Let's learn about MMT - Modern Monetary Theory. Everything you know about federal financing is wrong.
tjohn said:
When Drummerboy talks about stuff like this, I form a mental picture of a mad scientist who straps a slice of buttered toast to the back of a cat butter side up and then drops it on the floor. Now, since buttered toast must land butter side down and a cat must land on its feet, the result is that the cat spins at a great rate and generates unlimited power.
And you came up with this off the top of your head?
Regardless, it made me laugh. Danke.
DaveSchmidt said:
And you came up with this off the top of your head?
Regardless, it made me laugh. Danke.
tjohn said:
When Drummerboy talks about stuff like this, I form a mental picture of a mad scientist who straps a slice of buttered toast to the back of a cat butter side up and then drops it on the floor. Now, since buttered toast must land butter side down and a cat must land on its feet, the result is that the cat spins at a great rate and generates unlimited power.
Now, that's odd.
Though I think Cat Generator was in the early drafts of the GND.
oops (again) Didn't see the earlier post.
Vox with a long Explainer on MMT:
https://www.vox.com/future-perfect/2019/4/16/18251646/modern-monetary-theory-new-moment-explained
There is a good video which I kinda sorta understood.
Bernie Sanders’ 2016 economic advisor Stephanie Kelton on Modern Monetary Theory and the 2020 race
The CNBC piece was pretty good. Made me more convinced that this is a valid economic theory.
The Vox piece I found revealed a lot more nuance and insight that I'd previously seen, and I can see a strong case for MMT than I had before. The idea that MMT "swaps the roles of fiscal and monetary policy" puts it in a way I hadn't thought of before.
I'd still have a few concerns though. First, even if MMT-supporting economists are keyed into the nuances that make this a serious approach that pays attention to inflation, I'm not sure the same could be said for most elected officials. Warren I could believe would be able to distinguish between MMT vs its caricature of "spend whatever you like", others I'm less convinced.
Second, it seems that under MMT it's Congress, rather than the Fed, that would have to take primary responsibility for managing the threat of inflation, and I don't think it could actually do it. The Vox article notes that under MMT raising taxes or regulating "monopolists and other predatory capitalists" can be effective tools.
Even if we accept this as true, I have a hard time imagining Congress reaching for such tools in a timely or effective manner even under full Democratic control, much less if at least one chamber was held by Republicans. Maybe those approaches are theoretically as good or better than having the Fed set interest rates, but I can't see it working out as well in practice.
I do think the section at the end, talking the politics of it in terms of a prisoner’s dilemma scenario, is a decent short-term argument, though I have some doubts as to how that would play out in the medium term and beyond.
good essay on MMT from Cory Doctorow
https://boingboing.net/2018/09/28/trillion-dollar-coin.html
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You know the drill: someone proposes something utterly commonsense, that has been done all over the world (say, universal healthcare) and the next thing you know, someone's shown up to shout "Who will pay for it?!"
Or, more toxically, a discussion of immigration or refugees or asylum seekers ends up being derailed by the state's inability to pay for basic services for the people in the country today -- how can we afford immigrants?
Or, worst of all, someone tells you that they voted for a shambling pile of human garbage because he's promised to "fix the debt" and to do less would be immoral, burdening the generations to come (see also: the ******* Democrats buying into this).
Governments aren't households, and governments borrowing money in a currency that they themselves issue isn't the same thing as you getting a bank loan. For more than a century, there has been a group of economists who've pointed this out: called "chartalists," then "neo-chartalists" and now, "modern monetary theorists" and they know exactly how to fund universal healthcare.
Modern Monetary Theory is the key to the economic prescriptions of Bernie Sanders and it underpins the platform of the Democratic Socialists of America. It's an idea that is having something of a moment!
This week's Planet Money podcast does an excellent job of describing MMT in terms that are literally designed to be understood by an eight-year-old (so I was able to follow along, too!).
Once you've given that a listen, try The Nation's potted history of MMT and the groundswell of support for it.
And remember: governments are not businesses, CEOs make ****** presidents, and government debt is not a bank-loan.
To a layperson, MMT can seem dizzyingly complex, but at its core is the belief that most of us have the economy backward. Conventional wisdom holds that the government taxes individuals and companies in order to fund its own spending. But the government—which is ultimately the source of all dollars, taxed or untaxed—pays or spends first and taxes later. When it funds programs, it literally spends money into existence, injecting cash into the economy. Taxes exist in order to control inflation by reducing the money supply, and to ensure that dollars, as the only currency accepted for tax payments, remain in demand.
It follows that currency-issuing governments could (and, depending on how you lean politically, should) spend as much as they need to in order to guarantee full employment and other social goods. MMT’s adherents like to point out that the federal government never “runs out” of money to fund the military, but routinely invokes budget constraints to justify defunding social programs. Money, in other words, isn’t a scarce commodity like silver or gold. “To people who’ve worked in financial markets, who work at the Fed, this isn’t controversial at all,” says Galbraith, who, while not an adherent, can certainly be described as “MMT-friendly.”
The decisions about how to issue, lend, and spend money come down to politics, values, and convention, whether the goal is reducing inequality or boosting entrepreneurship. Inflation, MMT’s proponents contend, can be controlled through taxation, and only becomes a problem at full employment—and we’re a long way off from that, particularly if we include people who have given up looking for jobs or aren’t working as much as they’d like to among the officially “unemployed.” The point is that, once you shake off notions of artificial scarcity, MMT’s possibilities are endless. The state can guarantee a job to anyone who wants one, lowering unemployment and competing with the private sector for workers, raising standards and wages across the board.
bump
Lots of good stuff in here that very well may change the way you think about how money actually works.
Why impose taxes at all if all we need to do is print money?
Please explain.
jimmurphy said:
Why impose taxes at all if all we need to do is print money?
Please explain.
One could only wish it was as simple. The magical free lunch ride.
No need then to issue treasury bond debt that has to be paid back with interest.
Printing out of debt never works. Any country seriously doing so will end like Zimbabwe, Venezuela or the Weimar Republic. Worthless.
BG9 said:
One could only wish it was as simple. The magical free lunch ride.
No need then to issue treasury bond debt that has to be paid back with interest.
Printing out of debt never works. Any country seriously doing so will end like Zimbabwe, Venezuela or the Weimar Republic. Worthless.
or Japan
jimmurphy said:
Why impose taxes at all if all we need to do is print money?
Please explain.
The purpose of taxes is to extract money from the economy in order to maintain a balance. (redistributionary effects of taxes is a different subject.)
Or do you think the way the government pays for stuff is to transfer money from their tax receipts account to their checking account?
BG9 said:
jimmurphy said:
Why impose taxes at all if all we need to do is print money?
Please explain.
One could only wish it was as simple. The magical free lunch ride.
No need then to issue treasury bond debt that has to be paid back with interest.
Printing out of debt never works. Any country seriously doing so will end like Zimbabwe, Venezuela or the Weimar Republic. Worthless.
You obviously don't have the slightest clue as to what MMT is, so your thoughts on the subject are kinda worthless.
Nor do you understand how inflation works. Inflation is not caused by too much money in circulation. The money supply is increased in an attempt to keep up with price of goods that are in extreme short supply.
If it was caused by simply too much money being printed, we would have had wild inflation after the 2008 crash due to the trillions of dollars the feds pumped into the money supply as part of their quantitative easing. In fact, many people predicted exactly that. They were wrong. (looking at you @terp. )
There is a lot that's been written recently on MMT. I suggest everyone read up on it, because it really makes a lot of sense.
Here's a good defense of MMT from Forbes magazine.
drummerboy said:
You obviously don't have the slightest clue as to what MMT is, so your thoughts on the subject are kinda worthless.
Nor do you understand how inflation works. Inflation is not caused by too much money in circulation. The money supply is increased in an attempt to keep up with price of goods that are in extreme short supply.
If it was caused by simply too much money being printed, we would have had wild inflation after the 2008 crash due to the trillions of dollars the feds pumped into the money supply as part of their quantitative easing. In fact, many people predicted exactly that. They were wrong. (looking at you @terp. )
There is a lot that's been written recently on MMT. I suggest everyone read up on it, because it really makes a lot of sense.
Here's a good defense of MMT from Forbes magazine.
Dick Cheney was an MMT guy, except that he said it more bluntly -- "deficits don't matter."
drummerboy said:
You obviously don't have the slightest clue as to what MMT is, so your thoughts on the subject are kinda worthless.
Nor do you understand how inflation works. Inflation is not caused by too much money in circulation. The money supply is increased in an attempt to keep up with price of goods that are in extreme short supply.
Did you even read what I wrote? Did you understand what I wrote? Did I comment on inflation?
Again, you can't print your way out of debt. Any country doing so will end up worthless.
BG9 said:
drummerboy said:
You obviously don't have the slightest clue as to what MMT is, so your thoughts on the subject are kinda worthless.
Nor do you understand how inflation works. Inflation is not caused by too much money in circulation. The money supply is increased in an attempt to keep up with price of goods that are in extreme short supply.
Did you even read what I wrote? Did you understand what I wrote? Did I comment on inflation?
Again, you can't print your way out of debt. Any country doing so will end up worthless.
If your comments about the Weimar republic, Venezuela, et al did not have to do with inflation, then I apologize.
But then I have to ask, what was the point of the comment? What does it mean for money to become worthless but not have anything to do with inflation?
clearly the GOP is already operating if they think MMT is completely valid. They don't pause for a minute if they want to cut taxes or raise the military budget. Why is it that all the so-called experts will tell us it's impossible to do the same to give people health insurance, or to rebuild the infrastructure? The money is ALWAYS there to bomb the crap out of another country, or to give rich people a tax cut.
But why don’t they just do both? Bomb the hell out of everyone, fund the military AND give universal health care. Lower everyone’s taxes and just print money. They’d be heroes!
Since I’m “so ignorant” on the subject, I decided to further “educate” myself.
From an earlier quoted article:
“The first reaction flows from MMT’s rhetoric about the government always being able to print more money. The image of a government creating infinite piles of cash to finance whatever it wants to spend brings to mind Weimar-era wheelbarrows of cash...
The MMT reply to this is simple: No, our approach won’t lead to hyperinflation, because we take inflation incredibly seriously. Taxes are, they concede, sometimes necessary to stave off inflation, and as a consequence, preventing inflation can require cutting back on deficit spending by hiking taxes. But the lower inflation caused by higher taxes is not an effect of “lowering the deficit”; the lower deficit is just an artifact of the choice to raise taxes to fight inflation.”
Now I’m starting to “get it.”
Politicians will raise and lower taxes whenever the economy demands. That makes sense. People won’t mind it at all. Politicians won’t worry about this.
Once everyone is properly educated like I’ve been.
jimmurphy said:
Since I’m “so ignorant” on the subject, I decided to further “educate” myself.
From an earlier quoted article:
“The first reaction flows from MMT’s rhetoric about the government always being able to print more money. The image of a government creating infinite piles of cash to finance whatever it wants to spend brings to mind Weimar-era wheelbarrows of cash...The MMT reply to this is simple: No, our approach won’t lead to hyperinflation, because we take inflation incredibly seriously. Taxes are, they concede, sometimes necessary to stave off inflation, and as a consequence, preventing inflation can require cutting back on deficit spending by hiking taxes. But the lower inflation caused by higher taxes is not an effect of “lowering the deficit”; the lower deficit is just an artifact of the choice to raise taxes to fight inflation.”
Now I’m starting to “get it.”
Politicians will raise and lower taxes whenever the economy demands. That makes sense. People won’t mind it at all. Politicians won’t worry about this.
Once everyone is properly educated like I’ve been.
don't know why you're being flippant about not knowing anything about MMT. It's a complicated subject that pretty much rethinks standard economic theory. And it's been around for a while. It's not some flash in the pan.
It requires some work to understand.
I ask again - where did the money come from to pay for the Iraq war and quantitative easing? Do you think it was paid for by "taxing" or "borrowing"? Well, it clearly didn't come from taxing. Didn't come from borrowing either.
So explain it to me.
Hmm. Are you sure it didn’t come from borrowing? What makes you think that?
DB: Any comments on the flexible taxation levels to deal with inflation?
jimmurphy said:
But why don’t they just do both? Bomb the hell out of everyone, fund the military AND give universal health care. Lower everyone’s taxes and just print money. They’d be heroes!
they certainly could it they wanted to. But for many people in government the cruelty of the policies is a feature not a bug.
jimmurphy said:
Hmm. Are you sure it didn’t come from borrowing? What makes you think that?
It wouldn't make sense to come from borrowing. The point was to pump money into the economy. Borrowing takes money out of the economy.
jimmurphy said:
DB: Any comments on the flexible taxation levels to deal with inflation?
I don't know what you mean by "flexible" here.
However, since taxation takes money out of the economy, it can be used as a tool to decrease inflation.
ml1 said:
jimmurphy said:
But why don’t they just do both? Bomb the hell out of everyone, fund the military AND give universal health care. Lower everyone’s taxes and just print money. They’d be heroes!
they certainly could it they wanted to. But for many people in government the cruelty of the policies is a feature not a bug.
FWIW, our media featured several articles yesterday looking at the history and intent behind the ‘Medevac’ legislation & offshore holding of ‘illegal arrivals’ (asylum seekers/refugees etc coming by boat; also some deportees who have had visas/citizenship cancelled on character grounds). The government wants to repeal this Medevac legislation, or weaken it because it compels more humane treatment for offshore detainees
What’s pertinent to the discussion of this thread is that a former long-term public servant wrote to Parliament about this Bill, due to be debated this week. The result of the vote basically rests with crossbench, in effect one Independent. Everyone is trying to explain to her that the entire history of offshore detention is to maximise cruelty and uncertainty in every aspect of daily life, including being returned to place of origin even if you’re in danger. No matter how it costs the taxpayer to ‘prove’ how safe we’re keeping our shores and compassionate we are to ‘true refugees’. (We’re not, any more)
Meantime, over 80k people overstay their visas each year, arriving by plane (from memory; figure quoted earlier in the week). And we’re wasting billions on military stuff that’s outdated and not delivered (planes, submarines) we don’t need.
There are plans to cut back & privatise our universal health scheme next year, and to introduce major cuts to our social security systems.
drummerboy said:
jimmurphy said:
Hmm. Are you sure it didn’t come from borrowing? What makes you think that?
It wouldn't make sense to come from borrowing. The point was to pump money into the economy. Borrowing takes money out of the economy.
'fraid not.
The borrowing comes from issuing Treasury bonds to cover the difference between expenditures and receipts, which in turn need to be repaid plus interest. We pay for the wars and tax cuts by issuing bonds to cover the shortfall.
What exactly do you think the national debt is??
This fundamental misunderstanding fully explains why you'd think MMT makes sense.
It does not.
jimmurphy said:
drummerboy said:
jimmurphy said:
Hmm. Are you sure it didn’t come from borrowing? What makes you think that?
It wouldn't make sense to come from borrowing. The point was to pump money into the economy. Borrowing takes money out of the economy.
'fraid not.
The borrowing comes from issuing Treasury bonds to cover the difference between expenditures and receipts, which in turn need to be repaid plus interest. We pay for the wars and tax cuts by issuing bonds to cover the shortfall.
What exactly do you think the national debt is??
This fundamental misunderstanding fully explains why you'd think MMT makes sense.
It does not.
sorry, but you're quite wrong about this.
The fed did not borrow the money for QE. They simply created it. As I said, it makes no sense to borrow money from the people you're trying to give it to. The whole point of QE was to increase the money supply.
And again, how can you say a theory makes no sense when you clearly no less about it than I do, (which isn't an awful lot, I'll admit. It's a complicated subject)
(I was wrong about how the Iraq war was paid for, that was apparently done through bonds, as far as I can figure out.)
Meanwhile, the yearly treasury debt repayment will exceed our yearly national defense budget. In 10 years debt repayment will be our largest budget item.
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And so it is with global warming for many people. And vaccines for many others.