https://www.bloomberg.com/news/features/2019-03-2…
Solid article by Bloomberg re: high level discussion on MMT. What are y'alls' thoughts? Anyone talking about this at work? Anyone think this will ever enter the mainstream?
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Although the fed has never publicly stated it.. pretty sure it is the current game plan. FX swaps went neg for many euro sovereigns at the end of Q4 meaning anything positive for them was not hedged. China hasn't bought any in years. Doesn't leave many other major buyers. So demand in theory should be down.. But all we're doing is rolling more and more debt. At this stage in the cycle we should be doing the opposite, but we're not
You're saying we're kicking the problem further down the road, but inevitably we'll have to deal with it?
Right now I don't see a clear cut solution... but until the debt starts to get cut back it would appear so
Complete garbage that fundamentally misunderstands money.
Explain your position...
It's based on these bullshit accounting equations that have nothing to do with the economic fundamentals of money and its (vital) relationship to other economic goods.
It also completely denies history: the stagflation crisis in the US/UK, the various hyperinflation's of the 20th century and the fact that money, for the vast majority of its history, was a commodity! Money was gold way before it was government backed notes.
Finally, the value of money is in no way related to taxes (a key premise in MMT). Theres no relationship between the two. High taxes does not produce deflation. It just doesn't.
At the end of the day, it's just the same bullshit apologetics for inflationary policies. Actually it's worse. Warren Mosler just stole the idea from another failed economist: Silvio Gesel.
MMT ignores basic supply/demand, or assumes a lot of things without any support.
For example, while it's true that a government can simply print more money to pay off debts issued in its currency, MMT proponents ignore the fact that they'd be devaluing the currency and worse, undermining confidence in it. Additionally, if a bond is sold to a party not accepting the currency, like another country, then they wouldn't necessarily accept payment in the form of currency and certainly not a devaluing one. The falling exchange rate would rule out conversion (as your currency devalues you'd need more of it to pay in the other currency, cancelling out the larger amount you printed) and you'd absolutely destroy the value of savings and debt. You could only think this is a good idea if you don't know how money works.
Some tenets of MMT are features of standard economic theory, but MMT is not a viable standalone point of view. I think certain things can be done that look like MMT, but in reality are explained by other things. Also, using taxation to control inflation is insane: if tax rates fluctuated rapidly it would result in civilizational chaos.
To quote the article, "...country with its own currency, such as the U.S., doesn’t have to worry about accumulating too much debt because it can always print more money to pay interest. So the only constraint on spending is inflation, which can break out if the public and private sectors spend too much at the same time...". So looks like the bold part is addressed, no? Also what is inherently bad about devaluing a currency?
I don't know if I agree with your rationale w/r/t the bond. Currencies fluctuate all the time so F/X risk never goes away.
Could falling exchange rate be compensated for via improved productivity?
I do agree with you in that I don't fully understand what would happen to savings. But I'm guessing an MMT-er would say that it would lead to investment and consumer spending.
Also, why the chaos?
Devalue a currency too far and you destroy the value of savings, and destroy the incentive to loan money. You also destroy the ability to borrow money because the rising interest rates will be passed on to the consumer: you'd be encouraging mass defaults. Consumers can't "just print money". What MMT also doesn't acknowledge is that a confidence in a country's currency will be eroded and they won't be able to A) make other purchases or B) issue debt in the future, so while yes you're paying down one ledger value, you're destroying the civilization in every other way. Hardly constructive and MMT has no realistic rebuttal to that point. On this item alone MMT is dead in the water. But I'll continue.
As for F/X risk, MMT isn't describing fluctuations like ripples on a pond, it's advocating emptying a lake. A) the lowering water level is your buying power going down which is horrendous for the consumer economy and B) that water has to go somewhere, figuratively you're now drowning an area with tax increases and high interest rates they can't pay.
Why are volatile tax rates a problem? Inventory management and income forecasting. You can't plan anything if you A) don't know what your total cost will be in the future and B) you can't estimate buying power if people's incomes are being taxed away at varying rates.
Chaos? Google hyperinflation.
Anything MMT talks about is covered under other financial theory and they're simply trying to justify debasing the currency to avoid raising taxes. Given the orange imbecile already handed out tax cuts, it's safe to say the plan is to devalue the currency. Thing is, with everyone on some level interlinked with our currency, their economies suffer too. The global economy isn't a zero sum game, it's more like a water balloon: squeeze too hard and it bursts (aka "war"). Republicans know this so there's your economic rationale for increased militarization.
MMT is shit and so are the people pushing it.
The article (or in this case the article that Bloomberg is referencing is wrong / too simplistic). Yes it is true a country with it's own currency can print more to pay down debt but think about what China might do when they see us printing money to pay down debt? What happens if in 3 years they stop accepting USD or require many-fold more USD to pay down existing debt (not even considering raising new debt). We pay 1:1, print more, might have to pay 2.5:1, that's fine we can print more, end up paying 5:1, you see where I'm going with this? Where does it stop? Printing $500,000 to pay off $1 in debt?
MMT is Garbage. When you run high deficits, you have to finance them through borrowing money (treasuries), or taxes. Taxes can only go so high, or you limit economic growth. MMT isn’t a theory but rather a shoddy explanation of how governments can recklessly spend money for the “social good.” What’s most startling about MMT is that it doesn’t recognize real world examples of its policy: Countries are drowning in their MMT-driven debt and the best thing MMTers says is “this time it’s different.”
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