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The acolytes of MMT? Sheesh! How come anything touching on "what is money" gets goofy immediately? Most of the world's monetary systems have been run under Mo

by netcan 5y ago

The acolytes of MMT? Sheesh! How come anything touching on "what is money" gets goofy immediately? Most of the world's monetary systems have been run under Monetarist theories for 40-ish years. Theory is now entirely at odds with observed realities. New theories gain ground. National debts "exploded" a long time ago. Japan's exploded over a generation ago and most of western economies "exploded" 10-15 years ago. Except these explosions aren't explosions. Central banks continue to decree whatever interest rates they want, with no market pushbacks. The monetarists and goldbugs have been screaming "inflation" constantly for 25+ years. That does not mean that their theory of inflation (national debt) is true. It isn't.

argentinian 5y ago
> Most of the world's monetary systems have been run under Monetarist theories for 40-ish years. Argentina's monetary system hasn't.
- wbsss4412 5y ago
  It hasn’t been run under MMT either, given that it’s an entirely new academic theory.
  - netcan 5y ago
    Both true. I'd even say that "theories," is probably the wrong term. More "school of thought." I would also point out that the USD/EUR/GPM/Yen/etc are "run under MMT" in the basic sense. They simply have different ideas about inflation. Broadly, MMT thinks same year spending is the main inflationary mover. Monetarism thinks cumulative national debt is what impacts inflation.
    - wbsss4412 5y ago
      Agreed in the sense that MMT theorists assert that their theories describe what happens in practice. I disagree if the assertion is that policy makers have been consciously crafting policy under MMT this whole time.
uejfiweun 5y ago
I think it's less that inflation is caused by the national debt, and more that it will be nearly impossible to pay off the debt without massive inflation. Certainly the Fed is in a box with the debt, as it can't raise interest rates without massively increasing US Government debt payments. The only solution seems to be to keep rates low, which results in inflating away the debt.
- mullingitover 5y ago
  > ...it will be nearly impossible to pay off the debt without massive inflation Isn't it the opposite, that it's impossible to pay off the debt without massive deflation? 'Paying off the debt' means reducing the money supply, which means money later is worth than money now. That never ends well.
  - uejfiweun 5y ago
    Well my understanding is "paying off" the national debt amounts to reducing the amount of value that is owed. You could do this in two ways. Way 1 is what you described, which is directly paying off the debt. This is the path of austerity, high taxes, spending cuts, etc. Agreed that this never ends well. Way 2 is that you reduce the value of the debt by reducing the value of the currency it is held in. This isn't really an option for most countries, but the US is unique in that it controls the world reserve currency and can directly print the debt away. This would be a far politically easier option as inflation is a complex phenomenon that can't simply be blamed on harsh austerity policies. It does strike me that they are going to go with option 2. The political conditions for this aren't quite there yet, but you can see it forming with articles like the OP.
    - mullingitover 5y ago
      > but the US is unique in that it controls the world reserve currency and can directly print the debt away This doesn't seem like a real option, though. The United States doesn't simply print money, we issue debt to increase the money supply. If we just started literally printing new, unbacked money we'd immediately lose our reserve currency status and it would likely be the end of US global hegemony. Maybe the end of the US, period. Meanwhile, using our standard practice of issuing debt to pay for it wouldn't work here because that would be exactly counter to the thing we're trying to do: reduce our debt.
anm89 5y ago
Not clear to me what is "goofy" here. You dislike the word acolytes? > Japan's exploded over a generation ago and And how did that go? > Most of western economies "exploded" 10-15 years ago. Sure and they had 15+ years worth of runway to lower rates. So seems about right that they didn't have an issue while their strategy was still viable. > That does not mean that their theory of inflation (national debt) What does this even mean? Debt to GDP is ~130%. Seems like what most of them have been consistently predicting for years.

by netcan 5y ago

argentinian 5y ago

> Most of the world's monetary systems have been run under Monetarist theories for 40-ish years. Argentina's monetary system hasn't.

wbsss4412 5y ago
It hasn’t been run under MMT either, given that it’s an entirely new academic theory.
- netcan 5y ago
  Both true. I'd even say that "theories," is probably the wrong term. More "school of thought." I would also point out that the USD/EUR/GPM/Yen/etc are "run under MMT" in the basic sense. They simply have different ideas about inflation. Broadly, MMT thinks same year spending is the main inflationary mover. Monetarism thinks cumulative national debt is what impacts inflation.
  - wbsss4412 5y ago
    Agreed in the sense that MMT theorists assert that their theories describe what happens in practice. I disagree if the assertion is that policy makers have been consciously crafting policy under MMT this whole time.

uejfiweun 5y ago

I think it's less that inflation is caused by the national debt, and more that it will be nearly impossible to pay off the debt without massive inflation. Certainly the Fed is in a box with the debt, as it can't raise interest rates without massively increasing US Government debt payments. The only solution seems to be to keep rates low, which results in inflating away the debt.

mullingitover 5y ago
> ...it will be nearly impossible to pay off the debt without massive inflation Isn't it the opposite, that it's impossible to pay off the debt without massive deflation? 'Paying off the debt' means reducing the money supply, which means money later is worth than money now. That never ends well.
- uejfiweun 5y ago
  Well my understanding is "paying off" the national debt amounts to reducing the amount of value that is owed. You could do this in two ways. Way 1 is what you described, which is directly paying off the debt. This is the path of austerity, high taxes, spending cuts, etc. Agreed that this never ends well. Way 2 is that you reduce the value of the debt by reducing the value of the currency it is held in. This isn't really an option for most countries, but the US is unique in that it controls the world reserve currency and can directly print the debt away. This would be a far politically easier option as inflation is a complex phenomenon that can't simply be blamed on harsh austerity policies. It does strike me that they are going to go with option 2. The political conditions for this aren't quite there yet, but you can see it forming with articles like the OP.
  - mullingitover 5y ago
    > but the US is unique in that it controls the world reserve currency and can directly print the debt away This doesn't seem like a real option, though. The United States doesn't simply print money, we issue debt to increase the money supply. If we just started literally printing new, unbacked money we'd immediately lose our reserve currency status and it would likely be the end of US global hegemony. Maybe the end of the US, period. Meanwhile, using our standard practice of issuing debt to pay for it wouldn't work here because that would be exactly counter to the thing we're trying to do: reduce our debt.

anm89 5y ago

Not clear to me what is "goofy" here. You dislike the word acolytes? > Japan's exploded over a generation ago and And how did that go? > Most of western economies "exploded" 10-15 years ago. Sure and they had 15+ years worth of runway to lower rates. So seems about right that they didn't have an issue while their strategy was still viable. > That does not mean that their theory of inflation (national debt) What does this even mean? Debt to GDP is ~130%. Seems like what most of them have been consistently predicting for years.