A Beginner’s Guide to MMT • Hacker News Board

Re: A Beginner’s Guide to MMT

#41

Post by doppelganger27 » Thu, Mar 21, 2019, 5:53 PM UTC

jonahhorowitz wrote: post #14

currymj wrote: post #8

The 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"?

I'm no expert on this, but I think that wording suggests that the government's goal is to tax, but it seems to me that a government really wants to spend.

My understanding of MMT is that it removes the direct relationship between the ideas of spending and taxation, instead tying them both to inflation. Spending increases inflation by adding currency into circulation, and taxation decreases inflation by removing it from circulation. Although I'm not sure how that fits into a one-liner :)

Re: A Beginner’s Guide to MMT

#42

Post by peisistratos » Thu, Mar 21, 2019, 5:53 PM UTC

bryanlarsen wrote: post #4

another primer: https://www.bradford-delong.com/2019/01/what-is-modern-monet...

The chart in the Bloomberg article is pretty great. Delong is left-leaning by the way, meaning not just conservatives see this as nutty.

Left leaning Paul Krugman sees MMT as nutty

https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wo...

Even further left, Doug Henwood is down on MMT

https://www.jacobinmag.com/2019/02/modern-monetary-theory-is...

It's not just conservatives who are down on this. Left and center-left economists see MMT as wishful thinking.

Re: A Beginner’s Guide to MMT

#43

Post by thadjo » Thu, Mar 21, 2019, 5:55 PM UTC

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'm not sure if you need all of the parts in place to see if / how it works. The fed could start offsetting deficits to the tune of $100B to the treasury and see how the USD, bond markets react. If inflation goes up, it could in theory, be offset with a tax scheme inline with MMT. I'm not saying this would be terribly smooth, but I do think it is possible to test parts MMT in relative isolation.

Re: A Beginner’s Guide to MMT

#44

Post by holymacaral » Thu, Mar 21, 2019, 5:55 PM UTC

mason55 wrote: post #34

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…

A lot of MMT is just restating things Keynesians and Austrians already know and pretending it's some brilliant idea. For instance, they think it's a big breakthrough that the government can pay down debt by issuing more currency. We already know the government can do this, and we also know why it's a bad idea.

Re: A Beginner’s Guide to MMT

#45

Post by erentz » Thu, Mar 21, 2019, 5:58 PM UTC

u10 wrote: post #39

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.

Isn’t QE believed to have lead to considerable asset price inflation? Even if the price of a bottle of milk stayed the same, the price of housing, or stock, etc. have increased a lot.

Re: A Beginner’s Guide to MMT

#46

Post by ergothus » Thu, Mar 21, 2019, 5:58 PM UTC

erentz wrote: post #40

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 diluti…

> Presumably if we had work to be done we would have open positions for it.

I don't follow the presumption. There's no shortage of work out there to be done, we just don't have the means to PAY for it under the current system. Now, you might not think MMT does either (in real terms), but the world is NOT short of work to be done.

> Now we have to magic up jobs, which means diluting jobs other people currently do

...which doesn't follow if your first point fails.

Re: A Beginner’s Guide to MMT

#47

Post by CPLX » Thu, Mar 21, 2019, 5:59 PM UTC

holymacaral wrote: post #44

mason55 wrote: post #34

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…

A lot of MMT is just restating things Keynesians and Austrians already know and pretending it's some brilliant idea. For instance, they think it's a big breakthrough that the government can pay down debt by issuing more currency. We already know the government can do this, and we also know why it's a bad idea.

> we also know why it's a bad idea

Do tell.

Re: A Beginner’s Guide to MMT

#48

Post by the_optimist » Thu, Mar 21, 2019, 6:01 PM UTC

A credentialed economist should put a stake through the heart of the heart of MMT.

Two simple critiques: 1) Relative to a financial statement (i.e. budget), it is difficult to predict and measure inflation. This difficulty lowers the likelihood of government fiscal responsibility and increases the likelihood of devestating inflation.

2) A basic second-order effect: What happens when people realize transfer medium is being debased? They'll obviously try not to store value in that transfer medium. How will volatile inflation affect the use of the transfer medium? Why wouldn't users switch to a better store of value, like every single developing market that has ever lost control of its currency?

I am embarrassed for profession of economics that MMT is being entertained as a viable "new-old idea." Of course the government can debase the numéraire of the economy. Obviously, doing so transfers value from non-government to the government similar to taxation. The financial statement of the economy has to balance. This is merely a backdoor way of transferring assets in a deeply unaccountable way.

Re: A Beginner’s Guide to MMT

#49

Post by bryanlarsen » Thu, Mar 21, 2019, 6:01 PM UTC

holymacaral wrote: post #44

mason55 wrote: post #34

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…

A lot of MMT is just restating things Keynesians and Austrians already know and pretending it's some brilliant idea. For instance, they think it's a big breakthrough that the government can pay down debt by issuing more currency. We already know the government can do this, and we also know why it's a bad idea.

MMT supporters would agree with that statement, AFAICT. Some claim that their theories are more clearly descended from Keynes than conventional economics do.

"why it's a bad idea"

aka, inflation. Which MMT spends a lot of effort modelling.

Re: A Beginner’s Guide to MMT

#50

Post by thadjo » Thu, Mar 21, 2019, 6:02 PM UTC

erentz wrote: post #40

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 diluti…

> 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 think the idea is that deficits don't matter if you print money and offset any inflation (1) some sort of jobs program, (2) taxes which can take money back out of the economy and cool inflation, and maybe (3) more traditional ways of tweaking interest rates.