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It is certain that many more mainstream (MS) economists are now saying MMT like things.

They are agreeing with MMT's points one by one but denying that they are doing exactly that.

Perhaps I was not clear about what I think MMT is saying.

1] MMT requires that the Gov. fund and local govs. run a JGP, job guarantee program, that pays a "socially inclusive" wage to all who want such a job. By this I think in America this would be about $25/hr.
2] MMT says that the Gov. does not need to issue bonds to fund deficits. In fact most of them would reduce the interest on Gov. bonds to zero % because they see such interest as a ift to the rich. I think that insurance comps. need bonds with at least 2% interest to keep up with the central bank's target inflation rate of 2%.
3] MMT says that deficits will not cause inflation until they begin too cause there to be shortages in some natural resources, incl. labor. So, they say that economists need to learn how to track resource use and not rely on rough ideas about "money".
4] MMT says that there are certain "leakeges" of money out of the economy. Some examples are:
. . a] Savings. Once a dollar is parked in a nice savings place, it is not being used to bid up prices of anything.
. . b] Paying for imported goods. Once a dollar goes overseas, it isn't being used to bid up prices in America.
. . c] Other capital flows out of the US. Same as imports.
5] MMT says that therefore, as a minimum, there needs to be enough deficit spending to replace the above leakages and also keep up with population growth.
6] MMT makes a big deal out of fully "fiat money" nations. So, not any EU nation and certainly not any eurozone nation. MMT says it is really only talking about fully fiat nations. To be fully fiat an nation must:
. . a] Issue its own money or currency.
. . b] Never borrow in any other currency.
. . c] Float its currency and not peg it to anything.
7] MMT says that there is never any need to pay down or pay off any of its Gov. debt. That this is taking money out of the economy to take an interest bearing asset away from someone who would otherwise have it. And, this is pointless.
8] MMT says that a Gov. surplus (combined with a net imports deficit) will always result in the Private Sector of the economy being in deficit. It will need to borrow or draw down savings to just keep up. And, this will always reduce the GDP soon, when lenders stop the easy lending spree.
9] MMT says that it is by definition impossible for all nations to be net exporters at the same time. That for every dollar of value some nation exports, some other nation MUST import that dollar of value. That international lending doesn't change this, because the lender will be paid interest and later principal, which is as bad as importing.
10] Therefore, some nations will always be net importers. That this is always going to be a problem. And, net exporting nations are not helping the world. That the damage they are causing will someday become obvious. So, such nations are not acting ethically. However, such nations are now able to act superior, because their exports allow them to balance their nation's books far more often. So, don't look to Germany and Norway as counter examples. And, maybe Japan too, although, Japan has had large deficits for 28 years.
11] So, bottom line; the reason the UK, aka England in the beginning, has had a national debt since 1694 (for 327 years) is that the Gov. debt of nations never needs to be paid off. That the risk to the holders of such debt (now that they have fiat currencies) is that the nation will cease to exist. But, then holders of that nation's currency will also lose, when it become worthless fire starter paper.
. . Further, since a Gov. surplus will always damage the GDP, aka economy, paying down the Gov's debt is almost always a bad idea for the people of the nation. However, some people may benefit from this.

Of course, I firmly believe that the overriding issue today is the climate crisis. That the risk is human extinction in the worst likely case. And, a massive human die off as the minimum bad case IF the crisis is not addressed very soon. And, no-one can be confident that they or their descendants will avoid being among of those dying off.
. . . So, even the billionaires are making a huge mistake IF they love and care about their descendants.

Steve_American wrote:I suspect that there is a typo there. MY #11 says nothing about inflation. My #3 talks about inflation.
So, I think you meant No. 10 Downing St., i.e. the PM.

#11 refers to No. 11 Downing Street, which is the official address of the Chancellor of the Exchequer. Next door to the Prime Minister.

Fed chair Jerome Powell has insisted the central bank does not fear a rise in long-term inflation and that any price hikes over the next year will not be structural.

But there is concern in financial markets that inflation could take off and the extent of the US stimulus measures will bring a rise in interest rates, notwithstanding the Fed’s commitment to keep its base rate near zero at least until 2024.

In a recent comment entitled “The return of the inflation spectre,” Financial Times columnist Martin Wolf warned that an inflation overshoot could trigger a deflationary response from central banks, leading to much higher rates. And its effects would go far beyond lower-income countries.

“That could lead to waves of defaults far more pervasive than in the early 1980s, when the big story was the debt crisis in developing countries. This time, the debt crisis could be almost everywhere, because there is so much more debt.”

It is a measure of the profound crisis within the capitalist system that the prospect of higher growth in the US—normally regarded as a positive for the world economy—has sparked fears it will lead to rising interest rates, resulting in economic devastation for lower-income countries. And not only there but it could hit the advanced countries as well because the profit-making machine centred in Wall Street and other major financial markets has become so addicted to the endless supply of cheap money. ... t-a01.html

Note that there's a *mismatch* between the rising interest rates on government bonds, and the actual GDP growth rate for the U.S., regardless of Georgieva's touted '5.5%' figure, from the article.

U.S. gdp growth rate for 2019 was 2.16%, a 0.77% decline from 2018.
U.S. gdp growth rate for 2018 was 2.93%, a 0.56% increase from 2017.
U.S. gdp growth rate for 2017 was 2.37%, a 0.73% increase from 2016.
U.S. gdp growth rate for 2016 was 1.64%, a 1.27% decline from 2015. ... rowth-rate

'Fears of inflation' apply specifically to matters of government *finance* -- indicating that government bonds are *decreasing* in perceived value and viability, just as with any *junk bond*.
"It is strange to me that for years economists pined for a better mix of monetary and fiscal policy and now we have it and there is a narrative among some that it has to end in disaster. I am more optimistic about the macro outlook than I have been in a long time and am far more focused on how quickly the labor market returns to health than any threat from inflation."
late wrote:

"It is strange to me that for years economists pined for a better mix of monetary and fiscal policy and now we have it and there is a narrative among some that it has to end in disaster. I am more optimistic about the macro outlook than I have been in a long time and am far more focused on how quickly the labor market returns to health than any threat from inflation."

Let's *both* make a hardcopy printout of that, late, and lock it away safely, to see what happens later.


Obviously what you're trying to do here, of course, is to make the association in people's minds of 'inflation = wage demands', when what we're seeing in fact is that inflation is really due to *finance* / capitalism -- holding government bonds becomes uncertain, risky, and undesirable, pushing up yields for those daring and intrepid enough to *hold* them, against the odds, sucking value out of the real economy, meaning from debtors like governments themselves.
"From that point onward, there are two possible paths. The first is that businesses will actually need that extra cash, due to low consumer demand and a stalled recovery. In that case, the potentially inflationary boost from a higher money supply would be offset by lower demand elsewhere in the economy. The velocity of money would be weak, and there would be no reason to expect major inflationary pressures.

The second possible path is that the recovery will proceed at a rapid clip, and businesses will have extra cash on their hands for a while. That likely would translate into lower borrowing for the rest of the year and a smoothing of monetary flows — and no major increase in inflationary pressures.

Instead of inflation, in other words, there will be demand rationing. For Disney World, this will mean that you need to reserve your visit well in advance. The same phenomenon will apply to top restaurants, where reservations are likely to be harder to come by. Rationing demand is preferable to raising prices, especially since the demand boom will probably not be permanent.

So will there be inflation? Yes, if it’s defined as quality deterioration — more waiting — instead of higher prices. It will be strongest for unique goods whose supply is hard to augment, and for goods for which Covid has created pent-up demand."
late wrote:

businesses will have extra cash on their hands for a while. That likely would translate into lower borrowing

This is ludicrous reasoning, since this describes how things *have been* through the post-2008-2009 period of financial upswing, with a *surplus* of capital goods -- cheap government money, in other words, which *encourages* borrowing.

The remainder of the treatment simply describes the *class divide* wherein people *without* disposable income -- most people -- have to *wait* since there's insufficient general economic growth (GDP) to get the *real* economy moving, for real production and jobs growth, etc.

'Inflation' isn't really the best term to use here -- rather, 'lack of incentive to supply real goods to real people in the real economy, thereby pushing up costs' would be a better description, since everyone knows that casino capitalism (finance) is where the money is these days.
late wrote:
The bulk of my money is not in the market. I meant what I said, the economy (once again) is stronger than I expected, and the government stimulus should help even further.

Yup -- the capitalist markets are so demonstrably unreliable on their own (multiple government bailouts) by this point that *no one* can make the least 'free markets' argument anymore. The U.S. and the rest of the world are practically on the threshold of *Stalinism*.

Political Spectrum, Simplified

Spoiler: show

And, gratuitously:

History, Macro-Micro -- simplified

Spoiler: show
ckaihatsu wrote:
Yup -- the capitalist markets are so demonstrably unreliable on their own (multiple government bailouts) by this point that *no one* can make the least 'free markets' argument anymore.

Free markets are a myth. Capitalism was, from the beginning, a cooperation between business and the state.

Economies are inherently unstable, they need managing, and if you do a piss poor job of managing them (which is what Americans do) then there's hell to pay.
MMT economists define 'inflation' as an *ongoing* rise in prices.

MS economiists define 'inflation' as an increase in the money supply. [Not counting money added by bank loans, which are falsely assumed to be made from the bank's deposotors' money.] They assume this *will* then caasue a rise in prices.

I say that any change in prices for the next year will be impossoble to prove has a given cause. This is because the market has been destsbilized by the pandemic. There is pent up demand and reductions in supply caused by businesses closing, etc. There has been a large increase in the money supply from Gov. deficits, but almost no bank lending (so no increase in money suppy from bank lending).
wat0n wrote:Economists don't define inflation as "an increase in the money supply". ... %20economy.

INVESTOPEDIA, What Is the Quantity Theory of Money?
Monetary economics is a branch of economics that studies different theories of money. One of the primary research areas for this branch of economics is the quantity theory of money. According to the quantity theory of money, the general price level of goods and services is proportional to the money supply in an economy. While this theory was originally formulated by Polish mathematician Nicolaus Copernicus in 1517, it was popularized later by economists Milton Friedman and Anna Schwartz after the publication of their book, "A Monetary History of the United States, 1867-1960," in 1963.1

According to the quantity theory of money, if the amount of money in an economy doubles, price levels will also double. This means that the consumer will pay twice as much for the same amount of goods and services. This increase in price levels will eventually result in a rising inflation level; inflation is a measure of the rate of rising prices of goods and services in an economy.
Throughout the 1970s and 1980s, the quantity theory of money became more relevant as a result of the rise of monetarism. In monetary economics, the chief method of achieving economic stability is through controlling the supply of money. According to monetarism and monetary theory, changes in the money supply are the main forces underpinning all economic activity, so governments should implement policies that influence the money supply as a way of fostering economic growth. Because of its emphasis on the quantity of money determining the value of money, the quantity theory of money is central to the concept of monetarism.

According to monetarists, a rapid increase in the money supply can lead to a rapid increase in inflation. This is because when money growth surpasses the growth of economic output, there is too much money backing too little production of goods and services. In order to curb a rapid rise in the inflation level, it is imperative that growth in the money supply falls below the growth in economic output.

It seems at least some economsts do define 'inflation' as an increse in the money supply.
At least in that an increase in the money supply always leads to inflation.
Last edited by Steve_American on 05 Apr 2021 11:09, edited 1 time in total.

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