Penger, gjeld og andre ubetydeligheter

Deadlock! Total Borrowing Has Stabilized at a Mild Contraction Rate as Private Debt Reduction Stops Increasing and Government Borrowing Stays Steady (Thought Offerings)

the big news is that it has become clearer that the private sector's negative rate of borrowing has stopped increasing and has stabilized at a level roughly opposite to the government's positive rate of borrowing.

Dette rimer for meg; mer "bias confirmation" enn "big news".

Bakgrunn: Steve Keen i It’s Hard Being a Bear (Part Six)?Good Alternative Theory?:

So there is no coherent neoclassical theory that can take solace from the success of the government stimulus packages, should they avert a deep recession and cause a sustained recovery without a rise in the private debt to GDP ratio.[2] If there is to be a winner in this debate, it has to be a non-neoclassical school of thought.

There is such a school of thought which has developed in Post Keynesian literature recently. Known as Chartalism, it argues that the government can and should maintain deficits to ensure full employment.

Chartalism rejects neoclassical economics, as I do. However it takes a very different approach to analyzing the monetary system, putting the emphasis upon government money creation whereas I focus upon private credit creation. It is therefore in one sense a rival approach to the “Circuitist” School which I see myself as part of. But it could also be that both groups are right, as in the parable of the blind men and the elephant: we’ve got hold of the same animal, but since one of us has a leg and the other a trunk, we think we’re holding on to vastly different creatures.

Keen lar chartalisten prof. Bill Mitchell (som forøvrig fører en veldig bra blog) presentere synspunktet. Relevante utdrag (alle uthevinger med fet skrift i det gjenstående er mine):

Under a fiat currency system, the monetary unit defined by the government has no intrinsic worth. It cannot be legally converted by government, for example, into gold as it was under the gold standard. The viability of the fiat currency is ensured by the fact that it is the only unit which is acceptable for payment of taxes and other financial demands of the government.

The analogy that mainstream macroeconomics draws between private household budgets and the national government budget is thus false. Households, the users of the currency, must finance their spending prior to the fact. However, government, as the issuer of the currency, must spend first (credit private bank accounts) before it can subsequently tax (debit private accounts). Government spending is therefore the source of the funds the private sector requires to pay its taxes and to net save, and it is not inherently revenue constrained.

So statements such as “the federal government is spending taxpayers’ funds” are totally inapplicable to operational reality of our monetary system. Taxation acts to withdraw spending power from the private sector but does not provide any extra financial capacity for public spending.

As a matter of national accounting, the federal government deficit (surplus) equals the non-government surplus (deficit). In aggregate, there can be no net savings of financial assets of the non-government sector without cumulative government deficit spending. The federal government via net spending (deficits) is the only entity that can provide the non-government sector with net financial assets (net savings) and thereby simultaneously accommodate any net desire to save and hence eliminate unemployment. Additionally, and contrary to mainstream economic rhetoric, the systematic pursuit of government budget surpluses is necessarily manifested as systematic declines in private sector savings.

Altså: den overbelånte amerikanske private sektoren må betale ned gjeld; det må balanseres med offentlige underskudd. Mitchell mener dette ikke er det samme som at det offentlige må ta opp gjeld; han ser på offentlig gjeldsopptak som et virkemiddel for å få opp renta:

Government spending and purchases of government bonds by the central bank add liquidity, while taxation and sales of government securities drain private liquidity. These transactions influence the cash position of the system on a daily basis and on any one day they can result in a system surplus (deficit) due to the outflow of funds from the official sector being above (below) the funds inflow to the official sector. The system cash position has crucial implications for the central bank, which targets the level of short-term interest rates as its monetary policy position. Budget deficits result in system-wide surpluses (excess bank reserves).

Competition between the commercial banks to create better earning opportunities on the surplus reserves then puts downward pressure on the cash rate (as they try to off-load the excess reserves in the overnight interbank market). So budget deficits actually put downward pressure on short-term interest rates which is contrary to all the claims made by mainstream economics.

If the central bank desires to maintain the current positive target cash rate then it must drain this surplus liquidity by selling government debt. In other words, government debt functions as interest rate support via the maintenance of desired reserve levels in the commercial banking system and not as a source of funds to finance government spending.

Fra et dobbelt bokføringsperspektiv er dette nærmest trivielt; for enhver post finnes det alltid en like stor, men motsatt, motpost (eller sum av poster). Så i et fiat-regime må det, for hvert $penn (utt.: "schpenn"), alltid finnes et anti-$penn. Det betyr enten en gjeld eller et (akkumulert offentlig) underskudd.

(En digresjon ift denne posten men relevant mtp forrige er Mitchells syn på sammenhengen mellom offentlig pengebruk og arbeidsledighet:

As a matter of accounting, for aggregate output to be sold, total spending must equal total income (whether actual income generated in production is fully spent or not each period). Involuntary unemployment is idle labour unable to find a buyer at the current money wage. In the absence of government spending, unemployment arises when the private sector, in aggregate, desires to spend less of the monetary unit of account than it earns. Nominal (or real) wage cuts per se do not clear the labour market, unless they somehow eliminate the private sector desire to net save and increase spending. Thus, unemployment occurs when net government spending is too low to accommodate the need to pay taxes and the desire to net save.

)

Her kommer vår gamle kjenning James Kenneth Galbraith inn; for med Mitchells ord i bakhodet er det mulig å følge resonnementet Galbraith presenterer i The Predator State, og det Galbraith sier utfyller Mitchell.

The Predator State, s. 54 f:

What few understood was that the budget deficit and the trade deficit were closely linked, and each was closely related to the evolving character of the global financial system. They were so closely related, in fact, that they usually amounted to two aspects of the same thing. And as the new global monetary system developed, the growing need for dollars -- for monetary reserves -- held outside the United States would come to guarantee that the United States would necessarily experience both trade deficits and budget deficits almost all of the time. The deficits were not so much a symptom of a declining position as the tribute paid to the United States for its position atop the world financial order. The falling dollar in the 1970s stemmed from the threat to that position, following the Nixon shocks, the triumph of international monetarism, and the destruction of Bretton Woods. [KODE innskyter: ...og at oljeproduksjonen deres toppet i 1970, muligens kanskje?]

There is a basic relationship in macroeconomy, as fundamental as it is poorly understood, that links the internal and international financial positions of any country. A country's internal deficit, that is, its "public" deficit and its "private" deficit -- the annual borrowing by companies and households -- will together equal its international deficit. In the early postwar United States, the typical pattern of the private sector, which consists of companies and households, was to run a small net surplus each year, of around 2 percent of GDP. Thus, the private sector accumulated financial assets, while the publilc sector built up a corresponding stock of debts. Overall, the country enjoyed a situation in which approximate external balance could be (and was) maintained, so long as the public sector deficit did not exceed 2 percent of GDP. If households and companies were depositing money in the banks every year, government could borrow that money without having to look for it abroad. To put it another way, government did not borrow abroad, and so the government's deficit, which is the amount by which public spending put into the economy exceeds taxes taken out, created an exactly offsetting private surplus.

Vi hopper fram til Reagan (s. 58):

Why did it prove possible for Reagan to do what Carter could not, namely run large deficits, without a fall itn the dollar and consequent inflation? Because the Federal Reserve's policy of super-high interest rates and a super-strong dollar helped Reagan out. By attracting a flood of investment capital back into the United States, the strong dollar policy reconciled fiscal stimulus, recovering employment, and a rapid end to inflation. The dollar now became the unchallenged world reserve currency, which meant the United States not only could, but had to, run trade deficits to the extent of the demand for reserves. So long as the domestic private sector remained of a mind to accumulate financial assets, which it did through the Reagan term, the trade deficits had to be translated, as a matter of accounting, into federal budget deficits of a similar size. The doctrine of "twin deficits" did gain official notice -- Paul Volcker spoke and wrote about it in the mid-1980s -- but the interpretation then given held that budget deficits were to blame for the trade deficit. The role of the world financial system in making the deficit inevitable was overlooked.

Vi hopper til sent i '93 (s. 60 f):

For the next three years, the recovery gathered force. Unemployment fell, the budget deficit began to diminish, and inflation did not rise. The 1997 Asian crisis brought a flood of capital back into the safe haven of U.S. Treasury bonds, strengthening the dollar. The trade deficit rose.

But now the budget deficit did not. Indeed it fell -- all the way to zero and into actual surplus, for the first time since 1969. How could this happen? How could our foreign deficits go up while our budget deficit went down? If the money sent abroad did not come from the government, where did it come from? This fact caused many who had been exposed to the "twin deficits" view of budgets and trade to deny that the view was accurate. But they were forgetting the third element in that equation. There is one possible way (and only one) for budget deficits to go down while the trade deficit goes up: for the private sector of the American economy to "take over" the budget deficits previously run by the state. And that is what happened. Private businesses and households in the late 1990s chose, for the first time in postwar history, to move massively into deficit. Credit cards, mortgages, and home equity loans suddenly became the drivers of American economic growth. For a time, the American household took over the job of running deficits from the American government. This was the Keynesian devolution.

Se også The US government has run short of money (Bill Mitchell)

Galbraith: Kina kan ha hatt handelsunderskudd

via Zero Hedge:

University of Texas professor James Galbraith discusses one aspect of China's "booming" economy, specifically the question of China's Trade Surplus, which as he notes has been drastically inflated since 2002 due to Chinese companies over-reporting profits on exports in order to disguise various investments by foreigners into China, so as to beat capital control restrictions.

Galbraith argues the "fake profits" are so large that China may have actually ran a trade deficit in some years, and these figures casts serious doubt on the reported P&L of Chinese companies.

Dette er veldig interessant; Kina er et eksempel mange som gjerne vil hevde at ikke alt er bæsj i verdensøkonomien trekker fram. Og Galbraith har førstehåndskjennskap til Kina... jeg bare må sitere fra hans diskusjon om Kina i The Predator State:

[R]eal wages in the exporting regions -- wages measured in terms of the consumption goods they provide for -- are not low at all by the larger standards of working populations in the developing world. [...] Working people in Chinese cities are largely fit, literate, and well fed [...]

How do the Chinese achieve this? Not by planning, and not by avoiding the competitive pressures of the free market in consumer goods. Quite to the contrary: China enjoys the largest number of small producers and the most diverse and competitive consumer marketplace on the planet. Correspondingly, many of these firms performs as the competitive model predicts: they earn profits rarely, losses often.

How then do firms survive? Why does China prosper? How can it continue to grow at reported rates near 10 percent, through the Japanese depression, the Russian crisis, the Internet bust? The answer is, once again, not to be found in the trading agreements so much as in the structure of financial control. For in this area, China benefits form its underdevelopment.

A key and unique feature of the Chinese scene is the relative absence of a developed market for capital assets. Such markets -- for stocks and corporate control -- do exist; indeed the Shanghai stock market went on an epic run in the mid-2000s. [fotnote: The fuel behind the Chinese stock and real estate booms remains open to analysis. One possibility is that after certain financial liberalizations in 2002, firms inflated the value of Chinese exports in order to evade capital controls and bring funds into the country. If true, this would explain several otherwise strange phenomena, including mysteriously high reported profits reported by some major Chinese firms and the astonishing rises in the reported trade surplus and fixed investment as a share of Chinese GDP.] But the capital markets have limited scope, limited liquidity, and limited power. Most firms are not publicly valued and not easily traded; in this important sense, "property rights" in the firm are limited. Diverse ownership form and relatively small scale are especially characteristic of the vast array of consumer goods producers that now dominate manufacturing in southern China. Though formerly owned by villages and townships in many cases, they have been recently privatized -- sold off to managers or worker's collectives -- not because they are profitable but because they are not. Selling them off removes their direct claim on the local budget.

In these circumstances, capital markets do not excercise discipline over the medium-term financial performance of manufacturing firms. Firms can run losses, and their shares do not collapse, and their managements are not replaced. When they run profits (with difficulty, but it does happen) their managements are not enriched per se; there is graft and there is speculation, but there is relatively little possibility, for most excecutives, of selling out and retiring on the proceeds. To make money in this situation requires preserving the enterprise as a going concern. And that means passing whatever financial scrutiny would otherwise cause the firm to lose credit and to be shut down. In China, this scrutiny is extremely weak.

[...] This competition results in a chronic glut in consumer markets. This is evident in the fact that sidewalks across China are covered with stalls. Price competition is phenomenal, as any casual visitor can find out: with minimal effort, prices will fall to a tenth or less of the original offer. There is little possibility that such prices cover the fixed costs of those who produce the goods on offer.

Is there any way for the Chinese manufacturing firm to turn a profit? Yes: the alternative to selling on the domestic market is to export. [...] [T]he optimal strategy for earning a profit is to aim, atleast in some ultimate sense, for export. It is to produce and produce, gaining practice, improving quality, and demonstrating reliability -- in the hope of eventually selling part of production on the export market -- perhaps first to some low-income venue such as India, later to middle-income countries such as Turkey or Mexico, and ultimately to the United States and Europe. For this, labor must be treated as fixed cost. That is, production must continue regardless of demand. The strategy will be defeated, from the beginning, if firms must interrupt production and dismiss workers simply because the output they are producing cannot be sold immediately at the Wal-Mart price.

So what to do with the output that cannot be exported? The answer is already stated. That output is dumped on the domestic market at whatever price it may command. The imperative to the small shopkeeper inside China is not to earn a profit; it is to unload product, because more will be coming from the factory soon. And the result is falling prices (deflation) for Chinese consumers. Relative to a fixed money wage, this implies a rising real wage in terms of staples. The result -- well-fed, well-clothed citizens and a near absence of visible human depravity in the cities -- is visually evident to any observer.

[...]

China reproduces, more closely than capitalist countries do, both the theoretical dynamics and the public welfare implications of the perfectly competitive market. It does so precisely because it lacks the essential feature of advanced capitalism, a fully developed market for capital assets. Such markets are under development -- if China truly lives up to commitments made under its World Trade Organization agreements to liberalize its financial sector -- and one may confidently predict that if it becomes fully developed, the Chinese model will go into crisis, and progress will stop -- as it did in Latin America, Eastern Europe, and elsewhere in Asia. But for the moment, the Chinese appear to have that impulse to self-destruction under control. (s 82 ff)

Jeg har utelatt Galbraiths kommentarer om bankenes rolle i systemet... Skrev av manuelt fra boken, for lat til å ta med mer...