4 ms·

Were an MMT system inevitably go awry, the outward manifestation would be of course manifest as inflation, so central planners would of course try to get ahead

by apo 8y ago

Were an MMT system inevitably go awry, the outward manifestation would be of course manifest as inflation, so central planners would of course try to get ahead of it by draining more liquidity, faster, by increasing taxes. As this fed on itself and accelerated, the populace, as if being swept up in a hyperinflation isn’t bad enough, would be sandwiched between hyperinflation and hypertaxation!. I'm not convinced. Deficit hawks have been beating the inflation drums for decades now, with zilch to show for it. We do see inflation. But rather than inflated consumer prices, we see inflated asset prices as measured by historical valuations of stocks and record-low (or even negative) bond yields for example. MMT seems like a prescription, not for Weimar-style hyperinflation, but a world in which asset prices rise beyond any reasonable level only to collapse in a terrifying catastrophe, only to be rescued by central banks which buy up even more assets to continue the cycle. The Bank of Japan has a leg up on the US here. It currently owns a sizable share of the Japanese stock market: https://asia.nikkei.com/Economy/BOJ-is-top-10-shareholder-in-40-of-Japan-s-listed-companies https://asia.nikkei.com/Economy/BOJ-is-top-10-shareholder-in...

NTDF9 8y ago
Asset inflation is THE problem in developed countries. Why? 1. Because there are people alive with large debts on the other side of those inflated assets. Any deflation will kill the lender (if borrower defaults) and the borrower (if the asset's value declines or they can't make any more payments) 2. There are entire populations unable to make asset purchases because assets are too expensive, thus they are left out. The Fed's actions jumpstarted the economy by creating this massive inequality and has left out many behind.
- 0x8BADF00D 8y ago
  > The Fed's actions jumpstarted the economy by creating this massive inequality and has left out many behind. This should not be surprising to anyone. Bernanke’s stated goal was to inflate asset prices through QE, so that consumers would feel an increased “wealth effect”[1] and spend more. The lie at the root of this policy is that spending == productivity which is probably the biggest bald-faced lie ever told. We don’t call an overleveraged man with 30k in credit card debt rich or productive. That would be absurd. Yet it is this lie that is at the root of quantitative easing and the overleveraged American economy. [1] https://www.federalreserve.gov/newsevents/other/o_bernanke20101105a.htm https://www.federalreserve.gov/newsevents/other/o_bernanke20...
AnimalMuppet 8y ago
"Central planners" in the case of at least the US means the Fed. They "drain liquidity", not by raising taxes (which they do not have the authority to do), but by selling bonds. [Edit: And an MMT system is not the same as what we've been doing, so it is not relevant that the deficit hawks have been wrong.]
hoki 8y ago
>We do see inflation. But rather than inflated consumer prices, we see inflated asset prices as measured by historical valuations of stocks and record-low (or even negative) bond yields for example Isn't, say rent, part of the "consumer prices" bit? If so, it is definitely tied to "asset price" of the said home.
- existencebox 8y ago
  I don't want to make a concrete statement on this, I am not an economist, but I know enough of this debate to call out that there's dissent on if the way housing costs are calculated into CPI ends up reflecting the actual costs of obtaining stable housing. ("owner occupied rents" or "imputed rents" are some relevant concepts)

by apo 8y ago

NTDF9 8y ago

Asset inflation is THE problem in developed countries. Why? 1. Because there are people alive with large debts on the other side of those inflated assets. Any deflation will kill the lender (if borrower defaults) and the borrower (if the asset's value declines or they can't make any more payments) 2. There are entire populations unable to make asset purchases because assets are too expensive, thus they are left out. The Fed's actions jumpstarted the economy by creating this massive inequality and has left out many behind.

0x8BADF00D 8y ago
> The Fed's actions jumpstarted the economy by creating this massive inequality and has left out many behind. This should not be surprising to anyone. Bernanke’s stated goal was to inflate asset prices through QE, so that consumers would feel an increased “wealth effect”[1] and spend more. The lie at the root of this policy is that spending == productivity which is probably the biggest bald-faced lie ever told. We don’t call an overleveraged man with 30k in credit card debt rich or productive. That would be absurd. Yet it is this lie that is at the root of quantitative easing and the overleveraged American economy. [1] https://www.federalreserve.gov/newsevents/other/o_bernanke20101105a.htm https://www.federalreserve.gov/newsevents/other/o_bernanke20...

AnimalMuppet 8y ago

"Central planners" in the case of at least the US means the Fed. They "drain liquidity", not by raising taxes (which they do not have the authority to do), but by selling bonds. [Edit: And an MMT system is not the same as what we've been doing, so it is not relevant that the deficit hawks have been wrong.]

hoki 8y ago

>We do see inflation. But rather than inflated consumer prices, we see inflated asset prices as measured by historical valuations of stocks and record-low (or even negative) bond yields for example Isn't, say rent, part of the "consumer prices" bit? If so, it is definitely tied to "asset price" of the said home.

existencebox 8y ago
I don't want to make a concrete statement on this, I am not an economist, but I know enough of this debate to call out that there's dissent on if the way housing costs are calculated into CPI ends up reflecting the actual costs of obtaining stable housing. ("owner occupied rents" or "imputed rents" are some relevant concepts)