5 ms·

They moved on from Keynesian economics a long time ago, today it is all about MMT i.e Magical Monetary Thinking errrr... Modern Monetary Theory

by syshum 5y ago

whimsicalism 5y ago
You have no idea what you are talking about.
tharne 5y ago
> They moved on from Keynesian economics a long time ago This 100%. Keynesian economics sees debt as temporary to be used to fight a war or stimulate the economy during a depression, with the expectation that the debt is paid down during the good times. This is what the U.S. did during World War 2. They ran up a huge debt to fight the war then paid it back down in the prosperous years following the war. Modern Monetary Theory on the other hand is the philosophy of a six year old who asks daddy why the government can't just print more money to buy stuff.
- ThunderSizzle 5y ago
  TBF, we never really _paid_ off the WW2 debt. We started to use GDP vs Debt as the measurement tool to avoid actually paying off debt instead of endlessly servicing it. It didn't take much time to convince our 6-year-old selves that we could just endlessly service more debt when GDP grows and to grow more GDP. Obviously there's no bad if taking debt causes GDP to grow, and GDP will always grow, so debt should always grow, because more GDP!
- mindslight 5y ago
  What do you call the period from 1971-2019 when the government printed lots of money with no intention of paying it back, but only handed it out to the upper class? From my fiscally conservative Austrian perspective, MMT is actually an improvement - by creating direct price inflation (as opposed to just asset inflation that nobody dares to call real inflation), it forces the Fed to put the brakes on the printing press.
  - tharne 5y ago
    I'm an Austrian myself, and that's an interesting take on MMT I hadn't considered. I'll have to noodle on that one for a bit.
  - dragonwriter 5y ago
    > MMT is actually an improvement - by creating direct price inflation MMT doesn't create price inflation, it acknowledges that monetary effects (like inflation and deflation) are the only real constraints on government finances when spending its own fiat, and that requiring debt financing for net spending is a farcical result of pretending fiat is resource-limited commodity currency, and encourages abandoning that kind of fiscal fiction in favor of expressly considering monetary effects in setting the kind of policy that has historically been called “fiscal”.
    - mindslight 5y ago
      I agree with you - MMT mostly just acknowledges the dynamic that has already been in place for the past 50 years, ultimately letting the government regain the power to spend money where it deems fit (eg infrastructure), rather than being bound by this "lending" facade that mainly directs new money to the financial industry. What I mean by it causing price inflation is that money directly spent (especially on social welfare programs) tends to flow to consumers within one or two hops, where it will directly bid up the CPI. Whereas money that is "loaned" tends to linger in the financial economy and mainly causes asset inflation (which only eventually, maybe, causes price inflation). By making the economic feedback loop shorter, MMT makes the results of monetary inflation more apparent, and from an Austrian perspective this is a good thing.
- yufeng66 5y ago
  This is a common misunderstanding. As a percentage of GDP, debt did go down. But the US government didn't actually paydown the debt. The debt notional more or less stayed the same. The ratio decreased due to GDP growth and inflation. https://fred.stlouisfed.org/series/FYGFD https://fred.stlouisfed.org/series/FYGFD
  - ur-whale 5y ago
    > The ratio decreased due to GDP growth and inflation. Inflation, the magic silver bullet that makes a countrys' debt disappear. At whose expense is of course the question.
- wbsss4412 5y ago
  I’m not really sure that you understand MMT. MMT isn’t about giving out a free pass to print money, it simply states that deficits are the primary driver of inflation rather than changes in the money supply. That’s not the same thing as giving out a free pass, in fact, it’s proponents would state that in the face of rising inflation one should reduce budget deficits.
  - whimsicalism 5y ago
    > deficits are the primary driver of inflation rather than changes in the money supply MMT "theorists" will say different things every time you ask them. I doubt many of them would say this though, because it's pretty obviously on-face wrong.
    - wbsss4412 5y ago
      It seems clear that you have very little respect for the MMT set. But I haven’t seen anything to suggest they’d disagree with my characterization. I wonder where you draw your understanding of MMT because from my view the theory is fairly straightforward: money creation happens when the government spends, and is taken out when it raises taxes. The purpose of central banks is to provide financial stability.
      - whimsicalism 5y ago
        > from my view the theory is fairly straightforward But as you've stated it, the "theory" is on-face wrong. Money isn't created when the government spends because it borrows from private credit markets when it spends, taking money out of circulation. Money is created by monetary policy, not fiscal policy. I don't necessarily disrespect MMT, I just have trouble tying people down to making a specific claim. Either they are saying something obvious and not at all contrary to mainstream economics, or they are making claims that I think are wrong - but I have trouble pinning down any particular claims.
        wbsss4412 5y ago
- dragonwriter 5y ago
  > Modern Monetary Theory on the other hand is the philosophy of a six year old who asks daddy why the government can't just print more money to buy stuff. MMT is just “fiat money isn't commodity money, so fiscal constraints are historical cosplay rather than fundamental reality. The real constraint on so-called ‘fiscal’ activity is purely monetary.” No part of the descriptive element of MMT is in actual serious dispute by orthodox economics. Orthodox economists just tend to prefer the policy behavior that occurs with c the cosplay of fiscal rather than purely monetary constraints. Which is fine—frankly, I think Congress does a bad enough job with fiscal policy when monetary policy is hived off and given to the Fed, so I can see some naive policy responses to the realities embraced by MMT that would be counterproductive. OTOH, acknowledging the realities instead of trying or bury them because their are some obvious bad potential responses is necessary to have the discussion that gets to policy that incorporates reality well.
thepasswordis 5y ago
It’s so convenient that the everybody was confused about economics, and actually the really good economics is that politicians can and SHOULD spend money on whatever they want!

They moved on from Keynesian economics a long time ago, today it is all about MMT i.e Magical Monetary Thinking errrr... Modern Monetary Theory

by syshum 5y ago

They moved on from Keynesian economics a long time ago, today it is all about MMT i.e Magical Monetary Thinking errrr... Modern Monetary Theory

whimsicalism 5y ago

You have no idea what you are talking about.

tharne 5y ago

> They moved on from Keynesian economics a long time ago This 100%. Keynesian economics sees debt as temporary to be used to fight a war or stimulate the economy during a depression, with the expectation that the debt is paid down during the good times. This is what the U.S. did during World War 2. They ran up a huge debt to fight the war then paid it back down in the prosperous years following the war. Modern Monetary Theory on the other hand is the philosophy of a six year old who asks daddy why the government can't just print more money to buy stuff.

ThunderSizzle 5y ago
TBF, we never really _paid_ off the WW2 debt. We started to use GDP vs Debt as the measurement tool to avoid actually paying off debt instead of endlessly servicing it. It didn't take much time to convince our 6-year-old selves that we could just endlessly service more debt when GDP grows and to grow more GDP. Obviously there's no bad if taking debt causes GDP to grow, and GDP will always grow, so debt should always grow, because more GDP!
mindslight 5y ago
What do you call the period from 1971-2019 when the government printed lots of money with no intention of paying it back, but only handed it out to the upper class? From my fiscally conservative Austrian perspective, MMT is actually an improvement - by creating direct price inflation (as opposed to just asset inflation that nobody dares to call real inflation), it forces the Fed to put the brakes on the printing press.
- tharne 5y ago
  I'm an Austrian myself, and that's an interesting take on MMT I hadn't considered. I'll have to noodle on that one for a bit.
- dragonwriter 5y ago
  > MMT is actually an improvement - by creating direct price inflation MMT doesn't create price inflation, it acknowledges that monetary effects (like inflation and deflation) are the only real constraints on government finances when spending its own fiat, and that requiring debt financing for net spending is a farcical result of pretending fiat is resource-limited commodity currency, and encourages abandoning that kind of fiscal fiction in favor of expressly considering monetary effects in setting the kind of policy that has historically been called “fiscal”.
  - mindslight 5y ago
    I agree with you - MMT mostly just acknowledges the dynamic that has already been in place for the past 50 years, ultimately letting the government regain the power to spend money where it deems fit (eg infrastructure), rather than being bound by this "lending" facade that mainly directs new money to the financial industry. What I mean by it causing price inflation is that money directly spent (especially on social welfare programs) tends to flow to consumers within one or two hops, where it will directly bid up the CPI. Whereas money that is "loaned" tends to linger in the financial economy and mainly causes asset inflation (which only eventually, maybe, causes price inflation). By making the economic feedback loop shorter, MMT makes the results of monetary inflation more apparent, and from an Austrian perspective this is a good thing.
yufeng66 5y ago
This is a common misunderstanding. As a percentage of GDP, debt did go down. But the US government didn't actually paydown the debt. The debt notional more or less stayed the same. The ratio decreased due to GDP growth and inflation. https://fred.stlouisfed.org/series/FYGFD https://fred.stlouisfed.org/series/FYGFD
- ur-whale 5y ago
  > The ratio decreased due to GDP growth and inflation. Inflation, the magic silver bullet that makes a countrys' debt disappear. At whose expense is of course the question.
wbsss4412 5y ago
I’m not really sure that you understand MMT. MMT isn’t about giving out a free pass to print money, it simply states that deficits are the primary driver of inflation rather than changes in the money supply. That’s not the same thing as giving out a free pass, in fact, it’s proponents would state that in the face of rising inflation one should reduce budget deficits.
- whimsicalism 5y ago
  > deficits are the primary driver of inflation rather than changes in the money supply MMT "theorists" will say different things every time you ask them. I doubt many of them would say this though, because it's pretty obviously on-face wrong.
  - wbsss4412 5y ago
    It seems clear that you have very little respect for the MMT set. But I haven’t seen anything to suggest they’d disagree with my characterization. I wonder where you draw your understanding of MMT because from my view the theory is fairly straightforward: money creation happens when the government spends, and is taken out when it raises taxes. The purpose of central banks is to provide financial stability.
    - whimsicalism 5y ago
      > from my view the theory is fairly straightforward But as you've stated it, the "theory" is on-face wrong. Money isn't created when the government spends because it borrows from private credit markets when it spends, taking money out of circulation. Money is created by monetary policy, not fiscal policy. I don't necessarily disrespect MMT, I just have trouble tying people down to making a specific claim. Either they are saying something obvious and not at all contrary to mainstream economics, or they are making claims that I think are wrong - but I have trouble pinning down any particular claims.
      - wbsss4412 5y ago
dragonwriter 5y ago
> Modern Monetary Theory on the other hand is the philosophy of a six year old who asks daddy why the government can't just print more money to buy stuff. MMT is just “fiat money isn't commodity money, so fiscal constraints are historical cosplay rather than fundamental reality. The real constraint on so-called ‘fiscal’ activity is purely monetary.” No part of the descriptive element of MMT is in actual serious dispute by orthodox economics. Orthodox economists just tend to prefer the policy behavior that occurs with c the cosplay of fiscal rather than purely monetary constraints. Which is fine—frankly, I think Congress does a bad enough job with fiscal policy when monetary policy is hived off and given to the Fed, so I can see some naive policy responses to the realities embraced by MMT that would be counterproductive. OTOH, acknowledging the realities instead of trying or bury them because their are some obvious bad potential responses is necessary to have the discussion that gets to policy that incorporates reality well.

thepasswordis 5y ago

It’s so convenient that the everybody was confused about economics, and actually the really good economics is that politicians can and SHOULD spend money on whatever they want!