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A Beginner’s Guide to MMT

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Re: A Beginner’s Guide to MMT

#121

Post by AnimalMuppet »

tptacek wrote: post #102
pytester wrote: post #100

Earlier quoted context omitted.

^^ 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.

Help me understand where I went wrong reading this. I read, paraphrased: "The problem with MMT is that if everyone believes in it, they'll do things that cause inflation to rise", and "This is a problem primarily for the investing class".

"Rising inflation" != "runaway inflation".

The difference may be differing assumptions on how likely it is, if MMT were adopted, that we would stop with merely rising inflation.

Re: A Beginner’s Guide to MMT

#122

Post by cjlars »

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…

Scott Sumner, who is a leading monetary economist and very much credentialed, has a takedown on his blog: https://www.themoneyillusion.com

Re: A Beginner’s Guide to MMT

#123

Post by tptacek »

pytester wrote: post #120
tptacek wrote: post #116

Earlier quoted context omitted.

MMT economists don't support inflation at any level, do they? They support alternative means of controlling inflation. Put differently, it sounds like you're using "MMT" as an incantation to dismiss inflation, which would be unfair to the MMT'ers.

>MMT economists don't support inflation at any level, do they? MMT does not make normative judgements on inflation. It does state that taxation and fiscal spending are more effective control knobs to target inflation than monetary policy, but that isn't a normative judgement either. >it sounds like you're using "MMT" as an incantation to dismiss inflation I'm giving context to why hyperinflation / inflation scaremong…

Can you source your claim that MMT doesn't make normative judgements on inflation? That's not my understanding, it's not what this article says, and it's not what Kelton said in her debate with Jason Furman on Ezra Klein's show. As I understand it --- once again --- MMT says inflation is bad, but that there are better ways to control it than monetarism and fiscal austerity.

The distinction between my understanding and yours is highly material, because in my understanding, an attempt to actually deploy MMT policies at the Fed in the service of (say) single-payer that resulted in rising inflation would be a problem and evidence of failure, and in your understanding it wouldn't. In my understanding, the MMT economists would say "here are a set of policy levers we should use to ensure inflation doesn't increase", and in yours MMT economists would say, essentially, "single payer is worth extra inflation".

The idea that inflation and deficits simply don't matter as much as conventional economists think it does is, as I understand it, a caricature of MMT that actually annoys MMT economists.

Re: A Beginner’s Guide to MMT

#124

Post by AnimalMuppet »

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…

> All it would take is one conservative majority congress to semi-dismantle any MMT mechanism and completely mess up any "controls" put in place by MMT proponents.

One liberal majority Congress could do the same. They might dismantle in a different direction, but it could be just as disastrous.

Re: A Beginner’s Guide to MMT

#125

Post by pytester »

skewart wrote: post #119
pytester wrote: post #112

Earlier quoted context omitted.

>Low and middle income people (which probably have more of their assets in dollars) will have their savings constantly devalued. Low and middle income people tend to have little in the way of savings (40% of Americans are one paycheck away from poverty) and a lot in the way of debts - debts which will be constantly devalued in a high inflation environment.

> debts which will be constantly devalued in a high inflation environment. Why wouldn't lenders just charge higher interest rates to offset inflation?

They might on newly issued debt - that still allows the ~40 trillion USD of existing private debt to be watered down, however.

Re: A Beginner’s Guide to MMT

#126

Post by User23 »

brianjcohen wrote: post #12
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…

> 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 fe…

> 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.

Nope, it's when too much money chases too few goods and services. Inflation is everywhere and always a dynamic process. The federal reserve can print 100 trillion dollars and credit it to their own account and it won't affect inflation at all until they start spending it or transferring it to parties that will.

Re: A Beginner’s Guide to MMT

#127

Post by pytester »

tptacek wrote: post #123
pytester wrote: post #120

Earlier quoted context omitted.

>MMT economists don't support inflation at any level, do they? MMT does not make normative judgements on inflation. It does state that taxation and fiscal spending are more effective control knobs to target inflation than monetary policy, but that isn't a normative judgement either. >it sounds like you're using "MMT" as an incantation to dismiss inflation I'm giving context to why hyperinflation / inflation scaremong…

Can you source your claim that MMT doesn't make normative judgements on inflation? That's not my understanding, it's not what this article says, and it's not what Kelton said in her debate with Jason Furman on Ezra Klein's show. As I understand it --- once again --- MMT says inflation is bad, but that there are better ways to control it than monetarism and fiscal austerity. The distinction between my understanding an…

>Can you source your claim that MMT doesn't make normative judgements on inflation?

It's in the name - modern monetary theory. Much like the theory of gravitation does not posit that gravity is "bad" or "good", modern monetary theory does not posit that inflation is bad.

>That's not my understanding, it's not what this article says, and it's not what Kelton said in her debate with Jason Furman on Ezra Klein's show.

Much as your earlier posts massively misrepresented what I said, I strongly suspect you are misrepresenting what others said.

>In my understanding, the MMT economists would say "here are a set of policy levers we should use to ensure inflation doesn't increase", and in yours MMT economists would say, essentially, "single payer is worth extra inflation".

MMT economists might very well opine that extra inflation is worth medicare for all and at the same time set out a set of policy levers which can bring down inflation if desired. One is a normative statement; the other positive.

>The idea that inflation and deficits simply don't matter as much as conventional economists think it does is, as I understand it, a caricature of MMT that actually annoys MMT economists.

I think the personal feelings of many MMT economists is probably that a slightly elevated inflation doesn't matter that much. There are economists who are motivated by money and prestige who will naturally gravitate towards, for example, richly funded think tanks representing investor interests and there are economists who are interested in figuring out how the economy actually works.

These two groups will naturally have differing personal feelings about inflation precisely because the people who pay their bills do.

I think what pisses them off are the people who say that MMT is simply a theory that says governments can spend limitless amounts of money.

Re: A Beginner’s Guide to MMT

#128

Post by User23 »

MMT has been getting a lot of press lately. I wonder what submarine[1] is responsible?

Here's the thing: MMT isn't a policy position. It's simply an attempt to accurately describe how the monetary system actually works from an operational perspective[2]. It was a reaction against the Krugmanite nonsense that has no basis in reality and describes the activities of no market practioners. Anyone curious should read the linked primer, but the core principle of MMT is that Taxes drive the value of money. The sovereign's power to impose taxes that can only be paid in the sovereign's liabilities creates an intrinsic demand for those liabilities, which is to say money. Even the gold standard worked this way. The government used to print gold certificates and use those to buy bullion from miners! And of course gold certificates were accepted to extinguish tax liabilities.

That said, a number of MMT theorists are in fact politically liberal and believe that the government should use its monetary sovereignty to interfere more in the economy. It's valid to object to claims like "every dollar of spending has to be funded by a dollar of taxes" because they are observably false. But you could be a hard money conservative goldbug and MMT would STILL be a theoretically valid understanding of how money works. The theory correctly describes the consequences of using a currency the sovereign cannot issue, be it gold, or another sovereign's liabilities.

One area where MMT does hand-wave a bit is on the importance of business investment in creating additional demand for the sovereign's liabilities. While from an authoritarian perspective the power to tax and imprison suffices to create demand for sovereign liabilities, in terms of having a society that isn't awful to live in it's really nice to have lots of businesses doing interesting things that can be paid for with those sovereign liabilities too. I suspect this is partially why proponents of the theory are so bullish on the sovereign controlling more of the economy, they fail to adequately consider the indirect consequences. Or they simply don't care or even consider a command economy a feature rather than a bug. I don't know.

So, please, don't confuse the factual descriptive theory with the subjective policy recommendations some people attempt to justify with that theory. The theory can only describe what government CAN do. What government SHOULD do is not dictated by MMT.

Edit: I discovered MMT during the first Greek debt crisis when lots of economists were going on about how America was going to be the next Greece. Farcical, but I guess it got clicks? This[3] is a nice overview of why the USA isn't like Europe. Of course this isn't really news, since Wynne Godley described the problem in 1992[4].

[1]http://paulgraham.com/submarine.html

[2]http://neweconomicperspectives.org/modern-monetary-theory-pr...

[3]http://neweconomicperspectives.org/2011/09/mmp-blog-16-unusu...

[4]https://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-al...

Re: A Beginner’s Guide to MMT

#129

Post by tptacek »

pytester wrote: post #127
tptacek wrote: post #123

Earlier quoted context omitted.

Can you source your claim that MMT doesn't make normative judgements on inflation? That's not my understanding, it's not what this article says, and it's not what Kelton said in her debate with Jason Furman on Ezra Klein's show. As I understand it --- once again --- MMT says inflation is bad, but that there are better ways to control it than monetarism and fiscal austerity. The distinction between my understanding an…

>Can you source your claim that MMT doesn't make normative judgements on inflation? It's in the name - modern monetary theory . Much like the theory of gravitation does not posit that gravity is "bad" or "good", modern monetary theory does not posit that inflation is bad. >That's not my understanding, it's not what this article says, and it's not what Kelton said in her debate with Jason Furman on Ezra Klein's show.…

Thanks, I'm pretty comfortable with what this thread says about your argument and mine at this point.

Re: A Beginner’s Guide to MMT

#130

Post by howard941 »

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.

Seems you incited someone to submit it [0]. I don't think it's unfair to say there wasn't any meaningful disagreement across the respondents at all. They only differed in how much confidence they had in disagreeing with the answer-begging question.

[0] https://news.ycombinator.com/item?id=19456616

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