Demystify Debt

A few comments this week on Michael Hudson and Steve Keen ranting on the DemystifySci podcast (here) . A nice confluence of an offbeat youtube channels I occassionally watch and MMM (the framework formerly known as MMT ;-)

I posted comment sthere, but pretty sure they’ll get “cleaned” (deleted) by someone. However, DemystifySci often have some interesting content on Ai, biotech, and related. It’s not all loony tunes, even though sometimes it is. Science as entertainment for nerds.

As usual Hudson rants a lot, making extreme exaggerated statements. But I have no terrible beef with him, he is in a sense simply countering the mainstream economics rhetoric and so helping reject all the neoliberal garbage.

Caveats

I wrote the comments on the DemystifySci channel in a rush, and a bit hot headed. Feel free to contact me to let me know if you think I have something terribly wrong.

Rents are Not Necessary

What started me commenting was when the host guy tried to correct Keen by claming some rent is necessary.

The overarching point is that no one should ever need to be forced to pay rent on the necessities (food, clothing, shelter, electricity, healthcare). These are public services, or should be, so un-privatise them! If your nation wants people to be free to charge rent between themselves for non-essentials, well… try it out. But for heavens sake, protect the innocent from fraudsters and banksters. Regulate the banks, à la Mosler’s proposals .

My comment:

@58:00 host dude badly wrong here. We do not need rents. At least not for young couples seeking a first home. Housing (and education and healthcare) should not be a commodity (see Polanyi). Governments can always fund the first home buyers, and have some of the housing cost repaid as a fair proportion of the family income as a tax (not a pay-for) if house construction is slow. None of this is “tax payer funded” because governments issue the currency by fiat, it is mere scorekeeping for the government. They impose taxes to create demand for the currency, not supply. The government is the supplier. Interview Warren Mosler on all this.
      Also, commercial banks are in all cases chartered by the state, they are for all effects simply agents of the state. They should be tamed as such, because they’re dangerous beats. A bank should be regarded as a public utility for running the payments system, nothing more, except perhaps assessing credit risk. But the credit is again scorekeeping: the currency does not come form anywhere, banks just type a number into your bank account and an equal number on their books as an asset which records the loan (promise to repay). Banks have no business doing any other financial activity. This is Mosler’s narrow banking proposals. Keep the banks tamed and operating in the public interest, not for-profit. The bankers could be simply salaried contractors (if you want to avoid excessive politicization) or community trusts.
      Note: governments never need a “pay for”. They issue the currency by accounting entries. They need instead demand for the currency, which is the purpose of imposing taxes fees and fines, not to “pay for” anything in monetary terms. It’s all about real terms (for a fiat currency issuer), real resources, not “the money”. It’s about “the money” only if you have an IOU that no one wants, so you need to earn someone else’s IOU. State currencies are IOUs of the government, they make people need it by imposing taxes (primarily, unless they are oil rich in which case oil buyers take their currency). I’l repeat: talk to Warren Mosler.

Some Elaborations on Rentiers

If an older couple own a house they’re not living in then it should be taxed away from them if it is not occupied. If they seek to rent it, government regulations should automatically kick in to purchase it off them, at fair market value. There is no “tax payer” or “bank borrowing” funding this, the government just credits the old folks bank account using a computer. Frees up the house for that young couple. Older couple have currency they could then invest in real production, you might hope. No rentiers. Euthanize them.

Some Elaboration on Debt Jubilee

Hudson went on a rant claiming the USA cannot cancel debts. He’s only half right. It is about willingness to pay, not capacity to pay.

@1:12:00 c’mon! Governments have always had the power to cancel debts. State currency is simply scorekeeping (with severe legal and economic consequences for fraud etc.). Your problem is who controls government — it’s the proverbial One Percent. Michael is being disingenuous about the USA. All USD issuing private banks are chartered by the state, they cannot exist without the US State. The issue is who regulates them? The answer is the oligarchs, the One Percent, the bankers get to regulate themselves (as Obama allowed). Point is, Obama (c.2008) and Congress should not have allowed them to regulate themselves! Nor should any government. Proper role of government is to fulfill the public purpose, not private profit. But it’ll be private profit government until the citizenry seize back control of what aught to be their (the citizenry) government apparatus.

I added a bit more…

What I mean is, it’s not just China that has the power to cancel private debts for poorer households. All governments can, except the eurozone, who are no longer sovereign governments, they’d rely on the unelected ECB to cancel debts. But even there, the ECB could vote to cancel private debts for poorer eurozone households. It has to be (read: shoudl be) done fairly, by a little bit of simple accounting. Households that were defrauded, that is, forced to borrow (use their credit cards) from banks to pay for electricity, groceries, etc., should get their debt cancelled. Not households that took bank credit to buy yachts and condominiums.

Or, a one-time debt jubilee could occur via Prof Keen’s idea, to give the same lump sum to all households, but those with debt have to pay off their debt (so it is automatic) and those without debt have to invest in real sustainable production (according to a sustainable firm schedule, also automatic, they get the shares only, not cash). However, this does further (needlessly) enrich the One Percent, so I’d apply a simple debt jubilee cap if I were supreme benevolent dictator ;-).

But this also in conjunction with Warren Mosler’s proposal for eliminating the gambling casino that is the stock market. I’d limit all share prices to $\$$10 max. Opening at say $\$$10. Once the price hits $\$$10/share the firm can sell more shares. Fix price, let quantity float. Same as a fiat currency operation should be. The idea is to maximize employment — in this case “employment” in real sustainable goods production of available investor equity. Not to make profits for rentiers.

Hudson should not be ranting by claiming the US State cannot cancel debts. He’s only half right. It is about willingness to pay, not capacity to pay.