Category Archives: Modern Monetary Theory

Pointers to the Philosophic, Mathematical, and Scientific Bases of Lonergan’s Functional Macroeconomic Dynamics

Being is the objective of the unrestricted desire to know.  Being is intrinsically intelligible and one. Apart from being there is nothing.

Intelligibility is the very essence of unity.  Intelligibility is intrinsic to being and, at the same time, it is the essence of unity.  Formal intelligibility is form; it is the unity of unification or of correlation.  Correlation is abstract; it constitutes the implicit definition of explanatory terms by their functional relations among themselves.

“Functional” is for Lonergan a technical term pertaining to the realm of explanation, analysis, theory;  … Lonergan (identified) the contemporary notion of a “function” as one of the most basic kinds of explanatory, implicit definition – one that specifies “things in their relations to one another” … [CWL 15, 26-27  ftnt 27]

The economic process is an aspect of being.  The immanent intelligibility of the dynamic economic process is the essence of the process’s unity.  (Continue reading)

Elizabeth Warren’s Advice to Jerome Powell; Sentiment Without Intelligence

The Wall Street Journal of 7/25/2022 featured an article by Senator Elizabeth Warren:  “Jerome Powell’s Fed Pursues a Painful and Ineffective Inflation Cure.” Because she lacks an objectivenormative, abstract, explanatory theory and, thus, fails to understand the functional interdependencies constituting the organic economic process, particular arguments in her article are a) sometimes contaminated by psychopolitical wishful opinions, b) often ignorantly one-sided because she is unaware that some policies have double edges, c) sometimes contradictory of her other arguments, and d) in at least one case, supercilious.

E. Warren suffers from the same plight as Thomas Picketty. To satisfy her responsibility to the public, she needs to achieve a scientific understanding of the organic economic process; she needs to get a “grip.”

We are at the heart of Picketty’s plight: he has no clue of the needed grip on the grounds of the inequality in history.  So, what else can he offer but a centralist solution, taxation, to history’s drunken careening. (McShane, Philip, Picketty’s Plight, 53)

In equity (the basic expansion following the surplus expansion) should be directed to raising the standard of living of the whole society.  It does not.  And the reason why it does not is not the reason on which simple-minded moralists insist.  They blame greed.  But the prime cause is ignorance.  The dynamics of surplus and basic expansion, surplus and basic incomes are not understood, not formulated, not taught….. [CWL 15, 82]

(Continue reading)

Modern Monetary Theory Is Backward; It Creates “Illegal” Superposed Circuits

Preliminary note: In this section we are addressing the proper understanding and management of the economic process in normal, non-pandemic times.  We affirm that the recent pandemic called for extraordinary measures.

xxxxxxx

Unwittingly, first out of ignorance, more recently as necessitated by a pandemic, and most recently out of continuing ignorance, some nations, including the U.S., have wandered into the ultimate menace to the financial system, the spending without constraint blessed and recommended by unscientific. so-called Modern Monetary Theory. (Click here and here) The systematic result of MMT’s unconstrained printing of money, unjustified by corresponding, concomitant production of goods and services, is rampant inflation in prices for a) goods and services and/or b) financial assets.  (Continue reading)

Facing Facts: The Ideal Of Constant Value Of The Currency vs. The Fact Of Inflation

 

We have recited some aspects of the dynamic economic process:

    • (Dummy) money “must be constant in exchange value.”
    • Prices alone do not explain the economic process. Prices must be interpreted in the light of those significant variables which actually explain the economic process.
    • The economic process of production and exchange always is the current, purely-dynamic process
    • The economic process is an organic whole
    • The process has an exigence for a normative pure cycle of expansion.
    • Equilibrium requires the keeping of pace and balance among interdependent flows of products and money
    • Scarcity is the normal cause of inflation
    • Maladjustment of incomes is the maladaptive cause of inflation
    • Just as the surplus phase of the expansion is anti-egalitarian in tendency, postulating an increasing rate of saving, … so the basic phase of the expansion is egalitarian in tendency; it postulates a continuously decreasing rate of saving [CWL 15, 139]
    • The central adjustment to the respective phases of the process may be formulated as adjustment of I”/(I’ + I”), the ratio of surplus income to total income
    • Interpreters of prices must distinguish between real and relative price increases monetary and absolute changes in prices We have recited some aspects of the dynamic economic process: (Continue reading)

Economics Is Economics, Sociology Is Sociology, Politics Is Politics; A Is a Distinct Science; It Is neither B nor C

On Friday, October 8, N. Gregory Mankiw’s Blog featured Nick Romeo’s interesting article entitled “Is It Time For a New Economics Curriculum?”  Greg provided a quote from Romeo’s paragraph re  Jonathan Gruber’s take on CORE.

Jonathan Gruber, who teaches introductory economics at M.I.T., felt that CORE might introduce too much complexity for a foundational course. He worried that so much emphasis on the ethical and political dimensions of economics might make the subject feel like a different discipline altogether. “The question is, do you want the students to feel like they’re coming out of, you know, to be blunt, a sociology class or an economics class?” Gruber said.

Continue reading

Bootcamp To Educate the House, Senate, Federal Reserve, and Bureau of Economic Analysis, Especially Janet Yellen and Jerome Powell

One Week Bootcamp

Restricted to persons with solid backgrounds in mathematics and the natural sciences

Topics

Continue reading

Jamie Dimon’s Challenges to Himself and to the Nation

4/7/2021:  Yahoo Finance today featured an article by Julia La Roche entitled ‘The fault line is inequality’: J.P. Morgan’s Dimon calls for fixing America’s ‘self-inflicted’ problems.  La Roche was reviewing the Public Policy section of Dimon’s 67-page Chairman and CEO Letter to Shareholders.  Mr. Dimon seeks to end the nation’s self-infliction of problems threatening the culture, the economy and the polity.  He particularly regrets “false arguments of fanatics, the certitude of ideologues and cycles of intolerance.” Continue reading

The Cycle of Basic Income

We ask all serious graduate students and professors of macroeconomics, government economists, conscientious politicians, poorly educated journalists, and financial-talk-show “pundits” to please read Bernard Lonergan’s Macroeconomic Dynamics, (CWL 15), Section 26, “The Cycle of Basic Income”.  That section addresses several important economic issues:

  • the adjustment of the  rate of saving to the phases of the pure cycle of expansion in the economic process
  • the complementary mechanism of changing prices
  • the significance of a relative and an absolute rise or fall of monetary prices
  • the difficulty with the theory of manipulating interest rates in that a)  it lumps together a number of quite different things, and b) overlooks the order of magnitude of the fundamental problem
  • the ineptitude of the procedure of manipulating interest rates.

Then, after the first reading, please read that section a second time.

Thank you.

[CWL 15] Lonergan, Bernard (1999), Macroeconomic Dynamics: An Essay in Circulation Analysis, ed. Frederick G. Lawrence, Patrick H. Byrne, and Charles Hefling, Jr., vol 15 of Collected Works of Bernard Lonergan, (Toronto: University of Toronto Press)

Bloomberg TV and Intelligence Squared’s “That’s Debatable” — “Stop Worrying About National Deficits”

Recently on Bloomberg TV, Intelligence Squared’s That’s Debatable” featured  James K. Galbraith, Stephanie Kelton, Todd Buchholz, and Otmar Issing arguing for and against the proposition of the program’s title, “Stop Worrying About National Deficits”. (Continue reading)

Alberto Bisin Re Modern Monetary Theory

On Saturday, 12/19/ 2020, John Cochrane‘s blog “Bisin on MMT Rhetoric” cited Alberto Bisin’s review of Stephanie Kelton’s Book “The Deficit Myth. “  Alberto Bisin contends, as do we, that So-Called Modern Monetary Theory, as espoused by Kelton and others,  does not qualify as a theory.  Cochrane quotes Bisin:

The book should be seen as a rhetorical exercise. Indeed, it is the core of MMT that appears as merely a rhetorical exercise. As such it is interesting, but not a theory in any meaningful sense I can make of the word. The T in MMT is more like a collection of interrelated statements floating in fluid arguments. Never is its logical structure expressed in a direct, clear way, from head to toe.

Continue reading