Modern Monetary Theory discussion

[El_Machinae]

Alternatively, we should let conduct a huge portion of our transactions through Bezos's software, and let him have access to the metadata nearly immediately. That way he can conduct trades in the stock market that reflect data accumulated earlier than shareholders can get the data.

The winning move is to just have Bezos owe you money.

 

[Patine]

All these economic arguments are tiresome!


Let's just switch to 100% electronic currency with all transactions monitored by the government.

Then economists can use the meta-data to construct 100% accurate economic models.

And sacrifice all fiscal freedom and privacy and pay transaction fees on private, interpersonal currency exchanges? I must digress sharply and sternly. Any other Orwellian agendas you'd like to propose?

 

[Patine]

Alternatively, we should let conduct a huge portion of our transactions through Bezos's software, and let him have access to the metadata nearly immediately. That way he can conduct trades in the stock market that reflect data accumulated earlier than shareholders can get the data.

The winning move is to just have Bezos owe you money.

You're assuming I, or anyone with a brain in their skull, trust Bezos that far, or really should.

 

[Estebonrober]

I thought @Kaitzilla and el were being sarcastic. Was that supposed to be serious?

 

[Patine]

I thought @Kaitzilla and el were being sarcastic. Was that supposed to be serious?

I hope they're being sarcastic. There were no emoticons. But I hope...

 

[El_Machinae]

I thought @Kaitzilla and el were being sarcastic. Was that supposed to be serious?

No, obvious sarcasm was obvious. Kat was being ridiculous, I was being a Cassandra

 

[amadeus]

@Patine, you quoted my post but under a different user.

So, what happened if there was a drought, or a bad harvest, or insect pestilence in the fields, and the stored rice has needed IMMEDIATELY?

There was trouble.

 

[El_Machinae]

It would present as stagflation. Also, the story of Joseph reads differently when you realize scrip was given for food.

56 So when the famine had spread over all the land, Joseph opened all the storehouses, and sold to the Egyptians, for the famine was severe in the land of Egypt.

 

[El_Machinae]

Forgive me but I'm still lost as to how a trade surplus affects decisions made by central banks re: money supply. Does anyone have a good link that explains the relationship between the two?

It's a good question. In the post-GFC era in Canada, it looks like both household debts (vs. GDP) and Federal debt (vs GDP) stabilized under Harper. AND Canada switched into an account deficit at the same time. The Central Bank holdings ballooned, but then quickly returned to normal. The value of the CAD to the USD eroded quite a bit. Provincial debts climbed pretty steadily, though.

 

[stinkubus]

If you assume all else stays constant expansionary policies weaken domestic currencies relative to foreign ones and encourage exports. Foreigners can buy more dollars using the same amount of their own currency. If central banks attempt to tighten credit the opposite is true. The US's status as a debtor nation ensures it will run trade deficits regardless of the activities of the central bank - so long as they don't go far enough to dissuade purchases of government debt.

The primary purpose of the Federal Reserve is to stabilize the dollar in order to favor creditors (banks and holders of large quantities of treasuries) over debtors (the populace). The situation is perpetuated by the fact that the US dollar is the world's reserve currency. Almost all of the major oil exporters will only accept US dollars as payment. This guarantees a certain level of demand on the part of foreigners for US dollars. Those dollars are obtained either by selling us imports or purchasing dollar denominated debt (i.e. treasuries).

Anyone who does not play ball is likely to either be invaded or have security guarantees revoked.

 

[cardgame]

If you assume all else stays constant expansionary policies weaken domestic currencies relative to foreign ones and encourage exports. Foreigners can buy more dollars using the same amount of their own currency. If central banks attempt to tighten credit the opposite is true. The US's status as a debtor nation ensures it will run trade deficits regardless of the activities of the central bank - so long as they don't go far enough to dissuade purchases of government debt.

The primary purpose of the Federal Reserve is to stabilize the dollar in order to favor creditors (banks and holders of large quantities of treasuries) over debtors (the populace). The situation is perpetuated by the fact that the US dollar is the world's reserve currency. Almost all of the major oil exporters will only accept US dollars as payment. This guarantees a certain level of demand on the part of foreigners for US dollars. Those dollars are obtained either by selling us imports or purchasing dollar denominated debt (i.e. treasuries).

Anyone who does not play ball is likely to either be invaded or have security guarantees revoked.

In summary, the US can do whatever the hell it wants to, MMT or no MMT, including printing money. Right?

 

[Patine]

@El_Machinae @Estebonrober @stinkubus @cardgame @Naskra @Farm Boy @amadeus @Lexicus @hobbsyoyo Sounds to me like the exposition for a global economic crash in the foreseeable future in the making that will absolutely dwarf the Great Depression - more akin to a Post-Modern "Fall of the Roman Empire" event, within the lifetime of many, if not all, of us here. And, of course, as is typical, the "short-sighted, maximal-profit-now-and-to-Hell-with-the-future," ultra-rich crowd benefiting at the moment will do NOTHING about this impending apocalypse, and use their vast resources to prevent anyone else from stopping or mitigating it by at all derailing the gravytrain now.

 

[amadeus]

I consider that fairly unlikely.

 

[cardgame]

People have been positing the imminent fall of the US alike to Rome for probably a century now. At least half of one. Probably won't happen for another century or so. Well, on the original time scale. Climate change might speed that up, but I still think 50 years from now the earliest you could call it.

 

[Patine]

People have been positing the imminent fall of the US alike to Rome for probably a century now. At least half of one. Probably won't happen for another century or so. Well, on the original time scale. Climate change might speed that up, but I still think 50 years from now the earliest you could call it.

I didn't say the U.S. I said the global economy. And it wouldn't solely be the doing of wealthy Americans. Wealthy Asians (whether Chinese, Indians, or citizens of the "Five Dragons,"), despotic monarchs who dominate OPEC, reckless Russians, the crumbling and growingly clumsy EU, and banking barons of many nationalities would have their hand in the pie. Please, read my post more carefully before assuming it's yet another cliched prediction of the fall of the U.S. in a void, blaming the U.S. for everything in a void, or any of the many other unrealistic and egotistical ideals, negative or positive, many Americans view the U.S. as being in, in a void. That's not what I said at all.

 

[cardgame]

mmhmm, that's still what it sounds like though.

 

[amadeus]

@Patine, what makes you think the global economy is close to crashing? A slowdown, I can reasonably imagine within the next few years but hardly a worldwide breakdown of the economic order.

Edit: also, what are your policy suggestions to avert this coming crisis?

 

[Moriarte]

@Patine, what makes you think the global economy is close to crashing? A slowdown, I can reasonably imagine within the next few years but hardly a worldwide breakdown of the economic order.

Edit: also, what are your policy suggestions to avert this coming crisis?

If we were to talk about the world of controlled economies, in this world the crysis could be avoided. In the rigid world of wild, loosely controlled capitalism, where money (and other resources) flow freely where They want, in an unplanned manner, crysis can dawn on us anytime the “favourable” circrumstances present themselves. When enough negatives compound, we get a global event. However, it is in the nature of this flavour of capitalism to break down periodically. Warren Buffet became a richest investor alive, by using this fact to stock up on stuff, when blood is on the streets and most people run for cover.

There is a direct answer to that problem, but you won’t like it.

 

[amadeus]

If we were to talk about the world of controlled economies, in this world the crysis could be avoided. In the rigid world of wild, loosely controlled capitalism, where money (and other resources) flow freely where They want, in an unplanned manner, crysis can dawn on us anytime the “favourable” circrumstances present themselves. When enough negatives compound, we get a global event. However, it is in the nature of this flavour of capitalism to break down periodically. Warren Buffet became a richest investor alive, by using this fact to stock up on stuff, when blood is on the streets and most people run for cover.

There is a direct answer to that problem, but you won’t like it.

None of this describes the how of this supposed coming collapse. In my lifetime the only economies to collapse were—surprise!—not those of capitalist countries that had protection of private property.

Soviet Union? Big socialist behemoth.

Somalia? Siad Barre was a devotee of “scientific socialism,” and one of the continents poorest countries stayed that way.

Cuba? Totally dependent on Soviet welfare to prop up its inefficient state-planned economy.

Zimbabwe? Their economy tanked once “war veterans” from the ZANU-PF went and took all the productive businesses.

Venezuela? Chavez and Maduro.

Those cases are all far worse than anything that’s happened in the capitalist world.

 

[El_Machinae]

It's hard to figure out how much the United States was saved from collapse through quantitative easing. It was one of the greatest destructions of private property in world history, the printing of five trillion dollars. Everyone that was holding debt paper and was salivating at forced bankruptcies found themselves just being handed stacks of cash instead. But who knows what would have happened if all those contracts had been forced to resolve themselves?

The coming economic collapse should be held as a theoretical possibility, obviously. Or else people will do nothing to guard against it. It's insignificantly different from counting the numbers of rounds chambered in your six-shooter before playing Russian roulette. Or collecting what you know about the landscape before you travel at speed through fog. If anything, I think the risk is ecological. What's required there is sufficient investment in Alternatives before the loss of some fundamental. There are two lines on this graph, the rate of investment and the drawdown rate of the fundamental. Odds are, it's a Black Swan, unless you have enough people thinking about it