73/ Well there it is, I wasn’t off base after all. Because of the position of the dollar the Feds actions, aimed at the domestic economy, has a much larger international blast radius.
72/ Finally had some time to continue and this chapter might take a while, and I might need to read it several times. Funnily it seems that she agrees that the dollar is special. I learned a thing, though, after the world abandoned the gold standard we kind of didn’t, we pegged the dollar to gold and a lot of the other currencies to the dollar. This was called the “Bretton Woods system”. https://en.wikipedia.org/wiki/Bretton_Woods_system
76/ The “winning vs losing” at trade is explicitly directed at Donald Trump. But she spends a lot of time emphasizing that American workers have lost jobs (“well paid union jobs” comes up several times) when production moved offshore.
It feels to me like she is arguing for a midpoint, a more protectionist approach, but not measuring in trade deficit/surplus, but instead in… standard of living?
She gets slightly into the topics of “The Shock Doctrine” in that the international trade organizations and the world bank became dominated by extremist (my word) capitalist forces.
75/ Chapter 5: “‘Winning’ at trade” is interesting, but doesn’t really go into the depth I’d like (but I guess after reading 4 Econ books in a row I’m not the target readership). The chapter is very “political” and idealistic rather than descriptive, but that was a tendency we saw earlier too. The basic idea is that a trade deficit isn’t a bad thing. She goes on to envisage a world economy that is more… equitable? It argues for developing countries to focus more inward, and diversifying their economies, perhaps making them less vulnerable to the global markets. It argues against losing control over one’s own currency (its MMT, so obviously). It makes clear that the dollar gives the US an outsized influence and leverage over the rest of the world.
She criticizes both democrats and republicans, but seems to have a soft spot for Bernie Sanders. He hired her to work at the Capitol, so I guess that makes sense.
The MMT premise seems to be that you don’t have to “have the money” to fund guaranteed full employment or “entitlement programs”, because the control over the currency means that the government always “has the money” to pay.
74/ Some Norwegians have recommended that we peg the NOK to the Euro, and I think that our feeling that Denmark is similar to us culturally distracts us from recognizing how fundamentally different our economies are. Most importantly the petroleum “enhanced” economy of Norway and the fact that Denmark is a member of the EU and we are not, even with our extensive trade agreement.
78/ I think 4 is essential for progress to be made, because the current right and left political movements are focusing on targeting hate and animosity towards another group of humans, rather than at an inequitable system. And that only perpetuates that system because that energy is wasted on being unproductive (and hateful, which sucks the soul out of everyone at a time when we need a surplus of generosity, in my view)
77/ What I appreciate: 1. She is clear that the challenges that face us in the years to come are global, and that we have to work together to solve them, as partners instead of competitors. 2. She is not proposing some sort of bloody global revolution. 3. She is slowly selling me on the idea that guaranteed employment, benefits and entitlement programs are a safeguard against radicalization. I have mostly thought of these things as the “right thing to do” rather than a way to maintain peace. 4. The ideology is inclusive instead of divisive, and therefore doesn’t rest on the boogeyman approach of both the fundamentalist left and right. She doesn’t use immigrants or poorly veiled antisemitic tropes (the evil rich man of various formats) to paint some other group as the enemy.
66/ Ok, done with chapter 3, the above sums it up, maybe with an addition that she is very pro-deficit, to the point that she’d like to give it another name. The whole thing is very idealistic, and that part should probably have been discussed beforehand. Because in effect the ideology and The Plan is mixed in with what is presented as descriptive. And maybe it’s just me, but I like it when the agenda is very clear and when the shifts between what is claimed to be descriptive and what is prescriptive is clear and emphasized.
36/ Turns out that the pre-Friedman King of Economy, John Maynard Keynes, agreed with me (according to the book), or the quote is about the opposite (about lowering the interest rate to make people take out loans)… but it turns out to be kind of the same for the NOK 🤪
38/ Apparently one of the things you can do in our situation is to increase salaries. Because the currency thing is making goods a lot more expensive an increase in salaries could make that gap smaller. And we did that. Sort of. The government blessed a really good deal between the employers and the unions.
40/ And one sector is particularly vulnerable: construction. Because:
1. Materials (imported) are much more expensive 2. Interest rates are way up, so a lot of projects are halted due to financing 3. They are dominated by highly unionized workers and their salaries just went up (because the unions didn’t negotiate with them, they negotiated with the swimming in money export sector)
So all sorts of companies associated with construction are going bankrupt.
43/ And that gets us the whole “what is inflation?”. Because if it is that it is harder to make ends meet because everything is more expensive. Then they are actually creating MORE inflation.
Yeah, we are exposed to the exchange rate, but now we are killing the economy that’s supposed to compensate, while driving actual living costs even further through the roof.
42/ The interest rate hikes are making a hard situation worse by “cooling” the wrong economy. We are getting a higher interest rate because America has lower unemployment (I am really happy for y’all though).
45/ However, if you are a renter you are also getting hit, again by different effects. The current left coalition (and previous iterations) have wanted to make it less lucrative to be a landlord. So margins have shrunk due to higher taxes etc. But a lot of this has been funded through loans, and so those margins are getting squeezed further. So landlords are either selling off their properties, which are often in the cities, or raising rents. But the housing market is undersupplied so it just absorbs these properties.
So now we have fewer rental properties, which would drive up prices on its own (according to economic theory 😅), but the remaining market is also increasing rent to compensate for higher interest rates.
So even if you rent you are getting hit by the interest rate. And actually it’s worse there, because rents will for sure not go down in the same way mortgages will if/when they reduce the interest rate.
44/ Housing is also a weird market in general, because once you’re in, you buy and sell in the same market. So that market becomes sort of disconnected from everything else. Because demand is constant and supply is pretty constrained: the people selling their homes and newly built stuff.
But with no construction the supply is even more constrained, and the people buying are mostly the people selling, so it becomes a strange closed loop system.
51/ Ok, I’m still on the inflation chapter (but getting towards the end, I promise), and I think I get at least one of the major changes MMT wants to do: To manage the economy through fiscal policy: spending more/less and increasing/lowering taxes, instead of through monetary policy: raising/lowering interest rates.
50/ I told you, inflation is much harder to grok than I thought, because it’s much less well-defined than they say it is. It seems economists don’t actually know what it is, they just know some of its shapes. Unfortunately, the current Norwegian shape is not the stereotypical one. And the Norwegian central bank only has one hammer and it was made for the stereotypical case.
57/ The parts of MMT that I like are the descriptive parts. Where they just talk about How Stuff Works In Practice. The problem I have (and tbh they are by far the worst here) is that when they slip over from descriptive to prescriptive it’s like they don’t even notice. They go straight from How Stuff Works to My Opinion without skipping a beat. And then I start to wonder if they can even tell the difference.