tag:blogger.com,1999:blog-2546602206734889307.post928853252261548363..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: The Ethics of Helicopter MoneyMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger69125tag:blogger.com,1999:blog-2546602206734889307.post-91371933128979219732015-08-12T09:51:03.109+00:002015-08-12T09:51:03.109+00:00I'm not making an argument against representat...I'm not making an argument against representative democracy. I'm just pointing out that the accountability you call for is more symbolic than actual.<br /><br />Maybe a better way to improve democratic accountability of central bank policy would be to educate the population more about economic ideas. There would be better oversight of the handling of the economy if the electorate understood the underlying concepts -- regardless of whether particular powers were in the hands of technocrats or elected representatives, a distinction that currently has few if any genuine implications for democracy given public ignorance.Samhttps://www.blogger.com/profile/06743143177414830201noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-14907527389793556192015-08-11T19:36:45.295+00:002015-08-11T19:36:45.295+00:00SW-L is quite right to say that HM keeps influenci...SW-L is quite right to say that HM keeps influencing inflation after it stops being produced, and Jure Jordan is wrong to question that point. The reason has been pointed out over and over by MMTers, namely that HM is or results in an increase in private sector paper assets or “private sector net financial assets” (PSNFA) as MMTers tend to call it.<br /><br />However, inflation is constantly eroding the value of PSNFA, and to that extent the inflation or stimulus producing effect of a given stock of PSNFA declines over time. The net effect of all that is that if HM alone is used to adjust stimulus it will have to be produced almost every year, though the quantity will vary depending on how much stimulus comes from other sources, e.g. exports or private sector irrational exuberance. Sanjay Mittalhttps://www.blogger.com/profile/18032814733307421482noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-42314487357748024352015-08-11T19:18:41.133+00:002015-08-11T19:18:41.133+00:00In the US the Fed could just issue deposits to the...In the US the Fed could just issue deposits to the individual states based on a simple per capita formula (say $500 per head), the states can then decide how to use the newly created funds. You could also just issue it as a tax credit. In either case you account for it as Dan K Illustrates above.mmcoskerhttps://www.blogger.com/profile/09340832287496890370noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-32686394242291417042015-08-11T14:54:37.365+00:002015-08-11T14:54:37.365+00:00Sam,
Yes, those are all standard arguments agains...Sam,<br /><br />Yes, those are all standard arguments against representative democracy, and in favour of rule by Technocrats.<br /><br />You could replace 'interest rates' with any other 'technical issue' you liked in your question. <br /><br />I am not claiming representative democracy is perfect, or that the degree of accountability is high. I do however think it is worth maintaining, and that rule by elected representatives is the best available option. Serious people over centuries have not agreed of course, and think you are right. Plato wasn't an idiot.SpinningHugonoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-87223790037357186152015-08-11T08:02:39.057+00:002015-08-11T08:02:39.057+00:00Raising taxes to reduce demand does not compensat...Raising taxes to reduce demand does not compensate for lack of supply caused by previous government consumption. the government acquiring resources by decree and then pursuing to reduce the metric of price inflation by removing the means of transaction from the population, leaves the economy with a dearth of supply.<br />It is in no way the equivalent of the government intervening in the pre existing money transactions of the economy in order to obtain spending power.<br />Government spending from taxation or borrowing of pre existing deposits uses deposits that inherently entails future supply from the borrowers obligation to the associated loan contracts. It also entails the prior scrutiny , and the conclusion of , bank loan officers and borrowers, that , that supply will be forthcoming. Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-55150504901642022232015-08-10T16:31:34.887+00:002015-08-10T16:31:34.887+00:00Hi Hugo - could you explain what form democratic a...Hi Hugo - could you explain what form democratic accountability takes when it comes to highly technical issues like the setting of interest rates? A general election every five years is not really an opportunity for the electorate to inform the government what central bank policy should be.<br /><br />99% of the electorate doesn't understand how the mechanism works or what exactly it's for, and don't know how to tell whether those in charge have done a good job or not. The accountability you are calling for would be essentially symbolic, would it not? How do hold someone accountable when you don't know what their job involves or how to judge them on it?Samhttps://www.blogger.com/profile/06743143177414830201noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-58191757421452765992015-08-10T16:19:16.219+00:002015-08-10T16:19:16.219+00:00We just disagree. The evidence I would point to in...We just disagree. The evidence I would point to in the U.S. context is that when center-right economists like Mankiw and Rogoff suggested raising the inflation target, they were quickly shot down and went back to towing the party line.<br /><br />In Europe of course there is the example of the humiliation of Greece. <br /><br />Cameron is just fanning the flames of fear that without austerity, they'd get a rise in interest rates. As usual I disagree with most everything you write.<br /><br />I would agree that the rightwing wants to dismantle the regulations of Frank-Dodd so they don't want limits on leverage and that sort of thing.Peterhttps://www.blogger.com/profile/08272747870634233567noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-44554577674134696882015-08-10T14:43:54.827+00:002015-08-10T14:43:54.827+00:00Phillippe:
It has everything to do with ounces of ...Phillippe:<br />It has everything to do with ounces of silver. If the bank either gets assets in exchange for the new money, or else has enough existing assets to buy back all the money it has issued, including the new money, then it's not helicopter money.<br /><br />Peter:<br />As long as the government can collect taxes, and as long as the central bank is viewed as part of the government, then the government's "taxes receivable" back the central bank's money just like the central bank's bonds would do, and it's not helicopter money.<br /><br />Recapitalizing the central bank would require giving it more assets. A printing press can give the central bank more liabilities, but not more assets.<br /><br />I suppose the Keynesians populating this blog would nod in agreement about targets, catch-up growth, output gaps and so on, but it's a very shaky set of ideas with no logical foundation.Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-37662639117089855942015-08-10T12:44:29.887+00:002015-08-10T12:44:29.887+00:00Raising taxes to reduce demand does not compensat...Raising taxes to reduce demand does not compensate for lack of supply caused by previous government consumption. <br />Using pre existing deposits created by private sector borrowers, entails future supply from borrowers in the process of the repayment of the associated loan contracts. It also entails the prior scrutiny and the decision of bank loan officers and borrowers that that will be the case.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-46355274815974637392015-08-10T11:57:52.288+00:002015-08-10T11:57:52.288+00:00Professor Wren-Lewis, your helicopter money propos...Professor Wren-Lewis, your helicopter money proposal seems so convoluted! You've taken a simple idea, wedded it to the morass of mainstream macroeconomics, and turned it into a byzantine bureaucratic mess.<br /><br />I assume that in the UK, just like the US, the government's accounts are held at the central bank. The simplest form of helicopter money, then, consists of the central bank adding numbers to the balance in that account. End of story.<br /><br />It's not a central bank *loan* to the government; or an asset purchase *from* the government, or anything like that. The central bank simply adds dollars to the account as a gift outright. Done. And you don't need to set up any special delegating mechanisms for the central bank to conduct its own separate fiscal policy on the side. The government carries out the spending in the same way it always does: the legislature passes spending bills.The difference is that, following the helicopter drop into the government account, the government now has extra money in its account that it doesn't have to pay back. No additional taxes; no new debt issuance; no fiscal drag coming from either of those directions.<br /><br />You also seem to run into all sorts of confusion in explaining the difference between helicopter money, however it is administered, and quantitative easing. Isn't it obvious? QE is an asset-purchasing program. The central bank creates dollars on the accounts of various asset dealers who, *in exchange*, surrender valuable assets to the central bank. With helicopter money, the recipients of the money don't surrender anything. The private sector retains all of those assets and the cash flows attached to them. But somebody gets free money in addition.<br /><br />You also say: "To the extent that the central bank makes a loss on QE (and if QE is temporary they really could make a loss, which is why the Bank of England got the government to cover these losses), it involves given newly created money away."<br /><br />From a broader, more consolidated perspective, it's not giving free money away if the government then covers it. That's just a transfer from one part of the economy to another. It works roughly the same way in the US system: If the Fed income statement shows a loss after expenses and statutorily mandated dividends are paid, it books that loss as a "deferred asset". The total amount of the accumulated deferred asset is counted against any disbursements to the treasury in subsequent profitable years, until such time as the government has paid off that deferred asset in the form of reduced distributions from the central bank.<br /><br />So if you want helicopter money to work, and to be a genuine helicopter drop and not a transfer, it would be best to take the helicopter money off of the central bank balance sheet. You authorize the central bank to make helicopter drops to the government's treasury, and legislate the accounting rules such that the money does not get added to the liability side of the central bank balance sheet or the expenses side of the income statement. It then doesn't represent a loss that has to be covered.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-46989788927937929752015-08-10T11:31:00.226+00:002015-08-10T11:31:00.226+00:00To me the use of the analogy illustrates the absur...To me the use of the analogy illustrates the absurdity of your position. I don't think this perfect 'democratic mandate' you speak of exists. Democracy involves the delegation of power at all sorts of levels: sometimes it's a good idea, sometimes it isn't. The independence of the BOI was obviously a very significant delegation, but it is generally considered to have been a success, and in any case I for one don't lie awake at night worrying that a future UK government wouldn't be able to reverse it if it wanted to. JDnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-23067545257400802112015-08-10T10:08:10.773+00:002015-08-10T10:08:10.773+00:00All good questions that need to be looked at.
Hen...All good questions that need to be looked at.<br /><br />HenryAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-76270169417768031892015-08-10T07:48:21.855+00:002015-08-10T07:48:21.855+00:00But can you find a spending that does not divert s...But can you find a spending that does not divert some parts to unwanzed purposes?<br />And would such enforecement cost more then divertion of funds?Critical Tinkererhttps://www.blogger.com/profile/08540226813192385645noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-9887506252089761922015-08-10T05:48:33.418+00:002015-08-10T05:48:33.418+00:00Jure,
What I am saying is that giving out HM may ...Jure,<br /><br />What I am saying is that giving out HM may lead to that money being diverted to expenditure which does not suit the goals of the exercise. So, perhaps better ways of directing expenditure may need to be found. What is the point of giving money out if it is diverted to the purchase of foreign goods, for instance?<br /><br />Regarding "horrid", I was not referring to Rudd but to the GFC.<br /><br />HenryAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-71111231160914772742015-08-10T05:26:30.442+00:002015-08-10T05:26:30.442+00:00JD
Yet again, of course they are different.
The ...JD<br /><br />Yet again, of course they are different.<br /><br />The point of the analogy is to show how the "set up and endorsed by the government" argument does not, as is thought, means that the delegation has no democratic trade off.<br /><br />And as I said in the original post<br /><br />"t is no answer to say that democratic legislatures could reverse the handover of power to these unaccountable institutions if they choose. The objection is to unaccountable individuals and bodies ever exercising this power. Full stop"<br /><br /><br />So no, for the avoidance of doubt, I am not claimining that giving central banks helicopter drop powers is the same as the worst excesses of Nazi Germany. <br /><br />I am saying that it results in more power being exercised by those with no democratic mandate, and that the argument that a democratic legislature has sanctioned this does not overcome the problem as so many seem to think.<br /><br />The Low Pay Commission's recommendations were never binding. They did not set the minimum wage. SpinningHugonoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-66081790955220886302015-08-10T05:07:34.169+00:002015-08-10T05:07:34.169+00:00And what was so horrid with Rudd? The fact that hi...And what was so horrid with Rudd? The fact that his governement spent $52 b giving to people, building schools, pension system and housing saved Aus from recession from debt deleverage?Critical Tinkererhttps://www.blogger.com/profile/08540226813192385645noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-68003663176784127682015-08-10T04:59:57.325+00:002015-08-10T04:59:57.325+00:00What you are saying is that people will not drink ...What you are saying is that people will not drink gamble and smoke unless government gives them the money. Realy interesting.<br />Another point is that people will not tattoo unless they are incentivised by government.even more interesting.<br /><br />You are looking at ideal government that knows and have such resources to prevent wastefull spending which definitevly requiers much much bigger governments then we have.<br /><br />Only perfect way to perfectly use funds would be if governemt make contracts only with non-profits or with state owned corporations. Contracting privaate corps will asure huge profits going to buy foreign luxuries like french vines and yahts. <br />Any deales with profit organizations involves huge profits going to be spent on imports.<br /><br />Do you like your ideal world, where it exists?Critical Tinkererhttps://www.blogger.com/profile/08540226813192385645noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-1839770411510207332015-08-10T03:35:26.446+00:002015-08-10T03:35:26.446+00:00@SH
George Osborne just removed responsibility for...@SH<br />George Osborne just removed responsibility for setting the minimum wage from the LPC. The Philosopher Kings were granted their power, and now they have been stripped of it.<br />Even in the case of the ECB the 'nakedly political role' of the institution in the Greek crisis shows that this kind of delegation is never absolute. The problem with the eurozone is political: the Kings could be dethroned, but the mechanisms to achieve this have been explicitly designed not to work. In this matter at least the UK government isn't constrained by the political <i>huis clos</i> of EU decision-making. <br />More generally your Nazi analogy fails to differentiate between using a democratic mandate to accrue more power to yourself from using that mandate to delegate power to someone else. These things are rather different.JDnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-58533759599871267312015-08-10T00:55:36.074+00:002015-08-10T00:55:36.074+00:00I forgot to add that during the horrid days of 200...I forgot to add that during the horrid days of 2009 the Australian Rudd government, via fiscal transfer, gave away a swag of money - it was suggested that a good deal of it would go to the tattoo industry - I suppose a tattoo lead recovery is better than nothing.<br /><br />HenryAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-63134016381778826042015-08-10T00:37:12.253+00:002015-08-10T00:37:12.253+00:00This question probably out of bounds, but why shou...This question probably out of bounds, but why should financial resources of the state be used to gee up inflation to meet a target, why not be more specific and include unemployment amelioration as well? <br /><br />Who should get the money? Should there be an asset/income test?<br /><br />Should the money be distributed if there was a high risk it would be largely diverted to socially unacceptable activities such as smoking, boozing and gambling? It may result in long term negative health and social costs. The moral deprivation aspects might be overwhelmed by the sensual/emotional aspects (if only momentary).<br /><br />What if the money is largely spent on foreign produced consumer goods (TVs from China say)? This might kick up local prices but will it do the economy (local unemployment) any good?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53938110656876196502015-08-09T22:52:32.840+00:002015-08-09T22:52:32.840+00:00In effect, yes. The way I would put it is this. If...In effect, yes. The way I would put it is this. If HM does not require future recapitalisation, that is because of profits the bank makes which would otherwise have gone to the government. Those profits could have been used to pay back the borrowing required to cut taxes. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-36047175464559969582015-08-09T22:25:28.036+00:002015-08-09T22:25:28.036+00:00"we have just seen the downsides of the kind ..."we have just seen the downsides of the kind of technocracy you and S W-L prefer played out in real time for us."<br /><br />Obviously not though as neither of us is advocating that, despite your desire to believe otherwise.<br />Ahttps://www.blogger.com/profile/17386123430230365251noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-15264925037781653972015-08-09T21:59:59.679+00:002015-08-09T21:59:59.679+00:00As someone who is a small investor in mostly US eq...As someone who is a small investor in mostly US equities, the Fed's QE seemed to boost equities greatly. When the fed pulled back , see the last few weeks, markets dipped.<br /><br />Yet Fridays unemployment rate was ok,not great. Maybe HM is the better way to growth rather than QE. I invested in Apple few years back, and they have lot of cash they just sit on. <br /><br />The central banks are comprised of hopefully competent economists who can evaluate interest rates, trending inflation, unemployment and median wages, and likely fiscal policy given the politics. <br /><br />I have read a poster say HM is illegal in the US, don't know. But the US would be the best place to try this I reckon bc the dollar is reserve currency and is too strong. Also, if it worked here it would have greater spill off effects. Unfortunately our politics and culture makes nigh on unthinkable. Some gutsy central bank with a depressed economy should try it.Anonymoushttps://www.blogger.com/profile/07944928931697915829noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-1850040282853048762015-08-09T21:32:11.016+00:002015-08-09T21:32:11.016+00:00Only the money received can be stimulating, not th...Only the money received can be stimulating, not the portion that is not received and never supposed to have received. The real truth is zhat taxes have no effect on a long term equilibrium. People would have received the same real value weather taxed or not. In long term inflation makes purchasing parity equal wether tax or not. But in short term change of tax can have huge effects. Only in short term soon after change.<br />In the real world the rate of change is what matters not static relations.Critical Tinkererhttps://www.blogger.com/profile/08540226813192385645noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-63455638986776732242015-08-09T21:18:54.383+00:002015-08-09T21:18:54.383+00:00Philippe
1. That is not 'basically what I am ...Philippe<br /><br />1. That is not 'basically what I am saying' no.<br /><br />If a democratic government adopts a policy of this kind it has<br /><br />(i) the mandate to do so<br /><br />and<br /><br />(ii) can be removed from office by democratic means.<br /><br />2. The point about the EU is that it is the largest and most prominent form of a technocracy we have. The ECB is independent, and its mandate is determined by rules as well. however, we have just seen the downsides of the kind of technocracy you and S W-L prefer played out in real time for us.<br /><br />And no, I don't think we are just talking about the bank of England. S W-L's post does not mention it: it wasn't directed in principle at any specific jurisdiction. <br /><br />3. Not in practice because in practice since Brown gave the Bank of England independence in 1997 no decision has in fact ever been challenged.SpinningHugonoreply@blogger.com