Let's learn about MMT - Modern Monetary Theory. Everything you know about federal financing is wrong.

terp said:

I've been trying to be kind here recently 

Noticed and appreciated.

terp said:

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.

Character assassination? All I did was look into the background of a man I'd never heard of before and note that what I'd learned didn't leave me warm and fuzzy. You're a bit sensitive here I think.

Telling me that I know less about him than pretty much anything else is hardly news too. I plead guilty.

terp,

And not for nothing, in this thread I've admitted my knowledge of MMT is limited, but I've expounded on what I believe its implications are.

You, on the other hand, have offered no thoughts of your own (that I can recall anyway) but have pointed only to mises.org and Murphy as rebuttals. And offering a 2 hour video is a bit of an ask.

Do you have thoughts of your own on the issue, or do you want to battle with links?

I'm just about through with Stephanie Kelton's The Deficit Myth and I'm really impressed. I haven't disagreed with anything she's said of any consequence. Recommended.

It has really fleshed out my understanding of MMT, which pretty clearly more accurately describes the relationship between spending and the federal debt than does the "we spend too much and need to balance the budget" mindset that is prevalent in our economic discourse, much to our great detriment.

drummerboy said:

I'm just about through with Stephanie Kelton's The Deficit Myth and I'm really impressed. I haven't disagreed with anything she's said of any consequence. Recommended.

It has really fleshed out my understanding of MMT, which pretty clearly more accurately describes the relationship between spending and the federal debt than does the "we spend too much and need to balance the budget" mindset that is prevalent in our economic discourse, much to our great detriment.

Trying to bait me out of hiding?

Does the last three weeks of the House not even having a speaker make you feel more, less, or about the same level of confidence in MMT's championing of fiscal over monetary policy?

jimmurphy said:

drummerboy said:

I'm just about through with Stephanie Kelton's The Deficit Myth and I'm really impressed. I haven't disagreed with anything she's said of any consequence. Recommended.

It has really fleshed out my understanding of MMT, which pretty clearly more accurately describes the relationship between spending and the federal debt than does the "we spend too much and need to balance the budget" mindset that is prevalent in our economic discourse, much to our great detriment.

Trying to bait me out of hiding?

ha

PVW said:

Does the last three weeks of the House not even having a speaker make you feel more, less, or about the same level of confidence in MMT's championing of fiscal over monetary policy?

made no difference actually.

don't know if I posted this before, but this is a good explainer on why taxes are not necessary to fund the federal government.

the recent downgrading of the US credit rating by Moody's has an MMT component and really calls into question Moody's competency.

Moody's, among other things, said that the U.S. is at risk of default due to the growing debt.

The only risk of default comes legislatively, from Republicans if they refuse to increase the debt ceiling. Otherwise, the U.S. can always pay it's creditors because it can simply create the requisite dollars.

You can make an argument that creating all those dollars might have a bad effect on the economy, but that is not an issue of defaulting. Defaulting is simply not possible.

https://www.cnbc.com/id/44051683

"The United States can pay any debt it has because we can always print
money to do that. So there is zero probability of default" said
Greenspan on NBC's Meet the Press

Bernanke has said much the same thing.

drummerboy said:

the recent downgrading of the US credit rating by Moody's has an MMT component and really calls into question Moody's competency.

Moody’s downgraded its outlook for the rating. The rating itself is still AAA.

DaveSchmidt said:

drummerboy said:

the recent downgrading of the US credit rating by Moody's has an MMT component and really calls into question Moody's competency.

Moody’s downgraded its outlook for the rating. The rating itself is still AAA.

Yes, that's correct but immaterial to my criticism.

drummerboy said:

the recent downgrading of the US credit rating by Moody's has an MMT component and really calls into question Moody's competency.

Moody's, among other things, said that the U.S. is at risk of default due to the growing debt.

The only risk of default comes legislatively, from Republicans if they refuse to increase the debt ceiling. Otherwise, the U.S. can always pay it's creditors because it can simply create the requisite dollars.

You can make an argument that creating all those dollars might have a bad effect on the economy, but that is not an issue of defaulting. Defaulting is simply not possible.

https://www.cnbc.com/id/44051683

"The United States can pay any debt it has because we can always print
money to do that. So there is zero probability of default" said
Greenspan on NBC's Meet the Press

Bernanke has said much the same thing.

Ok, but even if there's no danger of Congress being unable to pay any debt, it still seems like Congress just deciding not to pay debts is a real risk. Defaulting is, rather stupidly, absolutely possible.

PVW said:

drummerboy said:

the recent downgrading of the US credit rating by Moody's has an MMT component and really calls into question Moody's competency.

Moody's, among other things, said that the U.S. is at risk of default due to the growing debt.

The only risk of default comes legislatively, from Republicans if they refuse to increase the debt ceiling. Otherwise, the U.S. can always pay it's creditors because it can simply create the requisite dollars.

You can make an argument that creating all those dollars might have a bad effect on the economy, but that is not an issue of defaulting. Defaulting is simply not possible.

https://www.cnbc.com/id/44051683

"The United States can pay any debt it has because we can always print
money to do that. So there is zero probability of default" said
Greenspan on NBC's Meet the Press

Bernanke has said much the same thing.

Ok, but even if there's no danger of Congress being unable to pay any debt, it still seems like Congress just deciding not to pay debts is a real risk. Defaulting is, rather stupidly, absolutely possible.

Yeah but Moody's is complaining about the size of the debt, which has nothing to do with the risk. They do mention political instability as an issue though.

eta: As far as I can see, Moody's concern over politics has nothing to do with the ceiling but rather is a complaint that Congress is not tackling the "debt" situation.

Here's a deep dive

https://mythfighter.com/2023/11/17/when-facts-dont-matter-the-right-wings-refusal-to-understand-monetary-sovereignty/

drummerboy said:

Yes, that's correct but immaterial to my criticism.

I just saw you there and thought I’d save you the error.

I've been continuing my education in MMT, and the one thing that has become apparent that wasn't so clear when I started this was that MMT is not about policy but is rather just an attempt to accurately describe how Federal spending works, and in so doing clear up the many misconceptions in the public's understanding of that. MMT’ers like to refer to MMT as a lens.

Consequently, I think all of the following things are true. (I’m going to use “Federal debt” below, even though it’s not really debt in the traditional sense

MMT is primarily a description of how money works in a monetarily sovereign nation. It doesn’t deal with partisan policy issues, though certainly people who favor MMT have policy preferences. But the principles can be used by any political viewpoint.

In no particular order:

• The Federal budget has no relationship to household budgets
• The Federal debt is not a burden to future generations.
• The Federal debt is not debt in any conventional sense of the word.
• The government spends first and taxes second. Therefore:
  • Taxes are not used to fund Federal spending.
• Every dollar of Federal debt is someone else’s surplus.
• The Federal deficit is merely the difference between what the government has spent and what it has taxed. The Federal debt is merely the sum of all those deficits.
• Selling treasuries is a policy choice. It is not a source of funding.
• Deficits are necessary for a healthy economy.
• Anyone asking “how do we pay for this” is either ignorant or hiding the truth.
• We do not need to increase taxes on either the wealthy or big business to have nice things.
• The Federal government does not need to borrow to fund spending.
• The U.S. is not out of money, contra Obama circa a long time ago. https://www.c-span.org/video/?c4951036/user-clip-obama-money. Obama’s error caused the recovery from the Great Recession to last many more years than necessary.
• The U.S. can’t run out of money.
• The U.S. can’t default on its debt, except through the stupid debt ceiling law.
• Hyperinflation is not now nor has ever in history been primarily caused by a too large money supply, though it might exacerbate already existing high inflation. (this is MMT adjacent but is needed to counter criticism that too much spending will lead to hyperinflation) There’s a CATO study (of all people) that looked at this. Popular examples like Zimbabwe, Venezuela and Weimar show this to be true.
• The constraints on Federal spending are not fiscal (i.e. how do we pay for it) but rather based on resources. Do we have the labor and industrial capacity to support the spending? If these fall short, they can lead to inflation, because we will have injected too much money into the economy, chasing too few goods.

In his next installment, Drummerboy will debunk the laws of physics.

Oh, I don't know that I'd put it that way. MMT strikes me not as wrong, but rather as far less revolutionary than it sells itself as. Much of it is simply restating the same thing as "traditional" monetary theory in a different form. As far a practical differences, the biggest one seems to me that it urges a great focus on fiscal policy (via taxation) to do what is currently mainly done via monetary policy (Federal Reserve actions).

And sure, it seems plausible that in a time of full employment raising taxes is more effective for combating inflation than raising interest rates. As a practical matter, though, I have to say MMT proponents seem to have far greater faith on Congress's ability to respond to economic conditions in an agile and timely matter than I do.

Actually, as the wikipedia entry notes, a major theoretical bone of contention is around how government spending, deficits, and interest rates interact. I can't say that I have sufficient grounding to have a well-formed opinion on that -- and based on DB's other thread, I can't say I'm convinced anyone else I've seen opine on MOL does either.

PVW said:

Oh, I don't know that I'd put it that way. MMT strikes me not as wrong, but rather as far less revolutionary than it sells itself as. Much of it is simply restating the same thing as "traditional" monetary theory in a different form. As far a practical differences, the biggest one seems to me that it urges a great focus on fiscal policy (via taxation) to do what is currently mainly done via monetary policy (Federal Reserve actions).

And sure, it seems plausible that in a time of full employment raising taxes is more effective for combating inflation than raising interest rates. As a practical matter, though, I have to say MMT proponents seem to have far greater faith on Congress's ability to respond to economic conditions in an agile and timely matter than I do.

Actually, as the wikipedia entry notes, a major theoretical bone of contention is around how government spending, deficits, and interest rates interact. I can't say that I have sufficient grounding to have a well-formed opinion on that -- and based on DB's other thread, I can't say I'm convinced anyone else I've seen opine on MOL does either.

Your description of MMT is kind of wrong. Name me one major tenet of MMT that is merely a restatement of traditional monetary theory. And what exactly do you mean by traditional monetary theory in the first place?

I don't really understand this sentence: "As far a practical differences, the biggest one seems to me that it urges a great focus on fiscal policy (via taxation) to do what is currently mainly done via monetary policy (Federal Reserve actions)."

Not sure why you think MMT places a focus on taxation.

The biggest practical difference between MMT and the mainstream is that the question "where is the money to pay for this" is fundamentally the wrong question to ask and is based on false premises.

Another practical difference is stating that that debt/deficit are not inherent threats to us or our children or to our children's children. Not now and not in the future.

If you ask me, it's the definition of revolutionary to state that every politician who claims otherwise is wrong. And it's revolutionary to state that taxes do not fund the government. (Though it's certainly not a new idea.) Or to state that the government does not need to sell treasuries to borrow to fund the government.

These are all basic, fundamental beliefs held by an overwhelming majority of the public and politicians. They have dominated the mainstream economic discourse for decades and decades. And MMT says they are flat out wrong.

Not sure what more of a revolution you want.

tjohn said:

In his next installment, Drummerboy will debunk the laws of physics.

you can write a post such as this, or tell me how I'm wrong,

drummerboy said:

Your description of MMT is kind of wrong. Name me one major tenet of MMT that is merely a restatement of traditional monetary theory. And what exactly do you mean by traditional monetary theory in the first place?

I don't really understand this sentence: "As far a practical differences, the biggest one seems to me that it urges a great focus on fiscal policy (via taxation) to do what is currently mainly done via monetary policy (Federal Reserve actions)."

Not sure why you think MMT places a focus on taxation.

The biggest practical difference between MMT and the mainstream is that the question "where is the money to pay for this" is fundamentally the wrong question to ask and is based on false premises.

Another practical difference is stating that that debt/deficit are not inherent threats to us or our children or to our children's children. Not now and not in the future.

If you ask me, it's the definition of revolutionary to state that every politician who claims otherwise is wrong. And it's revolutionary to state that taxes do not fund the government. (Though it's certainly not a new idea.) Or to state that the government does not need to sell treasuries to borrow to fund the government.

These are all basic, fundamental beliefs held by an overwhelming majority of the public and politicians. They have dominated the mainstream economic discourse for decades and decades. And MMT says they are flat out wrong.

Not sure what more of a revolution you want.

I see little difference between MMT and Keynesian economics. Sure, as a political point, lots of people are always going on about the deficit. In practice, since Keynes we basically always run deficits, probably always will, and that's fine. I guess MMT gives us some new language for saying "that's fine," but what's actually different in practice?

tl;dr -- a framework that results in continuing to do what we've long been doing is not "revolutionary" to my mind.

PVW said:

tl;dr -- a framework that results in continuing to do what we've long been doing is not "revolutionary" to my mind.

dude - MMT turns the common understanding of Federal economics upside down and inside out. If the MMT lens was used by everyone, public policy would likely be enormously different. We continue to do what we've been doing (policy wise) not as a result of MMT but because people don't understand how money works at the Federal level.

i.e. it's incorrect to say that MMT is "a framework that results in continuing to do what we've long been doing ".  Do you realize how we've been hampered by austerity measures and pay-go rules in the past 20 years? All distinctively anti-MMT.

If by that statement you are merely referring to the fact that we continue to deficit spend, you are only talking about half of the pie. The other half is what we choose to spend on, and as long as people think their taxes are going to pay lazy people (usually non-white) for doing nothing we'll be stuck without most of the advantages that the rest of the modern world takes for granted.

you're being deliberately obstinate I think.  It's one thing to criticize the tenets of MMT - have at it - but to claim that it's a nothing burger is silly. If it was so, it wouldn't have such opposition in mainstream economics.

PVW said:

tl;dr -- a framework that results in continuing to do what we've long been doing is not "revolutionary" to my mind.

Ok, DS, since I know you're probably thinking it given we've just celebrated the New Year-- yes, some revolutions (say that of the Earth around the Sun) leave you exactly where you were before.

drummerboy said:

dude - MMT turns the common understanding of Federal economics upside down and inside out. If the MMT lens was used by everyone, public policy would likely be enormously different. We continue to do what we've been doing (policy wise) not as a result of MMT but because people don't understand how money works at the Federal level.

i.e. it's incorrect to say that MMT is "a framework that results in continuing to do what we've long been doing ".  Do you realize how we've been hampered by austerity measures and pay-go rules in the past 20 years? All distinctively anti-MMT.

If by that statement you are merely referring to the fact that we continue to deficit spend, you are only talking about half of the pie. The other half is what we choose to spend on, and as long as people think their taxes are going to pay lazy people (usually non-white) for doing nothing we'll be stuck without most of the advantages that the rest of the modern world takes for granted.

you're being deliberately obstinate I think.  It's one thing to criticize the tenets of MMT - have at it - but to claim that it's a nothing burger is silly. If it was so, it wouldn't have such opposition in mainstream economics.

I'd submit austerity is more about politics than economics. Republicans aren't opposed to investing in health and education because they actually care about the deficit.

PVW said:

Ok, DS, since I know you're probably thinking it given we've just celebrated the New Year-- yes, some revolutions (say that of the Earth around the Sun) leave you exactly where you were before.

dude - you’re being deliberately clairvoyant I think.

PVW said:

drummerboy said:

dude - MMT turns the common understanding of Federal economics upside down and inside out. If the MMT lens was used by everyone, public policy would likely be enormously different. We continue to do what we've been doing (policy wise) not as a result of MMT but because people don't understand how money works at the Federal level.

i.e. it's incorrect to say that MMT is "a framework that results in continuing to do what we've long been doing ".  Do you realize how we've been hampered by austerity measures and pay-go rules in the past 20 years? All distinctively anti-MMT.

If by that statement you are merely referring to the fact that we continue to deficit spend, you are only talking about half of the pie. The other half is what we choose to spend on, and as long as people think their taxes are going to pay lazy people (usually non-white) for doing nothing we'll be stuck without most of the advantages that the rest of the modern world takes for granted.

you're being deliberately obstinate I think.  It's one thing to criticize the tenets of MMT - have at it - but to claim that it's a nothing burger is silly. If it was so, it wouldn't have such opposition in mainstream economics.

I'd submit austerity is more about politics than economics. Republicans aren't opposed to investing in health and education because they actually care about the deficit.

absolutely - but they get the support of their voters because their voters think their taxes are being wasted. because that's what they are told.

PVW said:

PVW said:

tl;dr -- a framework that results in continuing to do what we've long been doing is not "revolutionary" to my mind.

Ok, DS, since I know you're probably thinking it given we've just celebrated the New Year-- yes, some revolutions (say that of the Earth around the Sun) leave you exactly where you were before.

sigh

and some don't.

a case in point: the NYT, whom we love to depend on for economic analysis, today tells us that we are yet again facing doom because of the debt, scaring millions of Americans in the process.

oh noes! we're gonna run out of money!

and no, mr. daveschmidt , the word doom does not appear in the article. I made that part up for dramatic effect.

this showed up today