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.

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.

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.

46/ Or in kubernetes analogy (because of Cybercyn and the book The Unaccountability Machine): some stuff in our system (the Norwegian housing market) are auto-scaling in some cloud, some are manually scaled (by buying and adding new servers in our on prem data center) and once the peak in consumption is over, some things might scale down quickly, but some are stuck now with a lot of expensive hardware taking up space in our server racks.

Mortgages are in AWS and rents are on-prem in my very confusing analogy.

47/ I don’t know what the answer is, my earlier idea of constraining the supply of NOK… it looks like they did that, and it had apparently about as much effect as the interest rate (not much if any).

Maybe without these two things it would’ve spiraled out of control… but I don’t think so, because this wasn’t caused by our economy.

So maybe the best thing would’ve been to just accept it? Yeah, the NOK is weak, because the world is rough, increase salaries some and just sit tight? Maybe even stimulate internal growth to compensate?

52/ Ok, I think I get it. MMT says that a deficit isn’t a sign of government overspending, inflation is. (And here they are clearly talking about the overheated economy inflation) So as long as the spending doesn’t cause inflation, it doesn’t matter if you run with a deficit even over a longer period (she mentioned decades).

So basically she is sort of saying that deficits aren’t real because taxes aren’t real.

This is more like the water in a radiator system (my analogy). You can add in water or remove water, but the system isn’t the water. And adding water (money) only becomes a problem when the pressure in the system gets too high and water starts spilling out somewhere.

Basically, money isn’t “real”. It’s… just water in a radiator system in a building. The building and the radiators and the people living there are the real things.

62/ I feel so smart when I read news articles that agree with me 🤓 🤣
“And an interest rate increase will not help, he believes. - The higher the interest rate goes, the more landlords have to raise the rent, and then the interest rate increase is inflationary. It does not have the same effect as in the housing market, where prices fall if interest rates rise. The interest rate is not a good weapon to deal with this kind of inflation. It makes matters worse, he says.”
https://e24.no/norsk-oekonomi/i/93zl4d/uenige-om-leieprisene-det-gjoer-vondt-verre

https://social.vivaldi.net/@Patricia/112720508129615142

65/ After spending ages on inflation, I’m apparently breezing through chapter 3 “The National Debt (That Isn’t)”

Basically, in the same way tax isn’t real (in that it is just a mechanism to remove money from the economy and/or create demand for the currency. MMT says that the deficit isn’t real. Very clear that it is the US they are talking about. To generalize to more countries she picked the UK and I would’ve preferred another more “normal” country.

67/ To be fair, I think that issue is pervasive in the whole field. They are not able to separate ideology from models of the economy. And then they infuse in morality and destiny and Right and Wrong in these models until it’s more mythology than science.

And I don’t mind ideology. I have a great helping myself. But when you’re already in a non rigorous field, mixing opinions into “models” makes the whole thing even less serious.

A complex system is what it is. You find out the shape of it empirically. You can form hypotheses, design experiments and test. You don’t sit in a corner and Devine It. You might have a famous “shower thought” but then you test.

And seriously, these people (economists) don’t test ANYTHING.

68/ I really thought I’d be more convinced by leftist economists. But they are methodically all very similar. And it is the methodology I have issue with in this whole… project(?).

This field has imo structural issues and they aren’t fixed by the practitioner being less of an ass.

The problem is they believe in these simplistic models and that is standing in the way of developing the kind of tooling, discipline and humility needed when working with complex systems imo.

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.

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.