What is Modern Monetary Theory?

[Birdjaguar]

No. This is mistaking the individual for the aggregate. In aggregate every dollar the Chinese have they got from the US at some point. In that sense it's not "new" money, it's our own money coming back to us.

It's true that the open economy changes the analysis somewhat. It adds a third term to the macro accounting identity. It's also true that a country could pursue a strategy of a balanced government budget (or even surplus) and a large trade surplus to allow its private sector to accumulate net financial claims on the foreign sector - this is, in fact, what Germany has been able to do because of the Euro. The problem with such a strategy is that it relies on other nations being perpetual debtor/deficit nations. In the long term it is probably better to rely on your own democratic government, rather than the foreign sector, as the engine of your national economy's financial wealth.

The bolded part sounds just plain silly.

Remember, we are talking about the creation of new money. The 25k that the Chinese own in your example was already borrowed into existence. For somebody to have that 25k, an entity must own more than $25,000. But yeah, I guess outside entities could borrow in u.s. dollars using their assets as leverage.

It's part of the reason why the United States has so much seigniorage on its US dollar. Countries were forced to acquire dollars in order to purchase oil in international markets. So to have US dollars in your International savings account means that somebody else, or you, is in debt for US dollars.

I could be wrong. Maybe the source of new dollars for the US economy comes from outside entities borrowing US dollars instead of their Sovereign currency

To begin this sounds way too US centric in a world economy. If I work for for a Chinese or Mongolian mining company that sells its products in Africa, it seems to me that it is pretty much non US money. They could even pay me 175,000 RMB and let me turn it into $25,000 dollars. I do not think that just because the dollar is used worldwide, that the US creates all wealth.

I think MMT needs a graphic that shows its theoretical underpinnings. They way you all use words just makes it sound like philosophical discussion. I put little stock in those. How is money created, how it moves through an economy, what it does at each point and who can influence events along the way.

Did MMT predict the 2000 recession in advance or in hindsight?

 

[Lexicus]

The bolded part sounds just plain silly.

To begin this sounds way too US centric in a world economy. If I work for for a Chinese or Mongolian mining company that sells its products in Africa, it seems to me that it is pretty much non US money. They could even pay me 175,000 RMB and let me turn it into $25,000 dollars. I do not think that just because the dollar is used worldwide, that the US creates all wealth.

Yeah, it sounds silly because you don't understand the statement. There is no claim here that "the US creates all wealth".

The Chinese have their own government that issues its own currency (duh). It doesn't issue dollars however, and the Chinese can try to counterfeit dollars I suppose but that isn't very easy, and so in aggregate every dollar the Chinese have, they got from us. Dollars, not RMB.

I think MMT needs a graphic that shows its theoretical underpinnings.

Here's one:

How is money created, how it moves through an economy, what it does at each point and who can influence events along the way.

If you've ever done an introductory course in macro, you probably saw a chart that was called the "circular flow" of money: what MMT says is not very different from that circular flow picture. What MMT does is allow us to account precisely for where all the money in the economy goes, and where it comes from.

 

[ulyssesSgrant]

The bolded part sounds just plain silly.

Yeah, it sounds silly because you don't understand the statement.

To be fair, you have to have a very high IQ to understand MMT. The concepts are extremely subtle, and without a solid grasp of post keynesian economics most of the ideas will go over a typical readers head. There's also MMT's nihilistic outlook, which is deftly woven into its characterization of money- a philosophy that draws heavily from Alfred Mitchell-Innes's literature, for instance. The fans understand this stuff; they have the intellectual capacity to truly appreciate the depths of these concepts, to realise that they're not just interesting- they say something deep about LIFE. As a consequence people who dislike MMT truly ARE idiots- of course they wouldn't appreciate, for instance, the dept of insight that a MMT presents when it claims a government cannot default on debt denominated in its own currency, which itself is a cryptic reference to Georg Friedrich Knapp epic, State Theory of Money. I'm smirking right now just imagining one of those addlepated simpletons scratching their heads in confusion as Warren Mosler's genius wit unfolds itself while reading the Seven Deadly Innocent Frauds of Economic Policy. What fools.. how I pity them.

And yes, by the way, i DO have a MMT tattoo. And no, you cannot see it. It's for the ladies' eyes only- and even then they have to demonstrate that they're within 5 IQ points of my own (preferably lower) beforehand. Nothin personnel kid

 

[El_Machinae]

You could be paid in RMB and buy USD. But those USD already exist, they're not new USD, they're just sitting in someone's savings account (increasingly: someone who will only use currency to buy more ownership instead of productivity).

There needs to be more money spent next year than this year. And yeah, some of that can come from savings. But that system only works so long, because you eventually need new money. I don't know who's going to borrow the next needed dollar into existence

Edit: not sure why the bolded is silly. Sometimes you can interchange dollars with stuff. A can of soup costs a buck.

But if you have a can of soup made in China, if you want to hold a USD in exchange for the soup, the dollar was originally created by a US bank or by the Reserve. No one else can create dollars.

 

[Lexicus]

To be fair, you have to have a very high IQ to understand MMT. The concepts are extremely subtle, and without a solid grasp of post keynesian economics most of the ideas will go over a typical readers head. There's also MMT's nihilistic outlook, which is deftly woven into its characterization of money- a philosophy that draws heavily from Alfred Mitchell-Innes's literature, for instance. The fans understand this stuff; they have the intellectual capacity to truly appreciate the depths of these concepts, to realise that they're not just interesting- they say something deep about LIFE. As a consequence people who dislike MMT truly ARE idiots- of course they wouldn't appreciate, for instance, the dept of insight that a MMT presents when it claims a government cannot default on debt denominated in its own currency, which itself is a cryptic reference to Georg Friedrich Knapp epic, State Theory of Money. I'm smirking right now just imagining one of those addlepated simpletons scratching their heads in confusion as Warren Mosler's genius wit unfolds itself while reading the Seven Deadly Innocent Frauds of Economic Policy. What fools.. how I pity them.

And yes, by the way, i DO have a MMT tattoo. And no, you cannot see it. It's for the ladies' eyes only- and even then they have to demonstrate that they're within 5 IQ points of my own (preferably lower) beforehand. Nothin personnel kid

I mean nice effort here but you know I meant "you misinterpreted the statement" not "you are incapable of understanding because your IQ is too low" right

 

[ulyssesSgrant]

I mean nice effort here but you know I meant "you misinterpreted the statement" not "you are incapable of understanding because your IQ is too low" right

Yeah, I probably shouldn't have quoted those messages, I didn't really mean to target you or anything I was just goofing around.

 

[Lexicus]

I should have phrased differently so I'll take it

 

[Birdjaguar]

Yeah, it sounds silly because you don't understand the statement. There is no claim here that "the US creates all wealth".

The Chinese have their own government that issues its own currency (duh). It doesn't issue dollars however, and the Chinese can try to counterfeit dollars I suppose but that isn't very easy, and so in aggregate every dollar the Chinese have, they got from us. Dollars, not RMB.

You have not explained why or how "every dollar the Chinese have they got from us".

To be fair, you have to have a very high IQ to understand MMT. The concepts are extremely subtle, and without a solid grasp of post keynesian economics most of the ideas will go over a typical readers head. There's also MMT's nihilistic outlook, which is deftly woven into its characterization of money- a philosophy that draws heavily from Alfred Mitchell-Innes's literature, for instance. The fans understand this stuff; they have the intellectual capacity to truly appreciate the depths of these concepts, to realise that they're not just interesting- they say something deep about LIFE. As a consequence people who dislike MMT truly ARE idiots- of course they wouldn't appreciate, for instance, the dept of insight that a MMT presents when it claims a government cannot default on debt denominated in its own currency, which itself is a cryptic reference to Georg Friedrich Knapp epic, State Theory of Money. I'm smirking right now just imagining one of those addlepated simpletons scratching their heads in confusion as Warren Mosler's genius wit unfolds itself while reading the Seven Deadly Innocent Frauds of Economic Policy. What fools.. how I pity them.

And yes, by the way, i DO have a MMT tattoo. And no, you cannot see it. It's for the ladies' eyes only- and even then they have to demonstrate that they're within 5 IQ points of my own (preferably lower) beforehand. Nothin personnel kid

Yeah, I guess I'm just too stupid to understand what ya'll smart people are talking about. You have certainly exhibited your brilliance in your post.

 

[Lexicus]

You have not explained why or how "every dollar the Chinese have they got from us".

Okay, where do you think the Chinese could get dollars from, if not from the US or from other countries who got them from the US? Do you think the Chinese government or other Chinese entity has a printing press that lets them print their own dollars?

 

[El_Machinae]

You have not explained why or how "every dollar the Chinese have they got from us".

He means the original source. Obviously, if the Saudis got a USD from the US, they can use it to buy something from the Chinese.

I think the breakdown is happening because we've assumed that you know how a new dollar comes into existence

 

[Lexicus]

Yeah, I guess I'm just too stupid to understand what ya'll smart people are talking about. You have certainly exhibited your brilliance in your post.

So you know, that is a well-known 'copypasta' originally about the show Rick & Morty and USG has actually shown a degree of brilliance in adapting the copypasta to MMT.

Here is the history of this one:
https://knowyourmeme.com/memes/to-b...e-a-very-high-iq-to-understand-rick-and-morty

 

[Birdjaguar]

Could be. That's why I think MMT needs a graphic that depicts its key underlying principles. When you guys use words, it just sounds like a CFC discussion of philosophy: intellectual masturbation.

 

[Birdjaguar]

So you know, that is a well-known 'copypasta' originally about the show Rick & Morty and USG has actually shown a degree of brilliance in adapting the copypasta to MMT.

Here is the history of this one:
https://knowyourmeme.com/memes/to-b...e-a-very-high-iq-to-understand-rick-and-morty

Doesn't impress me, but whatever. Half of being clever is enjoying your own cleverness.

 

[El_Machinae]

The origin of money is not a function of MMT. MMT just creates an idea of how to use the power that already exists.

Sorry, about to catch the bus. Bird, you could summarize where you think new dollars come from, that might help. I had a really long discussion with a friend about economics, increasingly heated with a boggled audience, before we realized that he thought a Chinese person making a can of soup was also creating the US dollar used to purchase it

 

[Lexicus]

That's why I think MMT needs a graphic that depicts its key underlying principles

There are many such graphics floating around the internet.

When you guys use words, it just sounds like a CFC discussion of philosophy: intellectual masturbation.

Well, thanks, that's a really nice thing to say...

 

[Farm Boy]

How philosophical do you want to be? If Chinese people want US dollars that they can use to purchase things or back the value of their currency and they want to have the capacity to produce cans of soup, and, to some extent, if the Chinese extract or produce things that the US government wants to have purchased and imported to the US, it will fart into existence new US dollars in such a way(theoretically) that the can of soup can be bought and the production will be expanded so that it is if more dollars are desired and more capacity is desired. Isn't he just next-leveling your MMT understanding?

Like seriously, isn't that like the central point of it? The purported useful part of the framing that something can actually be done with? A la that whole thing with Paul Ryan and Alan Greenspan.

 

[Birdjaguar]

Thanks El Mach.

 

[Birdjaguar]

There are many such graphics floating around the internet.

Well, thanks, that's a really nice thing to say...

It is a reflection on the fact that you don't seem to get your fundamental principles across to others. If you cannot explain what you are talking about to non believers, your pool of adherents won't grow. I'm open and willing to learn, but so far you haven't presented anything convincing or even particularly enlightening. Mostly you seem to be saying is "we are right and your are wrong."

What are the three? basic principles/assumptions of MMT?

 

[Lexicus]

It is a reflection on the fact that you don't seem to get your fundamental principles across to others. If you cannot explain what you are talking about to non believers, your pool of adherents won't grow. I'm open and willing to learn, but so far you haven't presented anything convincing or even particularly enlightening. Mostly you seem to be saying is "we are right and your are wrong."

What are the three? basic principles/assumptions of MMT?

From my perspective what you're doing looks a lot like sealioning

 

[Birdjaguar]

i do not know what sealioning is or means.