3 ms·

MMT is a language of Ents, not Squirrels: The truth about magic money trees

2 points by Gigamouse 6y ago

oa335 6y ago
Does anyone have a good summary of arguments/evidence for and against MMT? I have a hard time finding things that are don’t seem polemic in tone.
- jfengel 6y ago
  The gist: governments have done just fine with endless rounds of increased debt and quantitative easing without causing inflation. Why not just print the money directly and do away with the fig leaf of paying it back? Con: But that causes inflation. Pro: You can control inflation with taxes. Instead of fake paying back the fake debt, you just evaporate the tax money, same as you printed it. You still control the money supply. But you get more flexibility in budgeting: tax the things you want less of, spend on what you want more of, and don't worry too much about the difference. Con: But you know you won't balance it. Pro: And you'll get a little inflation. Which is fine. That encourages people to spend and invest their money rather than sitting on it. For over a decade we've had more of a problem with deflation than inflation, despite money printer going brr. (Cf HN today: https://news.ycombinator.com/item?id=25430321 https://news.ycombinator.com/item?id=25430321) Con: We used to have inflation, and it was really bad. Pro: Historically inflation has been caused more by supply side than the fiscal side. American inflation in the 70s started with a massive increase in the price of a key input, oil. Hyperinflation always starts with a production collapse or mismanagement, and monetary policy is the result, not the cause. Con: Still sounds fishy. Pro: So does fractional reserve banking, where banks get to loan out more money than they have. If banks can print money, why not governments? Just cut out the middle man. Con: But it's still just a theory. Nobody has tried it. Pro: True. But the theory is sound. Besides, quantitative easing is kind of a natural experiment, and thus far it affirms the theory. Basically, it's not as dissimilar to orthodox theory as you might think. But it's different enough that it's still a minority view among economists.

2 points by Gigamouse 6y ago

Does anyone have a good summary of arguments/evidence for and against MMT? I have a hard time finding things that are don’t seem polemic in tone.

jfengel 6y ago
The gist: governments have done just fine with endless rounds of increased debt and quantitative easing without causing inflation. Why not just print the money directly and do away with the fig leaf of paying it back? Con: But that causes inflation. Pro: You can control inflation with taxes. Instead of fake paying back the fake debt, you just evaporate the tax money, same as you printed it. You still control the money supply. But you get more flexibility in budgeting: tax the things you want less of, spend on what you want more of, and don't worry too much about the difference. Con: But you know you won't balance it. Pro: And you'll get a little inflation. Which is fine. That encourages people to spend and invest their money rather than sitting on it. For over a decade we've had more of a problem with deflation than inflation, despite money printer going brr. (Cf HN today: https://news.ycombinator.com/item?id=25430321 https://news.ycombinator.com/item?id=25430321) Con: We used to have inflation, and it was really bad. Pro: Historically inflation has been caused more by supply side than the fiscal side. American inflation in the 70s started with a massive increase in the price of a key input, oil. Hyperinflation always starts with a production collapse or mismanagement, and monetary policy is the result, not the cause. Con: Still sounds fishy. Pro: So does fractional reserve banking, where banks get to loan out more money than they have. If banks can print money, why not governments? Just cut out the middle man. Con: But it's still just a theory. Nobody has tried it. Pro: True. But the theory is sound. Besides, quantitative easing is kind of a natural experiment, and thus far it affirms the theory. Basically, it's not as dissimilar to orthodox theory as you might think. But it's different enough that it's still a minority view among economists.