That was refreshingly NOT a hatchet job article on MMT...meaning it didn't wildly misrepresent MMT.
A Beginner’s Guide to MMT
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Re: A Beginner’s Guide to MMT
#12It’s immediately obvious that increasing the money supply and spending the money will result in inflation. MMT says that the only constraint on spending is inflation, but also turns around and says that you can always print more money. That’s a contradiction. Printing more money does not change the real wealth in the economy. You can’t create additional purchasing power with an increase in the money supply because pr…
> MMT says that the only constraint on spending is inflation, but also turns around and says that you can always print more money. That’s a contradiction.
The article follows that up by saying:
>> As long as there are enough workers and equipment to meet growing demand without igniting inflation, the government can spend what it needs to maintain employment
and later on:
>> To stabilize employment, MMT would add a federally funded, locally administered job guarantee. Government would employ more people in slumps than in booms.
So I think the idea is that MMT recognizes that inflation would indeed occur if you kept printing money without a demand for that money, which they say will be supplied by government-sponsored full employment.
What I don't understand is: is there a situation in which full employment has already been achieved and the government just keeps printing money for new initiatives, and we're back to inflation?
Re: A Beginner’s Guide to MMT
#13It’s immediately obvious that increasing the money supply and spending the money will result in inflation. MMT says that the only constraint on spending is inflation, but also turns around and says that you can always print more money. That’s a contradiction. Printing more money does not change the real wealth in the economy. You can’t create additional purchasing power with an increase in the money supply because pr…
Inflation is MV = PQ... you are commenting only on the M which is money supply. You have to factor in the other variables, notably V or the rate of spending. If V remains low, then M can increase without significant inflation.
Re: A Beginner’s Guide to MMT
#14The mainstream way of thinking says "the government must tax in order to spend" whereas MMT says "if the government wants to spend it will have to tax".
I think it's more "the government must spend to be able to tax"?
Re: A Beginner’s Guide to MMT
#15It’s immediately obvious that increasing the money supply and spending the money will result in inflation. MMT says that the only constraint on spending is inflation, but also turns around and says that you can always print more money. That’s a contradiction. Printing more money does not change the real wealth in the economy. You can’t create additional purchasing power with an increase in the money supply because pr…
> It’s immediately obvious that increasing the money supply and spending the money will result in inflation.
I think the MMT argument is that one can reduce the money supply through taxation. From the article:
> In MMT’s ideal world there would still be taxes, but their main purpose, aside from lessening inequality, would be as “offsets” to keep inflation under control. Taxes would drain just enough money from consumers and businesses so total spending in the economy won’t be excessive.
So currently Left-leaning people are labeled "tax and spend": you increase revenues, which you then turn around and spend on programs/infrastructure. With MMT it's the opposite (AFAICT): "spend and tax". Run the proverbial printing presses to pay for the programs, and then use (higher?) taxes to drain the 'excess' money supply.
MMT also (AFAICT) seems to make the central bank subservient to the finance/treasury people, instead of independent (which is the modern way of doing things). This control of interest rates is important for technical reasons:
* https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wo...
Re: A Beginner’s Guide to MMT
#16Relevant: https://www.themoneyillusion.com/mmt-explained/
(This is a post by Scott Sumner, who is also quoted near the beginning of this article. His earlier post is at https://www.themoneyillusion.com/wrong-in-a-very-confusing-w... and is also worth reading for context.)
Re: A Beginner’s Guide to MMT
#17It seems obvious once you think about it that at the federal level taxes don't pay for spending. The fed can print as much money as it wants. Taxes only serve to remove excess cash from the economy and keep inflation down.
Or, even more abstractly, they serve as an alternative to inflation, which devalues money indiscriminately. Printing money and taxation both transfer value to the fed; but the latter can be crafted & targeted while the former cannot. In practice perhaps the most significant realization of this is that inflation is a tax on wealth while our system today is mostly a tax on income.
Your last point is a great one and reflects the economic literature on the subject in that inflation is effectively a tax on money holdings.
Re: A Beginner’s Guide to MMT
#18It’s immediately obvious that increasing the money supply and spending the money will result in inflation. MMT says that the only constraint on spending is inflation, but also turns around and says that you can always print more money. That’s a contradiction. Printing more money does not change the real wealth in the economy. You can’t create additional purchasing power with an increase in the money supply because pr…
Actually, printing money doesn't necessarily cause inflation because there are two sides to the equation.
If you have more money chasing the same amount of goods you get inflation. Yes. But if supply is currently in excess, or if production is well below production capacity, then inflation is much less likely. I'd argue that in today's international economy, there is actually a huge excess of supply capacity that is under utilized.
Re: A Beginner’s Guide to MMT
#19[deleted]
Re: A Beginner’s Guide to MMT
#20It’s immediately obvious that increasing the money supply and spending the money will result in inflation. MMT says that the only constraint on spending is inflation, but also turns around and says that you can always print more money. That’s a contradiction. Printing more money does not change the real wealth in the economy. You can’t create additional purchasing power with an increase in the money supply because pr…
> Printing more money does not change the real wealth in the economy. You can’t create additional purchasing power with an increase in the money supply because prices will adjust to the new level.
I think the point is more thatn printing money and transferring it to treasury coffers effectively is a tax on anyone holding USD. More government spending -> bigger deficits -> more money printed -> higher inflation (taxes). That's my understanding anyway.