Climate Change/Mass Extinction Megathread

[viper37]

Of course, none of this sheds any light on why Aoki-san is talking about MMT at a time of full employment and heated up labor markets.

because the GOP is raking immense deficits, it is hard to propose unlimited spending to add trillions on the trillions of debt you will inherit in 2020.  It's a convenient way to say "we can spend however we want, it is never going to be a problem, see this nice little theory we have here makes everything allright".

I've heard of this before, but not by this specific name.  And I think Krugman devoted a column debunking it.

[The Minsky Moment]

There's a lot of confusion about MMT, some of which is caused by the MMT people themselves.
It's basically just a updated version of Functional Finance, a theory proposed by Abba Lerner in the 60s and 70s.

Lerner's theory is that there is no binding fiscal constraint on a country that borrows in its own currency because it can always just print more currency.  The constraint on the fiscal side is thus concern over inflation, not insolvency.  Taxes are raised to keep inflation and inflation expectations suppressed, not to finance spending. The MMT people basically took Lerner's ideas and surrounded them with a lot of jargon.

There's nothing really wrong with the theory. The conventional way to manage an economy is to have a fixed fiscal constraint - i.e. either a balance budget or more commonly a capped deficit target or 2 or 3 percent of GDP and then use monetary policy to manage demand.  But you could do it the other way around.  Target a nominal growth rate for the economy -whuch corresponds to a risk free nominal interest rate - and then use fiscal policy to hit the target. 

While economically, both these policy regimes should work and could work similarly, politically they operate differently given current institutions.  Using monetary policy to regulate demand means the responsibility is the hands of unelected experts at the Fed. Using fiscal policy puts it in the hands of Congress.

MMT has a leftist coloration because of the assumption that implementation of a MMT regime would involve using more spending as the way to generate demand and thus provide a macro-economic justification for things lefties want to do anyways.  But it doesn't have to work that way - you could implement MMT by freezing spending and then varying tax levels by eg using period tax rebates to generate deficits when desired.

The irony is that most prominent practioner of MMT right now is arguably the Trump Administration.  Trump's macro policy basically follows MMT - target a desired rate of nominal growth and then set a level of fiscal deficit to hit that target. 

[Admiral Yi]

I disagree that there is nothing wrong with this theory Joan.

First the assumption that countries which borrow in their own currency have no total debt constraint.  Investors' willingness to purchase government debt is contingent on the expectation of being repaid and the real return offered.  As debt/GDP increases not only does the government's ability to service its debt decrease, but so does its willingness.  And as we discussed countless times before, although one can inflate away existing debt problems, that creates its own serious problems, such as hyperinflation, the elimination of prices as signalling mechanisms, barterization, and erasing personal savings. This calculus doesn't change simply because your country is borrowing from its own residents.

Second the problem I mentioned above, that present proponents of MMT seem to have read a 7th grade Cliff Notes version of MMT (probably on Slate) and misunderstood it to mean that we can spend as much as we want, whenever we want, without worrying.

Third is absurdity of expecting the political system to deliver fiscal tightening in periods of overheating.  The Fed, in contrast, has shown it is capable of being a mean bastard when that is what is needed, precisely because of its independence.

[viper37]

Second the problem I mentioned above, that present proponents of MMT seem to have read a 7th grade Cliff Notes version of MMT (probably on Slate) and misunderstood it to mean that we can spend as much as we want, whenever we want, without worrying.

Bingo!

Proponents of such theory seem to imagine GDP will always grow due to constant public sector spending.  Therefore, debt/gdp is not important to their calculations because it remains stable.

Note as Joan said, it is the same thing as the GOP is doing by slashing taxes and building a wall: they expect so much GDP growth that the ratio will actually go down or at worst remain stable.

[The Minsky Moment]

First the assumption that countries which borrow in their own currency have no total debt constraint.  Investors' willingness to purchase government debt is contingent on the expectation of being repaid and the real return offered.  As debt/GDP increases not only does the government's ability to service its debt decrease, but so does its willingness.

At the extremes perhaps, but empirically that doesn't really hold. US Debt/GDP has nearly doubled since the Clinton years and looks likely to rise further but borrowing costs have gone way down.  As long as the real economy looks healthy and the dollar holds its value people will buy debt and not scruple at debt/GDP ratios over 100%.

although one can inflate away existing debt problems, that creates its own serious problems, such as hyperinflation, the elimination of prices as signalling mechanisms, barterization, and erasing personal savings. This calculus doesn't change simply because your country is borrowing from its own residents.

That is true and acknowledged in theory by MMT in the sense that the fiscal balance must be managed to control inflation.

Second the problem I mentioned above, that present proponents of MMT seem to have read a 7th grade Cliff Notes version of MMT (probably on Slate) and misunderstood it to mean that we can spend as much as we want, whenever we want, without worrying.

Quite so - I doubt Ocasio-Cortez has read the academic articles very carefully, she is just seizing on a theory that sounds helpful.

Third is absurdity of expecting the political system to deliver fiscal tightening in periods of overheating.  The Fed, in contrast, has shown it is capable of being a mean bastard when that is what is needed, precisely because of its independence.

I agree that whatever can be said of MMT as a matter of economic theory, it doesnt work as a matter of practical political economy.  The Fed has established a decent track record of competence on macro management since Volcker, despite some missteps. Congress doesn't inspire the same confidence.

[Admiral Yi]

At the extremes perhaps, but empirically that doesn't really hold. US Debt/GDP has nearly doubled since the Clinton years and looks likely to rise further but borrowing costs have gone way down.  As long as the real economy looks healthy and the dollar holds its value people will buy debt and not scruple at debt/GDP ratios over 100%.

It didn't hold empirically for Greece either, until it did.

[Syt]

https://www.bbc.com/news/world-us-canada-47754189

Canada warming twice as fast as the rest of the world, report says

Canada is warming on average at a rate twice as fast as the rest of the world, a new scientific report indicates.

The federal government climate report also warns that changes are already evident in many parts of the country and are projected to intensify.

Canada's Arctic has seen the deepest impact and will continue to warm at more than double the global rate.

The report suggests that many of the effects already seen are likely irreversible.

Canada's annual average temperature has increased by an estimated 1.7C (3F) since 1948, when nationwide temperatures were first recorded.

The largest temperature increases have been seen in the North, the Prairies, and in northern British Columbia.

Annual average temperature in northern Canada increased by approximately 2.3C.

"While both human activities and natural variations in the climate have contributed to the observed warming in Canada, the human factor is dominant," the report states.

"It is likely that more than half of the observed warming in Canada is due to the influence of human activities."

What are the effects?

The effects of global warming on Canada's environment include more extreme weather.

Hotter temperatures could mean more heat waves and a higher risk of wildfires and droughts in some parts of the country.

Oceans are expected to become more acidic and less oxygenated, which could harm marine life.

Parts of Canada's Arctic Ocean are projected to have extensive ice-free periods during summer within a few decades.

A rise in sea levels could also increase the risk of coastal flooding and more intense rainfall could cause problems with flooding in urban centres.

What caused Canada's warming?

Canada's rapid warming is due to a number of factors, including a loss of snow and sea ice, which is increasing the absorption of solar radiation and causing larger surface warming than in other regions, according to the report.

Despite the bleak projections, the report notes that the amount of warming could be limited if global action is taken by drastically reducing "carbon emissions to near zero early in the second half of the century and [reducing] emissions of other greenhouse gases substantially".

Canada is one of nearly 200 countries that have signed on to the Paris Agreement - a single global agreement on tackling climate change that seeks to keep temperatures "well below" 2C above pre-industrial times and "endeavour to limit" them even more, to 1.5C.

The Canadian government says it will meet the Paris target of cutting emissions to 30% below 2005 levels by 2030 despite the fact that a number of official reports indicate the country is unlikely to meet its reduction targets without significant effort.

[Tamas]

I know globally we are fucked, but how is Canada becoming warmer a bad thing for Canada or Canadians?

[Valmy]

I know globally we are fucked, but how is Canada becoming warmer a bad thing for Canada or Canadians?

More raccoons and possums.

[Syt]

I know globally we are fucked, but how is Canada becoming warmer a bad thing for Canada or Canadians?

It might, if their Southern neighbors decide Canada is more attractive to live in than their home countries.

[crazy canuck]

I know globally we are fucked, but how is Canada becoming warmer a bad thing for Canada or Canadians?

Much of the infrastructure, housing, heck everything, in the North is built on permafrost.  As that melts everything is going to hell.

The North is basically turning into a large swampy bog unfit for what now inhabits that area.

For the world in general it is terrible news, as the permafrost melts it is releasing more greenhouse gases that had been locked into the permafrost (carbon dioxide and methane).  It is a feedback loop scientists had been warning would occur, and now that it is here, it may be too late to stop.

[crazy canuck]

I know globally we are fucked, but how is Canada becoming warmer a bad thing for Canada or Canadians?

It might, if their Southern neighbors decide Canada is more attractive to live in than their home countries.

We are thinking about building a wall.

[Syt]

For the world in general it is terrible news, as the permafrost melts it is releasing more greenhouse gases that had been locked into the permafrost (carbon dioxide and methane).  It is a feedback loop scientists had been warning would occur, and now that it is here, it may be too late to stop.

Pretty much the same thing happens in Siberia, btw.

[Valmy]

Guys, stop being fearmongers. Think of Ronald Reagan riding a dinosaur.

[crazy canuck]

For the world in general it is terrible news, as the permafrost melts it is releasing more greenhouse gases that had been locked into the permafrost (carbon dioxide and methane).  It is a feedback loop scientists had been warning would occur, and now that it is here, it may be too late to stop.

Pretty much the same thing happens in Siberia, btw.

Yeah, I assume it is happening there too.  But the data was taken in Canada, thus the headline.

Guys, stop being fearmongers. Think of Ronald Reagan riding a dinosaur.

And the report was released the same day the Conservative party in Canada robo texted people to let them know they would repeal the carbon tax introduced yesterday.  Great timing.