Who Gets What: Economics as Religion -- Once More Unto the Breach!
March 23, 2019 2:56 AM Subscribe
A Beginner's Guide to MMT (Modern Monetary Theory) - "MMT proposes that a 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. As long as there are enough workers and equipment to meet growing demand without igniting inflation, the government can spend what it needs to maintain employment and achieve goals such as halting climate change."
What Did We Learn From The MMT Maelstrom? - "Anyone coming to the horror show of academic economics from another field has to wonder whether there is a better way."
Three Things to Keep in Mind About the MMT Debate - "Given that experimental central bank policies have already been used to save the financial system, repress financial volatility, boost asset prices and de facto favor the wealthy who own financial assets, why not experiment further in order to target more broadly and more directly the well-being of society?"
to round up some other critiques -- and make up your own mind :P
Central banking, shadow banking, and infrastructural power - "Public monetary governance and private market practices are closely entangled. Monetary policy depends on private financial infrastructures. At the same time, central banks exert considerable influence on market structures and practices. This paper presents the theoretical rationale for analyzing state-finance interactions through the lens of infrastructural entanglement and infrastructural power. We then apply this perspective to two crucial cases, showing how and why the Federal Reserve and the European Central Bank advocated and actively promoted, for monetary policy purposes, the development of shadow banking and shadow money. These cases serve to illustrate our argument that financialization could not have unfolded the way it has without increased infrastructural entanglement of central banking and shadow banking."
IBM Wants Crypto to Help Banks Like JPMorgan Do Banking (Why IBM Built World Wire on Stellar)
Banking, metaphysics, and art in fifteenth-century Florence - "Usury alters things. With interest rates, money is no longer a simple and stable metal commodity that just happens to have been chosen as a means of exchange. Projected through time, it multiplies, and this without any toil on the part of the usurer. Everything becomes more fluid. A man can borrow money, buy a loom, sell his wool at a high price, change his station in life. Another man can borrow money, buy the first man's wool, ship it abroad, and sell it at an even higher price. He moves up the social scale. Or if he is unlucky, or foolish, he is ruined. Meanwhile, the usurer, the banker, grows richer and richer. We can't even know how rich, because money can be moved and hidden, and gains on financial transactions are hard to trace. It's pointless to count his sheep and cattle or to measure how much land he owns. Who will make him pay his tithe? Who will make him pay his taxes? Who will persuade him to pay some attention to his soul when life has become so interesting? With usury, things are getting out of hand."
The Incoherence of the Economists - "What is an economist? There is an easy answer: economists are social scientists who create simplified quantitative models of large-scale market phenomena. But they are more than that. Besides their scientific role, economists have achieved a social cachet that far exceeds what one might expect from a class of geeky quasi-mathematicians. In addition to being scholars, economists today often advise national leaders, occupying some of the most influential roles in government. They are commonly treated like modern sages, given column space in our most prestigious periodicals, and turned to for analysis that goes far beyond pure economics and veers into politics, culture, and even morality." Economics' biggest flaw - "Its habit of assuming away coercion (in politics, foreign affairs and trade, immigration, law, crime, etc.) and security and yet pretending that its results are universal or readily applicable in coercive situations." (its second: "it tries to leap the chasm from our consumption of stuff (supply and demand, utility functions) to our ability to flourish and lead a meaningful life. The two aren't that related. Should reduce the importance of economists. Hasn't.")
The Rosetta Stone's Hidden Lesson on Taxes and Special Interests - "Tax season is a good time to remind us that the history of taxes tells the story of whole civilizations. What is taxed, and how much is it taxed, tells us what the rulers valued. What was exempt tells us who had the political pull to be excluded... The Rosetta Stone—one of the most famous artifacts in archeology—is such an example. For all its translation value, its purpose was to secure tax-exempt status for temples."
How the rich, the poor and the rest of us make and spend our money - "While there certainly are some similarities as to how cash flows in and out of the households across the income spectrum, one stark, and rather obvious, difference is that the bottom 20% spend every penny they make — and then some — just to pay the bills, while the top 20%, on average, manage to afford their pricier lifestyle and still have a nice chunk of change left over to splurge and save."
People want higher taxes on rich, better welfare, survey finds - "A strong majority of people in wealthy countries want to tax the rich more and there is broad support for building up the welfare state in most countries, a survey conducted for the OECD showed Tuesday."
If aliens invaded, how would we fund the war? - "Short answer: We would quasi-nationalize the economy. For more teachings, I refer you to @billjaneway: 'The critical issue is defining a legitimizing mission for the state. The green new deal is a step in that direction but obviously we have not had a Pearl Harbor moment with respect to climate change yet.'"
Ignore All Arguments About What Is "Politically Feasible" - "What does justice require and how are we going to get it?"
Mainstream economists argue that the correct parts of MMT aren’t new and the new parts aren’t correct. But MMTers point out that the establishment hasn’t covered itself in glory in recent years—largely failing to foresee the global financial crisis a decade ago, for instance. Paul McCulley, the former chief economist of bond giant Pacific Investment Management Co., says that though he’s “not a card-carrying MMTer,” he believes it offers a “robust architecture for a fiat currency world.”American Colonists Had a Modern Monetary Theory of Their Own - "In the 1600s, Massachusetts solved a dire liquidity problem by issuing the first fiat currency in the Western world."
In any case, the new textbook gives MMT a good slingshot. Samuelson, in the preface to the 1990 edition of his best-selling principles book, wrote, “I don’t care who writes a nation’s laws—or crafts its advanced treaties—if I can write its economics textbooks.” Stephanie Kelton, an MMTer who was the economic adviser on Vermont Independent Senator Bernie Sanders’s presidential campaign in 2016 and is a Bloomberg Opinion columnist, sees the tide turning. In presentations, the Stony Brook University economist likes to flash up a quote that says, essentially: First they ignore you, then they laugh at you, then they fight you. Then you win.
Several centuries ago, a handful of creative colonists in Massachusetts came up with a desperate but undeniably ingenious solution to their monetary woes that anticipated one of the key tenets of MMT. It worked — up to a point...Keynes is Dead; This is the Long Run - "Specifically, printing money for governments to spend, even when savings don't allow for such spending, is now called Modern Monetary Theory, or MMT. Of course, the name is something of an oxymoron; there is really nothing modern about this monetary theory. Confusing money creation with wealth creation was at the core of the debate between John Law and Richard Cantillon 300 years ago. For Law (a Scot who fled British justice, took refuge in France, and within a few years managed to drive what was then the leading economic power of the day into near bankruptcy), increases in the supply of money would lead to the employment of unused land and labor, which in turn would lead to higher productivity. Meanwhile, Cantillon explained in his Essay On Commerce that mistaking money for wealth always leads to disaster. "
Over the course of the seventeenth century, dissenting Puritans founded and developed the colony of Massachusetts into a thriving commercial hub. As the population and economy boomed, they faced a growing problem: a lack of money.
They had plenty of illiquid assets: land, agricultural produce, and other things. But for several complicated reasons, including trade imbalances, the colonists lacked a medium of exchange. Coins were extraordinarily scarce, posing an obstacle to economic growth...
Hutchinson and the others devised an unusual solution to the problem. They issued what is generally recognized as the first fiat currency in the Western world. The twenty-shilling notes they printed cheekily claimed that they “shall be in value equal to money” — meaning that they were equivalent to silver coin.
This was, on the face of it, preposterous. Massachusetts had no ability within its borders or beyond to compel people to accept the money at face value. Despite its promise to redeem the money at a “convenient time,” the colonial treasury could not do so when it first issued the bills.
Dror Goldberg, the leading historian of this formative episode, summed up this venture: “Never before has history seen such a weak money.” Which begs the obvious question: Why would any self-respecting soldier accept it, or for that matter, a shopkeeper, merchant, or anyone else?
The answer lies with the other language that appeared on the bill. It declared that they “shall be accordingly accepted by the Treasurer, and receivers subordinate to him, in all public payments.” They could be used to pay taxes.
Hutchinson and his allies spent before they taxed. And it was precisely that fact — that the money they injected into the economy would then be withdrawn via taxation — that gave the money its value. And it worked. The money circulated in the colony, greasing the wheels of commerce, and then disappearing at tax time.
What Did We Learn From The MMT Maelstrom? - "Anyone coming to the horror show of academic economics from another field has to wonder whether there is a better way."
Three Things to Keep in Mind About the MMT Debate - "Given that experimental central bank policies have already been used to save the financial system, repress financial volatility, boost asset prices and de facto favor the wealthy who own financial assets, why not experiment further in order to target more broadly and more directly the well-being of society?"
to round up some other critiques -- and make up your own mind :P
- MMT "explained"
- MMT's Big Coin Gambit
- On Empty Purses and MMT Rhetoric
- The Case Against Both Paul Krugman and MMT
- Is MMT "America First" Economics?
- Is modern monetary theory nutty or essential? [ungated] - "Paul Romer, a Nobel laureate last year, wrote in 2016 that 'for more than three decades, macroeconomics has gone backwards'. MMT is not obviously a step forward. But if it wins political support and influences policy only to flop, that is hardly voodoo. It is macroeconomics as usual."
- One of Keynes' methodological exhortations in the General Theory - "The object of our analysis is, not to provide a machine, or method of blind manipulation, which will furnish an infallible answer, but to provide ourselves with an organized and orderly method of thinking out particular problems; and, after we have reached a provisional conclusion by isolating the complicating factors one by one, we then have to go back on ourselves and allow, as well as we can, for the probable interactions of the factors amongst themselves. This is the nature of economic thinking." (the post-45 mathematization of econ; people can pretty much interpret it any way they want; getting busy on the proof)
- Preface everything you say by "As far as I can tell, though I may very well be wrong..." - "MMT is just IS-LM AD-AS and (i) consolidate Central Bank w/Treasury, (ii) set slope of Phillips curve to zero, (iii) anchor inflation expectations at zero."
- From the comments - "You cast MMT as the case of a vertical IS curve within ISLM. I believe you've explained that a vertical IS curve means monetary policy is without effect. That seems to be the precise logical translation of vertical. But I don't think that's precisely what MMT is saying. It's saying that monetary policy may have effect, but that it's effect is unreliable - in at least one important sense in that its potential impact may be directionally ambiguous – a point I made earlier above and a point that Mosler made in his comment. MMT does claim I believe that fiscal policy is more effective than monetary policy in closing the employment gap, because it is unambiguous in its income creation effect, without the necessary complication of (ambiguous) interest rate manipulation. This ambiguity is a fairly important point to MMTers. So one might intuit that the IS curve according to MMT may not be vertical – instead it may be some unreliable squiggle, with different compound effects in two different directions in different circumstances. That's uncertainty more than verticality. And they dislike that uncertainty and ambiguity."
- Next Steps for the Fiscal Theory of the Price Level - "The fiscal (or real) theory of the price level suggests that traditional macroeconomic roles can be reversed, with monetary policy stabilizing debt and fiscal policy determining the price level."
- But how do we use the fiscal theory? - "If inflation rises, the government raises taxes or cuts spending to soak up extra money. If inflation declines, the government does the opposite, putting extra money and debt in the economy but in a way that does not trigger higher future surpluses, so it does push up prices." [pdf]
Central banking, shadow banking, and infrastructural power - "Public monetary governance and private market practices are closely entangled. Monetary policy depends on private financial infrastructures. At the same time, central banks exert considerable influence on market structures and practices. This paper presents the theoretical rationale for analyzing state-finance interactions through the lens of infrastructural entanglement and infrastructural power. We then apply this perspective to two crucial cases, showing how and why the Federal Reserve and the European Central Bank advocated and actively promoted, for monetary policy purposes, the development of shadow banking and shadow money. These cases serve to illustrate our argument that financialization could not have unfolded the way it has without increased infrastructural entanglement of central banking and shadow banking."
- Peter Stella on Debt, Safe Assets, and Central Bank Operations
- A safe asset is not the same as a safe liability
IBM Wants Crypto to Help Banks Like JPMorgan Do Banking (Why IBM Built World Wire on Stellar)
- Banks are the entities in our society that keep lists of who has how much money. When banks need to update those lists — to reflect that I have sent you money, for instance, so now I have less money and you have more — it is very hard for them, and it takes them a long time to do it.
- When two banks are involved — when my money is at one bank and yours is at another — it is virtually impossible, don’t even ask, it could be days, weeks even. And if we are in two different countries, forget about it.
- International Business Machines Corp., a big computer/consulting/business-machines company, has gone to the banks to propose a way of keeping the lists of money on computers, so that if I want to send money to you, our banks could just make the relevant entries electronically, almost instantaneously, rather than spending days trying to figure it out.
- The banks are like “oh man yes, that sounds amazing, sign us up.”
Banking, metaphysics, and art in fifteenth-century Florence - "Usury alters things. With interest rates, money is no longer a simple and stable metal commodity that just happens to have been chosen as a means of exchange. Projected through time, it multiplies, and this without any toil on the part of the usurer. Everything becomes more fluid. A man can borrow money, buy a loom, sell his wool at a high price, change his station in life. Another man can borrow money, buy the first man's wool, ship it abroad, and sell it at an even higher price. He moves up the social scale. Or if he is unlucky, or foolish, he is ruined. Meanwhile, the usurer, the banker, grows richer and richer. We can't even know how rich, because money can be moved and hidden, and gains on financial transactions are hard to trace. It's pointless to count his sheep and cattle or to measure how much land he owns. Who will make him pay his tithe? Who will make him pay his taxes? Who will persuade him to pay some attention to his soul when life has become so interesting? With usury, things are getting out of hand."
The Incoherence of the Economists - "What is an economist? There is an easy answer: economists are social scientists who create simplified quantitative models of large-scale market phenomena. But they are more than that. Besides their scientific role, economists have achieved a social cachet that far exceeds what one might expect from a class of geeky quasi-mathematicians. In addition to being scholars, economists today often advise national leaders, occupying some of the most influential roles in government. They are commonly treated like modern sages, given column space in our most prestigious periodicals, and turned to for analysis that goes far beyond pure economics and veers into politics, culture, and even morality." Economics' biggest flaw - "Its habit of assuming away coercion (in politics, foreign affairs and trade, immigration, law, crime, etc.) and security and yet pretending that its results are universal or readily applicable in coercive situations." (its second: "it tries to leap the chasm from our consumption of stuff (supply and demand, utility functions) to our ability to flourish and lead a meaningful life. The two aren't that related. Should reduce the importance of economists. Hasn't.")
The Rosetta Stone's Hidden Lesson on Taxes and Special Interests - "Tax season is a good time to remind us that the history of taxes tells the story of whole civilizations. What is taxed, and how much is it taxed, tells us what the rulers valued. What was exempt tells us who had the political pull to be excluded... The Rosetta Stone—one of the most famous artifacts in archeology—is such an example. For all its translation value, its purpose was to secure tax-exempt status for temples."
How the rich, the poor and the rest of us make and spend our money - "While there certainly are some similarities as to how cash flows in and out of the households across the income spectrum, one stark, and rather obvious, difference is that the bottom 20% spend every penny they make — and then some — just to pay the bills, while the top 20%, on average, manage to afford their pricier lifestyle and still have a nice chunk of change left over to splurge and save."
People want higher taxes on rich, better welfare, survey finds - "A strong majority of people in wealthy countries want to tax the rich more and there is broad support for building up the welfare state in most countries, a survey conducted for the OECD showed Tuesday."
- Reimagining Capitalism: How The Greatest System Ever Conceived (And Its Billionaires) Need To Change
If aliens invaded, how would we fund the war? - "Short answer: We would quasi-nationalize the economy. For more teachings, I refer you to @billjaneway: 'The critical issue is defining a legitimizing mission for the state. The green new deal is a step in that direction but obviously we have not had a Pearl Harbor moment with respect to climate change yet.'"
- Data for Progress's Green New Deal
- It's 2050 And This Is How We Stopped Climate Change
- Forget Tesla, It's China's E-Buses That Are Denting Oil Demand
Ignore All Arguments About What Is "Politically Feasible" - "What does justice require and how are we going to get it?"
You still have to be practical. Let me distinguish between different types of feasibility. It’s important to look at whether a policy is economically, logistically, or technically feasible. You don’t want to pass a law that will have catastrophically bad effects. Your goals need to be sensible ones that would actually change the world. It’s “political” feasibility that I find borderline worthless to consider. Nearly anything is politically feasible, as the history of the 20th century shows. In Britain, a national health service was built from scratch, and in the United States we had a vast New Deal. The possibilities can be awful too: People were convinced that Hitler would never come to power, because such a thing would be extreme and absurd. It turned out that extreme, absurd, terrible things do happen. Personally I think human history could go in one of many different directions: We could build a lush, peaceful, socialistic utopia or a barren, brutal, neo-feudal dystopia. Which direction it takes depends on the choices that people make, and they should make the choices on the basis of what they think ought to happen rather than what they think will happen.Neoliberals to Socialists, and also Socialists to Neoliberals - "You keep referring to yourself by that word. I do not think it means what you think it means."[1,2,3,4,5,6]
“Can we have universal healthcare?”
“No that’s socialism”
“OK let’s be socialist then”
“No, socialism has killed millions of people”
“What about the Nordic countries?”
“That’s actually capitalism”
“Well can we have that system?”
“No”
This is excellent, thanks for posting it! Will take me a long time to digest. I hope it engenders some discussion here.
Would be nice to get a few members like Mutant in here to throw in their two cents.
posted by Telf at 3:20 AM on March 23, 2019 [2 favorites]
Would be nice to get a few members like Mutant in here to throw in their two cents.
posted by Telf at 3:20 AM on March 23, 2019 [2 favorites]
So we've had decades of this ultra-low inflation thing. Official unemployment numbers are low. Why are more of us experiencing precarity?
posted by scruss at 4:31 AM on March 23, 2019 [6 favorites]
posted by scruss at 4:31 AM on March 23, 2019 [6 favorites]
Blockchain, the secret is in the computer networks, math will save us, have I got an investment coin 4 U!
posted by sammyo at 4:45 AM on March 23, 2019
posted by sammyo at 4:45 AM on March 23, 2019
Great, let's talk about employment. I keep hearing people say that the economy is great and unemployment numbers are low. True enough, on it's face. However, it's a gamed system. You've been unemployed for x amount of years, you're bumped from the rolls as unemployable (or something ). Plenty of people I know, are underemployed, sure they've got a job( or 3) but it's not enough, especially when we have to fight this nonsense about the minimum wage. "THAT'S A STARTER WAGE FOR TEENS!" and various similar nonsense. As long as you're willing to let others starve because "I'VE GOT MINE!" we're going to have problems.
I don't know economic theory, I know what we have now doesn't work. I'm willing to try something new, and I'm willing to vote for it.
"But evilDoug, you just want to burn it all down, and kill the rich!?" I hear you say. Well it's true. If they don't want to listen to sense maybe we have to force them. Honestly, I'd really prefer if it didn't come to that but I'm not holding a lot of hope that it's possible.
posted by evilDoug at 6:52 AM on March 23, 2019 [9 favorites]
I don't know economic theory, I know what we have now doesn't work. I'm willing to try something new, and I'm willing to vote for it.
"But evilDoug, you just want to burn it all down, and kill the rich!?" I hear you say. Well it's true. If they don't want to listen to sense maybe we have to force them. Honestly, I'd really prefer if it didn't come to that but I'm not holding a lot of hope that it's possible.
posted by evilDoug at 6:52 AM on March 23, 2019 [9 favorites]
The problem with unemployment statistics over time is that the validity of U3 as an intuitive number to represent the economic status of working people is breaking down. If you assume that the relationship between U3 (official unemployment rate), U6 (the most inclusive rate), and a general sense of how well people are doing economically is stationary then you can compare U3 over time and get some sense out of it.
If the U3 U6 gap grows, then U3 trends over time are not good proxies for U6 over time and "unemployment" can be at a historic low while plenty of people are underemployment.
None of the unemployment numbers measure precarity either which is why both U6 and U3 can be low while people still feel that the economy is bad. Stitching together a £20k / yr income from a range of zero-hour contract jobs is not the same as £20k / yr from a FT job with a contract in an industry where you're likely to have a job for life (or at least for decades). There's a big difference in the feeling of having £20 in your account the day before pay day if you know you're going to be paid and having £20 in your account and not knowing how many hours you're going to get next week.
Of course, unemployment statistics don't account for real wages in any case.
Anyway, back to MMT. The way I explain MMT to people who think that it's magical thinking is this: MMT and conventional monetary policy both say that there are two levers, fiscal policy and monetary policy and two targets, debt affordability and output gap management.
In conventional monetary policy you use monetary policy (mainly interest rate but also other central bank activity) as the primary level to control the output gap (inflation and unemployment) which has only a secondary effect on the affordability of the national debt.
You use fiscal policy to control affordability of the national debt which has a secondary effect on the output gap.
In MMT you have the same targets and the same levers, you just use them in a different order. In fact, MMT grew out of observations about how real governments actually work - We already use fiscal policy (stimulus spending, automatic stabilisers like unemployment benefits) to control output!
You still don't get a free lunch. MMT will not grow wheat without fields and fertiliser, it won't make cars without factories and workers, and it won't educate without teachers. Fundamentally though, that isn't what monetary policy is about anyway! Monetary policy aims to solve the problem that somehow our economies often have idle car factories and people who need new cars at the same time. MMT is not magic and it will not solve all of our problems but it also isn't a dreamland economic fantasy world, it's based on empirical observation first and economic theory second.
It's not about government "spending money it doesn't have" because that misunderstands what money is. Government still can't magic the economy into producing what it physically can't and if government "spends money" aka "directs the economy" to do too much at the same time as non-government demand is directing the economy to do something then you get inflation.
In my experience, the most important thing that convinces skeptic laymen that there might be something to MMT is to explain the ways in which it is not magic and does not solve everything. People rightly distrust utopianism.
posted by atrazine at 7:30 AM on March 23, 2019 [20 favorites]
If the U3 U6 gap grows, then U3 trends over time are not good proxies for U6 over time and "unemployment" can be at a historic low while plenty of people are underemployment.
None of the unemployment numbers measure precarity either which is why both U6 and U3 can be low while people still feel that the economy is bad. Stitching together a £20k / yr income from a range of zero-hour contract jobs is not the same as £20k / yr from a FT job with a contract in an industry where you're likely to have a job for life (or at least for decades). There's a big difference in the feeling of having £20 in your account the day before pay day if you know you're going to be paid and having £20 in your account and not knowing how many hours you're going to get next week.
Of course, unemployment statistics don't account for real wages in any case.
Anyway, back to MMT. The way I explain MMT to people who think that it's magical thinking is this: MMT and conventional monetary policy both say that there are two levers, fiscal policy and monetary policy and two targets, debt affordability and output gap management.
In conventional monetary policy you use monetary policy (mainly interest rate but also other central bank activity) as the primary level to control the output gap (inflation and unemployment) which has only a secondary effect on the affordability of the national debt.
You use fiscal policy to control affordability of the national debt which has a secondary effect on the output gap.
In MMT you have the same targets and the same levers, you just use them in a different order. In fact, MMT grew out of observations about how real governments actually work - We already use fiscal policy (stimulus spending, automatic stabilisers like unemployment benefits) to control output!
You still don't get a free lunch. MMT will not grow wheat without fields and fertiliser, it won't make cars without factories and workers, and it won't educate without teachers. Fundamentally though, that isn't what monetary policy is about anyway! Monetary policy aims to solve the problem that somehow our economies often have idle car factories and people who need new cars at the same time. MMT is not magic and it will not solve all of our problems but it also isn't a dreamland economic fantasy world, it's based on empirical observation first and economic theory second.
It's not about government "spending money it doesn't have" because that misunderstands what money is. Government still can't magic the economy into producing what it physically can't and if government "spends money" aka "directs the economy" to do too much at the same time as non-government demand is directing the economy to do something then you get inflation.
In my experience, the most important thing that convinces skeptic laymen that there might be something to MMT is to explain the ways in which it is not magic and does not solve everything. People rightly distrust utopianism.
posted by atrazine at 7:30 AM on March 23, 2019 [20 favorites]
So we've had decades of this ultra-low inflation thing. Official unemployment numbers are low. Why are more of us experiencing precarity?
Because hugely increasing productivity has not resulted in increasing wages.
MMT sounds like Keynesianism without the self-control of only deficit spending on things that have an ROI (infrastructure has an ROI, wars and tax breaks for the rich don't).
posted by tclark at 7:33 AM on March 23, 2019 [3 favorites]
Because hugely increasing productivity has not resulted in increasing wages.
MMT sounds like Keynesianism without the self-control of only deficit spending on things that have an ROI (infrastructure has an ROI, wars and tax breaks for the rich don't).
posted by tclark at 7:33 AM on March 23, 2019 [3 favorites]
Are proponents of MMT looking to lower U6, or looking to modify the social safety net to more comfortably accommodate workers that the economy deems obsolescent as that population expands? Doesn't most of Europe have comparable U6 numbers? What's considered ideal?
posted by Selena777 at 8:40 AM on March 23, 2019 [2 favorites]
posted by Selena777 at 8:40 AM on March 23, 2019 [2 favorites]
So we've had decades of this ultra-low inflation thing. Official unemployment numbers are low. Why are more of us experiencing precarity?
Because hugely increasing productivity has not resulted in increasing wages.
Yes, but also because the nature of work in nearly all jobs is changing far more rapidly than it ever did, which means people need to switch jobs and relearn jobs far more often than in the past. Hence, instability, precarity.
Also, the 2008 recession was deeper than just about anything since the Depression, which threw a lot of people for a midcareer loop from which many have not yet recovered.
posted by beagle at 8:42 AM on March 23, 2019
Because hugely increasing productivity has not resulted in increasing wages.
Yes, but also because the nature of work in nearly all jobs is changing far more rapidly than it ever did, which means people need to switch jobs and relearn jobs far more often than in the past. Hence, instability, precarity.
Also, the 2008 recession was deeper than just about anything since the Depression, which threw a lot of people for a midcareer loop from which many have not yet recovered.
posted by beagle at 8:42 AM on March 23, 2019
So we've had decades of this ultra-low inflation thing. Official unemployment numbers are low. Why are more of us experiencing precarity?
because the linchpin of your economy is the assumption that fabulously rich people know (and are willing to do) better than govt with respect to how to take care of those people who, for whatever reason, just can't (or won't) take care of themselves. In other words, you lack a functional social safety net. Your fear of a few slackers somehow getting more than they deserve trumps your basic humanity pretty much every time.
I'm saying YOU here because I'm Canadian. Our particular "welfare" system is vastly imperfect, but man, do we look like geniuses compared to all y'all when it comes to the pragmatics of just taking care of folks who need it. And even though people still get poor up here, lose their homes, end up on the streets, it's on significantly less virulent level than in the US of A. Thus, we don't live with such an acute sense of precarity. Good word by the way.
posted by philip-random at 8:49 AM on March 23, 2019 [13 favorites]
MMT breaks down when inflationary sectors of scarcity — housing, higher education, healthcare — bump up their prices to match the highest bidders in the Dutch Auction that is these sectors.
I’m all for MMT directed at increasing the supply of these services, in fact I suspect it’s what MMT should be primarily directed at — “funding” the loans that eliminates scarcity here.
The Fed pushed ~$2T into housing when nobody was looking:
https://fred.stlouisfed.org/series/WSHOMCB
and that helped preserve the existing stock of housing from further collapse.
posted by Heywood Mogroot III at 8:50 AM on March 23, 2019 [4 favorites]
I’m all for MMT directed at increasing the supply of these services, in fact I suspect it’s what MMT should be primarily directed at — “funding” the loans that eliminates scarcity here.
The Fed pushed ~$2T into housing when nobody was looking:
https://fred.stlouisfed.org/series/WSHOMCB
and that helped preserve the existing stock of housing from further collapse.
posted by Heywood Mogroot III at 8:50 AM on March 23, 2019 [4 favorites]
>Why are more of us experiencing precarity?
https://en.m.wikipedia.org/wiki/The_Two-Income_Trap is part of the housing sector inflation story — the more we make and/or can borrow, the more we collectively bid up the cost of housing
Student loan debt is apparently 50% greater than credit card debt now...
Health care? It’s risen 8x in real per-capita basis since the 50s...
posted by Heywood Mogroot III at 9:02 AM on March 23, 2019 [8 favorites]
https://en.m.wikipedia.org/wiki/The_Two-Income_Trap is part of the housing sector inflation story — the more we make and/or can borrow, the more we collectively bid up the cost of housing
Student loan debt is apparently 50% greater than credit card debt now...
Health care? It’s risen 8x in real per-capita basis since the 50s...
posted by Heywood Mogroot III at 9:02 AM on March 23, 2019 [8 favorites]
What a rich post, kliuless. Thank you.
posted by doctornemo at 9:03 AM on March 23, 2019 [6 favorites]
posted by doctornemo at 9:03 AM on March 23, 2019 [6 favorites]
How often and in how much detail were Americans in the 1950s - of all kinds, not just the group who good jobs were de facto and de jure reserved for - polled about their opinions on economic precarity?
posted by Selena777 at 9:06 AM on March 23, 2019 [2 favorites]
posted by Selena777 at 9:06 AM on March 23, 2019 [2 favorites]
What Did We Learn From The MMT Maelstrom?
Brian Romanchuk mentions that his first introduction to MMT at an academic level was Full Employment Abandoned. I started with the same book, but I had to stop halfway through and read Understanding Modern Money to get my bearings. I would strongly recommend reading a primer like Understanding Modern Money before diving into Full Employment Abandoned.
posted by Ptrin at 9:46 AM on March 23, 2019 [2 favorites]
Brian Romanchuk mentions that his first introduction to MMT at an academic level was Full Employment Abandoned. I started with the same book, but I had to stop halfway through and read Understanding Modern Money to get my bearings. I would strongly recommend reading a primer like Understanding Modern Money before diving into Full Employment Abandoned.
posted by Ptrin at 9:46 AM on March 23, 2019 [2 favorites]
I would be really grateful if someone could translate MMT into the terms laid out in Marx's analysis of the money form in Capital. I am kind of an originalist that way, and also have no real knowledge of macroeconomics as an academic discipline. Like, how is surplus value accrued? What about socially necessary labor time?
posted by Morpeth at 10:42 AM on March 23, 2019 [3 favorites]
posted by Morpeth at 10:42 AM on March 23, 2019 [3 favorites]
Am I misunderstanding the article where it says something like, MMT wants to set interest rates to zero therefore investment and accumulation of capital are discouraged? It was one line in the middle of the piece.
And MMT is a form of fiat money?
posted by polymodus at 10:54 AM on March 23, 2019
And MMT is a form of fiat money?
posted by polymodus at 10:54 AM on March 23, 2019
The Fed pushed ~$2T into housing when nobody was looking: https://fred.stlouisfed.org/series/WSHOMCB and that helped preserve the existing stock of housing from further collapse.
Some of us were looking, or we've noticed since those years that the result of all that was pricing an entire generation out of many of our major cities. Quantitative easing was the father of millennial socialism:
Some of us were looking, or we've noticed since those years that the result of all that was pricing an entire generation out of many of our major cities. Quantitative easing was the father of millennial socialism:
Bernanke’s unorthodox “cash for trash” scheme, otherwise known as quantitative easing, drove up asset prices and bailed out baby boomers at the profound political cost of pricing out millennials from that most divisive of asset markets, property. This has left the former comfortable, but the latter with a fragile stake in the society they are supposed to build.posted by zachlipton at 11:33 AM on March 23, 2019 [15 favorites]
If there is one thing that the Great Recession did of value is that it wiped the smug confidence off the faces of the orthodox monetarists who thought that the Federal Reserve had everything under control and that its tools were adequate to prevent a great recession ever occurring. Modern monetary theory reemphasizes the importance of fiscal tools.
posted by JackFlash at 11:40 AM on March 23, 2019 [1 favorite]
posted by JackFlash at 11:40 AM on March 23, 2019 [1 favorite]
I would be really grateful if someone could translate MMT into the terms laid out in Marx's analysis of the money form in Capital.
Isn't that rather like asking someone to translate modern quantum physics into the Rutherford model of the atom? I mean it's weird when a theory can't be dealt with in its own modern terms.
posted by happyroach at 12:15 PM on March 23, 2019 [7 favorites]
Isn't that rather like asking someone to translate modern quantum physics into the Rutherford model of the atom? I mean it's weird when a theory can't be dealt with in its own modern terms.
posted by happyroach at 12:15 PM on March 23, 2019 [7 favorites]
Personally, I'm very unhappy with MMT entering into public consciousness because almost all people know almost nothing about macroeconomics in the most elementary sense. The last ten years have made that obvious.
This post is thorough and impressive, no mistake. My fear is that in practical political terms MMT reaching the public awareness muddies the water even more than it already is.
posted by Ivan Fyodorovich at 12:49 PM on March 23, 2019 [2 favorites]
This post is thorough and impressive, no mistake. My fear is that in practical political terms MMT reaching the public awareness muddies the water even more than it already is.
posted by Ivan Fyodorovich at 12:49 PM on March 23, 2019 [2 favorites]
My fear is that in practical political terms MMT reaching the public awareness muddies the water even more than it already is.
I see it as clarifying rather than muddying, by challenging the failed assumptions of orthodox monetarists. The austerians and deficit hawks have owned the public awareness unchallenged for decades. Their policies have resulted in untold misery and deprivation for millions in the aftermath of the Great Recession in the US and Europe. The New York Times and Washington Post routinely lecture the public on the need to have "entitlement reform," meaning cuts to Social Security and Medicare. The public pundits tell us that the "richest country in the world" can't afford universal healthcare.
I don't think it is the Modern Monetarists who are muddying the water.
posted by JackFlash at 1:05 PM on March 23, 2019 [7 favorites]
I see it as clarifying rather than muddying, by challenging the failed assumptions of orthodox monetarists. The austerians and deficit hawks have owned the public awareness unchallenged for decades. Their policies have resulted in untold misery and deprivation for millions in the aftermath of the Great Recession in the US and Europe. The New York Times and Washington Post routinely lecture the public on the need to have "entitlement reform," meaning cuts to Social Security and Medicare. The public pundits tell us that the "richest country in the world" can't afford universal healthcare.
I don't think it is the Modern Monetarists who are muddying the water.
posted by JackFlash at 1:05 PM on March 23, 2019 [7 favorites]
> I see it as clarifying rather than muddying, by challenging the failed assumptions of orthodox monetarists.
What are the failed assumptions of orthodox monetarists?
posted by cirgue at 1:41 PM on March 23, 2019
What are the failed assumptions of orthodox monetarists?
posted by cirgue at 1:41 PM on March 23, 2019
Apparently the current annual interest on US government debt is 479 billion dollars. The total amount owed is $22 trillion. Although such numbers are too big to really comprehend, feels like people will instinctively want to lower them, rather than increase them. If you get in the habit of paying the interest with new money while inflation is low, then what do you do if inflation increases and you still need to make the payments but can no longer increase the money supply?
posted by JonB at 1:52 PM on March 23, 2019 [1 favorite]
posted by JonB at 1:52 PM on March 23, 2019 [1 favorite]
In popular discourse -- which, ignorant as it is, determines political support for various policies -- one frequently invoked metaphor for national monetary policy seems to be a household with a credit card. And boy, if you want a powerful metaphor, you've got one, because that's the lived experience of just about every American, and everyone who hasn't had a card that got out of hand and either exploded or became a ball and chain knows someone who has. That's what debt is to most people.
The problem is that a nation-state, especially one that produces its own currency, seems.... not very much like a modern working class household.
I'm also pretty ignorant, so I don't know how far that difference stretches, especially if it stretches as far as ambitious progressives looking to underwrite safety nets might wish. I don't know if MMT fits reality better. But I'd be willing to bet it wears better than the credit card metaphor itself.
posted by wildblueyonder at 2:48 PM on March 23, 2019 [3 favorites]
The problem is that a nation-state, especially one that produces its own currency, seems.... not very much like a modern working class household.
I'm also pretty ignorant, so I don't know how far that difference stretches, especially if it stretches as far as ambitious progressives looking to underwrite safety nets might wish. I don't know if MMT fits reality better. But I'd be willing to bet it wears better than the credit card metaphor itself.
posted by wildblueyonder at 2:48 PM on March 23, 2019 [3 favorites]
My issue with MMT is that it seems interesting when you're reading about it, as described by someone who believes in / is in favor of MMT. But that's true when you read about other economic theories as well. The varying theories are, as a testament to people who have spent not insignificant amounts of time devising them, generally pretty internally consistent. By the time an economic theory makes it to the popular press, it's generally at least plausible.
That's the case in lots of other fields, too. I mean, string theory sounds pretty dope, and it's internally consistent... but it's also pretty worthless because it doesn't make any testable predictions.* A theory that can't be tested is vanishingly close to mental masturbation. Or religion, if you're feeling really uncharitable.
So... how do we actually start to figure out if MMT works? If the answer is "well we need to just turn over a global superpower's economy to MMT folks and see what happens", I think that's... unlikely to occur. There needs to be a way of testing it on some more limited scale, if you want to get an opportunity to go up from there.
The key prediction of MMT seems to be that a central bank can issue as much fiat currency as it likes, and it won't lead to inflation so long as the demand for goods doesn't actually outstrip productive capacity. That's what its major claim seems to be, anyway. That at least seems like it's testable on its face.
Has anyone tried to simulate it in a game economy / MMO or something? I think we're at the point where the theory sounds interesting, it's time for some experiments.
* At least as of ~20 years ago, I admit to not having read up much on the topic since.
posted by Kadin2048 at 3:29 PM on March 23, 2019 [4 favorites]
That's the case in lots of other fields, too. I mean, string theory sounds pretty dope, and it's internally consistent... but it's also pretty worthless because it doesn't make any testable predictions.* A theory that can't be tested is vanishingly close to mental masturbation. Or religion, if you're feeling really uncharitable.
So... how do we actually start to figure out if MMT works? If the answer is "well we need to just turn over a global superpower's economy to MMT folks and see what happens", I think that's... unlikely to occur. There needs to be a way of testing it on some more limited scale, if you want to get an opportunity to go up from there.
The key prediction of MMT seems to be that a central bank can issue as much fiat currency as it likes, and it won't lead to inflation so long as the demand for goods doesn't actually outstrip productive capacity. That's what its major claim seems to be, anyway. That at least seems like it's testable on its face.
Has anyone tried to simulate it in a game economy / MMO or something? I think we're at the point where the theory sounds interesting, it's time for some experiments.
* At least as of ~20 years ago, I admit to not having read up much on the topic since.
posted by Kadin2048 at 3:29 PM on March 23, 2019 [4 favorites]
The key prediction of MMT seems to be that a central bank can issue as much fiat currency as it likes, and it won't lead to inflation so long as the demand for goods doesn't actually outstrip productive capacity. That's what its major claim seems to be, anyway. That at least seems like it's testable on its face.
Seems obvious on its face, really.
Back before the 70s, manufacturing was *hard*:
All Employees: Manufacturing/All Employees: Total Nonfarm Payrolls
shows in 1970 one out of *four* workers were in manufacturing, falling to one out of 5 by 1980 [I pull a lot of home-made FRED charts and this is one I'm most incredulous about]
The problem is that a nation-state, especially one that produces its own currency, seems.... not very much like a modern working class household.
Yup, the https://en.wikipedia.org/wiki/Paradox_of_thrift makes all traditional economics deal in "false" economies!
Government has immense powers to create all the public goods we need, but conservatives of course would rather keep the masses immiserated rather than see their relative positional advantage evaporate.
posted by Heywood Mogroot III at 4:16 PM on March 23, 2019 [2 favorites]
Seems obvious on its face, really.
Back before the 70s, manufacturing was *hard*:
All Employees: Manufacturing/All Employees: Total Nonfarm Payrolls
shows in 1970 one out of *four* workers were in manufacturing, falling to one out of 5 by 1980 [I pull a lot of home-made FRED charts and this is one I'm most incredulous about]
The problem is that a nation-state, especially one that produces its own currency, seems.... not very much like a modern working class household.
Yup, the https://en.wikipedia.org/wiki/Paradox_of_thrift makes all traditional economics deal in "false" economies!
Government has immense powers to create all the public goods we need, but conservatives of course would rather keep the masses immiserated rather than see their relative positional advantage evaporate.
posted by Heywood Mogroot III at 4:16 PM on March 23, 2019 [2 favorites]
then what do you do if inflation increases
Use MMT to attack the inflationary causes.
and you still need to make the payments
Pay 'em in Trump Bucks, good only in Trump properties, Trump University, Trump Steaks, etc.
but can no longer increase the money supply?
Bank of Japan: Total Assets for Japan shows Japan has printed $4T via the BOJ in the past decade.
You can always run the presses as long as your economy cash the checks.
I guess what's happening is the money is just collecting with people at the top with already too much money and nowhere to put it...
Velocity of MZM Money Stock (MZMV)
posted by Heywood Mogroot III at 4:29 PM on March 23, 2019 [1 favorite]
Use MMT to attack the inflationary causes.
and you still need to make the payments
Pay 'em in Trump Bucks, good only in Trump properties, Trump University, Trump Steaks, etc.
but can no longer increase the money supply?
Bank of Japan: Total Assets for Japan shows Japan has printed $4T via the BOJ in the past decade.
You can always run the presses as long as your economy cash the checks.
I guess what's happening is the money is just collecting with people at the top with already too much money and nowhere to put it...
Velocity of MZM Money Stock (MZMV)
posted by Heywood Mogroot III at 4:29 PM on March 23, 2019 [1 favorite]
I'm saying YOU here because I'm Canadian. Our particular "welfare" system is vastly imperfect, but man, do we look like geniuses compared to all y'all when it comes to the pragmatics of just taking care of folks who need it. And even though people still get poor up here, lose their homes, end up on the streets, it's on significantly less virulent level than in the US of A. Thus, we don't live with such an acute sense of precarity.
I'm also Canadian, and this is mostly garbage. The United States spends significantly more on public welfare programs as a percentage of its federal and state budgets than we do. Yes, they spend it inefficiently and yes, they have issues to say the least, but pretending that our country isn't a relentlessly stingy and selfish one in far too many regards just because we somehow managed to end up with a socialized healthcare system does nobody any favours.
posted by mightygodking at 5:13 PM on March 23, 2019 [7 favorites]
I'm also Canadian, and this is mostly garbage. The United States spends significantly more on public welfare programs as a percentage of its federal and state budgets than we do. Yes, they spend it inefficiently and yes, they have issues to say the least, but pretending that our country isn't a relentlessly stingy and selfish one in far too many regards just because we somehow managed to end up with a socialized healthcare system does nobody any favours.
posted by mightygodking at 5:13 PM on March 23, 2019 [7 favorites]
then what do you do if inflation increases
Simple, you increase taxes. You can think of taxes as just a mechanism for reducing inflation. Government doesn't need to collect taxes to finance spending since the government can simply print money. It collects taxes to manage inflation by making room for government spending.
If the economy is at maximum output because of full employment, then more spending is not necessary. But if you need to spend for particular needs, say a New Green Deal, then you need to increase taxes to offset that spending and to reduce inflation.
But if the economy is below maximum output because of unemployment, then there is no limit to government spending because the government can just print the money. There is no need for more taxes to finance the spending because there shouldn't be inflation if the economy is not limited in output. The economy can simply make more stuff and prices don't rise.
posted by JackFlash at 5:22 PM on March 23, 2019 [7 favorites]
Simple, you increase taxes. You can think of taxes as just a mechanism for reducing inflation. Government doesn't need to collect taxes to finance spending since the government can simply print money. It collects taxes to manage inflation by making room for government spending.
If the economy is at maximum output because of full employment, then more spending is not necessary. But if you need to spend for particular needs, say a New Green Deal, then you need to increase taxes to offset that spending and to reduce inflation.
But if the economy is below maximum output because of unemployment, then there is no limit to government spending because the government can just print the money. There is no need for more taxes to finance the spending because there shouldn't be inflation if the economy is not limited in output. The economy can simply make more stuff and prices don't rise.
posted by JackFlash at 5:22 PM on March 23, 2019 [7 favorites]
The key prediction of MMT seems to be that a central bank can issue as much fiat currency as it likes, and it won't lead to inflation so long as the demand for goods doesn't actually outstrip productive capacity. That's what its major claim seems to be, anyway.
As Heywood says, this seems pretty obvious. Inflation is not caused by excess money. It is caused by a shortage of goods and a bidding war for that shortage. If the economy has the capacity to produce more goods, then printing money doesn't cause inflation. It just creates more jobs and more goods.
posted by JackFlash at 5:25 PM on March 23, 2019 [5 favorites]
As Heywood says, this seems pretty obvious. Inflation is not caused by excess money. It is caused by a shortage of goods and a bidding war for that shortage. If the economy has the capacity to produce more goods, then printing money doesn't cause inflation. It just creates more jobs and more goods.
posted by JackFlash at 5:25 PM on March 23, 2019 [5 favorites]
I've been thinking about the household with a credit card metaphor for a while now; it's obviously crap but it resonates, as you say, because it's a lived experience for most people.
I think the metaphor killer here has to be somewhat nationalistic. Everyone recognises that the credit card company has vastly more power than they do; if you don't pay the bills they will send the goons out at you. Putting that on nation state terms, if America doesn't pay it's bills, who's sending the goons out? No other country has that much power over America, in fact even if you look at the imbalance between say Kiribati and America, I believe the imbalance is an order of magnitude less than that of a credit card company and a poor person.
I suggest that another metaphor for this situation has a similar resonance but is more accurate; money in the community. Everyone, from the poorest on up, has money in the community. You loaned Emma $20, you need to collect on a $50 bet with Abdul, you've got a revolving line of credit with your sister currently you owe her a $100 that you needed to sort out a bill before payday.
Hell, if you added up all the money you have in the community you might be up or down $1000, but nobody is sending the goons out.
Abdul might not be able to pay the $50 back, but you'll take $20 and a hand sorting out the garage roof. You're sister only takes cash but is fine with $10 a month. Emma doesn't seem like she's going to pay you back in any form, which sucks, but you're going to leave it and complain to people about Emma. Next time she wants to borrow money, people will remember you're experience and be a bit tighter. Maybe 3 months down the track you get that $20 and a cake when Emma realises that she needs to sweeten her reputation to be able to take part in the community money.
It's a metaphor that scales well; if you're talking to the upper class then maybe Emma didn't pay her share on a $2000 bar tab, and you get that back when she realises she's not getting into the country club with her reputation for free loading.
posted by fido~depravo at 7:18 PM on March 23, 2019 [1 favorite]
I think the metaphor killer here has to be somewhat nationalistic. Everyone recognises that the credit card company has vastly more power than they do; if you don't pay the bills they will send the goons out at you. Putting that on nation state terms, if America doesn't pay it's bills, who's sending the goons out? No other country has that much power over America, in fact even if you look at the imbalance between say Kiribati and America, I believe the imbalance is an order of magnitude less than that of a credit card company and a poor person.
I suggest that another metaphor for this situation has a similar resonance but is more accurate; money in the community. Everyone, from the poorest on up, has money in the community. You loaned Emma $20, you need to collect on a $50 bet with Abdul, you've got a revolving line of credit with your sister currently you owe her a $100 that you needed to sort out a bill before payday.
Hell, if you added up all the money you have in the community you might be up or down $1000, but nobody is sending the goons out.
Abdul might not be able to pay the $50 back, but you'll take $20 and a hand sorting out the garage roof. You're sister only takes cash but is fine with $10 a month. Emma doesn't seem like she's going to pay you back in any form, which sucks, but you're going to leave it and complain to people about Emma. Next time she wants to borrow money, people will remember you're experience and be a bit tighter. Maybe 3 months down the track you get that $20 and a cake when Emma realises that she needs to sweeten her reputation to be able to take part in the community money.
It's a metaphor that scales well; if you're talking to the upper class then maybe Emma didn't pay her share on a $2000 bar tab, and you get that back when she realises she's not getting into the country club with her reputation for free loading.
posted by fido~depravo at 7:18 PM on March 23, 2019 [1 favorite]
The basic problem for average people is that productivity has soared since the 70s, but wages have remained flat in real terms. Working harder and/or more efficiently used to lead to higher rewards; now you have to do that just to stand still.
So if workers haven't received the reward of increasing productivity, who did? The top 5%. Unsurprising really, when a number of lawmakers are wealthy, or in-hock to the wealthy for election spending.
Government policies across the west in response to the 2010 recession have been to protect asset values and cut taxes for the wealthiest. I'm certainly only a layman at best on economics. But things like this:
>then what do you do if inflation increases
Simple, you increase taxes. You can think of taxes as just a mechanism for reducing inflation. Government doesn't need to collect taxes to finance spending since the government can simply print money. It collects taxes to manage inflation by making room for government spending.
make me worry MMT would ultimately be used to worsen inequality, not improve it - by using government spending to inflate assets, and reducing inflation by taxing the working and middle classes. I'm with Thomas Piketty generally that until you re-work the balance between return on capital vs wages, inequality will continue to worsen.
posted by Absolutely No You-Know-What at 3:16 AM on March 24, 2019 [6 favorites]
So if workers haven't received the reward of increasing productivity, who did? The top 5%. Unsurprising really, when a number of lawmakers are wealthy, or in-hock to the wealthy for election spending.
Government policies across the west in response to the 2010 recession have been to protect asset values and cut taxes for the wealthiest. I'm certainly only a layman at best on economics. But things like this:
>then what do you do if inflation increases
Simple, you increase taxes. You can think of taxes as just a mechanism for reducing inflation. Government doesn't need to collect taxes to finance spending since the government can simply print money. It collects taxes to manage inflation by making room for government spending.
make me worry MMT would ultimately be used to worsen inequality, not improve it - by using government spending to inflate assets, and reducing inflation by taxing the working and middle classes. I'm with Thomas Piketty generally that until you re-work the balance between return on capital vs wages, inequality will continue to worsen.
posted by Absolutely No You-Know-What at 3:16 AM on March 24, 2019 [6 favorites]
As Heywood says, this seems pretty obvious. Inflation is not caused by excess money.
Well, I guess I find it less than obvious, because the majority of stuff I spend money on isn't stuff that's manfuactured. It's mostly payment of economic rents and payment for other humans' labor.
If you increase the money supply, what's to stop ~100% of it being soaked up by rents? I.e. actual rent, housing prices, etc.? Quantitative easing has in the past been great for housing prices.
And then there are a lot of other goods that are priced in ways totally disconnected from underlying costs. E.g. healthcare / drugs. They're not pricing medication as a function of what it costs to develop them, they're pricing them (as far as I can tell) based on what they think the lack of misery the drug provides is worth. I.e. if the drug gives you five years of not-shitty lifetime, well, it's gonna probably cost you a big chunk of whatever five years of human life are worth in the economy. (Or if the drug lets you avoid a liver transplant, it's gonna cost whatever a liver transplant costs, less a small amount.)
Education is not dissimilar; people buy more education when they have more available income (at higher SES tranches), but in a very arms-race-y way with other people in their economic tranche. If we had enough income for everyone to afford a Masters degree, all jobs would require Masters degrees, and people at the higher end of the economic spectrum would be slugging it out with each other trying to get crazy postdoctoral certificates in order to edge each other out in the job market. I mean that's what happens right now, not that we're at the postdoctoral-certificate level in most professions, but if you add more money it's seems like pouring gasoline on a fire. Sure, in an ideal world people would pursue higher ed for the sake of education and self-fulfillment or whatever, but let's be honest: that's not what happens. Higher ed is mainly a zero-sum game where people buy expensive pieces of paper because you need one to get a job.
And those are collectively some of the biggest areas of spending in the US (housing, healthcare, education).
Even if you can fix the stupid US-centric problems in those industries—I mean, we're not doing ourselves any favors in how we address any of them, compared to other countries—healthcare and education are extremely labor intensive and not amenable to much automation or productivity enhancements. So they seem prone to inflation as long as the labor market is tight and people have money to spend outbidding each other for quality of services.
I find MMT very intriguing but the central claim that inflation can be avoided as long as excess productive capacity exists, seems to rely on an assumption that dominant industries can increase productivity to meet demand without additional labor. If the dominant industries are fundamentally labor-bound (or land-bound), it doesn't seem obvious that will work.
posted by Kadin2048 at 8:02 AM on March 24, 2019 [2 favorites]
Well, I guess I find it less than obvious, because the majority of stuff I spend money on isn't stuff that's manfuactured. It's mostly payment of economic rents and payment for other humans' labor.
If you increase the money supply, what's to stop ~100% of it being soaked up by rents? I.e. actual rent, housing prices, etc.? Quantitative easing has in the past been great for housing prices.
And then there are a lot of other goods that are priced in ways totally disconnected from underlying costs. E.g. healthcare / drugs. They're not pricing medication as a function of what it costs to develop them, they're pricing them (as far as I can tell) based on what they think the lack of misery the drug provides is worth. I.e. if the drug gives you five years of not-shitty lifetime, well, it's gonna probably cost you a big chunk of whatever five years of human life are worth in the economy. (Or if the drug lets you avoid a liver transplant, it's gonna cost whatever a liver transplant costs, less a small amount.)
Education is not dissimilar; people buy more education when they have more available income (at higher SES tranches), but in a very arms-race-y way with other people in their economic tranche. If we had enough income for everyone to afford a Masters degree, all jobs would require Masters degrees, and people at the higher end of the economic spectrum would be slugging it out with each other trying to get crazy postdoctoral certificates in order to edge each other out in the job market. I mean that's what happens right now, not that we're at the postdoctoral-certificate level in most professions, but if you add more money it's seems like pouring gasoline on a fire. Sure, in an ideal world people would pursue higher ed for the sake of education and self-fulfillment or whatever, but let's be honest: that's not what happens. Higher ed is mainly a zero-sum game where people buy expensive pieces of paper because you need one to get a job.
And those are collectively some of the biggest areas of spending in the US (housing, healthcare, education).
Even if you can fix the stupid US-centric problems in those industries—I mean, we're not doing ourselves any favors in how we address any of them, compared to other countries—healthcare and education are extremely labor intensive and not amenable to much automation or productivity enhancements. So they seem prone to inflation as long as the labor market is tight and people have money to spend outbidding each other for quality of services.
I find MMT very intriguing but the central claim that inflation can be avoided as long as excess productive capacity exists, seems to rely on an assumption that dominant industries can increase productivity to meet demand without additional labor. If the dominant industries are fundamentally labor-bound (or land-bound), it doesn't seem obvious that will work.
posted by Kadin2048 at 8:02 AM on March 24, 2019 [2 favorites]
I find MMT very intriguing but the central claim that inflation can be avoided as long as excess productive capacity exists, seems to rely on an assumption that dominant industries can increase productivity to meet demand without additional labor. If the dominant industries are fundamentally labor-bound (or land-bound), it doesn't seem obvious that will work.
You have it exactly backwards. MMT says that if production is bound by a shortage of labor, then more spending will lead to inflation. In that case you need less spending or more taxes. The goal of MMT is full employment without accelerating inflation.
All of the injustices you enumerate are quite valid but they aren't caused by too much government spending or too much money. They are caused because the economy is rigged to make the rich richer - through laws, regulations, and government policies - to transfer money from the poor to the rich.
Economist Dean Baker has a great (free) book called Rigged that explains how this wealth transfer from poor to rich works.
posted by JackFlash at 9:07 AM on March 24, 2019 [2 favorites]
You have it exactly backwards. MMT says that if production is bound by a shortage of labor, then more spending will lead to inflation. In that case you need less spending or more taxes. The goal of MMT is full employment without accelerating inflation.
All of the injustices you enumerate are quite valid but they aren't caused by too much government spending or too much money. They are caused because the economy is rigged to make the rich richer - through laws, regulations, and government policies - to transfer money from the poor to the rich.
Economist Dean Baker has a great (free) book called Rigged that explains how this wealth transfer from poor to rich works.
posted by JackFlash at 9:07 AM on March 24, 2019 [2 favorites]
So we've had decades of this ultra-low inflation thing. Official unemployment numbers are low. Why are more of us experiencing precarity?
Because labour saving devices do.
posted by flabdablet at 9:36 AM on March 24, 2019 [2 favorites]
Because labour saving devices do.
posted by flabdablet at 9:36 AM on March 24, 2019 [2 favorites]
My understanding is that, at heart, MMT is just the idea that, rather than taxes being a way to gather money to later use on public expenditures, taxes are a way of giving value to all the otherwise worthless paper money the government uses for expenditures. It's hard to argue with the claim, the same way it's hard to argue that a cube projects a square shadow or a diamond-shaped one: they're both equally true from some vantage point.
I don't think you need this perspective flip in order to see that the government should spend what it should spend to do the things it is trying to achieve, and then tax as it needs to tax to make everything whole. The chain of causality seems like arguing about the number of angels on a pin. Let's just build the transit infrastructure/renewable energy plants/high-efficiency batteries, and then have a separate conversation about whose consumption we have to cut to make that happen. We literally have to do this stuff or we'll die, so no point in arguing if we can afford it or not. It seems like we probably can, but even if we can't, the alternative is just to die, so we may as well try.
posted by LiteOpera at 9:49 AM on March 24, 2019 [2 favorites]
I don't think you need this perspective flip in order to see that the government should spend what it should spend to do the things it is trying to achieve, and then tax as it needs to tax to make everything whole. The chain of causality seems like arguing about the number of angels on a pin. Let's just build the transit infrastructure/renewable energy plants/high-efficiency batteries, and then have a separate conversation about whose consumption we have to cut to make that happen. We literally have to do this stuff or we'll die, so no point in arguing if we can afford it or not. It seems like we probably can, but even if we can't, the alternative is just to die, so we may as well try.
posted by LiteOpera at 9:49 AM on March 24, 2019 [2 favorites]
>So we've had decades of this ultra-low inflation thing. Official unemployment numbers are low. Why are more of us experiencing precarity?
>Because labour saving devices do.
This is the old story that robots are taking all the jobs - which turns out to be false. It is completely contradicted by the data. There are two important numbers relating to the "robots" story.
Productivity growth is near record lows, running about 1% annually. Low productivity growth means that robots are not taking jobs. 3% productivity growth would be substantial, but 1% productivity growth is anemic. Businesses are hiring people to do the jobs, not robots.
And second, if robots were taking the jobs, then unemployment would be rising. Instead unemployment is falling to near record lows.
And lets go a step farther. The "robots" claim is that it is taking away the less skilled jobs first. But the current employment and wage numbers say just the opposite. With record low unemployment, the wages of the less skilled are rising faster than the wages of the college educated.
posted by JackFlash at 10:11 AM on March 24, 2019
>Because labour saving devices do.
This is the old story that robots are taking all the jobs - which turns out to be false. It is completely contradicted by the data. There are two important numbers relating to the "robots" story.
Productivity growth is near record lows, running about 1% annually. Low productivity growth means that robots are not taking jobs. 3% productivity growth would be substantial, but 1% productivity growth is anemic. Businesses are hiring people to do the jobs, not robots.
And second, if robots were taking the jobs, then unemployment would be rising. Instead unemployment is falling to near record lows.
And lets go a step farther. The "robots" claim is that it is taking away the less skilled jobs first. But the current employment and wage numbers say just the opposite. With record low unemployment, the wages of the less skilled are rising faster than the wages of the college educated.
posted by JackFlash at 10:11 AM on March 24, 2019
My understanding is that, at heart, MMT is just the idea that, rather than taxes being a way to gather money to later use on public expenditures, taxes are a way of giving value to all the otherwise worthless paper money the government uses for expenditures.
Not sure where you get that understanding because that isn't MMT at all. Taxes are a mechanism for removing excess money from the economy to reduce inflation. That's it. Taxes are not a mechanism for generating revenue, per se, because you don't need revenue to do government spending. You only increase taxes as necessary to control inflation.
Inflation has been near record lows for the last 10 years. Instead of austerity, this should have meant that government should have vastly increased spending to increase employment. Instead we have had a decade of anemic growth and under-employment that have made people poorer.
posted by JackFlash at 10:19 AM on March 24, 2019 [3 favorites]
Not sure where you get that understanding because that isn't MMT at all. Taxes are a mechanism for removing excess money from the economy to reduce inflation. That's it. Taxes are not a mechanism for generating revenue, per se, because you don't need revenue to do government spending. You only increase taxes as necessary to control inflation.
Inflation has been near record lows for the last 10 years. Instead of austerity, this should have meant that government should have vastly increased spending to increase employment. Instead we have had a decade of anemic growth and under-employment that have made people poorer.
posted by JackFlash at 10:19 AM on March 24, 2019 [3 favorites]
Precarity and unemployment are not the same thing. It's not about whether the robots are taking your job, it's about whether the working conditions for human beings are being inexorably forced into line with those of robots because the instant the robots actually cost less than humans they will take the jobs.
Robots are slaves without any legitimate claim to human rights whatsoever, and people have spent the last few decades being retrained to compete with them on their own terms.
posted by flabdablet at 10:22 AM on March 24, 2019
Robots are slaves without any legitimate claim to human rights whatsoever, and people have spent the last few decades being retrained to compete with them on their own terms.
posted by flabdablet at 10:22 AM on March 24, 2019
As politics I think progressive enthusiasm for MMT is horrible. It strikes me as the classic "fighting the last war"--as in, after Republicans lied about worrying about the deficit, and ignored basic mainstream economics to boot, so we're going to spend energy inventing an alternate accounting form that's even less intuitive that they can actively mock instead of just ignore?
There's no reason saying "government spending does not need to be funded by taxes" will lead to more government spending as opposed to lower taxes. Some people don't like government spending, everyone likes lower taxes.
The politics of trying to use taxes as a policy tool--to steer investment, reduce inequality, price in externalities, etc.--is going to be a lot harder if you say "we don't tax people to fund spending, we tax them to confiscate cash and take it out of circulation."
Trying to implement MMT will be a nightmare. The political economy of trying to raise taxes in response to a boom is insane. People are finally feeling they are doing well and elected politicians say "oh, no, you need to understand a lot of your increase in income is only nominal income from the extra money we printed so we need to take it away"?
There are extremely good traditional arguments for spending money on things we think are important like health care and infrastructure. But you need to convince people these things are good on the merits. Trying to change the argument to being about accounting standards is a sucker move.
posted by mark k at 11:03 AM on March 24, 2019 [3 favorites]
There's no reason saying "government spending does not need to be funded by taxes" will lead to more government spending as opposed to lower taxes. Some people don't like government spending, everyone likes lower taxes.
The politics of trying to use taxes as a policy tool--to steer investment, reduce inequality, price in externalities, etc.--is going to be a lot harder if you say "we don't tax people to fund spending, we tax them to confiscate cash and take it out of circulation."
Trying to implement MMT will be a nightmare. The political economy of trying to raise taxes in response to a boom is insane. People are finally feeling they are doing well and elected politicians say "oh, no, you need to understand a lot of your increase in income is only nominal income from the extra money we printed so we need to take it away"?
There are extremely good traditional arguments for spending money on things we think are important like health care and infrastructure. But you need to convince people these things are good on the merits. Trying to change the argument to being about accounting standards is a sucker move.
posted by mark k at 11:03 AM on March 24, 2019 [3 favorites]
Inflation has been near record lows for the last 10 years. Instead of austerity, this should have meant that government should have vastly increased spending to increase employment. Instead we have had a decade of anemic growth and under-employment that have made people poorer.
That's really interesting to know. Is MMT the only argument for this or did others similarly argue for this strategy?
posted by polymodus at 12:06 PM on March 24, 2019
That's really interesting to know. Is MMT the only argument for this or did others similarly argue for this strategy?
posted by polymodus at 12:06 PM on March 24, 2019
Has there been a clear followup on Krugman's opinion? He wrote his objection in clear language though the ideas were a bit technical for me. What would an MMT counter in response?
posted by polymodus at 12:35 PM on March 24, 2019
posted by polymodus at 12:35 PM on March 24, 2019
Has anyone tried to simulate it in a game economy / MMO or something? I think we're at the point where the theory sounds interesting, it's time for some experiments.
The Fed kindly proved the central tenet, that printing money does not in fact cause inflation on its own, when it printed trillions of dollars in a couple of years and inflation (and interest rates) remained stubbornly stuck near zero.
posted by wierdo at 12:53 PM on March 24, 2019 [1 favorite]
The Fed kindly proved the central tenet, that printing money does not in fact cause inflation on its own, when it printed trillions of dollars in a couple of years and inflation (and interest rates) remained stubbornly stuck near zero.
posted by wierdo at 12:53 PM on March 24, 2019 [1 favorite]
Also, if you'd like to have your brain fundamentally understand the difference between money and its flows and actual wealth and its flows, read the book entitled "The Panic of 1903" and put yourself in the position of a farmer or small manufacturer back when the money supply was uncontrolled.
posted by wierdo at 1:09 PM on March 24, 2019
posted by wierdo at 1:09 PM on March 24, 2019
"That's really interesting to know. Is MMT the only argument for this or did others similarly argue for this strategy?"
Keynesian macro would have doubled the stimulus and would have continued massive government spending until there were signs that the economy was overheating (i.e., working age employment had reached or surpassed the previous high-water mark of twenty years ago, correspondingly that wage-increases showed the labor market was tight, and subsequently inflation rose beyond 4-5 percent, none of which has happened). At that point, public debt might have become more expensive, but given that it's in our own currency and that it's the world's reserve currency, there's good reason to think that this would only happen after a lengthy period of serious inflation coupled with massively ballooning debt. In other words, while Keynesian (neo or otherwise) theory does foresee a natural limit on fiscal stimulus and debt, there was (and probably still is) a lot of headroom. And, yes, until the debt became more expensive, it's literally free money.
Whether there's a lot of headroom now is debatable, but that's beside the point with regard to your question. That the US spent almost a decade with underemployment and real interest rates extraordinarily low means that a) there was a lot of slack in the economy which we directly lost forever and indirectly we lost its compunded growth, b) a portion of the underemployment became structurally entrenched, and c) corporate profits were kept in accumulating cash reserves instead of put into capital investment.
Most of our sovereign debt is domestically owned but given European austerity and China's surplus, world capital was looking for a safe harbor, which is us, which is yet another reason to expect our debt would remain inexpensive or free (in real rates) even as there was massive, sustained fiscal stimulus and increasing debt. Had our economy grown as it should have, China's hypergrowth would have been sustained longer through that period, also meaning that their demand would have contributed to keeping our debt inexpensive.
You don't need MMT for the last yen years to have been very different.
posted by Ivan Fyodorovich at 2:28 PM on March 24, 2019 [3 favorites]
Keynesian macro would have doubled the stimulus and would have continued massive government spending until there were signs that the economy was overheating (i.e., working age employment had reached or surpassed the previous high-water mark of twenty years ago, correspondingly that wage-increases showed the labor market was tight, and subsequently inflation rose beyond 4-5 percent, none of which has happened). At that point, public debt might have become more expensive, but given that it's in our own currency and that it's the world's reserve currency, there's good reason to think that this would only happen after a lengthy period of serious inflation coupled with massively ballooning debt. In other words, while Keynesian (neo or otherwise) theory does foresee a natural limit on fiscal stimulus and debt, there was (and probably still is) a lot of headroom. And, yes, until the debt became more expensive, it's literally free money.
Whether there's a lot of headroom now is debatable, but that's beside the point with regard to your question. That the US spent almost a decade with underemployment and real interest rates extraordinarily low means that a) there was a lot of slack in the economy which we directly lost forever and indirectly we lost its compunded growth, b) a portion of the underemployment became structurally entrenched, and c) corporate profits were kept in accumulating cash reserves instead of put into capital investment.
Most of our sovereign debt is domestically owned but given European austerity and China's surplus, world capital was looking for a safe harbor, which is us, which is yet another reason to expect our debt would remain inexpensive or free (in real rates) even as there was massive, sustained fiscal stimulus and increasing debt. Had our economy grown as it should have, China's hypergrowth would have been sustained longer through that period, also meaning that their demand would have contributed to keeping our debt inexpensive.
You don't need MMT for the last yen years to have been very different.
posted by Ivan Fyodorovich at 2:28 PM on March 24, 2019 [3 favorites]
Isn't that rather like asking someone to translate modern quantum physics into the Rutherford model of the atom? I mean it's weird when a theory can't be dealt with in its own modern terms.
It seems to me that there are lots of people out there translating macroeconomic theory into political economy. Maybe a better way to ask my question is, What would David Harvey say about Modern Monetary Theory?
posted by Morpeth at 4:03 PM on March 25, 2019
It seems to me that there are lots of people out there translating macroeconomic theory into political economy. Maybe a better way to ask my question is, What would David Harvey say about Modern Monetary Theory?
posted by Morpeth at 4:03 PM on March 25, 2019
> MMT will not grow wheat without fields and fertiliser, it won't make cars without factories and workers, and it won't educate without teachers.
> ...if you add more money it's seems like pouring gasoline on a fire [for] some of the biggest areas of spending in the US (housing, healthcare, education)... So they seem prone to inflation as long as the labor market is tight and people have money to spend outbidding each other for quality of services.
as Heywood Mogroot III says: "I'm all for MMT directed at increasing the supply of these services, in fact I suspect it's what MMT should be primarily directed at —'funding' the loans that eliminates scarcity here."
like you (the government) could just pay people to produce more of this stuff -- housing, health care, education, etc. -- if it's seen in short supply or as inadequate. you could also even link it to a job guarantee :P and if there aren't enough qualified people to produce the stuff people want (in short supply) you could also pay people to learn and pay qualified people to teach them. is that inflationary? not if the quantity supplied matches or exceeds the quantity demanded!
posted by kliuless at 8:16 PM on March 25, 2019
> ...if you add more money it's seems like pouring gasoline on a fire [for] some of the biggest areas of spending in the US (housing, healthcare, education)... So they seem prone to inflation as long as the labor market is tight and people have money to spend outbidding each other for quality of services.
as Heywood Mogroot III says: "I'm all for MMT directed at increasing the supply of these services, in fact I suspect it's what MMT should be primarily directed at —'funding' the loans that eliminates scarcity here."
like you (the government) could just pay people to produce more of this stuff -- housing, health care, education, etc. -- if it's seen in short supply or as inadequate. you could also even link it to a job guarantee :P and if there aren't enough qualified people to produce the stuff people want (in short supply) you could also pay people to learn and pay qualified people to teach them. is that inflationary? not if the quantity supplied matches or exceeds the quantity demanded!
posted by kliuless at 8:16 PM on March 25, 2019
In my experience, the most important thing that convinces skeptic laymen that there might be something to MMT is to explain the ways in which it is not magic and does not solve everything. People rightly distrust utopianism.
speaking of "confusing money creation with wealth creation," i thought SRW explained it well when i first learned about MMT here:
posted by kliuless at 11:34 PM on March 25, 2019 [1 favorite]
speaking of "confusing money creation with wealth creation," i thought SRW explained it well when i first learned about MMT here:
Note that a government’s “political capacity to levy and and enforce payment of taxes” depends first and foremost on the quality of the real economy it superintends. The value that a government is capable of taxing if necessary to sustain the value of its obligations increases with the value produced overall. A government that wishes to be solvent should first and foremost interact with the polity in a manner that promotes productivity. Secondly, the political capacity to levy taxes depends upon either the legitimacy of or the coercive power of the state. A government that wishes to sustain the value of its obligations must either gain the consent of those it would tax or maintain an infrastructure of compulsion. In theory, either choice could be effective, although along with the libertarians, I like to imagine excessively coercive regimes are inconsistent with overall productivity, so that legitimacy is a government’s best bet.but also note that productivity and GDP as measured count only monetary transactions -- market-based production and consumption -- which is great for accounting, logistics and coordinating (originally industrial) production as mediated through price signals about supply and demand, but they tend to undercount systematically the utility of public goods and services. so that is one way MMT focuses attention on 'true wealth creation'.*
And therein lies the difference between a poor society and a prosperous one. It isn’t the amount of money that a society has in circulation, whether dollars, euros, beads, or wampum. Rather, it is the availability of the things that create well-being—like antibiotics, air conditioning, safe food, the ability to travel, and even frivolous things like video games. It is the availability of these “solutions” to human problems—things that make life better on a relative basis—that makes us prosperous.and, fwiw, this can also be made more concrete in measures of economic complexity!* like, for example, one reason why japan (or switzerland or china) can 'get away' with money printing while countries like, say, zimbabwe, venezuela or argentina cannot, is because 'the quality of the real economy its government superintends' allows 'enough workers and equipment to meet growing demand without igniting inflation [so] the government can spend what it needs to maintain employment and achieve goals such as [insert democratic/socialist priority here]."
This is why prosperity in human societies can’t be properly understood by just looking at monetary measures of income or wealth. Prosperity in a society is the accumulation of solutions to human problems.
These solutions run from the prosaic, like a crunchier potato chip, to the profound, like cures for deadly diseases. Ultimately, the measure of a society’s wealth is the range of human problems that it has found a way to solve and how available it has made those solutions to its citizens.
posted by kliuless at 11:34 PM on March 25, 2019 [1 favorite]
Why Does Everyone Hate MMT (pdf)
posted by kliuless at 7:56 PM on March 28, 2019
Modern Monetary Theory (MMT) seems to provoke a visceral reaction amongst the 'great and the good' such as Rogoff, Krugman, and Summers. However, when reading their criticism I am often left with the impression that they haven't actually bothered reading anything on the subject of their critique. Rather, they seem to prefer to knock down straw men based on massively caricatured paraphrasing, and by using name-calling and scary (but empty) stories to make their case. These are not the actions of people interested in open and honest debate, but are more reminiscent of the actions of 'mind guards' in defense of groupthink. In my experience, MMT provides a much more accurate and insightful framework for understanding the economy than the precepts of neoclassical economics.When DoJ and the FCC slowed inflation - "Under MMT, all agencies would have responsibility for inflation — cutting rent-seeking by enforcing antitrust, for example. That's what DOJ and the FCC did in 2011, when they killed a merger and prices dropped."
posted by kliuless at 7:56 PM on March 28, 2019
Fiscal Rules for the 21st Century: How to Pay for the Public Sector (via)
From unaffordable housing, to lack of access to higher education and health care, to extreme income and wealth inequality, to the existential crisis of climate change, the US faces many urgent problems that call for a substantially expanded, more active public sector. The question, however, is always: How do we pay for it?posted by kliuless at 8:00 PM on March 28, 2019
In “Fiscal Rules for the 21st Century: How to Pay for the Public Sector,” Roosevelt Fellow J.W. Mason explains why this concern leads to a misdirected focus on non-problems of public finance, which can derail essential public initiatives—the stimulus in the wake of the 2008 recession, for example, and efforts to deal with climate change today—and lead to half-hearted, ineffectual solutions to America’s very real problems. Outlining nine key principles, Mason argues that the question of “How do we pay for it?” actually makes the case for an expanded public sector—not against it.
The critical point linking all Mason’s arguments is that the public sector not only has unique advantages in providing many goods and services, but it also has unique advantages in paying for them.
Should governments finance themselves through their central bank? - "The point I want to make is that the Federal government hasn't had to issue bonds to the public in order to fund the prudential liquidity management plan, nor has it had to wait for taxes to be paid. All it did was tell the Bank of Canada to create some dollars for it out of nothing, and the Bank of Canada shrugged and complied."
posted by kliuless at 1:11 AM on March 29, 2019
posted by kliuless at 1:11 AM on March 29, 2019
In the past when US Government debt has been presented as a problem the believers in MMT have claimed it is not a problem and people like James Kunsler who say 'things keep going 'till they don't' are just simplistic dismissals of MMT.
I don't believe a link to the latest report on the debt has been presented so here ya go:
The number of times the word “unsustainable” appears in this report has been on a significant long-term uptrend, from zero times in 1998 to 15 times in 2017. It rose again to 16 times in 2018. The introductory “Results in Brief” section of the report had a new subsection this year, titled “An Unsustainable Fiscal Path.” In other words, the topic of sustainability of federal government finances is not only growing as a matter of discussion, but it is now explicitly emphasized, right up front.
posted by rough ashlar at 12:20 PM on April 2, 2019
I don't believe a link to the latest report on the debt has been presented so here ya go:
The number of times the word “unsustainable” appears in this report has been on a significant long-term uptrend, from zero times in 1998 to 15 times in 2017. It rose again to 16 times in 2018. The introductory “Results in Brief” section of the report had a new subsection this year, titled “An Unsustainable Fiscal Path.” In other words, the topic of sustainability of federal government finances is not only growing as a matter of discussion, but it is now explicitly emphasized, right up front.
posted by rough ashlar at 12:20 PM on April 2, 2019
The Fed pushed ~$2T into housing when nobody was looking: https://fred.stlouisfed.org/series/WSHOMCB and that helped preserve the existing stock of housing from further collapse.
Some of us were looking, or we've noticed since those years that the result of all that was pricing an entire generation out of many of our major cities. Quantitative easing was the father of millennial socialism:
There may be another reason for this. MERS/NINJA home loans being trash and sold to China/Germany as good debt to invest in. One could let that wind its way through the courts OR prop up the bad paperwork.
An example IKB Deutsche Industriebank had put money into American debt securities, including some based on subprime loans. Some of those loans started to fail.
posted by rough ashlar at 12:33 PM on April 2, 2019
Some of us were looking, or we've noticed since those years that the result of all that was pricing an entire generation out of many of our major cities. Quantitative easing was the father of millennial socialism:
There may be another reason for this. MERS/NINJA home loans being trash and sold to China/Germany as good debt to invest in. One could let that wind its way through the courts OR prop up the bad paperwork.
An example IKB Deutsche Industriebank had put money into American debt securities, including some based on subprime loans. Some of those loans started to fail.
posted by rough ashlar at 12:33 PM on April 2, 2019
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And by the time we do the barn door will have already been open for too long and the cows will have fucked thoroughly off. I'm only like 3% kidding when I say that I'm super happy I chose not to have children so that I can just ride out late stage capitalism, die, and not feel guilty that they will have to confront what happens next.
posted by axiom at 3:19 AM on March 23, 2019 [27 favorites]