Waiting For Octopus City

 

Octopus City, rendering of a plan by Peter Thiel's Seasteading Institute, via Wired, May 2015, when the techie billionaires were giving up on their idea. Then Donald Trump announced his presidential candidacy.

Found myself unexpectedly attracted by a conspiracy theory around the tariff mishegas, from a Substacker, Daniel Pinchbeck, with an excitingly transgressive headline: Paul Krugman is wrong.

Not that I was planning to go that far myself! I think Krugman's judgment of the White House at the moment is fundamentally right:

Bidenomics Works

From Philipp Plein's Billionaire clothing line, via Yahoo Sports. 

Heather Cox Richardson puts together a couple of things I really should have put together myself: Bidenomics, seen as a definitive turn from Reagan-era neoliberalism, and the amazing character of the US economy at the moment, as reflected in the current numbers on growth, unemployment, and consumer spending:

with the election of Republican president Ronald Reagan, lawmakers claimed that concentrating wealth on the “supply side” of the economy would enable wealthy investors and businessmen to manage the economy more efficiently than was possible when the government meddled, and the resulting economic growth would make the entire country more prosperous. 

The problem was that this system never produced the economic boom it promised. Instead, it moved money dramatically upward and hollowed out the American middle class while leaving poorer Americans significantly worse off. 

The Souring of America

 

I can't get over this chart, from early September in The Economist, which I saw somewhere on Substack—sadly can't reconstruct where exactly.

The light blue line is the University of Michigan index of consumer sentiment, which has been going on since 1946 and is regarded as a very reliable indicator of how Americans feel about the economy and predictor of how much money they're going to feel like spending. The dark blue line is an index constructed by the magazine (after an initial idea by a Twitter user called @quantian1) to predict what consumer sentiment ought to be, based on a bundle of 13 economic indicators like inflation, unemployment, and gas prices, and as you can see it does a really good job for the first 40 years to which they applied it, tracking the actual U of M consumer sentiment very closely (the real consumer feelings are more emotional, more depressed during the lows and more excited in the highs)—it accounts for 86% of the movement in the traditional number.

And then it goes wacky, immediately after the first financial crisis of COVID in 2020. It continues to show the same shape as the actual consumer sentiment, low when it's low and high when it's high, but at a distance of some 30 points.

Hurray For the Biden Economy! But Is Anybody Going to Notice?

Nobody was driving when Biden took office. Our country was in a raging pandemic killing thousands on a daily basis and the economy was in collapse, while Trump kept telling us it was no big deal.

That's why gas was cheap. 1/2

— Ghastreblyansky (@Yastreblyansky) October 26, 2022

It's more your fault than Biden's, Senator Young. Take some responsibility.

— Ghastreblyansky (@Yastreblyansky) October 26, 2022

Honestly, this Indiana senator is on the committee (Commerce, Science, and Transportation) where the Gas Price Gouging Prevention Act died last spring, and maybe he didn't like that one, but he hasn't offered any alternative proposals either, or accomplished a single thing on the issue, or any other issue as far as I know.

Democracy for Efficiency

Mudslide blocking a road in Cayey, Puerto Rico, on Sunday. Photo by AP via Wisconsin Public Radio.

Really interesting radio thing, on a study from 2018

Akey, Pat and Dobridge, Christine and Heimer, Rawley and Lewellen, Stefan, Pushing Boundaries: Political Redistricting and Consumer Credit (March 2018). Available at SSRN: https://ssrn.com/abstract=3031604 or http://dx.doi.org/10.2139/ssrn.3031604

in which researchers found that abusive partisan redistricting—gerrymandering—has economic effects, and pernicious ones: it makes it harder for people in the gerrymandered district to access credit.

Really, you ask? Yes, really; not across the board, those who are well off can always get a loan, but for those around the margin, without much of a credit history, there's a real empirical difference in whether your legislators are in safe, gerrymandered seats or competitive ones where they have a good chance of losing the next election. That's likely to be the reason:

For the Record: What Is Capitalism

Class Strugle--The board game. Via Wikipedia.

Covering some ground I'm afraid we may have covered before—

employees while the CEO keeps getting richer and takes rides into outer space in a flying penis rocket. But it also applies to Linda making a decent living by selling homemade cupcakes at the flea market. If she's selling something she produced and pricing it at...

— Ghost of Gene Rayburn of House Moderna🍸 (@ghostofgener) February 8, 2022

That is literally not capitalism. Linda is not an alienated wage slave selling her labor for the benefit of an owner sucking the surplus value out of it. She's an independent artisan who controls her own means of production, in a pattern from long before capitalism was invented.

— Against Yastronomical Odds (@Yastreblyansky) February 8, 2022

Stop Trying to Make Fear Happen

 

You know what they say about the 1960s,  "If you can remember it, you probably weren't there"? There's something like that going on about inflation in the 1970s, as in this column by Barron's retirement columnist, Neal Templin:

When I was a young reporter in the 1980s, my newspaper gave me raises twice a year for a while. I’d like to tell you I earned the salary boosts through extraordinary merit, but all the reporters got them.

The reason: The inflation rate was so high then that it was considered a hardship to go a full year between raises. Amazing, huh?

Sociological Bent

So two weeks ago was Bad David Brooks, and last week we had Self-Help David Brooks ("The Awesome Importance of Imagination", which read like a compilation of BrainyQuotes, though it actually wasn't), so naturally today Woke David Brooks is doing a shift ("Joe Biden Is Succeeding"), which among other things praises the Biden agenda to the skies. And then explains why he's qualified to disagree with the economist Lawrence Summers on the subject of whether last spring's American Rescue Plan might overstimulate the economy and lead to inflation

Larry is one of the most intelligent people I’ve ever known and someone I really admire. If I were an economist, I might have agreed with him. But I’m a journalist with a sociological bent. For over a decade I have been covering a country that was economically, socially and morally coming apart. I figured one way to reverse that was to turbocharge the economy and create white-hot labor markets that would lift wages at the bottom. If inflation was a byproduct, so be it. The trade-off is worth it to prevent a national rupture.

and then agrees with him anyway

The End of Economics

 

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I've been having a hard time thinking any thoughts about anything relevant other than what's happening in Congress, which is far too noisy at this point for me to think I understand anything, and my "ideas" about money, which nobody likes, too intangible and abstract for most regular readers but raw and downright backwoodsy from the standpoint of more refined visitors, and I meant my promise that the previous post would be the last one.

But I did bump into a kind of back door, which I'll get to below, to a part of the discussion that's more or less concrete and interesting, the ancient history part where, as you may or may not remember, the theory of the origin of money I hammered together out of old bits of scrap metal out in the shed turned out to be awfully similar to the brilliant and highly controversial theory developed by the anarchist anthropologist David Graeber in his 2014 Debt: The First 5,000 Years, except his had vast amounts of exemplification, archaeological and documentary (some of it reputedly wrong), backing it up.  

Purposely Naïve

 

Via Card-Cow Vintage Postcards.

Very peculiar impression from this New York Times column by Ezra Klein, "The Way the Senate Melted Down Over Crypto Is Very Revealing". I find it pretty informative, but I'm not sure what part of it is supposed to be the big reveal: the way the Senate melted down reveals mainly that

As I’ve said before: The Senate is a ridiculous institution, run by ridiculous rules.

Namely, the "meltdown" was over a provision the Bipartisan Infrastructure Bill or BIB allowing the Treasury Department to force the "brokers" of cryptocurrency transactions to pay taxes owing on the transactions, written by (GOP) Senator Portman and backed by the White House, and predictably there was an outctry of pain among those senators who can't stand that an unenforced tax law should ever be enforced. In fact there was some good faith in the objections, notably over the way Portman's language didn't say very clearly what a "broker" is in this context, and a compromise amendment was duly worked out, involving pro-crypto liberal Ron Wyden, which might well have made the taxes in question a little easier to evade. But the Senate couldn't vote on this amendment Wednesday night, for reasons that had nothing to do with cryptocurrency at all:

Joe Did What? Not Deficit Hawkery.

 

Bathtub boats, via Walmart.

So, as promised earlier in the week, to the Biden program: one reassuring thing we've learned over the pandemic year is that the federal government has a lot of fiscal and financial tools for dealing with an out-of-the-blue emergency. We may not be totally able to rely on the people, in Congress, in the White House, at the Fed, but the tools are really there—we don't need to devise a whole new system, the way the Union did (and the Confederacy failed to do) at the outset of the Civil War. The Federal Reserve Bank can keep interest rates near zero for years at a time, it seems, and Treasury can borrow more or less unlimited funds to deal with it, if Congress allows them to. And indeed, they've borrowed $4.3 trillion for Covid relief since March 2020, the last $1.9-trillion tranche signed by President Joe Biden, in a bill passed without a single Republican vote.

Which is a sign that Democrats may not be simply reverting "back to the days of paygo politics," as David Dayen complains, when they propose they propose some $4 trillion in tax hikes, all of it on the top 0.3% earners and on corporations, to "pay for" the planned new spending of the American Jobs Plan and American Families Plan:

“So, how do we pay for my Jobs and Family Plan?  I made it clear, we can do it without increasing the deficits,” Biden said last night. “What I propose is fair, fiscally responsible, and it raises revenue to pay for the plans I have proposed.” This was in a section where Biden attacked trickle-down economics, but even there, he condemned Trump for adding “$2 trillion to the deficit” with his tax cuts.

Rarely Asked Questions: How Does Government Pay Its Bills?

Winner of my "Best Visual Illustration of Rarely Asked Questions" contest, via EntheoNation.

I'm crazy about the Biden proposals introduced in Wednesday's Joint Speech, or as Susan Glasser/New Yorker says, in what seems to me like the most accurate summary I've seen,

To anyone who remembered last year’s Democratic primaries, the President’s first address to a joint session of Congress sounded as if Elizabeth Warren, and not Biden, had won.

and I'm going to want to take issue with scoffers, not necessarily representing "Modern Monetary Theory", including the generally very estimable David Dayen at The American Prospect, complaining of "that old deficit hawkery" in the way the plan is being sold.

I don't think it's that at all. But before I get there, I'd like to lay down some basics on the nature of government spending in a modern state that I think aren't well understood. because most of us think we already know, and as I've been learning recently we don't:

Rarely Asked Questions:

Q: How does the government pay its bills?

A: It has a checking account, known as the Fund Balance With Treasury (FBWT).

Q: Where does the money come from?

A: Everyplace that gives the US government money, including tax collections by the IRS and other agencies, fees it collects from various enterprises (think parking at national parks. but there's lots more), and of course money it has borrowed from the private sector by selling bonds and other kinds of federal paper. Unlike your checking account, it also includes all the assets the government owns that it can't easily convert into cash, generally inventory, and isn't supposed to sell, like stocks of toilet paper and paperclips and nuclear weapons and land, plus the loans it issues to veterans, students, small business owners, etc.

Q: So that's a lot of money, right?

Back to Piketty

 

Green Lantern Corps Quarterly 2/47.

One last word (I hope) on my economic views, and where they come from, and why I'm so dogged on the point, and then I'll try to stop.

I grew up in the belief that capitalism—the arrangement that divides society into two (slightly overlapping) groups, the very small group of the owners of capital, who control the economy for the purpose of profit, that is of increasing their capital stock, and the very large group of the rest of us, who are controlled by it, and must surrender to the demands of capital to survive—is a problem: unleashing astonishingly creative and transformative forces, as Marx and Engels put it in the 1848 Manifesto,

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization of rivers, whole populations conjured out of the ground – what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor? 

but doling out the rewards of this extraordinary progress in unequal fashion, keeping most of the "surplus product" for the owners, and giving everybody else just enough to keep them more or less quiet and docile, and creating disparities between them that have and them that have not that could only grow, and grow, and grow inexorably worse. 

It's the Debt, Stupid. I Mean the GOOD Debt.

Sichuan man with 13,500 copper cash, same as the Qin dynasty more than 2,000 years earlier, 1917, photo by Sydney D. Gamble via Wikipedia.

My mind is still stuck on money here, and all the wonderful things I've learned about it in the last couple of weeks, of which a lot is scattered around the comments and not necessarily quite coherent, starting with the point about where money comes from. Willie Sutton was right! It comes from the bank! 

Seriously—this was not always the case, and it was never the case as much as it is now, but banks make money, by which I don't mean physical currency, the bills and coins in your wallet that represent your money, which are of course manufactured by the Mint and the Bureau of Engraving and given to the bank to distribute to the public as a convenient way for us to move our money around, as in buying things, turning them over to the shopkeeper as a token of our exchange that she can send back to the bank to inform them that the money is now hers and have them adjust her account accordingly. 

That money, actual money, is not a thing at all, but a relationship, or potential relationship, between a person who has something and a person who wants something, the relationship of indebtedness: when I give the person my dollar bill, she is obligated to give me a cup of coffee, she owes it to me—or if I don't, and take the coffee anyway, I am obligated to her, and must bring her the dollar bill later on (these tiny credit operations hardly happen anywhere any more, I think, but they used to be a normal part of life, where they'd keep you a tab at the grocer and the barber and the bar and so forth).

Let Me Hear Your Balalaikas Ringing Out

Some folks probably thought I was joking when I spoke of Modern Monetary Theory as something that could lead to a situation like that of the countries in the Soviet orbit after World War II, and I guess I was trying to get a rise, anyway, but it's pretty amazing how close I came, based on a little (a very little) research—how much the monetary and fiscal system in the USSR itself, at any rate, worked the way MMT advocates claim monetary and fiscal systems are supposed to work, which just happens to explain some of the very serious problems that led to the country's demise in 1991.

Starting with the fact that, while Stephanie Kelton and colleagues wrongly suggest that the US government has sole responsibility to create all the money in the United States, in the Soviet Union it really did create all the money. That's because, for starters, there was basically only one bank, the Gosudarstvennyj Bank USSR or Gosbank, combining the functions of a central bank and a commercial bank. As the central bank, it issued all the currency, the physical rubles and kopeks, and as the sole commercial bank it issued all the credit, in particular loans, such as they were, to the state "enterprises" that constituted most commercial activity, so all the money is included in those two functions:

Reaganomics With a Human Face, Continued

Warren Mosler, godfather of MMT, at his St. Croix home, with Bloomberg's headline, "A Hedge Fund Guy Lefties Can Love". Really?

Commenter Iain Bason had some very useful issues with the Modern Monetary Theory post.

Caveat: I am not an economist, so don't take anything I say as authoritative! My impression is that the academic MMT people are upset at those who distort the theory that way, but I can't remember where I read about that. Maybe Naked Capitalism?

At any rate, I think you're mistaken (or maybe just glossing over the complexity) about budget deficits not causing inflation, as well as about printing money causing inflation. Even without the Fed simply buying Treasury bonds and then essentially burning them, which I understand it can and does do, simply having the same quantity of dollars being used in more transactions looks very much like increasing the money supply; just as having the same quantity of dollars sitting in a vault and not being used at all looks very much like decreasing the money supply.

The key insight that I gleaned from dipping into MMT articles is that financial constraints are a matter of accounting, which means that we can change them by changing the rules. (Not that that's necessarily easy; and changing rules tends to cause problems; but it isn't absolutely impossible.) Physical constraints, on the other hand, cannot be avoided. If I'm elected ruler of the universe on the promise to give everyone a pony, I may find it difficult to come up with the money to fulfill that promise, but I will find it impossible to breed enough ponies. (That is not an original example, but again I can't remember where I read it.)

My idea was you didn't need to be an economist to understand where the pop-MMT argument was going wrong, that it was chiefly a matter of rhetoric, and I may have been wrong about that, in the sense that the good-economics is as odd, intuitively, as the bad-economics, and may take more preparation than I thought. The post itself could have been a lot better written, as a matter of fact, and I think some of these issues arise because of problems in the writing, so I'd like to do some clarification, though it may mean sounding a lot more like an economist (which I'm not) than I wanted to.

Reconciliation II, continued

 

Red-Green, by Eskemar.

Two years ago Brad DeLong https://t.co/k1silHdHv5 via @voxdotcom I can't imagine Biden managed to read this but it's almost as if somebody did

— Screechy Ill-Speak (@Yastreblyansky) March 21, 2021

Now he's re-upped it, or the link to it, at his SubStack venue: that Vox interview, which I remembered quite well though I don't seem to have written about it at the time, about how old "Rubin Democrats" like himself need to give up and pass the baton to the democratic socialists, because his own way would never have another chance to succeed:

The core reason, DeLong argues, is political. The policies he supports depend on a responsible center-right partner to succeed. They’re premised on the understanding that at least a faction of the Republican Party would be willing to support market-friendly ideas like Obamacare or a cap-and-trade system for climate change. This is no longer the case, if it ever were. 

“Barack Obama rolls into office with Mitt Romney’s health care policy, with John McCain’s climate policy, with Bill Clinton’s tax policy, and George H.W. Bush’s foreign policy,” DeLong notes. “And did George H.W. Bush, did Mitt Romney, did John McCain say a single good word about anything Barack Obama ever did over the course of eight solid years? No, they fucking did not.”

Literary Corner: Time Will Tell

Mark, Rothko, No. 6 (Yellow, White, Blue over Yellow on Gray), 1954. Via WikiArt.

This Administration Will Not

by Donald J. Trump

According to some estimates, a national lockdown

costs fifty billion dollars a day and hundreds of

thousands of jobs every single day. Ideally,

we won’t go to a lockdown. I will not go.

This administration will not be going to

a lockdown. Hopefully, whatever happens in the

future, who knows which administration it will be.

I guess time will tell, but I can tell you,

this administration will not go to a lockdown.

Heritage Foundation on 20 April guessed that an 8-week national shutdown would lower economic output by $2 trillion, which only comes to $357 million a day, and cost 14 million jobs from February's 152 million total employed, or 250,000 jobs per day. This was under the assumption that the only region of the country seriously affected by the coronavirus was the New York area, and that this would remain true. 

In the event, in the real world as opposed to Heritage's modeling factory, total US economic output declined at exactly that rate, for a total of $3 trillion in the second quarter of 2020, while the number of jobs declined by 25 million or nearly 300,000 jobs per day, without a national shutdown, so if Heritage's estimates were correct a national shutdown would actually have led to a small but significant improvement, but never mind that. 

For the Record: Affirmative Action

InterTribal Youth/Young Native Scholars visiting UC San Diego and a La Jolla beach, July 2014, via UCSD News. 

That is, they think it's a way of giving a leg up to non-white people who aren't as good as white people. THIS IS NOT TRUE. Affirmative action is meant to find talented people at all levels whose talent is masked by systemic discrimination

— Swami Vivi-ka-Newman (@Yastreblyansky) February 28, 2020

second-rate white people get an advantage over talented minority members, and it's not only unfair but bad for society as a whole. Affirmative action is meant to correct for those biases and make things better.

— Swami Vivi-ka-Newman (@Yastreblyansky) February 28, 2020

For the Record: Miscellany

Twitter is like an intellectual equivalent of the southeastern Australian coast right now, deadly brush fires everywhere you turn demanding your attention so you don't know where to focus.

Why are these Democrats complaining about lawyer lawsuits? We have lawyer lawsuits all the time! You can't FILE a lawsuit without a lawyer!

Oh, FOIA lawsuits?

Never mind https://t.co/oDQGAN880e

— Dopes 'n' Babies (@Yastreblyansky) January 23, 2020

Trump doubling down on his belief that there were no US casualties in the Iranian raids on bases in Iraq, after the army announced that there were a number of cases of traumatic brain injury (TBI)