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Thread: MMT to the rescue!

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    Re: MMT to the rescue!

    Quote Originally Posted by Moonglow View Post
    But Oblama was so generous and gave out an extra twenty five bucks a week extra on unemployment.
    He was lucky to get that out of the GOP, with Mitch McConnell, and Ted Cruz pushing the government to the edge of default.

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    Re: MMT to the rescue!

    Quote Originally Posted by JohnfrmClevelan View Post
    When I talk about this "theory," I am very specific about how the federal government finances itself RIGHT NOW. There isn't much about MMT that is theoretical.

    Other schools of thought, that said QE would lead to massive inflation? THAT'S theoretical. When MMT said that QE would not lead to massive inflation? THAT was theoretical. (QE didn't lead to inflation, btw, so we were right on that.) Whether or not these plans will preserve the economy? That's theoretical stuff, and what I was hoping we would be discussing eventually.

    But the mechanics of federal funding are objectively verifiable facts.

    QE can lead to inflation, if the new money exceeds production to a great extent, i.e., if it's overdone.

    If demand sinks, and it's use to bring demand back to normal, it won't cause inflation.

    In the current situation, it probably won't, it will just prevent deflation if nothing is done. However, they could over do it.

    The last QE that didn't result in inflation is not proof that QE doesn't cause inflation, for it has, in the past, so it depends on what is going on in the economy.


    Quantitative easing - Wikipedia

    Quantitative easing may cause higher inflation than desired if the amount of easing required is overestimated and too much money is created by the purchase of liquid assets. On the other hand, QE can fail to spur demand if banks remain reluctant to lend money to businesses and households.
    This is my beef with MMT'ers, it's becoming a cult of sorts, as if this is the panacea for all of our economic woes. The truth is, it's considered "fringe" economics by many economists, though no one is doubting that a few persons of letters are advocating it.

    My criticism is that they, like you, offer the last 10 years as "proof" that QE doesn't cause inflation. You have to go back further, a lot further, than that, to weigh the policy and know when you can do it, and when you can't, and even then, the economy is a very difficult thing to manage, because the effect of policies often take months to take affect, during which time the ground can shift again. Managing the economy is a tricky business, for sure.

    I would be very reluctant to accept any school of economic thinking as the final approach to any problem, everything should be considered, and weighed, accordingly.
    Last edited by OscarLevant; 03-23-20 at 11:57 PM.
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    Re: MMT to the rescue!

    Quote Originally Posted by OscarLevant View Post
    QE can lead to inflation, if the new money exceeds production to a great extent, i.e., if it's overdone.

    If demand sinks, and it's use to bring demand back to normal, it won't cause inflation.

    In the current situation, it probably won't, it will just prevent deflation if nothing is done. However, they could over do it.

    The last QE that didn't result in inflation is not proof that QE doesn't cause inflation, for it has, in the past, so it depends on what is going on in the economy.
    When, in the past, has QE resulted in inflation?


    Quote Originally Posted by OscarLevant View Post
    This is my beef with MMT'ers, it's becoming a cult of sorts, as if this is the panacea for all of our economic woes. The truth is, it's considered "fringe" economics by many economists, though no one is doubting that a few persons of letters are advocating it.

    My criticism is that they, like you, offer the last 10 years as "proof" that QE doesn't cause inflation. You have to go back further, a lot further, than that, to weigh the policy and know when you can do it, and when you can't, and even then, the economy is a very difficult thing to manage, because the effect of policies often take months to take affect, during which time the ground can shift again. Managing the economy is a tricky business, for sure.

    I would be very reluctant to accept any school of economic thinking as the final approach to any problem, everything should be considered, and weighed, accordingly.
    There is nothing more cult-like than a group of people believing in something that not only isn't backed up by data, but also doesn't make logical sense. For years, educated economists, who should well understand the mechanics of federal finance, have insisted that the country goes into actual debt when they issue bonds, even with a fiat currency. I'm sure you are familiar with the process; if not, I went over it in an earlier post in this thread. Can anybody understand those mechanics and still think that the government is in real, resource-costing debt? Yet that belief has continued to shape economic policy half a century after leaving the gold standard.

    It is against this background that we ask, "Why is the burden of proof always on us? Why do we still take these older, unfounded economic assumptions as the prima facie truth?" Why should we start with the assumption that QE would cause inflation (and that was the mainstream view before it happened)? Why should we believe that one can control the economy with a single lever that supposedly adjusts both the overnight interest rate and the unemploymet rate?

    We have already gone through the trouble of considering and weighing these mainstream theories, and we have rejected them. (Almost nobody starts out with an MMT background - all of the academics plowed through standard econ programs to get their degrees.) Very few mainstream economists, on the other hand, have made a genuine effort to understand MMT.

    I don't care if this is a fringe economic theory or not, because the vast majority of economists are both wrong and unwilling to change their thinking. Acceptance into their deluded world is not something we aspire to.
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    Re: MMT to the rescue!

    Quote Originally Posted by JohnfrmClevelan View Post
    Congress is considering a number of measures to deal with COVID-19's effects on the economy, the most novel being direct cash payments to individuals, paid for by deficit spending (at least in the short term). We are talking about amounts in the $1-3 trillion range.

    For example, giving 100 million households about $20,000 each (one of the more generous plans) would cost about $2 trillion.

    The benefits are obvious - a ton of newly unemployed people, plus those who were just scraping by, would now be relatively secure and able to pay their bills, avoid foreclosure or eviction, eat, etc. Demand that would normally be lost because of high unemployment would be mostly sustained. The idea is to mitigate the kinds of economic (and social) damage that we saw in 2008.

    The drawbacks?
    Have to admit I have been a skeptic of what you have been posting for a long time. However after years of zero interest rates, QE in the trillions, Europe with negative interest rates and the Bank of Japan buying up just about anything not nailed down with no signs of inflation in any major country to speak of you deserve to be listened to.

    Just throws everything we think we "knew" about money supply and inflation out the window,hard to do.

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    Re: MMT to the rescue!

    Quote Originally Posted by washunut View Post
    Have to admit I have been a skeptic of what you have been posting for a long time. However after years of zero interest rates, QE in the trillions, Europe with negative interest rates and the Bank of Japan buying up just about anything not nailed down with no signs of inflation in any major country to speak of you deserve to be listened to.

    Just throws everything we think we "knew" about money supply and inflation out the window,hard to do.
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    Re: MMT to the rescue!

    Quote Originally Posted by JohnfrmClevelan View Post
    Yeah, all you are doing is saying it. Over and over, as if that makes it true.

    You predicted the pandemic? Really? Let's see those posts, then.

    You have no idea what you are talking about.
    I predicted that MMT would lead to a world wide Depression if some event such as the pandemic were to happen. It's in the posts here. I said it several times. That's the trouble with MMT, it only works if everything runs along hunky dory. Once some form of calamity hits and national debts are huge problems, on comes another Great Depression. We are here. It is happening. To deny that is foolish.

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    Re: MMT to the rescue!

    Quote Originally Posted by washunut View Post
    Have to admit I have been a skeptic of what you have been posting for a long time. However after years of zero interest rates, QE in the trillions, Europe with negative interest rates and the Bank of Japan buying up just about anything not nailed down with no signs of inflation in any major country to speak of you deserve to be listened to.

    Just throws everything we think we "knew" about money supply and inflation out the window,hard to do.
    I was skeptical of the quantitative easing that was undertaken by the Obama Administration. It wasn’t significantly different from the Fed’s behavior in the 1979 stagflation recession.

    That one may have saved Wall Street, but it was very hard on Main Street.

    QE clearly saved the US economy, that and the Stimulus Bill.

    What’s different between 1979 and 2009 is the role of the price of oil.

    In the 1980’s oil was the most valuable commodity on earth. And, after the 1979 embargo, OPEC was able to sustain its cartel price for five more years. This artificially high price stunted economic growth and delayed the recovery worldwide

    Indeed, the brakes only went off when Saudi Arabia announced that it would no longer restrict production to cover cheating by Nigeria and Iraq.

    Fast forward three decades, and oil is a much smaller part of the energy equation that it was in 1980.

    So, when the Saudis announced that they were not going to restrict production to prevent prices from falling, the financial markets barely noticed.

    Indeed, oil prices will continue to collapse. Allowing central banks to buy up debt and prop up the world’s financial stability.

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    Re: MMT to the rescue!

    I agree with Jet. The risk is it’s an unknown.

    The problem is, in responsible hands it would be fine. But then, Republicans.

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    Re: MMT to the rescue!

    Quote Originally Posted by washunut View Post
    Have to admit I have been a skeptic of what you have been posting for a long time. However after years of zero interest rates, QE in the trillions, Europe with negative interest rates and the Bank of Japan buying up just about anything not nailed down with no signs of inflation in any major country to speak of you deserve to be listened to.

    Just throws everything we think we "knew" about money supply and inflation out the window,hard to do.
    When I first came across MMT about 5 years ago or more, I too was skeptical but kept an open mind. As I watched videos by Steve Keen, Wray and Kelton though, I started to understand more fully just how the Fed and Treasury actually operate. Once I grasped the essential nature of FIAT money, I realized that all MMT did was describe reality. It was not a prescription or ideology, it was simply a way of understanding how banking and the macro economy are linked. People want to believe that econ is a science because it looks like one and is sold to us as one. But in reality, it is really just about how to manage a macro economy to suit the aims and goals of that economy. If your goal is to create a class of super wealthy people, you will love monetarism and supply side. If you want to increase the middle class and create a more egalitarian economy, you start out with Keynes and then move on to MMT. Its that simple.
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    Re: MMT to the rescue!

    Quote Originally Posted by JohnfrmClevelan View Post
    And $2 trillion more held by the private sector. Where is the downside?



    Your taxes don't pay down the debt now. What makes you think they would pay down the debt in the future?



    In the short term, probably nothing. People need money NOW to pay bills. In the longer term, it's a relatively simple matter of eliminating those with a sufficient income and phasing out assistance.



    The different plans have different cutoffs. In the short term, it's too difficult to separate the needy from the rest.

    But let me point out that even people with relatively good incomes usually have relatively larger obligations. A foreclosure is an economically destructive event, whether it's a small mortgage or a bigger one. So money going to the middle class would still be money well-spent.

    There are going to be complainers either way. Either we should only help the ones that need help, or we should be fair and give everybody the same amount, or we should only give taxpayers money back, depending on how much they paid in taxes, etc. There is no plan that will make everybody happy, but any plan that preserves most of our economy will benefit everybody, compared to letting the economy crumble.
    What about lower classes?


    See also the reason twump cultists need to play little “hypocrisy” games is they know they are in deep **** so the only way they can pull off any victory is by trying to make their opponents look just as bad as they are. Its the never play defense tactic

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