12 ms·

Wonder what HN thinks of Modern Monetary Theory[1] which posits amongst other things that government debt is consumer surplus - and not inherently a bad thing,

by otalp 8y ago

Wonder what HN thinks of Modern Monetary Theory[1] which posits amongst other things that government debt is consumer surplus - and not inherently a bad thing, and also that printing fiat currency specifically to pay for domestic programs does not itself increase inflation [1] - http://neweconomicperspectives.org/2014/01/diagrams-dollars-modern-money-illustrated-part-1.html http://neweconomicperspectives.org/2014/01/diagrams-dollars-...

robertAngst 8y ago
> that government debt is consumer surplus and not inherently a bad thing, and also that printing fiat currency specifically to pay for programs does not itself increase inflation Sounds like when cigarette companies funded studies to 'prove' cigarettes were safe. They even went full 'USA Freedom Act' by throwing the word Modern in the title. Those are two non-political red flags. I'll save my personal ideas on economics as this gets into politics.
- otalp 8y ago
  Both MMT advocates and critics have agreed that MMT isn't particularly new; it seems to be a rekindling of Neo-Keynesianism. And generally people do have a misconception that printing more money = inflation. For example in the last 2 decades the amount of Chinese currency has increased by more than 800%(https://webofdebt.files.wordpress.com/2018/12/m2-for-China-FRED.png https://webofdebt.files.wordpress.com/2018/12/m2-for-China-F...), but inflation remains at 2.2%.
  - pixl97 8y ago
    At what rate has Chinese production increased. Money supply does need to increase in some situations.
  - quadrangle 8y ago
    I don't think all the MMTers are Neo-Keynesian. The alternate term applicable to MMT is neochartalist. It's more of a claim about money and systems, and less of a statement about what should or shouldn't be done once these facts are acknowledged.
- ploika 8y ago
  I think "modern" is more of an allusion to Modern Portfolio Theory, which has been around for decades, rather than trying to imply that modern = newer = better. Modern in this sense could loosely mean "after John Maynard Keynes died", or "Adam Smith never heard of it". Modern Monetary Theory itself is a general economic theory, rather than an American monetary or fiscal policy position. The jury is still out on it, but it could suit countries like the US or maybe Switzerland, who have the right economic and currency conditions.
pjc50 8y ago
I generally agree with it: money is claims on future resources. Printing money redistributes resources. The government can redistribute internally as much as it likes without creating inflation. Especially if it's printing money to hire people and the economy is not at full employment. What you can't do is print foreign currency. So the component of spending that goes on imports is affected. You can't have a program that prints money to buy people discount fuel if you're not a net oil producing country, for example (this mistake has blown up a number of African economies!)
jganetsk 8y ago
MMT is great. > government debt is consumer surplus You are referring to the Sectoral Balances Framework, which says that in aggregate, one sector's deficit is another sector's surplus. https://en.wikipedia.org/wiki/Sectoral_balances https://en.wikipedia.org/wiki/Sectoral_balances The MMT response to "the world's debt is soaring" is that means "the world's assets are soaring" as well. Because every liability is someone else's asset. The question is, what kinds of assets are these? If we are talking about debt of governments with sovereign control of their currencies, this is a stable situation. But other kinds of debt could lead to a bubble popping and a financial crisis.
solotronics 8y ago
then why not just accelerate government debt without any heed? this is basically what is happening right now in the US
AnimalMuppet 8y ago
Printing fiat currency specifically to pay for domestic programs does not itself increase inflation? I'd classify that as "just barely possible, but very probably untrue". In particular, I'd want to know how it's different from what Venezuela did, how it's different from what Zimbabwe did, and how it's different from what the Weimar Republic did. The next problem is, even if it's true, it may not matter. If the political pressure is too high, governments will proceed from doing what MMT says, and move on to doing what Venezuela did. This may not be a safe road to start down even if the theory is correct, because human nature says that we won't stick to the course specified by the theory. I could be convinced that I'm wrong, but I want more than a fine-sounding theory that says we can have our cake and eat it too. I want a theory that says how this is actually different from all the times it's blown up in the past.

by otalp 8y ago

robertAngst 8y ago

> that government debt is consumer surplus and not inherently a bad thing, and also that printing fiat currency specifically to pay for programs does not itself increase inflation Sounds like when cigarette companies funded studies to 'prove' cigarettes were safe. They even went full 'USA Freedom Act' by throwing the word Modern in the title. Those are two non-political red flags. I'll save my personal ideas on economics as this gets into politics.

otalp 8y ago
Both MMT advocates and critics have agreed that MMT isn't particularly new; it seems to be a rekindling of Neo-Keynesianism. And generally people do have a misconception that printing more money = inflation. For example in the last 2 decades the amount of Chinese currency has increased by more than 800%(https://webofdebt.files.wordpress.com/2018/12/m2-for-China-FRED.png https://webofdebt.files.wordpress.com/2018/12/m2-for-China-F...), but inflation remains at 2.2%.
- pixl97 8y ago
  At what rate has Chinese production increased. Money supply does need to increase in some situations.
- quadrangle 8y ago
  I don't think all the MMTers are Neo-Keynesian. The alternate term applicable to MMT is neochartalist. It's more of a claim about money and systems, and less of a statement about what should or shouldn't be done once these facts are acknowledged.
ploika 8y ago
I think "modern" is more of an allusion to Modern Portfolio Theory, which has been around for decades, rather than trying to imply that modern = newer = better. Modern in this sense could loosely mean "after John Maynard Keynes died", or "Adam Smith never heard of it". Modern Monetary Theory itself is a general economic theory, rather than an American monetary or fiscal policy position. The jury is still out on it, but it could suit countries like the US or maybe Switzerland, who have the right economic and currency conditions.

pjc50 8y ago

I generally agree with it: money is claims on future resources. Printing money redistributes resources. The government can redistribute internally as much as it likes without creating inflation. Especially if it's printing money to hire people and the economy is not at full employment. What you can't do is print foreign currency. So the component of spending that goes on imports is affected. You can't have a program that prints money to buy people discount fuel if you're not a net oil producing country, for example (this mistake has blown up a number of African economies!)

jganetsk 8y ago

MMT is great. > government debt is consumer surplus You are referring to the Sectoral Balances Framework, which says that in aggregate, one sector's deficit is another sector's surplus. https://en.wikipedia.org/wiki/Sectoral_balances https://en.wikipedia.org/wiki/Sectoral_balances The MMT response to "the world's debt is soaring" is that means "the world's assets are soaring" as well. Because every liability is someone else's asset. The question is, what kinds of assets are these? If we are talking about debt of governments with sovereign control of their currencies, this is a stable situation. But other kinds of debt could lead to a bubble popping and a financial crisis.

solotronics 8y ago

then why not just accelerate government debt without any heed? this is basically what is happening right now in the US

AnimalMuppet 8y ago

Printing fiat currency specifically to pay for domestic programs does not itself increase inflation? I'd classify that as "just barely possible, but very probably untrue". In particular, I'd want to know how it's different from what Venezuela did, how it's different from what Zimbabwe did, and how it's different from what the Weimar Republic did. The next problem is, even if it's true, it may not matter. If the political pressure is too high, governments will proceed from doing what MMT says, and move on to doing what Venezuela did. This may not be a safe road to start down even if the theory is correct, because human nature says that we won't stick to the course specified by the theory. I could be convinced that I'm wrong, but I want more than a fine-sounding theory that says we can have our cake and eat it too. I want a theory that says how this is actually different from all the times it's blown up in the past.