Music is Better than Economics

Some may feel that a post on economics might be in order. Perhaps a comment or two on the “Positive Money” proposal that has recently been explained in plain language? But it’s hard to care about economics some days. So instead I migrated to YouTube and began listening to Peter & Kerry who, according to the Guardian (here), is the band “least likely to split an infinitive”. That seems pretext enough for featuring them in a post.

There are nice poppy versions of “I Don’t Know” posted on YouTube, but I am especially taken with this slower, stripped-down acoustic performance. (The song is followed by a short interview.)

The Guardian also suggests that Peter & Kerry are the band “most likely to split for the suburbs”. On hearing the lyrics of “Split for the City”, I don’t know why they would want to do that. But they do seem to sing a lot about marriage and the suburbs, so the Guardian might be a more reliable source in this instance than when it spouts mostly neo-liberal nonsense on macroeconomic issues.

Some may consider it a stretch to place this post on an economics blog. I beg to differ. Plus, it saves having to write about economics.

And one more thing:

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21 thoughts on “Music is Better than Economics

  1. There are quite a few negatives to positive money. The main one being that money is still controlled by a cabal of clever wizards rather than democratically elected representatives.

    That’s unacceptable in a representative democratic system under the ‘those who pay the piper call the tune’ principle.

    Obviously if they wish to propose a different ruling system they are welcome to do so, but that should be made clear.

    I find anything drenched in propaganda worrying.

  2. I absolutely agree. I started to prepare a post on the proposal, then decided that I couldn’t be bothered. This lack of interest may change at some point.

    The notion of an undemocratic, independent committee determining the government’s capacity to create new money (inject additional NFA) is the least desirable aspect.

    Personally, I do like the aspect of the proposal that would eliminate government debt and deficits, because these terms are taken to be pejorative by many. There is no need for this to be done in an undemocratic fashion.

    I also like the proposal’s elimination of risk-free interest in the form of government debt or current accounts.

    I don’t see value in the idea that banks should have to lend out of existing deposits. Loans should create deposits as now. This is more flexible and also reflects the fact that investment and other injections generate a corresponding amount of leakages.

  3. And speaking of bad, really bad, terrible, awful ideas (actually, it’s such a terrible idea that I suspect it came directly from an economic advisor to either Labor or the Coalition; what, with the upcoming election and all):

    When all you have is a hammer
    http://www.macrobusiness.com.au/2013/02/when-all-you-have-is-a-hammer/

    In a nutshell: give the RBA the power to change the GST rate as it sees fit, to fight inflation. May God have mercy of us all!

  4. “I don’t see value in the idea that banks should have to lend out of existing deposits.”

    They never do anyway. Loans always create deposits.

    £100 deposit in a transaction account at 0% owed by person B – an investor and asset salesmen.

    Person A borrows £100 to buy assets from person B from a bank at 6% and that goes into the sales pipeline. Bank then persuades Person B to invest £100 at 3%. The transaction chain can now complete with Person B owning a £100 bank capital bond paying 3%, still having £100 in a transaction account and Person A owning £100 of assets and owing the bank £100.

    Rinse and repeat. The money supply expands in exactly the same way as now – just at a different price and with more risk and cost on individuals. There is no maturity matching – so you’ll have seven day deposits and ten year loans.

    That smells to me of a belief in the magical power of ‘sterilisation’. If you just call things something other than money it’ll stop acting like money.

  5. True, the loan would still create a new deposit, but the way I understand the proposal, this deposit would be “replacing” what used to be a deposit of the saver but is now in the possession of the bank for an agreed period. So, in aggregate, an increase in loans would not increase deposits, only shuffle deposits around.

    Is that how you read it?

  6. Incidentally, this is why I saw the attempt to create a loanable funds market as an attempt to increase the power of savers. Unlike a private bank, which has an interest in lending to make interest income, private savers can achieve the same in real terms via deflation. By strangling the supply of loans, they strangle the economy. Banks would have to offer higher interest to attract the same level of deposits for lending purposes. Awful idea, I think.

  7. peter,

    I read it in the same way that ‘government bonds’ stop an increase in ‘base money’.

    ie the idea that ‘government bonds’ are somehow magically stop excessive spending – even though they are constantly increasing. MMT shows there is no material difference between the two.

    It’s the same idea here. There is some sort of religious objection to ordinary bank deposits. So if you call them something else and increase the risk on them then suddenly everything will be ok. A straightforward MMT analysis here shows that all you have done is increased the price.

    Banks do their thing via maturity transformation. If you continue to allow that then you will get the same result – whatever you decide to call the liabilities.

  8. “Incidentally, this is why I saw the attempt to create a loanable funds market as an attempt to increase the power of savers”

    The overly tight restrictions on the discount window create the same effect. The UK has been forced to introduce the ‘funding for lending’ scheme – which is essentially a discount window without the stigma. That’s because saver rates were creeping up and were not being competed down by the discount window. Unsurprisingly at that point the lending rates were diverging from the base rate.

    I’m not at all convinced that central banks know how to use their discount windows effectively.

  9. Incidentally I found out the other day this attitude has a name – the Bagehot principle.

    No doubt another long dead economist that wrote something that others then misunderstood completely.

  10. Interesting observations, Neil. Thanks for clarifying on the banking stuff. Your knowledge is far superior to mine in that area.

  11. Pete and all,

    This may sound like a most unusual reading suggestion, but to my surprise I found it quite enlightening. Try reading chapter III of The Anti-Capitalistic Mentality by Ludwig von Mises [*], where he considers literature.

    Although to the best of my knowledge he wasn’t a psychologist or a sociologist, in that work Mises attempts what is somewhere else described as a “socio-psychological study of anti-market bias”.

    Mises, in other words, tries to second-guess why people oppose capitalism and to explain how this opposition manifests itself (for instance, in crime novels and how he interprets them).

    Being myself opposed to capitalism, I won’t judge how successful Mises’ psychology was at describing me and my motivations. Those who know me personally are better qualified than me to make a pronouncement.

    I, however, found it extremely useful at describing and explaining Mises’ motivations to me. In that light, reading that chapter was for me an enlightening experience (after a while, nonetheless, it becomes boring).

    If you do read that, keep in mind (1) Mises’ family background [a wealthy family from an oppressed ethnic/religious group that suddenly, through commercial success and through reneging his family background (aka assimilation), acquires control and power over those who previously despised them, without quite gaining social acceptance] and (2) Mises is a founding father of libertarianism.

    [*] http://mises.org/etexts/mises/anticap/section3.asp

  12. Yeah, Mises was crazy. He just could not see beyond the individual and thought that capitalism and markets were about individuals only. He completely missed institutions and life in society. He suffered from acute narcissism, like most Libertarians.

    Psychologically, they are deathly afraid of intimacy as threatening the boundaries of the self. It’s really a psychopathology that results in exhibiting symptoms of borderline personality disorder as personal strengths.

  13. Leaving aside those things, which are actually quite striking, did you notice the guy did not offer **one** piece of evidence to support his statements?

    I mean, I’ve read other Austrians (I am writing something about one, who explains quite clearly why he considers that the Keynesian ideas of demand-driven growth are bullshit). One may disagree with the author (in fact, I am sure any MMTer aficionado reading him will find plenty and obvious holes in his reasoning), but at least he tried to assemble ideas. And, you know what, after giving his writing some thought, I managed to salvage something interesting (although I am sure the author would be surprised by what I found).

    But with Mises not even that. Not a quote, barely a shadow of reasoning: in essence, nada, zip, rien, nichts.

    Beyond his psychology, which I am not really qualified to judge (that doesn’t mean he doesn’t strike me as weird), intellectually the guy is a mediocre. And this is not the first time I read Mises and find myself thinking exactly the same.

  14. Hey Pete

    Prof. Wolff is explaining his own views on Marx. Really cool.

    He is a very good teacher, and an entertaining and funny writer, too (by the way, he exemplifies why work, even in a pro bono capacity, can be therapeutic for those who retire, after having worked all their lives).

    He is a Sraffian, though.

    The first post in a long series:

    What I have been doing since the late 70’s
    http://robertpaulwolff.blogspot.com.au/2013/02/what-i-have-been-doing-since-late-70s.html

    Highly recommended!

  15. Magpie, I was going to respond to your Mises’ piece here, but it gave me an idea for a short post.

    Thanks for the interesting link.

  16. I have gone through Mises epistemology over at MNE, in particular, in discussions with Major Freedom. Mises is a neo-Kantian that posits synthetic a priori knowledge and therefore feels completely justified in claiming that his assertions are either self-evident or follow from self-evidence. He just makes shit up and claims it is self-evident or its foundation is self-evident (praxeology).

    This is the cue that what he is doing is philosophy and is presenting a worldview that is constructed on a foundation that he has posited as self-evident. That is to say, the foundation of the assumptions is not only not questioned, it is privileged from questioning because it is ideological and the ideology is dogmatic. This is why it is impossible to argue with the Mises-Rothbard faction. They “know,” evidence to the contrary notwithstanding, when driven back to fundamentals.

    Neoliberalism is the same wrt to assumptions like “market fundamentalism.” These are just different versions of fundamentalism, like religious fundamentalism. Of course, the same kind of fundamentalism exists on the left, too. For example, many Marxist-Leninists are also fundamentalists in the dogmatic sense when it comes to their worldview.

  17. “Mises is a neo-Kantian that posits synthetic a priori knowledge and therefore feels completely justified in claiming that his assertions are either self-evident or follow from self-evidence. He just makes shit up and claims it is self-evident or its foundation is self-evident (praxeology)”

    Two can play that game: I could posit on self-evident reasons that he was a deeply troubled man, a man deserving of compassion and psychological treatment.

    Having come to the world in Lvov (a provincial city), Mises was afraid of losing his meager privileges as a member of the provincial aristocracy (as opposed to the really big wigs in Vienna and Budapest who wouldn’t have given a shit about his “nobility”), acquired by his family god knows how (but probably acquired in a quite literal sense, too, as in “buying a title”).

    Any threat to his status as make-believe-aristocrat, no matter how impersonal, how unintended, was perceived by our small-town “intellectual” as a personal threat and insult. Thus, his deep hatred and inability to reason properly, and his willingness to associate himself politically with murderers barely distinguishable from the Nazis.

  18. Pete

    Actually, Prof. Wolff is no Sraffian! No siree bob.

    He’s got his own views about exploitation and, quite frankly, I find them quite interesting. He thinks Sraffa’s system fails to acknowledge this.

    The old-timer is clever and mischievous! I like him! 🙂

    As the late Big Kev used to say in his TV ads “I’m ex-oi-ted!”

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