I tried to tell a lot of people the facts about money, mostly they thought I'm crazy. MMT is correct - Politics Forum.org | PoFo

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#15078492
What MMT is saying has always been true since the world went off the gold standard in 1971.

The corona virus is so shocking to economies that it suddenly is obvious to almost everyone.
Prof. Bill Mitchell's blog post for Thur., 3/26/20 lays it all out.

The following are all untrue or lies --- Quoting Bill's blog post.
1. Fiscal deficits push up interest rates and crowd out private investment.
2. Deficits run up unsustainable public debt which mortgages our children's futures.
3. Deficits cause inflation.
4. Central banks cannot fund government deficits or else hyperinflation results.
5. Governments cannot promote growth and create employment.
6. Income support provided by the government undermines private incentives and subsidizes unemployment.
7. Essential infrastructure should be provided by the private sector.
8. The banking system should be deregulated because financial markets are efficient (always put funds into best value use).
9. The private market (price system) will always deliver outcomes that generate the most wealth for all.
10. Rising inequality does not undermine growth and prosperity.
I could go on.


Bill goes on to point out this article ---
"And overnight, the Financial Times published an Op Ed from former ECB boss, Mario Draghi (March 25, 2020) – [titled] We face a war against coronavirus and must mobilise accordingly – where he said: ..."

The challenge we face is how to act with sufficient strength and speed to prevent the recession from morphing into a prolonged depression, made deeper by a plethora of defaults leaving irreversible damage. It is already clear that the answer must involve a significant increase in public debt. The loss of income incurred by the private sector — and any debt raised to fill the gap — must eventually be absorbed, wholly or in part, on to government balance sheets. Much higher public debt levels will become a permanent feature of our economies and will be accompanied by private debt cancellation.


Acting to save the economy fro the shock that coronavirus is giving it (the economy) WILL NOT destroy the economy. Almost every conservative economic expert is saying this now.
But, this has always been true since the world went off the gold standard in 1971.

Link to the blog post.
http://bilbo.economicoutlook.net/blog/?p=44572
Last edited by Steve_American on 26 Mar 2020 11:24, edited 1 time in total.
#15078533
late wrote:
Your news ain't new, and your friends are the crazy ones.

Stiglitz is the best I've seen at talking about the implications, try Price of Inequality.

Not just my friends.
I have tried on line.
Very few said I was right.
So, lets do a poll.
Please, everyone who thinks that MMT is right give this here reply a "like".
So, we can see if coronavirus has changed the minds of many.
#15080861
Slightly off my own topic.
The stimulus bills of nations currently being passed are *not* what MMTers would be doing.
They give too much money to businesses and the well off, and not enough directly to the mass of the people.
A lot of the money is therefore being wasted.
What*is* being done is sort of what MMT says is always possible.

OTOH, we are already hearing the bleeting about how and when this is going to have to be paid for.
How this is going to be a burden on our children.
That inflation will be caused. They say that any price rise is inflation. Well, the coronavirus crisis will cause changes in the prices of many things all by itself. How can we say which price changes are cause by the virus caused economic dislocation AND which are caused by our responses to keep people alive for 3-6 months in this crisis? MMTers say we can't tell which is which. But, the experts will say *all* the bad effects are caused by the response and none caused by the crisis itself. Do not believe them. Reality in Japan has *proven* that massive deficits year after year (even if bought up by the central bank) have not caused for 28 years now any high interest rates or inflation. MMTers say that an actual experiment by Japan has proven this.

MMTers also say BS about paying off the bonds someday. The bonds that are the national debt (of whatever nation you live in, except the EU or EZ) are also assets of the people of those nations. It is not necessary to take those assets from their owners. It may have been necessary decades ago when the world was on the gold standard. There is zero argument for why it is necessary now. If the central bank owns the bonds then the interest on them is paid back to the nation. It is exactly like a wife paying her husband back when he gives her a birthday present. If a pension plan comp. owns the bonds then the interest is needed by it to grow its assets so it can meet its obligations.
. . . The only people who have a lot of money to pay the taxes are the really rich and the super rich and they will block new taxes on them. Taxing the mass of the people to give a pension plan comp. cash for their bond doesn't help the comp. at all and devastates the people paying the taxes. It is pointless & harmful, and therefore evil. To even say it is evil. At least for experts. Most common people believe this and don't know any better, so they get a Pass. The experts are lying about it.

There is a crisis. People are dying. Many people lived week to week. They will need cash to buy food and pay bills or they will die in the next 3-6 months. This is a fact.
. . . It is evil to deny this fact.
. . . It is also evil to tell lies that stop necessary responses from being used. Stopping the responses will make additional people die for no necessary reason. Is this not *evil*? Is this not harmful (killing people) for no necessary reason. Is that not evil, and worse, evil in a crisis?!

We need to shut those people up or hold them accountable in some way. To lie in a crisis and make people die is evil. At a minimum we should not believe them. We should mark them as liars and rethink our past choices to believe them. We should demand they provide real world arguments for why they are right and MMTers are wrong. We should not any longer let them wave their hands at an imaginary world as proof that reality is the same as their imaginary world. When a real experiment is done or has been done that proves them wrong then we have to accept real experimental results and reject thought experiments.
. . . There are 3 real experiments that have been done to prove the neo-liberal economic experts are wrong. They are --
1] The 325 year long experiment in what happens when England, Great Britian, and now its called the UK has had a national debt and not paid it down hardly any at all for 325 years. Results are, Nothing happens.
2] The 28 year long experiment that Japan has done to see what happens when it has massive deficits for 28 years. Results are no inflation and no high interest rates.
3] The experiment done in 2014 in Germany to see what happens in a bank when it makes a 200,000 euro loan and that money is moved to a different bank while many graduate students watched the bank's officers do their thing. Results were, the money was created out of thin air and the depositors' money was not loaned out.

These are real world experiments. They should be taken as *proof* that the neo-liberal economic theory is false in these ways and maybe its false in many other way too.
#15082952
Another way of saying the MMT is correct is ---

For over a decade we have seem Repub. Admin. using deficit spending in hugely massive amounts to bailout banks, and other comp., banks all around the world even, then tax cuts for the really rich, then more tax cuts for the really rich, and now spending in the coronavirus crisis. All this with almost no push back of "How are we going to pay for this, someday?" Or, "this is going to cause inflation, crowd out bank lending, cause high interest rates, or bankrupt the USA." So, deficit spending of trillions is OK as long as it benefits the elites.
. . . Well, it follows that the same sort of massive deficit spending can be done in every year from now on to feed money into the mass of Americans and then it will filter up thru the economy to make the really rich richer. In the process of filtering up it will help the mass of the American people have better lives. .
. . . This increased deficit spending is NOT unlimited, so some safeguard would be wise. I SUGGEST (and experts can improve it) that deficits be limited to the amount of the trade deficit + all the saving in the last year + 1% to 3% of the GDP. And if it is necessary to spend even more in an emergency like the current coronavirus crisis, then with a 2/3 vote there can be even more spending. .
. . . It has been proven that the worst that can happen if there is too much deficit spending is inflation can rise to levels like 10%, and then the Gov. should cut back on deficit spending. IF the GOV. doubles down on deficit spending then we might see hyperinflation, BUT only if the Gov. does something really stupid. .
. . . Until that happens the normal deficit spending I suggested above will be making the lives of the American people better AND making the rich richer. It is a Win, Win idea.!! .
. . . BTW . The US national debt can never be paid off with tax money. The only way to pay it off is with masses of newly created dollars, this is not a good idea though. OTOH, the UK\England has had a national debt for 325 years and not paid it down much in all that time. . The graphs you see that 'say' otherwise are of debt as a percentage of the GDP, so as the GDP grew the debt appeared to go down, while it really went up in absolute terms. There is no need to ever pay the debt off, after all the national debt is also the assets of the non-gov. sector of the economy and as such bigger is better, right? Right?
#15083490
MMT (AKA Neo-Chartalism), for those who haven't followed economic history, is a branch of PK (Post-Keynesian Economics). Post-Keynsian is not to be confused with New Keynesian, LOL. Post-Keynesianism is broad strand of economics that is the most closely descended from Keynes. PK (as well as MMT) are considered branches of Heterodox Economics (outside the mainstream), a designation that includes a lot of current economic theory - Austrian Economics is heterodox, for sure, but it occupies its own separate niche.

Neoclassical economics IS mainstream economics now, having consolidated complete control of academic economics in the postwar era. The rigidities of neoclassical thought have left it increasingly vulnerable over the decades. Especially since the shock of '08 and particularly since the recent shock of covid crisis, it is now being openly challenged even in mainstream circles.

MMT is a macroeconomic theory focused on operational realism. It is certainly not "original," nor is it intended to be. It gathers up and ties together many historic strands, including chartalism, and Lerner's functional finance, and of course Keynes.

Schools of economic thought are more numerous and arcane than schools of literary criticism. This graphic is a radically simplified schematic - the oldest schools of thought are at the bottom, and progress upward through time:

Image

In this scheme, MMT would be fall somewhere in the top left. Closest to Post-Keynesianism, but partaking of other Heterodox thought including Veblen and Galbraith. On a broader canvas, MMT is part of the tradition of Classical Economics (Political Economy) that runs through Adam Smith, Mill, and Marx. Somewhat ironically, that oldest tradition of Political Economy is now considered Heterodox.

Stephanie Kelton, former economic adviser to Bernie Sanders, is perhaps the best known MMT economist - at least, the most in the public eye. Pavlina Tcherneva, Warren Mosler, L. Randall Wray, and Bill Mitchell are prominent.
#15083561
foxdemon wrote:@Steve_American So the value of currency is credible as long as the institution which created it is credible as guarantor?

Precious metals once provided tangible credibility of the value of currency?

No, not really.
The currency will have some value as long as the nation that issued it collects taxes and only accepts that currency to pay them.
The value of the currency is set in other ways. I am no expert and so should leave it at that, however, internationally it is set by the floating currency market. Internally it is set by what the nation pays for stuff when it buys stuff. At least that is my understanding.
#15083567
foxdemon wrote:@Steve_American So the value of currency is credible as long as the institution which created it is credible as guarantor?

No, not really.
The currency will have some value as long as the nation that issued it collects taxes and only accepts that currency to pay them.
The value of the currency is set in other ways. I am no expert and so should leave it at that, however, internationally it is set by the floating currency market. Internally it is set by what the nation pays for stuff when it buys stuff. At least that is my understanding.
Precious metals once provided tangible credibility of the value of currency?
#15083578
foxdemon wrote:
@Steve_American So the value of currency is credible as long as the institution which created it is credible as guarantor?

Precious metals once provided tangible credibility of the value of currency?



It's a sliding scale. There are runs on currencies, meaning there's the rough and tumble of a market. If there is weakness, traders will attack.

Gold and silver were currency once. Now most money never leaves the confines of hard drives. Anything can be money. My favorite moment in American history, that doesn't get the attention it deserves, is Shays Rebellion.

After we got our independence, the good burghers of Boston would not accept American money. Which destroyed it's worth as a currency in Mass. This was also the case with taxes.

This resulted in Mass improperly stealing property. Which is why they rebelled, they were being robbed.

Point is, the Massholes sucked every bit of money out of most of Mass. People started using receipts as money, which is common when a currency collapses.
#15083849
I am hearing people saying things like, "OK, the Gov. can spend tons of money now in the covid crisis, but how can we deal with the resulting huge increase in the national debt (actually phrased as 'How can we pay for it?')?

MMT says it is simple. We will deal with the resulting national debt by rolling it over forever. The principal and interest will be paid with borrowed money, or if necessary, with newly created money. And because the national debt is also the assets of the American people this is not really a bad thing.

Also, don't worry interest rates on the national debt can be set *by* the Fed. or the US Gov. at any rate they want even zero %.
#15083850
Some youtube videos on MMT

"MMT for You and Me (consolidated)" 11 min. long,
[actually posted by] Warren Mosler [a well known original MMTer]


"How MMT Can Help Us Understand the Economy", about 60 min. long,
Bloomberg Markets and Finance, a discussion on MMT with Stephanie Kelton.


Warren Mosler - Modern Monetary Theory (MMT) Interview - Real Vision - July 2019, 57 min long,
#15083954
Steve_American wrote:I am hearing people saying things like, "OK, the Gov. can spend tons of money now in the covid crisis, but how can we deal with the resulting huge increase in the national debt (actually phrased as 'How can we pay for it?')?

MMT says it is simple. We will deal with the resulting national debt by rolling it over forever. The principal and interest will be paid with borrowed money, or if necessary, with newly created money. And because the national debt is also the assets of the American people this is not really a bad thing.

Also, don't worry interest rates on the national debt can be set *by* the Fed. or the US Gov. at any rate they want even zero %.


I'd add the following:

Requiring that the US government offset its deficit spending by issuing bonds is strictly an artificial necessity imposed by legal and institutional arrangements. What does this mean? Simply that there is no operational necessity to issue bonds to deficit spend. This is sometimes called Overt Monetary Financing; OMF means government spends without reference to taxes or bond position. In reality, the government does this quite frequently - some wags call it Covert Monetary Financing. Over time, the logical reality of fiat currency will diminish these legal requirements, and they will disappear.

It is the position of most MMT theorists that all sovereign spending should be OMF. Bonds should be issued on the basis of market demand, irrespective of the deficit position.

The same consideration applies to taxes. Taxes should be levied to establish a basic demand for its currency; also to break up concentrations of wealth, reduce aggregate demand, to limit inter-generational wealth transfer (financial aristocracy), and some other objectives. Taxes do not fund government spending.

To summarize, government spending should occur without regard to tax revenue or bond issuance. Thus, we "pay for it" by directing the government to spend the money. It's that simple.
#15084642

By Greg Robb

Blanchard, who has made waves down playing worries about government debt draws the line: ‘I am not an MMT person.’

Olivier Blanchard, former chief economist of the International Monetary Fund, recently argued that concern about the burden of government borrowing is misplaced in the new global environment of low interest rates. Olivier Blanchard, former IMF chief economist and professor at Massachusetts Institute of Technology, who wrote a book on macroeconomics, waded into treacherous waters on Tuesday — the simmering debate on modern monetary theory.

The theory, known as MMT for short, has captured the imagination of left-wing Democrats because it seems to offer the opportunity for the Federal Reserve to fund ways to combat economic inequality.

Since the start of the 2020 presidential campaign, there has been a low-grade social media war among economists about what MMT actually is and what it isn’t.

During a panel discussion on the outlook for fiscal policy at an event sponsored by the Peterson Foundation, the moderator of the panel, Greg Ip of the Wall Street Journal, summed up MMT as the view that the U.S. “can borrow and spend as much as we wish to get the economy to full employment because we control our own currency and we can’t go broke.”

What MMT gets wrong, Blanchard said, is the notion that the Federal Reserve can just print money to pay for this increase in spending.

“The notion that you can finance this [spending] by money is wrong, is plain wrong,” he said.The Fed did purchase trillions of dollars in assets, known as quantitative easing, to lower long-term interest rates and pull the economy out of the Great Recession of 2008.

But this was not printing money, Blanchard said.

It was essentially just buying long-term bonds with short-term debt, creating bank reserves at the Federal Reserve, that still paid an interest rate, he said. In effect, QE was government debt transformation.

“If [the Fed] issued money at zero rate, then we’d have hyperinflation. But we’re basically issuing a new form of debt, which is bank reserves,” he said.

“The notion that for some magical reasons you can do this through money is wrong,” he said.

The one exception, which has caught the eye of MMT advocates, is Japan, where interest rates are zero.

“When you are at zero, debt and money are the same thing,” he said.

But this can’t last forever.

“The day on which Japan has to pay a positive interest rate on bonds, it will have to pay a positive interest rate on the money, otherwise people will not hold it, or there will be hyperinflation,” he said.

On the surface, Blanchard seemed like a natural ally for modern monetary theory supporters. He caused a stir at the American Economic Association earlier this year when he said there was too much concern about government debt levels given the new low-interest-rate global economy.

Blanchard, who has made waves down playing worries about government debt draws the line: ‘I am not an MMT person.’

Olivier Blanchard, former chief economist of the International Monetary Fund, recently argued that concern about the burden of government borrowing is misplaced in the new global environment of low interest rates.

Olivier Blanchard, former IMF chief economist and professor at Massachusetts Institute of Technology, who wrote a book on macroeconomics, waded into treacherous waters on Tuesday — the simmering debate on modern monetary theory.

The theory, known as MMT for short, has captured the imagination of left-wing Democrats because it seems to offer the opportunity for the Federal Reserve to fund ways to combat economic inequality.

Since the start of the 2020 presidential campaign, there has been a low-grade social media war among economists about what MMT actually is and what it isn’t.

During a panel discussion on the outlook for fiscal policy at an event sponsored by the Peterson Foundation, the moderator of the panel, Greg Ip of the Wall Street Journal, summed up MMT as the view that the U.S. “can borrow and spend as much as we wish to get the economy to full employment because we control our own currency and we can’t go broke.”

What MMT gets wrong, Blanchard said, is the notion that the Federal Reserve can just print money to pay for this increase in spending.

“The notion that you can finance this [spending] by money is wrong, is plain wrong,” he said.


The Fed did purchase trillions of dollars in assets, known as quantitative easing, to lower long-term interest rates and pull the economy out of the Great Recession of 2008.

But this was not printing money, Blanchard said.

It was essentially just buying long-term bonds with short-term debt, creating bank reserves at the Federal Reserve, that still paid an interest rate, he said. In effect, QE was government debt transformation.

“If [the Fed] issued money at zero rate, then we’d have hyperinflation. But we’re basically issuing a new form of debt, which is bank reserves,” he said.

“The notion that for some magical reasons you can do this through money is wrong,” he said.

The one exception, which has caught the eye of MMT advocates, is Japan, where interest rates are zero.

“When you are at zero, debt and money are the same thing,” he said.

But this can’t last forever.

“The day on which Japan has to pay a positive interest rate on bonds, it will have to pay a positive interest rate on the money, otherwise people will not hold it, or there will be hyperinflation,” he said.

On the surface, Blanchard seemed like a natural ally for modern monetary theory supporters. He caused a stir at the American Economic Association earlier this year when he said there was too much concern about government debt levels given the new low-interest-rate global economy.


He argued that, with interest rates low, public debt was not “crowding out” more productive investment, which was the long-time fear about high government borrowing.

At the moment, Blanchard said the best course for U.S. fiscal policy is a slow reduction in the deficit, taking care not to damage the economy.

If there is a recession, the Fed does not have the firepower to fight it alone and fiscal policy will have to be used, adding to the debt, he added. This will not be catastrophic, he added.

And Blanchard said lawmakers should “start now” to make the necessary spending decisions to keep the debt from exploding from the expected higher costs of Social Security and other entitlement programs.

“I have no desire to see debt increase to 150%” of GDP, he said.
https://www.marketwatch.com/story/what-modern-monetary-theory-gets-plain-wrong---former-imf-chief-economist-2019-06-11
#15084707
Olivier Blanchard was the chief economist at the IMF and is a senior fellow of the Peterson Institute. This is kind of like being a necrophiliac AND a pederast.
#15084773
@Deutschmania,
This is just one man's opinion. He has credentials that I don't have.
But, there are other economists with credentials that agree with me and disagree with him.
I have presented fasts in this thread to back my MMTers with PhDs and me up. His words that you quoted included not even one fact that backed him up.
Not one actual fact to back his opinion up.

In this time of crisis the people of the many nations need to demand that expert opinions be backed up by real world facts.
IMHO, the fact that massive cash has been spent for the really rich in to form of tax cuts, bank bailouts and other such spending is evidence that it can also be done to help the masses. At an absolute minimum it shows that the tax cuts could have been aimed at the mass of the voters and not at the top 1% of earners.

MMTers say that that absolute minimum is actually no where near what can be done in terms of increasing deficit spending as the normal situation to replace money that is saved by the private sector (which is the [people, the comps. and foreigners). The part that goes to be saved by foreigners is equal to the balance of trade deficit.
. . . Also, sending that is an investment for the future,an example that Americans totally reject is the NHS in the UK. The part it spends to keep children and workers healthy and alive is an investment in the future wealth of the nation. This part can be done with deficit spending.
. . . Also, spending on repairing and building infrastructure is an investment and can all be paid for with deficit spending.

MMTers call for all this deficit spending to be the *normal situation*.
MMTers also include their form of a Job Guarantee Program as part of MMT.
#15084808
I can only guess that the Blanchard thing above was pre coronavirus crisis, since central banks are now proposing exactly the kind of Overt Monetary Financing he seems to think can't be done.

That just leaves the tired old cry of "then we'd have hyperinflation" - which has been addressed a zillion times. Yes, if you do too much of it; otherwise, no. If Blanchard thinks there'll necessarily be too much of it, he needs to say why.
#15085771
Steve_American wrote:@Deutschmania,
IMHO, the fact that massive cash has been spent for the really rich in to form of tax cuts, bank bailouts and other such spending is evidence that it can also be done to help the masses. At an absolute minimum it shows that the tax cuts could have been aimed at the mass of the voters and not at the top 1% of earners.

It's a strange world that I live in when those supposedly on the left end up agreeing with Vice President Cheney . https://www.taxpolicycenter.org/taxvox/james-galbraith-deficits-dick-cheney-far-left
It’s now pretty much conventional wisdom among the political class, as former Vice President Dick Cheney said, that “deficits don’t matter,” and complaints about deficits are merely an excuse to dismiss an expensive program — for example, so-called Medicaid for all — out of hand.

But deficits do matter. They reflect a shift of spending from the private sector to the public sector, and while the public sector has its place in providing for a common defense, public goods and a safety net, it’s the private sector that drives innovation and the overall economy in the long term, creating the surplus of wealth that makes all that government spending possible. The slow rate of growth coming out of the 2008 recession is probably, in part, a consequence of the mounting debt.

The federal budget deficit probably isn’t a catastrophic threat, but it is a drag on the economy, and the weight of it may be one reason, even when the economy is growing, the middle class feels squeezed.
https://www.timesdaily.com/opinion/deficits-don-t-matter-until-they-do/article_1d8ec67e-b3b5-501a-b3a1-498f808b42e3.html
Running a deficit can be an important tool to grow an economy, especially if the economy is weak and needs a boost. A deficit can also be justified for a one-time investment, like a useful infrastructure project that pays for itself over time. But starting a new unfunded entitlement, like the proposed Medicare-for-All floated by Ocasio-Cortez, which creates a deficit every year going forward should be treated with more caution, because structural deficits come with bigger risks. Politicians and tax payers should be wary of running large deficits year after year. If interest rates do increase, there is a risk rolling over debt won’t be feasible or it will require spending cuts to pay bond holders. High rates can force governments into austerity when the economy is weak and government spending is most necessary.
https://qz.com/1517842/do-deficits-matter/
The real issues come in the form of interest rates and inflation. Assuming the government ran out of people and investors willing to buy Treasury Bonds, it would have to pay higher interest rates. In fact, whenever the government needs to borrow more money, it holds an auction to sell bonds. This sets the interest rates.

However, even though the debt is higher than it has ever been, interest rates are very low. The reason, is the U.S. economy.

Ironically, inflation is low for the same reason. The U.S. economy is not generating higher wages, or greater employment, so inflation is not rising either.

In other words, the economy has much more of an affect on the deficit than the deficit has on the economy.

Theoretically, there would come a point where this would no longer be the case. The catch here, is inflation. As low as inflation is right now, it does exist, and 30 years from now, 18 trillion won’t be worth what 18 trillion is today. In other words, a lot of the debt we have now is getting smaller just by existing longer. As long as the national debt doesn’t outpace actual inflation, nothing really happens except politicians get to excitedly proclaim that they can “fix” the debt.
https://financegourmet.com/blog/news/economy-news/does-the-deficit-really-matter/
Large government budget deficits may be warranted at times when the economy is in a downturn, like during the Great Recession that began in 2008, in order to stimulate spending and mitigate economic weakness. But large deficits that occur when the economy is at or near its full-capacity raise concerns of increasing costs of borrowing, reduced private capital formation, and potential financial and economic destabilization. Deficits can shrink with strong economic growth, but the combination of likely policies and plausible GDP growth rates for the United States point towards rising deficits over the next decade. As Bill Gale points out, a period of relative economic prosperity is when policymakers should address fiscal imbalances and the longer we wait to do so, the more difficult and more disruptive the eventual needed correction.
https://econofact.org/government-budget-deficits-and-economic-growth

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