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National debt and private debt are two very different creatures. National debt is for the most part a good thing, since it's a measure of the amount of a nation

National debt and private debt are two very different creatures. National debt is for the most part a good thing, since it's a measure of the amount of a national currency is in circulation Modern economic theory proposes that nations, with full control over their currency, have infinite spending power (aka can go into infinite debt) without any issues, as long as full-employment hasn't been reached This is of course not entirely possible for many EU countries, since being a member of the eurozone means the country does not have full control over its currency - which was a large contributor to, for instance, the Greek financial crisis

oblio 6y ago
I don't know what kind of economic books you've read, but mine had terms such as "hyperinflation" in them :-) If anything, stuff like global currencies ($, €) bail out their respective owners because they're world reserve currencies. Some of the smaller Eurozone countries would have definitely defaulted, had hyperinflation, etc, without the Euro. Now they're in recession instead, which sucks a lot but still less than the alternative.
- js8 6y ago
  MMT doesn't say you can't have hyperinflation due to economic mismanagement, it just says you can bootstrap yourself out of unemployment (a crisis) by printing money. Just because a government is printing money it doesn't yet mean they practice a sane economic policy, which would be to increase the demand to meet the supply of labor.
- Scandiravian 6y ago
  I have never understood, why everyone brings up inflation as an argument against this, as if that isn't something that already exists Inflation is only an issue if you spend money beyond what is required to achieve full employment in the workforce, since new money in the system is balanced with new wealth being generated through work Inflation can then be controlled through taxation. Raising taxes pulls money out of circulation, thereby reducing inflation Private banks already have the ability to create money out of thin air, but for some weird reason, that's apparently not really an issue for most people I can't think of any small European countries that I can imagine defaulting without the euro. Could you specify which ones you think would have defaulted?
  - oblio 6y ago
    Greece, for sure. They would have defaulted and the drachma would have probably been at a point where a loaf of bread would cost millions of drachmas.
    - Scandiravian 6y ago
      On the contrary, the eurozone is a massive reason for the Greek economy collapsing as catastrophically as it did in the wake of the 2008 financial crisis It also doesn't matter how "many" of a currency is needed for a loaf of bread, as long as the supply is available. The Italian lira was extremely inexpensive, but as long as the government made sure the supply matched the demand there was no issue Edit: I'd also say that Greece is not really a "smaller European country", being the 14th most populous European country
      - oblio 6y ago
        What about savings? What about salaries? Hyperinflation absolutely wrecks the lives of regular people.
        Scandiravian 6y ago
        What about them? You're just listing questions without contributing with any alternatives or reflection on what has been said by others Hyperinflation is an extreme case and others have already posted several answers to this, which you have chosen to ignore
        oblio 6y ago
        Is there any country that defaulted and didn't suffer from hyperinflation? I can't think of any. I've chosen to ignore the rest because everyone treats hyperinflation like a rare occurrence, under the circumstances.
        Scandiravian 6y ago
- imtringued 6y ago
  >I don't know what kind of economic books you've read, but mine had terms such as "hyperinflation" in them :-) You don't have to issue more currency/debt once you have reached the target inflation rate because if you manage to hit the right inflation rate every year you have already executed your stimulus properly and are reducing unemployment. Consumer inflation is a proxy for worker income because most of the goods or services that are indexed are the product of labor. If the stimulus arrives in the hands of workers first it will mean that worker salaries will grow ahead of inflation. >If anything, stuff like global currencies ($, €) bail out their respective owners because they're world reserve currencies. Some of the smaller Eurozone countries would have definitely defaulted, had hyperinflation, etc, without the Euro. Now they're in recession instead, which sucks a lot but still less than the alternative. They are in recession because of a lack of demand for domestic workers which is basically the problem that moderate inflation would solve. Just look at these charts: https://www.statista.com/statistics/225698/monthly-inflation-rate-in-eu-countries/ https://www.statista.com/statistics/225698/monthly-inflation... Inflation is high in Poland and Hungary. Does this mean they suffer from problems? Actually no it's the opposite. https://www.statista.com/statistics/268830/unemployment-rate-in-eu-countries/ https://www.statista.com/statistics/268830/unemployment-rate... Poland has the second lowest unemployment rate and Hungary is still well below the EU average. Please bear in mind that this chart only shows the inflation rate in August. I chose this chart because it is a easy to read bar chart. Some numbers may be outliers but the general trend will be the same no matter what chart you look at.
HuwytNashi_010 6y ago
I wonder how "educated" one need to be before they can believe that.
- Scandiravian 6y ago
  I think this is a low-effort post that brings nothing new to the table and that it degrades the level of discussion. I'd like you to put more effort into bringing perspective to a discussion in future posts you make
- imtringued 6y ago
  I have no education, merely firsthand experience in virtual economies. The actual policies that have to be implemented might not be the same but the basic mechanism by which they solve problems is the same.
mytailorisrich 6y ago
I wonder which "modern" theory this comes from... Some debt is a good thing because, like for a business or individual, it is generally a good thing to borrow in order to invest for the future (leveraging effect). But too much debt is not a good thing. Debt must be serviced and one need to find creditors willing to lend. Infinite borrowing based on "full control of currency" only means that the value of the currency decreases towards zero and creates hyperinflation: can Zimbabwe support a debt of trillions of Zimbabwean dollars? Sure... But how much is a Zimbabwean dollar worth? Close to nothing and people need a wheelbarrow full of cash to buy a loaf of bread.
- Scandiravian 6y ago
  Sovereign nations don't indebt themselves through banks. They're not taking out loans to fund their spending, so they don't need a creditor Avoiding hyperinflation is about "how" you spend the money, not where they come from. In the case of Zimbabwe, the events leading up to their crash was massive destruction of productivity, which meant their wealth generation no longer matched the amount of money in circulation The trust in their currency took a nosedive, because of the confiscation of assets from wealthy farmers - basically a clear message saying, that the government will not protect assets purchased with their currency, making it risky to own and use Most western economies are much more stable and have high levels of demand for their currencies, which acts as a counterweight to inflation as well
  - mytailorisrich 6y ago
    This is patently false and a rather strange claim. Sovereign nations do indebt themselves through banks and financial markets in general, most often through the issuance of bonds, which can be defined as highly tradeable loans. This is why sovereign debt is given a rating by credit agencies and why interest rates on debt freely vary based on the perceived risk by creditors. This also means that it can become difficult for a country to borrow at all (hence organizations like the IMF sometimes stepping in) There is no magic. However you spend money, inflation is created by an excess supply, not least when money is printed to cover debts (an effective devaluation). This is actually what happened in Zimbabwe.
js8 6y ago
In addition to the above, which I agree with, you might also view money not as a resource, but a vote in economy. If we assume that people are motivated by money, they will still work even on UBI, because what UBI shifts is just who is voting (who is making the decisions to produce stuff). So having an UBI is not really that different than change in demand from one set of products to another, which the economy should be able to handle even according to classical theories. But people are still rewarded for useful work even in the system with UBI, as usual. In fact, if many people decide not to work with UBI, and you do a useful job, your salary might go up, since demand from all these people for your work has gone up.
- Scandiravian 6y ago
  I've never thought of it that way. It's an interesting idea, that I want to understand better, so I'll spend a few hours reading up on this today. Your post taught me something new, which I probably wouldn't have found out on my own. Thank you :)
emteycz 6y ago
That's interesting - if what you're saying is true then why is the government's next year policy significantly increasing taxes, essentially stopping all investment and reducing social safety payouts to nearly zero - all of that in order to pay debt? We're not in the Eurozone, were THE ONE country with nearly total employment, and were the fastest growing European economy before the pandemic.
- Scandiravian 6y ago
  I'm not sure what country you're referring to - could you specify that?
username90 6y ago
> National debt is for the most part a good thing, since it's a measure of the amount of a national currency is in circulation Why do you say this as a Scandinavian when all Scandinavian are fiscally responsible and don't take on more debt every year? Taking on debt isn't a good thing, you can have currency without having any debt as a nation, they aren't related at all. People arguing for that are just trying to manipulate you into believing they are on your side.
- Scandiravian 6y ago
  I think you're skipping over "for the most part" in my post Are you talking about private debt or governmental debt? They are, as stated in my first post, two entirely different things
  - username90 6y ago
    Government debt. https://tradingeconomics.com/sweden/government-debt-to-gdp https://tradingeconomics.com/sweden/government-debt-to-gdp For example Sweden where I live has reduced their government debt to GDP ratio pretty consistently the past 25 years, and I haven't noticed any problems with it. People saying that we would have problems if governments balanced their budgets are just big fat liars.
    - Scandiravian 6y ago
      I think calling other "big fat liars" is a sad approach to a discourse. I don't know who the "people" you refer to are, so unless you specify that, I can't comment on it. I can't remember making a claim like that In fact reducing national debt through taxation is an effective way of reducing inflation. Reducing national debt does not mean the economy will fail. The economy is not a binary system ("success", "fail"), so the more interesting question to me, is whether Sweden's economy would have done better if they had chosen a different economic policy
      - username90 6y ago

oblio 6y ago

I don't know what kind of economic books you've read, but mine had terms such as "hyperinflation" in them :-) If anything, stuff like global currencies ($, €) bail out their respective owners because they're world reserve currencies. Some of the smaller Eurozone countries would have definitely defaulted, had hyperinflation, etc, without the Euro. Now they're in recession instead, which sucks a lot but still less than the alternative.

js8 6y ago
MMT doesn't say you can't have hyperinflation due to economic mismanagement, it just says you can bootstrap yourself out of unemployment (a crisis) by printing money. Just because a government is printing money it doesn't yet mean they practice a sane economic policy, which would be to increase the demand to meet the supply of labor.
Scandiravian 6y ago
I have never understood, why everyone brings up inflation as an argument against this, as if that isn't something that already exists Inflation is only an issue if you spend money beyond what is required to achieve full employment in the workforce, since new money in the system is balanced with new wealth being generated through work Inflation can then be controlled through taxation. Raising taxes pulls money out of circulation, thereby reducing inflation Private banks already have the ability to create money out of thin air, but for some weird reason, that's apparently not really an issue for most people I can't think of any small European countries that I can imagine defaulting without the euro. Could you specify which ones you think would have defaulted?
- oblio 6y ago
  Greece, for sure. They would have defaulted and the drachma would have probably been at a point where a loaf of bread would cost millions of drachmas.
  - Scandiravian 6y ago
    On the contrary, the eurozone is a massive reason for the Greek economy collapsing as catastrophically as it did in the wake of the 2008 financial crisis It also doesn't matter how "many" of a currency is needed for a loaf of bread, as long as the supply is available. The Italian lira was extremely inexpensive, but as long as the government made sure the supply matched the demand there was no issue Edit: I'd also say that Greece is not really a "smaller European country", being the 14th most populous European country
    - oblio 6y ago
      What about savings? What about salaries? Hyperinflation absolutely wrecks the lives of regular people.
      - Scandiravian 6y ago
        What about them? You're just listing questions without contributing with any alternatives or reflection on what has been said by others Hyperinflation is an extreme case and others have already posted several answers to this, which you have chosen to ignore
        oblio 6y ago
        Is there any country that defaulted and didn't suffer from hyperinflation? I can't think of any. I've chosen to ignore the rest because everyone treats hyperinflation like a rare occurrence, under the circumstances.
        Scandiravian 6y ago
imtringued 6y ago
>I don't know what kind of economic books you've read, but mine had terms such as "hyperinflation" in them :-) You don't have to issue more currency/debt once you have reached the target inflation rate because if you manage to hit the right inflation rate every year you have already executed your stimulus properly and are reducing unemployment. Consumer inflation is a proxy for worker income because most of the goods or services that are indexed are the product of labor. If the stimulus arrives in the hands of workers first it will mean that worker salaries will grow ahead of inflation. >If anything, stuff like global currencies ($, €) bail out their respective owners because they're world reserve currencies. Some of the smaller Eurozone countries would have definitely defaulted, had hyperinflation, etc, without the Euro. Now they're in recession instead, which sucks a lot but still less than the alternative. They are in recession because of a lack of demand for domestic workers which is basically the problem that moderate inflation would solve. Just look at these charts: https://www.statista.com/statistics/225698/monthly-inflation-rate-in-eu-countries/ https://www.statista.com/statistics/225698/monthly-inflation... Inflation is high in Poland and Hungary. Does this mean they suffer from problems? Actually no it's the opposite. https://www.statista.com/statistics/268830/unemployment-rate-in-eu-countries/ https://www.statista.com/statistics/268830/unemployment-rate... Poland has the second lowest unemployment rate and Hungary is still well below the EU average. Please bear in mind that this chart only shows the inflation rate in August. I chose this chart because it is a easy to read bar chart. Some numbers may be outliers but the general trend will be the same no matter what chart you look at.

HuwytNashi_010 6y ago

I wonder how "educated" one need to be before they can believe that.

Scandiravian 6y ago
I think this is a low-effort post that brings nothing new to the table and that it degrades the level of discussion. I'd like you to put more effort into bringing perspective to a discussion in future posts you make
imtringued 6y ago
I have no education, merely firsthand experience in virtual economies. The actual policies that have to be implemented might not be the same but the basic mechanism by which they solve problems is the same.

mytailorisrich 6y ago

I wonder which "modern" theory this comes from... Some debt is a good thing because, like for a business or individual, it is generally a good thing to borrow in order to invest for the future (leveraging effect). But too much debt is not a good thing. Debt must be serviced and one need to find creditors willing to lend. Infinite borrowing based on "full control of currency" only means that the value of the currency decreases towards zero and creates hyperinflation: can Zimbabwe support a debt of trillions of Zimbabwean dollars? Sure... But how much is a Zimbabwean dollar worth? Close to nothing and people need a wheelbarrow full of cash to buy a loaf of bread.

Scandiravian 6y ago
Sovereign nations don't indebt themselves through banks. They're not taking out loans to fund their spending, so they don't need a creditor Avoiding hyperinflation is about "how" you spend the money, not where they come from. In the case of Zimbabwe, the events leading up to their crash was massive destruction of productivity, which meant their wealth generation no longer matched the amount of money in circulation The trust in their currency took a nosedive, because of the confiscation of assets from wealthy farmers - basically a clear message saying, that the government will not protect assets purchased with their currency, making it risky to own and use Most western economies are much more stable and have high levels of demand for their currencies, which acts as a counterweight to inflation as well
- mytailorisrich 6y ago
  This is patently false and a rather strange claim. Sovereign nations do indebt themselves through banks and financial markets in general, most often through the issuance of bonds, which can be defined as highly tradeable loans. This is why sovereign debt is given a rating by credit agencies and why interest rates on debt freely vary based on the perceived risk by creditors. This also means that it can become difficult for a country to borrow at all (hence organizations like the IMF sometimes stepping in) There is no magic. However you spend money, inflation is created by an excess supply, not least when money is printed to cover debts (an effective devaluation). This is actually what happened in Zimbabwe.

js8 6y ago

In addition to the above, which I agree with, you might also view money not as a resource, but a vote in economy. If we assume that people are motivated by money, they will still work even on UBI, because what UBI shifts is just who is voting (who is making the decisions to produce stuff). So having an UBI is not really that different than change in demand from one set of products to another, which the economy should be able to handle even according to classical theories. But people are still rewarded for useful work even in the system with UBI, as usual. In fact, if many people decide not to work with UBI, and you do a useful job, your salary might go up, since demand from all these people for your work has gone up.

Scandiravian 6y ago
I've never thought of it that way. It's an interesting idea, that I want to understand better, so I'll spend a few hours reading up on this today. Your post taught me something new, which I probably wouldn't have found out on my own. Thank you :)

emteycz 6y ago

That's interesting - if what you're saying is true then why is the government's next year policy significantly increasing taxes, essentially stopping all investment and reducing social safety payouts to nearly zero - all of that in order to pay debt? We're not in the Eurozone, were THE ONE country with nearly total employment, and were the fastest growing European economy before the pandemic.

Scandiravian 6y ago
I'm not sure what country you're referring to - could you specify that?

username90 6y ago

> National debt is for the most part a good thing, since it's a measure of the amount of a national currency is in circulation Why do you say this as a Scandinavian when all Scandinavian are fiscally responsible and don't take on more debt every year? Taking on debt isn't a good thing, you can have currency without having any debt as a nation, they aren't related at all. People arguing for that are just trying to manipulate you into believing they are on your side.

Scandiravian 6y ago
I think you're skipping over "for the most part" in my post Are you talking about private debt or governmental debt? They are, as stated in my first post, two entirely different things
- username90 6y ago
  Government debt. https://tradingeconomics.com/sweden/government-debt-to-gdp https://tradingeconomics.com/sweden/government-debt-to-gdp For example Sweden where I live has reduced their government debt to GDP ratio pretty consistently the past 25 years, and I haven't noticed any problems with it. People saying that we would have problems if governments balanced their budgets are just big fat liars.
  - Scandiravian 6y ago
    I think calling other "big fat liars" is a sad approach to a discourse. I don't know who the "people" you refer to are, so unless you specify that, I can't comment on it. I can't remember making a claim like that In fact reducing national debt through taxation is an effective way of reducing inflation. Reducing national debt does not mean the economy will fail. The economy is not a binary system ("success", "fail"), so the more interesting question to me, is whether Sweden's economy would have done better if they had chosen a different economic policy
    - username90 6y ago