[Steve_American]

The "Angry Birds" Approach to Understanding Deficits in the Modern Economy

presented by Dr/Prof. Stephanie Kelton.

A comment by Matt N: “I'm not an economist. This was an incredibly succinct presentation that has put a lot into perspective for me. Thank you Stephanie Kelton
I'm also glad to read that Stephanie Kelton is [was] Bernie Sander's chief economist on the Budget Committee, its clear she understands economics.” …
...snip...

Dr. Kelton is an MMTer. I like MMT, it makes more sense to me than the “mainstream” or Neo-liberal or Neo-classical theory of economics [3 names for the same theory] does. Neo-liberalism assumes the US is still on the gold standard. [Dr. Steve Keen likes to say that Neo-classical theory assumes the world is still on the barter system and only adds money as an after thought. MMTers also say that Neo-liberalism ignores the banking system when it talks about Gov. debt and deficits.]

Four interesting points she made are:
1] The relationship between the Fed. Res. Bk and the US Treasury is not what most people think in 1 important way. It differs from your personal bank account in this 1 important way. It is, as soon as the Treasury authorizes the sales of US bonds or T-bills the Fed. credits the US account with that amount of dollars. So, in fact, the US Gov. can spend before it gets the loan, i.e. before it sells the bonds. MMT would point out that this makes it much easier to sell the bonds because the money goes into the banking system before it is taken out.

2] The US economy has gone into a recession *every* time since 1974 that the US Gov. deficit has gone below 3.9% of GDP. I think this is because of the chronic balance of payments problem that sucks dollars out of the US economy. This level of deficit is merely replacing those lost dollars.

3] Allen Greenspan testified under oath in reply to a question by Paul Ryan that the US Soc. Sec. system can always pay out any amount of benefits after the Trust Fund is exhausted because the US can create money. See point 1 above. However, he when on to add to his answer that what is necessary to support the elderly is for the economy to be able to provide the goods and services that they need or want to buy with their SS benefits.

4] Dr. Kelton said she has gone to Washington several times and sat down to explain MMT economics to Reps and Senators. She said that it takes a while but finally many of them have their aha moment and get it. But, then in every case they say, “I can't say that” [publicly]. The problem is that gold standard thinking is entrenched into American [and I think] European economic thinking, despite the fact that the US has been off the gold standard since 1971. Politicians can't go against what “everyone” “knows”.

[SueDeNîmes]

Anyone who thinks we can't have nice things because "THERE ISN'T ENOUGH MONEY!!1!" should watch the vid.

Four interesting points she made are:
1] The relationship between the Fed. Res. Bk and the US Treasury is not what most people think in 1 important way. It differs from your personal bank account in this 1 important way. It is, as soon as the Treasury authorizes the sales of US bonds or T-bills the Fed. credits the US account with that amount of dollars. So, in fact, the US Gov. can spend before it gets the loan, i.e. before it sells the bonds. MMT would point out that this makes it much easier to sell the bonds because the money goes into the banking system before it is taken out.

I think it's more like the Fed credits the payee's bank's Fed account with reserves, which are like meta-money the banks use to borrow from and settle up with each other, and which the Fed creates out of nothing. Whatever, same net effect.

(...)

4] Dr. Kelton said she has gone to Washington several times and sat down to explain MMT economics to Reps and Senators. She said that it takes a while but finally many of them have their aha moment and get it. But, then in every case they say, “I can't say that” [publicly]. The problem is that gold standard thinking is entrenched into American [and I think] European economic thinking, despite the fact that the US has been off the gold standard since 1971. Politicians can't go against what “everyone” “knows”.

Some UK think tank tried it with focus groups and suchlike on behalf of the Labour Party. They found that people (including most MPs) just couldn't get their heads round it. They'd have an ah-ha moment, then rapidly revert to household budget mindset.

Thus all public economic discourse continues on that basis, giving the Conservatives a permanent advantage.

[Crantag]

I watched a bit of the video.

The smuggness which typifies the presentation immediately stands out.

The theory presents like a User's Guide for the American monetary system, as the architects wish it to operate (though only those things deemed fit by the mainstream/interests to see light are treated).

The smuggness might give it an air of precision or even scientific grounding to those sympathetic to the conclusions. However, the Subprime Crisis of 2007-8 was a failure of MMT. Bernenke's policy prescriptions, which were consistent with MMT, likewise proved to have less-than expected effects (Hellicopter Ben was a student of the Great Depression, and believed he knew how to handle a crisis, but his theories were mostly bunk. Greenspan was also very wrong in his presumptions about the monetary system, in spite of his charisma. The Subprime Crisis was in part a failure of the Greenspan Agenda.)

[Steve_American]

I disagree.
Yes, there was a large deficit and this was consistent with MMT.
But, the 2008 crisis was not caused by inflation, which in turn was caused by deficit spending.
It was caused by massive fraud in the sub-prime loan practice being used.
When loans started to be un-repaid this made the banks re-valuate the value of their outstanding loans. Some economists say this was caused by a new "mark to market" rule, recently imposed.
IIRC inflation was quite low except in housing prices.
MMT was not the accepted theory of economics at the time.
So, no, MMT didn't fail. It wasn't being used.

Certainly, if deregulation of the banks was "part of the Greenspan agenda" then the Greenspan agenda was mainly at fault.

[Rugoz]

Bernenke's policy prescriptions, which were consistent with MMT, likewise proved to have less-than expected effects (Hellicopter Ben was a student of the Great Depression, and believed he knew how to handle a crisis, but his theories were mostly bunk.)

Says who? Bernanke had no choice but to work with the tools at his disposal, i.e. influencing long-term interest rates with QE. He had not control over fiscal policy, so he obviously couldn't implement Helicopter money.

[Steve_American]

Crantag wrote "I watched a bit of the video.

The smuggness which typifies the presentation immediately stands out.

The theory presents like a User's Guide for the American monetary system, as the architects wish it to operate (though only those things deemed fit by the mainstream/interests to see light are treated)."

I'm not sure what you mean by the bolded part, because MMT is in opposition to the "Mainstream" economic theory. If the only parts of MMT that were "deemed fit by the mainstream interests" were being implemented by the Bush Admin., then it isn't really MMT. MMT has 2 main prescriptions AFAICS, 1] don't worry about a moderate deficit and never run a surplus, and 2] the Gov. must have a program to hire all who want a job at a fairly low pay-rate. Only the 1st was being implemented by the Bush Admin. so it isn't MMT. And inflation [= prices increasing] was not the cause of the 2008 crash.

So, I think you are badly mistaken or spouting misinformation.