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A Beginner’s Guide to MMT

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Re: A Beginner’s Guide to MMT

#31

Post by mruts »

klaudius wrote: post #25
bryanlarsen wrote: post #21

Earlier quoted context omitted.

"It’s immediately obvious that increasing the money supply and spending the money will result in inflation." The money supply has almost quadrupled in the last 10 years, yet inflation has been low. MMT says that spending new money only causes inflation when the money is spent on stuff the private sector is also bidding for. Since that's pretty much everything that the government would want to spend money on, MMT & co…

What if Joe Sixpack creates more value by being unemployed that by being formally employed? You do understand that some people can destroy value by doing work?

Unless joe is making more money by not working than working, that is extremely unlikely.

Making money for all intents and purposes is the definition of creating value.

There are some exceptions, but they usually involve distortion by the government or theft.

Re: A Beginner’s Guide to MMT

#32

Post by vasilipupkin »

Macroeconomics is a sufficiently complex topic that trying to understand it or discuss it at a "beginner level" is almost pointless. At that level, all you need to know is that any theory that promises some certain knowledge of what's going to happen if this or that happens and that it's all very simple, is almost certainly wrong.

Re: A Beginner’s Guide to MMT

#33

Post by jimbo507 »

mmmmmmmm MMT!

Finally some sensible financial policy.

Did the New Deal result in inflation?

Did the Wall St bailout result in inflation?

Does productive investment, private or public, result in inflation?

Why do we care so much about inflation?.... oh yea, because it spooks bondholders!

Boohoo - 'en marche MMT!'

I think we obsess over inflation because it's an elite creditor concern, so it dominates headlines - but the real economic killer is deflation, when the population's debt grows and eats away their purchasing power....

Re: A Beginner’s Guide to MMT

#34

Post by mason55 »

I was surprised to see a reference to "loans create deposits" in this article. I thought that concept was very well accepted and wouldn't have considered it to be part of MMT? Is the MMT part of this just that it also applies to the Treasury/Central Bank relationship and not just retail banks?

> MMT says that, contrary to appearances, banks don’t make loans out of deposits. Rather, they make loans based on the demand for borrowing, then the borrowers stash the proceeds in the bank. Anyone they write a check to simply makes a deposit in another bank. The bottom line is that loans create deposits rather than deposits creating loans. This is one aspect of MMT that even some conservative central bankers—including those at Germany’s Bundesbank—agree with.

Re: A Beginner’s Guide to MMT

#35

Post by SubiculumCode »

thadjo wrote: post #28
SubiculumCode wrote: post #18

Earlier quoted context omitted.

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…

> I'd argue that in today's international economy, there is actually a huge excess of supply capacity that is under utilized. By "supply capacity" here do you mean idle capital? I'm interested in this, but I'm not really sure what metrics show it.

I mean the capacity to produce goods and services. I am not an economist but it seems to me that factories will often run underneath max capacity. I also think that supply chains are more flexible than they were in the past. All cases of hyper inflation I know of always had a concurrent disruption to supply capacity (e.g. war, natural disaster, political strife). It seems ramping up production to meet demand is usually not an issue over the course of a year if there isn't some big externality preventing it (i.e.war). I'd be interested hearing from people who know more if this is the case.

Re: A Beginner’s Guide to MMT

#36

Post by throw0101a »

bryanlarsen wrote: post #21
p_roz wrote: post #5

It’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." The money supply has almost quadrupled in the last 10 years, yet inflation has been low. MMT says that spending new money only causes inflation when the money is spent on stuff the private sector is also bidding for. Since that's pretty much everything that the government would want to spend money on, MMT & co…

> The money supply has almost quadrupled in the last 10 years, yet inflation has been low.

Explained by "traditional" (e.g., Keynesian) economics already:

* https://en.wikipedia.org/wiki/Zero_lower_bound

When QE was introduced, the US political Right went ape shit talking about inflation. Krugman (for one) predicted it would be fine because of interest rates, citing Japan as an example:

> Everyone knows about the infamous open letter warning Ben Bernanke not to engage in quantitative easing, lest he cause inflation and currency debasement; many are also familiar with the remarkable unwillingness of that letter’s signatories to admit, after more than four years of low inflation and a rising dollar, that they were wrong.

* https://krugman.blogs.nytimes.com/2015/02/12/qe-truthers/

If the private sector is not spending, then the public sector (gov't) should to take up the slack in a lack of demand:

> The problem, of course, is that you can’t cut interest rates below zero (if you try, lenders will just hoard cash.) So the Fed simply can’t do what the rule says it should.

>

> This is why we need a huge fiscal stimulus, unconventional monetary policy, and anything else you can think of to fight this slump. Quite literally, the usual rules no longer apply.

* https://krugman.blogs.nytimes.com/2009/01/17/zero-lower-boun...

There are a finite amount of resources in an economy, and when an "infinite" amount of cash goes after that, you start to big up prices: inflation. I don't think that mainstream (Left-leaning) are against deficit spending to boost the economy; it's just that many of them don't see MMT is adding to what they've already been saying.

Re: A Beginner’s Guide to MMT

#37

Post by mdparker89 »

ThirdFoundation wrote: post #10

A fear of mine is that MMT gains enough traction to be implemented, but only partially. Similar to what has happened with the ACA. For argument's sake, let's just assume MMT is a sound theory. Regardless, if it's only half-implemented -- without all components for regulating taxes, inflation, and spending -- it could be an absolute disaster. Additionally, there are concerns about having the government itself involved…

I see this problem with a lot of big policy. It's sold as a rewrite when in practice it has to be implemented as an incremental refactor. The two have different implications and trade offs. A partial rewrite is often the worst place to end up.

Re: A Beginner’s Guide to MMT

#38

Post by holymacaral »

MMT is a rationalization for unlimited spending & economic control. Do you really think AOC, Warren, Sanders actually understand the theory of MMT which they advocate (if not by name)?

The MMT theorists began with the conclusion they wanted and concocted a theory to get there. This is policy shaping theory at its finest.

Re: A Beginner’s Guide to MMT

#39

Post by u10 »

p_roz wrote: post #5

It’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…

The quantitative evidence of a decade of QE says otherwise.

Re: A Beginner’s Guide to MMT

#40

Post by erentz »

Probably dumb question: if debt and deficits don’t matter and a country can just print money - how does that explain cases where countries have defaulted and other countries and their own citizens lose confidence in the currency?

I also don’t understand how the jobs guarantee is supposed to work. Presumably if we had work to be done we would have open positions for it. Now we have to magic up jobs, which means diluting jobs other people currently do and the income the currently derive from it, or make pointless “dig and fill” hole jobs. Won’t all this just make everything a hell of a lot less efficient? And won’t it worsen potential economic recovery? You’re depriving potential new industries or business from labour because that labour is working for the government. You’re also preventing government departments (or wherever those jobs go) from improving their own services. To pick a historical example, instead of moving to computerizing records taking away jobs it would now be necessary to continue to do things on a typewriter because you need to keep the jobs. This in turn removes money flowing from the government to computer industry, which helps to drive up and develop whole new businesses and industry that drive the economy. That is, is there not a risk that the way the jobs guarantee is described as helping during the downturns could actually hinder recovery and development of new industry? OTOH why I like UBI is it still leaves all those incentives to do new things in place.

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