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#15164845
Staying the Quantity Theory of Money doesn't mean economists define inflation as a rise in the money supply. Also, that's generally seen as a relationship holding in the long run only. It's not a mechanical 1:1 relationship holding all the time, at all. This is also clear from reading some of the economists quoted ITT.
#15165079
Steve_American wrote: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.

Well that depends on exactly how you define the "money supply".

(And I'm not talking about the generally accepted economics definition)

I personally believe the money supply can expand without necessarily causing inflation, but that money has to be backed by wealth in some way.
There are several different ways the "money supply" can be expanded.

And "money supply" in economics terminology does not mean what most ordinary people imagine it to mean.


Making it more complicated, there are such things as inflationary pressures without actual observed inflation, and temporary inflation, which could be caused for example in the midst of an economic bubble.
#15165252
@Puffer Fish,
According to MMT economists, to avoid inflation, deficit spending should avoid being way larger than the total of total savings plus payments to foreigners, (trade deficit).

This because money in a US bond or in a savings account is not circulating in the economy. Therefore, it can't drive up prices.

In the late 60s and early 70s, the US Gov. tried an experiment. AFAIK, every nation before had raised taxes as it entered a war. Pres. Johnson didn't do that, and neither did Nixon. We ended up with 500K solders in Vietnam and maybe 250K in the fleet standing off it or Air Force airmen in Thailand, etc. The combination of more money in the economy and less yung men in the job market, can be seen as being a force to push prices and wages up.

Then, Nixon in '71, took the world of the gold standard. This was seen by many as very inflationary all by itself. IMHO, that 'many' included the hyper conservative leaders of Arab nations in OPEC. Then here was the Yon Kippor War (sp?), in which the US helped Isreal and the Arab nations used oil to punish the US and European nations by doubling the price of oil very fast (IIRC).

This rise in oil prices drove up the prices of almost everything.

Therefore, MMTers say that even in the 70s infltion was not caused by just deficit spending. And it only rached 10-15%. This is no where near hyprinflation levels. It was not a crisis. I really don't see why there is so much fear of inflation, unless it is ginned up by the 1% to keep the Gov. from spending money to compete with their corps. that are fleecing the mass of the people.

The US has the world's recerve currency. I don't see any other currency being set to take over that role. Some say China's. I say BS. After covid the world doesn't trust China any more than I do. Some say the euro. I say BS. Europe has rules that keep its nations from selling bonds or are nations like Germany and export so they don't need to sell bonds. Who wants to hold euros as cash? What nation's banking system is secure enough for the 1% to park their money there? Some say bitcoin. I say BS. Bitcoin is a ponzi scheme. In the end, the holders will find them worthless. They are not backed by anything. At least the US dollar is backed by the taxing power of the US and the strength of the US economy.

Japan exports more than it imports, so it has that advntage. Nevertheless, MS economists have been yelling "infflation" at Japanese leders for 29 years and so far have been wrong that entire time. Japan can sell all its bonds, it has almost 0% inflation, its bonds have an interest rate of < .6%, and the Yen is one of the world's stongest curriencies. MS economists have not just been wrong; they have been shouting"fire" and then completely and totally wrong for 29 years.

So yes, MMTers say there is a limit on how much defcit spending the US Gov. can do. They have NEVER SAID OTHERWISE.They say the limit is when inflation gets above 2.5%/yr. They say that for the next year, there likely will by changes in prices, up & down. An example of down is tickets to watch a basebll game. I just saw a report that 95% of people , as of now, would not feel safe going to a ball game. So, if this continues tickets will be cheap to "fill" the seats, even with social distance in place.

But, in my experience, not one person will admit to changing their mind on line, not one. [Other than me.]

OTOH, the economy in th US is now, by some accounts, owned by the 1%. They own the 6 corps. that own all the other corps.
This means that the 1% could create inflation by just raising the prices they charge by 5% per month. Since, they own everything, the people would have only 2 choicrs. 1] Pay while complaining, or 2] riot in the streets.
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#15165270
Steve_American wrote:https://www.investopedia.com/insights/what-is-the-quantity-theory-of-money/#:~:text=According%20to%20the%20quantity%20theory%20of%20money%2C%20if%20the%20amount,price%20levels%20will%20also%20double.&text=This%20increase%20in%20price%20levels,and%20services%20in%20an%20economy.

INVESTOPEDIA, What Is the Quantity Theory of Money?


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.

Your statement is categorically false, and the passage you quoted does not say what you claim it does.

Inflation is an increase in prices.

Deflation is a decrease in prices.

Currency appreciation is an increase in the value of a currency.

Currency depreciation is a decrease in the value of a currency.

An increase in the money supply is an increase in the money supply.

There are proposed and supposed correlations between these things, but you can't substitute definitions based on proposed causal relationships.

The quantity theory of money is descended from the Currency School. Its contemporary, the Banking School argued, more correctly, against the one-to-one ratio proposed by the quantity theory, as quoted by you.

The banking school correctly pointed out, for example, that there is both hording of money, and alternatives to money (barter, basically, which includes hanging a 'will work for food' sign), which preclude a one-to-one correlation (while not denying that such correlations exist (though not as an iron rule--more as a highly probable occurrence)).

I wish you would stop thinking that reading MMT blogs supplied you with a thorough economics education. You could always, you know, actually study economics.
Last edited by Crantag on 08 Apr 2021 14:37, edited 1 time in total.
#15165271
Puffer Fish wrote:Well that depends on exactly how you define the "money supply".

(And I'm not talking about the generally accepted economics definition)

I personally believe the money supply can expand without necessarily causing inflation, but that money has to be backed by wealth in some way.
There are several different ways the "money supply" can be expanded.

And "money supply" in economics terminology does not mean what most ordinary people imagine it to mean.


Making it more complicated, there are such things as inflationary pressures without actual observed inflation, and temporary inflation, which could be caused for example in the midst of an economic bubble.

In truth, 'money supply' is sort of an archaic concept, at least in the economics mainstream. It is probably a left-over concept of the 'Gold Exchange Standard' (Bretton Woods, not the Gold Standard, which is different). No authorities seek to track the money supply in the US now.
#15165520
Steve_American wrote: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.

Like I said before, some of it is a semantics argument. Exactly what sort of "money" we are talking about.

Meanings easily get lost in definitions. It's just the nature of economics, it's a little complex, and many of the ordinary words we have have ambiguous meanings, or dual meanings in the field of economics.

My personal view is that if money is actually "backed" (in some way) by wealth, it need not necessarily create inflation.
#15165523
Crantag wrote:In truth, 'money supply' is sort of an archaic concept, at least in the economics mainstream. It is probably a left-over concept of the 'Gold Exchange Standard' (Bretton Woods, not the Gold Standard, which is different). No authorities seek to track the money supply in the US now.


I think it's still useful for detecting countries that are choosing to abuse segniorage and also for operational purposes for the bank itself. But yeah, it's not all that useful in practice beyond that. Makes good pedagogy though.
#15165539
Steve_American wrote:
This because money in a US bond or in a savings account is not circulating in the economy. Therefore, it can't drive up prices.

Puffer Fish wrote:I personally disagree with that view. The fact of whether money is circulating or not is irrelevant.

It will still affect people's spending if they think they have savings (or debts).

Well, it's true that having a $1M US Gov. bond will effect the owner's spending decisions.
However, do those spending decisions by that 1 person have much effect on a $20T GDP? I'm sure the answer is no.
Suppose, that person spends $50K because they have the $1M bond. If they keep spending the money not in their savings/bonds, then they are just spending money not in savings. They can do this in any case. They will not keep doing it unless they start spending their savings.
Now, go back, when the bond owner spent $50K, does the new holder of the $50K in "cash" care that somebody has a $1M bond? Of course not, this fact doesn't change their plans of what to do with the $50K they just got.

This is what I meant by saying 'money being saved is not causeing inflation' because it is not circulating. It is not bidding up prices.
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#15165732
Crantag wrote:If you were genuinely interested, Steve, I'd tell you to look up M1, M2, M3. In economics different sorts of money are classified in these categories on scale of liquidity, M1 being the most liquid (like cash and bank deposits). It's been a while, but I will gander that treasury bonds are M2.

In a political forums discussion, we aren't going to be sticking to strict "economics field" descriptions.

Nor should common readers be expected to know all the finer points.
#15165737
MMT is leftist utopian bullshit. It's a wonderful excuse to spend lots of money a country doesn't have on a utopian want-list.

No surprise that the MMT proponent in the OP starts talking about guaranteed jobs programs and debt-spending to fight climate change etc. while fear-mongering about human extinction.

The leftist utopian ideal is everyone never having to work a day in their life ever again while being taken care of by the state, and free to spend their days making art, traveling, watching TV, and picking their nose. So basically their ideal is to be 7 years old again being taken care of by mommy. Dependent children will always want to be dependent children.
#15165738
ckaihatsu wrote:The threat of inflation is not so imminent as No 11 would have us believe

https://www.theguardian.com/uk-news/202 ... us-believe


Low interest rates over long periods will typically cause inflation. We've already seen housing prices explode post-2008 thanks in part to cheap affordable credit.

I wonder if there will be another housing crisis if interest rates went back to 4-5%. Speculative bubbles love to burst. Everybody's got an investment property these days.
#15165750
Crantag wrote:I wish you would stop thinking that reading MMT blogs supplied you with a thorough economics education. You could always, you know, actually study economics.

Just as you don't study MMTT becaus you thnk it is wrong,
I will not study mainstream economics because I know that it is not a science because it can't accurately predict anything useful. I know that because it can't make accurate predictions that the theory is flatly wrong in a lot of places.

on't try tosay it is complicated, either. Since the 70s there has been a whole new field of mathematics called Chaos Theory for short. AFAIK, MS econ. has totally ignored this advance in how to make accurate predictons about complex systems.
I would predict that such a study would be instructive, but likely would invalidate much of MS econ.

I know that you and I disagree on this.

I wish you would try studying MMT.
;-). . . ;-(
.
#15165754
Unthinking Majority wrote:MMT is leftist utopian bullshit. It's a wonderful excuse to spend money a nation doesn't have on a utopian want-list.

No surprise that the MMT proponent in the OP starts talking about guaranteed jobs programs and debt-spending to fight climate change etc. while fear-mongering about human extinction.

The leftist utopian ideal is everyone never having to work a day in their life ever again while being taken care of by the state, and free to spend their days making art, traveling, watching TV, and picking their nose. So basically their ideal is to be 7 years old again being taken care of by mommy. Dependent children will always want to be dependent children.

You disproved your claim of what MMTers want in your post.
Or, maybe you didn't really want to equate MMTers and "leftists".
However, it sure seemed like you did equate them.

Anyway, all MMT economists reject a UBI while calling for a GJP (jobs) that isn't going to let the workers in the prgram do less that a day's work. They say the UBIis inflationary, while the GJP fights inflation, or controls inflation.

What do you mean by, ".... spend money a nation doesn't have ..."?
The US Gov. sells bonds it diesn't have before it creates them. In the same way the US Gov. can spend money by creating it.
In fact, MMT has *proven* that the US economy *needs* increases in the money supply to keep functioning. An example is, look at Europe after 2008. The nations there could not deficit spend enough to keep the economy going. The result was some nations have 20% unemployment after 5% of the people left to find a job somewhere else. [And, yes, because of the free moveent rules there we can't separate the unemployment by nation. The EU is by definition one market, and one labor market.] Even Germany saw an increase in gig jobs since 2008. The whole EU economy has failed to deliver "prosperty" to the people of the EU.

But, I write to convince the lurkers, not those who reply, because their minds have been madeup for years, even decades.
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#15165755
Steve_American wrote:Just as you don't study MMTT becaus you thnk it is wrong,
I will not study mainstream economics because I know that it is not a science because it can't accurately predict anything useful. I know that because it can't make accurate predictions that the theory is flatly wrong in a lot of places.

on't try tosay it is complicated, either. Since the 70s there has been a whole new field of mathematics called Chaos Theory for short. AFAIK, MS econ. has totally ignored this advance in how to make accurate predictons about complex systems.
I would predict that such a study would be instructive, but likely would invalidate much of MS econ.

I know that you and I disagree on this.

I wish you would try studying MMT.
;-). . . ;-(
.

Yeah, nice strawman attempt there, buddy.

At issue is not whether or not you shall actually study economics (and reading blogs isn't studying economics, and also mainstream economics isn't anything that is not MMT).

The issue is you wanting to have things both ways, by consistently posting ignorant stuff, while displaying a pompous attitude as if you actually ever had studied economics and understood economics well (neither of which attain).
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