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Modern Monetary Theory...

  1. The sovereign “deficit” is not a debt which the citizens have to repay with future taxes. Instead, the sovereign “deficit” is simply the balance sheet accounting of the fiat Dollars the sovereign has issued and paid to the citizens. What is written as a “deficit” on the sovereign side of the balance sheet is a financial “asset”—Dollars earned—on the citizen’s side. The citizens then use those Dollar assets to pay for goods and services amongst themselves.
http://neweconomicperspectives.org/

Now there is much more to this new way of thinking about money but this is a great start. As long as we have excess capacity in the nation in terms of labor, resources and capital, we are under utilizing our ability to perform at peak levels. The only way we can increase our demand is to export more than we import or spend/earn more ourselves. If we cannot export our way to full employment and we do not have enough money to increase domestic demand, the only place to go is the government. The deficits over time represent the amount of money we allowed to be spent filling this gap. We will never pay it back, why should we? Who would we pay back anyway? We would be paying ourselves. No, the deficit is completely immaterial to economic well being unless we are operating at peak employment. The day we are fully employed meaning that everyone that is capable to have a job has a job doing something important to all of us is the day we will no longer need to replace that demand from fiat money. Now where does this extra demand come from? The government. They just spend enough money to keep everyone participating in the economy in a meaningful way. We have millions of college kids out of work. Put them to work. We have millions of over 50 folks that got laid off and can't find a job. Give them a job. We force kids to go into debt to educate themselves, absurd. We should be funding them 100%. No, austerity and the traditional way of viewing money and deficits is wrong. Read the blog.
 
So if we can print money at will, why don't we do it to insure full employment? Other than WW2 and for short periods during bubbles, we have never been at full employment. The free market simply cannot perform this function. Do we want everyone to have a job that produces something of value in return for money? Of course we all do. But the free market cannot accomplish this goal, they are only going to get here if demand is present continuously. We all know that demand is not a continuous function but don't we all wish it was? Of course we do. So how do we do it? By having the government put us to work. But what about inflation? Taxes take money out of the system to counter inflation. Very simple. We can have our cake and eat it too folks.
 

Joe Economist

Council Member
  1. The sovereign “deficit” is not a debt which the citizens have to repay with future taxes. Instead, the sovereign “deficit” is simply the balance sheet accounting of the fiat Dollars the sovereign has issued and paid to the citizens. What is written as a “deficit” on the sovereign side of the balance sheet is a financial “asset”—Dollars earned—on the citizen’s side. The citizens then use those Dollar assets to pay for goods and services amongst themselves.
http://neweconomicperspectives.org/

Now there is much more to this new way of thinking about money but this is a great start. As long as we have excess capacity in the nation in terms of labor, resources and capital, we are under utilizing our ability to perform at peak levels. The only way we can increase our demand is to export more than we import or spend/earn more ourselves. If we cannot export our way to full employment and we do not have enough money to increase domestic demand, the only place to go is the government. The deficits over time represent the amount of money we allowed to be spent filling this gap. We will never pay it back, why should we? Who would we pay back anyway? We would be paying ourselves. No, the deficit is completely immaterial to economic well being unless we are operating at peak employment. The day we are fully employed meaning that everyone that is capable to have a job has a job doing something important to all of us is the day we will no longer need to replace that demand from fiat money. Now where does this extra demand come from? The government. They just spend enough money to keep everyone participating in the economy in a meaningful way. We have millions of college kids out of work. Put them to work. We have millions of over 50 folks that got laid off and can't find a job. Give them a job. We force kids to go into debt to educate themselves, absurd. We should be funding them 100%. No, austerity and the traditional way of viewing money and deficits is wrong. Read the blog.
Wolly, Don't buy into this non-sense. MMT is to economics what Drunk Driving is to NASCAR. The "neweconomics" published a blog piece on WWII without mentioning the inflation rates from 1940 to 1950. It failed to mention the fact that we had rationing cards. It was a piece that took the perfect example of the failure of MMT, and turned it into a positive - all by ignoring facts.
 
Wolly, Don't buy into this non-sense. MMT is to economics what Drunk Driving is to NASCAR. The "neweconomics" published a blog piece on WWII without mentioning the inflation rates from 1940 to 1950. It failed to mention the fact that we had rationing cards. It was a piece that took the perfect example of the failure of MMT, and turned it into a positive - all by ignoring facts.
Not sure if those points mean anything to their position. And the throw away that MMT is akin to drunk driving a race car, again just a way of showing that you likely know very little about it. Try watching this lecture, its long but explains it very well.

 

Joe Economist

Council Member
Not sure if those points mean anything to their position.
Let's not be so bold as to say that they have a position. 1000s of years of economic history debunk everything they say.

The critics of MMT say that it will lead to inflation, and a destablized currency that will hurt the economy more than help it. Ignoring the impact of inflation (on a ration system) says that they have no position.

If MMT was credible, Zimbabwe would be a world power rather than an economic basketcase. Currency failures have crushed South American countries, which magically restore themselves once the currency is controlled. No where in history has a country been able to abuse its currency for any length of time.

Today, the government is printing money most of which winds-up overseas. So long as there is demand for the currency printing money will not cause a problem. The question is whether that demand will persist.
 

Joe Economist

Council Member
So if we can print money at will, why don't we do it to insure full employment? Other than WW2 and for short periods during bubbles, we have never been at full employment. The free market simply cannot perform this function. Do we want everyone to have a job that produces something of value in return for money? Of course we all do. But the free market cannot accomplish this goal, they are only going to get here if demand is present continuously. We all know that demand is not a continuous function but don't we all wish it was? Of course we do. So how do we do it? By having the government put us to work. But what about inflation? Taxes take money out of the system to counter inflation. Very simple. We can have our cake and eat it too folks.
"So if we can print money at will, why don't we do it to insure full employment?"

You don't insure 'full employment'.

The purpose of currency is to store value. I accept currency in exchange for my wares because I know that I will be able to use it to buy something else. Without currency, our economy would be barter based.

Destablizing your currency only hurts your economy as it loses its ability to store value. The currency becomes a foreign currency where time determines the exchange rate. I am less inclined to trade my wares for currency because I don't know that I will be able to buy something else with it in the future. MMT is the return of the barterbased economy.
 
Let's not be so bold as to say that they have a position. 1000s of years of economic history debunk everything they say.

The critics of MMT say that it will lead to inflation, and a destablized currency that will hurt the economy more than help it. Ignoring the impact of inflation (on a ration system) says that they have no position.

If MMT was credible, Zimbabwe would be a world power rather than an economic basketcase. Currency failures have crushed South American countries, which magically restore themselves once the currency is controlled. No where in history has a country been able to abuse its currency for any length of time.

Today, the government is printing money most of which winds-up overseas. So long as there is demand for the currency printing money will not cause a problem. The question is whether that demand will persist.
I remember you from the time I was here before, you call yourself an economist and then purport to tell us that your preferred framework is thousands of years old. I realize you are trying very hard to be an economist on blogs like this and I encourage you to keep trying but your ideas are really quite silly. If you were an economist you would know that economists usually don't agree with anyone that does not accept their viewpoints. So, the fact that some scream about inflation is not very interesting to me. Greenspan was worried about inflation, look where it got us. The value of the currency within the nation itself is the key to understanding my point. Inflation only hurts imports, it helps exports. Most of the horror stories you will likely trot out were because nations were pegged to fixed exchange rates (Argentina) or gold (Weimar Germany). Money is a creation of the state in an economy like ours. It exists solely to further the interests of the state, that is why the state forces you to pay taxes in dollars and not bit coins or pesos. The lack of demand in this economy is the central issue facing us today. There is no untapped pool of demand that will magically create jobs to get unemployment down to 5% or so. Even if there was some magic market based period where this happens, it is always either during a war or a bubble. This proves that the market cannot and has never accomplished full employment alone. The market is not even interested in full employment. Full employment is the key to economic success for the people themselves. The government has the ability tomorrow to employ every single out of work person. Do it.
 

fairsheet

Senator
I remember you from the time I was here before, you call yourself an economist and then purport to tell us that your preferred framework is thousands of years old. I realize you are trying very hard to be an economist on blogs like this and I encourage you to keep trying but your ideas are really quite silly. If you were an economist you would know that economists usually don't agree with anyone that does not accept their viewpoints. So, the fact that some scream about inflation is not very interesting to me. Greenspan was worried about inflation, look where it got us. The value of the currency within the nation itself is the key to understanding my point. Inflation only hurts imports, it helps exports. Most of the horror stories you will likely trot out were because nations were pegged to fixed exchange rates (Argentina) or gold (Weimar Germany). Money is a creation of the state in an economy like ours. It exists solely to further the interests of the state, that is why the state forces you to pay taxes in dollars and not bit coins or pesos. The lack of demand in this economy is the central issue facing us today. There is no untapped pool of demand that will magically create jobs to get unemployment down to 5% or so. Even if there was some magic market based period where this happens, it is always either during a war or a bubble. This proves that the market cannot and has never accomplished full employment alone. The market is not even interested in full employment. Full employment is the key to economic success for the people themselves. The government has the ability tomorrow to employ every single out of work person. Do it.

I should qualify that I'm one of those crackpots that thinks our economy actually needs a coupla more inflation points.

Anyway.....what these (mainly) gold-shill inspired "economists" don't quite get, is that even as monetary easing CAN lead to untoward inflation, there's no guarantee that it WILL.

None of these people can tell us how monetary easing is a bad thing, IF there's no untoward inflation. And in fact...most nation's are jealous as hell of we Americans in that we CAN "print money" without necessarily suffering inflation. "Printing money" sans inflation, is one of the best of all worlds.

Of course...none of what's gone down to this point, completely obviates the threat of future inflation. We have tools for fighting inflation, to include raising interest rates and or taxes, and trimming our budget deficits. I'm not sure we've EVER been so well positioned to employ those "fixes" if necessary, than we are right now. But....we'd be godamned fools to apply those "fixes" to a problem that doesn't currently exist.
 
I should qualify that I'm one of those crackpots that thinks our economy actually needs a coupla more inflation points.

Anyway.....what these (mainly) gold-shill inspired "economists" don't quite get, is that even as monetary easing CAN lead to untoward inflation, there's no guarantee that it WILL.

None of these people can tell us how monetary easing is a bad thing, IF there's no untoward inflation. And in fact...most nation's are jealous as hell of we Americans in that we CAN "print money" without necessarily suffering inflation. "Printing money" sans inflation, is one of the best of all worlds.

Of course...none of what's gone down to this point, completely obviates the threat of future inflation. We have tools for fighting inflation, to include raising interest rates and or taxes, and trimming our budget deficits. I'm not sure we've EVER been so well positioned to employ those "fixes" if necessary, than we are right now. But....we'd be godamned fools to apply those "fixes" to a problem that doesn't currently exist.
Exactly. The Fed has two mandates, they usually only care about inflation. They can only do so much about employment so Yellen is doing what any responsible person would do in her position, making the Congress understand that she has no more tools and that fiscal policy is the last resort to full employment in this situation. It struck me yesterday that people like Joe can never tell us where all that new demand is going to come from. Where is the new money going to emerge to drive the economy? Sellling assets? Personal debt? Rising incomes? Exports? What exactly is going to change when a guy like Joe or Paul Ryan says "In order to create more jobs, we are going to stop spending, the lower spending number will create more jobs". Where? How? With what money?
 
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