the economy. Economist
Joseph Stiglitz, a Nobel laureate, says the government should guarantee
workers’ pay and forbid evictions or foreclosures. Larry Fink, the chief
executive of BlackRock, a New York-based investment firm, told CNBC last
week that an additional $1 trillion may be needed for small businesses.

But once the coronavirus has been tamed and the country regains its
swagger, U.S. leaders will need to find an exit from the extraordinary
levels of government borrowing.

Building a consensus for the blend of tax increases and spending cuts
needed to shrink the mammoth post-crisis debt will be tough to manage.
Neither political party emphasized spending limits in recent years. And the
presumptive Democratic nominee for president, former vice president Joe
Biden, proposed relatively modest tax increases compared with his former
rivals. Republicans, meanwhile, reflexively oppose tax hikes.

The Fed, likewise, will face difficulty extricating the economy from
today’s elevated levels of financial support. The Fed had only partial
success in unwinding its efforts to buttress the economy after the
2008-2009 crisis before the pandemic drew it back into an emergency posture.

Economists typically worry that excessive debt could lead to a