Modern Monetary Theory discussion

[Lexicus]

As I said, this peak has being going on for such a long time that it can't be called peak.

"Wow, spanning two decades"

 

[Estebonrober]

Fiat version is the only flavor MMT comes in.

this is true currently

 

[Estebonrober]

There's a limit to what you can do with printing more money/ borrowing.

What the right has been doing is racking up large deficits without drastic cuts to spending.

In effect they're borrowing for tax cuts.

They don't tend to cut it choke programs that their voters care about such as pensions.
Welfare is open though as most welfare types don't vote right wing and there's not that many anyway.

Since 25% to 33% don't tend to vote you only need your core 30% that are motivated to vote plus maybe another 5%bto win elections.

So when the left eventually win power they inherit a big deficit and they get painted as tax and spend. The right is just spend and borrow.
. But if the left wants to get anything done they have to put up taxes which tends to get them binned out of office.

well ok. I mean all of this and what I said can be true at the same time. So sure.

The reality is the right wing in the US are complete liars about their economic policy but I get it. Fork the poor. I got mine.

 

[luiz]

Hand waving away the cause and scope of the shock caused by having untenable private debt and then saying the rich countries recovered better doesn’t answer the question.

Running big deficits isn’t the point, the point is that if everyone runs surpluses then you are requiring the private debt load to grow as a proportion until it hits 100% and then the follow up is continue to issue loans to cover the loans, which necessitates people grinding productivity gains until their bodies wear out, or a game of asset price increases to cover new loans. Both end in financial crisis, before starting back up, and absent government intervention (huge influx of nonbank money) we have good example that the resulting depressions don’t really fix themselves.

There’s no “solution” as money cannot be “solved” but we can certainly mind the balance of how leveraged private sector finances are via public taxation and spending.

But nobody actually advocates running big surpluses forever.
And it's not that "rich countries recovered better". It's that some rich countries running surpluses recovered far better than other comparably rich countries running large deficits. But I'm not saying the surplus caused the fast recovery, I'm saying that the MMT belief that the government must always run at least a small deficit otherwise Doom is horse dung. There is absolutely no link between government deficit and full employment. It does not exist in the real world.
The real world disproves MMT. Drop the oversimplified bean counting and revert to your classical monetary education.

 

[Naskra]

this is true currently

It will always be true. MMT cannot apply to hard money.

 

[Zardnaar]

well ok. I mean all of this and what I said can be true at the same time. So sure.

The reality is the right wing in the US are complete liars about their economic policy but I get it. Fork the poor. I got mine.

Pretty much.

Here the right isn't as bad but they blew the debt out from 10 billion through to 90 billion.

I would give them a pass for the earthquakes but that accounts for around half the increase in debt.

Reagan put up taxes. I think the early proponents of trickle down probably genuinely believed it would work.

The arcitects. sat down in Washington in the mid 70s, Reagan was the provider/tool. Note in the 70s they had stagflation.

Somewhere between Reagan and Bush2 it mutated into tax cuts at all costs. When they claim tax cuts will pay for themselves or poor jet fuel on the economy that's utter tripe.

 

[cardgame]

It will always be true. MMT cannot apply to hard money.

Hard money doesn't exist, though, so I'm curious why you bring it up.

 

[stinkubus]

"Exogenous shock" is Fedspeak for "not our fault". "Margin call" in the context is meaningless.

Exogeneous is an academic term. It means that the shock came from a factor not determined by the model under consideration.

 

[Estebonrober]

It will always be true. MMT cannot apply to hard money.

I don't get the feeling you've actually read anything on MMT.

 

[Hygro]

"Exogenous shock" is Fedspeak for "not our fault". "Margin call" in the context is meaningless.

Loans go bad when the Fed raises rates.

But nobody actually advocates running big surpluses forever.
And it's not that "rich countries recovered better". It's that some rich countries running surpluses recovered far better than other comparably rich countries running large deficits. But I'm not saying the surplus caused the fast recovery, I'm saying that the MMT belief that the government must always run at least a small deficit otherwise Doom is horse dung. There is absolutely no link between government deficit and full employment. It does not exist in the real world.
The real world disproves MMT. Drop the oversimplified bean counting and revert to your classical monetary education.

To have the best moneyed economy you want to create more money when there's more, for money.

 

[luiz]

To have the best moneyed economy you want to create more money when there's more, for money.

And yet these countries have full employment, without having to be big net exporters, while other countries of similar development level, running huge government deficits, have big unemployment rates.

This is the real world. Shall we throw the real world in the trash to because some high-school level accounting identities and third-rate economists say so? Or should we perhaps throw MMT in the trash and not trust serious matters to such third-rate economists?

I mean why bother discussing the theoretical aspects of MMT (the silly accounting identities) when it so clearly fails at explaining what we can easily measure in the real world?

 

[Estebonrober]

And yet these countries have full employment, without having to be big net exporters, while other countries of similar development level, running huge government deficits, have big unemployment rates.

This is the real world. Shall we throw the real world in the trash to because some high-school level accounting identities and third-rate economists say so? Or should we perhaps throw MMT in the trash and not trust serious matters to such third-rate economists?

I mean why bother discussing the theoretical aspects of MMT (the silly accounting identities) when it so clearly fails at explaining what we can easily measure in the real world?

http://www.levyinstitute.org/pubs/wp_778.pdf

https://scholar.harvard.edu/files/mankiw/files/skeptics_guide_to_modern_monetary_theory.pdf

https://www.hoover.org/sites/default/files/research/docs/19106_edwards.pdf

https://www.mercatus.org/system/fil...monetary_theory_as_a_guide_to_policy_-_v1.pdf

Fwiw the idea that this is not taken seriously by real economists is just garbage. Here is two for two against papers by serious economists and policy people. Also for what its worth there is no good description of economics as far as I can tell it is a "soft" science and always will be.

 

[stinkubus]

LOL the second link is by the author of the Mirco text he told me to consult but obviously hadn't read himself.

 

[Estebonrober]

LOL the second link is by the author of the Mirco text he told me to consult but obviously hadn't read himself.

I haven't read all of them either but macroeconomic papers I take in doses when debates like this come up since medicine is my main. I should point out that I'm not speaking from authority or anything here I just find the idea at least worthy of discussion and I think using SA economies as models of failure for the idea kind of misnomer considering their economic position globally.

My understanding is runaway inflation is the main concern but if that happens then you've messed up the application of MMT.

 

[luiz]

http://www.levyinstitute.org/pubs/wp_778.pdf

https://scholar.harvard.edu/files/mankiw/files/skeptics_guide_to_modern_monetary_theory.pdf

https://www.hoover.org/sites/default/files/research/docs/19106_edwards.pdf

https://www.mercatus.org/system/fil...monetary_theory_as_a_guide_to_policy_-_v1.pdf

Fwiw the idea that this is not taken seriously by real economists is just garbage. Here is two for two against papers by serious economists and policy people. Also for what its worth there is no good description of economics as far as I can tell it is a "soft" science and always will be.

Eh, that's actually 3 against and 1 for. The only really first rate economists there are on the against camp. You didn't read the papers you quoted yourself, which tells me something. And indeed they demonstrate quite well why MMT is horse dung.

 

[amadeus]

Yeah, because it's not the same as printing money. The money-printing, or rather, digital money-creation via keystroke, is a process that is not directly related to bond issuance. We could stop issuing bonds and announce we weren't making service payments on outstanding US debt, and it would have no effect on the federal government's ability to finance its own operations via keystroke. I'm not saying it would be a good idea, but the government is in no sense dependent on money from people who purchase bonds to finance itself.

Is it not dependent on the confidence of the people have in the government to reasonably manage the money supply? Otherwise, there is always the use of force like applied in Venezuela, but I know no one here would advocate haphazard government seizure of property in order to meet its obligations.

What a lot of the left doesn't realize is that while much of the defense budget goes to armaments, all the military spending is someone's income, mostly people who live (thus, mostly, consume) and work in the US, so there are large tangible social benefits we realize from much military spending. The critique the left needs to be making is that the state should be investing heavily in allowing people to collectively manage their communities through the climate crisis rather than in armaments and a vast hierarchical, bureaucratic thing whose purpose is to kill people.

I don’t see them as tangible social benefits as they are a drain on the economy if the goal of an economy is to provide an increased standard of living. Every piece of steel used in a tank or gallon of jet fuel for a bomber could be used better elsewhere. We should think of defense spending as at best a necessary evil, a 5% of our incomes that go ostensibly to protect the other 95%.

Everyone in the thread should also realize that what luiz means by "reach full employment" is actually just "reach the peak of the business cycle" in many cases. It's a pattern of neoliberalism to point to the upswing side of the business cycle as an example of capitalism working really well...

In the aggregate, capitalism has worked exceptionally well compared to every attempt at a state-run economy.

It was conjured out of the magical void of valueless fiat, like all money today. As I said above, money no longer has any solid, intrinsic, real value anymore. The world economy might as well be run with Monopoly money. It's a hoodwink and deception of massive proportions - and should be ended and owned up to before it was it is no longer viable.

There’s no hoodwink if we all agree to play by the same rules. I know the bank doesn’t have 100% of everyone’s deposits on hand. I know most of the money in the world is stored in bankbook ledgers.

The hoodwink comes in when the state starts saying we’re on the gold standard, fixes the gold price again and people think their money has value because the government says a piece of shiny metal in a Kentucky bank vault is $35. If they can say that, they can just as easily say it’s $70 or $100 or $20,000.

Gold is the same as money.

It only has value because we percieve it to have value.

Whatever we use for currency will have that problem. You need to have faith it's worth something.

Here in Japan hundreds of years ago, rice was used as a medium of exchange and this developed into a system of rice warehousing. Rather than having to carry around a sack of rice, merchants would issue warehouse receipts that could then be exchanged back at the warehouse for the amount of rice written on the receipt.

Everyone see where this is going? The merchants discovered that the claimants didn’t all come at the same time, so the merchants could issue more receipts than rice they had on hand. They created their own fractional reserve system based on rice.

 

[Estebonrober]

Eh, that's actually 3 against and 1 for. The only really first rate economists there are on the against camp. You didn't read the papers you quoted yourself, which tells me something. And indeed they demonstrate quite well why MMT is horse dung.

Any idea takes time to understand and work out. Like I've said in other posts the US has sort of been running this for 40 years so its not horse dung. Are you trained in economics in anyway? Cause honestly you just sound like an arrogant blowhard in this thread.

 

[luiz]

Any idea takes time to understand and work out. Like I've said in other posts the US has sort of been running this for 40 years so its not horse dung. Are you trained in economics in anyway? Cause honestly you just sound like an arrogant blowhard in this thread.

Yes, I have a masters in economics.
And why trust me when you can trust Mankiw or Sumner?

BTW, running a deficit does not mean following MMT. If it did, the MMT cultists would not be so critical of US economic policy, would they?

 

[Zardnaar]

Boiled down MMT is print a lot if money that will retain it's value just because?

 

[Naskra]

Like I've said in other posts the US has sort of been running this for 40 years

Truth through repetition? The MMT government funding scheme is unlawful; it has not been going on for forty years. The government must balance its books. Laws (quite a few) need to be changed before MMT can be put in practice. Only then can you enter magical final state of fiat money - called scrip.