- 21 Jul 2020 05:02
#15108883
What Most non-MMT believers don't seem to understand is how MMT intends to control inflation of over about 2%.
. . . Also, my proposed temporary alternate why to limit so called deficit spending so that it doesn't cause excess inflation.
[Before I go on let me just say; MMTers say that there has been room for more so called deficit spending [we need a new snappy name for this concept] in every nation for decades that would not have caused too much inflation and therefore there was [and now in the covid crisis] there is a *lot* of room for more so called deficit spending by every industrial or Western nation.]
As I understand MMTers plan there are 2 or 3 ways they intend to control inflation.
A] With their Nationally funded but locally controlled Job Guarantee Program to provide Transitory Employment for every worker for whom the private sector currently doesn't have a job, which I will talk about later.
B] By looking at the actual resources that will be needed. The US did this in WWII. When the Gov. (the Air Force) placed orders for airplanes, the Gov. had to think about was there aluminium enough being produced to make this many more planes. This is how the Congressional Budget Office (CBO) should think.
. . 1] MMTers are proposing that the CBO will have to learn how to estimate what resources each proposed spending bill will need someone to use, therefore to buy, and if someone is already using it then how can the Gov. get them to not use it.
. . 2] I can see where many non-MMT believers will see this as state planning, and therefore a *terrible* idea.
. . 3] Non-MMT believers want the market to control the distribution of everything. They believe the Mainstream economic theories that claim to have proven that the market is the most efficient way to do this. I wonder how many of them know the complete list of assumptions that was used to prove that conclusion? MMTers tell me that some of those assumptions are obviously false. One of those false assumptions is that the Market consists of one person who will live forever, and is selling the stuff to *himself*. For me, any conclusion proven with this assumption is B*ll Sh*t. Total BS.!!
. . . For me the claim is not proven and also doesn't seem to match up with the facts of economic history. For me, the facts of economic history are superior to any theory based on assumptions *even if* they were true. Economists claim that their conclusions are close enough [I say there is no evidence of this] to reality to be useful and anyway are based on simplifying assumptions that are necessary because the problem is just too complicated and must be simplified.
. . . Well, Math has improved since many of you studied it. It now has Chaos Theory, the Theory of Complexity, or the theory of non-linear problems. This was finally cracked when desktop computers became common. Long story short, to simplify a non-linear problem and make it linear just destroys the strange behavior of chaotic systems. An example most of you will not know about is that the orbits of the asteroids are not actually stable. You think they are stable because Newton simplified the problem and proved they were stable, But, the non-linear elements of the calculations can now be made easily on computers and they show us that over long time spans an asteroid can fall out of its orbit and fall into a new orbit nearer the sun. And it can happen suddenly.
. . . What I'm saying, with the analogy above, is that simplifying the problem is fine as long as you rigorously test your results against reality (which in economics is economic history). But, it is better to forget the simplifying assumptions and try to solve the problem on a computer. You may be surprised how easy it is now to do that. [Check out Steve Keen's computer program named “Minsky” for an example of one.]
. . 4] MMTers have proven that so called deficit spending is necessary to keep the economy humming along. They say that people want to save, so some people save some of their income. They say this reduces someone's income because the money saved was not spent in their store (for example). They say that MS economists are *flatly* wrong to claim that the savings are loaned out by the bank where it is deposited. So, we can discount their argument that saving is a “wash”. It isn't, and so it must be replaced to maintain incomes over time. MMTers say the best way for it to be replaced is by the US Gov. making so called deficit spending. This so called deficit spending can't be unlimited though. They say that this so called deficit spending should be spent so as to go to the workers 1st and then to the rich when they extract it from the workers. Therefore, QE is a bad idea, because it goes 1st to the rich.
. . 5] So, how should the so called deficit spending be limited? In #2 above I said many will not want to see a lot of state planing. I have some suggestions of a different way to limit it.
. . Basically, actual investment spending, JGP spending, and savings to be replaced should be the total of so called deficit spending.
. . . . a] All so called deficit spending by the Job Guarantee Program should be part of the allowed so called deficit spending This money does provide incomes to grow the GDP because it mostly only increases when corps. are laying off people.
. . . . b]All so spending on long term investments like repairing bridges should be part of the allowed so called deficit spending. This may very well include all healthcare spending on those aged 20 to 50 who are the nation's work force and so must be kept healthy.
. . . . c] All money that leaves the nation to buy stuff from other nations should be counted as part of the “savings to be replaced”. It is being saved or spent elsewhere.
. . . . d] All the money saved by Americans or American corps. should be counted as part of the “savings to be replaced”. It is being saved in America.
Therefore, the total of all 4 of these sorts of so called deficit spending is the amount of so called deficit spending to be allowed. This sets the limit.
Just so you know, many or most MMTers tell me I'm flatly wrong to propose this artificial limit on so called deficit spending. They want the state planing solution. I can see that some of this will also be a better why to do it, but just “some”.
. . . I'm proposing this as a perhaps temporary expedient to help Congress be able to pass budgets with large so called deficits. Maybe later a better way will be found.
. . . And remember, the US national debt is only the so called national debt. What it *really is* is the “total financial assets the Gov. has provided to the people to keep the economy humming.” [This phrase needs a snappy name.] As such it is stupid to pay it down, let alone pay it off, and there is no need to pay it down. Paying it down gains the nation nothing, *really*, nothing is gained. [This is because it has already been spent and it didn't cause too much inflation. So, it was already saved by someone.]
______________________________________ ___________________________________________
BTW ---
MMTers say that bond sales are *not* necessary to deficit spend. Many of them want the “bond” rate to be set at zero% and left there. I'm no expert and they are, so I'm likely wrong. However, I think a rate of 1% to 2% is fine and it shouldn't be changed to fine tune the economy. There needs to be some stable rate of interest so widows can live on their interest income.
. . . Therefore, the Fed. sells bonds at (say) 1.5% and if nobody buys them, fine. The Gov. can so called deficit spend directly into the economy.
.
. . . Also, my proposed temporary alternate why to limit so called deficit spending so that it doesn't cause excess inflation.
[Before I go on let me just say; MMTers say that there has been room for more so called deficit spending [we need a new snappy name for this concept] in every nation for decades that would not have caused too much inflation and therefore there was [and now in the covid crisis] there is a *lot* of room for more so called deficit spending by every industrial or Western nation.]
As I understand MMTers plan there are 2 or 3 ways they intend to control inflation.
A] With their Nationally funded but locally controlled Job Guarantee Program to provide Transitory Employment for every worker for whom the private sector currently doesn't have a job, which I will talk about later.
B] By looking at the actual resources that will be needed. The US did this in WWII. When the Gov. (the Air Force) placed orders for airplanes, the Gov. had to think about was there aluminium enough being produced to make this many more planes. This is how the Congressional Budget Office (CBO) should think.
. . 1] MMTers are proposing that the CBO will have to learn how to estimate what resources each proposed spending bill will need someone to use, therefore to buy, and if someone is already using it then how can the Gov. get them to not use it.
. . 2] I can see where many non-MMT believers will see this as state planning, and therefore a *terrible* idea.
. . 3] Non-MMT believers want the market to control the distribution of everything. They believe the Mainstream economic theories that claim to have proven that the market is the most efficient way to do this. I wonder how many of them know the complete list of assumptions that was used to prove that conclusion? MMTers tell me that some of those assumptions are obviously false. One of those false assumptions is that the Market consists of one person who will live forever, and is selling the stuff to *himself*. For me, any conclusion proven with this assumption is B*ll Sh*t. Total BS.!!
. . . For me the claim is not proven and also doesn't seem to match up with the facts of economic history. For me, the facts of economic history are superior to any theory based on assumptions *even if* they were true. Economists claim that their conclusions are close enough [I say there is no evidence of this] to reality to be useful and anyway are based on simplifying assumptions that are necessary because the problem is just too complicated and must be simplified.
. . . Well, Math has improved since many of you studied it. It now has Chaos Theory, the Theory of Complexity, or the theory of non-linear problems. This was finally cracked when desktop computers became common. Long story short, to simplify a non-linear problem and make it linear just destroys the strange behavior of chaotic systems. An example most of you will not know about is that the orbits of the asteroids are not actually stable. You think they are stable because Newton simplified the problem and proved they were stable, But, the non-linear elements of the calculations can now be made easily on computers and they show us that over long time spans an asteroid can fall out of its orbit and fall into a new orbit nearer the sun. And it can happen suddenly.
. . . What I'm saying, with the analogy above, is that simplifying the problem is fine as long as you rigorously test your results against reality (which in economics is economic history). But, it is better to forget the simplifying assumptions and try to solve the problem on a computer. You may be surprised how easy it is now to do that. [Check out Steve Keen's computer program named “Minsky” for an example of one.]
. . 4] MMTers have proven that so called deficit spending is necessary to keep the economy humming along. They say that people want to save, so some people save some of their income. They say this reduces someone's income because the money saved was not spent in their store (for example). They say that MS economists are *flatly* wrong to claim that the savings are loaned out by the bank where it is deposited. So, we can discount their argument that saving is a “wash”. It isn't, and so it must be replaced to maintain incomes over time. MMTers say the best way for it to be replaced is by the US Gov. making so called deficit spending. This so called deficit spending can't be unlimited though. They say that this so called deficit spending should be spent so as to go to the workers 1st and then to the rich when they extract it from the workers. Therefore, QE is a bad idea, because it goes 1st to the rich.
. . 5] So, how should the so called deficit spending be limited? In #2 above I said many will not want to see a lot of state planing. I have some suggestions of a different way to limit it.
. . Basically, actual investment spending, JGP spending, and savings to be replaced should be the total of so called deficit spending.
. . . . a] All so called deficit spending by the Job Guarantee Program should be part of the allowed so called deficit spending This money does provide incomes to grow the GDP because it mostly only increases when corps. are laying off people.
. . . . b]All so spending on long term investments like repairing bridges should be part of the allowed so called deficit spending. This may very well include all healthcare spending on those aged 20 to 50 who are the nation's work force and so must be kept healthy.
. . . . c] All money that leaves the nation to buy stuff from other nations should be counted as part of the “savings to be replaced”. It is being saved or spent elsewhere.
. . . . d] All the money saved by Americans or American corps. should be counted as part of the “savings to be replaced”. It is being saved in America.
Therefore, the total of all 4 of these sorts of so called deficit spending is the amount of so called deficit spending to be allowed. This sets the limit.
Just so you know, many or most MMTers tell me I'm flatly wrong to propose this artificial limit on so called deficit spending. They want the state planing solution. I can see that some of this will also be a better why to do it, but just “some”.
. . . I'm proposing this as a perhaps temporary expedient to help Congress be able to pass budgets with large so called deficits. Maybe later a better way will be found.
. . . And remember, the US national debt is only the so called national debt. What it *really is* is the “total financial assets the Gov. has provided to the people to keep the economy humming.” [This phrase needs a snappy name.] As such it is stupid to pay it down, let alone pay it off, and there is no need to pay it down. Paying it down gains the nation nothing, *really*, nothing is gained. [This is because it has already been spent and it didn't cause too much inflation. So, it was already saved by someone.]
______________________________________ ___________________________________________
BTW ---
MMTers say that bond sales are *not* necessary to deficit spend. Many of them want the “bond” rate to be set at zero% and left there. I'm no expert and they are, so I'm likely wrong. However, I think a rate of 1% to 2% is fine and it shouldn't be changed to fine tune the economy. There needs to be some stable rate of interest so widows can live on their interest income.
. . . Therefore, the Fed. sells bonds at (say) 1.5% and if nobody buys them, fine. The Gov. can so called deficit spend directly into the economy.
.
- By Rich
- By ingliz
- By Unthinking Majority