If the MS econ. assumption that the 'market' is just one person selling to herself, then of course it gets it wrong.
OTOH, I personally have not seen an MMTer explain it well.
For me the main assumption we must make is that int. trade is a 'zero-sum game'. That is for every buyer there must be a seller (at the same price). Or, for every net exporting nation there must be some net importing nation or nations.
. . . It seems to me that it follows directly from this that, no nation can import more than it exports every year for many, many continuous years. At some point it will run out of money, stuff inside its borders it can sell to get money, or the desire of foreigners to save its currency or bonds. The US seems like an exception, but it is possible, or likely, that other nations or foreigners in general will stop being willing to save US$. That is, someday the US$ will stop being the worlds reserve currency.
. . . From this it seems to follow that no nation should be “allowed” to export more than it imports over some time period, like a decade. The only exceptions would be nations that owe other nations money.
Peter Zeihan in an IFTV youtube of Nov. 24, 2014, said that after WWII the US made a deal with the world. It would buy all the stuff they wanted to export and police the sealanes, etc. The Bretton Woods system was put in place. The US was on the gold standard at $32/oz., and all others pegged their currency to the US$. Functionally, this put the world back onto the gold standard.
. . . There were some problems because some nations could not avoid importing too much and could not pay. IIRC, they devalued or the US bailed them out. [This is the problem now with int. trade (gold standard or not). It is always going to be a problem until it is fixed.] Then in 1971 the Sec. of Treasury told Pres. Nixon that there was a run on the US gold reserves and the US could not do anything but go off the gold standard, which Nixon did do.
. . . What the Bretton Woods period showed *me* was that (even in the best times the world had ever had, economically) the system was deeply flawed. Even with the US having a CAD every year some nations still got in trouble, and then the US got in trouble. So, even during the biggest boom period in history int. trade was still “unstable”, and came apart in just 26 years.
. . . I can make an analogy to people in a city. Some people earn less than they *must* spend on food and rent. No matter how much money they start with, someday they will not be able to buy food to eat that day. They will need help. Lending them money (like the EU did to Greece in the GFC) can never solve this problem, because the person (or Greece) can never pay the loan back. Therefore, logically the must be charity, some sort of free money. [In this analogy, the solution of 'get him a job' is not possible.]
. . . Historically, many nations went to war and invaded a neighbor when they got in this mess.
. . . In the US we can see the states as being like nations. They use a common currency and can't control their borders. The solution in the US is that the Fed. gov. spends more than it taxes out, into the states with a net outflow of money. This comes close to balancing the outflow. So far at least, it is not critical, but it is a problem that *no one* has faced yet.
My conclusion is two fold ---
1] That most nations be *required* to have close to a balance in their Credit Account averaged over each decade, unless they are paying off old debts.
2] That the world must create a charity system for those nations that can't seem (no matter what they do or can do) to sell enough to be able to buy what it must buy.
. . . So, maybe the UN could put a "tax" on all nations with a Credit Account Surplus and give the money as charity to the nations that need it.
. . . The UN "tax" on net exporting nations would actually be on its Central Bank which would create fiat money to pay it. In the EU case, the EU would have to do something, because the tax would be on the ECB and it would create euros. But the guilty parties are nations like Germany, et all. So, the EU could let them slide or impose some penalty on them.
. . . Do it this way lets the rich sell stuff and the poor buy stuff, and nobody fails to get paid.
Why doesn't anyone see this problem? I think it is an example of the observation that you can't make someone *see* fact X, when his income depends on him not seeing it. That is, the rich make money from int. trade and so can't see the inherent problems with the system.
. . . I keep saying that I'm not an expert. So, I can be wrong here. Show me how I'm wrong here.