- 19 May 2018 04:35
#14916064
My understanding of economics is based on MMT. Google it.
During the crisis of 2007-2008, European member nations were punished because the economic slowdown reduced their GDP and this damaged their ratio of national debt to GDP.
This caused austerity. Austerity just made things worse. It is not possible for a nation to cut spending and raise taxes in a recession to reduce the deficit. The cuts and increases just reduce the GDP more, so the deficit is not impacted that much.
By changing the relevant ratio to --- national debt to total population
the ratio is not impacted by a recession. It may be necessary to have different target ratios for different nations, though.
Also, MMT says that the ECB *must* find a way to sell bonds in a recession and *give* euros to the member nations to counteract the effects of the recession. This is the opposite of austerity. Maybe all nations get the same amount of euros per person, not based on GDP but on population. Even this might not help the poorer nations enough.
Then after the recession there *must* be no effort to get those euros back. Just let the fiat currency backed borrowing rise without limit. Keeping inflation down with a tax increase when inflation starts. If and when inflation starts growing too fast.
During the crisis of 2007-2008, European member nations were punished because the economic slowdown reduced their GDP and this damaged their ratio of national debt to GDP.
This caused austerity. Austerity just made things worse. It is not possible for a nation to cut spending and raise taxes in a recession to reduce the deficit. The cuts and increases just reduce the GDP more, so the deficit is not impacted that much.
By changing the relevant ratio to --- national debt to total population
the ratio is not impacted by a recession. It may be necessary to have different target ratios for different nations, though.
Also, MMT says that the ECB *must* find a way to sell bonds in a recession and *give* euros to the member nations to counteract the effects of the recession. This is the opposite of austerity. Maybe all nations get the same amount of euros per person, not based on GDP but on population. Even this might not help the poorer nations enough.
Then after the recession there *must* be no effort to get those euros back. Just let the fiat currency backed borrowing rise without limit. Keeping inflation down with a tax increase when inflation starts. If and when inflation starts growing too fast.
- By litwin
- By Rancid