A new open thread for climate solutions in the new year (and the soon-to-be new US administration actions). As for the climate science open threads, please try to renew your commitment to constructive dialog that prioritises light over heat (like LED bulbs for instance!). Thanks!
EP from last month says: “The US government can finance it the way it finances everything else, and at far better interest rates than private borrowing. The materials and skills (and siting and…) issues are the REAL issues.
What better cause for borrowing, than to build 100-year infrastructure?”
I think you got that mostly right. One small point, per MMT, as I understand from this Stephanie Kelton video does not need to borrow money, money is a monopoly created by governments because (generally speaking) the govt is the only entity that is allowed to print money.
I think banks somehow create money (or make money available in the economy) by issuing loans and credit, but that’s still dependent on the relationship between the banks and the monetary system that is defined in some important ways by decisions that the govt makes about printing money. MMT does not change the fact that govt prints money. It simply looks at that function in a somewhat new manner.
Here’s the video link again: https://www.youtube.com/watch?v=gcgDazSsyRw
Cheers
Mike
https://www.youtube.com/watch?v=gcgDazSsyRw
How about adding PV panels to transform solar energy into direct electric current to LED bulbs ? Greetings and a (hopefully) better year
Piotr @183, earlier comment thread — The quality of commentary here would be improved if all read the earlier linked article from the Potsdam Institute.
Yale Climate Connections has offered a useful new addition to Climate Envoy Kerry’s diplomatic toolkit:
https://vvattsupwiththat.blogspot.com/2021/01/can-carbon-capture-in-champagne-corks.html
Mike @180 on last months FR thread said :”This video says with MMT you control (respond to) inflation with taxation which takes money out of circulation instead of raising interest rates. That is essentially the reverse of “printing money” so this model is not just about printing money, it is also about controlling inflation by destroying money through taxation when necessary.”
No MMT isn’t the reverse of printing money. I suggest read a basic definition of MMT, perhaps investopedia is as good as any “Put simply, such governments do not rely on taxes or borrowing for spending since they can print as much as they need and are the monopoly issuers of the currency. Since their budgets aren’t like a regular household’s, their policies should not be shaped by fears of rising national debt.”
Or wikipedia “MMT is an alternative to mainstream macroeconomic theory. … MMT argues that governments create new money by using fiscal policy. According to advocates, the primary risk once the economy reaches full employment is inflation, which can be addressed by gathering taxes to reduce the spending capacity of the private sector….(Governments) Can pay for goods, services, and financial assets without a need to collect money in the form of taxes or debt issuance in advance of such purchases….Cannot be forced to default on debt denominated in its own currency….Is limited in its “”money creation”” and purchases only by inflation, which accelerates once the real resources (labour, capital and natural resources) of the economy are utilized at full employment….Can control demand-pull inflation[13] by taxation which removes excess money from circulation….Does not compete with the private sector for scarce savings by issuing bonds.”
So at its heart MMT is money printing, in the sense the government through its reserve bank creates new money out of thin air as a book entry to fund the governments activities in part or whole, but normally it would be in part. MMT also argues deficits don’t matter so they can borrow forever ( good luck with that idea). Taxation is used as well to try to control inflation but it doesn’t mean the government don’t create new money as per the references I quoted.
I just have some reservations about MMT becoming the new normal for general government financing. It appears most economists dismiss the idea. Its not as if I’m alone in being a bit sceptical. But it doesn’t mean MMT in some form doesn’t have its uses in certain circumstances as I’ve argued. What’s so hard to understand about that? By analogy its like morphine, you don’t use it for a headache, but it has its valuable applications.
I think at the very least we could create a good case for some form of targeted MMT, or fairly loose monetary policy to help fund new climate related infrastructure, given the situation we are in and that inflation is near zero. And as EP points out government funding of infrastructure is a very good thing. Such a thing as targeted money printing in some form would obviously be inherently time limited and constrained in various ways.
But its absurd to try to argue MMT should necessarily also be the new norm. Its like QE. This been used in emergencies and rightly so, but that doesn’t mean it should become the new norm. We still don’t know its long term implications.
————————————
David B. Benson @3
“Piotr @183, earlier comment thread — The quality of commentary here would be improved if all read the earlier linked article from the Potsdam Institute.”
The quality of commentary would be improved if you also said what point you are trying to make rather than just posting a link and a couple of cryptic words. Otherwise people probably wont even read the link. You have to hook people in a bit. Don’t get me wrong, I think you have your feet on the ground and do post some rather good stuff.
David B. Benson (3): Piotr @183, earlier comment thread — The quality of commentary here would be improved if all read the earlier linked article from the Potsdam Institute.
Huh? From the post you refer to – you ALREADYT KNOW that I have read it – so it is a cop-out. My question wasn’t about the linked article, but about what you THINK the one line you chose it from: “ Carbon tax of about $100 per tonne”
SUPPOSEDLY PROVES.
You know, people do not post numbers, if they don’t think their support their views, so not wanting to put words in your mouth, I HAVE ASKED YOU. And you have ducked it already TWICE.
So once again: “ Why do you, David B. Benson, think your “Carbon tax of about $100 per tonne” proves?”
I think I know, but wanted to hear fromt he horse’s mouth, so the horse can’t claim later that his motives were misunderstood. Third time a charm?
Piotr @7 — I fail to comprehend the question.
But next time I’ll attempt to be more thorough. However, please note
https://bravenewclimate.proboards.com/thread/697/power-world
read carefully, Nigel. This is what I wrote at 180 last month:
”This video says with MMT you control (respond to) inflation with taxation which takes money out of circulation instead of raising interest rates. That is essentially the reverse of “printing money” so this model is not just about printing money, it is also about controlling inflation by destroying money through taxation when necessary.”
You responded at 5: “No MMT isn’t the reverse of printing money.”
I don’t think anyone has stated that MMT is the reverse of printing money.
In MMT, as I understand it and as explained by Professor Kelton in the video, taxation is the reverse of printing money. Please read carefully so the discussion makes sense and proceeds in a sensible manner.
Cheers
Mike
@5:
One of the long-term implications is that nothing significant can be accomplished WITHOUT it. That should scare us, because it depends on the knowledge and wisdom of people who very likely do not have it.
We can do some things that way, like following the historic knowledge about energy. But the sectors of the economy which rely upon innovation will be utterly ruined if their fate relies upon the support of those wedded to obsolete paradigms.
David B. Benson (8): I fail to comprehend the question.
Sorry, it should have read “What” not “Why”. I.e.: “What do you think your “Carbon tax of about $100 per tonne” proves?”
But if the wrong word threw you off here, you still should have been able to comprehend the two earlier questions about the same:
David B. Benson(171): “Carbon tax of about $100 per tonne in 2020”
Piotr(174): “… and is there a point here?”
and
Piotr(183): “What was your point in posting this number [“$100 per tonne”] here?”
“In other words, what did you want to say/achieve BY posting the [“$100 per tonne”]. (People usually don’t post without a reason).”
>But next time I’ll attempt to be more thorough.
I’d rather you answered _this_ time. And since the question is simple, the answer does not have to be very “thorough”. Something like:
“In (171) I quoted “Carbon tax of about $100 per tonne”, because I think it proves my opinion that …[and you end the sentence here] ”
You know what you wanted to achieve by your post (171), right?
DBB: “ However, please note https://bravenewclimate.proboards.com/thread/697/power-world ”
I won’t waste my time reading some unspecified discussions on some other websites.
You posted HERE, and I asked you HERE, so your answer should also be HERE.
“What do you, David B. Benson, think your “ $100 per tonne” [DBB 171] proves?”
Mike @9, my apologies. I didn’t read your comment very well. But that doesnt make any of the other comments I posted wrong and I have some doubts about whether taxation can work to tame inflation as well as hoped. I hope you read the links I posted on the positives and negatives about the MMT idea. I tried to find something like that giving a balanced analysis.
Engineer-Poet @10
“One of the long-term implications is that nothing significant can be accomplished WITHOUT it (QE?). That should scare us, because it depends on the knowledge and wisdom of people who very likely do not have it.We can do some things that way, like following the historic knowledge about energy. But the sectors of the economy which rely upon innovation will be utterly ruined if their fate relies upon the support of those wedded to obsolete paradigms.”
I disagee in a way. Some countries like New Zealand and Australia have used the “old paradigm” of tax and some limited borrowing and made it work. They have borrowed just during recessions, while running surpluses when the economy is boyant, and made it all work. This is old fashioned keynsian economics. Government debt and deficits are low and theres been plenty of funds for innovation. It just requires discipline. NZ has used some limited QE due to this covid 19 problem and fears it could cause an economic depression but only because of that. Its unlikely to be a permanent thing.
So is the old paradigm of tax and some prudent borrowing obsolete, or are countries and governments just incompetent and undisciplined? I suppose we could argue the incompetence is so ingrained and debt has got so high in many places that a new paradigm is inevitable!
And yes embracing this new stuff is scary for the reasons you say. I hope it all works out, and I agree to the extent that in our current climate problem circumstances governmnets should fund infrastructure, whatever method they use. If countries have a lot of debt it might have to be MMT or QE. With inflation so low MMT and QE are at least reasonably safe. The greater evil would be to be too frugal or conservative or to embrace austerity.
mike @9
Actually on second thoughts I think my original criticism @5 of part of your comment was correct.
I said “No MMT isn’t the reverse of printing money.”
You said “I don’t think anyone has stated that MMT is the reverse of printing money.” But you did state this. You said previously “This video says with MMT you control (respond to) inflation with taxation which takes money out of circulation instead of raising interest rates. That is essentially the reverse of “printing money” so this model is not just about printing money, it is also about controlling inflation by destroying money through taxation when necessary.”
So actually you did effectively say that MMT is the reverse of money printing. We all get our words slightly wrong on occasion. Its not a big deal as far as Im concerned.
Antonio Sarmiento #2,
Sure, but it would be uneconomic to retrofit most dwellings. In new construction, you could have recessed or fixed lights all running on a DC circuit, and a relatively inexpensive battery like sealed lead-acid, which is very easily recyclable.
I’ve suggested in the past here that with existing technology, you could build a development of detached houses or maybe low-rise apartments that would have a DC local grid and solar generation that would be a net producer.
The trick is sourcing end-use devices so that the only conversion to AC occurs where the grid connects to the utility. It’s the kind of chicken-egg problem you get with chargers for EV. So if people want big fancy refrigerators, there might have to be a plug-in inverter available.
Still, your concept that going DC would save energy and resources is correct.
EP: One of the long-term implications is that nothing significant can be accomplished WITHOUT it. That should scare us, because it depends on the knowledge and wisdom of people who very likely do not have it.
AB: Yes, MMT demolishes the underlying “Truth” of Capitalism: wealth is the scarce commodity that must be rewarded over labor. That’s obviously false because capital can be created out of nothing in the blink of an eye. If done wisely, that new invention or infrastructure or whatever will create enough that the tax drain will keep the system stable.
MMT and allowing incumbents to run for office sounds like a bad mix to me. Who’s going to shut down the party at closing time? And it is soooo weaponizable. Look at the GOPpers. Tons of money showered on “their” projects not because of any need but to provide evidence that, given that the maximum reasonable drain size is “extra tiny” there’s no way for the system to safely borrow/print funds for education, healthcare, infrastructure, food, housing, or anything that might help Others.
Fixing democracy needs to be concurrent with fixing the functioning of the government.
I’m not impressed with the USA’s system. How about China? China is trying their technocratic thing. Their social control system reminds me of Trump’s bleach injection “joke”. Turning everyone into good little cogs, all shiny and bright.
Heebie Jeebies on both sides of the Pacific. “Shiny and bright” versus “Angry and dying”. Wonder which one wins?
Let’s fight for “neither”.
Only a holistic economic approach can begin to salvage the Planetary life support systems all life requires. Only GREEN jobs can approach 100% employment. How to make Green jobs pay without burdening future generations is the question.
CEOs could fix capitalism if they were not so greedy, however, the Government can help a lot, as well as the population. This presents a quandary.
First: Government must look at the population as an asset, not a liability. Yes, Jobs are needed for all, however, the only jobs that can deliver 100% employment and not trash the Planet are GREEN Jobs.
Every black job just digs the Climate Crisis hole deeper. Attempting to fill all the Green jobs with only higher-paying jobs then drives up the cost of the Renewable Awakening Economy’s required transition. All while still leaving millions homeless, even as robots steal ever more jobs. In order to counter this societal cost, Government saves by providing a Universal Basic income, (~$1200) for 8 hours of Green work/week or 32 hours/mth. This must include Universal Health Care for basic environmental jobs. The value of that package is ~$37/hour. A person then has the rest of the month to pursue other green jobs at say $10 -15/+hour and still improve their lives substantially. Such jobs as inexpensive home insulation labor, Health care assistant, janitor work, farm or garden work, the list is as long as there are people.
Corporations can also save money with less expensive labor, as health care is provided. The Government saves with lower social service costs as the $1200 takes care of all other social services, (one check/month electronically transferred to each persons bank account and no bureaucrats to pay. They can get a life beside being pencil pushers, and get the basic income as well.). Universal health care for all is proven to be a lot less expensive than for-profit health care. The people’s lives are improved because poverty, hunger, crime, and homelessness is erased and the Green awakening Economy gets a meaningful kick in the pants commensurate with the crisis. Also, more cash is circulated in the economy. Pleasing the banks. and the government. There are a lot more areas as well but this is a start. i.e. Tax robots for jobs displaced. Make the Military Green in tooth and nail. It then becomes an asset to the Nation and the world to those that request their help. Who would want to invade us?
“War becomes perpetual when used as a rationale for peace,” Norman Solomon.
“Peace becomes perpetual when used as a rationale for survival.” Yours truly.
“The last great exploration on Earth is to survive on Earth.”
— Robert Swann
Piotr @11 — Your English is deficient:
https://www.google.com/search?q=lexico+proof&oq=lexico+proof&aqs=chrome..69i57j0i22i30i457.14157j0j7&client=ms-android-sprint-mvno-us&sourceid=chrome-mobile&ie=UTF-8
as my assertion proves nothing, obviously.
Now please drop it and instead do something productive such as reading the links in the BNC Discussion Forum. Which is, incidentally, farely well-known.
Al Bundy @16, now you seem to be going crazy as well (just kidding). Obviously you can create vast sums of new money at the stroke of a keyboard, but the real wealth is in infrastructure and possessions and those are all scarce commodities compared to the size of the planet and its population. Create too much money and you debase the currency (as you alluded to) and get inflation or asset bubbles, and all this hurts workers and poor people and renters the most. Creating a whole lot more money than usual doesn’t lead to more infrastructure, UNLESS there is significant spare capacity in the system (like in the middle of a recession).
Its a very fine line creating the right amount of money, and MMT is just playing with the issue. Its doesn’t make a huge difference to how much money is created, because it cant, because you will get inflation. So its just a sophisticated toy that at best has some limited applications that can be abused depending on whos in power.
The real problem is massive levels of debt. It doesnt matter if governments can pay that off by printing money because that has big hidden negative consequences. Our country reached a cross party consensus to keep debt within certain parameters and its worked for 20 years. This is the sort of thing that’s needed. Keep debt low and you don’t need to resort to desperate money printing schemes and the government doesn,t have to pay huge amounts in interest to borrowers.
AB @16:
This is a category error. Money is not wealth, as anyone from Venezuela, Zimbabwe or Weimar Germany could tell you. Wealth is roads, factories, fiber-optic cables, machine tools, houses, water treatment and distribution systems, and the like. It takes time, labor and materials to build them.
An 1115 MW nuclear plant operating at 93% capacity factor generates about 9,090,000 MWh per year. At $50/MWh, that’s about $454 million/year in energy sales. Even at $6 billion/unit, you’d only need $120 million/year revenue to pay the interest at 2%. The plants collect money, but THEY are the true wealth. It may take 10 years to build one, but then you can enjoy it for the next century. You can’t say that about wind farms or PV panels.
“That is essentially the reverse of “printing money” so this model is not just about printing money, it is also about controlling inflation by destroying money through taxation when necessary.”
The quote above is what I said.
You say at 14: “So actually you did effectively say that MMT is the reverse of money printing.”
Nope, never said that. Effectively or otherwise. Taxation is the mechanism that MMT believes is the tool to control inflation if/when inflation becomes a problem in an economy. No shorthand. No effective translations of these simple statements please.
If you don’t understand that MMT believes the best mechanism for controlling inflation is taxes rather than through higher interest rates that is often used in other macro-economic models to control inflation, that’s fine. It’s not important that you understand that, but please don’t assign your misunderstanding to me. Please read and quote carefully and accurately. Your misunderstanding of what I have stated quite clearly is yours to own.
12 and 14 is representative of your practice that I was laughing off with Killian recently. Inconsistency may or may not be one of your problems.
Cheers,
Mike
“Japan is well known for having a huge national debt. As of the end of December in 2018, the total amount of Japanese debt was 1,100,526,600,000,000(one quadrillion one hundred trillion five hundred twenty-six billion six hundred million) yen. And it’s only increasing.
In 1980, it was only 50% of GDP but now Japan’s debt is close to 240% of GDP, more than quadrillion, that’s a very big number. So Japanese mass media say now Japan’s debt is very huge, each Japanese person has about 9 million yen debt.
People may wonder: Wouldn’t it have an inflation problem? Wouldn’t it lead to a rising interest rate? Wouldn’t this be destructive some way? The answer to all those questions is no.”
You can read more here if you are interested: https://medium.com/@JapanDetail/explain-with-charts-why-japans-huge-national-debt-is-not-a-problem-at-all-5b1994293915
I think Japan has managed to accumulate this debt without establishing and maintaining up a large military infrastructure. Worth a look, maybe?
Cheers
Mike
David B. Benson “ Your English is deficient”
Piotr: It may well be so, being my third language. But apparently is not deficient enough to prevent me from spotting a coward, who does not have the balls to stand by his words, and tries to get off on a technicality.
And if my deficient usage of the word “proves”: “What do you, David B. Benson, think your “ $100 per tonne” [DBB 171] proves?”
has stumped the towering intellect of David B. Benson, how about the questions that … did not use this word? You know, like:
David B. Benson(171): “Carbon tax of about $100 per tonne in 2020”
Piotr(174): “… and is there a point here?”
or: Piotr (183) “In other words, what did you want to say/achieve BY posting the [“$100 per tonne”]? (People usually don’t post without a reason).” ?
Our do you “fail to comprehend [these two] questions” too, on the grounds of my deficient English?
DBB: “Now please drop it and instead do something productive such as reading the links in the BNC Discussion Forum.”
Why? Your BNC didn’t help you coming up with answers in this thread.
DBB: “Which is, incidentally, farely well-known.”
English is your 3rd language too ??? Oooooh ;-)
But, unlike you, I won’t pretend that it makes your sentence impossible to “comprehend“:
1. “ Being well-known” proves nothing. Ask Trump.
2. Knowing your arguments on RC, your recommendations are a kiss of death. By their fruits you shall know them, eh?
#20, E-P–
Or maybe you spend $9 billion and end up with a cost/Watt that illustrates the practical applications of division by zero.
One useful application of printing money might be an infrastructure bank. Commentators in New Zealand have suggested the government create an infrastructure bank, as an SOE (state owned enterprise) and fund its core capital by newly printed reserve bank money. I cant find an article so have to go by memory but its a fairly simple idea.
The bank then makes loans for infrastructure projects. The advantage is the newly minted money is narrowly targeted at infrastructure, and could be micro targeted at zero emissions energy infrastructure. So the funds are less likely to cause asset bubbles, and would be controlled mainly by a set of rules and a bank charter and technocrats, rather than entirely the whim of politicians. And its kept separate from the rest of the governmnet and its more traditional financing stream. This idea is what I meant by a selective, targeted form of MMT.
Barack Obama had ideas for an infrastructure bank as below,but I think it was funded more conventionally:
https://obamawhitehouse.archives.gov/blog/2011/11/03/five-facts-about-national-infrastructure-bank
Nazi Boy 20: It may take 10 years to build one [nuclear plant], but then you can enjoy it for the next century.
BPL: Except that nukes are being shut down and decommissioned many decades short of a “century.”
Moderators — Do we have to put up with Piotr @23 and Barton Paul Levenson @26?
BPL @26:
Due to wrong-headed policies which massively subsidize certain “renewables” while failing to reward nuclear for doing the same job better, and refusing to ding fossil fuels for their emissions.
Equalize the reward for a given benefit, and things would turn around in a hurry.
BPL: Except that nukes are being shut down and decommissioned many decades short of a “century.”
AB: What are the odds of a 1960s design, using 1960s materials, being built today?
How many miles did ya get on a car before it turned into a money pit back in the 60s?
_______
nigel,
You’re not getting the change in paradigm that MMT brings. You’re still trying to fit it into Old School thinking. It doesn’t fit. Read mike’s words a few more times.
mike @21
No mike. I paraphrased your statement fairly and accurately. You talk about MMT having components that “reverse money printing” its fair to say that MMT reverses money printing just as shorthand notation. Its a discussion blog not a university thesis for goodness sake. But I wont paraphrase your statements in future and no offence was meant.
“If you don’t understand that MMT believes the best mechanism for controlling inflation is taxes rather than through higher interest rates that is often used in other macro-economic models to control inflation, that’s fine. ”
I understand what MMT believes perfectly well. I just think its a flawed system for the reasons I stated and as in the links I posted. So dont play games of rhetorical trickery trying to imply I don’t understand something and am imposing that on you.
I fully admit I change my mind sometimes and get some things wrong, as I pointed out on last months FR thread. Although it just happened not to be the things you claimed. I would say half the problems humanity has are stubborn people never able to admit they are wrong either to themselves or others or both. There’s a a fine line between having firm convictions and being a stubborn fool.
“When the Facts Change, I Change My Mind. What Do You Do, Sir?”
(This is a famous quote attributed to J M Keynes, who was accused of constantly changing his mind)
Al Bundy @29
“You’re not getting the change in paradigm that MMT brings. You’re still trying to fit it into Old School thinking. It doesn’t fit. Read mike’s words a few more times.”
Quite correct that I’m trying to fit MMT into old school thinking, because I dont think MMT works EXCEPT as a limited component of old world thinking. Doh!
Just because we have a new idea like MMT doesn’t mean its a good idea as a stand alone system! Until you are able to answer the criticisms in the link I posted you have got nothing :)
And MMT is a complex new system. Nobody can be sure it will work until its actually tried out at moderately large scale. My suggestion is try it out at small scale somehow, and within the envelope of the old system, and that will give us some clues without taking big risks.
Regarding this pearl of wisdom (not)
https://medium.com/@JapanDetail/explain-with-charts-why-japans-huge-national-debt-is-not-a-problem-at-all-5b1994293915
Japan does have very high levels of government debt and is doing ok economically right now, and is a stable country, but that is a very foolish argument that high levels of government debt don’t matter. I would argue debt has ultimate limits beyond which you will get problems. This is incredibly and powerfully intuitive. Japan is doing ok economically but it definitely isn’t doing very well! Eventually interest payments on the debt take up a huge proportion of tax revenue and it all becomes ridiculous leaving little money to spend on anything else. I don’t have time to check Japans level of interest payments but its been a problem in the past where I live.
Yes sure countries cant be bankrupted by other countries if their government debt is owed to their own central bank. That is effectively a form of MMT but is not a sufficient argument to adopt MMT as a whole system. Its very easy not to go bankrupt if you just pay the money you frigging well owe! You dont need to adopt MMT if you are fiscally responsible and dont take on excessive debt. This is just like with a household or business and yeah a government is not exactly like a household or business as we are told endlessly and this is sort of true, but excessive debt is still always a PROBLEM.
And yes Japans debt is partly in yen, and so other countries cant bankrupt Japan, because Japan can just turn on the money taps and create more yen, but that isnt’ a get out of jail free card. If the holders of that yen decide its becoming worthless they wont loan any more money to Japan. And japans economy is pretty sluggish with barely much GDP growth. Its not the power house it once was. So I dont think they will be able to increase that debt forever.
David B. Benson (27): Moderators — Do we have to put up with Piotr @23 and Barton Paul Levenson @26?”
Yes, because David B. Benson does not appreciate being asked questions about his … posts. Apparently, only in a “deficient English”, the word “discussion” means that people answer questions about their previous statements, as opposed to contemptuous comments and vaguely referring the readers to …some other websites in search for the answers to their questions about what David B. Benson wrote on RC.
David B. Benson: “Carbon tax of about $100 per tonne in 2020”
Piotr: “… and is there a point here?” “In other words, what did you want to say/achieve BY posting the [“$100 per tonne”]? (People usually don’t post without a reason).” ?
David B. Benson:
– “I fail to comprehend the question”
– “Your English is deficient”,
– “The quality of commentary here would be improved if all read the earlier linked article from the Potsdam Institute” [to avoid answering a question why David B. Benson quoted a sentence from the said article on RC]
– “Now please drop it and instead do something productive such as reading the links in the BNC Discussion Forum.”
– “Moderators — Do we have to put up with [Piotr’s questions]“
EP: Wealth is roads, factories, fiber-optic cables, machine tools, houses, water treatment and distribution systems, and the like.
AB: Ahh, yes. Does a metric represent the physical or become physical? And it gets more tangled since so much wealth has no physicality to speak of. Software, music, books, movies, perhaps even access.
I like your compartmentalization of “wealth” and “money”. But as long as folks trade the metric and the physical freely then at the individual level it’s almost moot. Except that “money” needs to be “drained” via taxes or be made insignificant via inflation and/or economic growth. And it’s a heck of a lot easier to create money than physical wealth. Look at the financial sector. Creates just about zero physical wealth but the they sure have gobs of wealth in whatever form they’re storing their virtual winnings.
#32, Nigel–
Per Reuters, Japan plans to spend $242 billion to service its debt next year. That’s about 5% of GDP.
https://www.reuters.com/article/us-japan-economy-budget/japan-ministry-of-finance-to-seek-242-billion-for-debt-servicing-fy2021-22-draft-idUSKCN26F1O7
Plus, it looks like the debt has been more or less constant for the last 6 years or so (relative to GDP)–not growing. (Though it will doubtless be up again for 2020 and probably 2021 too, due to Covid.)
https://tradingeconomics.com/japan/government-debt-to-gdp
I’m not terribly strong on economics, but it looks like over the last 10 years Japanese GDP has been bumping along somewhere in the general vicinity of 1.5%/year.
https://tradingeconomics.com/japan/gdp-growth-annual
Maybe a tad low by developed world standards, but not drastically so?
Here is another interesting lecture on MMT for those who want to understand MMT.
https://www.youtube.com/watch?v=E5JTn7GS4oA
If you already understand everything about MMT and are clear in your own mind that MMT violates what everyone knows about debt, then you should not bother to watch and listen. You won’t gain anything from the lecture in that circumstance.
Cheers
Mike
nigelj (6) to David B. Benson: The quality of commentary would be improved if you also said what point you are trying to make rather than just posting a link and a couple of cryptic words.[…] Don’t get me wrong, I think you have your feet on the ground and do post some rather good stuff.
You catch more flies with honey than vinegar, eh? ;-) Several DBB’s posts later – how has this worked out ?;-) Well, I am not surprised. First, I know something about biology (it is not honey that best attracts flies ;-)). Second, it’s a deajvu – see post 132 in
http://www.realclimate.org/index.php/archives/2020/06/forced-responses-jun-2020/comment-page-3/
Below a short summary of my June discussion with David B. Benson
===
1. June: DBB on RC dismissed renewables, because of their need for a fast ramp-up petroleum and gas turbines. Asked about them, he … substituted them with … the more polluting and much more difficult to quickly ramp up … COAL burners.
2. Asked why the change, he answered: “Well, its done in the state of West Australia. A description is found buried in
https://bravenewclimate.proboards.com/thread/524/state-solar-pv?page=3 ”
[That’s the same “farely well-known” site he sends the readers of RC now]
3. I checked that BNC link … only to find some … “David B. Benson” writing, I quote: “ The isolated, antiquated grid of West Australia is certainly not a lesson for the majority of the world.” Whau.
4. When I pointed the hutzpah of defending Benson’s RC post with with his own post on BNC that CONTRADICTED the message of his RC post – our David responded with …. misdirection and derision:
David B. Benson: June (34) “ I simply observed two grids that continue to build coal and lignite, basically burnable dirt. Further, you stated nothing about Germany. If you wish to actually understand the grid some study is required. I’ve suggested some sources. As it is, you appear to merely be sputtering, sorry.”
To which I reminded him (June; 43) that my post was not about Germany or understanding grids, but about CONTRADICTIONS between
– D.B. Benson in RC using “the West Australia grid” to dismiss renewables in the majority of the world
– AND the same DB Benson in BNC dismissing people using … the very same “West Australia grid”, as not relevant “for the majority of the world”.
And the hutzpah of giving a link to the latter as a justification for the former.
To which our brave DBB proudly … said nothing and moved on to other discussions. When the going gets tough, the though get going, eh? ;-)
Kevin McKinney @36,
“Per Reuters, Japan plans to spend $242 billion to service its debt next year. That’s about 5% of GDP”
Yeah I’m sure this number would be right, but the more salient number is how much of the tax take goes to funding interest payments on that debt, because the higher it is the less tax take is available for other things like education spending and social security payments. In New Zealand debt got to a point where 25% of our tax take was used to fund interest payments on governmnet debt from what I’ve read, which is getting onerous and I recall that debt was still quite a bit lower than in Japan right now. It actually caused a change of government and privatisations of various assets.
That said, Japan works in an odd way where much of its debt is owed to its reserve bank and so interest might not be required. But what you have in japan is a economy that performs only ok at best (by numerous measures) so this is not exactly an ringing endorsement of their monetary policies. Basically japan had a huge housing crash about 20 years ago, that caused deflation and utter stagnation and they messed up fixing this the proper way, so they have spent billions of government money trying to stimulate things ever since, and have clawed back to 1.5% gdp growth. This is part of the reason for all that debt.
Kevin McKinney @36,
And yes servicing big debts can be done by increasing taxes, but we know how popular and politically plausible that is :)
Al Bundy @34
Yes indeed wealth is commonly defined as physical assets or money, and obviously all things being equal they are interchangeable. But as I said the real wealth is really physical assets. Because money is only wealth if the economy has about the right amount of money increasing at the right pace. With too much money increasing too fast, and the inflation will mean your money will buy less and less and the historical examples are pretty sobering. Your wealth can vanish especially if its all in something like savings. It can create a sort of mental anguish and chaos, and eventually the real economy breaks down.
Money is only wealth in certain circumstances. There’s no such thing as a free lunch just by cranking up the printing presses, and that’s where I get a little bit suspicious of MMT despite its assurances that this problem is “all under control”. Ok maybe I’m being a prophet of doom, but I just knew you guys would be in favour of MMT and I’m just saying read the critiques carefully and don’t take any of the one sided promotions of the idea at face value.
“AB: Ahh, yes. Does a metric represent the physical or become physical? And it gets more tangled since so much wealth has no physicality to speak of. Software, music, books, movies, perhaps even access.”
Stuff like music stored on computer discs is still physical wealth because it wouldn’t exist unless its either stored on a physical medium or being played,and stuff like music stored in peoples heads is still actually physical wealth. Its still just information coded in the neurons. It just has high value sometimes, if one is a Beethoven or Taylor Swift (although I have no idea why people see value in her music). So its not quite as tangled as you think.
#39, nigel–
Seems like Japan is getting close to that 25% value you mentioned.
https://www.statista.com/statistics/630367/japan-general-account-budget-debt-service-expenditures/
Piotr @38, I concede you make a good argument and DBB doesnt seem to have learned. However I do think its important when criticising peoples comments to provide some positive feedback, just to get the message across one is not trolling. It usually works for me. Its become a bit reflexive even if they have been difficult in the past.
Paul Krugman on MMT:
https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wonkish.html
I post this in an attempt to put an end to commentary about this way-out economic hypothesis here on Real Climate.
“In New Zealand debt got to a point where 25% of our tax take was used to fund interest payments on governmnet debt from what I’ve read”
Where did you read that, Nigel? What year did the NZ debt get to a point where 25% of tax take was used to make interest payments on that debt?
Your apparent concern about NZ debt does not match well with what I find about NZ debt level and its ability to service that debt.
https://commodity.com/data/new-zealand/debt-clock/
“The IMF calculated that the gross national debt to GDP ratio stood at 29.84% at the end of 2018. This is one of the lowest debt ratios in the world.”
“The parliament of New Zealand has tasked the government with getting the national debt down to 20% of GDP by 2020. If that goal is framed in terms of net debt, then that aim has already been achieved. In terms of gross public debt, the government still has a little way to go.”
Are you confusing the national debt to GDP ration with the percentage of annual tax revenue that is used to service the national debt? I think those are not the same thing.
Cheers
Mike
Piotr,
In David’s defense, he knows his science, and has been quite helpful to me in the past in that regard. His post about the tax probably meant that he advocated such a tax, and I think he is genuinely confused about what you’re asking for some reason.
All,
I’m going to stop referring to E-P as “Nazi boy.” Granted, his political philosophy appears to be Nazi, right down to defending that particular (1933-1945) regime. But taunting him with it won’t change his mind, and it was nasty on my part. If I want to come off as a Christian I have to act like one, and that includes “Love your enemies, bless them that curse you, do good to them that hate you, and pray for them which despitefully use you, and persecute you” (Matthew 5:44). Not easy for someone as vindictive as I am, but Jesus won’t let me off doing it because it’s not easy.
#46, Barton–
A good decision on the name-calling. It’s a temptation sometimes to be sure, but I think you’re wise to resist.
Barton Paul Levenson (46): In David’s defense, he knows his science, and has been quite helpful to me in the past in that regard.
Barton, my previous encounters with David (see 38) didn’t question his knowledge, but his ethics: his cherry-picking of the facts to support his views (renewables-bad!). As summarized in my (38): he ate the cake on BNW forum, then wanted to have it still on RC, and to makes things better, he claimed that the justification of HAVING a cake to eat on RC is on … BNW forum. I decided to check his claim, went to BNW, and found … David at the table with the cake all over his face… (see 38)
BPL: His post about the tax probably meant that he advocated such a tax, and I think he is genuinely confused about what you’re asking for some reason.
Well, there is at least one COMPLETELY DIFFERENT possibility why he has posted it – not to advocate FOR the tax, but to advocate AGAINST it. And that’s precisely why I wanted to hear from him to clarify which was his intention, so I don’t fire at the innocent.
Here is why I think him advocating AGAINST carbon tax is a clear possibility:
David is extremely critical of renewables, and renewables would greatly benefit economically from their fossil fuel competition no longer being able to alter climate for free, so the only NEW information in his quote – that the carbon tax would have to be “$100 per tonne” – to me sounds like a number a climate change denier would use to ATTACK the carbon tax by claiming that: “ the hard-working people and their families of [enter here your country] can’t afford the carbon tax“, which is almost a direct quote from the Conservative Party attack ads against the Liberal Party proposing (revenue-neutral!) carbon tax in Canada.
So it makes a huge difference whether David posted his “$100 per tonne” to advocate FOR or AGAINST the tax, because if he were FOR I would not need to demonstrate why using this number AGAINST the carbon tax is disingenuous.
And if he was “genuinely confused about what [I am] asking” after my “… and is there a point here?” and “In other words, what did you want to say/achieve BY posting the [“$100 per tonne”]? (People usually don’t post without a reason).” – he shouldn’t be after SEVERAL rephrasings of that, and after Nigel has asked the same:
Nigel(6): The quality of commentary would be improved if you also said what point you are trying to make rather than just posting a link and a couple of cryptic words.
I don’t think there is much room for genuine confusion after that.
at Nigel at 39: I found this link to New Zealand GDP and debt. I think this is a good site and source for NZ economic data:
https://www.treasury.govt.nz/publications/wp/wp-19-01-html#section-2
If you find a stat that suggests debt servicing is taking 25% of collected taxes, please share.
Cheers,
Mike
Mike @45
“In New Zealand debt got to a point where 25% of our tax take was used to fund interest payments on governmnet debt from what I’ve read”
“Where did you read that, Nigel? What year did the NZ debt get to a point where 25% of tax take was used to make interest payments on that debt?….Your apparent concern about NZ debt does not match well with what I find about NZ debt level and its ability to service that debt….“The IMF calculated that the gross national debt to GDP ratio stood at 29.84% at the end of 2018. This is one of the lowest debt ratios in the world.”“The parliament of New Zealand has tasked the government with getting the national debt down to 20% of GDP by 2020. If that goal is framed in terms of net debt, then that aim has already been achieved. In terms of gross public debt, the government still has a little way to go. Are you confusing the national debt to GDP ration with the percentage of annual tax revenue that is used to service the national debt? I think those are not the same thing.”
Mike, the data you posted only goes back to 2004, in the graph. Im talking about the 1980s and 1990s. I also cant find any mention whatsoever in your link of the percentage of tax revenue used to pay interest on debt. As far as I can tell it just deals with debt as a percentage of gdp and concentrates on the last few years. However obviously the higher the debt the higher the debt servicing costs, so lets work with that.
In the 1970s debt was quite low, but it grew and by mid 1980s and 1990’s New Zealand had quite high government debt as a percentage of gdp, AND I recall reading that it took 25% of the tax take to fund that debt. Obviously if you have high debt you also have high debt servicing costs. Debt servicing costs were also higher back then due to higher interest rates than presently so this an additional reason for the high percentage of taxes needed to fund that debt
The growing debt and difficulties funding interest payments on that debt (much of it owed to the IMF and you dont want to be owing these people money) was apparently one reason for a change of government in 1984 where the centre right National government lost and the centre left Labour government were elected. The National government was lead by Robert Muldoon, and the incoming Labour governmnet was lead by David Lange. But the debt continued to grow after that period until about 1993 and the problems grew along with that. Interest payments on the debt were a bit higher than currently at least until around 1990 I think. From there debt fell to very low levels by the 2000’s, then increased during the GFC as with you guys.
You can find information on New Zealands governmnet debt going back to the 1970’s on this page. Click on the menu for the appropriate time period:
https://tradingeconomics.com/new-zealand/government-debt-to-gdp
I cannot find records on interest payments on that debt as a % taxes, and I don’t intend to spend all day looking. I just recall it was 25% at the wrost point. But you can see debt was quite high in NZ back 1n the 1984 – 1994 period so obviously debt servicing costs were high (especially as interest rates were quite high for some of that period).
Now debt has started to spike again during this covid problem and is expected to hit about 60% of gdp, but fortunately with low interest rates servicing that debt wont be too onerous. But if interest rates go up it will be a killer and they could go up. Its all a bit of a gamble. Don’t get me wrong, I think its the right move to have borrowed money to get through the covid 19 problem and build a bit of infrastructure, but we are pushing the limits. There gets a point where you can have too much debt. I would have thought that was fairly self evident. Sorry if the history is complicated with many factors to tease out. It is what it is.