Why do I keep harping on MMT? - Politics Forum.org | PoFo

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#14922700
I do it because until the people demand that economists look at MMT and give it a fair shot at setting Gov. actions, America is not going to get out of the current economic mess it is in.

I do it because I am convinced it is far more 'true' than the other theories being used.

I do it because most people don't get it. But, I hope they will. They will when they reach their aha moment.
. . . I have seen youtube videos of MMTres where they say that they have gone to Washington and sat down with members of Congress and taught them MMT. That after a while the member reaches his/her aha moment. But that, this doesn't help because the member immediately says something like, "OK, your right. I can see that. BUT, I can't say that out loud. The people don't get it and I would sound like a lunatic until the people do get it."

I do it because I am trying to do my little bit to improve the lives of Americans and also European who labor under austerity. Also every other nation would be better off if a more true economic theory was used by the IMF, etc.

I do it because austerity is destroying people's lives. It is literally killing people. See cuts to the UK's NHS.
#14922785
Sir, your post led to a bit of a search for me. MMT was not defined, and so I first had to run it to ground.

Your post extolling the virtues of MMT suggests* that it has much to offer as a replacement for the more widespread Kenyesian approach as expressed in both the Chicago and East Coast dialects.

Basically a scientist in my thinking, I look for an experiment designed to eliminate one or the other of two contending theories. Can you supply one?

Regards.

* Ed.: A somewhat stronger term's indicated, nu?
#14922790
Torus34 wrote:Sir, your post led to a bit of a search for me. MMT was not defined, and so I first had to run it to ground.

Your post extolling the virtues of MMT suggests* that it has much to offer as a replacement for the more widespread Kenyesian approach as expressed in both the Chicago and East Coast dialects.

Basically a scientist in my thinking, I look for an experiment designed to eliminate one or the other of two contending theories. Can you supply one?

Regards.

* Ed.: A somewhat stronger term's indicated, nu?

Chicago school is neoliberalism, which displaced Keynesianism. Just thought I'd note that.
#14922801
Torus34 wrote:Sir, your post led to a bit of a search for me. MMT was not defined, and so I first had to run it to ground.

Your post extolling the virtues of MMT suggests* that it has much to offer as a replacement for the more widespread Kenyesian approach as expressed in both the Chicago and East Coast dialects.

Basically a scientist in my thinking, I look for an experiment designed to eliminate one or the other of two contending theories. Can you supply one?

Regards.

* Ed.: A somewhat stronger term's indicated, nu?

Torus34, macroeconomics is not a science because it is not really possible to do controlled double blind experiments. Or maybe even any real experiments. So, I can't really suggest one.

Mostly we look at history and fit the theories to it. For example, in another thread today, I said the the Neo-liberal or Mainstream economics theory has factored the entire banking system out of its model. Therefore, no MSE saw the cliff coming in 2005 to 2008. Right up until the crash all MS economists were saying that everything was fine. It clearly wasn't fine. There were signs of the coming cliff and MMT saw them.

Why does MSE ignore the banking system? According to MMTers MSE says things like "banks only gather deposits from thrifty people and lend them to spendthrift people or to businessmen who can't wait for their savings to accumulate enough to open their business. Bcause banks just move money from one person to another that will have little effect on the massive economy." MS economists say therefore there is very little macroeconomic effect on the economy from the operations of the banking system.
. . . The thing is --- this is totally false. It is now widely known and has been confirmed by an experiment that bank loan officers do not check to make sure the bank has $4M to make a loan. He/she just makes the loan and deposits $4M into the borrowers account. It is up to other officers to find the money before the next business day. This is not a problem because the bank can borrow it on the overnight market which all banks are part of. In an emergency the Fed. Res. Bk. will lend the bank what it needs. The Fed. will *never* let a check bounce [for this reason/in this situation] because that would very much damage the economy. *It is well known* that banks create dollars out of thin air when they make loans. These dollars are negated in some sense by the loan note about how the borrower will repay the loan. Only the US Gov. can create dollars without such negating 'notes'. Although you might think that the US Bonds are such but they are not the same because if the borrower can't pay and he is one of thousands, this can destroy the economy. This is exactly what happened in 2008.
. . . US Bonds are not like the loan notes because the US Gov. can [if it must] create as many dollars as it needs to pay what ever amount it needs to pay on a given day. Dollars are not created by printing them any more. They are created by key strokes that credit the dollars to some account with the key strokes.
. . . MMT says IIRC that the crash of 2008 was caused by a bubble that burst and overnight literally trillions of dollars that the banks had created disappeared. As a result the US Gov. rushed to pass the TARP act that provided $800B to the failing banks AND THEN the Fed. loaned those banks $27T more that the Fed. created out of thin air to save those banks from failing. Yes, I wrote that right $27T [according to info collected by freedom of info requests to the Fed.]

I hope all this helps you.

{As I have said over and over, Macroeconomics can only prove things with deductive proofs. It can't do experiments so inductive proofs are not possible. The problem is that all theories of economics make "simplifying assumptions" instead of real assumptions. In logic the formal statement is like this "If all of A, B ,C, D & E are true, then F is true". So, if for example assumption/premise C is not true then the proof is not valid. And every economics proof has assumptions that are not true. So, all their proofs are not valid. It is really eyeopening to dig to find the assumptions and see how obviously false some of them are. }
#14922996
Rugoz wrote:MMT doesn't seem to offer any new insight about anything. It's some kind of popular science construct that attracts a lot of armchair economists. Truly weird.

I think your statement is just false. Zero new insights means I can't find even one case where MMT and Mainstream economics differ.
But there is one case all can see easily.
MSE says that the US Gov. needs to move toward a balanced budget because someday the interest payments will make it impossible for the US Gov. to pay its bills. Or, that someday nobody will buy its bonds and then the US Gov. will not be able to pay its bills.
MMT {OTOH} says that the US can always pay its bills because it can [and it has] created $27 trillion out of thin air for a purpose and nothing bad happened.

How can you say that MMT has not "offered any new insight about anything"?
#14923407
Steve_American wrote:I think your statement is just false. Zero new insights means I can't find even one case where MMT and Mainstream economics differ.
But there is one case all can see easily.
MSE says that the US Gov. needs to move toward a balanced budget because someday the interest payments will make it impossible for the US Gov. to pay its bills. Or, that someday nobody will buy its bonds and then the US Gov. will not be able to pay its bills.
MMT {OTOH} says that the US can always pay its bills because it can [and it has] created $27 trillion out of thin air for a purpose and nothing bad happened.

How can you say that MMT has not "offered any new insight about anything"?


As you said in another thread, as long as the government is willing to take the money out of the system once inflation sets in, financing a deficit with newly created money is not a problem. That's what standard macro theory says, and it's apparently what MMT says as well. Note that QE plus deficit spending is equivalent.
#14924030
Rugoz wrote:
As you said in another thread, as long as the government is willing to take the money out of the system once inflation sets in, financing a deficit with newly created money is not a problem. That* is what standard macro theory says, and it's apparently what MMT says as well. Note that QE plus deficit spending is equivalent.

.* . "that" being that the US Gov. can just print and spend dollars without any inflation worries in the now (so long as it is willing to raise taxes later).
I will leave it to the lurkers and readers to evaluated your claim there that I put in bold.
For me though I have heard for decades that Weimar Germany means you can't spend newly printed money without hyperinflation.

Yes, QE plus deficit spending is alot like spending newly created dollars. But, MSE doesn't like QE all that much for that exact reason. IIRC.
#14925139
Steve_American wrote:I will leave it to the lurkers and readers to evaluated your claim there that I put in bold.


Maybe you should look up the whole fiscalist vs. monetarist debate. I.e. the question of whether fiscal policy or monetary policy is more effective for dealing with the business cycle. The mainstream consensus, or at least that's how I learned it, is that monetary policy is more effective under a flexible exchange rate regime UNLESS the economy is at the zero lower bound, which of course has been the case after the financial crisis and is still the case in the Eurozone. Everybody seems to have forgotten about textbook macro. :hmm:
#14925239
Prosthetic Conscience wrote:I thought that Keynesian economics was quite happy with QE and deficit spending. For instance, http://blogs.reuters.com/anatole-kalets ... was-right/

PC,
Two quotes from the article you linked.
"Monetarism overturned the Keynesian fiscal consensus that prevailed from the 1930s to the 1970s, by introducing one simple assumption into the models that guided governments and central banks. The case for Keynesian fiscal stimulus in deep recessions was simply assumed away by asserting that interest rates could always be reduced sufficiently to stimulate private investment, discourage private savings and so restore growth. As a result, the private sector as a whole would never suffer for long from a shortfall in spending. Therefore government borrowing would never be needed to balance inadequate private demand."

"Ironically, therefore, the very success of monetarism and central banking in conquering inflation now means that the era of monetary dominance is over. Keynesian fiscal thinking has triumphed and finance ministers are again more important than central bankers, even though most of them have not yet noticed."

1st, MST (then called supply-side economics and now Neo-liberal economics) replaced Keynesian economics with Reagan. So, it doesn't matter what Keynesians think, they are not MSE.
2nd, the article was written in 2014. The 2nd quote predicted something that didn't happen. MSE was not replaced with a rebirth of Keynesianism. Not that I can see. In Europe they are still using austerity theory. In America the Repubs in Congress still say they want a smaller deficit. They slash taxes,yes;but then they immediately start looking from spending to cut to reduce the deficit.

So, I still don't think MSE likes QE all that much.
#14925371
Steve_American wrote:MST (then called supply-side economics and now Neo-liberal economics)

Oh, well, if you're going to define away Keynesian economics as "not main-stream", then you can define anything you want at all. You even seem to be defining political policy ("they are still using austerity theory") as the only instance of "mainstream economics", ignoring the actual economic practices of central banks, let alone what academic economists say.

OK, I'm persuaded this thread, and others in which you talk about MMT, are pointless. You're just trying to alter definitions so that you can say you support something that is 'right' and that you are 'ahead of the game'.
#14926027
Prosthetic Conscience wrote:Oh, well, if you're going to define away Keynesian economics as "not main-stream", then you can define anything you want at all. You even seem to be defining political policy ("they are still using austerity theory") as the only instance of "mainstream economics", ignoring the actual economic practices of central banks, let alone what academic economists say.

OK, I'm persuaded this thread, and others in which you talk about MMT, are pointless. You're just trying to alter definitions so that you can say you support something that is 'right' and that you are 'ahead of the game'.

As I said, I am only a layman.
I used the phrase 'mainstream economics' so I think I get to say what I meant with that phrase.
I meant the economic's theory NOW being used by policy makers. Since Keynesian economics was superceeded by a different theory in Reagan's time, and I don't think it has made a comeback, then it isn't now MSE. Of course being just a layman I may have missed its comeback.

So, I'll ask anyone --- what Keynesian policies are being used and also espoused by what central bank and what nations? I add 'espoused' because I want to know that the people know what is being done in their name.

I do understand that the ECB has relaxed its policy about not lending money to the PIIGS by buying their Gov. bonds. But, it can't be truthful about it since it is a clear violation of the treaty rules. So, forcing Italy to cave about who it wants in the cabinet by not buying its Bonds is doing things according the Keynesian theory? I don't think so.
#14926549
Simon Wren-Lewis (Emeritus Professor, Economics, Oxford) discusses that here :

Why is MMT so popular?

..what MMT followers are typically not so good at is explaining exactly why and how they differ from mainstream macroeconomics. To understand this, we need to go back to the 1960s and 70s. Then there was a debate between two groups in macro over whether it was better to use monetary policy or fiscal policy as an instrument for stabilising the economy. I prefer to call these two groups Monetarists and Fiscalists, because both sides used the same theoretical framework, which was Keynesian.

To cut a long story short the monetarist won that argument, although not quite in the way they intended. Instead of central banks controlling the economy in a hands off way using the money supply, they instead actively used interest rate changes to control output and inflation. Fiscal policy was increasingly seen as about controlling the level of government debt. I have called this the Consensus Assignment, because it became a consensus and because I don’t think there is another name for it.

The one or two decades before the financial crisis were the golden years for the Consensus Assignment, in the sense that monetary policy did seem to be relatively successful at controlling inflation and dampening the business cycle. However many governments were less successful at controlling government debt, and this failure was termed ‘deficit bias’.

MMT is essentially different because it rejects the Consensus Assignment. It regards monetary policy as an unreliable instrument for controlling the economy, and MMT prefers to use fiscal policy instead. They are, to use my previous terminology, fiscalists.

(...)

Now we can see why MMT is so popular. Austerity is about governments pretending the Consensus Assignment still works when it does not, because interest rates are at their lower bound. We are in an MMT world, where we should be using fiscal policy and not worrying about the deficit, but policymakers don’t understand that. I think most mainstream macroeconomists do understand this, but we are not often heard. The ground was therefore ripe for MMT.

(full article : https://mainlymacro.blogspot.com/2017/1 ... pular.html)


IMO, MMT is better seen as an antidote to the "household fallacy" economics which dominates mainstream party political discourse. Mainstream macroeconomics is a mishmash that vacillates all over the place to the extent that there's no consistent mainstream. Mainstream party political discourse OTOH consistently assumes the economy is just a big a household with a household budget. Even the (supposed) left thinks we can't have nice things because there isn't enough money!!1!.
#14926581
Sue, nice article and good comment.
It seems to me [ISTM] that the Dems have been neutered by the 1%. The Clintons and many other elected Dems have blocked what Obama needed to do. They sold the people out.

So, yes they buy in to family analogy because their masters tell them to.

But, maybe you meant some other people on the left, did you?
#14926701
I think I just had an aha moment.

The enemy of my enemy is my friend, kind of.

Mainstream economics and MMT both use flawed paradigms but as a vanguard intent on attacking mainstream economics I guess MMT is an okay force.

I might have some forthcoming analysis on how recent monetary developments in China have actually solved a number of persistent riddles.

My consistent stance (which I believe I arrived at independently) has in essence been that the technical aspects of money have never sufficiently caught up with the practical necessities for money as means of settlement for commerce (and this problem is magnified with global economy); but essentially the show must go on and does so, in spite of the systemic flaws.
#14926872
Crantag wrote:I think I just had an aha moment.

The enemy of my enemy is my friend, kind of.

Mainstream economics and MMT both use flawed paradigms but as a vanguard intent on attacking mainstream economics I guess MMT is an okay force.

I might have some forthcoming analysis on how recent monetary developments in China have actually solved a number of persistent riddles.

My consistent stance (which I believe I arrived at independently) has in essence been that the technical aspects of money have never sufficiently caught up with the practical necessities for money as means of settlement for commerce (and this problem is magnified with global economy); but essentially the show must go on and does so, in spite of the systemic flaws.

I'm glad you reached your aha moment.
I hope to see your analysis soon. Here or in a new thread.
#14926878
Steve_American wrote:I'm glad you reached your aha moment.
I hope to see your analysis soon. Here or in a new thread.

I hope you realize I was being a bit tongue-in-cheek.

I watched the video with the extremely smug commentator you posted talking about 'aha moment' and I noticed your parrot job.

The reason I think MMT is based on a flawed paradigm is that it seems based on a dominant USA and dominant USD; but these circumstances are fleeting.

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