Modern Monetary Theory discussion

[Lexicus]

I believe Japan has employed for some time now an expansionist monetary policy and has failed to meet its growth targets almost every time.

One of the major points of MMT is that monetary policy alone is insufficient to maintain economic policy goals like full employment.

MMT sounds nice in theory until you realize policy and spending decisions are made by human actors.

lmao what? MMT is literally all about how policy and spending decisions are made by human actors. It's neoclassical economics which handwaves all of this with the Market Fairies magically dropping money into the most efficient investments and the myth of an independent central bank.

 

[luiz]

Neither France nor Italy have a sovereign currency. Also, MMT says very little about the % of spending should be done by the government.

Which countries running surpluses have full employment?

Many countries running surpluses have full or near full employment. Germany, Netherlands, Switzerland, Denmark, Luxembourg, Iceland, Singapore, South Korea... Just from the top of my head. And many countries running massive deficits, and with massive government spending as a percentage of GDP, have mass unemployment. Including many that have their own currency (Brazil and Argentina, to stay in the neighborhood). Basically, MMT is a load of garbage with zero explicative power of the real world. It's what happens when we let accountants start theorizing.

 

[Moriarte]

Well, Switzerland, Togo and Singapore are all fine. But do they run their colors on the world arena? Nope, they’re just temporary puppets to those oligarchs who deem it most suitable to use them at This point in time. US routes international political economy. It all stems from the US (also China during latest decades). Does Singapore wield a fleet of aircraft carriers, combat drones, orbital intelligence network, which enables it to dictate it’s iron will across the world? No. US does it. And thus comparing surpluses/deficits/employment/etc out of this context is .. incomplete.

 

[Patine]

Neither France nor Italy have a sovereign currency. Also, MMT says very little about the % of spending should be done by the government.

Which countries running surpluses have full employment?

It could be (and has been) argued that the U.S., too, lacks a sovereign currency, as it doesn't have a government-owned and -regulated central bank, but a Federal Reserve that is not completely, or sufficiently, under U.S. government authority - and whose board of directors and controlling interests are actually CLASSIFIED!

 

[amadeus]

lmao what? MMT is literally all about how policy and spending decisions are made by human actors. It's neoclassical economics which handwaves all of this with the Market Fairies magically dropping money into the most efficient investments and the myth of an independent central bank.

I don’t have faith that the proponents of MMT would be able to stop runaway inflation or effectively control state spending when the cost to politicians is printing more green pieces of paper.

 

[Naskra]

whose board of directors and controlling interests are actually CLASSIFIED!

The board members are known. Unknown is the distribution of shares. And the whereabouts of the third mandate.

 

[Patine]

The board members are known. Unknown is the distribution of shares. And the whereabouts of the third mandate.

It's still not a fully government-owned and regulated central bank, and thus the status of the American dollar as a "sovereign currency," can at least have an argument against it, even if it's not a settled and uncontested fact. That's my point.

 

[Naskra]

not a fully government-owned and regulated central bank,

The fed is not owned by the government, true. It is, however, thoroughly regulated (in theory). The standing of the dollar is a separate issue, and rather complicated.

 

[Estebonrober]

Its clear MMT sort of works anyways Republicans have been running it for the last 40 years every time they get their hands on the purse strings. They just give the money to their friends.

 

[amadeus]

Its clear MMT sort of works anyways Republicans have been running it for the last 40 years every time they get their hands on the purse strings. They just give the money to their friends.

Isn't the fundamental premise of MMT that the government can by fiat print money to pay for public investments to reach full employment and then raise taxes to take that money out of circulation to prevent runaway inflation? That doesn't sound like anything the Republicans have done since Reagan, unless you think Paul Volcker raising the interest rate to 20% was somehow a scheme to... give money away to rich Republicans by charging banks more to borrow money?

 

[Hygro]

Many countries running surpluses have full or near full employment. Germany, Netherlands, Switzerland, Denmark, Luxembourg, Iceland, Singapore, South Korea... Just from the top of my head. And many countries running massive deficits, and with massive government spending as a percentage of GDP, have mass unemployment. Including many that have their own currency (Brazil and Argentina, to stay in the neighborhood). Basically, MMT is a load of garbage with zero explicative power of the real world. It's what happens when we let accountants start theorizing.

All of those countries receive addition money via exports. So in the end, whether you’re the US bankrolling European and Asian labor markets with our deficits or Korean/German laborers selling their labor for money ultimately funded by US deficits, the world economy is paid for with money and new money is created by spending over taxation.

 

[Lexicus]

Many countries running surpluses have full or near full employment. Germany, Netherlands, Switzerland, Denmark, Luxembourg, Iceland, Singapore, South Korea... Just from the top of my head. And many countries running massive deficits, and with massive government spending as a percentage of GDP, have mass unemployment. Including many that have their own currency (Brazil and Argentina, to stay in the neighborhood). Basically, MMT is a load of garbage with zero explicative power of the real world. It's what happens when we let accountants start theorizing.

MMT doesn't claim that the only thing influencing unemployment is the government's budget situation. This is a strawman. The sad thing is, you don't even know it is a strawman because you haven't bothered to actually understand the claims MMT makes.

I don’t have faith that the proponents of MMT would be able to stop runaway inflation or effectively control state spending when the cost to politicians is printing more green pieces of paper.

Isn't the fundamental premise of MMT that the government can by fiat print money to pay for public investments to reach full employment and then raise taxes to take that money out of circulation to prevent runaway inflation? That doesn't sound like anything the Republicans have done since Reagan, unless you think Paul Volcker raising the interest rate to 20% was somehow a scheme to... give money away to rich Republicans by charging banks more to borrow money?

MMT's point is that the cost of government spending is already "printing more green pieces of paper," or, more accurately, creating entries in digital balance sheets using computers.

The Republicans have paid for massive wars and tax cuts by printing money, because everything the federal government does is "paid for" by printing money. This is not a proposal that MMT suggests, this is what is actually already happening in the real world.

We have massive deficits and an increasing national debt and yet inflation has barely nudged above 2%!

new money is created by spending over taxation.

Clarification: on any given day most money is created by bank loans, but these cancel out in the short-to-medium term so the long-term source of new money is net government spending.

 

[Hygro]

Yeah most is by banks true.

 

[luiz]

All of those countries receive addition money via exports. So in the end, whether you’re the US bankrolling European and Asian labor markets with our deficits or Korean/German laborers selling their labor for money ultimately funded by US deficits, the world economy is paid for with money and new money is created by spending over taxation.

That's getting it exactly backwards. What I see is many countries doing the opposite of what MMT prescribes and reaching full employment, while there are others that do exactly what MMT prescribes that keep struggling with mass unemployment. Basically, owning your own currency, having huge government spending as a percentage of GDP and running massive deficits year after year do not in any way improve employment. Who would have guessed! Well, anyone who ever bothered to look at economic data outside the US, for example.

And BTW, among the countries I listed that run government surpluses and have full employment there are net importers. So MMT fails?

 

[El_Machinae]

Oh, then a country just needs to be a net exporter. Everyone can do that!

Regardless: it creates a series of political questions.

Should a government protect contracts?
Should a country have a currency?
AND, should a country enforce contracts not denominated in its currency?

If so, you then run into a series of problems. In order to get growth, you need a source of new currency. At that point, some entity needs the ability to create new currency. A country either retains sovereignty over its currency, or it doesn't.

Once a country is protecting contracts and is providing a currency, it's providing a service. Everyone and their goat believes that it's fair to charge for services. And, most people's inclination is that the entity that is charging for a service does so for the benefit of its owners. Some people think that prices should be set for the 'benefit of all'.

 

[luiz]

Oh, then a country just needs to be a net exporter. Everyone can do that!

Regardless: it creates a series of political questions.

Should a government protect contracts?
Should a country have a currency?
AND, should a country enforce contracts not denominated in its currency?

If so, you then run into a series of problems. In order to get growth, you need a source of new currency. At that point, some entity needs the ability to create new currency. A country either retains sovereignty over its currency, or it doesn't.

Once a country is protecting contracts and is providing a currency, it's providing a service. Everyone and their goat believes that it's fair to charge for services. And, most people's inclination is that the entity that is charging for a service does so for the benefit of its owners. Some people think that prices should be set for the 'benefit of all'.

Except of course that among the countries I mentioned that run surpluses and have full employment there are also some who are net importers.

What now, MMT supporters?

Could it be that the whole edifice of economic thought is not wrong and rather its your little sect that didn't get it?

 

[amadeus]

MMT's point is that the cost of government spending is already "printing more green pieces of paper," or, more accurately, creating entries in digital balance sheets using computers.

The Republicans have paid for massive wars and tax cuts by printing money, because everything the federal government does is "paid for" by printing money. This is not a proposal that MMT suggests, this is what is actually already happening in the real world.

We have massive deficits and an increasing national debt and yet inflation has barely nudged above 2%!

I don't see how issuing bonds is the same as printing the money.

Budget deficits as a percentage of GDP are higher than they should be, but they are not at present unmanageable or irreversible.

Defense spending is also historically lower than in the post-WWII period; it hanged around 10% between the 1950s and 1960s and then closer to 8% afterwards.

 

[Hygro]

That's getting it exactly backwards. What I see is many countries doing the opposite of what MMT prescribes and reaching full employment, while there are others that do exactly what MMT prescribes that keep struggling with mass unemployment. Basically, owning your own currency, having huge government spending as a percentage of GDP and running massive deficits year after year do not in any way improve employment. Who would have guessed! Well, anyone who ever bothered to look at economic data outside the US, for example.

Again they’re getting money one way or another. Germany and the Netherlands might not have a sovereign currency, but it’s a lot more sovereign to them than the euro is to Bulgaria and Greece, and they’re getting their money via exports. People work for money.

Dunno what’s going on in Brazil but I can tell you what’s going on in Nicaragua: they had good employment and high growth running 6% deficits and exporting a huge portion of their economy in the form of tourism. The government cracked down on protestors over cutting pensions and the tourism dropped by over 90%. Huge economic contractions two years running. Meanwhile deficits “grew” to 7%. To leve exports out of the equation is ignore how macro money and employment works.

 

[cardgame]

Bonds are just pieces of paper that can be exchanged for money

Money is just pieces of paper that can be exchanged for goods and services

Bonds are just money with extra steps @amadeus - assuming people buy them of course.

 

[Hygro]

Except of course that among the countries I mentioned that run surpluses and have full employment there are also some who are net importers.

Who is running a surplus while being a net importer and has full employment? If they aren’t crushed by the next margin call I will happily rethink everything.