4 ms·

Directly related is "Modern Monetary Theory" or MMT. Here's a 24 minute explainer from NPR, Planet Money. https://www.npr.org/2021/01/20/958854717/modern-monet

Directly related is "Modern Monetary Theory" or MMT. Here's a 24 minute explainer from NPR, Planet Money. https://www.npr.org/2021/01/20/958854717/modern-monetary-theory-classic https://www.npr.org/2021/01/20/958854717/modern-monetary-the... And a brief explainer from The Conversation https://theconversation.com/modern-monetary-theory-the-rise-of-economists-who-say-huge-government-debt-is-not-a-problem-141495 https://theconversation.com/modern-monetary-theory-the-rise-... Also known by its detractors as "Magic Money Tree." One of those detractors is of course the Adam Smith Institute. https://www.adamsmith.org/research/the-magic-money-tree-the-case-against-modern-monetary-theory https://www.adamsmith.org/research/the-magic-money-tree-the-... I thought I remembered Freakonomics doing a fairly in-depth discussion on this, but I can't find it. Maybe I mis-remember.

mikewarot 6y ago
It's not really an economic question, it's one of politics, intimidation, and a global empire. The "magic money tree" is backed by the full force of the United States. Heads of state who have suggested alternatives found themselves confronted with a sweeping range of responses, starting with bribes, then coercion, sanctions, and if those fail, hiding in a hole from US forces. There's nothing magic, nor mysterious about it. We're the only ones (right now) with the system in place to hold the rest of the world hostage. When those in charge press their luck too far, or if by accident they let an idiot run the place for 4 years, that grip on things could loosen, and eventually our position could collapse. When that happens, we'll be forced to use money from someone else's "magic money tree". Having to export hard currency instead of magic money, would cause prices on all things imported to double or worse in a few years or less. The only real question is how many % of the value of the dollar when spent as an export is real, and how much is the "global reserve currency" status. I suspect it used to be %20 real, and lately it's more like 50% as our leaders fumble the ball too much for the rest of the world's liking.
- AnimalMuppet 6y ago
  Does MMT work if you're not the reserve currency? (Honest question; I don't know enough about the theory to say.) But it is really an economic question. What will be the results if you run your economy this way? What will be the results if you do so as the reserve currency, and what will be the results if you do so when you're not?
  - sdenton4 6y ago
    MMT works so long as you've got the ability to conjure your own money. (Eg, not on the Euro, or a currency pegged to another currency.) The idea is that you create money to pay for things, and then pull back excess money through taxes. (As opposed to pulling in money through taxes, using it to pay for things, and whining that you don't have enough.) So it 'works' as long as you have your own independent national currency. Another mind flip: the scarce resource isn't money - it can always be generated - but labor. Inflation starts when there's a labor shortage, because up to that point you can just employ more people to meet demands.
    - spurgu 6y ago
      Another mind flip: the scarce resource isn't labor - but energy. Edit: A gallon of oil is equivalent to roughly 400 hours of human labor. Manual work is nothing compared to the energy contained in fossil fuels (or external energy sources in general). An argument could be made that the economy is in decline due to this, that the sources of fossil fuels are getting more expensive. Most of the cheap sources have been used up already. There is still a lot of oil left, but it's a lot more expensive (offshore, fracking) to extract than it used to, and it's getting worse.
      - platz 6y ago
        Mark Blyth on MMT: https://youtu.be/2ONGvkAoOI0?t=1550 https://youtu.be/2ONGvkAoOI0?t=1550 - it only applies to the US - depends on having a hegemonic currency (i.e. everyone else earns in your currency and has to convert it, so that you can run a deficit and others supply the capital to fill it) - contingent on control of the house, senate, and presidency, for about 3 terms in a row, to do all the things you want to do (in the MMT program) - though sure, we could spend more on stuff we care about; we're not at "capacity" yet. - you've already got a bond market in the US... why do do we need to re-invent everything in the world when the bond market allows you to already do it? - hardly any other country actually sets their own monetary policy because the dollar is so dominant. When the fed goes up or down, it's effect is global. - since every country has to import, if you print a lot of money, you'll get inflation through exchange rates & the import channel Haven't listened to this one yet: https://youtu.be/NfKiW0Gfn04 https://youtu.be/NfKiW0Gfn04
lukifer 6y ago
I've been deep diving on MMT lately (per Rohan Gray, Stephanie Kelton, and L. Randall Wray); while I'm not entirely convinced, one thing that's surprised me is that it's less prescriptive than is oft assumed from its elevator pitch, and is much more focused on accurately describing what states do already. The claim is not that we can starting printing money willy-nilly without consequences; it's that we do that already, and we can be smarter about it if we're honest about that fact. A couple other interesting outgrowths from that premise: - the Federal Jobs Guarantee concept, which in addition to any positive externalities of putting the under-employed to work, also pegs the value of the dollar to labor (@$15/hr, $1=4min), while also providing a negotiating BATNA for the working class with their private employers. - Because money is printed into existence, rather than an empty ritual of collecting revenue before spending it, taxation exists only for money to exit the system, reducing inflation and creating demand for dollars; tax payments aren't used to pay for anything, and are effectively burned. Kelton also makes an interesting point: rather than taxes being a "necessary evil" policy to pay for some other good, they can actually be reconstrued as positive goods in and of themselves: to price externalities (pollution tax) or discourage behavior (sin tax), etc. The strongest argument against MMT, regardless of its theoretical merits, is simply the practical one: that Congress already perpetrates vast quantities of graft and fiscal short-sightedness, and it's unwise to trust such a transparently corrupt and dysfunctional institution with additional leeway for limitless spending.
- Gibbon1 6y ago
  > rather than taxes being a "necessary evil" policy to pay for some other good, they can actually be reconstrued as positive goods in and of themselves: to price externalities (pollution tax) or discourage behavior (sin tax), etc. You can think of the very high marginal income taxes prior to Reagan, even higher prior to JFK as 'sin taxes'. People opposed to high marginal tax rates like to point out that those high taxes didn't produce more revenue. But MMT thoery would tell you revenue was never the point. The point was to discourage people with the power to divert money into their own pockets from doing so.

mikewarot 6y ago

It's not really an economic question, it's one of politics, intimidation, and a global empire. The "magic money tree" is backed by the full force of the United States. Heads of state who have suggested alternatives found themselves confronted with a sweeping range of responses, starting with bribes, then coercion, sanctions, and if those fail, hiding in a hole from US forces. There's nothing magic, nor mysterious about it. We're the only ones (right now) with the system in place to hold the rest of the world hostage. When those in charge press their luck too far, or if by accident they let an idiot run the place for 4 years, that grip on things could loosen, and eventually our position could collapse. When that happens, we'll be forced to use money from someone else's "magic money tree". Having to export hard currency instead of magic money, would cause prices on all things imported to double or worse in a few years or less. The only real question is how many % of the value of the dollar when spent as an export is real, and how much is the "global reserve currency" status. I suspect it used to be %20 real, and lately it's more like 50% as our leaders fumble the ball too much for the rest of the world's liking.

AnimalMuppet 6y ago
Does MMT work if you're not the reserve currency? (Honest question; I don't know enough about the theory to say.) But it is really an economic question. What will be the results if you run your economy this way? What will be the results if you do so as the reserve currency, and what will be the results if you do so when you're not?
- sdenton4 6y ago
  MMT works so long as you've got the ability to conjure your own money. (Eg, not on the Euro, or a currency pegged to another currency.) The idea is that you create money to pay for things, and then pull back excess money through taxes. (As opposed to pulling in money through taxes, using it to pay for things, and whining that you don't have enough.) So it 'works' as long as you have your own independent national currency. Another mind flip: the scarce resource isn't money - it can always be generated - but labor. Inflation starts when there's a labor shortage, because up to that point you can just employ more people to meet demands.
  - spurgu 6y ago
    Another mind flip: the scarce resource isn't labor - but energy. Edit: A gallon of oil is equivalent to roughly 400 hours of human labor. Manual work is nothing compared to the energy contained in fossil fuels (or external energy sources in general). An argument could be made that the economy is in decline due to this, that the sources of fossil fuels are getting more expensive. Most of the cheap sources have been used up already. There is still a lot of oil left, but it's a lot more expensive (offshore, fracking) to extract than it used to, and it's getting worse.
    - platz 6y ago
      Mark Blyth on MMT: https://youtu.be/2ONGvkAoOI0?t=1550 https://youtu.be/2ONGvkAoOI0?t=1550 - it only applies to the US - depends on having a hegemonic currency (i.e. everyone else earns in your currency and has to convert it, so that you can run a deficit and others supply the capital to fill it) - contingent on control of the house, senate, and presidency, for about 3 terms in a row, to do all the things you want to do (in the MMT program) - though sure, we could spend more on stuff we care about; we're not at "capacity" yet. - you've already got a bond market in the US... why do do we need to re-invent everything in the world when the bond market allows you to already do it? - hardly any other country actually sets their own monetary policy because the dollar is so dominant. When the fed goes up or down, it's effect is global. - since every country has to import, if you print a lot of money, you'll get inflation through exchange rates & the import channel Haven't listened to this one yet: https://youtu.be/NfKiW0Gfn04 https://youtu.be/NfKiW0Gfn04

lukifer 6y ago

I've been deep diving on MMT lately (per Rohan Gray, Stephanie Kelton, and L. Randall Wray); while I'm not entirely convinced, one thing that's surprised me is that it's less prescriptive than is oft assumed from its elevator pitch, and is much more focused on accurately describing what states do already. The claim is not that we can starting printing money willy-nilly without consequences; it's that we do that already, and we can be smarter about it if we're honest about that fact. A couple other interesting outgrowths from that premise: - the Federal Jobs Guarantee concept, which in addition to any positive externalities of putting the under-employed to work, also pegs the value of the dollar to labor (@$15/hr, $1=4min), while also providing a negotiating BATNA for the working class with their private employers. - Because money is printed into existence, rather than an empty ritual of collecting revenue before spending it, taxation exists only for money to exit the system, reducing inflation and creating demand for dollars; tax payments aren't used to pay for anything, and are effectively burned. Kelton also makes an interesting point: rather than taxes being a "necessary evil" policy to pay for some other good, they can actually be reconstrued as positive goods in and of themselves: to price externalities (pollution tax) or discourage behavior (sin tax), etc. The strongest argument against MMT, regardless of its theoretical merits, is simply the practical one: that Congress already perpetrates vast quantities of graft and fiscal short-sightedness, and it's unwise to trust such a transparently corrupt and dysfunctional institution with additional leeway for limitless spending.

Gibbon1 6y ago
> rather than taxes being a "necessary evil" policy to pay for some other good, they can actually be reconstrued as positive goods in and of themselves: to price externalities (pollution tax) or discourage behavior (sin tax), etc. You can think of the very high marginal income taxes prior to Reagan, even higher prior to JFK as 'sin taxes'. People opposed to high marginal tax rates like to point out that those high taxes didn't produce more revenue. But MMT thoery would tell you revenue was never the point. The point was to discourage people with the power to divert money into their own pockets from doing so.