Comment: Setting time limits on unemployment benefits make the long-term unemployed five times more likely to find jobs.

Mosler: Removing support for labor=downward pressure on real wages+ no macro real benefit.

Mosler: It's true for fixed fx (fx = Exchange) regimes that don't care about real terms of trade or the real standard of living.

Comment: Take another look at the decelerating German export and income growth.

Mosler: US 1999, exports are the real cost of imports; sustain full employment, let trade adjust.

Comment: "Netherlands, Switzerland, Sweden, and Norway are all running surpluses that are larger as a proportion of GDP than Germany’s."

Mosler: I'd send them all a nice Christmas of thanks for supporting our real terms of trade!

Comment: Why do people (many economists included) assume that imports are a cost, rather than a benefit?

Mosler: they confuse monetary cost with real cost? And think the Federal deficit is a bad thing per se?

Mosler: Lew- subversive or doesn't know jack about real terms of trade?

Comment: How European Leaders Are Successfully Implementing Say's Law.

Mosler: Not to forget exports are the real economic costs and imports the real economic benefits.

Mosler: With a fixed exchange rate policy, the nominal interest rate is the 'real rate' (the own rate) for the object of conversion.

Mosler: Jobs are real costs of production, not benefits!!!

Comment: It's time to dethrone the dollar & bring back the #jobs.

Mosler: Imports real benefits, exports real costs -so cut taxes and/or hike spending to boost jobs instead of dethroning $US!

Comment: In today's Repubblica magazine (Donna), my piece on why Google, Tesla, Apple must pay back 4 risky state investments.

Mosler: The real beneficiaries are the users of the output. Most corporate taxes are ultimately highly regressive.

Comment: After taking into account the 16.2% drop in JPY since last July, the Nikkei Average is still up 15.4% in US$ terms.

Mosler: Almost like 'real' net income shifted from labor to exporters….

Comment: NPR couldn't find any economists worried about the Fed's exit strategy.

Mosler: It's not necessary or materially meaningful for the real economy in any case.

Comment: Donald Trump says "China’s de facto tariff... has cost the U.S. billions of dollars and millions of jobs."

Mosler: Remind him exports= real costs, imports= real benefits, it's about real terms of trade, + jobs are about fiscal.

Comment: More stimulative because stability bonds, if well designed, will boost potential growth & lower cost of capital.

Mosler: If so then because of the spending on real goods and services, not the means of 'finance'.

Comment: Right, even FICA tax cuts will eventually enrich the .1% as the money works its way thru from consumers to savers. Which is why.

Mosler: Don't forget to look first to what it does for real consumption and distribution of real consumption ;)

Comment: The drop in real rates we've seen since the March FOMC meeting two weeks ago is of a magnitude we've only seen five other times since 2009.

Mosler: And will likewise be of no consequence for the real economy.

Comment: At what point does Fed have to take into account upside risk to economic forecasts from the 40+ bps drop in real rates since March meeting?

Mosler: The economy is already decelerating and the real rate cut if anything most likely makes it worse.

Comment: Bernie Sanders wants a tax on carbon. Give that revenue directly to the people as a dividend, & we've got a humanity saving idea.

Comment: Yep. Take out the income effect and leave substitution effect in.

Mosler: Still looks to me like a massively regressive approach?

Comment: not if you redistribute on per capita basis.

Mosler: It still distributed consumption of real resources to the '1%'

Comment: 10-year real rate is back below zero. In a rational world we'd be building infrastructure.

Mosler: You build infrastructure when that infrastructure serves real public purpose, regardless of interest rates.

Mosler: Exports are real costs, imports real benefits. Sustain good paying jobs and real terms of trade via tax cuts or spending increases.

Comment: “Australia has to live within its means" when the Govt owns a bank that can never go broke, the expression is complete nonsense.

Mosler: Yes, it's true in 'real' terms, but inapplicable in 'nominal' terms.

Mosler: Exports are real costs, imports real benefits, so it's the US that's been winning. Victors get real things from losers.

Comment: Bullard in Australia: Deregulation, infrastructure spending and tax reform could improve U.S. productivity growth.

Mosler: And Medicare for all would dramatically improve real productivity near term more than anything else.

Comment: Using Fiscal Policy to Drive Trade Rebalancing Turns Out To Be Hard

Mosler: Use fiscal policy to sustain full employment and a Gov funded transition job- then optimize real terms of trade.

Comment: Warren, pundits speculating US losing its reserve status. In the event of a SDR type replacement, what happens to the public money monopoly?

Mosler: The currency monopoly remains. Worst case- real terms of trade diminish/real net exports increase.

Mosler: Exports are the real costs, imports the real benefits. It's about optimizing real terms of trade.

Comment: Now? Germany HAS been breaking EU rules for years: 8%+ trade surplus and not a word. “Germany now breaks more EU rules than any other country in the union”

Mosler: Not to forget exports are real costs, imports real benefits... ;) the problem is the fiscal rules, not trade.

Comment: I'm still waiting to see ONE person outside of those already advocating for a universal JG to admit there are macro-economically significant costs to existing involuntary unemployment that "may" rival any "cost" estimate of JG.

Mosler: Jobs are real costs. ;)

Comment: One thing I like about the Job Guarantee debate is that it represents an ideological evolution beyond the internet-standard MMT debate .It's like, ok, everyone agrees that popular notions of fiscal constraints are wrong. But now that we know that, what should we spend money on?

Mosler: The real gross cost to others of the job guarantee is the increase in real consumption of the participants which is most likely to be trivial.

Comment: So far all published critiques of JG assume US currently @ full employment

Mosler: And in any case the easiest time to implement JG is when the economy is presumed to be at full employment, recognizing there are never real costs, and only real benefits.

Comment: This is the US/Canada trade data for 2017, according to the US government. It shows the US with a modest $2.76b surplus. We have a very large dairy surplus with Canada as well, suggesting, by the president's own criteria, we are unfair to them. But I don't think that's the case.

Mosler: Not to forget imports are real benefits and exports real costs, it's better to pay less than more, and a trade deficit gives that nation more fiscal space. ;)

Comment: Exactly right Warren. But the way trade deficits are being demagogued, I don’t hold out much hope of people grasping that. Maybe we should just say when you pay $25,000 for an imported car, you get a car in return.

Mosler: If Trump wins, consequently our domestic prices rise more than our real earnings, negatively altering our standard of living. AKA reduced real terms of trade etc.

Comment: DJT's goal isn't to get US to pay more for stuff, it's 2get the other countries to remove tarrifs applied to USA products they import so USA products can compete "Fairly" in other countries,4business, like we allow here. This in turn circulates $ back to USA to buy more imports?

Mosler: Exports are real costs. It's about optimizing real terms of trade.

Comment: Market Power, Low Productivity, and Lagging Wages: The Real Drivers.

Mosler: Again, the 'labor market' is not a 'fair game', as people need to 'work to eat' while employers only hire if they like the 'profit prospects', so without some sort of 'support', real wages tend to gravitate toward subsistence levels.

Comment: Mosler is of the opinion that jacking rates prolonged the inflation of the 70s and deregulating natural gas was thing that broke it. Sounds right to me.

Mosler: The deregulation played a role but looking back at the charts it may have taken longer than It seemed to me at that time to kick in. The recession from real deficit reduction did the initial damage to demand.

Comment: "[Sunrise's] main goal is for the US to be 100% renewable by 2030 and they were demanding that of @NancyPelosi, also a Green New Deal, which is investment in the economy so that we can jump start clean energy jobs."

Mosler: I am in favor of going green but not addressing the productivity costs can keep it from happening. So, for example, I would 'combine' green energy conversion with Medicare for All's positive productivity shock which in real terms 'pays for it'.

Mosler: You can sustain full employment and output, and a permanent 0 rate policy, but real terms of (external) trade can be problematic in any case.

Mosler: But said debt need be no worse with your own currency, and less of an issue if you have your own currency and sustain higher levels of real domestic output?

Mosler: True. But the higher levels of domestic output from having your own currency work in your favor in support of your real wealth.

Mosler: Depends on how you define constrained but I do agree Turkey's fx debt reduces their real terms of trade potential vs. that of the UK. But both can quickly get to full employment and a 0 rate policy.

Mosler: Real GDP growth is still over 5% annually and has generally been higher than that, even with their high unemployment. Way better than the UK, Greece, Italy, Japan, US, etc?

Mosler: I just see they have $128 billion of fx reserves! That means the Gov has somehow directly or indirectly been selling lira to buy fx and driving the currency down.

Mosler: Probably to keep real wages down to support exporters with political clout

Mosler: And Scotland's 90% sterling debt under current institutional arrangements is a drag on its economy and will continue to be a drag with its own currency, though it would both be a lesser drag and diminish over time.

Mosler: And Scotland would be able to keep the population fully employed and sustain a 0 policy rate all of which would promote low inflation, a stable currency, and real gdp growth that would cause the fx debt to gdp to diminish over time all with a higher standard of living.

Mosler: My point remains that Scotland optimizes real wealth by sustaining full employment and if it isn't allowed to do this with sterling it can instead do it with its own currency, regardless of sterling debt and regardless of whether or not the new currency some day depreciates.

Comment: Here’s something actually worth airtime talking about: Half of the jobs in America pay less than $18/hour.

Mosler: Yes, as the labor market is not a 'fair game'. People must work to eat while business hires if it likes the profit prospects. Therefore without outside support real wages gravitate towards subsistence levels, as every student of game theory knows.

Mosler: The real wealth = domestic output plus imports minus exports. Not valuation vs some other currency that might be appreciating vs yours.

Comment: Donald Trump says if we abandon Saudi Arabia it would be a terrible mistake saying it’s about oil prices, arms deals & Iran. He claims 450 billion in Saudi deals but they’ve promised only 14.5 billion and he is ignoring CIA conclusion crown prince ordered Khashoggi murdered.

Mosler: Exports to the Saudis are real costs to the US, not real benefits. The President and the press all have it backwards.

Comment: Still can't get my mind to accept that exports are a cost to a country. Something counterintuitive about that kind of thinking.

Mosler: I’ve teased that economics is the opposite of religion- it's better to receive than to give. ;).

Comment: Carbon tax is meant to be restitution for harm done to the commons. In a sense, it's a pay-to-play fee - would marketing it as such make a difference? The fee should, at an absolute minimum, cover the cost of remediation. If it were up to me, there would be a premium added on for other negative externalities, such as impact on the health of humans and other creatures. Seeing the cleanup cost will reveal the size of the problem.

Mosler: Think about how the real costs are paid in real terms. Its labor hours being used in support of the consumption of those with money. I call that regressive.

Mosler: Same with real consumption.

Comment: Social Security Runs Short of Money and Ideas Fly on How to Repair It.

Mosler: *Fixing* social security is a good way to put a serious drag on the real economy.

Comment: It’s on - GreenNewDeal is now picking up steam in the Senate. I had an incredible time with @SenMarkey today, taking notes on his ‘07 Select Committee and how we can leverage past work into pushing for a GND today. He’s in. Thank you Sen.Markey for your climate leadership!

Mosler: Not to forget that even green jobs are real costs and not benefits. There is always more to be done than there are people to do it. Efficiency and productivity are about getting the most output from the fewest inputs.

Comment: The economy is not a closed loop. Global capitalism has lifted millions of people from poverty around the world, and continues to do so by creating jobs in manufacturing. Profits from re-exporting these products funds new jobs.

Mosler: Jobs are the real costs. Its real consumption of real output that ultimately define poverty and the standard of living.

Comment: I'm in favor of no payroll tax for small business owners and startups, as a way to ease their transition into a living wage model. Big business can afford it today... that's one way to deal with inequality.

Mosler: Not to forget that corporate taxes are in general ultimately regressive, and most often have high real compliance costs that remove real wealth from the macro economy.

Comment: Systematic transfer of our nation’s prosperity to the 1%. Same for the UK @UKLabour needs to do economics.

Mosler: As far as standard of living goes, it's about the distribution of real consumption, and I have yet to see any discussion in that regard.

Comment: The ultra-rich have rigged our economy & rigged our tax rules. We need structural change. That’s why I’m proposing something brand-new: An annual wealth tax on the tippy-top 0.1%. We’d get $3 trillion in new revenue to invest in rebuilding the middle-class. Let’s make it happen.

Mosler: It doesn't reduce aggregate demand so it doesn't add any fiscal space... :(

Mosler: So it doesn't at all address the real issue- excess consumption by 'the rich' (or anyone else), and, in fact is a useful distraction for 'the rich' that works to delay resolution of this real issue. :(

Mosler: We can gain $trillions per year of fiscal space by eliminating most of the parasitic financial sector by deleting the supportive institutional structure that created it. Not mention how Medicare for all likewise cuts $1 trillion in real costs.

Comment: How about: "anyone who opposes #GND, has to tell us why they insist on paying for the enormous economic devastation and human toll from hurricanes, floods, droughts, wildfires..." B/c we sure are and will continue to pay these large & unconscionable costs.

Mosler: Unfortunately we've let it go to the point we're likely to be paying for both (in real terms).

Comment: Yes. It's terribly unfortunate. Spending is a tax.

Mosler: Yes, the real tax is collected at the point of public spending. It's all in my book.

Comment: Not every MMT supporter is a lefty....

Mosler: In combo with full coverage Medicare4all, free public education, a full JG, narrow banking, $2,500/mo. minimum social security, etc. it's deflationary, and more than doubles the real standard of living of the "bottom" 50%.

Comment: Key point by @AOCEven if some jobs become obsolete, we have a moral duty to support those who did them. I'd add, not only in retirement, but if they wish to keep working, to transition them to new opportunities.

Mosler: Not to mention its work, a real cost, that produces the output that is the real benefit that adds to real wealth.

Comment: Warren, I get that higher rates add $ to the economy in the form of govt spending (assuming no fiscal budget cuts in response), but...Didn’t Volker hiking rates increase the dollar, which lowered oil prices, decreasing inflation in the early 80s.

Mosler: The progressive tax structure via inflation= fiscal contraction that shrank the 'real' public debt causing the recession that cut oil demand (helped some by the dereg of nat gas) too large for Saudi output cuts to counter caused oil to collapse from approx $40 to $15.

Comment: I think @wbmosler argues that it was mainly the deregulation of the gas industry that did it.

Mosler: On a look back, that and the recession from tight 'real' fiscal due to inflation cut global oil demand to where the Saudis couldn't sufficiently cut production to keep the price from collapsing.

Comment: Disney CEO explains how profits from merger w/ Fox will come from massive layoffs. As usual, layoffs' costs to workers, their families, & communities does not matter to capitalist. Private profits are far less than social costs but the profiteers decide.

Mosler: Jobs are real economic costs of production, not benefits. The crime against humanity is the state not supporting aggregate demand (total spending) at levels high enough to ensure business profits from providing well paid employment to displaced workers, etc.

Mosler: It's about optimizing real terms of trade. Have you read my (short, free, online) book?

Mosler: And how about export prices? At the macro level it's about real terms of trade. Internally it's a (very serious) distributional issue. Real wealth is domestic output + imports, - exports (all in real terms).

Comment: It’s not the tax cuts which made the deficit surge but welfare programs like Medicaid, Medicare... take a look into the budget.

Mosler: The deficit in real terms necessarily reflects the desire to net save financial assets.

Comment: Criticism of MMT is that it doesn’t apply to developing countries or those with non-reserve currency status as Frances mentions. These points have been addressed in the academic literature and at the 2017 MMT Conference by its core proponents.

Mosler: Yes, currency fluctuation doesn't per se alter real wealth. It does have serious distributional consequences best dealt with by adjusting internal institutional structure while sustaining domestic full employment.

Comment: Good piece on currency values and the trade deficit.

Mosler: Exports are real costs, imports real benefits. US real wealth goes up with real domestic output and real imports, down with real exports. Retaliating against the likes of China for not charging us enough an absurdity that undermines our real wealth and standard of living.

Comment: It's pretty simple. You either believe in a legal right to a decent paying job - a job guarantee, if you will - or you're against Sanders, AOC, DSA, and the GND, all of which have centered a JG in their policy platform.

Mosler: Or you don't understand that the labor market isn't a fair game, as people need work to eat and business only hires if it likes the returns, which means without some kind of support, real wages gravitate towards substance levels, as has been happening for maybe 40 years.

Comment: Eleven million people around the world were employed by the #RenewableEnergy sector in 2018, the International Renewable Energy Agency (#IRENA) reports from their latest analysis.

Mosler: Not to forget that jobs are real economic costs. They are "inputs."

Comment: The most promising growth sector of today's economy. Picture Republicans calling internal combustion ‘a hoax’ when Mr. Benz began selling his horseless carriages in the 1880s and you’ll get a glimpse of the significance of rightwing backwardness right now.

Mosler: It's critical, and I support it, but bragging rights are best awarded to getting it done with fewest number of labor hours. Jobs are real economic inputs and costs society. The benefit to society is the output. Think productivity! ;)

Comment: This is not "economic nationalism." What it is, is a country taking it upon itself to lead the way and show the rest of the world what can be done to address climate change. It's a lot easier to get your own country to do something then it is to get a bunch of countries to do it: I appreciate @ewarren pivoting from a question about jobs to the renewable energy transition, framing climate change as an issue of political economy & social equality. But I am disappointed with the economic nationalism that continues to pervade her thinking on these matters.

Mosler: The sooner they all get it through their heads that jobs are real economic costs and not benefits, the better... :(

Comment: “I appreciate @ewarren pivoting from a question about jobs to the renewable energy transition, framing climate change as an issue of political economy & social equality. But I am disappointed with the economic nationalism that continues to pervade her thinking on these matters”. Thea nicely summed up the cringey part of Warren's brief bit about industrial policy (!!) last night. If we really think the climate crisis demands a global response - it does! - the US can't "own" it.

Mosler: Except the jobs are a real economic cost, not a benefit. :(

Comment: ROI=wrong hurdle for fed govt investments b/c a monetary sovereign has no cost of capital or survival constraint. Int rate on govt debt=policy variable, not policy goal. & the higher the govt's ROI the lower the public sector financial balance unless curr acct improves more.

Mosler: And not to forget that higher Gov efficiency (getting the most from the fewest employees, etc.)= higher real wealth for the population.

Comment: Jimmy Carter broke the inflation by deregulating natural gas in 1978.

Mosler: That was a contributions factor, and the recession triggered by letting fiscal get way too tight in real terms (inflation adjusted) caused a large and immediate drop in oil demand.

Comment: Terrific policy. A carbon tax, 70% rebated to those with low & middle incomes and 30% used for green infrastructure, R&D, and adjustment. Nice. Senators to unveil carbon tax bill to generate $2.5 trillion in 10 years.

Mosler: It's still highly regressive in that it's the lower income earners who will be doing the real cutting back... :(

Comment: They may retaliate, but they are in a much worse position because they depend on us as the importers of last resort. That's the problem! @ewarren is right. So is @realDonaldTrump, but he has no attention span and is quite stupid.

Mosler: Not to forget that imports are the real benefits, exports the real costs.

Comment: Do you think the Volcker shock supported employment?

Mosler: Yes, and supported the inflation as well, which continued long after oil prices collapsed due to the higher rates. It was fiscal tightening (public debt shrunk in real terms) that caused the initial recession.

Comment: Agreed the so called "bleeding hearts" suddenly care more about "prices" rather than people having a productive job to shelter, feed, cloth, and educate thier family with dignity. Hard to pay less for something if you don’t have a job!

Mosler: Trade deficit= a productivity increase= fiscal space to lower taxes or increase public services to sustain full employment levels of aggregate demand. Imports are real benefits, exports are real costs- the problem is the policy response that turns a good thing into a bad thing.

Comment: This is characteristically sound in the classical Kaldor-Hicksian sense, especially over the short term. But the objection to vulgar Ricardianism isn't rooted in aggregative welfarism or global efficiency. It's rooted in distributive justice and national strategy.

Mosler: 'Distributive justice' is pretty much entirely a function of institutional structure including fiscal policy, which I suggest can be adjusted to desired 'distributive justice' without sacrificing real wealth via deliberate sub optimal real terms of trade.

Mosler: Exporters are Marx's capitalist. They have no interest in the well being of the domestic economy. They just want cheap labor and other inputs to profit from foreign sales. When exporters are in control, the domestic macro economy pays the price.

Comment: What if the export is a natural resource like oil. Would your comment apply to Norway?

Mosler: It's about optimizing real terms of trade- getting the most back in exchange for your exports. Tariffs do the opposite.

Mosler: Don't the New Keynesians assume constant real wages as a base case?

Mosler: And policy response determines whether a debt crisis spills over into the real economy.

Comment: 20% of population controlling 50% wealth, yes, because you could say they're using everyone else's wealth.

Mosler: How about distribution of real consumption? ;)

Comment: Without controls on capital zero interest rates leads to massive M&A activity. Massive deficit spending leads to massive trade deficits and the offshoring of U.S. production. But you don't see discussions of these problems.

Mosler: Imports are real benefits, exports real costs.

Comment: Take the low-hanging fruit, which is the fiscal space we currently have. I have cited Pilkington, who estimates $400-$500B per year and up to $1.5T if we're willing to tolerate as much as 4 percent inflation. There must be a Plan B in the event Congress won't raise taxes.

Mosler: Yes, and note that at 'full employment', real govt. spending 'crowds out' private sector real spending, via 'one time' increases in prices, etc.

Comment: Mosler: Tariffs are killing the global economy, with no pushback from the free trade Republicans or the opposing Democrats who also believe China is the 'bad guy'. Sadly, it reminds me of a child's game we called 'who can touch the softest.'

Mosler: In real terms, it benefits the importing nation at the expense of the expiring nations. Please read my 7dif book thanks!

Comment: Charts show from Jan to Jun Chinese exports to the US declined $30b (compared with the same period last yr) while US exports to China fell $12b. That’s a 19% decline for us exports and a 12% decline for Chinese exports. China was harder hit absolutely, US harder hit relatively.

Mosler: Not to mention exports are real costs to an economy, and imports real benefits...

Comment: How about we put a border adjusted tax which is am import tax that hits all countries equally and you can't cheat it with currency devaluation. Then let's talk if protectionism doesn't work. Half measures like tariffs on some Chinese products was doomed to failure from the start.

Mosler: That too would reduce our real terms of trade and reduce our potential standard of living. Have you read my short, free, online book?

Comment: The corona virus test should be made widely available and free. The corona virus vaccine, when ready, should be made widely available and free. Treatment for corona virus should be free, too. We're in a crisis. No one should have to pay for their corona virus health care costs.

Mosler: I agree there should be no charge, but it's not free in real terms, and it does use up fiscal space...

Mosler: Yes to rebuilding desired infrastructure, but always efficiently which means a minimum of jobs as jobs are real costs for an economy, and regardless of what the policy interest rate is.

Comment: Well, the article u reference mainly says it's the oil stocks & oil price which went up. Your comment was meant to say this will have bad repercussions for rest of economy?

Mosler: Think real terms of trade, along with how inducing higher fuel price now is highly regressive, etc.

Mosler: To my point that exports are real costs and imports real benefits: Corona virus Charts and News - Export of Medical Supplies In Short Supply Restricted .

Comment: And so were the costs of the millions who lost jobs onshore because there was no countervailing fiscal response to generate full employment.

Mosler: Real total consumption- the macro benefit- wasn't lost. You are referring to a distribution issue (and a serious one) due to policy response as you suggested.

Comment: If you are not gaining a silicon valley, you are losing one, to put it simply. And there is value, both socially & from POV of innovation, in a highly varied economy also (not to mention resilience). The "exports are real costs and imports real benefits" misses all these factors.

Mosler: I see that as a matter of time horizon- long term real terms of trade vs short term real terms of trade- vs 'missing factors'???

Comment: Fully agree that we can only defeat this virus by working together. We need funding for treatments and vaccines. This is why I decided to host an online pledging conference on 4 May. I hope that countries and organisations all over the world will contribute.

Mosler: You do know the ECB can immediately write the entire check? And with current available fiscal space there's no real cost?

Comment: The point was that @wbmosler said that the ECB can IMMEDIATELY write that check (see image). But due to a legal constraint (European Treaty), the ECB cannot do that. European Treaties cannot be immediately amended.

Mosler: The EU commissioner is pleasing for external funding for a medical emergency when her own ECB- the issuer of the currency- won't do it due to "mutual agreement" of sorts. :(

Comment: I agree but just pointing out you were being a bit harsh. I would not describe Warren as naive. I do think the justification of this “rate logic” requires too many ancillary explanations for past recessions and ignores the more obvious explanation that Rates too high crush demand.

Mosler: Look at the fiscal dynamics, both nominal and especially real of the later 1970's and you'll see a severe tightening under Carter.

Comment: When will the US go broke? Maybe the neoliberal fiscal hawks can answer.

Mosler: Eventually, the economy runs short of the government's money if the public deficit/debt is too small to accommodate savings desires... ;)

Comment: “respected and competent economists” who have all been repeatedly wrong about the size of the federal deficits, debt and interest rates. At the very least MMT has been consistent over the last 40+ years on how higher deficits will push interest rates down not up. Matches reality.

Mosler: Rates are set by a vote at the Fed...

Comment: My thoughts are very similar. I’m not big on MMTer policy proposals OR that they seem to ignore the credit markets, but I think the insights of UST being a money substitute, sectoral balance approach, and inflation being the true limit to favor spending are accurate.

Mosler: My entire time in the financial sector was in the credit markets. Here's my framework for analysis under the heading 'Mandatory Readings': A General Analytical Framework for the Analysis of Currencies and Other Commodities - The Center of...

Comment: If I may ask, I’m curious how you respond to this chart. When FF approaches 30y mortgage rate, recession follows. Something breaks down in the credit cycle in response to rate changes.

Mosler: The Fed raises rates until the fiscal cycle/auto stabilizers closes things down.

Comment: Appreciate the reply. Not sure I understand though. Do you agree that rising borrowing rates (say well above the inflation rate) reduces growth? I thought (perhaps mistakenly) you asserted rate hikes stimulate growth.

Mosler: In general I don't agree.

Comment: I agree but just pointing out you were being a bit hash. I would not describe Warren as naive. I do think the justification of this “rate logic” requires too many ancillary explanations for past recessions and ignores the more obvious explanation that Rates too high crush demand.

Mosler: Look at the fiscal dynamics both nominal and especially real of the later 1970's and you'll see a severe tightening under Carter.

Comment: "We were losing $500 billion a year to China, for years," Trump says, exaggerating the trade deficit with China for more than the 150th time. There has never been a $500 billion deficit with China in any year.

Mosler: Nor is it a loss, but in fact a real gain at their expense. Chapter 5.

Mosler: Market forces cause real investment to "crowd out" real consumption.

Mosler: Price signals from consumer goods and services in demand result in firms outbidding consumers for the real inputs of the investments that produce the additional desired consumer goods.

Comment: “Anything we can actually do, we can afford.” — John Maynard Keynes.

Mosler: You also have to consider the real costs of 'maintaining' it all.

Mosler: While I more than recognize the fundamental need for/benefits of collective action, I'm also well aware of the real costs....

Comment: When did hyperinflation occur in America?

Comment: I've said many times. The Fed won't allow accelerating inflation. You're not listening. And, government can borrow and spend, until interest payments crowd out all government spending, along with crowding out economic growth.

Comment: Can governments simply create and spend currency, with no debt and no interest payments? Of course they can. So your theories fall apart.

Comment: It's not a theory. If government creates money and spends, then when inflation accelerates, it has to destroy money and save by reducing spending in real terms, which it will never do. There are several consequences I explained before, if it doesn't do that

Comment: Govt loves, needs inflation. It's the only way to pay off its debt in real terms. It's the reason we went off the gold standard, so unlimited, unchecked amounts could be printed after USA was bankrupted by Vietnam. At a 2% inflation rate, real debt depreciates by 90% in 30yr.

Mosler: Inflation reduces the real value of the net money supply (public debt) slowing the economy until the net money supply (public debt) increases sufficiently. Check out the 1979 time frame when inflation decreased the real public debt and caused the recession

Mosler: Think real terms of trade. China has been the world's slave.

Comment: Are you prepared to pay your family’s share of the national debt? Nah. Gonna pass it on to my 4 year old daughter. And I’ll advise her to pass it on to her kids. It’ll be fine

Mosler: It was paid for (in real terms) when the goods and services were transferred from private to public domain.

Comment: The U.K. government first mobilises real resources by data entry into its spreadsheet, adding numbers denominated in its unit of account, the £. Taxes reverse the process, deleting numbers and driving demand for its currency. Smart folk have known this for decades.

Mosler: I like to begin the story a bit before that, where the UK Gov. first imposes a tax liability, payable in £ that come only from the Gov or its agents, which creates sellers of real goods and services needing the Gov's spending of £ to pay their taxes.

Comment: Situation similar to U.S. in 1980s. Apart from initial tax cut, Reagan administration raised taxes 8-10 times after that, largest in 1986. There was broad bipartisan support to "bring fiscal house in order"-- which provided the nominal anchor. It was this, not Volcker, that... .. permitted inflation to decline permanently (of course, Volcker brought inflation down temporarily by creating a temporary recession).

Mosler: You don't attribute that recession to the fiscal tightening? The real public debt contraction due to the inflation, bracket creep, etc.?

Comment: This was a really good discussion. MMTers sounding pretty mainstream, @AnnPettifor surely right to castigate them for absence of focus on the real economy ... how the wheel turns :)

Mosler: Seems like she hasn't read my 7dif book which is entirely about looking through the nominal to the real?

Comment: Okay, I am an applied microeconomist, not a macro specialist. And I have not read the book, although I will. When I do so, I will be looking for some reasonable explanation of how printing money, and the resultant inflation that would prompt, is not a hidden tax.

Mosler: The real (vs nominal) tax is paid at the point of state spending where real goods and services are transferred from private to public domain. ('Inflation' isn't a factor)

Comment: American taxpayers spend $107,575,000,000 more on police than public housing. Pass it on.

Mosler: I see adequate defense and public safety as highest order essentials that come first in the allocation of real resources serving collective public purpose, not to be thought of as 'tradable' in the way you suggest.

Comment: Austria has the right idea. Just sold 13 billion euros of 100-year debt with yields of less than 1% in its second-ever century bond offering. Huge demand from investors. How soon before 100-year bonds are the new 30-year...

Mosler: The real price is paid when Austria spends the 13b and real resources transferred from private to public domain. Also I wouldn't be surprised if the bonds were sold at a discount to their theoretical value inclusive of convexity, and were thereby a gift to the financial sector.

Comment: Thank you and I agree. The Job Guarantee aims to fit "jobs to people" befitting their needs and skills. One of the goals is to support people with disabilities and provide suitable employment opportunities for those who would like to work.

Mosler: I've also proposed that it serves public purpose to give disabled people priority for regular public sector employment, as it would increase total real output for the nation.

Comment: Wednesday’s blog post (15/07) is now posted (18:37 EAST) - MMTed Q&A - Episode 7 - featuring Dr Pavlina Tcherneva discussing the Job Guarantee with me.

Mosler: My comments: 1. Unemployment defines minimum 'fiscal space'. 2. Job Guarantee does not reduce the ability to import. 3. Currency depreciation does not reduce the ability to import or reduce real wealth, however it does alter internal distribution.

Comment: How does currency depreciation not affect ability to import?? Does that apply to all countries, or is this only applicable to reserve currencies?

Mosler: Real exports exchange for real imports, directly or indirectly, at 'world prices' even if you don't have a currency at all.

Comment: For example, it now takes more Scotch to buy a Ferrari. Just thinking about countries where they are dependent on mainly one export e.g. oil, as the relative price of oil to other items change, this is reflected in the change in currency value. Idk, just a thought?

Mosler: What you are pointing to is called real terms of trade which is a separate issue from exchange rates.

Comment: First, the question makes no sense. That’s because corona virus is already paid for. It’s being paid for by money creation, albeit imperfectly via QE. And it’s being paid for by more people saving more with the government. Because that’s what Gov borrowing really represents.

Comment: UK citizens save £70bn every year in ISA's etc but we don't imagine this in any sense as a huge debt problem for the banks and financial institutions. Savers like the safety of govt bonds, despite the lower rates.

Mosler: The real cost is the lost output and incremental consumption for treatments, etc. And it's path dependent, etc. :(

Comment: The very fact that you assume "how much debt" belongs in the conversation means you aren't debating full employment and GND "on their own merits" but have injected MMT into the debate right along with them.

Mosler: Presumes there's a real cost to a nominal accounting residual... ;)

Comment: Britain needs an industrial strategy to protect strategic domestic industries, but it’s the exporters that get the gongs, lobby MPs to put downward pressure on domestic wages and increase austerity.

Comment: But that doesn't change the fact that without addressing international competitiveness, a country will be constrained to follow a lower growth rate vs if it imported less/exporting more.

Mosler: The real limit to domestic output is the number of available domestic workers and their productivity. With floating fx, aggregate demand constraints are about fiscal balance/public policy which can be continuously adjusted to sustain full employment, etc.

Comment: If a countries CAD is ever expanding, a few problematic things can start to happen. One is that the country becomes very indebted. I'm not talking about government debt. I'm talking about private sector debt.

Mosler: Private sector debt can be resolved by bankruptcy at no real cost to the economy.

Comment: Of course there are real costs to bankruptcy and private sector financial crises.

Mosler: If any, only short term transition costs as the real assets shift hands.

Comment: The other issue comes with FX dealers. If CAD's are expanding every year, FX dealers are gradually exposed to more liquidity, FX risk and begin charging more for their services. What I'm talking about here is depreciation of the currency.

Mosler: Which doesn't alter real wealth but does involve internal distributional issues.

Comment: Depreciation is a not a painless process. Particularly as many CA imbalances are not driven by cost competitiveness, depreciation will mainly force lower consumption of imports, ie it will make people poorer.

Mosler: Not at the macro level. Only shifts in real terms of trade do that.

Comment: Did I ever once say that Balance of Payments issues negate what MMT says? I'm just saying that they exist.

Mosler:In any case full employment policy at all times is fundamental for optimizing real wealth.

Comment: So we should be advocating activist industrial development policy and trade policy.

Mosler: The point would be to optimize real terms of trade, real productivity gains, etc.

Comment: But the issue with Free trade is, if nothing is done about competitiveness, then because of things like increasing returns to scale, cumulative causation etc, imbalances will not only persist, they will indefinitely expand.

Mosler: It always comes down to optimizing domestic output and real terms of trade= full employment and enhancing productivity.

Comment: As in there are greater and greater costs to having your liabilities accepted, especially if capital flows have created speculative bubbles and debt burdens that can't be serviced. What about Balance of Payments Constraints/Crises?

Mosler: Thanks. There is never a case where trade issues would force the abandonment of full employment policy/optimizing domestic output of real wealth.

Comment: They are macro issues though, especially since what a country produces and what it imports matter for its long term growth prospects (because of returns to scale, cumulative causation)

Mosler: Yes, imports are real benefits, and domestic output is ultimately what's exchanged for imports, and real wealth is domestic output + imports – exports.

Comment: But we’re talking about a situation where CADs and BoP are causing problems for a country. So it goes too far to suggest that imports are always a benefit, that exports are a cost and that external issues are never of concern.

Mosler: CAD's and BOP's per se may be political problems of concern, but not real economic problems. Same with imports being real benefits and exports being real costs.

Comment: You’re talking about specific levels of specific imports at a specific point in time potentially not benefitting a nation. That’s a different argument. One that’s true almost by definition, btw. Importing vs imports.

Mosler: It's not about whether imports 'benefit a nation' in some general philosophical sense. It's about whether imports are 'real economic benefits' which, as a point of logic, they necessarily are when it’s presumed they are bought voluntarily. (vs incoming missiles, for example...)

Comment: This is why reliance on imports for a high growth rate is not the safest strategy and it's important to build up domestic manufacturing. Building up domestic manufacturing can in the long run be achieved by encouraging exports and discouraging imports.

Mosler: That falls under strategic considerations, as previously discussed and covered in my 7DIF book, while it remains that imports are real economic benefits and exports real economic costs.

Comment: Until 1934, gold was valued at $20.67 per ounce, or more accurately, the dollar was valued at 1/20.67th of an ounce of gold. Gold hit $2067 today, or a 100x increase in price (aka the dollar being worth 1/100th of what it once was.)

Mosler: It's not about what one dollar buys, it's about what all the dollars buy- the real GDP, so to speak (not that I look to GDP as a measure of success or well being...)

Comment: From whose perspective? Most of the currency devaluation over the past century occurred during times when real yields were negative, like in the 1940's and 1970's.What is the incentive to hold dollars (bank accounts, Treasuries) in that environment (which we have again now)?

Comment: What were your perceived drivers of that negative real yield for 10yr treasury, or the generally devaluation during 1940s

Comment: In the 1940s, the US basically did wartime MMT out of necessity. They ran huge deficits, built up huge federal debts, and the federal reserve locked treasury yields low at 2.5% even as inflation reached the double digits. As a result, they inflated away part of the debt

Mosler: That is, they inflated away the value of the net money supply, to the point where the public debt/net money supply equalled desired net savings of financial assets.

Comment: That is, they inflated away the purchasing power vs CPI of anyone actually holding Treasuries or bank savings deposits, as yields were forcibly kept below the prevailing inflation rate. People/institutions with substantial USD savings were hurt; those with hard assets preserved

Mosler: Either way with floating fx, the public debt is just $ (tax credits) in securities accts at the Fed-it already is 'the money'-so it's never about Gov 'paying it back' as it is with fixed fx. Gov/real domestic wealth doesn't gain or lose from changes in the price level

Comment: The worthwhile focus is avoiding the real loss incurred by those reliant on the swings in value. And the survival of the currency is eventually pegged to the survival and endurance of these participants or their avoidance of harm. Inflate slowly and short term transactional

Mosler: That's what the likes of social security are for. The currency itself has higher priorities that are jeopardized by prioritizing it an investment vehicle.

Comment: Currency and Treasuries are in part savings vehicles. If they fail to serve that purpose due to negative real yields, then they cease to be a store of value and instead are just a medium of exchange, and the incentive is to shift out of them until the devaluation runs its course.

Mosler: That all falls under "saving desires" as highlighted in my 7dif book and numerous other writings.

Mosler: Full employment optimizes domestic output and real wealth.

Comment: idea: we hire 3x as many teachers in America and reduce the class size to six to eight students--which is how we Greeks designed schools at the start. This would add ~9m jobs~$60k all in = ~$600b a year = ~$1,800 per American+ reduces unemployment & grows tax base, discuss!

Mosler: Jobs are real costs of production, output is the benefit. Think productivity.

Comment: When we talk about “national” household saving, we have to bear inequality in mind: Bottom 60% have neg savings. Top 20% responsible for c. 3/4. Macroeconomics is everywhere crosscut with class.

Mosler: Note that there is a larger difference in income than consumption. Not that income doesn't matter, but I've long suggested an increased focus on disparities of consumption which reflects real standards of living.

Comment: For 55 cents, USPS will deliver a letter anywhere in the country quickly and reliably. It offers more than half a million workers — 40% Black, Hispanic, and Asian — good wages and a dignified retirement. Private businesses should act more like USPS, not the other way around.

Mosler: I support funding the USPS, but don't forget jobs are real economic costs, and not benefits. The fewer people it takes to get the job done, the better off we all are. There is always more work to be done, public and private, than there are people to do it.

Comment: Semi-annual Reminder #4Makes no sense for public sector to minimize internal costs, like private firms. They are assigned a public purpose, and evaluated on if and how they achieve it. They can be cost-effective, but the goals are set independently by political decision.

Mosler: Not to forget that minimizing real costs allows 'fiscal space' to 'go further' allowing for that many more public services (or lower taxes).

Comment: The day is coming—and must come—when in this country, health care is seen as a human right, not just a job benefit.

Mosler: Single payer also=a massive real economic benefit, a gigantic productive gain/efficiency gain, and removes the drag of healthcare being a marginal cost of production. No bleeding heart arguments that invite scepticism required!

Mosler: For regions within a nation, Gov pubic services received are benefits paid for via tax liabilities and so are, functionally, imports. Gov spending on labor for production of its public services is a real cost for those regions and so are, functionally, exports.

Comment: "The theorized hard trade-off between unemployment and price stability did not appear to exist, which meant that America’s finest economic minds had been slowing growth and killing jobs for no good reason."

Mosler: Elementary game theory- People have to 'work to eat' while business hires only if it likes the return prospects= 'unfair game'= real wages gravitate toward subsistence without 'external' support= no P curve/real wage is a policy choice.

Comment: There's an asymmetry here, wouldn't you say? Lowering rates here (pushing longer yields down further) not likely to have much an effect. But increasing them from here is likely to be contractionary.

Mosler: Through what channel? Hasn't Fed research already determined that the link between real investments and rates is weak at best? And forward prices are a strong function of term rates.

Comment: It is but shows no theory is a universal panacea for all nations. US resource rich & could probably get away without exporting or importing. NZ needs to export surplus to be able to import things of modern economy can't produce itself. NZ's problem is local food sold at export prices.

Mosler: Just saying optimizing real wealth is about sustaining full employment and optimizing real terms of trade.

Comment: Let’s have a discussion about whether #MMT can add any value to analysis of the South African economy.

Mosler: SA can immediately move to sustained full employment and optimized real terms of trade and thereby optimize real wealth.

Comment: What’s your view on the Volcker shock and inflation thereafter?

Mosler: Fiscal tightened/public debt falling in real terms triggered recession, oil demand collapsed/oil price collapsed bringing down inflation and Carter's dereg of nat gas made it safe for utilities to convert keeping oil demand down.

Mosler: Look at it in real terms. Inflation lowered the real size of the public debt in the late 1970's to the point that in real terms the Gov reported a real fiscal surplus with a nominal deficit.

Comment: Donald Trump isn’t alone. The richest 1% of Americans is responsible for 70% of all unpaid taxes.

Mosler: Clearly, therefore, the tax code is functionally unenforceable and needs to be redone with a keener eye to enforceability, and to real compliance costs which are a material drag on our real standard of living.

Mosler: Real deficit spending is constrained by the desire to save/not spend income.

Comment: Yet game theory is also in people’s heads & doesn’t exist anywhere in the universe except for where there is consciousness making mistakes about things. So saying what some people think contradicts what others think is surely meaningless? Action makes thought real, even if wrong.

Mosler: In that, regardless of the rate of unemployment, 'the labor market' isn't a 'fair game' as people have to work to eat, so to speak, while employers only hire if they like the return prospects. So without 'external support' real wages gravitate toward subsistence levels, no?

Comment: To give a sense of what this would mean, higher debt than the current baseline through about 2035 but then leveling off around 150% of GDP. Real net interest stabilizing around 1% of GDP. But, again, would mostly focus on the next decade, forecasts have massive errors after that.

Mosler: If you are driving on the highway and you have to turn in 10 miles you don't turn now, you wait until you get there. Much the same with fiscal balance, and unlike managing the real economy which does call for real adjustments now for future outcomes.

Comment: I'm not sure. @wbmosler what is your perspective of the local Land Value Tax approach many Georgists advance. as an add. on to MMT Macro?

Comment: Given that Warren's favorite tax (finally payable exclusively in the currency issuer's currency) is one that is inescapable, one which cannot be 'evaded'

Mosler: And lowest real compliance costs and most progressive in real terms.

Comment: After reading another terrible newspaper article, a gentle reminder: Italy has not been living beyond its means! Since 2012, Italy has been recording higher exports of goods and services than imports. Italians consume less than they produce.

Mosler: Not wrong to call it exporting your real savings...

Comment: In this thread, I'll help you understand the relationships between *investing* and *inflation*.

Comment: Agree with others that this is a thread worth reading. Inflation is a tax that lowers living standards. Rarely do I hear cogent arguments that “we need more tax.”

Mosler: Inflation has distributional effects but does reduce real output or consumption.

Comment: New Zealand government writes to its central bank about stabilizing rising property pricescnbc.com.

Mosler: Seems shifting tax liabilities from income and sales tax to property taxes would dramatically reduce price pressures from non residents and investors and it could be drafted so residents pay about the same as they do now. Plus lower compliance costs= higher real wealth.

Comment: Biden has nominated Katherine Tai to be the next US Trade Rep. She is a House lawyer/staffer who knows the issues inside & out. She's a strong labor advocate, a stance that could crush a lot of countries in trade negotiations. But she has NEVER led an organization or negotiation.

Mosler: Wonder if she knows imports are real benefits and exports real costs....

Comment: I would resist the urge to rush into signing free trade agreements with other nations. Relying on a combination of tariffs and subsidies instead to protect and nurture U.K. industry. We live in an age where the weaknesses of the Free Trade era are evident. It’s time for Security.

Mosler: Security comes from full employment levels of aggregate demand and a JG with decent compensation, etc. leaving you free to optimize real terms of trade, mindful of national security concerns, of course. ;)

Comment: Invoking the limits argument in bad faith, or just badly, has also stoked the equally bad idea [emanating particularly from MMT] that there are no limits, or no practical limits, that taxes don't fund govt spending, and that you can use the printing presses and not worry about it.

Mosler: There are no nominal limits in that spending is a matter of crediting accounts. The real limit to spending is what is offered for sale with a price tag in your currency.

Comment: Death of the Phillips curve brings political foes together at the gravesideft.com.

Mosler: Elementary game theory says no P curve- people need to work to eat/business hires if it feels like it=not a fair game=real wages stagnate without some form of external support.