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A Beginner’s Guide to MMT

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Re: A Beginner’s Guide to MMT

#91

Post by ThirdFoundation »

_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.

Do you mean in terms of spending?

Re: A Beginner’s Guide to MMT

#92

Post by mrow84 »

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…

Whilst it is obvious that increasing the money supply will cause inflation in an otherwise fixed economy, it is important to note that increasing the money supply will not cause inflation if productivity also increases.

If you believe that there is untapped productivity in the economy then, by increasing money supply and spending the additional money in those areas, it is possible to increase productivity whilst avoiding inflation.

Re: A Beginner’s Guide to MMT

#93

Post by chombier »

airstrike wrote: post #88
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.

It started as a joke. It's called "modern" because it only applies to the past 4000 years.

https://www.nakedcapitalism.com/2018/10/randy-wray-modern-mo...

Re: A Beginner’s Guide to MMT

#94

Post by chombier »

doppelganger27 wrote: post #41
jonahhorowitz wrote: post #14

Earlier quoted context omitted.

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 fr…

Government also needs to tax to ensure sufficient demand for its money ("taxes drive money")

Re: A Beginner’s Guide to MMT

#95

Post by ergothus »

airstrike wrote: post #76
ergothus wrote: post #52

Earlier quoted context omitted.

> It’s immediately obvious that increasing the money supply and spending the money will result in inflation. I'm not criticizing your logic, but I feel like my entire adult life (I'm 42) I've been bombarded with tales of EVERY proposal will "obviously result in inflation". During this time gold has also been upheld as the only safe investment, doom is always around the corner, Europe has been on the brink of financia…

> During this time gold has also been upheld as the only safe investment This isn't true, or at least there isn't consensus around that idea all of the time > doom is always around the corner That's just the boom and bust nature of the economic cycles. It's true of any other natural cycle, from the fall from paradise to the fall of Rome. I recommend Georges Canguilhem "The Normal and the Pathological", though I must…

> This isn't true, or at least there isn't consensus around that idea all of the time

I'm not saying it's true, nor that "most" people were saying it, just that enough loud voices were doing it.

My point was not that (often uninformed) people have been feeding enough BS about the economy for so long that "obvious" is untrustworthy.

Re: A Beginner’s Guide to MMT

#96

Post by CPLX »

mikhailfranco wrote: post #84
CPLX wrote: post #74

Earlier quoted context omitted.

> 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...

I quickly read, digested, and mentally analyzed the 52 page whitepaper you posted, and am ready to resume the argument from the exact same point of view.

Re: A Beginner’s Guide to MMT

#97

Post by rafiki6 »

Ugh...it seems that no one in the media actually understands what MMT is saying and what's underpinning it.

http://www.levyinstitute.org/publications/modern-money-theor...

MMT isn't actually proposing anything, but rather is simply explaining how money in the modern economy of a country like America, who's currency is a fiat currency and effectively underpins the currencies of many other much smaller economies, behaves. That's all it does.

In essence, conclusions can be drawn about government debt from this. Politicians are doing this. MMT scholars and economists happen to agree with them because of what MMT shows. Scientifically or rather economically, MMT isn't much different from something like the Credit Theory of Money, in that all it's attempting to do is explain the real behavior of money as opposed to the fiction we create about money in order for our society to function.

MMT does develop this idea of a deficit dove vs. deficit owl, which is where all of this comes from. If you read the article I linked above, you'll see that MMT is mostly focused on deficit spending during a recession.

Re: A Beginner’s Guide to MMT

#98

Post by JamesBarney »

anm89 wrote: post #90

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…

> You don't need any special economic training to understand that if you owe someone money, and you can't pay it back, it might not end that well

Not such a big deal if you own a money printing machine.

Re: A Beginner’s Guide to MMT

#99

Post by throw0101a »

breischl wrote: post #70
throw0101a wrote: post #36

Earlier quoted context omitted.

> 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 inf…

>you can’t cut interest rates below zero Well, he was wrong on that point. >Crazy as it sounds, several of Europe’s central banks cut interest rates below zero in 2014, and then Japan followed. By mid-2016, some 500 million people in a quarter of the world's economies were living with rates in the red https://www.bloomberg.com/quicktake/negative-interest-rates

> Well, he was wrong on that point.

He revisits the point:

> We now know that interest rates can, in fact, go negative; those of us who dismissed the possibility by saying that people could simply hold currency were clearly too casual about it.

* https://krugman.blogs.nytimes.com/2015/03/03/how-negative-ca... * https://krugman.blogs.nytimes.com/2015/03/06/the-below-zero-... * https://krugman.blogs.nytimes.com/2016/02/12/the-political-e...

The Great Recession was really an "interesting" time for economists: one usually can't run experiments on macroeconomic theories / hypothesis. :)

Re: A Beginner’s Guide to MMT

#100

Post by pytester »

tptacek wrote: post #81
pytester wrote: post #62

Earlier quoted context omitted.

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.

^^ This is a straw man. I also agree that runaway inflation is bad. Almost everybody does.

What I wrote above cannot, under any serious interpretation, be considered as a defense of runaway inflation.

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