Bernie Sanders' 2016 Advisor On Trump's Economy And Modern Monetary Theory
CNBC video above published Mar 4, 2019: Modern Monetary Theory (MMT) is gaining traction in American politics, energizing the progressive left and roiling deficit hawks. Stephanie Kelton, who advised Bernie Sanders' 2016 presidential campaign, explains the basics.
2020 Election: She says Democrat presidential hopefuls are swinging for the fences with ambitious policy proposals while Trump appears to have changed his thinking on the deficit and debt since his 2016 run. On headwinds facing the economy, Kelton says she sees an "extraordinarily resilient" U.S. economy despite a "real" global slowdown and a small chance of additional rate hikes from the Fed.
Stephanie Kelton is a proponent of Modern Monetary Theory (MMT), the economic rational cited by rising political stars like Rep. Alexandria Ocasio-Cortez D-N.Y. She is currently a professor of public policy and economics at Stony Brook University. Previously, she served as chief economist for the Democrats on the U.S. Senate Budget Committee and was a senior economic advisor to Bernie Sanders ' 2016 presidential campaign.
Editor's note: key questions: what is your definition of "full employment"? What political system has the necessary discipline to apply the constraints required for an effective long-term MMT policy?
See also:
Paul Krugman Asked Me About Modern Monetary Theory. Here Are 4 Answers. Deficit levels, interest rates and the tradeoff between fiscal and monetary policy, by Stephanie Kelton, March 1, 2019--bloomberg.com
The left’s embrace of modern monetary theory is a recipe for disaster by Larry Summers--WashingtonPost.com.
Modern Monetary Nonsense, Mar 4, 2019, by Kenneth Rogoff: "... Contrary to widespread opinion, the US central bank is not an independent financial entity: the [U.S.] government owns it lock, stock, and barrel. Unfortunately, the Fed itself is responsible for a good deal of the confusion surrounding the use of its balance sheet. In the years following the 2008 financial crisis, the Fed engaged in massive “quantitative easing” (QE), whereby it bought up very long-term government debt in exchange for bank reserves, and tried to convince the American public that this magically stimulated the economy. QE, when it consists simply of buying government bonds, is smoke and mirrors ..."--project-syndicate.org.
Running on MMT (Wonkish)--Trying to get this debate beyond Calvinball by Paul Krugman--NYTimes.com.
Robinhoodis an investing app valued at over $5 billion, that says it's trying to "democratize America's financial system" by making investing accessible to the little guy with free trades--Invest for Free--"Invest in stocks, ETFs, options, and cryptocurrencies, all commission-free, right from your phone or desktop." It's an eye-popping valuation for a financial company with opaque metrics and plenty of competition. The young company had its share of missteps as well, prompting questions of whether or not it can handle primetime.
Robinhood has faced criticism for business practices that allow it to offer free trading. It also botched the rollout of a checking and savings account feature in late 2018, garnering concern from regulators.
But the company's incredible growth and popularity with younger investors – more than 6 million users by the end of 2018 – means it could be a major player in banking moving forward. CNBC video above published Jan 16, 2019.
Yanis Varoufakis at the Oxford Union: The Euro Has Never Been More Problematic
Oxford Union video above published Dec 23, 2018: Yanis Varoufakis, Professor of Economics and former Finance Minister of Greece, talks about the Euro, Brexit and more. See also: The Euro Ends When Germany is Ready to Print Deutsche Marks Again--poundsterlinglive.com.
UPDATE 15 Jan 2019: UK's Parliament (House of Commons) voted 432-202 against Theresa May's 'Brexit deal' with the EU, the worst parliamentary defeat for a government in recent British history. Both Brexiteers and supporters of EU membership joined forces to vote down the deal.
The UK House of Commons votes Tuesday, January 15, 2019, on the 'Brexit Deal' negotiated by UK Prime Minister Theresa May with the European Union, follow the proceedings LIVE here,
Theresa May’s fatal error was to accept a two-phase negotiation: a divorce agreement followed by a new trade deal. “This was a declaration of war because Barnier said: ‘You will give us everything we want: money, people, Ireland. And only then will we discuss what you want.’ Well, that isn’t a negotiation, that’s a travesty. And Theresa May agreed to play along.”--Yanis Varoufakis in “The EU declared war and Theresa May played along”--newstatesman.com.
Wall Street Journal (wsj.com) video published Jun 25, 2018: You get tens of millions of songs for a few bucks a month no matter which you pick, but not all music services are the same. WSJ's David Pierce explains which is right choice for different types of music listeners. Spotify, Apple Music, Youtube Music, or Amazon Music?
Where the Money is in Music: Can Artistry Survive the Streaming Era?
The Bank for International Settlements (BIS) (domain: BIS.org) video above published Jun 17, 2018: Hyun Song Shin speaks about Chapter V of the Annual Economic Report 2018 (full embed below). Cryptocurrencies' decentralized model of generating trust limits their potential to replace conventional money, the chapter argues.
Abstract: "Cryptocurrencies promise to replace trusted institutions with distributed ledger technology. Yet, looking beyond the hype, it is hard to identify a specific economic problem which they currently solve. Transactions are slow and costly, prone to congestion, and cannot scale with demand. The decentralized consensus behind the technology is also fragile and consumes vast amounts of energy. Still, distributed ledger technology could have promise in other applications. Policy responses need to prevent abuses while allowing further experimentation."
The Bank for International Settlements, founded May 17, 1930, is an international financial institution owned by 60 of the world's central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." The BIS provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.
Vox video above published Aug 25, 2017: Venezuela is in chaos, but its leaders aren't going anywhere. Discussion of currency issues begins about 4:30. [Correction at 1:58: the Supreme Court tried to strip the country’s National Assembly of its powers in March 2017 (not 2016)].
After a decade and a half of strict exchange controls in Venezuela, access to U.S. dollars has been severely limited. Nonetheless, a black market in the world's foremost hard currency has spread in response. Venezuela's oil revenues have declined due to mismanagement and the decline in the price of oil on the world markets. Venezuela’s economy is now in free-fall, a living laboratory of whether Bitcoin or any other cryptocurrency could fulfill the needs of the market and economy. In fact, Venezuela has a plan to introduce its own cryptocurrency.
Unfortunately for cryptocurrency fanatics, so far, Venezuelans are not seeking any cryptocurrency. Instead, the practice first adopted by gourmet and design stores in Caracas over the last couple of years to charge in U.S. dollars to a select group of expatriates or Venezuelans with access to the greenbacks, is fast spreading--Venezuelans scramble to survive as merchants demand dollars | reuters.com Dec 26, 2017: “There’s no point keeping bolivars.”
In fact, several countries use the U.S. dollar as their official currency, and in many others it is the de facto currency.
Definitions: Cryptocurrency: "a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank." Hard currency: "currency that is not likely to depreciate suddenly or to fluctuate greatly in value." Bitcoin and other "cryptocurrencies" are not "hard currency." The U.S. dollar is the world's foremost "hard currency."
Commodity money is "created from a good, often a precious metal such as gold or silver, which has uses other than as a medium of exchange (such a good is called a commodity). Representative money is similar to fiat money, but it represents a claim on a commodity (which can be redeemed to a greater or lesser extent)."
The circulating paper money of the U.S. consists of Federal Reserve Notes that are denominated only in United States dollars (12 U.S.C. § 418). Federal Reserve Notes are the only type of U.S. banknote currently produced. Federal Reserve Notes are authorized by Section 16 of the Federal Reserve Act of 1913 and are issued to the Federal Reserve Banks at the discretion of the Board of Governors of the Federal Reserve System. The notes are then put into circulation by the Federal Reserve Banks, at which point they become liabilities of the Federal Reserve Banks and obligations of the United States. Federal Reserve Notes are legal tender, with the words "this note is legal tender for all debts, public and private" printed on each note. They have replaced United States Notes, which were once issued by the Treasury Department. Federal Reserve notes are backed by the assets of the Federal Reserve Banks, which serve as collateral under Section 16. Total assets of the U.S. Federal Reserve Banks as of Dec 20, 2017, were almost $4.5 trillion. There were approximately $1.55 trillion in Federal Reserve notes in circulation as of November 15, 2017.
U.S. dollars are easily exchanged for any other foreign currency and the U.S. dollar does not fluctuate greatly in value against a basket of otherhard currencies.
U.S. is still the world's largest economy, with the world's largest military.
Also note the differences between hard currencies, like the U.S. dollar, and any cryptocurrency:
Cryptocurrency scams, frauds, and theft are rampant:
The Great Forking Bitcoins of China | circleid.com: "... Since a large fraction of the [bitcoin] miners are inside China, and all of the hard currency exchanges are outside [China], this will cause a pretty serious fork ... If some of the disappeared transactions were yours, how would this affect your opinion on Bitcoins?"
For other reasons why cryptocurrency is inferior to any "hard currency," begin by reading this.
Lesson: if you want to speculate or "gamble" in Bitcoin or other cryptocurrencies, do not do so under the delusion that any cryptocurrency outside the world's central banking system, will replace the U.S. dollar, or any other "hard currency," in the foreseeable future.
How To Protect Your Bitcoin From Hackers
CNBC.com video above published Dec 26, 2017: CNBC's Seema Mody reports on bitcoin.
Martin Wolf on China capital controls | FT World - FT chief economics commentator Martin Wolf on whether China should tighten its capital controls to stem huge outflows of money, and the challenges posed by market turmoil and its slowing economy. Published on Jan 26, 2016
Published on Apr 8, 2015 - Martin Wolf, chief economics commentator, talks to the FT's Michael Skapinker about China’s economic slowdown and whether there is still reason to be optimistic about its prospects.
How to TransferWise - A quick guide showing you how to beat hidden bank fees with TransferWise. Published Apr 20, 2015
FinTech is experiencing tremendous growth | TransferWise Blog: "As reported by Business Insider, FinTech startups enabling services like peer to peer money transfer and lending services are on the rise. The first shows the amount of funding FinTech startups have received over the past 5 years. Investments in Q2 2010 made up less than $1 billion, in Q1 2015 they’ve risen to nearly $3 billion..."
TransferWise - Wikipedia: "TransferWise is an Estonian developed and UK-based peer-to-peer money transfer service launched in January 2011 by Kristo Käärmann and Taavet Hinrikus with headquarters in London and offices in Tallinn and New York. More than £3 billion has been transferred through TransferWise. TransferWise supports more than 300 currency routes across the world."
TransferWise Wants To Take Over The World | TechCrunch: "This year, TransferWise also raised $58 million from Andreessen Horowitz and existing investors. And Hinrikus thinks his company is in a great position right now when it comes to competition from other startups. “I think it’s a very highly defensible business. It’s very hard to build a brand online,” he said. “I challenge you to find another financial startup that has a 5 percent market share. Making sure that we move tens of millions every day is hard as well. I’m actually feeling pretty good.”"
The Transformation of Finance, Davos 2016 WEF Video: What trends and uncertainties are shaping the future of financial services? Transformations to be addressed:
Digitization and new business models
Regulatory requirements and new client needs
Data privacy and systemic connectedness
Speakers:
Dan Schulman - President and CEO of PayPal and Chairman of Symantec
Gillian R. Tett - author and journalist at the Financial Times
John Cryan - businessman and co-chief executive of Deutsche Bank AG in Frankfurt am Main
James P. Gorman - Chairman and Chief Executive Officer of Morgan Stanley
Tom de Swaan - Chairman, Interim Chief Executive Officer, Zurich Insurance Group AG
Christine Lagarde - Managing Director of the International Monetary Fund (IMF)
The parallels between the financial industry and the domain name industry are interesting--take note particularly (begins @37:00) the public role of banks and financial institutions as regulated utilities, with duties to act as extensions of law enforcement, required to collect and analyze data, report "suspicious" patterns and transactions, even closing customer accounts, etc.--if you want an insight into the future of the domain name industry and internet governance, watch this video.
Notes: What is the future of finance? What are the trends and uncertainties that are disrupting financial services, and how should we react? Panel member Christine Lagarde addressed this topic on the WEF website, Agenda. The Managing Director of the International Monetary Fund (IMF) looked ahead to what 2016 might hold for the global economy. She wrote:
“One reason that the global economy is so sluggish is that, seven years after the collapse of Lehman Brothers, financial stability is not yet assured. Financial-sector weaknesses linger in many countries – and financial risks are growing in emerging markets.”
“Putting all of this together, global growth in 2016 will be disappointing and uneven. The global economy’s medium-term growth prospects have weakened as well, because potential growth is being held back by low productivity, aging populations, and the legacies of the global financial crisis. High debt, low investment, and weak banks continue to burden some advanced economies, especially in Europe; and many emerging economies continue to face adjustments after their post-crisis credit and investment boom.
“This outlook is heavily affected by some major economic transitions that are creating global spillovers and spillbacks, particularly China’s transition to a new growth model and the normalization of US monetary policy. Both shifts are necessary and healthy. They are good for China, good for the US, and good for the world. The challenge is to manage them as efficiently and as smoothly as possible.”
“Our lives are being shaken to their very core by technological change, with the Fourth Industrial Revolution transforming economies as never before. The unprecedented speed of change, as well as the breadth and the depth of many radical changes unleashed by new digital, robotic and 3D technologies, is having major impacts on what we produce and do, how and where we do it and indeed how we earn a living. And while the transformation will proceed differently in advanced and developing parts of the world, no country or market will be spared from the tidal wave of change.”
It’s an interesting time for finance, says moderator Gillian R Tett. In 2007, bankers were on top of the world, holding their heads up high. Then, the crash, and since then many of the panels here in Davos have been dominated by what went wrong and what could be done to make things safer. Now, the discussions are forward looking, with less focus on regulation and more attention on fintech and the changes – both positive and negative – that are happening in the world of finance. The biggest challenge, argues Tett, isn’t a crisis in regulation, but the new players. Although regulation has moved out of the spotlight, there is still work to be done in this area, argues Christine Lagarde. There are issues between the US and Europe around over-the-counter derivatives and clearing systems which are not progressing at the speed at which they should. These areas need more regulation, says the IMF head. Basic retail banking is changing, Lagarde goes on to say. It’s being disrupted by innovations and there are people now who have never been – never had to – go into a bank. But this is merely another way of doing business. Virtual currencies and blockchains, on the other hand, can cause deeper disruptions. They may be relatively small (the current value of virtual currencies is around $7 billion), and may be nothing to worry about. They could also turn out to be beneficial – in reducing costs, providing better value and reaching the unbanked. But they could also a great instrument for crime. There is the potential for financing terrorism and the illicit economy, and they could disrupt monetary policy. The IMF has today released a report on this topic: Virtual Currencies and Beyond.
Will cash exist in the future?
The consensus is that, in 10 years, cash will no longer exist. Why? Because it’s inefficient, unnecessary and plays a key role in the illicit economy. Tom de Swaan believes that insurance will be the most affected of all the finance industries. Life at the top of a financial group was not, is not and will not be easy, because it is disruptive. “You have to find alliances with disruptors,” he says. “I haven’t met one who wants the insurance liability on their balance sheet.”
Dan Schulman, who heads perhaps one of the biggest disruptors in the industy – PayPal – says the biggest impediment to future success, is past success. “A lot of big companies extrapolate from what was and don’t imagine what could be. And this is a big danger.” His five key trends:
Money is definitely digitizing, cheques are disappearing. But let’s not forget that 85% of global transactions are still made with cash.
Mobile is exploding across the world. Soon everyone will have a smartphone and hold the power of a bank branch in one hand. This allows the industry to think about consumer transactions in an entirely different way, and it brings in billions of people.
The amount of data is exploding, and it’s not going to stop. Algorithms are the weapons of the digital company, and the ammunition is data. The better the quality of this data, the more value it is to the consumer. Security and privacy are genuine concerns, but data is going to change value propositions.
Industry lines are blurring, and product lines are blurring. Take digital payments – which involve tech companies, mobile carriers, handset manufacturers and merchants.
Security – something Schulman thinks about every day. There is so much data, and authentication is therefore very challenging.
Are regulators ready for this transformation?Tom de Swaan argues that regulators first need to define, what are they going to regulate? Privacy? The movement of data? The financial world is still rebuilding trust with consumers, and doing this while convincing them we need their data to create new products is a huge challenge. The regulatory environment also needs to be globally applicable.
Schulman: What are we trying to regulate, he asks? Let’s not look back at what happened, but what is likely to happen in the future. He thinks it’s likely a major hack could happen, but innovation needs to be responsible and we need to be able to try new things without worrying about over-regulation.
Lagarde supports Schulman’s idea of a “sandbox” to try new ideas, as this would help us to deal with trust and limit any damage to consumers. She doesn’t entirely agree, however, with John Cryan’s suggestion that regulation is made by policy-makers, rather than the regulators themselves. Governments do participate, she says, but the decisions are still being made by the likes of the Financial Stability Board and the Basel Committee, and then channelled into the regulatory system. For bad or for good, the profession still has a lot to do with how supervision is defined. Gorman believes that cyber-security issues need to be addressed. At the heart of the banking system, he says, is trust. When this goes, people want their money back, but the banks don’t have this money, they’ve given it to someone else, and this is what caused the 2008 crisis.
What about the future of blockchains? Cryan does not see this sector growing too quickly in the next 4-5 years. Banks are better prepared to manage cash flow of debt and are able to gain insights regarding the credit worthiness of debtors better than someone who can’t access this knowledge.
China: Yuan, Markets, Economy--'Don't Worry, Everything Is Under Control'--
PIMCO's Crescenzi: No One Knows What China Will Do Next - PIMCO's Anthony Crescenzi discusses his outlook for China and market volatility. He spoke on "Bloomberg Markets" on January 15, 2016 (video above).
The yuan and the markets | The Economist: "... China is not normal. It is caught in a dangerous no-man’s-land between the market and state control. And the yuan is the prime example ... because a stronger [U.S.] dollar has been dragging up the yuan, the People’s Bank of China (PBOC) has tried to abandon its loose peg against the greenback since August; but it is still targeting a basket of currencies. A gradual loosening of capital controls means savers have plenty of ways to get their money out. A weakening economy, a quasi-fixed exchange rate and more porous capital controls are a volatile combination. Looser monetary policy would boost demand. But it would also weaken the currency; and that prospect is already prompting savers to shovel their money offshore. In the last six months of 2015 capital left China at an annualised rate of about $1 trillion. The persistent gap between the official value of the yuan and its price in offshore markets suggests investors expect the government to allow the currency to fall even further in [the] future ... The government has reacted by trying to rig markets. The PBOC has squeezed the fledgling offshore market in Hong Kong by buying up yuan so zealously that the overnight interest rate spiked on January 12th at 67%. Likewise, in the stockmarket it has instructed the “national team” of state funds to stick to the policy of buying and holding shares ..." (emphasis added, read more at the link above)
Twitter feed--Shanghai Composite Index-- Tweets about Shanghai Composite Index See also: Xi’s new model army | The Economist: "... Late in 2014 President Xi Jinping went to Gutian, a small town in the south where, 85 years before, Mao had first laid down the doctrine that the People’s Liberation Army (PLA) is the armed force not of the government or the country but of the Communist Party. Mr Xi stressed the same law to the assembled brass: the PLA is still the party’s army; it must uphold its “revolutionary traditions” and maintain absolute loyalty to its political masters. His words were a prelude to sweeping reforms in the PLA that have unfolded in the past month, touching almost every military institution. The aim of these changes is twofold—to strengthen Mr Xi’s grip on the 2.3m-strong armed forces, which are embarrassingly corrupt at the highest level, and to make the PLA a more effective fighting force ..."
Good interview of Mathew Ingram, about the shutdown of Gigaom, in the Columbia Journalism Review (excerpt below) and the dangers of media companies, startups, and others, taking venture capital money--it's not always the smartest move--
Christopher Massie, CJR: One reason this is so strange is that Gigaom seemed like it was doing so well. What should the takeaway be for other media outlets?
Mathew Ingram: "Everyone has their own favorite lesson. Danny Sullivan at Search Engine Land talked about what this says about taking [venture capital] money when you’re a media company. And that’s part of the story. Gigaom has been VC-financed from the beginning. Other media startups were not. And when you take venture capital money they’re golden handcuffs, in a way. It’s a Faustian bargain. You make certain promises about your growth, and if that growth doesn’t materialize then VCs lose interest and your company fails... The model that Danny and others have chosen is to grow slowly and to be funded only by your cash flow. And that’s a much safer model—there’s no question about it. The only problem is it takes a lot longer. And you frequently don’t build as big a business... If you are super small and super focused and super niche you can succeed, arguably. And if you’re super huge and mass and gigantic and growing quickly, you can succeed. But in the middle, is death. The valley of death. So arguably we got caught in that valley of death...." (read more at the link above)
ICANN Sponsorship Opportunities | Meetings: "... Your company will receive unsurpassed recognition by our attendees as a Diamond level sponsor, with continuous brand exposure during the week of the meeting and beyond..."
screenshot of ICANN 51 sponsors (source: icann.org)
How would you feel if your national legislative assembly (e.g., Congress, Parliament, etc.) was commercially "sponsored" by the very same corporations seeking favorable treatment, favorable outcomes, and special prerogatives, rights, and privileges from that very same "governing body"--see any problem with that, any conflicts of interest?
Domain Mondo hopes everyone is enjoying ICANN 51--especially the sponsors--and that everyone in LA is getting their money's worth!
Of course, you will never hear ICANN acknowledge at one of its public meetings how much the Domain Name Registrants' fees support ICANN as a percentage of its operating budget--heck, Domain Name Registrants don't even have a seat at the table! (Don't go looking for a Domain Name Registrants Interest Group at ICANN--it doesn't exist!). And look at the ICANN Budget Revenues (pdf)--there is no information as to how much of the income shown as sourced from Registry/Registrars is actually paid by domain name registrants--this is to keep up the illusion that it is the domain name industry that is supporting ICANN when it is actually the domain name registrants!
For more on how ICANN has largely been captured by the Domain Name Industry see:
