4 ms·

Modern Monetary Theory Got a Pandemic Tryout. Inflation Is Now Testing It

6 points by NN88 5y ago

haspoken 5y ago
https://archive.is/t4sFT https://archive.is/t4sFT
ephbit 5y ago
> ... if a government controls its own currency and needs money — to make sure its citizens have food and places to live when, say, a global pandemic pushes many out of work — it can just print it, as long as its economy has the ability to churn out the needed goods and services. Wowowow .. "it" can print? "It", the government? Wait, I thought the central banks were totally independent ... let's be careful here and not fall out of our carefully crafted narrative.
ephbit 5y ago
> ... Ms. Kelton, and the movement she has come to represent, now seem anxious to control the narrative. The pandemic spending wasn’t entirely consistent with M.M.T principles, they say — it wasn’t assessed carefully for its inflationary effects as it was being drawn up, because it was crisis policy. But the situation has underlined how hard it is to know just where the economy’s constraints lay, and how difficult it is to fix things once you run into them. > .. carefully assessed for its inflationary effects .. Ah, yeah, so spending might indeed have inflationary effects, sometimes. > ... how hard it is to know just where the economy’s constraints lay, and how difficult it is to fix things once you run into them. Hm, how about we stick to more basic principles such as "more money usually means inflation" whenever we're dealing with an admittedly complex system where it's difficult if not impossible to predict the exact outcome? Like when you're blasting a mysterious black box with unknown contents using a blow torch ... the box might in mysterious ways temporarily keep its temperature more or less constant or even lower it, due to unknown complicated mechanisms inside ... but on a more general level the principles of thermodynamics would lead one to expect tadah, yes .. the temperature to increase.
ephbit 5y ago
> Last summer, Ms. Kelton called inflation a temporary sign of “growing pains.” By the fall, she painted it as a good problem to solve, compared with a continued weak economy. Framing things positively always helps, yes. I'm awaiting a time when more people will have had the epiphany that the "problem" of a weak economy might actually be the solution to the biggest problem the planet is facing right now.
ephbit 5y ago
> Ms. Kelton and her colleagues make clear that the pandemic relief packages did not follow one of M.M.T.’s key tenets — they did not try to account for resource constraints ahead of time. In an M.M.T. world, the Congressional Budget Office would have carefully analyzed possible inflation ahead of time, and lawmakers would have tried to offset any strain on available workers and widgets with stabilizing measures and tax increases. How do you "account for resource constraints"? Decide to not print as much money? Sounds a lot like afterwards knowing everything better but unfortunately only afterwards .. and then promising to hopefully do better next time. Vague.
ephbit 5y ago
> Many economists, both mainstream and M.M.T. ones, did not think that the March 2021 package would be inflationary. But homebound consumers, flush with cash, spent their money far more heavily on goods than they typically do, and it took them longer to shift back to services than just about anyone expected. That roiled supply chains, pushing up prices for cars and furniture and precipitating the heady inflation that now has America in its grip. So they spent far more on goods than anyone expected? Well, maybe services were hindered a bit buy some pandemic.
ephbit 5y ago
> Raising rates now would cool off investment, the logic goes, and how is that helpful at a moment when we don’t have enough factories or cargo ships? Exactly. The world needs at least twice as many factories and cargo ships as it has right now. The existing ones continue to churn out technology/products of the past and the new ones will produce all these things that we urgently need to invent needs for. /s
ephbit 5y ago
> Ms. Kelton laid out other suggestions M.M.T. economists have made in a recent blog post. Among them: Medicare for All, cutting the Pentagon budget, repealing some tariffs and unclogging the ports. > Medicare for All, cutting the Pentagon budget .. Not revolutionary, but the right direction at least.
ephbit 5y ago
> During our first talk, she never broke her cool when questioned about the inflationary moment and what it says about her theory. She laid out her response methodically. Times are weird, supply chains are constrained, decades of corporate consolidation make it all worse. True M.M.T. policy would have thought about inflation in the first place, with tax increases or other stabilizers built in. Right, M.M.T. totally works well, it's just the current special situation that it's not really ideally equipped for. But it's of course still the perfect theory to build upon. /s

6 points by NN88 5y ago

https://archive.is/t4sFT https://archive.is/t4sFT

> ... if a government controls its own currency and needs money — to make sure its citizens have food and places to live when, say, a global pandemic pushes many out of work — it can just print it, as long as its economy has the ability to churn out the needed goods and services. Wowowow .. "it" can print? "It", the government? Wait, I thought the central banks were totally independent ... let's be careful here and not fall out of our carefully crafted narrative.

ephbit 5y ago

> ... Ms. Kelton, and the movement she has come to represent, now seem anxious to control the narrative. The pandemic spending wasn’t entirely consistent with M.M.T principles, they say — it wasn’t assessed carefully for its inflationary effects as it was being drawn up, because it was crisis policy. But the situation has underlined how hard it is to know just where the economy’s constraints lay, and how difficult it is to fix things once you run into them. > .. carefully assessed for its inflationary effects .. Ah, yeah, so spending might indeed have inflationary effects, sometimes. > ... how hard it is to know just where the economy’s constraints lay, and how difficult it is to fix things once you run into them. Hm, how about we stick to more basic principles such as "more money usually means inflation" whenever we're dealing with an admittedly complex system where it's difficult if not impossible to predict the exact outcome? Like when you're blasting a mysterious black box with unknown contents using a blow torch ... the box might in mysterious ways temporarily keep its temperature more or less constant or even lower it, due to unknown complicated mechanisms inside ... but on a more general level the principles of thermodynamics would lead one to expect tadah, yes .. the temperature to increase.

ephbit 5y ago

> Last summer, Ms. Kelton called inflation a temporary sign of “growing pains.” By the fall, she painted it as a good problem to solve, compared with a continued weak economy. Framing things positively always helps, yes. I'm awaiting a time when more people will have had the epiphany that the "problem" of a weak economy might actually be the solution to the biggest problem the planet is facing right now.

ephbit 5y ago

> Ms. Kelton and her colleagues make clear that the pandemic relief packages did not follow one of M.M.T.’s key tenets — they did not try to account for resource constraints ahead of time. In an M.M.T. world, the Congressional Budget Office would have carefully analyzed possible inflation ahead of time, and lawmakers would have tried to offset any strain on available workers and widgets with stabilizing measures and tax increases. How do you "account for resource constraints"? Decide to not print as much money? Sounds a lot like afterwards knowing everything better but unfortunately only afterwards .. and then promising to hopefully do better next time. Vague.

ephbit 5y ago

> Many economists, both mainstream and M.M.T. ones, did not think that the March 2021 package would be inflationary. But homebound consumers, flush with cash, spent their money far more heavily on goods than they typically do, and it took them longer to shift back to services than just about anyone expected. That roiled supply chains, pushing up prices for cars and furniture and precipitating the heady inflation that now has America in its grip. So they spent far more on goods than anyone expected? Well, maybe services were hindered a bit buy some pandemic.

ephbit 5y ago

> Raising rates now would cool off investment, the logic goes, and how is that helpful at a moment when we don’t have enough factories or cargo ships? Exactly. The world needs at least twice as many factories and cargo ships as it has right now. The existing ones continue to churn out technology/products of the past and the new ones will produce all these things that we urgently need to invent needs for. /s

ephbit 5y ago

> Ms. Kelton laid out other suggestions M.M.T. economists have made in a recent blog post. Among them: Medicare for All, cutting the Pentagon budget, repealing some tariffs and unclogging the ports. > Medicare for All, cutting the Pentagon budget .. Not revolutionary, but the right direction at least.

ephbit 5y ago

> During our first talk, she never broke her cool when questioned about the inflationary moment and what it says about her theory. She laid out her response methodically. Times are weird, supply chains are constrained, decades of corporate consolidation make it all worse. True M.M.T. policy would have thought about inflation in the first place, with tax increases or other stabilizers built in. Right, M.M.T. totally works well, it's just the current special situation that it's not really ideally equipped for. But it's of course still the perfect theory to build upon. /s