The bimonthly open thread on climate solution discussions. Topics might focus on the incoming Biden administration, the five year anniversary of the Paris Accords, and the challenge of making post-covid plans sustainable. Climate science issues should be raised here.
mike @138
“at Killian at 129, yes, but he (referring to me) was for it (MMT) before he was against it, but now for it again with reservations. Like nailing jello to the wall sometimes. One thing I appreciate about you is that you are pretty consistent in your analysis and suggestions about what needs to be done.”
Youre a real little back stabber arent you. And you are also wrong. Ive always said the same thing: MMT ( as in the government funding its activities by printing money, on a permanent basis as a new system) sounds like a very bad idea, but some selective use of money printing in certain situations like emergencies and if inflation is very low sounds fine, all for reasons xyz. Go back and frigging well read what Ive said, it wasnt that hard to understand. Or maybe you are just dishonest.
Al Bundy @133
“No. MMT is based on the fact that “ownership” is a diffuse concept for a society.”
No to what, where?
“MMT pulls completely different levers than Keynes. Keynes is about smoothing business cycles without regard to interest rates. MMT is about taking advantage of the differential between the increase in the value of a society given an investment by the government vs the principle plus interest accrued. Low interest rates really help this equation. But, of course, there are zagged rocks in that surf. What happens at 12%?”
Yes agreed. Although I see the main problem with MMT is politicians get to decide how much money gets printed. Looks like recipe for inflation and/ or crowding out the private sector (farming, industry etcetera). Of course deficit financing can sometimes do the same, but MMT gives them even more power to do it on a grand scale. Deficit financing has some limits because the credit agencies will downgrade your ratings badly so it gets hard to borrow.
Please also read what I originally said at 64 where I posted a couple of links on the positives and negatives of MMT. I think they also address your question about what happens at !2%:
https://www.bleyerbullion.co.uk/advantages-disadvantages-modern-monetary-theory-mmt
https://www.macrobusiness.com.au/2019/04/pros-cons-mmt/
And once again for the dim wits. Although Im sceptical about MMT as a system, some limited money printing is quite ok in certain situations like emergenices and when inflation is basically zero.
Killian @135, those references on MMT are interesting, but sound a bit like voodoo economics to me. Governments that have too many deficits and build up too much governmnet debt can get punished by credit rating agencies, and costs of borrowing can become huge. Countries can go bankrupt. Remember the third world debt crisis?
Now if governmnets instead finance themselves by MMT (printing money) you just get a whole new set of problems, with the risk of inflation and crowding out the private sector. The EU makes it illegal for member states to just print money to fund all their activities. They only allow very limited use of QE. Read the links I posted @64 as below on the strengths and weaknesses of MMT:
https://www.bleyerbullion.co.uk/advantages-disadvantages-modern-monetary-theory-mmt
https://www.macrobusiness.com.au/2019/04/pros-cons-mmt/
Now having said, that printing money in certain specific situations like emergencies and when iflation is zero is ok obviously. And maybe there will be a variant on MMT that could work, but we aren’t there yet. And we wont get there just by arguing MMT versus the alternatives. You have to get creative.
Ray Ladbury @132
“The thing about MMT is that it would work–at least up to the point that people stopped believing in the economy–believing that their investments were safe,…”
And how do you think MMT would go if someone like Donald Trump, or Robert Mugabe, or some other populist idiot or say the leader of Argentina were running things? Eh? Inflation and crowding out the private sector. I simply dont tust ANY politicians to be printing money. Its bad enough when they borrow vast sums.
Things should be funded from taxes and Im not proposing austerity or low taxes either. New Zealand has made it work. And we aren’t alone. Our taxes are moderate, government debt is low, deficits are under control, we dont print money except in very exceptional circumstances, MMT is viewed with suspicion. If a tiny tin pot nation like us can make it work, anyone can.
America = voodoo economics and MMT is just another version.
“The simple fact is that MMT does not, definitively does not, describe the existing reality of the monetary system. Let me explain.”
https://www.pragcap.com/stop-saying-mmt-describes-reality-it-doesnt/
K 135: There is *NO* PRINTING MONEY!!!!
BPL: That would come as a surprise to Weimar Germany, Hungary in 1946, or Zimbabwe in 2005.
K 140: I told him profit equaled a drain on the system
BPL: Except that it doesn’t, because it’s just one of the four major forms of income–wages, rent, interest, and profit. Profit is the return on entrepreneurship. Profits don’t disappear, they stay in the economy, just like every other form of income does.
In short, you don’t know what you’re talking about.
Ray Ladbury @132
More on this.
“This was the Sumer of ’93, and the economy of Brazil was in freefall. Inflation was running 30% a year. There were people whose sole job was to migrate around the supermarkets and raise prices. ”
Yes, and that is what will happen if you have MMT and so some crazy politician printing money to buy votes and promote his crazy schemes. Ok I know its a cheap shot, but it could become very real. And it will crowd out the private sector as well.
“So in a sense, Modern Monetary Theory isn’t particularly modern. It is definitely a theory, though, a model. And as George Box tells us: All models are wrong. Some models are useful. The trick is finding the limits on the utility of the model, and in a field like economics where about half of what you study is subjective, that is a tricky business.
The problem is the way politicians could abuse the idea and its really hard controlling that variable. You get a good politician and MMT could work ok. You get a dumb, self serving populist and MMT wont work, and you know it. And dumb self serving populists are in the ascendancy.
I think we would need a form of MMT with a lot of checks and balances. I would rather technocrats decide how much money is printed. If its left entirely to reserve banks discretion it could be ok. But that would be very difficult to make work because politicians would be calling the shots on how much spending they want. I think you are maybe smart enough to understand.
And I have nothing against some limited money printing in severe recessions and emergencies and provided inflation is near zero. That is a system that puts a lot of limits around the issue.
And I agree with your statement “But ultimately, whether the economy works or not depends on whether people believe in it”. Scary eh?
Killian @140 mentions Steve Keen. Keen is always good value, but he does have the occasional brain implosion. Because he’s human. People tend to turn people into idols who can do know wrong. In psychology its a type of halo effect. I’m not saying you do this, but I see a lot of people doing this sort of thing.
Killian says “Economics, like all else, it ultimately energy. I told him profit equaled a drain on the system, therefore it creates imbalances in the system, so no model of economics that allows profit, and by extension, Capitalism, can be sustainable. If money were in some way separate from the natural system, then profit would not and could not matter, but money is a proxy for energy moving through the system. ”
And several people on this website have already told you why all that is nonsensical. When multiple people are agreed on this, it means they are far more likely to be right than Killian, especially when they have varied high level qualifications and who squabble a lot, but are all united over one issue like this.
And OF COURSE you are right to the extent that industrial capitalism in its current form is not sustainable in the long term. Very little is sustainable long term if one defines sustainable as something that can be continued indefinitely, as in forever, which is the definition you posted. About the only thing that might come close is living like hunter gatherers. I suspect most people would prefer to defer that possibility as long as possible.
We are stuck with having to develop a definition of sustainable living people can agree is acceptable to them. It will be a compromise. Once you understand all this, the specific solutions that make sense become fairly obvious: eliminating waste, renewable energy electric transport ( as much public transport as possible), a gentler form of agriculture, passive solar buildings, etcetera.
In fact you pretty much concede things will be a compromise yourself, because you essentially talk about humans living as much like hunter gatherers as possible, (in a general sense and socio economic sense), but with a minimalist, modern industrial backbone added on, that provides certain essential things that cant be provided by simple regenerative materials, presumably because you realise the alternatives are truly crazy. So you have compromised because you have a system combining sustainable and not fully sustainable elements. And its not a bad compromise either, other than to say we would have to be very careful not to reduce industrialisation so much that we become overly reliant on regenerating materials from a very fragile biosphere that has its own set of limits. As I’ve said before.
I’m saying we might have to compromise a bit more, and keep capitalism around for a while, at least to the extent of private ownership. Capitalism can possibly work by having not for profit organisations if people want that. I don’t think we will be going back to some form of shared ownership of the means of production and such things haven’t worked out very well in modern societies, in the main. Communal ownership would probably be more viable just with the ownership of land.
And yeah Steve Keen is right if there’s some huge emergency governments often revert to command economies just to get things done. This is pretty much what happened in WW2. John Kenneth Galbraith has written about this. It could happen if the climate crisis was to spiral out of control, but that is most likely to happen in tropical zone countries for rather obvious reasons. I would prefer that right now we stick to the traditional approach of free market capitalism but with governments playing a part with things like carbon taxes and environmental rules. Total command and control should be used sparingly – like politicians printing money. Command and control government can go badly wrong, especially if the wrong sorts of leaders are in charge, for example Joseph Stalin.
I was thinking about plenty of this stuff when I was basically just a kid, ffs.
“Further in suggesting the MMT lacks a concern for inflation those making these statements belie their own lack of research. Full employment and price stability is at the heart of MMT. The body of theory and policy applications that stem from that theory integrate the notion of a nominal anchor as a core element.”
http://bilbo.economicoutlook.net/blog/?cat=24&paged=5
“Zimbabwe for hyperventilators”
http://bilbo.economicoutlook.net/blog/?p=3773
nigelj: Looks like recipe for inflation and/ or crowding out the private sector
AB: Yes, crowding the private sector is a possible feature. My preference is “Capitalism with a socialized cap”, where the government uses MMT to compete in every industry, paying generous wages and competing like a shark. (Another model is non-profit organizations that arise from donations from previously socialized (de-profitized) organizations), creating a serious non-profit competitor in every market.
MMT is not just money printing. The “drain” has to be considered. What you build today MUST provide enough to supply tomorrow’s drain. Otherwise you drown. Reminds me of those countries the USA (and now China) were/are possibly bankrupting by building huge bits of infrastructure (dams, ports) on credit. Of course, MMT avoids the direct foreign creditor, but do you really think billionaires make better mortgage holders than China?
mike: I think Killian is correct
Killian: When am I not?
mike: but not particularly informative at 130.
Killian: So
AB: Throwing a dog a bone can make said dog think he’s a great hunter.
______________
Killian: Hmmm… so constantly changing your position in the direction of the people that have been schooling you while claiming you always knew is somehow admirable? It’s called dishonesty.
AB: HMMMM… so adding the opposite ‘while’ to what I said is somehow acceptable? I said that Nigel isn’t the sort who claims he always knew. He twists and stretches his previous vision to try to make it fit new evidence, and then, if warranted in his opinion, he snaps to a new vision. You’re likely reacting to his stretchy phase.
An honest debater might disagree with my analysis of Nigel, but you went, as usual, ad hom.
Eyeroll. Just eyeroll.
Yo, Killian! After you went all King Ego Perfecto and snapped Mike’s head off, what do you think the odds are that he’ll bother to expend the effort to type another nice thing about you?
Mike’s a good guy, so they’re significant, but I suspect that they went down a tad.
Rinse, repeat, spread to everyone. Result?
Nigel, Your attacks on MMT provide a very cogent argument against letting politicians have control over the economy, but they really say nothing specific against or or MMT. The goal of economists is to balance supplying short-term needs of the population and long-term growth. Politicians only care about the former, and then only to the extent it helps them get elected.
The fact that it can be done wrong is not an argument that it cannot be done right.
re: AB (145)
Piotr 137: “rain, lots of rain” applies to the hydro NEW GENERATION, not to the “Pumped storage“, hence irrelevant to the discussion at hand.
AB(145) a joke. Only a joke.
We make jokes to be funny or to make a point. Let’s see:
=====
-J Doug Swallow (40) tries to discredit “Pumped storage” by discovering the wheel that being STORAGE they “use more electricity than they produce ”
-me (119): the FAQ from EPA may be a revelation for you – but HERE, on RC, is not – I don’t recall ANYBODY EVER claiming that hydro STORAGE would “ produce more electricity than they use“.
-Al Bundy (122) “ Rain. Lots of rain”
====
There is no point in your “ Rain. Lots of rain“, so it must be … hilarious?
Killian @147
“Hmmm… so constantly changing your position in the direction of the people that have been schooling you while claiming you always knew is somehow admirable? It’s called dishonesty.”
Rubbish. My views on climate change and risk levels have been consistent for years.
I’ve always said the same things on ‘simplification’. Read what people actually say, not what you think they are saying, or want them to be saying. Read for comprehension. Ive always said some elements of simplification are good like eliminating waste (or at least getting as close as practically possible),passive solar buildings and some elements of organic farming, and zero population growth, and living in smaller homes.
I have always said I think some elements of simplification, or related to simplification are bad or implausible, like shared ownership ideas, some sort of perfect egalitarian system with no hierarchy, massive and rapid reductions in our use of non renewable materials, scaling up the use of the biosphere for wood burning and construction materials and about 10 other things. My views have been unwavering on this.
I have however become more receptive to nuclear power (somewhat reluctantly I admit)and ideas of smaller global population. I’m not some rigid thinking fool of a person.
Addendum: I have however become more receptive to nuclear power (somewhat reluctantly I admit) and ideas of smaller global population. I’m not some rigid thinking fool of a person.
And I have certainly never claimed I always thought these were good things. I used to be extremely sceptical about nuclear power for example, but having looked into it I think it has its place, alongside other options. I’ve always believed population growth must stop, but I hadn’t really considered much about getting the size of global population down until I read Zebras comments on it. I guessed that 2 billion would be a workable size, and this appears to be backed up by research I have come across more recently. So not a bad guesstimate, informed by thinking a lot about it.
Ray Ladbury @164
“Nigel, Your attacks on MMT provide a very cogent argument against letting politicians have control over the economy, but they really say nothing specific against or or MMT. The goal of economists is to balance supplying short-term needs of the population and long-term growth. Politicians only care about the former, and then only to the extent it helps them get elected.The fact that it can be done wrong is not an argument that it cannot be done right.”
Fair comments. I would refer you back to the references I ALREADY posted on MMT and how it works, and its advantages and disadvantages:
https://www.bleyerbullion.co.uk/advantages-disadvantages-modern-monetary-theory-mmt
https://www.macrobusiness.com.au/2019/04/pros-cons-mmt/
I tend to agree with the criticisms, particularly in the second reference, and its conclusions: “However, it can also be seen that MMT could create as many problems as it solves when dealing with our New Normal. From increasing market volatility to destroying functioning bond markets; and from revolutionising our entire political economy to potentially shattering world trade, the risks are there to be seen if one looks carefully enough.”
So in other words its not clear to me that MMT is ‘fundamentally’ better than the traditional system of governments raising revenue through taxation and some (hopefully) limited borrowing. And given MMT could be very easily abused by politicians, this is a further reason to be sceptical. So what is the point of it?
That said, governments have been using a selective version of MMT with all this quantitative easing recently. But this is not precisely the same as MMT. It has been orchestrated largely by independent central reserve banks and governments have still raised revenue the old fashioned way. MMT is much more of a whole system. And I think QE was justified in the circumstances of the GFC and this covid 19 problem. As Ive said before, inflation has been low and that makes printing money fairly low risk, and appropriate, but what the hell happens if inflation were to take off?
However MMT does have one other practical advantage. If governments just cannot increase taxes to deal with an emergency, (or perhaps climate change mitigation) like tax adverse countries like America, and debt is maxed out, then this does suggest MMT is an option, in a pragmatic sense alongside conventional taxation. Because there are no other options. But its pretty grim if things have come to that.
So yeah, I just dont think MMT has any real theoretical advantage as an alternative to taxes and borrowing, but it does have a place in certain specific circumstances.
Here’s a forced response: an Earth System Dynamics discussion where I claim that the Earth’s Chandler wobble is forced by a conjunction of lunar and solar nodal cycles.
https://esd.copernicus.org/preprints/esd-2020-74/
That’s an antidote to several days surrounding the hype of the Jupiter & Saturn conjunction that only had an impact in peoples’ minds.
Wait, there’s a conjunction? It’s been so cloudy here I don’t think I’ve even seen the Moon this month.
Carbon tax of about $100 per tonne in 2020:
https://www.pik-potsdam.de/en/news/latest-news/an-economic-case-for-the-un-climate-targets-early-and-strong-climate-action-pays-off
h/t to Willard on And Then There’s Physics
E-P said:
It’s a torquing conjunction — when the moon and sun are both declined maximally relative to the equatorial plane, maximum torque is applied to the earth’s rotational axis. Since the earth is not a perfect sphere, it will start to precess. According to a basic calculation, this precessional rate is predicted to be within a day of the measured Chandler wobble cycle. Yesterday, I was alerted that a Russian team had also predicted this, but it looks like they did the math wrong and they’re off by ~6 days.
It’s an open review so anyone can comment.
https://www.sciencedirect.com/science/article/pii/S0301421520306984?dgcid=rss_sd_all
Can liberalised electricity markets support decarbonised portfolios in line with the Paris Agreement? A case study of Central Western Europe.
Abstract
We model the evolution of the Central Western Europe power system until 2040 with an increasing carbon price and strong growth of variable renewable energy sources (vRES) for four electricity market designs: the current energy-only market, a reformed energy-only market, both also with the addition of a capacity market. Each design is modelled for two decarbonisation pathways: one targeting net-zero emissions by 2040 for a 2 °C warming limit, and the other targeting −850 Mt CO₂ y‾ for a 1.5 °C warming limit. We compare these scenarios against the high-level objectives of delivering low-carbon electricity reliably to consumers at the lowest possible cost. Our results suggest that both 2 °C and 1.5 °C compliant systems could be achieved and deliver electricity reliably. In terms of cost, we find the 1.5 °C warming scenarios lead to system costs which are twice as high as the 2 °C scenarios due to the high cost of negative emission technologies – in particular direct air carbon capture (DAC). To make a 1.5 °C target more affordable, policymakers should investigate lower cost alternatives in other sectors, and increase research and development in DAC to reduce its cost.
David B. Benson says (171): “Carbon tax of about $100 per tonne in 2020 ”
… and is there a point here?
Piotr @174 — The carbon tax to help avoid going over 2 °C global warming.
Al Bundy @161
“AB: Yes, crowding the private sector is a possible feature. My preference is “Capitalism with a socialized cap”, where the government uses MMT to compete in every industry, paying generous wages and competing like a shark. ”
Not a bad idea. We actually tried something like that with Kiwibank, a state owned bank designed to compete with the 4 private sector banks and keep them honest. Its not clear its achieved very much however it didn’t pay particularly high wages. It was financed the conventional way. Its also been suggested for insurance. The problem is the business sector has lobbied vigorously against these ideas, and they get watered down, then they don’t work that well, and get further discredited. And you have to be very careful something like kiwibank isnt allowed to get so large it crowds out the private sector, but that is easily enough controlled.
“MMT is not just money printing. The “drain” has to be considered. What you build today MUST provide enough to supply tomorrow’s drain. Otherwise you drown. Reminds me of those countries the USA (and now China) were/are possibly bankrupting by building huge bits of infrastructure (dams, ports) on credit. Of course, MMT avoids the direct foreign creditor, but do you really think billionaires make better mortgage holders than China?”
Yes MMT is not just money printing. Its quite a complex model. I just use money printing as shorthand notation plus it goes to the heart of the model. The drain will only be considered with good politicians running the system and that is the main problem.
I almost wish technocrats ran the system, but then they would probably abuse their power as well. There is no perfect system. Democratic capitalism with a bit of socialism tacked on is probably the best of a bad lot. The real problem is the general public who go on electing complete idiots like Trump!
But you can hedge things by having technocrats run certain parts of the system that lean towards their skills and mindset. Obviously Reserve banks do this.
MMT gets around the problems of creditors but creates a heightened risk of inflation and debasing the currency. So one step forwards, one step backwards. And its hard to make it work well, unless every country uses it, which probably isnt going to happen in unison (read the links).
Just because QE, which also prints money has been appropriately used for emergencies like The GFC and covid caused recession is not a logical reason to make QE or similar schemes like MMT the primary way of financing governmnets. People have forgotten how bad inflation can get. QE pushes up the price of housing and hurts poor people. MMT might lead to better and more public services but could push up the price of consumer goods as resources flow from one sector to the other. The one attractive thing about MMT is that it might be useful in limited form if all other financing options are already used up.
————————————
Engineer-Poet
I now you grind your teeth reading about MMT, but before we build stuff we have to find the money :)
Piotr: There is no point in your “ Rain. Lots of rain“, so it must be … hilarious?
AB: Well, sure, jokes are often based on the pointless, such as the microscopic increase in the output of an upper reservoir due to direct rainfall (as opposed to cheats like runoff from elsewhere). Whether it’s funny is subjective.
And tone can be difficult to discern but to miss a joke and then to diss the joke implies much beyond said joke. New year. New tone.
nigelj: That said, governments have been using a selective version of MMT
AB: Goes back further than that:
“Tax cuts pay for themselves” marries MMT with capitalism.
151 nigelj: mike @138
“at Killian at 129, yes, but he (referring to me) was for it (MMT) before he was against it, but now for it again with reservations. Like nailing jello to the wall sometimes. One thing I appreciate about you is that you are pretty consistent in your analysis and suggestions about what needs to be done.”
Indeed. That’s what comes of one’s thinking arising from First Principles, ecosystem function and regenerative societies.
Youre a real little back stabber arent you.
No. What a stupid thing to say as it in no way is accurate WRT interactions on this forum. Or any forum. Just… more stupid.
And you are also wrong. Ive always said the same thing: MMT ( as in the government funding its activities by printing money, on a permanent basis as a new system)
That’s not MMT.
Shut up.
Still studying up on MMT. Here is a four minute video on MMT and inflation:
https://www.youtube.com/watch?v=tyczLgF5DfI
I am still not very interested or impressed by all the economic theories in general, especially when our complicated situation gets dumbed down to an argument about tax and spend or economic austerity per the Chicago School as if everything is captured in that two dimensional spectrum.
This video says with MMT you control (respond to) inflation with taxation which takes money out of circulation instead of raising interest rates. That is essentially the reverse of “printing money” so this model is not just about printing money, it is also about controlling inflation by destroying money through taxation when necessary.
Cheers
Mike
More on MMT from Stephanie Kelton
https://www.youtube.com/watch?v=gcgDazSsyRw
If you want to understand this complicated stuff, listen and think carefully, avoid simply repeating the simple-minded short hand misunderstandings about MMT.
Cheers
Mike
AB: Well, sure, jokes are often based on the pointless, such as the microscopic increase in the output of an upper reservoir due to direct rainfall.
IF I or Mr. Swallow have argued that – then your joke WOULD HAVE a point. But since neither us have done so, quite the opposite, your joke is pointed at … nobody. Hence mine:
“Since there is no point in your “ Rain. Lots of rain“, so it must be … hilarious?”
AB: Whether it’s funny is subjective.
You said it, bro – we must be laughing from very different things. Let’s poll the others. Here is the joke in question:
=====
me (119): “the FAQ from EPA may be a revelation for [Mr. Swallow] – but HERE, on RC, it is not – I don’t recall ANYBODY EVER claiming that hydro STORAGE would “ produce more electricity than they use“.
-Al Bundy (122) “ Rain. Lots of rain”
===
Everybody who found this joke funny, please raise your hand!
David B. Benson (171): “Carbon tax of about $100 per tonne in 2020 ”
Piotr (174) … and is there a point here?
David B. Benson (175)”The carbon tax to help avoid going over 2 °C global warming.”
==
Thank you, but since it was obvious from the link you posted in (171), I wasn’t asked about that. My question was what was your point in posting this number here, in other words, what did you want to say/achieve BY posting it. (People usually don’t post without reason).
I don’t read about MMT. I mostly page over that stuff.
The US government can finance it the way it finances everything else, and at far better interest rates than private borrowing. The materials and skills (and siting and…) issues are the REAL issues.
What better cause for borrowing, than to build 100-year infrastructure?
Killian @179, running to the defence of Mike, so predictably. Once again Killian gets it wrong, defends the indefensible, and makes various claims with nothing more than empty assertions. Laughable really.
So… consider listening to what I have to say. (If you think this is about ego, you’re completely missing what’s important.)
https://aeon.co/essays/heres-why-so-many-physicists-are-wrong-about-free-will
When I said @151 that ” MMT ( as in the government funding its activities by printing money, on a permanent basis as a new system) ” I did not mean they literally print the folding stuff, necessarily. I was being facetious and using shorthand. In fuller terms the government through its reserve bank creates money out of nothing as a book entry. Bear in mind they are obliged to turn this into cash if people want so its immaterial! It should be effing obvious what the point was.