Let's learn about MMT - Modern Monetary Theory. Everything you know about federal financing is wrong.
jimmurphy said:
drummerboy said:
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.)
Let me get this straight.
- You've already admitted that you have no idea why every country that has its own currency doesn't just print money.
- You've admitted that you have no idea what effect the fact that currency rates float have on the process.
- You've stated that it doesn't matter in the least whether the USD is the world's reserve currency.
- You've dismissed examples of countries that had runaway inflation because they "printed money", completely devaluing their currency, despite that fact that they meet the six criteria of MMT that you spouted.
- You've admitted that you were wrong about how the government funds it's wars and national debt.
- You've demonstrated a complete misunderstanding of quantitative easing.
https://www.thebalance.com/what-is-quantitative-easing-definition-and-explanation-3305881
And you just admitted that you don't know "an awful lot" about this, yet you are so willing to stridently tell me I'm wrong.
I'm done. Enjoy your "liberal panacea" fantasy.
you're summary of what I'm wrong about is quite wrong for the most part, but why bother any more? you're just making stuff up.
And the main point about QE is that the Fed printed money, trillions of it. With no inflationary effect. It was not borrowed , as you contend. Deal with it.
So tell me again who doesn't get it.
drummerboy said:
And the main point about QE is that the Fed printed money, trillions of it. With no inflationary effect. It was not borrowed , as you contend.
When did jimmurphy contend this? Was it after you asked, “Where did the money come from to pay for the Iraq war and quantitative easing?”
DaveSchmidt said:
drummerboy said:
And the main point about QE is that the Fed printed money, trillions of it. With no inflationary effect. It was not borrowed , as you contend.
When did jimmurphy contend this? Was it after you asked, “Where did the money come from to pay for the Iraq war and quantitative easing?”
I took that from this:
You've demonstrated a complete misunderstanding of quantitative easing.
While I'll admit I don't have a complete understanding of QE, the main point I was making about QE was how the money for it came about. So if I have a complete misunderstanding of QE, that must be the part he says I don't understand, apart from every other part, which I apparently don't understand either, since my misunderstanding is complete.
Understand?
I see now. Where he linked to an article that began this way:
Quantitative easing is a massive expansion of the open market operations of a central bank. It’s used to stimulate the economy by making it easier for businesses to borrow money. The bank buys securities from its member banks to add liquidity to capital markets. This has the same effect as increasing the money supply. In return, the central bank issues credit to the banks' reserves to buy the securities.
Where do central banks get the credit to purchase these assets? They simply create it out of thin air. Only central banks have this unique power. This is what people are referring to when they talk about the Federal Reserve “printing money.”
Where do central banks get
the credit to purchase these assets? They simply create it out of thin
air. Only central banks have this unique power. This is what people are
referring to when they talk about the Federal Reserve “printing money.”
So basically classic Keynesian economics? Looking at QE in the wake of the 2008 recession and concluding we can just print money whenever we like strikes me as being akin to watching a car struggling uphill and concluding you can floor the accelerator whenever you want.
I think one major point missed in this discussion is the difference between monetary policy and fiscal policy.
Central banks have various tools and levers at their disposal to stimulate the economy and conversely rein in the economy as needed, with the goals of maintaining employment without undue inflation.. Quantitative easing aims to stimulate the economy by increasing the money supply and the opposite of that is quantitative tightening.
Fiscal policy is government spending and taxation. Totally different thing. Once money is spent on something, it's spent. There's no reverse of government spending and taxation like there is with quantitative easing.
So looking at QE and saying based on that model the government can just print money to spend on social programs without consequence to the economy is fallacious.
Smedley said:
...So looking at QE and saying based on that model the government can just print money to spend on social programs without consequence to the economy is fallacious.
actually it's not fallacious, because the argument against just printing money is that it will be inflationary and lead to the Weimar Republic.
But that's clearly not the case. Under the right circumstances (and MMT does not say you can simply print as much money as you want whenever you want. There are conditions which must be met.) you can print trillions of dollars without a deleterious effect.
PVW said:
Where do central banks get
the credit to purchase these assets? They simply create it out of thin
air. Only central banks have this unique power. This is what people are
referring to when they talk about the Federal Reserve “printing money.”So basically classic Keynesian economics? Looking at QE in the wake of the 2008 recession and concluding we can just print money whenever we like strikes me as being akin to watching a car struggling uphill and concluding you can floor the accelerator whenever you want.
But MMT does not say that "we can just print money whenever we like", so you're wrong in your assumptions.
Here's a good piece on the simplistic "printing money" canard.
drummerboy said:
Smedley said:
...So looking at QE and saying based on that model the government can just print money to spend on social programs without consequence to the economy is fallacious.
actually it's not fallacious, because the argument against just printing money is that it will be inflationary and lead to the Weimar Republic.
But that's clearly not the case. Under the right circumstances (and MMT does not say you can simply print as much money as you want whenever you want. There are conditions which must be met.) you can print trillions of dollars without a deleterious effect.
Under the right circumstances you can cross a busy highway and not get hit, but that doesn't mean you should do it.
But it's good that it's "clearly not the case" that just printing money will be inflationary. If only world leaders would check out MOL and embrace this idea, we can have a utopian paradise.
drummerboy said:
Here's a good piece on the simplistic "printing money" canard.
Best of luck to others. That blog post, well meaning as it was, helped me not at all. (Given DB’s posture in this “Let’s learn” thread, I did enjoy Mitchell’s retort that senior Keynesians “are used to treating the public with contempt,” though.)
Smedley said:
drummerboy said:
Smedley said:
...So looking at QE and saying based on that model the government can just print money to spend on social programs without consequence to the economy is fallacious.
actually it's not fallacious, because the argument against just printing money is that it will be inflationary and lead to the Weimar Republic.
But that's clearly not the case. Under the right circumstances (and MMT does not say you can simply print as much money as you want whenever you want. There are conditions which must be met.) you can print trillions of dollars without a deleterious effect.
Under the right circumstances you can cross a busy highway and not get hit, but that doesn't mean you should do it.
But it's good that it's "clearly not the case" that just printing money will be inflationary. If only world leaders would check out MOL and embrace this idea, we can have a utopian paradise.
Yeah, so how did you do on the Miller Analogy test? I'm guessing not great.
drummerboy said:
But MMT does not say that "we can just print money whenever we like", so you're wrong in your assumptions.
Ok, but I'm having a hard time seeing how that's not what you're saying. In your understanding of MMT, when should a government not print money?
PVW said:
Ok, but I'm having a hard time seeing how that's not what you're saying. In your understanding of MMT, when should a government not print money?
here ya go
https://boingboing.net/2019/03/06/austerity-doctrine.html
The limits are key to understanding MMT: the traditional account of deficit spending is that it is inflationary, because as the government issues more currency, it dilutes the existing supply, pushing up prices. But MMT says that inflation only occurs when government spending competes with private spending for the same labor and resources. If all the plumbers are working as hard as they can and the government prints a bunch of money to start a new nationwide plumbing initiative, then it will be bidding against anyone who needs some plumbing done for those plumbers' services, pushing up prices.
But if there is a bunch of excess capacity in the economy -- factories running below capacity, skilled people who want to work sitting around idle -- then the government can buy up all that excess capacity without competing with private spenders and employers, creating full employment and broad, shared prosperity. And when full employment is attained, the government can prevent inflation by taxing some of the money it issued out of existence.
MMT is an economic response to austerity, which has been a catastrophic failure everywhere it has been tried, creating misery, stalling growth, and wiping out the hopes of whole generations.
There are some important limits on MMT: first, it only works if you're a sovereign state issuing your own currency. This doesn't apply to cities, provinces, or countries in the Eurozone (whose power to issue currency is limited by the European Central Bank). MMT only works for countries whose debt is issued in their national currency: if your country borrows in a currency other than its own, then printing more money won't help service that debt.
drummerboy said:
PVW said:
Ok, but I'm having a hard time seeing how that's not what you're saying. In your understanding of MMT, when should a government not print money?
here ya go
https://boingboing.net/2019/03/06/austerity-doctrine.html
The limits are key to understanding MMT: the traditional account of deficit spending is that it is inflationary, because as the government issues more currency, it dilutes the existing supply, pushing up prices. But MMT says that inflation only occurs when government spending competes with private spending for the same labor and resources. If all the plumbers are working as hard as they can and the government prints a bunch of money to start a new nationwide plumbing initiative, then it will be bidding against anyone who needs some plumbing done for those plumbers' services, pushing up prices.
But if there is a bunch of excess capacity in the economy -- factories running below capacity, skilled people who want to work sitting around idle -- then the government can buy up all that excess capacity without competing with private spenders and employers, creating full employment and broad, shared prosperity. And when full employment is attained, the government can prevent inflation by taxing some of the money it issued out of existence.
MMT is an economic response to austerity, which has been a catastrophic failure everywhere it has been tried, creating misery, stalling growth, and wiping out the hopes of whole generations.
There are some important limits on MMT: first, it only works if you're a sovereign state issuing your own currency. This doesn't apply to cities, provinces, or countries in the Eurozone (whose power to issue currency is limited by the European Central Bank). MMT only works for countries whose debt is issued in their national currency: if your country borrows in a currency other than its own, then printing more money won't help service that debt.
So if the economy is at full-ish capacity, and Congress enacts M4A and raises no taxes, what would happen then?
PVW said:
So if the economy is at full-ish capacity, and Congress enacts M4A and raises no taxes, what would happen then?
It depends on what you mean by "fullish capacity". Even though we're at low unemployment, for example, there are still plenty of things the government could pour money into, such as infrastructure spending.
As for M4A, I'm pretty sure taxes would have to be raised somewhat, since in effect what we're doing is recapturing money that was formerly spent somewhere else (i.e. private insurance vs M4A). I don't think anyone is proposing that M4A simply be paid for by printing money, so to speak.
For funding M4A, I'm not sure why no one has proposed that for people who already have employer provided insurance, that the private insurance payments from both employee and employer simply be redirected towards M4A (in some pro-rated manner), rather than to the private insurance company. If that was done, then taxes wouldn't have to be raised at all - you're simply converting a privately paid premium into what is essentially a tax payment.
Good explainer on MMT by Cory Doctorow
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Modern Monetary Theory (previously) is an economic philosophy based on the idea that all state spending is "deficit" spending, since money comes into existence when the government spends it, and when the government raises taxes, it does so in order to take that money out of existence, both in order to control inflation and to limit the concentration of power in the hands of the wealthy.
The corollaries of this are many, but the two standout ones are:
1. The government can create money to buy any good or service that the private sector isn't using without driving inflation (that is, if there's someone unemployed and the government gives them a job, that won't drive up wages because the private sector had already passed on using their labor, so the supply/demand ratio of labor to private jobs remains constant), offering full employment to everyone who wants to work; and
2. The government can create money to buy goods and services that the private sector is currently using without creating inflation, provided it can convince people not to spend that money -- for example, by creating "war bonds" that sequester the vast sums that get pumped into the economy during wartime, to prevent the workers who receive those sums from bidding against the materials that are being used in munitions factories.
These two facts are central to the Green New Deal, which proposes using a combination of a federal jobs guarantee and federal procurements of the materials needed for a sustainable energy conversion and climate change remediation to avert the climate crisis.
As Modern Monetary Theory gains ground in DC -- thanks in large part to the likes Stephanie Kelton, a leading MMT advocate who is Bernie Sanders' economic advisor, the deficit/austerity hawks are starting to freak out at the thought that we might reverse 40 years of treating currency-issuing sovereign nations like they were households balancing their checkbooks.
Some centrists are trying to diffuse the energy for MMT by proposing "stimulus" as a means of making the economy less unequal and dysfunctional, but the right aren't even willing to make that concession -- instead, they're having a full-bore freakout.
The decline of the deficit fear-factor is palpable in Washington, said Coronado, a former Federal Reserve economist. “You can see it politically, it’s already happening,” she said. “The progressive camp is frustrated, they have had it, and are saying ‘You guys are wrong, you have been wrong about everything and now it’s going to be our turn.’”
Slowing global growth and trade disputes have helped push interest rates lower, and were cited by the Fed when it cut its target rate twice this year. Investors project a third cut Oct. 30, and other central banks are also easing policy.
drummerboy said:
Thought I'd revive this, since we're now living it.
and apparently MMT is also a conservative panacea (provided there isn't a Democrat in the White House)
terp said:
Conservatives are just Progressives driving the speed limit.
Nope. They are Moderates driving in reverse.
good explainer thread on the whole MMT thing. Learn why the trillions being spent on the pandemic will not bring on deficit hell.
#ModernMonetaryTheory is an economic lens for understanding how money works. It starts from the commonsense assertion that national governments are money-issuers, and the rest of us are money users, and that money works differently when you are in charge of creating it. 1/ pic.twitter.com/b9rnNbq7cN
Should I bother even reading reviews from the folks at Mises?
Have they ever been right about anything?
It depends if you want to understand some potential flaws in the author's thinking or if you'd rather just drink the koolaid.
Full disclosure: I'm a big Bob Murphy fan. He has debated Mosler. Video below...worth a watch if you are interested in the topic.
I dunno - devotees of a single individual like Mises may be the ones that are the kool-aid drinkers.
drummerboy said:
I dunno - devotees of a single individual like Mises may be the ones that are the kool-aid drinkers.
If you're not really interested in the topic but would rather believe the fairytale because it fits your world view that is your prerogative. BTW: George Washington University is devoted to more than just our first president. 
Sorry, that's a piss poor analogy, and I'm sure you know it.
Or are you saying that the teachings of Mises are not the driving forces of mises.org?
Hadn't heard of Murphy before, but finding out that he works (worked?) for a climate change denialist organization founded by Charles Koch doesn't give me a warm and fuzzy about him.
Mises was a leading figure in the school. The Austrian schools underpinnings go back to Carl Menger, Frederic Bastiat, and Jean Baptiste Say.
Regarding Murphy, all of the climate change work I've seen is based on IPCC data. Why is everything a witch hunt with the left? The pattern is : Think like us or don't work in our institutions! When someone goes to work for someone else, they dismiss them because they work for the bad guys.
The fact of the matter is that you know even less about Murphy than you know about the Austrian School, MMT or even economics. The problem is that you have no class. If you did you would talk derisively about people you know nothing about.
I've been trying to be kind here recently, but this flavor of ignorance is dangerous. I mean to advocate for something as radical as MMT and not take even a minimal interest in opposing views. But rather spend time at character assasination? I guess I shouldn't be surprised.
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Let me get this straight.
https://www.thebalance.com/what-is-quantitative-easing-definition-and-explanation-3305881
And you just admitted that you don't know "an awful lot" about this, yet you are so willing to stridently tell me I'm wrong.
I'm done. Enjoy your "liberal panacea" fantasy.