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> And by the same token, never believe anyone who says "the government is injecting money into the economy in order to fund more investments", because it's impo

> And by the same token, never believe anyone who says "the government is injecting money into the economy in order to fund more investments", because it's impossible for the government to increase or decrease the amount of money held by the non-financial sector This is false MMT midwittery. Money is fungible, whether held in highly liquid market assets or cash. As long as the government pulls in consumption (e.g. flows) that would not be transacted absent its intervention, it is creating money. That money may net out to zero, say via deflationary asset collapse of one party with price inflation of goods of another party does not mean money was not injected. It just means that one party stole wealth from another in a zero-sum exchange. Inflation does not happen all at once and the people receiving the injection of money are very happy to invest that in assets that will appreciate when the full impact of price inflation is realized. Likewise, when the Fed props up risky assets as if they are riskless, and the banks holding those assets continue circulating trades as if nothing has happened, money is in a net increase. It means interest--the time-adjusted price of money--is being mispriced, and someone is eventually bound to be on the losing end of that pricing error.

rsj_hn 5y ago
> Money is fungible, whether held in highly liquid market assets or cash. As long as the government pulls in consumption (e.g. flows) that would not be transacted absent its intervention, it is creating money. Please write more clearly and less stridently because this is very difficult to parse. As best I can tell, you are redefining money to be anything "liquid", and then pointing out that if the government insures a bond or guarantees to repo it, for example, it becomes liquid and so total money has increased. Well, OK, you can play definition games with your own private meaning of "money", and it's true that the term is a bit ill-defined, so more precise thinkers wouldn't speak of "money" at all, they'd speak of specific assets and liabilities (e.g. reserves, currency in circulation, deposits, etc) to avoid some interlocutor bumping in with "well akshually..." But seeing as how I was on a public forum using commonly understood terms, I stuck with that informal language. Specifically, I was responding to a post trying to trace "where the money came from" to support an increase of ETFs, and I pointed out that it doesn't come from anywhere at all, because money is a stock and can support any flow. What matters is the return offered by the investment - if there is a good return, there will be money to fund the investment. That is true regardless of how you define money. It's a basic fact about stocks and flows. A small stock can support a large flow and a large stock may have a small flow. The flow will be whatever it needs to be based on the return provided. So trying to trace "where the money comes from" when speaking of macro-economic investment is a goofy and unproductive thing to do. But it's not nearly as unproductive as arguing "well akshually money is anything that is liquid and the government can make anything liquid" - as that statement adds no informational content to a discussion of ETF funding.
- abernard1 5y ago
  No bud. You're the "well akshually." The obvious and correct identification of the problem is too much money in the system, and you don't understand how money flows through that system.
lubujackson 5y ago
It is well known that money only truly gets created in the economy via new debt - when I take out a loan, the bank hands me cash that is backed by some small percentage of the holdings, determined by the govt and ruled by the interest rate of bonds. This is why bond prices remain low, because banks are simply not lending enough/people aren't borrowing enough to allow rates to rise.

rsj_hn 5y ago

> Money is fungible, whether held in highly liquid market assets or cash. As long as the government pulls in consumption (e.g. flows) that would not be transacted absent its intervention, it is creating money. Please write more clearly and less stridently because this is very difficult to parse. As best I can tell, you are redefining money to be anything "liquid", and then pointing out that if the government insures a bond or guarantees to repo it, for example, it becomes liquid and so total money has increased. Well, OK, you can play definition games with your own private meaning of "money", and it's true that the term is a bit ill-defined, so more precise thinkers wouldn't speak of "money" at all, they'd speak of specific assets and liabilities (e.g. reserves, currency in circulation, deposits, etc) to avoid some interlocutor bumping in with "well akshually..." But seeing as how I was on a public forum using commonly understood terms, I stuck with that informal language. Specifically, I was responding to a post trying to trace "where the money came from" to support an increase of ETFs, and I pointed out that it doesn't come from anywhere at all, because money is a stock and can support any flow. What matters is the return offered by the investment - if there is a good return, there will be money to fund the investment. That is true regardless of how you define money. It's a basic fact about stocks and flows. A small stock can support a large flow and a large stock may have a small flow. The flow will be whatever it needs to be based on the return provided. So trying to trace "where the money comes from" when speaking of macro-economic investment is a goofy and unproductive thing to do. But it's not nearly as unproductive as arguing "well akshually money is anything that is liquid and the government can make anything liquid" - as that statement adds no informational content to a discussion of ETF funding.

abernard1 5y ago
No bud. You're the "well akshually." The obvious and correct identification of the problem is too much money in the system, and you don't understand how money flows through that system.

lubujackson 5y ago

It is well known that money only truly gets created in the economy via new debt - when I take out a loan, the bank hands me cash that is backed by some small percentage of the holdings, determined by the govt and ruled by the interest rate of bonds. This is why bond prices remain low, because banks are simply not lending enough/people aren't borrowing enough to allow rates to rise.