B0ycey wrote:I don't say that MSc contradictions are no big deal. In fact I say they are a very big deal. However what I also say is that increasing the money supply is a big deal too. To you you think that all the economies problems can be printed away and all the contradictions will just go awaty and we can spend like drunken sailors and boom up the economy. So which economy has successfully done that? Germany, Argentina, Zimbabwe... or even your favourite goto point...Japan?
. . . Well, it certainly seems like you meant the 'contradictions' in MS econ. theory are no big deal. If you think they are a big deal, what will be your response? Will you find a new better econ. theory, or keep to the MS theory? Or maybe you already do use a new theory.
. . . MMTers also, worry about the money supply. The *fact* that you keep saying they don't means you have not groked MMTers theory. So, again, MMT asserts that the only constraint on deficit spending is the risk of inflation.
Please, believe that.
. . . So, again, I reject your repeated claim that I believe that there is no limit on deficit spending. And, I like MMTers reject the use of the phrase "printing money" because the US spends with checks and direct deposits.
. . . See below for reply to "Japan?"
But that isn't assumptions of economics but your own assumption of what MSc economists think. It is largely accepted that bubbles, growth, recession and inflation is part of the system with everyone who studies economics. What the national Bank will do is try and control these things with interest rates. But that isn't a fail-safe. And when the economy goes pop, they national Bank then does QE (MMT in name) to solve one contradiction which in turn creates another. But given you think printing money is the answer, you need to explain that despite pretty much doubling the national debt 13 years ago and create even more debt today with our Covid response, why the economy of all major markets barely have had growth that makes a single digit for the past 13 years and why inflation seem to be happening now? Surely if increasing the money supply means we all spend more, why are we not spending more. The answer is simple. All that money, goes into property, rent not spending and that is what you should learn from Japan.
. . . Like I said, those assumptions are taken from others. I just choose to use them from much longer lists.
. . . Again, it is your assumption that I believe that deficit spending is the answer. My assertion is that we have not yet approached the limit on deficit spending. There are over 10 M unemployed now, IIRC. There is no reason to think that we can't use more raw resources. Of course I assert that we use those raw resources to mainly fight ACC and not to just restart consumer spending.
. . . Yes, you are right. Almost all of the deficit spending and QE has been spent wrong. Yes. it did go to the rich to fast who just saved it because what else can the do with it when demand by the masses is low? So, my answer to you is, that savings has been high. Savings by the rich has been high. So, high that the amount of the deficit spending and the way it has been spent meant that there has been low inflation. I assert that the masses would benefit from deficit spending that will help them. And the regs. may be needed to keep "rent seekers" from using their monopoly power to suck them up and save them, where they are useless to grow the economy.
. . . However, I also assert, that economic growth must be contained in the near future because of ACC.
The deposit money doesn't make money unless it is lent out, who says otherwise? That is the whole point. But really the deposit money is never lent out but as an insurance to back up loans anyway. When people say that banks create money when they issue a loan, this isn't entirely wrong. However they need the deposit money to back it up so to remain solvent. That is known as a fractional reserve. Fractional reserves aren't necessarily needed, however if loans become toxic due to default and there is a run on the bank like what happened to Northern Rock, the bank will run out of money. Loans should be regarded as assets, and like all assets they can lose value.
No reply needed.
Although given you are claiming the banks aren't lending at the moment, which isn't true but they are more careful who they lend to now I might add, that should be all the information you need to know that creating loans aren't without risk for the bank.
I wonder where you got the idea that I said banks are not lending now?
Maybe where I spoke about the beginning of many recessions that are started when the people can't afford to make larger debt payments and so stop borrowing. This is the start of that kind of recession. Then it continues as banks react to the drop in spending (all borrowing is soon spent on something).
. . . To be clearer I have learned about 3 kinds of recessions.
1] That kind. An example is the GFC/2008. This is the most common.
2] The kind that starts when the Gov. has run a surplus for a few years so incomes drop. An example is the dot com recession of 2000 or so. MMTers assert that the US has had a surplus 7 times for a few years, and in *every* case the surplus caused
a bank panic or recession.**
3] The 3rd kind may be called a black swan recession. Examples are after 9/11 and the covid pandemic recession.