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No, MMT is pretty much how the monetary system operates in modern fiat currency economies where the government both prints and taxes in a currency they control.

by pja 8y ago

No, MMT is pretty much how the monetary system operates in modern fiat currency economies where the government both prints and taxes in a currency they control. The essential insight is that taxes & spending are not joined at the hip - the only real constraint on total expenditure in a fiat economy is inflation. It’s not a particularly leftist idea - the right has tacitly treated government spending in this way for decades. It was Dick Cheney who said “deficits don’t matter” after all. The author of this article is confused: hyperinflations are a symptom of collapsing economies, not a cause in and of themselves. Having external debts that you can’t default on in a situation where your economy is shrinking is what drives hyperinflation. Look at every major hyperinflation (Weimar Germany, Zimbabwe etc etc) and you’ll see those are the drivers of hyperinflation.

candiodari 8y ago
Not at all. Another way of looking at money is that money represents value. It's a way of abstracting everything against each other. And let's ignore that that abstraction breaks as soon as you're talking even medium amounts of money, because we can. The total amount of money commands a fixed set of resources. Increasing the amount of money in circulation does not matter at all for reality. It's just an abstraction. An accounting fiction. If the government spends, there's someone else not using those same resources the government's now using. Even the Soviets didn't control 100% of the money supply. I once read that it was about 99.6%. And in both the Weimar and the Zimbabwe (and Venezuela) examples, it is very much the case that the government made the economy collapse, not the other way around. So yes, it is definitely possible to cause hyperinflation through government spending.
- pja 8y ago
  Weimar Germany had to pay reparations which were not denominated in Marks. Zimbabwe had to import food, which had to be paid for in $. Neither had an economy that was capable (at the time) of sustaining these payments. Hyperinflation was the inevitable result.
  - candiodari 8y ago
    Since this comment is made essentially 3 times, let me just ask the obvious question. Yes my comment gives the impression that the government just decides to overspend. The thing that matter is THAT the government overspent, why does not factor in meaningfully. Nor how, nor the historical context. Zimbabwe overspent by willfully destroying it's industry and agriculture for racial justice, talk about finding an original way to overspend. That's akin to quitting your 100k a year job and not changing apartments. Do you seriously think it matters whether it was a choice to overspend or not ? In Weimar Germany's case it was not a choice and arguably it was not really a choice in Zimbabwe either. In Venezuela I think it may have been a choice. I find a lot of people are obsessed with this justice thing, in various context. With guilt. As if some all powerful deity is just about to descend and decide if you've been good or bad, despite being atheists. And for guilt, of course choice matters. But being entirely innocent and a sac is worth one sac. So is being 100% guilty and a sac. If I gave you a choice of being a worker in Venezuela, Zimbabwe or Wiemar Germany what do you base your choice on ? I would base my choice on in which case I would be able to change my situation the easiest, so I'd pick Venezuela out of those options, because I think my odds of successfully working my way out of that situation is the highest, and that I think Venezuela is more "guilty" than Zimbabwe and more than Weimar Germany just doesn't factor into it.
    - pja 8y ago
      What you’re missing is that in all these cases, some sort of series economic fallout was inevitable. The German economy was going to be forced into crisis & deep, unending depression by war reparations that it couldn’t afford to pay, Zimbabwe was going to collapse due to inability to pay for food imports. The governments in question could have chosen not to print money. All that would have done would be to alter the distribution & order of the collapse. Its occurrence was inevitably either way. Obviously the Zimbabwean experience was caused by awful choices made by the government. But these were not 'spending' choices. They were policy choices that in turn led to the collapse of the Zimbabwean economy. “Justice” has nothing to do with any of this. Economics does: Hyperinflation is a result, not a cause.
      - 8y ago
- pytester 8y ago
  Zimbabwe suffered economic collapse because it destroyed its farmland and had no economically productive industries left. Venezuela suffered economic collapse because its industrial base was rendered non-competitive and destroyed. In neither case was the hyperinflation caused by "spending just a bit too much" - it was a side effect of killing economically productive industries and attempts to pay off externally denominated debts.
- pja 8y ago
  > The total amount of money commands a fixed set of resources. Increasing the amount of money in circulation does not matter at all for reality. It's just an abstraction. An accounting fiction. If the government spends, there's someone else not using those same resources the government's now using. You’re completely ignoring the velocity of money. This kind of confusion of stocks and flows is endemic in online macroeconomic discourse sadly. (Some have said that it’s endemic in the economics profession too.)

by pja 8y ago

candiodari 8y ago

Not at all. Another way of looking at money is that money represents value. It's a way of abstracting everything against each other. And let's ignore that that abstraction breaks as soon as you're talking even medium amounts of money, because we can. The total amount of money commands a fixed set of resources. Increasing the amount of money in circulation does not matter at all for reality. It's just an abstraction. An accounting fiction. If the government spends, there's someone else not using those same resources the government's now using. Even the Soviets didn't control 100% of the money supply. I once read that it was about 99.6%. And in both the Weimar and the Zimbabwe (and Venezuela) examples, it is very much the case that the government made the economy collapse, not the other way around. So yes, it is definitely possible to cause hyperinflation through government spending.

pja 8y ago
Weimar Germany had to pay reparations which were not denominated in Marks. Zimbabwe had to import food, which had to be paid for in $. Neither had an economy that was capable (at the time) of sustaining these payments. Hyperinflation was the inevitable result.
- candiodari 8y ago
  Since this comment is made essentially 3 times, let me just ask the obvious question. Yes my comment gives the impression that the government just decides to overspend. The thing that matter is THAT the government overspent, why does not factor in meaningfully. Nor how, nor the historical context. Zimbabwe overspent by willfully destroying it's industry and agriculture for racial justice, talk about finding an original way to overspend. That's akin to quitting your 100k a year job and not changing apartments. Do you seriously think it matters whether it was a choice to overspend or not ? In Weimar Germany's case it was not a choice and arguably it was not really a choice in Zimbabwe either. In Venezuela I think it may have been a choice. I find a lot of people are obsessed with this justice thing, in various context. With guilt. As if some all powerful deity is just about to descend and decide if you've been good or bad, despite being atheists. And for guilt, of course choice matters. But being entirely innocent and a sac is worth one sac. So is being 100% guilty and a sac. If I gave you a choice of being a worker in Venezuela, Zimbabwe or Wiemar Germany what do you base your choice on ? I would base my choice on in which case I would be able to change my situation the easiest, so I'd pick Venezuela out of those options, because I think my odds of successfully working my way out of that situation is the highest, and that I think Venezuela is more "guilty" than Zimbabwe and more than Weimar Germany just doesn't factor into it.
  - pja 8y ago
    What you’re missing is that in all these cases, some sort of series economic fallout was inevitable. The German economy was going to be forced into crisis & deep, unending depression by war reparations that it couldn’t afford to pay, Zimbabwe was going to collapse due to inability to pay for food imports. The governments in question could have chosen not to print money. All that would have done would be to alter the distribution & order of the collapse. Its occurrence was inevitably either way. Obviously the Zimbabwean experience was caused by awful choices made by the government. But these were not 'spending' choices. They were policy choices that in turn led to the collapse of the Zimbabwean economy. “Justice” has nothing to do with any of this. Economics does: Hyperinflation is a result, not a cause.
    - 8y ago
pytester 8y ago
Zimbabwe suffered economic collapse because it destroyed its farmland and had no economically productive industries left. Venezuela suffered economic collapse because its industrial base was rendered non-competitive and destroyed. In neither case was the hyperinflation caused by "spending just a bit too much" - it was a side effect of killing economically productive industries and attempts to pay off externally denominated debts.
pja 8y ago
> The total amount of money commands a fixed set of resources. Increasing the amount of money in circulation does not matter at all for reality. It's just an abstraction. An accounting fiction. If the government spends, there's someone else not using those same resources the government's now using. You’re completely ignoring the velocity of money. This kind of confusion of stocks and flows is endemic in online macroeconomic discourse sadly. (Some have said that it’s endemic in the economics profession too.)