4 ms·

A central observation of modern monetary theory is that all (federal) govt spending is done that way but the fed: the fed just conjures 1 bajillion $ into Lockh

A central observation of modern monetary theory is that all (federal) govt spending is done that way but the fed: the fed just conjures 1 bajillion $ into Lockheed's account, and taxes to "pay for" govt spending happen later. If that's not directly true in details it's true in effect. The next logical steps are that (1) it can never default on debts in its own currency unless it chooses too and (2) we don't need to "pay for" new spending with taxes. (Although taxes are still important for a variety of reasons: providing incentive structures, preventing inflation.)

lottin 5y ago
Only financial institutions can have accounts with the Federal Reserve.
- turtletontine 5y ago
  That's why I said not true in details, but true in effect
causalmodels 5y ago
No, governments are constrained by real resources. Deficits probably don’t matter as much as people thought they did, but that doesn’t mean deficit spendings can be unlimited. Plus not all spending is equal. Deficit funding of things like actual (physical) infrastructure doesn’t have the same issues as social programs. Like do we really think Western European countries have broad tax bases because they like it? Using taxes as a means of controlling inflation (raising them when inflation rises) may be true in theory but it is of zero practical importance. Raising taxes during inflationary periods, compounding the loss spending power, is a fantastic way for a politician to lose their job.
imtringued 5y ago
MMT boils down to "keeping people unemployed or underemployed against their own will is unethical". Therefore you create money to employ unemployed or underemployed people. The trick is that yes, you are printing money, but you are also "printing" goods and services provided by people who would otherwise stay unemployed or underemployed. Are there any good reasons for keeping people unemployed or underemployed? I can't think of any. People who don't want to work or can't aren't considered unemployed. Who exactly is losing out? That fast food restaurant that is underpaying people? Rich people whose relative wealth vs the poor is growing?

lottin 5y ago

Only financial institutions can have accounts with the Federal Reserve.

turtletontine 5y ago
That's why I said not true in details, but true in effect

causalmodels 5y ago

No, governments are constrained by real resources. Deficits probably don’t matter as much as people thought they did, but that doesn’t mean deficit spendings can be unlimited. Plus not all spending is equal. Deficit funding of things like actual (physical) infrastructure doesn’t have the same issues as social programs. Like do we really think Western European countries have broad tax bases because they like it? Using taxes as a means of controlling inflation (raising them when inflation rises) may be true in theory but it is of zero practical importance. Raising taxes during inflationary periods, compounding the loss spending power, is a fantastic way for a politician to lose their job.

imtringued 5y ago

MMT boils down to "keeping people unemployed or underemployed against their own will is unethical". Therefore you create money to employ unemployed or underemployed people. The trick is that yes, you are printing money, but you are also "printing" goods and services provided by people who would otherwise stay unemployed or underemployed. Are there any good reasons for keeping people unemployed or underemployed? I can't think of any. People who don't want to work or can't aren't considered unemployed. Who exactly is losing out? That fast food restaurant that is underpaying people? Rich people whose relative wealth vs the poor is growing?