Beating Back the Ghosts: Be Gone Appeals to Reinhart and Rogoff Authority. Welcome the Triumph of Reason.

They’ve haunted me.  Incessantly.  The ghosts of Reinhart and Rogoff.  Their research here, there, everywhere.

Bank of Canada speeches? Yes.  Finance Department talking points? Check. House of Commons debates? Yup.  Globe editorials? Ditto.  Discussions with fellow progressives? Sadly, yes.

Results? Arguments conjured in their name.  Reason decapitated.  Modern Monetary Theorists (MMT) banished to the netherworld of cranks.

But we told you so. We told you so**:

  • Randy Wray, writing a little more than a year ago, called them out, saying: “One hopes that the database they have assembled might provide more detail. We have tried contacting both authors to access the database, but so far with no response
  • Bill Mitchell: pointing to the inconvenient truth of the underlying analysis and its emphasis on external (not domestic) debt.  And then the countless exaggerations that followed by the authors and their propagandists.
  • Me, in private, countless times running through the arguments to no avail. Authority wins. Fear of trespassing on the sacred convention of balanced budgets wins.  Fear of the narrative wins.

For a nice roundup of what I speak, cryptically because I dare not tempt the gods, please check out the following.  Hopefully, this will suffice for the exorcism:




** I use we in the royal we sense not to mean me but the (far far far) more prolific MMT writers who I greatly admire.



  • Letter in Ottawa Sun

    Re: ANTHONY FUREY, Stimulus packages become new norm, March 23rd, 2013

    There’s a good reason stimulus packages are becoming the new norm. Households are indebted so can’t spend; businesses are sitting on cash because of the bleak economic outlook, and our country has a trade deficit. When this conjunction happens, purchasing power is drained from the economy, and if the government does not make up the difference, our economy goes into a downward spiral. This is what is happening to certain countries in the Eurozone which does not have mandatory fiscal transfers from rich regions to poor regions as we have in Canada. Anthony Furey thinks it unfortunate that government takes ameliorative action, but does he really want Canada to be the next Greece?

    Larry Kazdan,
    620 E. 23 Ave.,
    Vancouver, B.C.
    (604) 874-9982


    Australian economist Bill Mitchell explains:

    At last count there were two broad macroeconomic sectors – the government and the non-government. The non-government sector can be decomposed into the private domestic sector and the external sector. The private domestic sector can be further decomposed into households who consume and firms who invest (in productive capital).

    Macroeconomics is easy – thats it! 2 broad spending sectors and then some more detail.

    What do we know about these sectors in the US?

    1. Households are not spending enough on consumption – and why should they given they have to reduce their unsustainable debt levels and are saving to generate buffers just in case they are next to join the unemployment queue.

    2. Business firms are not spending enough on investment – and why should they given they have to reduce their unsustainable debt levels and that household spending is not pushing production levels beyond existing capacity (by a long margin).

    3. The external sector is deteriorating – that is, spending is contracting because the Europeans and the Brits are killing growth in their economies.

    How many more spending sectors are left in the US?

    The most basic macroeconomic rule – spending equals income. When someone spends another gains income. When a sector increases spending, other sectors enjoy the rise in income.

    So if all these non-government sector spenders are being cautious and the private domestic sector is attempting to save overall – and – the world economy is not going to drive US exports very hard – where is the deficit spending going to come from to drive growth?

    There is only one source – government budget deficits.

    More of A veritable pot pourri of lies, deception and self-serving bluster at

  • Thomas Bergbusch

    As always, great stuff Arun.

    Just adding related links:

    Mario Seccareccia via Mosler Economics:

    Bill Mitchell:

    Lars Syll:

    Media Maters : Major Errors Undermine Key Argument For Austerity Frequently Cited By Media.

  • Nice post, Arun. I felt the same way about R-R. Their name is everywhere — this duo were even quoted by economists I found pretty decent.

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