Thursday, February 21, 2013

Bill Mitchell — Unemployment and inflation – Part 4 and 5

Today I have had a major report to complete on “efficiency dividends” in government budgets (for a union), have a lot of travel ahead, and also want to progress my macroeconomics. Report complete except for summary, which I will finish on the plane tonight. So until then I am progressing the Modern Monetary Theory (MMT) text-book, which I am writing in liaison with my colleague and friend, Randy Wray. We are trying to get it completed for use in second-semester 2013 and so I am spending more time on it to meet that expectation. Today, I continue to develop the material on unemployment and inflation.
Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.


This is the continuation of the Chapter on unemployment and inflation – the series so far is:
▪ Unemployment and inflation – Part 1
▪ Unemployment and inflation – Part 2
▪ Unemployment and inflation – Part 3
I am now continuing Section 12.6 on the Phillips Curve …
Chapter 12 – Unemployment and Inflation
Bill Mitchell — billy blog
Unemployment and inflation – Part 4

Unemployment and inflation – Part 5
Bill Mitchell

1 comment:

Critical Tinkerer said...

Last night, I had a heated discussion with a catholic bishop and one of the power brokers when Croatia's moneatary system was set up in 1990s. Both of them are wigorously working on side problems while Rome is burning. Croatia's unemployment is around 17% and emigration of young people is stagering, coupled with natural decline of population presents a huge problem while 1% is actively pursuing Divide and Conquer strategy with highly emotional side issues.

After the discussion, i got an idea from Lord's Prayer that is translation of Mathew's 6:9 as is used in Croatia catholic community.

" Give us this day bread for our needs.
12 And make us free of our debts, as we have made those free who are in debt to us. "

I find those words as practical description of a monetary system established with idea of erasing poverty. To make it clear, It only needs one word to be added before words debt. That word is "currency".

In a modern environment the debt forgivness is present with bankruptcy proceedings and more importantly, with a bit higher inflation on fixed interest rate debt. It effectively is a debt forgivness on a mass scale while bankruptcy is on individual scale.

These words from Lord's Prayer coupled with Moses's orders/recomendations in Deutoronomy "15 At the end of every seven years you must cancel debts." in order to have prosperity among Israelites are clear practical instructions on solution to the present GFC.
This relates to money as modern Golden Calf, money which is idolised while what really matters is real goods and services which are attained trough constant money circulation.
This also relates with Job Guarantee idea and welfare state for poor.

I think that this kind of argument can persuade many of well meaning christians to the MMT kind of thinking.
The most valueable insights within MMT for me is handling the clear separation of nominal vs. real values while erasing zero-sum thinking. And the message from Lord's Prayer is exactly about that - destroying idolatry of money as Golden Calf was destroyed in order to provide for a day bread/ real value.