Jeremy Has Spoken (But Rest Assured, Pro Money Management Isn’t Listening)

Jeremy Grantham endeared himself to resource depletionists once again this week, as the longtime manager at asset giant GMO confronted the issue of limits, in a finite world. | see: Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever.

I wrote about Grantham’s original revelations in late 2009, when he first disclosed to the public his views on resource depletion, and in particular peak oil. Like the rest of us who’ve attempted to explain the trailing, cultural normalcy bias that’s been built up over the past 100 years, however, Jeremy’s discovered that having spoken—even from the mantle of GMO—doesn’t mean asset management professionals will pay attention. From my 2009 post: Peak Oil and Professional Money Management:

I was unsurprised to read Jeremy Grantham’s passing lament in his latest Quarterly Letter, that, his previous remarks on resource depletion went almost completely unnoticed, as though his words “had disappeared down a black hole.”

The decision of the University of Texas to trade a billion US Dollars for gold, revealed last week, remains an outlier among a profession otherwise stuck in Normal (Gauss). Surely Grantham knows that at Yale, at Harvard, and at CALPERS capital is being managed to optimize for relative gains among fellow asset managers. Worse, at a time of declining purchasing power among nearly all paper currencies (a feature of resource depletion) the profession continues to get away with posting nominal gains as the real losses mount.

The religion that makes this all possible of course is contemporary economic theory, with its belief in the infinite capability of credit. Indeed, the tie that binds all contemporary economists from Mankiw and Barro and Summers, to Krugman, Galbraith and DeLong is the view that economies are only restrained by man-made constructs–either regulatory or monetary. Hardly anyone believes in a physical limit that would permanently downshift future industrial growth, thus making current debt obligations either unserviceable, or unpayable. Grantham will come in for much uninformed criticism for these views. Or, like the rest of us, he’ll simply be ignored. But let’s be clear: the religion Grantham is up against is the belief in infinite resources in a finite world.

–Gregor

Sources:

Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever – Jeremy Grantham, GMO (free registration required).

Image: via comenter RDY, at The Oil Drum.

Further Reading:

Mr. Soddy’s Ecological Economy, Eric Zencey, 2008.

Friday Notebook: The New Simon-Ehrlich Teaching Story

  • http://biophilic.blogspot.com/ Burk

    You may not be familiar with this, but economics always deals with finite resources. That is the nature of the problem. Then it allocates them by price or other means in a more or less optimizing way. While dealing with an absolute energy shortfall will be difficult, we have the technology to make up the difference by conservation and scaling of existing non-fossil technologies. Society and economics will go on, I think.

  • Anonymous

    Great post Gregor. Many people especially Americans think things can continue on, like they have, despite the fact we live in a finite world. And some seem to think technology will save us. Sorry, that won’t be the case.

    @ Burk – you might want to start reading Kunstler, too understand the full scope. Here’s a good post to read: http://kunstler.com/blog/2011/04/blowing-green-smoke.html

  • gregor.us

    Cheers. General readership at gregor.us has not seen alot of my longer essay material, addressing the big themes of the past 300 years, and how fossil fuel abundance created the stability that Burk believes has always obtained with humans–and their genius for problem solving.

  • gregor.us

    “You may not be familiar with this, but economics always deals with finite resources.”

    You are delightful, as always, in your assumptions. :-)

    http://stocktwits.com/macroweekly/ExitfromNormal-August-15-2010.pdf

  • http://biophilic.blogspot.com/ Burk

    Thanks for the link. I think there is an analytical problem with… “But the declining marginal utility of monetary stimulus appears to have finally caught up to our debt-ridden financial system.”

    It is true that the monetary side of pumping reserves into the banks (and QE2) has been useless. The MMT school (see Bill Mitchell) most clearly shows that lending is never reserve-constrained, so bulking up reserves may reduce solvency/liquidity risk, but doesn’t do anything for lending, if risk-aversion and deleveraging rules the day.

    So the only effective stimulus has been actual government spending- the fiscal and tax spending programs of the last couple of years, which came in at roughly 1.5 trillion. Since much of that was offset by local and state retrenchment, the net stimulus was simply far too small to be positively effective, though it did stave off depression. Also, giving money to the rich, who tend to save it, also fails to have the intended effect.

    There are ten million unemployed. Lack of fossil fuels is no bar to employing them, if either the economic system or the state directed their employment to solar installation, giving pedicures, or clearing invasive plants, or … whatever it is that might be useful to their fellow man. The fact that they are not employed is a policy failure of the government, which has neither set up sufficient direct jobs programs nor done sufficient Keynesian demand replacement through the private economy (but which it could easily do, being monetarily sovereign and facing no problem on the interest rate or inflation fronts).

    Lack of fossil fuels is surely a cause for economic re-alignment, but not for lack of employment or, really for economic growth. The whole mindset of financial limits is fundamentally mistaken, when we do face some real energy limits- which would be best met by intensive economic activity in scaling alternative energy, doing research, etc. all of which would raise economic growth instead of lowering it.

    The narrative of financial limits is a purely political one, put out by the right to combine its goals of smaller government, fewer public goods, and lower taxes on the wealthy.

    Best wishes…

  • gregor.us

    I’m on record as being an advocate of Keynesian spending under the provision that the investment lowers the overall cost floor of energy inputs to society.

    The problem with MMT is that, as the ultimate articulation of Keynesianism, it is naive about energy resources as inputs to the economy. MMT proposes that it’s no problem to distribute as many Resource Claim Checks (cash) as possible to get the economy moving. From a political standpoint, I don’t disagree. From a biophysical standpoint, I do–disagree.

    “There are ten million unemployed. Lack of fossil fuels is no bar to employing them.”

    Obviously I disagree. I started out as an Economics major in university, then studied markets via a concentration in Social Anthropology. I have been reading econ theory and studying market theory for 30 years. My opinions are not tossed off. The work on energy’s component of industrial economies has already been done. Soddy’s work in 1921 (Nobel Prize winner) and of course Jevons among the examples. The United States has been super leveraged to fossil fuels and oil in particular. MMT will not save anyone from the fact that an economy leveraged to cheap oil has run into a wall as it confronts expensive oil.

    Rest assured I have long contemplated a non-industrial society, a transition to “more expensive” energy sources, and the bringing back home all the externalities associated with fossil fuel useage. Like you, I am not constrained from imagining a very different economy. I’m all for it. But I’m the minority! :-)

    We can have full employment, if we choose that as a society. As long as one cares less about output, and profits as historically organized. However, you remain overpersuaded imo about the magic of distributing Resource Claim Checks as a solution. Indeed, I suspect very strongly that the framing you bring to these issues disables you from seeing the point of this post.

    BEst, G

  • http://twitter.com/CondorOptions Jared Woodard

    I am really disappointed in the lack of Pearl Jam puns in this point. If not now, Gregor, when?

  • http://biophilic.blogspot.com/ Burk

    “MMT will not save anyone from the fact that an economy leveraged to cheap oil has run into a wall as it confronts expensive oil.”

    I agree.. they address different issues. Distribution of available resources is a different question from whether the total level of inputs is going up or down. Easier when going up, but still… Anyhow, the metaphor of a “wall” is misleading if prices are going up and we have to, as we must, increase our elasticities in response. It will be more or less gradual and that is what economies/prices are all about. Why “free marketeers” are so petrified about it is beyond me.

    Mostly, I was just commenting on the proposition that Keynesian stimulus was somehow played out in a policy or financial sense rather than a political sense.. that is not true. The Resource Claim Checks you allude to remain in short supply, as evidenced by the overall inflation and interest rates. Those metrics have little to do with whether real resources like oil are short or not, in our highly diversified situation.

    Whether distributing more of them “lowers the overall cost floor of energy inputs” is not really relevant to that question.. you are mixing in a policy/political diktat that, if I understand correctly, is certainly important for future overall prosperity, but not to the distribution of that prosperity, for instance to those without work.

    I might ask what that means… the overall cost floor… Do you demand that energy become cheaper instead of more expensive? That would be a fantasy, unless you know something about fusion energy that I don’t! If coal is your answer, that has many other unacceptable costs. Maybe fewer yachts and mansions will be built, by people instead employed holding mirrors in the desert to collect sunshine, etc.

    Ok, so one also can ask about gold. I assume you laud the U of Texas for their foresight? With inflation nowhere in sight, due to enormous financial hole we are in? Why gold? Can we burn it? One would get the impression that you think we have learned nothing about managing inflation over the decades.

  • gregor.us

    Of course I laud U of T for buying gold and it has little to do with inflation risk alone. It mainly has to do with the role Gold can play as a fast growing system that took on too much debt transitions to slow or no growth. That transition presents enormous risk to the financial complex, and the currency. The gold bet is about instability. Or, as I like to put it, the Exit from Normal.

    We are leaving the world of Gauss.

    BTW Burk, just by way of example, the money managers of CALPERS and the political complex in California were all managing debt, spending, and investment based on a future world that was presumed to be Normal, i.e. like the past 100 years with strong and always rebounding industrial growth. They were wrong. And it was not a surprise they were wrong. Though, it was a surprise to them.

    I have every confidence that MMT, while mainly correct as a descriptive model (of how we’re running things) will fail as prescriptive model. It’s already underway.

    BTW, advocacy of MMT is totally incompatible with being green or being pro sustainability. Is that not clear to you?

    G

  • gregor.us

    I wanted people to make their own, without me having to do the heavy lifting. :-)

  • http://pulse.yahoo.com/_OS7T27Z4YCADJUADK4BXPZJWZI VS

    For anyone who hasn’t read this, it is on GMO’s website and is well worth the read. There is a good amount of history and statistics in his analysis and the debate he raises is whether we are genetically predisposed to overconsume and not thing long term vs. whether we have an incredible ability to be innovative when we need to be so we will be bailed out through technological innovation as prices rise. – Adrian Meli

  • http://biophilic.blogspot.com/ Burk

    Re: exit from normal. We were supposed to be at the end of history too, but somehow, history just kept chugging long. Here is a prediction: inflation-adjusted GDP will continue to rise in the US and the world at large for the next fifty years, more or less continuously, even in the teeth of peal oil. (Barring political idiocy, which we are currently flirting with, admittedly.)

    The question is whether we have alternatives to fossil fuels, and the fundamental physical fact is that we do, even if they are a bit more difficult to generate. We are spending many multiples of what we used on health care as well. Has that bankrupted us? Have we “hit a wall”? No- we just allocate what we need/wish, based on the relative costs & resources. Choices, choices!

    I think the MMT school is fully compatible with environmental responsibility. Again, you are comparing incommensurate things. Macro-economics keeps on going whether the population, resource base, etc. is rising or falling. MMT prescribes continued deficits at the current time only because of the macro settings: world-wide savings desires in dollars, high unemployment, deficient demand, etc. These dictate expansionary monetary and fiscal policy.

    What we do with our money is a separate issue from having enough in the system to stave off deflation and economic contraction. The government could spend its resources on renewable energy and climate mitigation, rather than on fossil fuel subsidies. Corporate governance could be changed to further the public interest. Carbon emissions could be taxed, either raising revenue, or with various neutralizing offsets. All these are policy and political choices of distribution and regulation. All MMT says is that the financial constraints are not what the mainstream thinks they are- they are inflation, not solvency or public debt.

    Japan is the poster child for lagging growth due to insufficient stimulus and insufficient financial resolution after a bubble/bust similar to ours … but their public debt is not the problem. It is savings the people like to hold. Sorry to run on, but we are close to the same wavelength here, I think.

  • http://biophilic.blogspot.com/ Burk

    Oh, your question about California is very appropriate. The political complex in California was misled by the extremely cyclical revenue stream, which is heavily weighted to the marginal stock-market gains/losses of the rich. They chose to put their heads in the sand with respect to the overall business cycle, as they were instructed to do by Alan Greenspan.

    As for Calpers, they have been doing fine, keeping a long-term view. One can quibble about what their long-term actuarial assumptions should be .. 8%, 7%? 5%? I would be open to some downward adjustment. You seem to be inclined to suggest something like -5%. I would disagree- that is not realistic, making far too much of a single resource deficiency, though it might sell newsletters.

    http://calpensions.com/2010/11/18/legislative-analyst-calpers-state-rate-wont-soar/

  • Anonymous

    MMT is not prescriptive. It is a description of a modern fiat monetary system. Rejecting it is like rejecting the fact that 1+1=2.

    And MMTers are very vocal about the fact that the Saudi’s control prices and could inflict substantial harm on the US economy via their energy policy.

    It’s pretty obvious that you don’t understand how a fiat monetary system works and have no clue about MMT.

  • Anonymous

    Spent the last 20 minutes or so reviewing your work from the last few years. You’re a classic fear mongerer. You’ve been talking about depression and economic collapse in the USA since the March 2009 lows. You’ve been singing the old Zero Hedge tune for too long. Fiat collapse, bond demise, sovereign debt debacle in the USA, etc. You’ve been horribly wrong. Horribly. And the only reason you’ve been right about the commodity trades is because the global economy is far healthier than you believed. The world didn’t collapse and run into hard assets like you thought they might. In fact, the commodity trade has worked for the exact reasons you thought it wouldn’t! A quote of yours from 2009 has all the classic hyperinflation fear mongering tone to it except you’re not bold enough to actually say that you expected hyperinflation:

    “People truly believe the US government can service US Treasuries in a new US depression?
    Not a chance. The best the US Government would be able to do is print up money for rollovers and
    interest payments. Anyone who is still holding USTs at that point will be willing to accept confetti,
    and, the mockery that comes with monetization. The bottom line is that if someone tried to make
    the case that you could ride German Bunds all the way to a zero yield as the German economy totally collapsed and that German Bunds would maintain and even increase their purchasing power
    because of “deflation” you would just laugh at that person. The UK is no different, as this week’s
    events have shown. And the US is no different. We are not exceptional.”

    Meanwhile, there has been no funding crisis in the USA and no collapse in government bonds. How wrong was that 2009 analysis?!?! Being right about price doesn’t mean you are a good analyst. Sometimes, it just means you have been lucky. And in your case, it’s pretty clear that you’ve been lucky. And if you understood MMT you’d understand how a modern fiat monetary system works and you never would have written such foolish analysis to begin with.

  • Anonymous

    Spent the last 20 minutes or so reviewing your work from the last few years. You’re a classic fear mongerer. You’ve been talking about depression and economic collapse in the USA since the March 2009 lows. You’ve been singing the old Zero Hedge tune for too long. Fiat collapse, bond demise, sovereign debt debacle in the USA, etc. You’ve been horribly wrong. Horribly. And the only reason you’ve been right about the commodity trades is because the global economy is far healthier than you believed. The world didn’t collapse and run into hard assets like you thought they might. In fact, the commodity trade has worked for the exact reasons you thought it wouldn’t! A quote of yours from 2009 has all the classic hyperinflation fear mongering tone to it except you’re not bold enough to actually say that you expected hyperinflation:

    “People truly believe the US government can service US Treasuries in a new US depression?
    Not a chance. The best the US Government would be able to do is print up money for rollovers and
    interest payments. Anyone who is still holding USTs at that point will be willing to accept confetti,
    and, the mockery that comes with monetization. The bottom line is that if someone tried to make
    the case that you could ride German Bunds all the way to a zero yield as the German economy totally collapsed and that German Bunds would maintain and even increase their purchasing power
    because of “deflation” you would just laugh at that person. The UK is no different, as this week’s
    events have shown. And the US is no different. We are not exceptional.”

    Meanwhile, there has been no funding crisis in the USA and no collapse in government bonds. How wrong was that 2009 analysis?!?! Being right about price doesn’t mean you are a good analyst. Sometimes, it just means you have been lucky. And in your case, it’s pretty clear that you’ve been lucky. And if you understood MMT you’d understand how a modern fiat monetary system works and you never would have written such foolish analysis to begin with.

  • Anonymous

    Spent the last 20 minutes or so reviewing your work from the last few years. You’re a classic fear mongerer. You’ve been talking about depression and economic collapse in the USA since the March 2009 lows. You’ve been singing the old Zero Hedge tune for too long. Fiat collapse, bond demise, sovereign debt debacle in the USA, etc. You’ve been horribly wrong. Horribly. And the only reason you’ve been right about the commodity trades is because the global economy is far healthier than you believed. The world didn’t collapse and run into hard assets like you thought they might. In fact, the commodity trade has worked for the exact reasons you thought it wouldn’t! A quote of yours from 2009 has all the classic hyperinflation fear mongering tone to it except you’re not bold enough to actually say that you expected hyperinflation:

    “People truly believe the US government can service US Treasuries in a new US depression?
    Not a chance. The best the US Government would be able to do is print up money for rollovers and
    interest payments. Anyone who is still holding USTs at that point will be willing to accept confetti,
    and, the mockery that comes with monetization. The bottom line is that if someone tried to make
    the case that you could ride German Bunds all the way to a zero yield as the German economy totally collapsed and that German Bunds would maintain and even increase their purchasing power
    because of “deflation” you would just laugh at that person. The UK is no different, as this week’s
    events have shown. And the US is no different. We are not exceptional.”

    Meanwhile, there has been no funding crisis in the USA and no collapse in government bonds. How wrong was that 2009 analysis?!?! Being right about price doesn’t mean you are a good analyst. Sometimes, it just means you have been lucky. And in your case, it’s pretty clear that you’ve been lucky. And if you understood MMT you’d understand how a modern fiat monetary system works and you never would have written such foolish analysis to begin with.

  • gregor.us

    I disagree that MMT-ers do not invoke the model prescriptively. Galbraith, in particular, invokes it prescriptively. You can also lose the “you don’t know how a fiat money system works” line of argumentation. MMT is nothing special that can’t be understood in a week’s time. Besides, you overlook that I specifically allowed its descriptive potential. And yes, my view is that MMT is quackery as a prescriptive. imo, Krugman is very close also to such advocacy.

    Oh, and BTW, the Saudis no longer control the price of oil. That’s antiquated stuff. They are not even the world’s no 1 producer, and haven’t been for several years. What’s changed is this: everyone controls the price of oil now.

    Best,

    G

  • Anonymous

    Sure, lots of MMTers prescribe fixes. But that is their personal view. The foundation of MMT is descriptive of a modern fiat monetary system. If you really understood it you’d see the difference. Pragcap is very good in this regard. No politics or prescriptions involved in their work.

    http://pragcap.com/resources/understanding-modern-monetary-system

  • gregor.us

    Sincerely, I do understand MMT. I came to MMT through Mosler in 2007-2008, by reading his work and watching his lectures. I have read a ton of material from practicing MMT-ers, and am familiar with the full employment thinkers. I am less hostile to these views than you might imagine, and yet, more dead set in my disagreement with MMT than I have expressed so far. In truth, all–not some–MMT practitioners in my view offer it as a prescriptive model.

    Now, as for your ad hominem that the writing of this blog, http://www.gregor.us, is reduceable to fear mongering is not supported. That’s your perspective. In truth, I have documented repeatedly through data the historic downgrade to the American standard of living seen not only through the last 10 years, but since the crisis unfolded. Your characterization of the global economy as healthy is not inaccurate. However, I have continually made a distinction between the global economy and the US economy. Especially through my essays on coal. Indeed, I have derided those who have suggested the developing world would crash. As they are not as indebted as the OECD, I have disagreed with that view.

    You are correct that I was wrong about the fate of US Treasury Bonds. So far. I did not sufficiently credit the power of the world’s reserve currency to maintain the game this far. However, you are quite incorrect that there has been “no problem.” Indeed, we are both incorrect. MMT does not describe how all monopoly issuers of currency will weather a financial crisis. Instead, it merely describes how the US, as issuer of the world’s reserve currency will weather such. Again, so far. Moreover, I have been pretty clear that the US could choose several ways to reneg on its obligations–on this blog–and clearly debasement has been the choice. No surprise.

    As is the subject of today’s post, however, I have long preferred to mark the world in real terms. Not nominal terms. In real terms, the purchasing power of US Treasuries have been been in decline all decade. I suspect you might find that quaint. I don’t. Operationally, real people living in the real world ultimately use financial savings to command real goods and services. Nominal gains are for quarterly reports, printed on fine paper.

    This is how I see the situation:

    http://stockcharts.com/h-sc/ui?s=$UST:$CCI&p=M&st=2001-01-01&en=%28today%29&id=p20551408072

    In a way I am thankful to MMT for finally having clarified the looming clash between resource scarcity and Keynesiansim. I assure you, if I did not hold the view that an anomalous, 300 year period of extraordinary energy surplus was coming to an end, I would be much more favorable to chartalism. However, that 300 year period not only produced unsustainable industrial growth but it also produced a philosophical paradigm, which shows up in theories of probability and theories of growth.

    In truth, MMT is neither radical nor new. It is the logical heir to Smith, especially after the world converted natural resource capital to built up financial capital. MMT will not eradicate the poverty which I both decry, and have described, on the blog. A high growth world, marked to debt and price levels that are no longer attainable, has stranded a whole tranche of workers and while I do-I really do–sympathize with the full employment movement we will neither be absolved of the terrible problem of collapse either through Austerity, or Keynesianism. I assume you do not believe in the Keynesian Endpoint. Fair enough. I too think we can escape that endpoint too and as you point out, the US has so far. However, we will not escape it–have not escaped it–in real terms.

    Best,

    G

  • Anonymous

    You keep referring to MMT as a prescription. I agree that many of its proponents push the full employment stuff and other prescriptions, but that just takes the focus off of the core of MMT. And the core is just a description of the workings of a modern fiat monetary system. You say they don’t discuss other monetary systems outside the USA. This again shows you have no understanding of MMT. They predicted the Euro crisis and the stagnation in Japan.

    You are biased towards your energy view. That’s to be expected. You are an energy analyst after all. But it clouds your mind in terms of the bigger picture. There is a big world outside of energy consumption. Our problems do not stem merely from a scarcity of resources.

    I won’t implore your to look into MMT further, but it’s clear from your comments that you don’t fully understand it. You might think you do, but then again, lots of people think they do and don’t. Had you truly understood MMT as early as you claim you never ever would have written that nonsense about the bond market….I can lead a horse to water, but I can’t make it drink. And you sir, with all due respect, refuse to drink. You probably think it’s kool-aid, when in reality, it is nothing more than an accurate description of fiat money,

  • http://profiles.google.com/robert.kenneth.smart Robert Smart

    I thought Krugman knew nothing about resource constraints and made comments on his blog to suggest he get interested. Then it turned out that he’d spent some of his early research years on the subject. So it is disappointing that his position is so ostrich-like. Others are as bad or worse. Why can’t some of them be as sensible as Gregor or Stuart Staniford (http://earlywarn.blogspot.com/2011/04/global-world-product-will-not-grow-at-4.html).

  • http://profiles.google.com/robert.kenneth.smart Robert Smart

    I thought Krugman knew nothing about resource constraints and made comments on his blog to suggest he get interested. Then it turned out that he’d spent some of his early research years on the subject. So it is disappointing that his position is so ostrich-like. Others are as bad or worse. Why can’t some of them be as sensible as Gregor or Stuart Staniford (http://earlywarn.blogspot.com/2011/04/global-world-product-will-not-grow-at-4.html).

  • http://profiles.google.com/robert.kenneth.smart Robert Smart

    I thought Krugman knew nothing about resource constraints and made comments on his blog to suggest he get interested. Then it turned out that he’d spent some of his early research years on the subject. So it is disappointing that his position is so ostrich-like. Others are as bad or worse. Why can’t some of them be as sensible as Gregor or Stuart Staniford (http://earlywarn.blogspot.com/2011/04/global-world-product-will-not-grow-at-4.html).

  • Anonymous

    What a load of complete garbage. You spend 20 minutes cherry picking and you are now qualified to spout off like that? Everyone’s wrong about some things in our chaotic and random (in the intermediate term) markets. But I can tell you that I have been following Gregor’s work for over 5 years, and out of the loads of analysts that I read, very few have been as prescient as Gregor. Maybe none. And I can pretty much guarantee that he has run analytical circles around you, Anonymous Internet Blowhard. Where’s your predictive track record that compares so favorably to Gregor’s, both pre- and post-crisis? How about a link? Yeah, that’s what I thought.

    You MMT’ers crack me up. You smugly talk down to the rest of us and like you’ve discovered some immense secret, when in fact your grand theories all come down to a combination of stating the obvious and assuming that because printing excessive amounts of money hasn’t backfired yet, it never will. Well, despite your stock rebuttal, we do understand MMT. We just recognize that the it is based on a flawed assumption about how much monetary debasement will be tolerated in the real world.

  • Anonymous

    That’s the standard retort we hear all the time. You claim that we say money printing doesn’t matter. That just proves you really don’t understand MMT. Whatever, I know monetary systems are complex, but don’t spout off like you understand something when your comments make it 100% clear that you don’t.

  • Anonymous

    Yes, I am aware of the theoretical acknownledgement by MMTers that too much money printing could cause inflation.

    Yet you dismiss talk of a potential funding crisis as “foolish,” presumably because the government can just fund its obligations with fiat money. So despite a theoretical nod to the inflation risk from money printing, in PRACTICE you appreciate neither the loss or monetary confidence nor the misallocation of resources that would very likely arise from money printing on such a massive scale. So I stand by my statement that your views on the effects monetary debasement are deeply flawed.

    As to your statement that we are living in a fiat world…. well, yeah. The issue is whether the current system is systainable. I say no. Time will tell.

  • Anonymous

    The world does not care whether you believe it is sustainable or not. The fact is, we live in that world so your gold standard line of thinking with regards to the workings of the banking system and monetary system are defunct.

    Again, your comments prove you have no idea what MMTers believe. Your comments about malinvestment and confidence are totally off base. You clearly aren’t familiar with the things you’re attacking. I am not going to sit here and teach you what MMTers believe or how the monetary system actually works. If you are too stubborn to actually learn and soak it up then it’s your loss. What the hell do I do?

  • http://www.facebook.com/people/Christopher-Dobbie/785118652 Christopher Dobbie

    What about banks having the ability to create debt endogenously? Doesn’t this stick in the craw of MMT?!