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MMT is so misunderstood and has become a political hot topic. Which is really stupid because 95% of people can't understand, let alone explain economics. So you get the crowd who says it can't work. Says who? And the extreme other side says this works according to experts so let's go spend to the moon on my wish list.
The idea is basically a refutation that deficits matter. That's all. For ages we were told by the Austrians and others that deficits would crowd out borrowing so you had to worry about the straight jacket. Well we have had ballooning deficits since the 70s and Mr Market has done nothing to the economy, the debt market and the currency value. So MMT is working and probably will continue to work for awhile, but it's not a license to go crazy and print every dollar you need to pay for government programs. The markets will tell you when you are getting out of line and that message will come from the currency markets and the bond markets. The stock markets are not really correlated to this. The Fed is talking tough because they didn't like the message the bond market was sending early on. It caused the dollar to spike when rates went up which is telling the government to print more money. The Fed is doing the opposite and taking some money out of the economy. So even if MMT is a correct observation it's not being followed now anyways.
MMT is so misunderstood and has become a political hot topic. Which is really stupid because 95% of people can't understand, let alone explain economics. So you get the crowd who says it can't work. Says who? And the extreme other side says this works according to experts so let's go spend to the moon on my wish list.
The idea is basically a refutation that deficits matter. That's all. For ages we were told by the Austrians and others that deficits would crowd out borrowing so you had to worry about the straight jacket. Well we have had ballooning deficits since the 70s and Mr Market has done nothing to the economy, the debt market and the currency value. So MMT is working and probably will continue to work for awhile, but it's not a license to go crazy and print every dollar you need to pay for government programs. The markets will tell you when you are getting out of line and that message will come from the currency markets and the bond markets. The stock markets are not really correlated to this. The Fed is talking tough because they didn't like the message the bond market was sending early on. It caused the dollar to spike when rates went up which is telling the government to print more money. The Fed is doing the opposite and taking some money out of the economy. So even if MMT is a correct observation it's not being followed now anyways.
What "experts" says MMT works - the huge majority of economists say it doesn't. There was a survey of some 50 of the countries leading economists done in 2019 - not even one surveyed agreed with MMT premises and over 75% strongly disagreed with with the premises of MMT - survey results. From Washington Post
Quote:
Prominent economists, including left-leaners such as Larry H. Summers and Paul Krugman, were quick to dismantle and dismiss the MMT notion. Summers, likening MMT to the more extreme version of supply-side economics, labeled it a “fallacious” product of “fringe economists” that would lead directly to inflation or even hyperinflation. Krugman, attacking MMT more than once, has called it “indefensible” and “the cryptocurrency of macroeconomics.”
Only a couple, mostly non-economists, are saying it does work while most economists say it doesn't and many of them are pointing to the current inflation as proof that MMT does not work.
While I haven't studied this topic in-depth, and therefore welcome being educated; in a nutshell is this how it operates?;
We can grow an economy by increasing the amount of overall cash available to spend.
For years now, I've been hearing and reading traditional economists warning of mass inflation; and inevitable market crashes due to printing too much fiat currency.
So I guess my second question would be, without any real labor or value; how can this seemingly utopian policy be sustainable. Or did they finally realize it was unsustainable?, hence recent slowing the economy via rate hikes.
TY in advance for all of your input.
I may be oversimplifying but there are several components, among them the amount of money being created and the speed with which it is spent. During the pandemic tons of money was literally being thrown out of airplanes. Courtesy of lockdowns there was nowhere to spend it, which is why prices didn't rise much. Now, that money burns a hole in people's pockets. We are "off to the races" on inflation unless the Fed mops the excess liquidity up fast, by interest rate increases. Stock market declines may help as well.
I dunno, there seems to be plenty of people on this site who insist that the US dollar is in no danger and that it will be exempt from historical trends for some strange reason...
The Dollar's reserve currency is contingent upon:
1) Our ability to project military power across the world
2) Global trust in the Dollar's value, and
3) Exclusive use of the Dollar in oil transactions.
All three are under threat thanks to constant democrat navel gazing about muh racism.
1) Our ability to project military power across the world
2) Global trust in the Dollar's value, and
3) Exclusive use of the Dollar in oil transactions.
All three are under threat thanks to constant democrat navel gazing about muh racism.
Why is the USD still very valued on the global markets, and that relative value virtually unchanged in 30 years?
I may be oversimplifying but there are several components, among them the amount of money being created and the speed with which it is spent. During the pandemic tons of money was literally being thrown out of airplanes. Courtesy of lockdowns there was nowhere to spend it, which is why prices didn't rise much. Now, that money burns a hole in people's pockets. We are "off to the races" on inflation unless the Fed mops the excess liquidity up fast, by interest rate increases. Stock market declines may help as well.
How do higher interest rates 'mop up liquidity'? I certainly could be wrong, but I thought that was QT's job. Higher rates can certainly reduce the amount of future borrowing, but higher Treasury rates also put more money into the private sector.
All three options come down to 1 thing: more output. If you want your economy to grow, your economy must produce more output.
You don't see how new money can create more output? Gov't can step in where the private sectors don't or can't fulfill the people's needs. For instance like HC and war.
MMT appears to be an exercise in rhetoric -- not in any pejorative sense, but in its classic meaning:
Quote:
Rhetoric: "the art of effective or persuasive speaking or writing, especially the use of figures of speech and other compositional techniques."
Stephanie Kelton is an "economist" at SUNY Stony Brook and one of the ardent proponents of MMT. She was an economic advisor to Bernie Sanders' 2016 presidential campaign. She's self-described as non-orthodox in her view of economics. Here's a book she wrote on MMT: The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy
Here's John Cochrane's review of the book and of MMT:
The thing is, MMT doesn't appear to be an actual theory in the normal sense economists use the word "theory." It seems to be an English-language essay with no mathematical models that can be evaluated or data that can be used to test theories.
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; in a nutshell is this how it operates?;
