Yanis in a Harness

I’ve avoided clicking on Varoufakis’ technofeudalism talks, but finally caved-in today. Man was I pissed. I mean, the basic thesis is ok, even interesting, probably mostly true, but when Yanis starts talking about government debt as a bad thing I loose my sh$\ast$t.

I’ll spare the details and just link to the talk here .

My comments:

@35:00 someone did not read much history. State debt has never caused a collapse of empire. A State’s deficit is it’s citizens surplus by accounting identity, it is a good thing (all else equal). What happens in empire collapse is either massive corruption or with monetary systems something like massive private debt, which means if the State is in deficit some oligarchs are holding an enormous amount of currency (equal to the private household debt plus the government deficit). These are only scorepoints though as far as the State is concerned, but the banking systems tend to be pretty rigid (by law), and if private debts of the poor, especially farmers, are not forgiven then you get revolt, you also get economic collapse. But it is not because of the debt of the sate (which is private surplus) it is because too much of that currency outstanding, not yet used to pay taxes, is held by too few who are hoarding and not spending.
     It is gross inequality which is the instability, not the debt of the State. A state that issues it’s own scorepoints is never broke and can always pay its debts — in its own currency. (Cesar could have stamped the trillion aureus coin — the metal value of the coin is not the face value. State currency has always been a scorekeeping system.) There is then inflation risk, but that never causes the collapse of a state, since you only get nominal currency inflation if you have a booming economy, or have something crippling supply like a famine, drought or war reparations imposed. It is surprising Yanis is using monetarist understanding, he has friendly MMT colleagues, but seems to not have learned much from them.

Then he talked about the trade imbalance, crying about how the USA has been the only nation able to run a massive current account deficit (gets more imports than it exports) because it has “global reserve currency status”.

@38:00 that is such bs. Australia has a sovereign currency and can run deficits too. You send away uranium and import smartphones and Teslas… if you are smart. The government deficit is irrelevant (except in political psychology), it is an ex post accounting identity, and the bigger it is the wealthier your people, or if foreigners are holding more AUD then the more customers Aussie firms will have to sell to without the customer doing a forex swap. Yanis seems to be an imbecile when it comes to state currency operations. The reason the USA gets away with a huge current account deficit is because foreigners are stupid and have an insatiable desire for holding USD. But is the desire for the amount of AUD held also insatiable? Sure it is, you cannot give me enough of your AUD. If I hold your AUD I am not causing any price inflation of AUD goods either. Give me a trillion AUD, I can still use more. If I rashly spend it all in a blitz I’m only harming my interest in you guys keeping your prices low.
     I like Yanis, but he can be such an idiot. It harms the working class to perpetuate the Deficit Myth, it kills the poor. It emboldens the wealthy “tax payer” — who is not the entity funding the government. As Yanis just said before, it’s the other way around (9 out or 10 Musk/Bezos/Gates scorepoints came from the government). What he neglected to say is the other 1 in 10 also came from the government, via bank credit: all banks issuing credit are chartered and licensed by the State. The government is the source of all state currency, anything else is counterfeit.

A follow-up:

What he really means is the dynamic of superimperialism. Michael Hudson explains this much better. The USA has learned, even though they do not comprehend why, that government deficits do not matter. What matters is the real terms of trade — exports are your real cost, imports a real benefit. If you can get a foreigner to send you Mercedes cars in return for scorepoints at a FED bank, you are the winner. The USA just learned this before most others, and yet their politicians, including Kissinger, still do not understand why it works, and think it is this thing called “global reserve currency” — which is a meaningless concept. With a state currency on a floating exchange rate bank reserves are for payments clearing, they do not fund anything. And Treasury bonds are an interest rate maintenance operation, not a funding operation, or in other words basic income but only for people who already have money in proportion to how much money they already have.

When posting the the t00bs I am always aware some nerd will quibble, but while I don’t have the time to post a whole essay, I tend to get sucked into covering some lose ends or vacant bases:

And I do realize if I was a real dick and you gave me a trillion AUD, then I probably would not care about your durable goods prices, I’d buy up a whole lot of them, hoard it all, and wait for the price to sky-rocket, then sell it all. Yet this still does not collapse the AU economy, and your government can still purchase anything for sale in AUD, including all idle Aussie labour.

I had forgotten to mention Yanis used the old lie about the USD being a “global reserve currency”.

Also, the USA only had “global reserve currency status” under the gold standard/Bretton Woods agreement (a quasi gold standard — USA promised to redeem for gold, but only to foreigners, I believe US citizens were not allowed to buy bullion after 1935). But even under Bretton Woods the currency was not the gold (it was merely redeemable for gold, like tax liabilities).
      Bretton Woods ended in 1971/72, ever since then the USD is the same as any other State currency, like the UKP, Yen, Renminbi, AUD or NZD. Those who float can allow the government deficit to float, it is a mere accounting residual, of no economic consequence. Sadly it has negative political psychology repercussions, which is simply false consciousness.
      The “Deficit Myth”. The “deficit myth” and the “tax payer dollars myth” are two of the most diabolical popular memes that kill the hopes for the working class to be free forever from bullsh*t jobs and mass unemployment.

On the technofeudalism thesis I only had one comment:

@16:00 at this point I do not know if Yanis will get around to it, but I’d also hypothesize techno-feudalism eats itself. You cannot stop tinkerers and hackers from removing those chips from the Tesla, or subverting Amazon, or establishing pirate communications, &c. Hackers need some time to do this, also freedom from prosecution, but eventually they will do it (whatever “it” is) if it becomes legal and is “cool” or “based”. (Ironically Apple Inc through Wozniak demonstrated this a little, until Apple became greedy under S. Jobs.)

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