MMT says that by definition having a Federal surplus is forcing the Public Sector to be in deficit. - Page 5 - Politics Forum.org | PoFo

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#14949619
Rugoz wrote:
Given there's nothing new about MMT I don't see what policy changes it would imply.

But, there is at least one new thing.
MMT calls for a massive Jobs Program. For the US Gov. to offer to hire any person who wants a job, a full time job or part time if he/she isn't up to working 8 hr. a day. Local govs. would specify what needs to be done and the US Gov. would provide the dollars to pay the workers to do the work.
. . What work? Whatever the local gov. wants done [with a vetting process at the top]. Maintain the parks, sweep the streets, pick up trash, program the city's computers, etc.

This "nothing new" BS is a lie. Plain and simple. A lie.
MMT says that only when there is full employment will additional deficit spending cause inflation. That is the opposite of what Neo-liberal economics says.
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#14949620
Steve_American wrote:But, there is at least one new thing.
MMT calls for a massive Jobs Program. For the US Gov. to offer to hire any person who wants a job, a full time job or part time if he/she isn't up to working 8 hr. a day. Local govs. would specify what needs to be done and the US Gov. would provide the dollars to pay the workers to do the work.
. . What work? Whatever the local gov. wants done [with a vetting process at the top]. Maintain the parks, sweep the streets, pick up trash, program the city's computers, etc.

This "nothing new" BS is a lie. Plain and simple. A lie.
MMT says that only when there is full employment will additional deficit spending cause inflation. That is the opposite of what Neo-liberal economics says.
.

Those aren't new ideas, though. Ever heard of the New Deal?

Your insular ideological adherence prevents you from being taken seriously by people who do understand economic theory and history.
#14949630
Rugoz wrote:
Then what's your point? You said



but you didn't say what policy changes that would imply.


My overall point is that we can't just drop MMT concepts into the current system. We need to change the system. The primary part of which is to change how taxation is done.

Basically, what needs to be done is that taxes adjust automatically. It needs to be built into the system in a way that politicians can't mess with it. An example that was given is unemployment insurance. When times are good, the insurance premiums that companies have to pay decreases, but when times aren't so good, or they are expected to not be so good, they automatically have to pay in a bit more.

We would have to do similar with MMT, so that the system can balance itself automatically. What this means is that your paycheck could potentially will go up/down paycheck to paycheck as conditions change in the economy. This is necessary, but psychologically, people might have a hard time accepting this. The truth of the matter is, even in todays system every pay check we get is less than the previous due ot inflation, but the number stays the same (assuming hours worked is the same, or you're salaried). Nonetheless, this "steady paycheck" would be hard to give up.


Steve_American wrote:I'm so glad to have you on the team.
So, how can we convince others to join us?


One thing that I really like about it is that basically, when money is printed/created. Rather than handing it over to banks like it's done now. It's directly given to "the people" in the form of government spending on public goods (infrastructure, healthcare, military, etc. etc., all of which create jobs).

Other points I like about MMTers. We don't exactly know how inflation works, so the traditional interpretation of fed interest rates and inflation aren't solid. Also, governments could probably spend more, and we need infrastructure.

Last, ultimately, budgets don't matter in this setup. It's the more important stuff that matters. Capacity for production being the big one.

It's very interesting.
#14949633
Rancid wrote:My overall point is that we can't just drop MMT concepts into the current system. We need to change the system. The primary part of which is to change how taxation is done.

Basically, what needs to be done is that taxes adjust automatically. It needs to be built into the system in a way that politicians can't mess with it. An example that was given is unemployment insurance. When times are good, the insurance premiums that companies have to pay decreases, but when times aren't so good, or they are expected to not be so good, they automatically have to pay in a bit more.

We would have to do similar with MMT, so that the system can balance itself automatically. What this means is that your paycheck could potentially will go up/down paycheck to paycheck as conditions change in the economy. This is necessary, but psychologically, people might have a hard time accepting this. The truth of the matter is, even in todays system every pay check we get is less than the previous due ot inflation, but the number stays the same (assuming hours worked is the same, or you're salaried). Nonetheless, this "steady paycheck" would be hard to give up.


They're called automatic stabilizers and they've existed for like forever. Unemployment insurance is one of them. Nevertheless they're not always sufficient and they might also add to the structural deficit.

Rancid wrote:One thing that I really like about it is that basically, when money is printed/created. Rather than handing it over to banks like it's done now. It's directly given to "the people" in the form of government spending on public goods (infrastructure, healthcare, military, etc. etc., all of which create jobs).


The central bank doesn't hand over money to the banks, it buys assets to manipulate the interest rate. The return on those assets goes to the government. The FED's balance sheet is at ~25% of GDP, so technically net government debt is 25% lower, though the FED might need to sell those assets to fight inflation in the future.

Rancid wrote:Other points I like about MMTers. We don't exactly know how inflation works, so the traditional interpretation of fed interest rates and inflation aren't solid. Also, governments could probably spend more, and we need infrastructure.


How do we not know how inflation works and what is the "traditional interpretation"?

Rancid wrote:Last, ultimately, budgets don't matter in this setup. It's the more important stuff that matters. Capacity for production being the big one.


Capacity utilization being relevant for inflation, what an astounding insight. :roll:
#14949634
Rugoz wrote:The central bank doesn't hand over money to the banks, it buys assets to manipulate the interest rate. The return on those assets goes to the government. The FED's balance sheet is at ~25% of GDP, so technically net government debt is 25% lower, though the FED might need to sell those assets to fight inflation in the future.


The assets are held by banks. Thus, it's handing them money. Obviously it's not free money, but it's easy money.

Sure, but effectively the fed just types a number up to buy those assets. Which is expanding the money supply. The point is, this is how they manipulate interest rates and they are effectively printing money and giving it to banks on way or another.


Rugoz wrote:How do we not know how inflation works and what is the "traditional" interpretation?


Rather, the traditional way to manipulate inflation rates. Which is, fed interest rates. Increase interest rates to drop inflation, and decrease interest rates to increase inflation. In recent decades this lever hasn't been as influential on inflation overall.

One of the things to blame is technology. Companies today (like Walmart and Amamzon for example) are just so damn good at keeping products cheap, that it greatly counter acts interest rate decreases from the fed. The point is, that interest rate lever just isn't as bullet proof and tried and true as everyone thought.

According to the pod cast I was listening to, this is a thing that is generally accepted by most economists. The Fed interest rate lever just isn't what it used to be.



Anyway, MMT just isn't as crazy as I thought it was. Initially I thought people were saying that the government can just do whatever it wants, but that's not true. It's just a different way of looking at the money supply and the role of taxation.
#14949641
Rancid wrote:The assets are held by banks. Thus, it's handing them money. Obviously it's not free money, but it's easy money.

Sure, but effectively the fed just types a number up to buy those assets. Which is expanding the money supply. The point is, this is how they manipulate interest rates and they are effectively printing money and giving it to banks on way or another.


Buying an asset from somebody is not equivalent to handing over money, whether it's easy money depends on whether the asset is overvalued. Given the central bank buys low (recession) and sells high (boom), I would presume the opposite. It's certainly a nice source of revenue for the government:

Image

Could the government do better if the central bank would finance the government deficit directly (or better part of it, to the extent it would be compatible with the inflation target) instead of buying its bonds and other assets, that's an interesting question. Intuitively I would say no.

Rancid wrote:Rather, the traditional way to manipulate inflation rates. Which is, fed interest rates. Increase interest rates to drop inflation, and decrease interest rates to increase inflation. In recent decades this lever hasn't been as influential on inflation overall.

One of the things to blame is technology. Companies today (like Walmart and Amamzon for example) are just so damn good at keeping products cheap, that it greatly counter acts interest rate decreases from the fed. The point is, that interest rate lever just isn't as bullet proof and tried and true as everyone thought.

According to the pod cast I was listening to, this is a thing that is generally accepted by most economists. The Fed interest rate lever just isn't what it used to be.


Interest rates influence inflation through increased/decreased investment and consumption. That channel does not always work, but that is textbook stuff every undergraduate students is being taught. All MMT proponents have ever done here is knocking down straw men.
#14949788
Crantag wrote:Those [that is the so called new ideas of MMT] aren't new ideas, though. Ever heard of the New Deal?

Your insular ideological adherence prevents you from being taken seriously by people who do understand economic theory and history.

No, your willingness to accept the BS ideas that have been disproved by reality is what keeps you from understanding MMT.

Another "new idea" is that "as long as the balance of US trade is negative, the US Gov. should never run a surplus." This can be shown to be new because every Neo-liberal economist was in favor of Pres. Clinton's surpluses.

OTOH, maybe our disagreement is in the definition of "new" as in "new idea".
Maybe you assert that in order for an idea to be truly "new", it must never ever to have been uttered by anyone who counted ever in the past.
While, I assert that if an idea is sufficiently obscure or has been pushed aside for a long time, that it can be called a "new idea". Perhaps I'm being a little sloppy here. However, the "there is nothing new here" argument makes me mad when it is used by people who are implying, "These are all old ideas that were disproven long ago, so let's not reopen the argument on if they are really false or not."
#14949790
@Rancid,
I have thought about automatic changes to the tax rates before.
Part of the problem with the idea is that the Constitution seems to say that Congress can't delegate this power to someone else.

The sort of automatic tax changes I would like to see is --- tax rates go up when inflation goes over a certain set limit, maybe 1.5% or 2%. And they go up more as inflation goes higher.
This is similar to the Fed. Res. being given the power to set interest rates to fight inflation.

BTW --- Perhaps THE reason that interest rates don't seem to work for the last few decades is that fact that such a large percentage of the population is working paycheck to paycheck and only buying "necessities". When this is the case rising prices can't result in less spending, it just results is the spending buying less. I'm asking you-all --- does the people's dollars buying less stuff have the same effect as the effect before.

Anyway, the whole problem with the world's economy now is that the workers get less of the pie and the rich can't spend the huge chunk of the pie that they retain for themselves. This results from the workers having less power to demand a bigger piece of the pie, and this results from the capture of the Gov. [of most nations] by the rich who use the Gov. to give themselves more power and tax cuts that don't trickle down.
.
#14950169
Just above I wrote, "Anyway, the whole problem with the world's economy now is that the workers get less of the pie and the rich can't spend the huge chunk of the pie that they retain for themselves. This results from the workers having less power to demand a bigger piece of the pie, and this results from the capture of the Gov. [of most nations] by the rich who use the Gov. to give themselves more power and tax cuts that don't trickle down."
.
MMT uses a tool called "Sector Balances" to talk about what happens when the Gov. taxes a lot and spends a little. That is when the US Gov. has a 'surplus'. They point out that when the trade balance is negative and the Gov. has a surplus that that means that the Private Sector must by definition be in deficit. And when the people are in deficit they would rather cut spending than to eat into their savings and sell off their assets. OK, that is just to set up my point.
. . Suppose we divide the Private Sector into 2 parts; the mass of the people and the 1% & the Corps. they control. Now there are 4 Sectors, but the same definitions apply. If the new 1% Sector sucks up more money [this will apply world wide] and the Gov. is close to being in surplus and the trade balance is negative, then the 99% will be deeply in deficit.*
. . This reality is what is driving the rise of Populism in America and world wide.
.
We need real Progressives to be in power to save Capitalism from the greed of the 1%. They can't see that their excess wealth does them no good and it is destroying Capitalism. The 1% don't want to destroy Capitalism, I think, anyway. So, why are they digging in their heels and not being willing to share more of the wealth with the mass of people?
. . They should be willing to support Gov. actions** that hurt all the 1% more or less equally [i.e., they are not being the only one who "gives away" his wealth], and that give the wealth out to the mass of people to "buy" them off before the masses take actions that destroy Capitalism.
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* . Another responce of the 99% to being in deficit is to borrow from banks. This creates more dollars but it also is not stable. It is like a Ponzi scheme. Eventually, the borrowers will be unable to make the payments and this is exactly what caused the GFC/2008.
**. Actions like accepting MMT's views on economics, a new much higher minimum wage, free education thru college, forgiving student debt by paying it with Gov. [thin air dollars], single payer health care, etc. And maybe even a MMT style Jobs Program.
.
#14950896
Rancid wrote:Explain the intuition.


In the long run one can expect the monetary base to grow approx. at the nominal GDP growth rate (inflation+productivity growth). Similarly the risk-free interest rate, and thus the approximate return on the monetary base, can be expected to be approx. equal to the nominal GDP growth rate. Hence the monetary seigniorage (handing over the new base money to the government) and the opportunity cost seigniorage (buy interest-bearing assets with new base money and handing over the return on the monetary base to the government) should be approx. the same.

Of course since the financial crisis we're kind of living in a permanent short-term world, but I don't see how that favors one or the other (in terms of seigniorage). The monetary base and thus central bank assets have exploded, but interest rates are also at a historic low. With monetary seigniorage that expansion of the monetary base would not have been possible/necessary.

Anyway, I would have to do more reading.
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