Over at Naked Capitalism our old pal dday has a couple of thought provoking pieces I’d like to draw your attention to.

The first one is a reprint of an article by Chris Mayer that has also appeared at New Economic Perspectives.  Chris is no deficit dove, in fact he used to be an Austrian which is the school of Weber, Mises, and Hayek and heavily influnced the thinking of the ‘Freshwater’ University of Chicago style of economics with its theories of perfect markets and concerns about inflation.

In it he describes a simple thought experiment proposed by Warren Mosler (considered the father of neo-Chartalism or as we know it more familiarly now- Modern Monetary Theory) to describe how fiat currency, which is to say sovereign currency unbacked by any fixed convertibility into commodities or currency other than that of the state that issues it, works.

Chris Mayer: How Fiat Money Works

by David Dayen, Naked Capitalism

Posted on January 9, 2014

Imagine parents create coupons they use to pay their kids for doing chores around the house. They “tax” the kids 10 coupons per week. If the kids don’t have 10 coupons, the parents punish them. “This closely replicates taxation in the real economy, where we have to pay our taxes or face penalties,” Mosler writes.

So now our household has its own currency. This is much like the U.S. government, which issues dollars, a fiat currency. (Meaning Uncle Sam doesn’t have to give you something else for it. Say, like a certain weight in gold.) If you think through this simple analogy, all kinds of interesting insights emerge.

For example, do the parents have to get coupons from their kids before they can pay them to do any chores? Obviously not. In fact, the parents have to spend their coupons first by paying their children to do chores before they can collect the tax. “How else can the children get the coupons they owe to the parents?” Mosler writes.

“Likewise,” he continues, “in the real economy, the federal government, just like this household with its own coupons, doesn’t have to get the dollars it spends from taxing or borrowing or anywhere else to be able to spend them.”

The government creates dollars. It doesn’t even have to print them. The vast majority of spending is simply done by adding electronic dollars to bank accounts. Therefore, the U.S. government can’t go bankrupt. It pays all its bills in U.S. dollars, of which it is the sole issuer.

This sounds really obvious, but it is amazing how many people – even very smart people – forget this simple fact. They get hysterical about the fiscal deficit or the national debt. (This is not to say there aren’t bad consequences from issuing too many coupons, or from government spending in general.) The only way the U.S. government can default is if it chooses to do so.

Going back to Mosler’s example, let’s ask another question: How can the kids “save” coupons in excess of the weekly tax? Well, they can only do that if the parents spend more than they tax. There is no other way to hoard coupons. In the real economy, the same is true. The private sector can save dollars only if the government spends more than it taxes. Spending pours fiat money into an economy; tax payments drain it away.

Another question: Do the parents have fewer coupons if they spend more than they tax? No. The parents make the coupons. They don’t even need physical coupons. They can simply track them on a piece of paper or in a spreadsheet. Likewise, the U.S. government doesn’t have any fewer dollars after running deficits. It can’t run out. (There are real-world restraints on how much government spends.) To borrow from another Mosler analogy, the U.S. government can no more run out of dollars than a scorekeeper can run out of points.

You don’t have to like this. (I don’t.) It’s merely a description of how a fiat currency system works. That’s the world we live in.

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One great story Mosler tells in both books is how he cleaned up on another free lunch in lira-denominated bonds in the early ’90s. This was before the euro and back when there was worry over a default by Italy’s government. Italy’s national debt was 110% of GDP and interest rates were high on its bonds.

But Mosler knew that it was the sole issuer of lira. Italy could not default unless it wanted to. Mosler actually met with senior officials in Rome to let them in on the “secret.” Long story short, Italy didn’t default. Mosler’s fund made over $100 million.

For an investor, macroeconomics has limited uses most of the time. Mosler’s career shows this can be otherwise. But then again, you have to study economics that actually describe the real world. And Mosler’s economics, or MMT, does that rather well.

I think I might tell you some more about this research company that I have in the past and my brother currently works for, but what’s relevant today is that one of his most frequent pieces of field work is observing cars to collect statistics on how many people are texting while driving.

Yup.  I expect they’ll turn themselves in now and serve their time.

Just like Ed Snowden.

There is an apocryphal story about a trial where the defendant is accused of gambling and his defense was that he was playing Poker, which is not gambling at all.

In Poker one of your strongest tools is the Bluff, where you make a strong hand appear weak and a weak hand appear strong (through we generally only think of the latter).  As Joanne Woodward says in Big Hand for a Little Lady– “It’s not cheating, it’s entirely in the spirit of the game.”

Administration Peddling Increasing Blatant Canards on Proposed “Trade” Deals

by Yves Smith, Naked Capitalism

Posted on January 6, 2014

One of the tricks of dealmaking and legislating is to try to create the impression that the negotiations/vote herding are going well, even when they aren’t. That tactic was fully on display with the Administration’s failed effort to get Congressional approval for intervention in Syria. The White House kept messaging that it was getting support lined up even when whip counts showed that putting the measure to a vote would result in an overwhelming rejection.

Now while things are not as clear cut on the trade deals, they were already in trouble last year. Foreign news reports indicated that various proposed signatories to the TransPacific Partnership simply weren’t on board with provisions that the Americans regarded as critical. A State Department press conference after talks in Bali was so out of tune and arrogant that the press representatives there were openly skeptical. And that was before the Wikileaks disclosure of the text of one of the draft chapters, on intellectual property. It both showed how extreme the American position is and how much opposition it was getting from the other supposed “partners”. We don’t know as much about where the European deal stands, but there’s reason to believe that those potential signatories have much less reason to make the world safer for US IT companies in the wake of ongoing revelations about NSA snooping.

So what line is the Administration, via the Financial Times, pushing? (Note my surmise is this article comes directly or from sources close to the US Trade Representative’s office; it very mildly complains that Obama hasn’t spoken forcefully enough about trade, as if that’s going to make any difference).

In the article, Obama challenge on selling trade deals to resurgent left, there is astonishingly no mention of the issues the prospective partners have with the deal or how the Wikileaks publication showed that the critics if anything had understated how bad the deal is. And the headline pretty accurately reflects the spin of the article: Obama’s is supposedly those damned pinkos, as opposed to his lame duck status and the increasingly obvious outrageousness of the deal. But to an uninformed reader, it’s easy to sell the prejudice that only Luddite lefties are against the motherhood and apple pie of economists and the business community, “free trade”.

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Puhleeze. First, these “allies” that the Administration must manfully contend with are wusses. They make a show of opposition and let Team Dem carry on catering to powerful monied interests as usual.

Second, the notice how opposition to the deals are subtly presented as uninformed, as mere prejudice? The resistance is based on mere “belief”. In fact, NAFTA led to nearly a million lost jobs, and as we recounted in a weekend post, also wrecked much of the agricultural sector in Mexico. Tell me exactly how that helped regular people? And further notice the subtle bias in “ordinary workers”. To an FT reader, those are not part of their cohort, which are those directly connected to capital and the technocratic elite (executives, senior managers, policy wonks).

Third, the resistance extends well beyond the usual toothless leftie suspects. Over 200 Representatives, including some Republicans, have signed letters or otherwise voiced reservations about the trade deals. and another 30 to 40 are believed to be concerned. The opposition goes well beyond the small cohort of “progressives”.

Fourth, the Financial Times, rather than doing actual journalism (as in investigating) runs the blatant lie that the Administration is working to get tougher regulations via these deals. The most fundamental provisions of both pacts involve gutting regulations via strengthening the rights of foreign investors to sue governments at all level for anticipated losses (mind you, they don’t even have to prove they’d occurred) before secret international tribunals. As the group Public Citizen has documented in considerable detail, these panels are corrupt and bend over backwards to issue pro-investor rulings.

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The Senate Finance Committee is gearing up to move a Trade Promotion Authority, which is just another term of art for what is also called “fast track”. Fast track give Congress a limited amount of time to respond to a tabled trade deal with a simple up or down vote. This is just the old effort to move the pacts forward.

But this messaging means the Administration is still keen to get these deals done, which means it is also incumbent to keep the pushback going. Please call or e-mail your representative and tell them “Hell no!”

Zapatista Uprising 20 Years Later: How Indigenous Mexicans Stood Up Against NAFTA “Death Sentence”

Democracy Now

On the same day the North American Free Trade Agreement went into effect on Jan. 1, 1994, the Zapatista National Liberation Army and people of Chiapas declared war on the Mexican government, saying that NAFTA meant death to indigenous peoples. They took over five major towns in Chiapas with fully armed women and men.

Zapatista’s Warning Over NAFTA Rings True 2 Decades Later

Transcript

(note: This is Timothy A. Wise, Director of the Research and Policy Program at the Global Development and Environment Institute, Tufts University not Timothy J. Wise, anti-racism activist and writer)

How beer explains 20 years of NAFTA’s devastating effects on Mexico

Timothy A. Wise, Global Post

January 2, 2014 07:00

NAFTA produced a devastating one-two punch. For the first 10 years, the flood of US exports of corn, wheat, meat and other staples drove Mexican producer prices well below the costs of production.

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By the mid-2000s, Mexico was importing 42 percent of its food, mostly from the United States. Corn import dependence had grown from 8 percent before NAFTA to 32 percent. Mexico was importing nearly 60 percent of its wheat where before it had imported less than 20 percent.

Import dependence was more than 70 percent for soybeans, rice and cotton.

Then came the sucker punch. In 2007, international prices for many staple crops doubled or tripled, and so did the cost of importing them. Countries like Mexico that had gotten hooked on cheap imports paid a heavy price. Call it the Age of Dependency.

US policies had as much to do with these high and volatile prices as they had with the Age of Dumping. Now, instead of price-depressing surpluses caused by US agricultural policies, US subsidies and incentives were diverting 40 percent of US corn – 15 percent of the global supply – into ethanol production.

This drove up the price of corn, but also prices for related crops, like soybeans and wheat, and the livestock products that had relied for so long on cheap feed.

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(T)he beer sector is a perfect example of the kind of integration NAFTA can achieve.

“Look, Mexico’s even importing the barley malt from us to make its beer!” I said.

I took another sip.

“So Mexico’s agricultural contribution to its beer exports is … what?” I asked.

Nervous laughter.

Here is a case where NAFTA has gotten the United States to open its market to something of value that Mexico can export, and Mexico can’t even capture the value from it. The industry’s growth benefits US barley growers and US malt makers. Mexico can’t even import the barley and make the malt themselves.

So the country is basically a maquiladora for beer bottling. I guess Mexico contributes the water. Which it doesn’t have enough of.

20 Years on, Mexico is NAFTA’s Biggest Lie

Transcript

(note: David Bacon is an award-winning photojournalist, author, and immigrant rights activist who has spent over twenty years as a labor organizer.)

NAFTA Hurt Workers on Both Sides of the Border

Transcript

By Pushing the TPP, Obama is Repeating the Mistakes of NAFTA

Transcript

An easy pick.  Have I mentioned recently that I’m only half troll?  You see in Michigan a troll is anyone who’s from under the Mackinaw Island bridge.  If you were born in God’s country, which is the Upper Peninsula, they may call you a Yooper but what do you care anyway?  They’re trolls!

Now along with that comes certain allegiances- there is only one Football team and that is the Green Bay Packers.

For me it’s not just an accident of birth.  To quote from Wikipedia–

The Packers are the only non-profit, community-owned franchise in American professional sports major leagues. Typically, a team is owned by one person, partnership, or corporate entity, i.e., a “team owner.” The lack of a dominant owner has been stated as one of the reasons the Green Bay Packers have never been moved from the city of Green Bay, a city of only 102,313 people as of the 2000 census.

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As of June 8, 2005, 112,015 people (representing 4,750,934 shares) can lay claim to a franchise ownership interest. Shares of stock include voting rights, but the redemption price is minimal, no dividends are ever paid, the stock cannot appreciate in value – though private sales often exceed the face value of the stock, and stock ownership brings no season ticket privileges. No shareholder may own over 200,000 shares, a safeguard to ensure that no individual can assume control of the club. To run the corporation, a board of directors is elected by the stockholders.

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Green Bay is the only team with this form of ownership structure in the NFL; such ownership is in direct violation of current league rules, which stipulate a limit of 32 owners of one team and one of those owners having a minimum 30% stake. However, the Packers corporation was grandfathered when the NFL’s current ownership policy was established in the 1980s, and are thus exempt. The Packers are also the only American major-league sports franchise to release its financial balance sheet every year.

The ‘9ers are a fine team and San Fransisco a lovely town, but they no longer play there having moved to Santa Clara and ending San Fransisco’s bid for the 2016 Olympic Games about which (to her credit) even Dianne Feinstein is incensed.

They’re unlikely to win anyway as this game will be played on the frozen tundra of Lambeau Field (named for a real human being and not a slave labor exploiting blue jean company), Titletown USA, in conditions projected to rival the fabled Ice Bowl.

This is a tough one since I care so little about either team.  The Bengals have made the Playoffs 4 out of the last 5 years but they haven’t had a playoff victory since 1990.  Their problem is that they have a tendency to give up the ball a lot in the form of interceptions.  What’s notable about them historically is they were founded by the legendary Paul Brown after he was booted by the infamous Art Modell from his eponymous team and played for many years in Cleveland Browns uniforms that Brown owned and took with him in the breakup.  His son and heir Mike Brown is pretty much universally regarded as one of the dumbest owners in the NFL, which is saying a lot.

The Chargers haven’t been in the Playoffs since 2009 and contrary to their past playbook are primarily a running team.  This will be interesting since the Bengals are tough against the rush, giving up only about 100 yards a game on average.  The Chargers are one of the original AFL teams and are currently the only NFL team in Southern California since the Rams decamped Los Angeles in 1994.  If you want to find a reason to hate them, they employ Manti Te’o of the dead girlfriend hoax fame.  You remember that one don’t you?

One of the enduring stories of Notre Dame’s 2012 season was Te’o’s strong play following the death of his grandmother and girlfriend… In January 2013, the sports blog Deadspin revealed that the existence and death of his girlfriend had been faked. An acquaintance of Te’o confessed to orchestrating a hoax that lured Te’o into an online relationship with a nonexistent woman.

The other big plot line is snow in Brown Stadium (I’ll give the Bengals that, it’s still named after Paul Brown and not some faceless corporation).  Some are predicting it in buckets, others that it will be warm enough to be just freezing rain.  It shouldn’t handicap either team, the Bengals play in crappy lake effect weather all season long and some of the Chargers’ biggest victories this season have been outside in the cold.

Yes, that’s spelled right.

Once again an easy pick as to who to hate more for me.  You see, the Evils play in my Division against my favorite team, the Giants.  They’d have to be playing the ‘Boys or some even more execrable team to get me to root for them.

The Saints on the other hand are remembered fondly despite being no better or worse than most and a legendary record of failure because of their performance after Katrina.  There is speculation they might suffer because of the weather, but it’s not snowing now and it’s not as cold as it was (which was very).

I will give the Evils this however, their fans are loyal and turn out.  Of the 4 Wild Card games this was the only one not in danger of a TV Blackout.

In his Divisional Playoffs 2014 Trash Talk bmaz at emptywheel bemoans this phenomena (and he’s no John McCain) and the various excuses offered but by far the best commentary is from Peterr of Firedog Lake in a private email that bmaz shares-

Reading some of the news stories about this over breakfast, various folks point to the cost of tickets and the prevalence of 55 inch flat screens at home as reasons for people not going.

This strikes me as yet another symptom of the two-tier economic world we’re in these days. For all the 1%ers who have enjoyed the rise in the stock market and have plenty of money to throw around, there are still a lot of lunchpail fans for whom $100+ for the cheapest ticket is still too much, and a lot of other fans who used to carry lunchbuckets whom no job means no tickets either. The NFL is increasingly becoming a rich fan’s sport – PSLs, high ticket prices, higher parking/amenities fees, more games leaving broadcast TV for ESPN on basic cable or the pricier NFL Red Zone cable channel, over-the-top merchandise prices, etc.

Even if all three of these games do get sold out at the last minute, it’s a sign of real problems in the economy generally and the NFL specifically when selling out playoff games goes down to the last minute.

Well, its that time of year again and I’ll start off with a familiar observation, unless one of your favorites is in the chase it’s not so much about which team you like as it is about which team you hate more.

In this game my choice is obvious.  I really, really hate the way Irsay blackmailed Baltimore before moving to Indianapolis, which, while I’m sure it’s a great city and all is simply a blot of population in the middle of what in Michigan (where admittedly we have no love lost for Hoosiers) is called ‘cow country’ that in no way compares with the Baltimore – Washington market.  It was a deeply cynical and manipulative ploy I hope stains the Bolts franchise for the rest of it’s history.

Which is not to say I like the Chiefs which is a franchise storied only for their consistent record of futility, but at least they’re not carpetbaggers.  As the Dallas Texans they were one of the original AFL franchises and relocated to Kansas City in 1963 in the face of overwhelming competition from the much to be despised ‘Boys.  They’ve only ever been owned by the Hunt family of oil baron fame and despite being one of the objectively weakest teams in the league are valued at $1 Billion.

I’ll note for hahas that some incredibly optimistic Chiefs fan has already named them the 2013 Champions which demonstrates ‘wikiality’ for you Colbert aficionados.  In fact the Champions last year were the Baltimore Ravens and the Chief’s last playoff appearance was in 2011 when they lost in the Wild Card round to them.

Another opening observation I’d like to make is that starting out in the Wild Card round isn’t the enormous handicap that it is in Major League Baseball.  In Baseball in all the other rounds it’s not one and out, but in Throwball that’s the way it always is.