Keynes vs MMT: which economic theory fits our world?

This gets MMT close to where it needs to be. Taxation, especially of high incomes, must be seen as a way to regulate the excesses of capitalist speculation - which often leads to dangerous investment products that the originators pump and dump, while the top 25% of households is left holding the bag - while the liquidity of the bottom 75% is severely damaged in the dislocations.

An Asset Value Added Tax, as a replacement for capital gains taxes, with marking to market at Option Exercise, IPO and first sale after inheritance, gift or donation - and with an expansion of the ESOP sales exclusion to all stock purchases - not just privately held firms - (a tax cut) - will unwind capitalism so that a more cooperative economy can develop - including worker control over consumption, finance, social services and housing - as well as retirement savings and CEO recruitment (open auction).

Until taxes are adequate - that is - until we take the money we would otherwise borrow - running deficits is actually essential for capitalism to be liquid. Since the 2018 Trump cuts - there has been too much liquidity leading to asset bubbles in crypto, housing, commercial property, consumer debt ownership, etc. 

When the crash happens, the best cure would be a doubling or tripling of the child tax credit, shifting  COLA bonuses to an equal dollar pay bump (not a percentage based on) and a higher minimum wage. Then, the pay bump will be enough for the median to keep up, low enough to end the salary pull on price levels - especially for housing and durable goods - that all goes toward the top 10%. The minimum wage needs to double, as well as an increase to the poorest retirees. A VAT scheme would then eat some of the excess price inflation that will happen when the working class gets lots more money.

Why do We Still Need to Work?

A better option is 6.5*4 days or a 26 hour week (one third less), with a one-sixth decline in salary levels - but with a doubling of the minimum wage from 7.25 to 14.50 and a long-term unemployment insurance rate of 13.25 - with recipients required to be in school, caring for a child, or participating in a drug, psychiatric or physical disability rehabilitation program. This would result in a 82.5-65-100 deal, rather than 100-80-100. 

Manufacturing and service industries would have a two (or four) shift system - with a 43% bonus for second shift labor (working 52 hours in a week) or 200-130-200.  LTUI would pay 1481 per month.  Full time minimum wage would pay 1621 per month. Average Social Security would be 2494 (pegged to FT Min wage 40 hour work week).

Current min wage work is often for 29 hours a week, so real min wage job pays 904 per month.

COLAs are currently a fixed percentage of last year's wage, which causes inequality because prices chase wages at the 90th percentile. If they are granted on an equal dollar basis, management will give themselves the number of dollars that they need, with the understanding that everyone under them gets the same raise in dollar terms.  Managers and professionals will have to settle for less - and executives much less - but the economy would grow with less inflation (because it is excomp and professional salaries that drive up prices - especially for housing).

The 10 Biggest Myths About Our Economy

I am going to deal with each of these points in turn - with the benefit of hindsight on the first 6 months of Trump 47. I am going to try to get these in front of Bob, but if anyone who sees this can also forward them, I would be grateful.

1. The missing variable in the moral philosophy of economics is cultural theory. I am writing about that now. Michael Foucault, in one of his Paris lectures, addressed Homo Economicus and hit the nail on the head. Political Science has followed Economics into empiricism - so it is of little help. Moral philosophy, without cultural theory as a context, is anecdotal for all intents and purposes.

The rules of the economy are based in culture. Most of the working class behaves as obliged to by reason and threat, while the hierarchical culture gives its membership at least the appearance of due process. The former deals with sensory input, the latter by shared intuition.  As I discussed in a public forum with Gar Alperovitz, the answer to getting them to pursue change is a better mix of cash and prizes - not through trying to radicalize them with political proposals. In other words, some type of employer needs to offer a better mix of consumption, finance, housing, government - with libertarian socialism in some form - which eventually destroys politics - becoming the new paradigm. Until them, as Marx said, anything that capitalism does to make things worse makes permanent change more likely - unless government steps in to improve the cage workers are in.

2. The problem is capitalism. Saying it is corporations is tiptoeing through the minefield. Workers are property. The Libertarian assumption is that every day of work is a new contract freely negotiated, rather than an agreement for continued wage slavery. The JFK/LBJ 1965 tax cuts are what unleashed capitalists - who took what was given them and, because they now had an interest in doing so - pushed for more.

3. CEOs will set their own pay until employee-owners get the power to force CEO candidates to bid for their jobs in open auction and then vote among the bottom 3. As for intergenerational wealth, within three generations the management class takes control and nepo-babies drink themselves into an early grave or spend it away.

4. Campaign bribery is a function, not a cause, of capitalism. It also causes the rules to be changed to its advantage.

6. Global trade and the "free market" are bipartisan neoliberalism, which Bill and Hillary copied to get their share of the campaign finance system. The Democrats have now put the electoral game over governing. Also, bankruptcy reform happened with the full cooperation of Jim Moran - a Democrat.  The Trump trade policy has destroyed neo-liberalism. Be careful what you wish for.

7. Taxing the rich is social democracy. Socialism happens when employees elect their CEOs and/or make them bid on their salaries. Social Security is the most basic form. We do SD, but do it badly.

8. Our lack of purchasing power is a function of bad economic policy. Cost of Living Increases are granted as a percentage of current wages,  rather than as an equal dollar increase in all salaries. Prices change the median dollar, which is paid at the 90th percentile. Economic figures support this. If the minimum wage went up in the same manner, there would be little poverty. Democrats won't go all in on making the minimum wage permanent, as it is a better talking point than a change that would cost them campaign contributions.

9. Government spending on social programs, government contracts and salaries is first order growth. Private sector spending comes along as a second order effect, with plant and equipment spending is third order spending. All for a higher minimum wage. Biden did not do it, even with a majority.  Some degree of concentration may be helpful - as long as there are more than one libertarian socialist cooperatives - but vertical integration is essential. Prices did go up when the pandemic gave too many people in good jobs enough money to invest in Crypto, crap and bidding up the price of essentials. Again, costs change the 90th percentile. How we do cost of living adjustments cause inflation.

10. Air pollution, etc., is regulated in the U.S., but we offshore much of it to China and other developing nations by sending them our trash or our trash producing industries. They will soon collapse because of population loss and party infighting. Authoritarians tend to eat each other.

Global warming's processing is not generally known, although in the northern hemisphere, people are starting to pay attention due to the fact that we passed the point of no return in about 2016. Actually, it was more like 1990. Here is how it works. Since 1958, people had lots of cars and warming really started with vigor. Pacific warming sent wet winds to the N. American west coast, where the water was dropped and the warmth carried over to the Atlantic, picking up much more water and even more temperature. See the work Seager who explains this - under the heading of why Europe is warmer than America at the same latitudes. As Sigurd Lind has found, much of the warmth has made its way to Barents Sea. According to measurements started in 1980 - which likely represent what happened since 1958 IMHO - warm the Sea by 7 degrees F a decade. Over 7 decades, that one bottom of water has increased 50 degrees Fahrenheit. No other place has caught so much climate change. The answer is to ban gasoline powered cars -as this produced the problem - and replace them with tethered electric vehicles that can drive themselves home. To get this kind of thing adopted, people abandoning the South and Southwest is the necessary condition - along with more employee-ownership - or corporate employers in individual cities banning cars or uniting behind such a change as a workforce issue.

BONUS. Agree that conditions led to Trumpism, but it is also a result of Democratic Party politics - mainly women voting on a pro-choice ticket when they don't need to mention the issue. Other women get it. Also, Dems don't really make changes upending the neo-liberal status quo. Trump has - as promised. Oops. Some say that undoing Neolib consensus was necessary anyway because China and other Asian nations are collapsing under population decline - for either economic or environmental reasons. We need a new paradigm. Until we do, we get grievance, which almost always leads to a fascistic response.

2025: The end of our world as we know it | Peter Leyden

AI needs to be AC (artificial cognition) which includes group or individual sensory  information, general knowledge or specific reasoning, group or individual paradigms or plans and group feelings or individual values. See Jung.  

80 or rather 84 year cycles are one orbit of the planet Uranus through the zodiac.

Clean energy needs to embrace nuclear - especially small modular and salt reactors, not just solar and wind. The anti-nuke activists have long died out.

Hopefully we can one day get an at-home model meat processor - or one that can be used by a cooperative employer or ESOP. The social change that needs to go beyond capitalism is employee ownership of the means of 1. production, 2. finance, 3. housing, 4. consumption 5. human services, all based on a standard labor hour system rather than cash denominated capitalism. Any bonus for education and experience is distributed in the pension system rather than a higher return for labor. I have a book about this. https://www.amazon.com/dp/B07QN7WCW8

Michael Watkins: You can’t afford to be a dinosaur | Big Think+

Jung identified four cognitive functions: thinking (reasoning to make decisions) feeling (decisions on values), intuition (group agreement on concepts or values - and creativity) and sensory (individual perception). AI needs to have at least three of these working together, with thinking doing non-creative fact checking, feeling is a reaction to sensory information and seeks authenticity - deliberate bias where norms can be programmed - but must be able to change based on both individual sensory information and group intuition/creativity, sensory is easy for external input - but it is blind to personal sensation other than diagnostics, while intuition is where generative AI comes in. 

These functions exist in combination - and also include internal and external foci.

 For example, thinking/creating is a group activity with organized and specialized knowledge. When one of these functions is extraverted, the other is introverted. For example, intuitive thinking (deep dive into problems) is paired in humans with external intuition - contributing creativity to the larger system. It can also have a broad base of knowledge for the purpose of imposing a plan (rather than offering solutions).  Knowing a lot and offering a lot of options is socially inconvenient - and is the problem with current generative AI. Internal analysis for internal aggrandizement is Skynet.

Thinking can also be paired with sensing. For example, seeking reasons and storing the information (in order to offer options to clients or other machines), or seeking sensory input from the outside to take a deep dive in solving problems (and then coming up with a single answer).

Individual feeling is based on morality - and is paired with extraverted sensing - either hedonistically or by drawing from a range of data points in order to provide a single answer to the group based on a broad set of facts. External feeling is reading the room and is paired introverted sensing - recording group values in memory (and using these to solve problems with focus).

Sixteen profiles are based on having one ability be strong and its ability week, with the other two balancing and the prime function being either internal or external.

The beauty of machines is that you can have all four functions balanced, so there can be two basic functional sets depending on whether senses are for external use to yield on answer for the group or storage of data to provide a variety of options.

White Shirt Video - More on Tariffs

Over the past few weeks, I have been writing about the tax aspects of tariff policy - how because we do not have a Value Added Tax, we need either a generalized tariff based on the amount of VAT that is zero rated by exporting countries or a specific tariff to match the rates our trading partners have. Germany has a 13% VAT, so we need a 13% tariff to establish equivalency.

To make VAT, Carbon taxes and tariffs available, as well as life in general, we need a subtraction VAT on employers which they can offset by paying $700 or so per child or non-working parent per month - or more (whatever amount they pay to Social Security dependents - with wages or on top of any basic benefits paid by government (from UI to a potential long term UI that is no fault and would replace disability insurance and would be equal 75% of full-time minimum wage work -which also needs to be raised to $13/hour).

There is another reason to do tariffs. It is because standards of living vary for workers from country to country. In many cases, comparative advantage is really comparative slavery. This gives us a hint as to why we have a trade surplus with Europe. Their standard of living for workers is better than ours - much better if you include social benefits. They give us Euros to get stuff made by our workers.

In a cooperative economy, employee-owned firms would pay all workers the same wage in terms of standard living, even if they take a loss on the transfer price. This is probably illegal now, because it trades worker justice for fiduciary gain.

The tariff, therefore, must provide overseas workers and suppliers with the same standard of living overall - as productivity differences between goods should even out. If they do not, the tariff must fill in the gap.

This type of adjustment is what Donald Trump is unconsciously attempting, although if he thought it through, he would see it as socialist (because it is socialist - or at least anti-capitalist. This type of tariff adjustment is the ultimate cure for the neo-liberalism that populists hate. 

Let's do it - and if we don't do it, we should at least calculate and publish the difference between standards of living of workers in similar jobs and how that calculation interfaces with both tariffs and currency prices.

East Russian Infrastructure

The vast majority of Russia has no infrastructure. Neither does Alaska or northern Canada. Cities have roads, but are not interconnected. There is a reason for this - no people.

Russian and Chinese population figures are not honest. They don't have the same census infrastructure found in the United States - and overestimation is endemic. The only obstacles to freedom for Russia Asia is for the ethnic Russians to leave (the inevitable result of the war on Ukraine) and the expense of food. If American style lab grown meat and Dutch green house technology is developed from the Urals to Greenland, this obstacle is overcome - provided resource extraction income is adequate until an independent economy is developed - which takes people to do. Lower food prices will mean more population - especially if jobs are created.

South Asian Russia, which is Muslim, needs to be set free for Turkic and Persian nations to absorb. Inuit, Mongolian and First Nation peoples can reunify to an ethnically similar nation, provided they are allowed a fair share of extraction income. They could be the Saudis of the north.