My point was that in MMT thinking the zero sum equation is the driving force behind everything. My question was where in the formula does most economic trouble arise: government, domestic or foreign?
What is Modern Monetary Theory?
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Offhand, I would say that government and domestic are the two most common threats. The government might fail to spend sufficiently, and then cause unnecessary recession. Domestic can accidentally borrow too much non productively, and shuttle wealth upwards. Governments can easily overspend to cause too much inflation. Domestic can easily overspend to cause too much inflation.
I do perceive a foreign threat as possible, especially if you're dealing with a mercantilist power. In the end, a foreign power can act a lot like the 0.1% does, and just use dollars to increase ownership of your Society.
One area that proponents need to be careful is when they are discussing the ability of a government to default. They have to be aware of whether or not their audience is viewing it colloquially or literally. If money is Lent to the government with certain inflation expectations, then unexpected inflation is just as much of a default as refusing to pay the full Bond would be if there was no inflation.
I do perceive a foreign threat as possible, especially if you're dealing with a mercantilist power. In the end, a foreign power can act a lot like the 0.1% does, and just use dollars to increase ownership of your Society.
One area that proponents need to be careful is when they are discussing the ability of a government to default. They have to be aware of whether or not their audience is viewing it colloquially or literally. If money is Lent to the government with certain inflation expectations, then unexpected inflation is just as much of a default as refusing to pay the full Bond would be if there was no inflation.
civvver
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Is this an explanation of MMT? I can follow this. Basically government needs to keep spending to prevent economic stagnation, and private enterprises sitting on heaps of cash is not good. Which is happening now. Stock market goes way up but real wages don't really as companies hoard cash.
It's not an explanation of mmt. But it's part of its bedrock that everyone agrees on except maybe the austrians who cannot parse the idea that sometimes a dollar represents wealth then sometimes it represents a medium of exchange
I have a meeting to attend, but his has been fruitful. I am getting a much better handle on what you all are talking about. Thank you everyone, including Lexius. 
civvver
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Eh to me it kind of conflicts with trickle down because the new money from the government deficits goes to the top with the assumption that the top is companies and individuals who will spend it, but in reality they do not spend it so the economy stagnates. The government can't just spend, they have to spend in the right places. We should want companies to increase real wages and hire more people, create more jobs, not just hoard cash or do stock buybacks or increase dividends to share holders.
H4run
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I have a meeting to attend, but his has been fruitful. I am getting a much better handle on what you all are talking about. Thank you everyone, including Lexius.
That's why I like being in this forum, I feel like grinding my intellectual skill by being leisure reading internet forum lol
Yes, one of the damages of the current system is that new money is mostly created at the top. You will note that during the great financial crisis, and the quantitative easing, most of the new money was spent into the bottom. The FED purchased government bonds, and the majority of government spending goes into the bottom and into the middle. Now, they didn't spend enough into the bottom in order to prevent wealth from trickling upwards overall in the current debt and taxation scheme that the US currently has. If I owe $1,000 of Interest, and you give me $1,000, you have actually given the person who owns my debt $1,000. If you give me $2,000, you've given us both $1,000 each. People quail at the idea of free money, but it's because they imagine that free money is free stuff. Sometimes free money just prevents the system from jamming up for no good reason
Lexicus
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I'm glad you asked this question. Money is an abstract system, it's very similar historically and conceptually to a system of standardized weights and measures promulgated by a government. A 'dollar' is similar to a 'kilogram', it's just a measure we use, and the thing it measures is financial "stocks" and "flows". An example of a stock "stock variable" is net worth; a "flow variable" is something like "the amount of money I spend on rent each year". Flows accumulate into stocks; another way of putting this is that a stock is just the sum of net flows for a given economic entity (a household, business, government, or individual) over a given period of time. So, as you know, the sum of all the deficits the federal government has run over its lifetime is the national debt: in this example the flows are the deficits, the stock is the debt.
So 'dollars' conceptually need to be separated from the actual paper dollars in your wallet - those are what MMT calls the "money things," the physical tokens used to represent the abstract concept of a dollar - just as a ruler is a physical representation of the abstract concept of a foot or a yard or whatever. Most money today actually exists in the form of entries in electronic ledgers, so this is actually important. In the context of the previous discussion, we were talking about dollars in the abstract (I know that I confused this by bringing up a hypothetical Chinese printing press). The reality is that we know all dollars come from the US because the dollar is a construct of US law, just as the RMB is a construct of Chinese law, the GBP is a construct of UK law, and so on.
At the very least, MMT argues that we need robust regulation and supervision of the financial sector, as well as policies and programs that entail countercylical spending (countercyclical here means "against the business cycle" and it means spending to offset the decrease in spending that occurs during a business cycle downturn), to prevent or ameliorate future recessions.
EXACTLY! And this is why MMT breaks with "new Keynesian" orthodoxy in saying that the least inflationary, least trickle-down type of government spending is public employment programs that literally put money in the wallets of unemployed people while also adding to real wealth by performing needful tasks and building infastructure. You let consumer spending drive investment rather than attempting to do it the other way around. Democrats and Republicans have been trying to give money to rich people to stimulate investment for seventy years in this country and all it's done is led to the current bad situation.
Lexicus
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I have a meeting to attend, but his has been fruitful. I am getting a much better handle on what you all are talking about. Thank you everyone, including Lexius.
If you are really interested in learning more about this, I would suggest reading Warren Mosler's book. It is available for free here:
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
It is short, very accessible with no economic theory or technical discussion at all, and I think Mosler will be able to explain some of the basic concepts better than anyone on this forum, as well as their practical importance and what it means for making policy now and in the future.
Farm Boy
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So the banks all eventually get around to lending out way the hell too much, at least half of which to each other to force the issue, which collapses everything, except now they have liens everywhere to collect, so it converts make believe wealth markers they've been given carte blanche to wet dream up into control over real things that real men with real guns dispatched from the state will enforce. So what, the crux here is that banks are taxing entities of the state that occasionally break themselves in order to make their controllers obscenely rich? Gee, sounds like Congress. Lots of theories around already to adequately predict that.
Yes, the banks profit when the current system works. And some of the banks profit when the system breaks. Same with individual households. When a government deficit spends into a recession, and I keep my truck as a result, it's just as much of a bailout as the person who doesn't go broke after putting a vacation on the credit card.
It's why I talked about the marginal tax rates being too low. Gaming the system for profit only really matters if it results in the net flow of total wealth upwards. Also, it's why a lot of other people get frustrated that the bankers didn't get haircuts on their failed loans. A failed loan should result in a loss to the person who made it just as the person who took it out. Modern monetary Theory allows for this problem, if I understand it correctly, because it has mechanisms of preventing the bailout from causing the wealth to go upwards. There is no bail out, people are just paid to work.
It's why I talked about the marginal tax rates being too low. Gaming the system for profit only really matters if it results in the net flow of total wealth upwards. Also, it's why a lot of other people get frustrated that the bankers didn't get haircuts on their failed loans. A failed loan should result in a loss to the person who made it just as the person who took it out. Modern monetary Theory allows for this problem, if I understand it correctly, because it has mechanisms of preventing the bailout from causing the wealth to go upwards. There is no bail out, people are just paid to work.
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Hygro
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I listed five, there might be a few more.
It just means stop voting for people who want to run government surpluses because where the dollars come from matters, and prosecute financial fraudsters.
It's accounting, not theory, and those sectors account for all 3 sectors that make up 100% of a macroeconomy (you could break it down further but no need for this).
It wouldn't change the money, but it would change money demand levels in the private (or foreign) sector which is outside of accounting but a good reason not to shrink the private sector balance.
As a dollar. Cash in USD, bank account balances in USD, treasuries in USD. Any money that's a dollar and not another currency. Literally a dollar. Not a "dollar" for the sake of discussion, but a dollar.
A little bit! More than non post-Keynesian economics. But economics has largely been prescriptive that predictive.
no/no/yes
You didn't make the money, you made the thing someone with money wants. They got that money through a network of trades that leads back to a bank loan or government spending.
For the United States, trouble arises when the private sector goes into deficit. The demand for money is always increasing (hey, you made a children's book, and someone else made a child, there's now more stuff and more people demanding money) so the difference has to be made up via bank loans.
Well you can use a MMT understanding for nefarious ends, a la Dick "Deficits Don't Matter" Cheney. More money for the top won't bankrupt the government.
Hygro
soundcloud.com/hygro/
I don't remember. It might have been something as stupid as financing member-state deficits.
H4run
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I read this thread bite by bite, really mind blowing for someone who have zero knowledge on economy.
My conclusion is that debt cannot ever be paid in the big scheme, in fact the whole of modern economy are based on debt, debt is the reference, the reflection of all the money that exist. Add debt with interest, this made the circulation of money is lesser than the amount of debt, which can only be remedied with the debtor takes loan that results more debt and interest, because debt icannot ever be paid, that's crazy, it's impossible to erase debt.
It's really sound like a kind of addiction game or even like a giant scam if when the player don't play along (no debt taken in the future) the economy pretty much crushed badly. You should never ever stop the cycle of new money-loan-debt+interest-new money-loan-debt+interest.
But MMT really sound interesting because it challenged the conventional narrative. What I know during deficits bank should increase interest rate so the amount of money that circulating in the public could be decreased, and bank get money to play on, but MTT challenged this narrative, instead it said to lower the interest to stimulate loan and increase the economy productivity, this also somehow correlated with what El Machinae stated in other post that inflation is not caused by the amount of money get printed, it's caused by the availability of money is higher than the economy productivity.
And yes, if we see economy as some sort of balance, deficits means new printed money were use more by private sector, while surplus mean the new printed money was sitting on a bank than it was in the private sector. there is only where does it goes? Does it implied that deficits also an of the economy productivity?
The important narrative that mmt challenged from what I understand is that low interest is good for economy because it creates loan and productivity. And high interest in the other hand decreased the productivity. It stand for a more active and rigorous economy, to arm people with more ability to spend money.
But yea, haven't read page 8, I read it quite slowly. I think also I will do some re-read.
My conclusion is that debt cannot ever be paid in the big scheme, in fact the whole of modern economy are based on debt, debt is the reference, the reflection of all the money that exist. Add debt with interest, this made the circulation of money is lesser than the amount of debt, which can only be remedied with the debtor takes loan that results more debt and interest, because debt icannot ever be paid, that's crazy, it's impossible to erase debt.
It's really sound like a kind of addiction game or even like a giant scam if when the player don't play along (no debt taken in the future) the economy pretty much crushed badly. You should never ever stop the cycle of new money-loan-debt+interest-new money-loan-debt+interest.
But MMT really sound interesting because it challenged the conventional narrative. What I know during deficits bank should increase interest rate so the amount of money that circulating in the public could be decreased, and bank get money to play on, but MTT challenged this narrative, instead it said to lower the interest to stimulate loan and increase the economy productivity, this also somehow correlated with what El Machinae stated in other post that inflation is not caused by the amount of money get printed, it's caused by the availability of money is higher than the economy productivity.
And yes, if we see economy as some sort of balance, deficits means new printed money were use more by private sector, while surplus mean the new printed money was sitting on a bank than it was in the private sector. there is only where does it goes? Does it implied that deficits also an of the economy productivity?
The important narrative that mmt challenged from what I understand is that low interest is good for economy because it creates loan and productivity. And high interest in the other hand decreased the productivity. It stand for a more active and rigorous economy, to arm people with more ability to spend money.
But yea, haven't read page 8, I read it quite slowly. I think also I will do some re-read.
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Farm Boy
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Debt and tax are the whips that force you to work in the ways society deems useful. One might make the argument that the ratios and things encouraged are unfair, suboptimal, or even stupid or corrupt. One may make the same argument about how money is allowed into the system in the first place. But opting out is a big luxury of power. Usury is far more toxic to society than most people figure. There's a damned good reason it's an old sin.
I mean, there are worse ways for it to work. Could be real whips. Like private prisons for being inconvenient socioeconomic, or legit concentration camps for being ethnic and religious.
I mean, there are worse ways for it to work. Could be real whips. Like private prisons for being inconvenient socioeconomic, or legit concentration camps for being ethnic and religious.
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It's true, which is why the mmt crowd is starting to make noise. In truth, we work because we don't want to have an empty belly. We need to eat, and so we need to work.
The wealth imbalance is part of the problem. if you want to work these days, you need to take on debt: rent, car, education etc. and then you need to earn to just pay back the money you borrowed to 'invest in your future'. Even more painful for family business, where kids are raised with the expectation that they'll take on the family debt with their labor
It wouldn't be a problem, except that the wealth is compounding at the top. All of the true benefits are accrued up the wealth ladder, and aren't properly taxed back down. I'd say that a lot of MMT can be framed to respond to the problem presented by Picketty
The wealth imbalance is part of the problem. if you want to work these days, you need to take on debt: rent, car, education etc. and then you need to earn to just pay back the money you borrowed to 'invest in your future'. Even more painful for family business, where kids are raised with the expectation that they'll take on the family debt with their labor
It wouldn't be a problem, except that the wealth is compounding at the top. All of the true benefits are accrued up the wealth ladder, and aren't properly taxed back down. I'd say that a lot of MMT can be framed to respond to the problem presented by Picketty
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Estebonrober
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https://www.marketwatch.com/story/t...-now-represent-70-of-all-us-wealth-2019-05-24
Wealth accumulation at the top is continuing faster and faster.
Wealth accumulation at the top is continuing faster and faster.
innonimatu
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I got kind of tired of arguing economics, find myself repeating things, but really ought to revisit an old project on the history of economics here. Anyway, just want to throw in one thing now: current orthodox economics resulted from a very peculiar set of political conditions in the 1970s, changes that were happening about global trade and that derailed for a few years the previous kind-of-keynesian consensus. It was enough for a new group to drive in its wedge, and establish itself as the dominant political group.
Economics is a branch of politics... Its old name was more adequate, political economy. And any big political change leads to a change of orthodoxy in this "science". It is not surprising that orthodox economics is under pressure now.
Economics is a branch of politics... Its old name was more adequate, political economy. And any big political change leads to a change of orthodoxy in this "science". It is not surprising that orthodox economics is under pressure now.
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