EmmaZahn's picture

    Radical Mellonism

    The Mellon Doctrine - Paul Krugman - NYTimes.com:

    “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” That, according to Herbert Hoover, was the advice he received from Andrew Mellon, the Treasury secretary, as America plunged into depression. To be fair, there’s some question about whether Mellon actually said that; all we have is Hoover’s version, written many years later."

    Maybe Krugman is correct. Maybe Mellon-style liquidation is now the official doctrine of the G.O.P. Maybe rather than making the comparison then using it to sneer and argue against G.O.P. plans, it might be more effective to make the comparison then use it to advantage.

    Offer to take Mellon's advice. Liquidate everything. Put everything back in the kitty and start over. Refinance or absolve debts; clear up property titles. Still not sure what to do about money savings. There is so much of it that it is smothering us. Some of that money has to die. Once upon a time, it would have been taxed away. Now it just keeps growing and growing like a cancer on the body social.

    Yes, I am that radical.  That does not mean I am wrong.  Could just be ahead of the curve.

     

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    But it has to be everything. Banks and Wall Street as well. No sacred cows or special interests.

    EVERYTHING !

     

    And yes, I'm also that radical as well.

     


    One other thing I need to add. There could not be any favorites what so ever or there would be war. Not riots...WAR.


    I suspect we may reach a point where there is no other option, and I can see a lot of net positives in that myself.  One of the outcomes I wonder about in such a situation, is what the effect of all the black market money, from drugs as well as corporations, that's sloshing around the world through tax havens would be after debt is liquidated.  Does it become more powerful, less, or stay the same?  And you can count me in that same club, Emma.


    Miguel, we should have done this in September of 08.


    I agree.  We may all face forced liquidations.  An orderly one before then is preferable to me. 

    One of the reasons we got into this fix is that no one wants to take a loss on investments anymore.   Loaning money is an investment; just like buying stock.  There is risk involved.  If you make a bad loan, you lose just as if you picked a bum stock.  Often it hurts the pride more than the pocketbook.

     

     


    The problem is that there is no one that I am aware of that would have the cajoles to even suggest this, let alone force (and it would have to be forced) it's implementation.


    I meant forced by circumstances -- not by decree.

     


    That may happen as well.


    you may mean cajones, huevos...


    That too. Laughing


    Thanks, good to see someone else advocating a public bank option.  I think I will follow Dr. Hudson's blog for awhile.   


    As am I.


    FYI - That column has gone viral already. Just do a google search on it.


    Krugman's been having some public arguments with Randall Wray and others who subscribe to MMT; here's a diary at My.fdl who writes about it all the time.  I've read some, including comment threads, and I am just not getting it.  (economic newbie)  He links to a recent Wray piece.  Anyone?  Yves Smith gave a guest slot to a believer; the comments were long and highly-charged, and I came away no wiser.

    http://my.firedoglake.com/letsgetitdone/2011/03/31/neo-liberalism-cant-beat-the-tea-party-but-mmt-can/

    (The most common critique was that ours isn't a closed economic system.)


    I think you have hit the problem here Stardust. The deficit hawks (republican and democrat) are still thinking pre-Nixon economics when the dollar was directly convertible to a fixed amount of gold (or what ever) at a fixed rate and that was what it was worth. But that is no longer the case. Since the dollar is (and has been for over 40 years) floating, it's worth is what the government says it is.

    Or rather what the government wants it to be. We can peg the exchange rate at what ever we want just like China does with the Yuan. There a a lot of people though who hate this but I do not see it changing.

    What MMT (Modern Monetary Theory) says simply is that since the government prints the money and sets the exchange rate, it cannot go broke anymore that the Bank in the Monopoly game can go broke.  Washington through taxes and spending and the FED through interest rates control the amount money in circulation at any given time. 

    Because we do have our own currency and are not part of a common currency, we cannot go broke like Greece or Spain or Portugal.

    However the states themselves can go broke if Washington lets them.

     

     


    Thanks for decoding, C.  I had to go back through pages at NC, but here is one on MMT, not sure if the one I read might have been earlier. 

    http://www.nakedcapitalism.com/2011/03/scott-fulwiler-paul-krugman%e2%80%94the-conscience-of-a-neo-liberal.html

    I did like letsgetitdone's talking points, though I wasn't sure how accurate they were.  ;o)


    I will have to read that more thoroughly later, I think. It's a bit more info than I can handle.

    One other thing to note, which has not been covered in the media here is that a number economists have suggested that those countries with heavy deficit problems would be better off going off the Euro and back on to their own currency for precisely the reasons stated above.

    Of course Germany and France hate that idea because their banks (who own a good bit of the debt) would take it in the shorts if that happened.


    I've been collecting links to that discussion but decided to wait until Steve Waldman / Interfluidity posts his promised point-by-point critique --  or this weekend, whichever comes first. :D

    MMT or (Chartalism as it was once called) is intriguing but I find many of its advocates making too glib arguments about 1) the nature of money and 2) bookkeeping debits and credits.  

    I am guessing that the opponents who say that we do not have a closed econmic system are objecting to the MMTers using debits/credits and flow of funds arguments.

    I have become totally enthralled trying to understand the nature of money.  Maybe I will eventually be able to weave the various threads into a whole someday soon.  :D

     


    There was a very good essay on Sam Smith's progressive review site on the very subject of the nature of money a while ago but I think he has since taken it down.


    Thanks for the link, Emma.  You are waaay ahead of me on the subject.  The only reason I did the primer courses was when a few economists were fearing the credit bubble was about to burst, and so I thought I'd better pay some attention, then to FinReg and it's inadequacies.  Other than that, 'bout all I know is how much we have buried in a can outside.  ;o)  And that' we'll never have more...


    MMT doesn't assume a closed economic system. Here,

     

    here, and

     

    here,

    are three of many articles that take the external sector into account.

     

     


    Letsgetitdone, I swear I click on your comment but can;'t see it on the thread.  I actually saw this up at steve waldman's today, came to find you at my.fdl, but didn't.  Nice to see you here.

    http://www.interfluidity.com/v2/1357.html

    And thanks for the offer of help the other day; didn't see until yesterday, but I am waaay too far behind to ask intelligent questions.  At least on MMT.  ;o)

    wd


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