Saturday, April 29, 2023

Prosperity awaits

This post is to introduce a new paper I have written, an 8-page PDF stored at DropBox. The topic is "the debt ceiling and more." 

Actually no, that's the title. The topic is "Prosperity awaits".

Anyway, the link: The Debt Ceiling and more - A letter to my Senator

Enjoy it. Share it.

Comments on the paper are more than welcome. If you refer to something I said, please quote it so I can find it in the PDF! Leave comments here, with this post


///// Afterthoughts 

7:08 PM Sat, 29-Apr-2023
In the PDF I forgot to give a link to the Stephanie Kelton quote.
Robert Waldmann has it, here:
Bloomberg has it here:


Monday, April 24, 2023

Will Refusing to Increase the Debt Ceiling Fix the Problem?


Federal debt is not the problem. It is a consequence of the problem.


Here's the relationship between private and public debt:

Reducing the federal debt makes the line go up, where you get depressions and such.

Reducing private sector debt makes the line go down, where good times begin. 

This page:

For the XLS file see

Sunday, April 23, 2023

Will a Balanced Budget Amendment work?


Federal debt is not the main problem. It is a consequence.


Here's the relationship between private and public debt:

Reducing the federal debt makes the line go up, where you get depressions and such.

Reducing private sector debt makes the line go down, where the good times begin.

Saturday, April 22, 2023

We need a better plan

Two points to keep in mind:

  • If our economy went into decline after 1973, then 2023 marks half a century of decline.
  • Long-term economic decline is indistinguishable from the decline of civilization.

In Why Raising Interest Rates to Fight Off Energy Inflation is Counterproductive by Hielke Van Doorslaer we read that hiking interest rates, our go-to method of fighting inflation,

puts monetary policy at cross-purposes with other policy priorities (such as investing in renewables and energy-efficiency) and risks further entrenching years of public and private underinvestment. In this way prohibitive interest rates will further exacerbate the trend of secular stagnation (defined by low rates of growth, productivity, and investment) that has plagued advanced economies for at least a decade (with some even dating the onset of the declining trend back to the 1970’s).

I agree that our existing anti-inflation policy is "at cross purposes with other policy priorities". As new anti-inflation policy, I have suggested pruning back the policies that promote credit use, and creating policies that induce people and businesses to accelerate their repayment of debt by offering tax benefits for doing so. (But this is not today's topic.)

At the end of the excerpt Van Doorslaer points out that slow economic growth "has plagued advanced economies for at least a decade" and adds

with some even dating the onset of the declining trend back to the 1970’s.

This is today's topic: long-term slowing of economic growth.

A footnote attached to the Van Doorslaer excerpt links to Jack Copley's "Decarbonizing the downturn: Addressing climate change in an age of stagnation". Copley points out that "GDP growth and investment have trended downward globally since at least the 1970s".

Since at least the 1970s. Since the 1970s or before. Yep. I wrote for the blog one time since the 1960s but then I went back and changed it because people might accept the 1970s as start-of-decline, but it sounds crazy to say our long decline began in the 1960s. So ya knock off the sharp edges, and try to look sane. But it amazes me that so many people, even economists, regularly fail to see the long decline. People too often see what they've been told they see, instead of looking with their own eyes.

Copley also says

Brenner has labelled the years 1965–1973 a transition period from ‘long boom to long downturn’ (2006: 37).

And if I read Steve Keen right, Minsky put the end of the Golden Age at 1966.

Scott Sumner has said

I am not denying that growth in US living standards slowed after 1973, rather I am arguing that it would have slowed more had we not reformed our economy.

Yeah, yeah. If the economy slowed after 1973 despite the reforms Sumner mentions, then those reforms were not the right solution

If you don't know how and when the problem started, what the cause really was and what the problem really is, all you can do is guess at the solution.

America has had no doubt for half a century that we must balance the federal budget. But America refuses to acknowledge that the only way to balance the federal budget is by reducing private sector debt so that the economy can grow and people can afford to live. Once we get the economy growing we can easily balance the federal budget: Easily. It will be easy. And now you're questioning my sanity again.

We've been trying to balance the budget the wrong way for 50 years. We have not restored vigor to our economy. We have not even once actually balanced the federal budget: The last time the federal debt fell was in 1969. We need a better plan.

Friday, April 21, 2023

An inflation prediction

Graph #1: Price Increase from Previous Month

The last data shown is for March 2023. 

Inflation became newsworthy after the covid recession of 2020, and reached a month-on-month peak in June 2022. The following month, July, the number dropped to zero. According to the stats at least, prices didn't go up in July. And since July, the monthly increases have been pretty tame, similar to what we had for 10 years before 2020.

The news doesn't report the month-on-month increases that are shown on the graph above. They report the 12-month change: the price level for the month, relative to the price level 12 months before. For example, the "percent change from a year ago" inflation rate for the high point, June 2022, included all the price increases since June 2021.  This makes the inflation number much higher than it is on the first graph. The second graph shows the inflation data in this more newsworthy form:

Graph #2: Price Increase from a Year Ago

This graph shows the same source data, but it figures 12-month increases rather than 1-month increases. Notice that June 2022 is a high point on both graphs. But inflation is almost 9 percent on the second graph, and not much more than 1 percent on the first. One is newsworthy, and one is not.

Next, a prediction.

On the first graph, from June to July 2022 inflation drops all the way to zero. But on the second graph inflation is still high in July. That's because the second graph figures 12 months, not just one.

For the June 2022 number, they take June 2021 as a starting point and then count all the increases from July 2021 to June 2022.

Then for the next month, the July 2021 number is used as a new starting point. This time it doesn't count as an increase. The July 2022 number drops the July 2021 increase, counts the other 11 increases used the month before, and adds in the July 2022 increase. This is like why people don't like math I guess.

Anyway, the last data point shown on both graphs is for March 2023. March of 2022 is the starting point, and April 2022 is the first of a dozen monthly numbers used to figure the March 2023 number on the second graph. That's the process. It's kind of an incremental shift, one month at a time.

The high point on the first graph was the June 2022 increase. For June 2023, that increase no longer counts when they figure "from year ago" inflation. Instead, it serves as the starting point for the calculation. 

The last time the June 2022 increase (the big one) figures into the inflation rate is for May 2023. As of June 2023, all of the increasing inflation, from 2020 to June 2022, will be out of the calculation. The first monthly increase that comes into the June 2023 "from year ago" number is the July 2022 number -- the zero inflation shown on graph #1. 

And the inflation we got in the months after July 2022 was about as low as the inflation we had for the first ten years shown on graph #1. So my prediction is that the inflation for July 2023 and after will be "back to normal" or close to it. It will hardly be newsworthy anymore. 

That doesn't mean prices will come back down, of course. But at least we won't have to listen to them talk about it on the news!

Thursday, April 20, 2023

Debt and Inequality

In the paper "From Servant to Master: The Financial Sector and the Financial Crisis" by Michael Lim Mah-Hui, we read:

Among the reasons for this increasing income and wealth inequality are the effects of technology on the job market favouring skill-based professions over blue-collar work, globalisation that saw the outsourcing of work overseas, the erosion of union power, particularly after the Reagan era, stagnation of minimum wage, the lag of wage rates behind productivity increases, the astronomical rise in the compensation of chief executives and the structure of tax relief and incidence policies.

That is a weighty list of reasons for the rise of inequality, and valuable if we have in mind to reduce inequality. But I had to quit reading when I got to that paragraph, so I could write.

I have to say I've had a lucky streak lately, coming across several authors who think as I think: John Hotson, John McMurtry, William Hixson, Lawrence E. Mitchell, and Michael Lim Mah-Hui. And these are guys that know what they're talking about, not mere hobbyists like me.

I respect what they say and I want to read more. And where I disagree with them it is no doubt because I'm the amateur and they are pros. But it looks to me like Michael Lim left something important off his list of the reasons for inequality: debt. 

Maybe it is there, on the next page. But people tell me debt doesn't cause inequality; inequality causes debt. They think I have it backwards. 

I think they have it backwards. Debt, by means of the interest payments, is a device or a mechanism that moves income into the financial sector. Some of that money, probably most of it, never comes out again (or not for years and years) unless it comes out as a loan. In other words, money only comes out of finance if it is going to be returned to finance with interest. Money only comes out of finance to bring more money into finance. What goes into finance stays in finance!

People say inequality is the cause of debt. But inequality is not a mechanism. It is a measure of monetary imbalance. It is an indicator we can use to see that there is indeed a problem. 

But an indicator is not always a cause. Very often it is a result. The interest on debt, on the other hand, moves money out of the pockets of working people and out of the transaction accounts of productive ("nonfinancial") businesses, and into the steely cold vaults of the financial sector. The payment of interest is a cause of inequality, and it moves significant amounts of money into finance every year.

Mechanisms that move income are central to the problem of growing inequality. Debt is such a mechanism.

I must also emphasize that paying interest reduces the disposable income available for spending. This reduces aggregate demand, reduces employment and reduces economic growth. The short version: a growing debt not only contributes to inequality by shifting monetary balances, but also by slowing economic growth and income growth, which -- because of inequality -- hurts the rich much less than it hurts the rest of us.

Wednesday, April 19, 2023

Financialism leads to Mitchell, and Mitchell to Lim

I noted yesterday the PDF "Financialism: A (Very) Brief History" by Lawrence E. Mitchell. The Abstract at SSRN says

This essay describes various financial, economic, and legal developments in the United States from 1952 until 2007 and argues that they suggest a transformation of the American economic system from capitalism to one I term "financialism."

Mitchell puts the beginning of the process at 1952. This is the earliest date I have ever seen offered for the start of the financialization that turned capitalism into financialism. I happen to think we could go with an earlier date -- but not based on FRED's post-WWII data:

Graph #1: Corporate Finance as a Share of GDP

Clearly, however, financialization did not wait for the Reagan era to begin.


Mitchell writes (page 7) that Dr. Michael Lim Mah-Hui

attributes a significant proportion of the rise in what I call financialism to the dramatic increase in American debt between 1960 and 2007.

Lim uses a later start-date than Mitchell, but I don't care because he attributes the problem (or much of it) to excessive debt. He does, and it seems Mitchell does, and so do I -- heart and soul.

In Dr. Lim's paper "From Servant to Master: The Financial Sector and the Financial Crisis" (which Mitchell references) we read:

Between 1960 and 2007, financial sector debt rose an astounding 490 times, while household debt rose 64 times, non-financial corporate debt 53 times and government debt 24 times.

Evidence of imbalance; nuff said.

The irony in those numbers is that government debt -- the one America focuses on exclusively -- shows the smallest increase of them all.

Nuff said.

Tuesday, April 18, 2023


Well, it finally occurred to me that financialization is the process which turns capitalism into something that can only be called financialism. So I looked that up. 


At SSRN, a download page for "Financialism: A (Very) Brief History" by Ezra Wasserman Mitchell of the Shanghai University of Political Science and Law. The paper is dated August 9, 2010, and the download page contains an abstract.

The downloaded PDF has the same title but the author is Lawrence E. Mitchell and there is no abstract. I can see that Lawrence E. might be Lawrence Ezra, the same person, but I don't know that, and I don't want to attribute the paper to the wrong guy.. Anyway, the 15-page paper grabbed my attention. It is about half footnotes, by the way.

A note at the bottom of the first page says

An earlier version of this essay was presented as a lecture at Creighton University Law School and published at 43 Creighton L. Rev. 323 (2010).

The same search turned up the 12-page PDF "Financialism: A Lecture Delivered at Creighton University School of Law", by Lawrence E. Mitchell, Theodore Rinehart Professor of Law at George Washington University. This paper is dated September 25, 2009. This version has no footnotes. 

Both versions of the paper end with the sentence "We must destroy financialism for the sake of capitalism." I'm in.

Thursday, April 13, 2023

William Hixson's A Matter of Interest

In my post yesterday, footnote 3 in the McMurtry quote references the William Hixson book noted in the title of this post.

At Amazon:

A Matter of Interest: Reexamining Money, Debt, and Real Economic Growth
by William F. Hixson; publication date August 30, 1991 (for $111.75).

The blurb is a good one:

Hixson describes how the largely laissez-faire economy prior to 1929 was so structured to make a crisis of illiquidity and overindebtedness inevitable, and how the mixed economy that has prevailed since World War II is structured to result in a similar crisis.

And the reviews are good. There's a flattering one from Kenneth Boulding and this, attributed to "Choice":

... this businessman turned author focuses on the performance of the US economy since WW I vis-a-vis the size and growth of the money supply, the expansion of private and public debt, and the interest burden that debt generates. The soaring ratio of interest to total income is said to be the single most significant economic indicator in recent decades; depressions like that of 1929-32 arise because the economy, in order to grow, becomes increasingly indebted, illiquid, and interest burdened. Indeed, 1987 was more illiquid than 1929, though no panic had yet developed in the absence of public disillusionment that must eventually emerge.

Hixson departs from mainstream economics in many surprising ways, e.g., his belief that moderation of money growth and high-interest rates promotes inflation and his approach to counting interest only as cost and not income.

Wow! I also focus on the size and growth of the money supply, the expansion of private and public debt, and the interest burden that debt generates. I too think that the soaring ratio of interest to total income is the single most significant economic problem in recent decades. And I, like Hixson, hold that depressions like that of 1929-32 (and close calls like 2008-2010) arise because the economy becomes increasingly indebted and interest burdened.

Talk about suppression of non-mainstream economics, Hixson doesn't even have a Wikipedia page.

Wednesday, April 12, 2023

"the darkening outline of an ever more serious world disorder"

From John McMurtry (1997) at

From 1950 to the present, for example, net revenues from lending money in the U.S. have multiplied by almost 300-fold. This is more than 10 times the rise of G.N.P. over the same period, and nearly 25 times the rise in the total farm income of the the world’s greatest food-producing economy.3 Elsewhere interest demands on national economies have been even more extreme in their exponential rise. Between just 1980 and 1994, real interest demands on less developed countries multiplied by 16-fold from their 1975-79 average.4 If we reflect on these figures, we see the darkening outline of an ever more serious world disorder. Turning money into more money for money lenders has invisibly become the ruling imperative of the planet, drawing ever more revenues from productive use for human beings into the decoupled money sequence of usury.

The lethal mutation in the money sequence of value occurs when money demand is no longer a phase within the circuit of the production of society’s goods, but is exclusively committed at every stage of its growth only to the multiplication of itself. Instead of any productive function in the metabolism of money through the medium of use-value to more money, there is only the metabolism of money to more money without any conversion to use value in the circuit.

I didn't check his numbers, but they do show the problem.

And let me point out that McMurtry predicted "an ever more serious world disorder" in 1997, eleven years before the financial crisis that festers to this day.


Wikipedia says of McMurtry:

In The Cancer Stage of Capitalism, 1999, he claims a propensity of human societies to assume the social order in which they live as good however life-destructive they may be, focusing on financial capitalism as displaying the hallmark characteristics of a cancer invasion at the social level of life organization. He conceives "the civil commons" as a social immune system.

Sunday, April 9, 2023

On the need for economic growth

I usually just say that "economic growth" means the increase of GDP, and then point out that GDP is a measure of income. So people who say we don't need economic growth are saying that they don't want to increase their income.

But perhaps that is not the best argument in favor of economic growth.

Benjamin Friedman makes an impressively relevant argument in The Moral Consequences of Economic Growth. From page 4:

The value of a rising standard of living lies not just in the concrete improvements it brings to how individuals live but in how it shapes the social, political, and ultimately the moral character of a people.

Economic growth -- meaning a rising standard of living for the clear majority of citizens -- more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy. Ever since the Enlightenment, Western thinking has regarded each of these tendencies positively, and in explicitly moral terms.

Even societies that have already made great advances in these very dimensions, for example most of today's Western democracies, are more likely to make still further progress when their living standards rise. But when living standards stagnate or decline, most societies make little if any progress toward any of these goals, and in all too many instances they plainly retrogress.

The book is from 2005, well before the Trump retrogression.

Friday, April 7, 2023

Blogging for money in Florida

From Vanity Fair, 7 March 2023:

Weighing in on a proposed Florida bill that would require bloggers writing about Ron DeSantis (or other elected officials) to register with the state, Gingrich tweeted: “The idea that bloggers criticizing a politician should register with the government is insane. it is an embarrassment that it is a Republican state legislator in Florida who introduced a bill to that effect. He should withdraw it immediately.” The bill, which was introduced by Florida state lawmaker Jason Brodeur, states that “If a blogger posts to a blog about an elected state officer and receives, or will receive, compensation for that post, the blogger must register with the appropriate office…within 5 days after the first post by the blogger which mentions an elected state officer.” And it doesn’t stop there!

First I heard of it.