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Why does everyone hate mmt?

Cordelier said:
My problem with MMT is that it's highly inflationary... financing Government debt by printing money is what got Weimar Germany into such heavy trouble in the 1920's.
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There are indeed constraints to printing money, and they are resource constraints. MMT just transfers the constraint away from deficits, to inflation/resources.
 
JP Hochbaum said:
There are indeed constraints to printing money, and they are resource constraints. MMT just transfers the constraint away from deficits, to inflation/resources.
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And that's a major flaw... since people's behavior is affected by their concerned with deficits.
 
I do not know how anyone can claim that the MMTs folks are not concerned with inflation. They mention it every time I hear them speak. What they do challenge is the idea that you can have almost unlimited credit and borrowing without it impacting the overall economy. If the FED printing money is inflationary, why doesn't credit card debt, mortgages and private lending do the same thing? Notice how very few of the mainstream economists ever mention private sector debt as a factor in modeling the economy. Professor Keen noticed this years ago and has been talking about it for at least a decade. The driver for inflation is not too much money chasing too few goods alone. It can also be tied to servicing public debts in another currency as well. We have no debts in any other currency. We have virtually unlimited capacity to make goods and provide services. Except shortages of raw materials or cartels acting to raise prices, how exactly will prices go up if we allow for free trade to fill in demand from anywhere on the planet?
 
Moderate Right said:
MMT is used as a justification to spend spend spend on socialist ideals, just as people use the bible as justification as an eye for an eye, attacks on gays, etc. These people say that it is just a description of how things work and then they turn right around and use this explanation of how things work as a justification for unlimited spending on liberal/socialist ideals.
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I am confused by your conclusion since all economies are intended to serve the general public and are managed to do the most good for the most people. That is the intended purpose of the Fed even though it was likely created to serve the interests of the banks themselves hiding behind a facade of altruism and responsibility for the common good. If a policy helps as many as possible, how is that liberal or socialist? Are you claiming that the opposite is then a conservative policy statement?
 
Vadinho said:
I do not know how anyone can claim that the MMTs folks are not concerned with inflation. They mention it every time I hear them speak. What they do challenge is the idea that you can have almost unlimited credit and borrowing without it impacting the overall economy. If the FED printing money is inflationary, why doesn't credit card debt, mortgages and private lending do the same thing? Notice how very few of the mainstream economists ever mention private sector debt as a factor in modeling the economy. Professor Keen noticed this years ago and has been talking about it for at least a decade. The driver for inflation is not too much money chasing too few goods alone. It can also be tied to servicing public debts in another currency as well. We have no debts in any other currency. We have virtually unlimited capacity to make goods and provide services. Except shortages of raw materials or cartels acting to raise prices, how exactly will prices go up if we allow for free trade to fill in demand from anywhere on the planet?
Click to expand...

I've got to admit, I don't feel I have an adequate grasp on the theoretical implications of MMT... I'm kind of approaching this from a practical point of view, so in that light, I thought I'd post this chart on Federal Spending and Debt:

Overall.jpg

The Black Bar represents average receipts as a percentage of GDP for each 4-year term.
The Red Bar represents average outlays - when it's greater than the Black Bar, we're running a deficit, when it's lower, a surplus.
The Gray Bar is the total Debt (as a percentage of GDP) at the end of each term.
The Blue Bar represents the Net Debt held by the Public. The difference between the Gray Bar and the Blue Bar is the portion of the Debt held in Government accounts (ie, Social Security, Medicare, etc.)
The Green Bar represents the portion of the Net Debt held by the Federal Reserve... as it increases, it keeps interest rates down and as it decreases, interest rates go up.

The two key measurements are the Net Debt (Blue Bar) and the Debt held by the Federal Reserve (Green Bar)... The Blue Bar represents the part of the Debt out there on the markets, so it competes with private sector borrowing and drives up interest rates as it increases. This effect can be moderated by increasing the Green Bar, but the higher the Green Bar gets, the more uncertainty exists within the Bond Markets... why would you buy Bonds if the Federal Reserve could just dump part of it's supply out on the market at any time and undercut your position?

Now as far as I can tell, the main plank of MMT is that Government deficits (the different between the Red Bar and the Black Bar) should be financed by the Federal Reserve expanding the money supply and exchanging that "new money" for marketable Government debt (thus expanding the Green and Blue Bars). The run-up in the Green Bar during Obama I via QE is a prime example of this. But doesn't this just increase uncertainty in the Bond market and make interest rates increasingly unstable? It seems to me that the higher the Fed's holdings are relative to what's out there in the market, the more it's ability to "fine-tune" interest rates becomes constrained.... even a slight move on it's part would tend to have a disproportionate effect on interest rates.
 
jaeger19 said:
And that's a major flaw... since people's behavior is affected by their concerned with deficits.
Click to expand...

You have me curious, considering our deficit is massive, as is Japan's and China's, one would think their consumption would be horrible. Do you have any data to show this theory?
 
Cordelier said:
Now as far as I can tell, the main plank of MMT is that Government deficits (the different between the Red Bar and the Black Bar) should be financed by the Federal Reserve expanding the money supply and exchanging that "new money" for marketable Government debt (thus expanding the Green and Blue Bars). The run-up in the Green Bar during Obama I via QE is a prime example of this. But doesn't this just increase uncertainty in the Bond market and make interest rates increasingly unstable? It seems to me that the higher the Fed's holdings are relative to what's out there in the market, the more it's ability to "fine-tune" interest rates becomes constrained.... even a slight move on it's part would tend to have a disproportionate effect on interest rates.
Click to expand...
Well, MMT doesn't say that government deficits need to be financed, MMT says that taxes aren't necessary nor are bond sales necessary to finance a deficit.

In an ideal MT setup, the treasury and federal reserve would be one agency. Thus no need to issue bonds for the creation of a dollar. Bonds would still exist, but it's purpose would be to soak up excess dollars to stem inflationary pressures.
 
JP Hochbaum said:
You have me curious, considering our deficit is massive, as is Japan's and China's, one would think their consumption would be horrible. Do you have any data to show this theory?
Click to expand...

Nope you would not think our consumption would be terrible. Because currently the deficit is not seen as a problem.



How.. at times it is.

he deficit has also risen in importance in the public mind when Americans are asked at the beginning of each year what they believe to be the top national priorities for the president and the Congress.
The Pew Research Center began measuring national priorities in 1997. Jobs, education, Social Security, Medicare and the budget deficit were at the top of the list then just as they are now, in 2012.
The deficit had earlier slipped as a priority during the last years of the Clinton administration when the budget was in surplus and following the 9/11 attacks when terrorism rose as a priority.
Today, however, the budget deficit stands out as one of the fastest growing priorities for Americans, rising 16 percentage points since 2007 and ranking third with 69% calling it a top priority.
Click to expand...
Debt and Deficit: A Public Opinion Dilemma | Pew Research Center

The point being that when people are concerned about the deficit.. then the public starts doing things because they are worried... perhaps pull back on consumption they might have or stop plans to increase consumption... companies deciding not to expand etc.


And of course when people are concerned.. it becomes a political issue.. and that means that politicians will likely do things..like increase taxes.. or decrease federal spending etc.. that will have effects on the economy. In fact. it might be a bit of a self fulfilling prophesy.


But.. the what MMTers say is "but but but"...well they forget that the government has been fiscally conservative when it deems it does. So.. OBama DID reduce the deficit.. and that had economic consequences..
 
JP Hochbaum said:
Well, MMT doesn't say that government deficits need to be financed, MMT says that taxes aren't necessary nor are bond sales necessary to finance a deficit.

In an ideal MT setup, the treasury and federal reserve would be one agency. Thus no need to issue bonds for the creation of a dollar. Bonds would still exist, but it's purpose would be to soak up excess dollars to stem inflationary pressures.
Click to expand...

Okay.. lets make this simple..

I own several businesses.

Why should I accept the us dollar in payment?
 
JP Hochbaum said:
Well, MMT doesn't say that government deficits need to be financed, MMT says that taxes aren't necessary nor are bond sales necessary to finance a deficit.

In an ideal MT setup, the treasury and federal reserve would be one agency. Thus no need to issue bonds for the creation of a dollar. Bonds would still exist, but it's purpose would be to soak up excess dollars to stem inflationary pressures.
Click to expand...

If you create a dollar without issuing a Bond, isn't that, by definition, an inflationary currency debasement?

To me, it's like Nero reducing the amount of silver in the denarius.... it wasn't too long before successive Emperors copied the same strategy until the point there was hardly any silver at all.
 
Cordelier said:
I've got to admit, I don't feel I have an adequate grasp on the theoretical implications of MMT... I'm kind of approaching this from a practical point of view, so in that light, I thought I'd post this chart on Federal Spending and Debt:

View attachment 67254013

The Black Bar represents average receipts as a percentage of GDP for each 4-year term.
The Red Bar represents average outlays - when it's greater than the Black Bar, we're running a deficit, when it's lower, a surplus.
The Gray Bar is the total Debt (as a percentage of GDP) at the end of each term.
The Blue Bar represents the Net Debt held by the Public. The difference between the Gray Bar and the Blue Bar is the portion of the Debt held in Government accounts (ie, Social Security, Medicare, etc.)
The Green Bar represents the portion of the Net Debt held by the Federal Reserve... as it increases, it keeps interest rates down and as it decreases, interest rates go up.

The two key measurements are the Net Debt (Blue Bar) and the Debt held by the Federal Reserve (Green Bar)... The Blue Bar represents the part of the Debt out there on the markets, so it competes with private sector borrowing and drives up interest rates as it increases. This effect can be moderated by increasing the Green Bar, but the higher the Green Bar gets, the more uncertainty exists within the Bond Markets... why would you buy Bonds if the Federal Reserve could just dump part of it's supply out on the market at any time and undercut your position?

Now as far as I can tell, the main plank of MMT is that Government deficits (the different between the Red Bar and the Black Bar) should be financed by the Federal Reserve expanding the money supply and exchanging that "new money" for marketable Government debt (thus expanding the Green and Blue Bars). The run-up in the Green Bar during Obama I via QE is a prime example of this. But doesn't this just increase uncertainty in the Bond market and make interest rates increasingly unstable? It seems to me that the higher the Fed's holdings are relative to what's out there in the market, the more it's ability to "fine-tune" interest rates becomes constrained.... even a slight move on it's part would tend to have a disproportionate effect on interest rates.
Click to expand...

That is the theory as most of us were taught in college but let me ask you a simple question. When the prime was almost zero, did your personal debt follow that curve? Mortgages perhaps but how about credit cards? I do not buy the idea that the Fed sets any interest rates besides inter-bank charges. They set the rate that allows them to sell the bonds and nothing more or less. Now it is true that forcing interest rates up helped fix inflation during the Volker years but our financial system is nothing like that anymore. I can suggest some videos for you, look up Stephanie Kelton on youtube to more in depth on MMT.

Here is one of many.

YouTube

Remember one thing about economists. They are tied to their models. They will defend their models until they die because that is all they have to rely upon. I do not consider MMT to be perfect however I do see it as completely non-partisan. It simply describes what is not what should be. As for the debt, could the Fed not just put an asset into their reserves that equals the entire debt and issue currency against it paying the whole thing off? All they do is hit keystrokes and bam, money is created and destroyed magically. Why force them to issue bonds that pay interest at all? What is the point of doing so but to support a credit based system of creating new money? Who benefits from a system like this? Banks do which is why it was created in the first place by JP Morgan and his buddies.
 
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Vadinho said:
That is the theory as most of us were taught in college but let me ask you a simple question. When the prime was almost zero, did your personal debt follow that curve? Mortgages perhaps but how about credit cards? I do not buy the idea that the Fed sets any interest rates besides inter-bank charges. They set the rate that allows them to sell the bonds and nothing more or less. Now it is true that forcing interest rates up helped fix inflation during the Volker years but our financial system is nothing like that anymore. I can suggest some videos for you, look up Stephanie Kelton on youtube to more in depth on MMT.

Here is one of many.

YouTube

Remember one thing about economists. They are tied to their models. They will defend their models until they die because that is all they have to rely upon. I do not consider MMT to be perfect however I do see it as completely non-partisan. It simply describes what is not what should be. As for the debt, could the Fed not just put an asset into their reserves that equals the entire debt and issue currency against it paying the whole thing off? All they do is hit keystrokes and bam, money is created and destroyed magically. Why force them to issue bonds that pay interest at all? What is the point of doing so but to support a credit based system of creating new money? Who benefits from a system like this? Banks do which is why it was created in the first place by JP Morgan and his buddies.
Click to expand...

*L* I'm probably not the person to ask about personal debt... I think about the most I've ever owed at any point in my life was about $4,000.

Nothing personal against you, Vad, but I don't usually watch video links unless they're less than a minute long or they support an argument - not substitute for one.

I'm not quite sure what your point is about the "magic money" question... if the Fed prints money that isn't tied to a debt instrument, then it's no different than what Nero did to the Roman Denarii... or Weimar Germany did in the 1920's, what Argentina did in the 80's and what Robert Mugabe did in Zimbabwe. It's just a plain, old-fashioned currency debasement. People can dress it up into whatever fancy academic coat they want, but from everything I've seen on MMT, that's what it boils down to.
 
jaeger19 said:
Nope you would not think our consumption would be terrible. Because currently the deficit is not seen as a problem.



How.. at times it is.


Debt and Deficit: A Public Opinion Dilemma | Pew Research Center

The point being that when people are concerned about the deficit.. then the public starts doing things because they are worried... perhaps pull back on consumption they might have or stop plans to increase consumption... companies deciding not to expand etc.


And of course when people are concerned.. it becomes a political issue.. and that means that politicians will likely do things..like increase taxes.. or decrease federal spending etc.. that will have effects on the economy. In fact. it might be a bit of a self fulfilling prophesy.


But.. the what MMTers say is "but but but"...well they forget that the government has been fiscally conservative when it deems it does. So.. OBama DID reduce the deficit.. and that had economic consequences..
Click to expand...
Ok so you don't have any evidence that high deficits can effect consumption. Thanks.
 
Cordelier said:
Best example I could think of for a financial resource-based constraint.

So if it's not the Gold Standard, then what exactly do you mean by resource constraints?
Click to expand...
Things we produce as a country are our resources.
 
Cordelier said:
If you create a dollar without issuing a Bond, isn't that, by definition, an inflationary currency debasement?

To me, it's like Nero reducing the amount of silver in the denarius.... it wasn't too long before successive Emperors copied the same strategy until the point there was hardly any silver at all.
Click to expand...
Inflation is the increase in prices over a period of time. Creating dollars =/ inflation. In fact it is very hard to c
create inflation in productive mature economies like ours and Japan's. Japan has been trying to cause inflation for 20 years, and can't do it.
 
Kushinator said:
The sectoral balance theory of economic growth is utter nonsense.

It's important to understand that we cannot be constrained of dollars. It is important to understand that money supply growth is not the same as inflation growth. It's important to understand that reserves are necessarily acquired following a loan. And lastly, it is important to be able to distinguish between public and private debt. But to argue that economic slowdowns are a byproduct of not enough deficit spending... well, it has no empirical underpinning.
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It also doesnt really use a structural analysis, instead merely looking at the economy like a car.
 
Cordelier said:
*L* I'm probably not the person to ask about personal debt... I think about the most I've ever owed at any point in my life was about $4,000.

Nothing personal against you, Vad, but I don't usually watch video links unless they're less than a minute long or they support an argument - not substitute for one.

I'm not quite sure what your point is about the "magic money" question... if the Fed prints money that isn't tied to a debt instrument, then it's no different than what Nero did to the Roman Denarii... or Weimar Germany did in the 1920's, what Argentina did in the 80's and what Robert Mugabe did in Zimbabwe. It's just a plain, old-fashioned currency debasement. People can dress it up into whatever fancy academic coat they want, but from everything I've seen on MMT, that's what it boils down to.
Click to expand...

I find it amusing that in a thread about MMT where you comment on the subject critically you do not have more then one minute to watch one of the creators of MMT speak about it at length. If you knew more about the concepts you would not be comparing our fiat money system to Rome or Wiemar Germany. As for personal debt, my point was the nation not one individual, more money is created by banks then the FED creates. It's called fractional reserve banking, there might be one minute videos on it on youtube that you can view to grasp the nature of our money system.
 
JP Hochbaum said:
Inflation is the increase in prices over a period of time. Creating dollars =/ inflation. In fact it is very hard to c
create inflation in productive mature economies like ours and Japan's. Japan has been trying to cause inflation for 20 years, and can't do it.
Click to expand...

That's only because they haven't tried printing money and throwing out the back of airplanes yet.... give that a try and I guarantee you'll see a pretty swift rise in prices.
 
Vadinho said:
I find it amusing that in a thread about MMT where you comment on the subject critically you do not have more then one minute to watch one of the creators of MMT speak about it at length. If you knew more about the concepts you would not be comparing our fiat money system to Rome or Wiemar Germany. As for personal debt, my point was the nation not one individual, more money is created by banks then the FED creates. It's called fractional reserve banking, there might be one minute videos on it on youtube that you can view to grasp the nature of our money system.
Click to expand...

I'm here to debate, Vad... not watch videos. I can't debate with a video. If you've watched it and it's gotten you convinced, then why don't you echo their arguments?

Fair enough... if MMT doesn't essentially boil down to currency debasement, then explain to me exactly why it doesn't? Every time I ask one of you MMT advocates this question, you all start getting patronizing and suggesting I wouldn't understand the concepts. Which is pretty much the standard response for someone that doesn't know what they're talking about and wants to try to baffle you with B.S. . I'm not accusing you of that just yet, Vad... but you're walking pretty close to that cliff edge, and I wouldn't want you to fall off it.
 
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