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A Beginner’s Guide to MMT

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Re: A Beginner’s Guide to MMT

#81

Post by tptacek »

pytester wrote: post #62
the_optimist wrote: post #48

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…

This critique (and it is the by far the most common critique of MMT I've heard) boils down to this: "MMT may very well be an accurate depiction of reality, but the problem is that if people start to see it as an accurate depiction of reality then inflation might go up." That's definitely a problem for a certain class of people (creditors and investors). MMT is controversial because, if true , it's undermining a lie t…

This does not make sense as a rebuttal. The MMT'ers and the monetarists agree that runaway inflation is very bad. Essentially what you're doing here is confirming the misperception that MMT is just left-wing back-rationalized voodoo economics, which it is not.

Re: A Beginner’s Guide to MMT

#83

Post by patfla »

The economy is like an (enormous) electrical circuit with, crucially, non-linear elements. Mainstream macroeconomics models that poorly which we've seen well demonstrated over the last 10 yrs although there were earlier demonstrations, e.g. stagflation in the 1970's. MMT, while as the article indicates heavily politicized, adds, I think, some insights. For one, money is not exogenous. That is, it doesn't come only from the Fed, banks also in effect create money when they write new loans. Also, what are savings (not necessarily a question raised by MMT)? They're an accounting identity in mainstream macro and supposedly investment = savings. Too simple. Why is there a 'savings glut' in E Asia at the same time that investment in China is remarkably high?

And so it goes. Some steps forward, how many back - don't know but the article does demonstrate just what a political football MMT has become - I'm sure AOC is great but I'm not sure she's an expert in economics. I'd like to see a better theory of non-linear dynamics in economics. The non-linear elements are basically feedbacks where feedbacks allow components of systems to adjust more quickly to changes elsewhere in the system. A forest fire (speaking metaphorically) clears an area of land? The first species to recolonize the land are those that get there quickest. You need to be quick when opportunity arises and feedbacks jumpstart you.

To go back to the electrical circuit - have we even adequately characterized the components (resistor, capacitor, etc.) that go into making up an economic electrical circuit? Also as regards China. China accedes to the WTO in 1999 and only 8-9 yrs later (2007-2008) the circuit blows itself out. Add a huge new power source without compensations elsewhere in the circuit and it will likely fry itself and here we are more than 10 yrs later with the smoldering wreckage still visible. Although if you've come of age in the last 10 yrs, this might not be visible to you. An interesting thing to study is global capital flows - something like the electricity of the system. There was something somewhere where Joseph Stiglitz said: we need a better theory of finance. That is, we really don't know how this shit works.

Re: A Beginner’s Guide to MMT

#84

Post by mikhailfranco »

CPLX wrote: post #74
holymacaral wrote: post #54

Earlier quoted context omitted.

Countries can and have defaulted on debts issued in their own currencies. If you printed your way out of debt that would be a default in all but name. You would cause a collapse of credit and a collapse in confidence in the currency itself.

> Countries can and have defaulted on debts issued in their own currencies. Really? How? > If you printed your way out of debt that would be a default in all but name. Oh, right, actually they don't. So in fact it is actually impossible to default on debt in your own currency and you're admitting as much. > You would cause a collapse of credit and a collapse in confidence in the currency itself. Right. And a reductio…

https://scholar.harvard.edu/files/rogoff/files/forgotten_his...

Re: A Beginner’s Guide to MMT

#85

Post by ThirdFoundation »

iooi wrote: post #75
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…

For what it's worth, the ACA was pretty successful before it was slowly gutted by the current administration. Around 12M people signed up at its peak. Generally, incremental changes are better than a "perfect" solution that comes in a lot later.

I agree in regards to health care that incremental changes may be the only to achieve universal coverage.

However, the gutting of the policies by another administration is what scares me in regards to MMT. I'm not sure that incremental changes work with monetary policy. MMT in particular seems like it needs some big, systematic levers in order to actually function properly.

That being said, I'm happy to be wrong about this. MMT being viable would open a more clear path to something like universal health care.

Re: A Beginner’s Guide to MMT

#86

Post by _7fvc »

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…

We've already started MMT since 2008. The scary thing: it's been working well.

Re: A Beginner’s Guide to MMT

#87

Post by chombier »

_7fvc wrote: post #86
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…

We've already started MMT since 2008. The scary thing: it's been working well.

MMT without job guarantee is not quite MMT.

Re: A Beginner’s Guide to MMT

#88

Post by airstrike »

holymacaral wrote: post #38

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.

It's also such a disingenuous name – "modern" monetary theory. To the layman, it automatically reads like a new and improved understanding of Economics, when in reality it's just another theory, and not even a very mainstream one at that.

Re: A Beginner’s Guide to MMT

#89

Post by airstrike »

exolymph wrote: post #73
the_optimist wrote: post #48

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…

Here are some: http://www.igmchicago.org/surveys/modern-monetary-theory The thing is, economists disagree with each other all the time, including the most erudite ones. Expert opinion is nearly always conflicted.

Obligatory post from 2009: https://gregmankiw.blogspot.com/2009/02/news-flash-economist...

Re: A Beginner’s Guide to MMT

#90

Post by anm89 »

Assume someone with a biology PhD explained to you that the sky was actually purple because of a hidden extra cone your eye possesses that was perceiving light that your brain was canceling out. This somehow sounds plausible, and it's impossible for non biologist me to disprove but at the end of the day I can look up at the sky and say"no, I'm confident it's blue".

This is MMT. MMT says: "government debt isn't really debt and acquiring massive amounts of it that can never be payed off wont ever have consequences because of x, y, and z mental gymnastics".

You don't need a PhD in economics or to be able to disprove everyone one of the Arcane mental gymnastics performed to understand that "government debts are real and they can have consequences". You don't need any special economic training to understand that if you owe someone money, then next month you have a bit less money because you have a debt payment. There are a million caveats, and fifty people with 10$ words that you can't argue because you don't know what they mean because they don't mean anything will explain to you why you are the dumbest person on the planet for believing that "government debts are real and they can have consequences".

It's ok though because you can look up at the sky and know what color it is.

(don't take the sky example too literally, i know it doesn't really make sense).

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