I have noticed some discussions abroad that criticise Modern Monetary Theory (MMT) on the basis that none of the main proponents have ever actually worked on the operations desk of a central bank. This sort of criticism is in the realm of “you cannot know anything unless you do it” which if true would mean almost all of the knowledge base shared by humanity would be deemed meaningless jabber. It is clearly possible to form a very accurate view of the way the monetary system operates (including the way central banks and the commercial banks) interact without ever having worked in either. However, today, I review a publication from the Bank of International Settlements which dovetails perfectly with the understandings that MMT has provided. It provides a case for why we should abandon mainstream monetary textbooks from the perspective of those who work inside the central banking system.

I have very little blog time today (less than usual). I had a major piece to finish today and an Op Ed to write and some PhD drafts to read and I am floating around outside my office. But the Internet has allowed most nearly anyone (in the advanced employed world) to become a publisher and an owner of a site. It is not a very discriminating vehicle for quality control and in some sense that is probably a good thing because quality is often just an ideological construct. But there are some truly bizarre sites that breathe life courtesy of the Internet. One of the most bizarre is the Cut Cap and Balance Act home page with if I didn’t know otherwise I would assume was a parody on everything that is nonsensical about conservative free market economic thinking. The problem is that the site is deadly serious and that is truly scary. Cut, Cap and Balance is the new catch-cry. It is high farce but the proposers are actual legislators and they are dealing with real people. They should just retire and watch the Thunderbirds or something. Because all I can see in the CCB is Cut, cap and demolish – where prosperity and peoples’ life chances are the demolition target.

My time is short today so an early post. I am catching up on my reading and had time to study the evidence given by Simon Johnson to the Joint Economic Committee of the US Senate on June 21, 2011. There are many such committees within any national government and at present they are being bombarded with analysis from so-called experts who assume a non-problem, call it THE problem, then propose various solutions to the problem (that is, non-problem) which all in various ways would make the real problem even worse. That is the state of the public debate.

Yesterday I promised to stay clear of analysing the US economy for a while given how much mis-information is flowing out of there. Today I break that promise to myself. Last week (July 7, 2011) the rabid US Republican Paul Ryan released a “House Budget Committee document” – The Debt Overhang and the U.S. Jobs Malaise – which drew on work produced by Stanford Professor John B. Taylor. You can sort of understand politicians who lie and embellish but when a text-book writing, senior economic professors misuses our art to misrepresent the situation you have to wonder. Whoever Mark Twain got that phrase “Lies, damned lies, and statistics” from they must have been reading Taylor’s blog in recent years.

I checked my calendar today thinking I must be a few months out. Upon checking I determined that it wasn’t April 1. So what the hell is going on? I refer to the announcement of a senior appointment at the World Bank. They have just appointed to the role of Vice President and Treasurer the former Lehman Brothers Global Head of Risk Policy who then was Lehman’s Global Head of Market Risk Management as they sailed into bankruptcy. Hilarious. As the Twitter-verse noted – Did they also interview Bernie Madoff? Anyway, I saw this news piece come in as I was studying the 81st Annual Report 2010/11 of the Bank of International Settlements – the central bank of the central banks – which was released yesterday (June 26, 2011). My conclusion: BIS = BS – the I is gone and used to stand for integrity

Overnight, the US Bureau of Labor Statistics released their latest Mass Layoffs data (May 2011) which showed that the number of mass layoff events in May increased by 2 percent. Further, another month went by and the US national unemployment rate remained unchanged at (a very high) 9.1 percent. There is very little happening to reduce it and the omens are bad. Also yesterday the US Federal Reserve decided to keep interest rates on hold in the 0 to 1/4 per cent range indefinitely and the Congressional Budget Office (CBO) released its 2011 Long-Term Budget Outlook. The statements accompany the central banks decision by its Chairperson Ben Bernanke about long-run fiscal problems and the very aggressive message in the CBO Outlook suggest that the politicians will continue to retard the US economic recovery and lock millions into entrenched unemployment and poverty. The US leaders are sure making a mess of things and the advice they are getting is appalling. The omens are clear – aggregate demand growth is desperately required to attack unemployment. But the land of the free is sliding further into oppression – self-induced by its political class.