4 ms·

MMT claims that money creation happens when the government spends money, and it is “destroyed” when the government “taxes it back out”. This differs from tradi

MMT claims that money creation happens when the government spends money, and it is “destroyed” when the government “taxes it back out”. This differs from traditional theory wherein the banking sector, specifically central banks, play the primary role in managing the money supply. Proponents of MMT also advocate spending to maintain full employment, to the point when inflation occurs, at which point it becomes necessary to cut deficits. Note that this policy prescription is only the case when a country actually controls their own currency. Also, anyone who says things like “it means money printer go brrr” likely has spent close to zero time actually attempting to understand even basic facts about MMT, and likely gained anything they know about MMT from memes or shallow criticism.

abernard1 5y ago
> Proponents of MMT also advocate spending to maintain full employment, to the point when inflation occurs, at which point it becomes necessary to cut deficits. So do Keynesians, relying on the Phillips Curve, which has to be one of the most embarrassing, historically invalidated concepts of all time. > Also, anyone who says things like “it means money printer go brrr” likely has spent close to zero time actually attempting to understand even basic facts about MMT, and likely gained anything they know about MMT from memes or shallow criticism. Waves macro finance degree here. MMT, magic monetary theory, is very much "money printer go brrrr" in practice. They rely on a qualitative understanding of inflation like the Austrians as opposed to a CPI quantitative understanding. Where Austrians see nominal credit expansion as money creation, MMT proponents see credit expansion as being able to be cancelled out via taxation at the aggregate level. It's argumentation via definition. MMT also is of the "heads I win tails you lose" style of argumentation, because it pretends that state extraction of resources via taxes nets out the impact of state extraction of resources via inflation. Implicit in the (false) argument of no net impact on inflation is that those taxes will be transferred to deserving members of society via fiscal transfer payments, and therefore CPI-style inflation is mitigated. It's monetary communism and a philosophy promoted by charlatans.
- wbsss4412 5y ago
  > They rely on a qualitative understanding of inflation like the Austrians as opposed to a CPI quantitative understanding. Perhaps I’ve missed this, but what the hell is a “qualitative” understanding of inflation, and where have MMTer argued this? Edit: after doing some basic searching, it seems that MMT’s primary critique is that CPI is a poor measure of overall inflation, and that it shouldn’t be a primary target of fed policy, because monetary policy mechanisms don’t have a very direct impact on moving the index.
  - marcusverus 5y ago
    Thanks for following up, but I'm not sure that you've put the issue to bed. Do MMT types use some other quantitative understanding of inflation? If not, it seems like main thrust of GP's criticism ("they rely on a qualitative understanding of inflation...as opposed to a... quantitative understanding") stands.
    - wbsss4412 5y ago
      Unfortunately it is really challenging to know what the field as a whole says without undertaking some serious lit. review, but from my understanding their main issue with CPI isn’t that you shouldn’t attempt to understand inflation from a quantitative perspective, rather, CPI itself is but one (imperfect) measure of inflation. The “true” value of inflation isn’t perfectly observable, and further, from a policy making perspective, because of its limitations, CPI shouldn’t be a be all end all target. One should look at other measures, such as economic growth and unemployment (inflation after all, occurs when the money supply grows faster than productive capacity). Perhaps that’s “qualitative” by some definition, but it seems to be that it’s more just a case of goodhart’s law. That’s the best I can gather at the moment.
8note 5y ago
Is that descriptive or prescriptive? In their theory, what does fractional reserve banking do?
- wbsss4412 5y ago
  My understanding is that the “money creation” is descriptive in their view. Unfortunately I haven’t gotten all that deep into the theory, so I can’t go much further on how they view fractional reserve banking.
  - kizer 5y ago
    Thank you for that explanation.
legitster 5y ago
> Proponents of MMT also advocate spending to maintain full employment, to the point when inflation occurs, at which point it becomes necessary to cut deficits. This is basically the same conclusion as Keynesianism or even Fiscal Theory. The difference is these other theories actually care about when inflation will occur. Meanwhile MMT kind of handwaves it away with "we'll know when we get there". And it only took about 5 feet out the driveway to find it. > Also, anyone who says things like “it means money printer go brrr” likely has spent close to zero time actually attempting to understand even basic facts about MMT, and likely gained anything they know about MMT from memes or shallow criticism. It doesn't help that most vocal proponents of MMT to tend to treat it like an infinite money glitch hack of the economy. And to be fair, the only insight MMT provides over more mainstream economic models is that deficit spending could be much higher than it is.

abernard1 5y ago

> Proponents of MMT also advocate spending to maintain full employment, to the point when inflation occurs, at which point it becomes necessary to cut deficits. So do Keynesians, relying on the Phillips Curve, which has to be one of the most embarrassing, historically invalidated concepts of all time. > Also, anyone who says things like “it means money printer go brrr” likely has spent close to zero time actually attempting to understand even basic facts about MMT, and likely gained anything they know about MMT from memes or shallow criticism. Waves macro finance degree here. MMT, magic monetary theory, is very much "money printer go brrrr" in practice. They rely on a qualitative understanding of inflation like the Austrians as opposed to a CPI quantitative understanding. Where Austrians see nominal credit expansion as money creation, MMT proponents see credit expansion as being able to be cancelled out via taxation at the aggregate level. It's argumentation via definition. MMT also is of the "heads I win tails you lose" style of argumentation, because it pretends that state extraction of resources via taxes nets out the impact of state extraction of resources via inflation. Implicit in the (false) argument of no net impact on inflation is that those taxes will be transferred to deserving members of society via fiscal transfer payments, and therefore CPI-style inflation is mitigated. It's monetary communism and a philosophy promoted by charlatans.

wbsss4412 5y ago
> They rely on a qualitative understanding of inflation like the Austrians as opposed to a CPI quantitative understanding. Perhaps I’ve missed this, but what the hell is a “qualitative” understanding of inflation, and where have MMTer argued this? Edit: after doing some basic searching, it seems that MMT’s primary critique is that CPI is a poor measure of overall inflation, and that it shouldn’t be a primary target of fed policy, because monetary policy mechanisms don’t have a very direct impact on moving the index.
- marcusverus 5y ago
  Thanks for following up, but I'm not sure that you've put the issue to bed. Do MMT types use some other quantitative understanding of inflation? If not, it seems like main thrust of GP's criticism ("they rely on a qualitative understanding of inflation...as opposed to a... quantitative understanding") stands.
  - wbsss4412 5y ago
    Unfortunately it is really challenging to know what the field as a whole says without undertaking some serious lit. review, but from my understanding their main issue with CPI isn’t that you shouldn’t attempt to understand inflation from a quantitative perspective, rather, CPI itself is but one (imperfect) measure of inflation. The “true” value of inflation isn’t perfectly observable, and further, from a policy making perspective, because of its limitations, CPI shouldn’t be a be all end all target. One should look at other measures, such as economic growth and unemployment (inflation after all, occurs when the money supply grows faster than productive capacity). Perhaps that’s “qualitative” by some definition, but it seems to be that it’s more just a case of goodhart’s law. That’s the best I can gather at the moment.

8note 5y ago

Is that descriptive or prescriptive? In their theory, what does fractional reserve banking do?

wbsss4412 5y ago
My understanding is that the “money creation” is descriptive in their view. Unfortunately I haven’t gotten all that deep into the theory, so I can’t go much further on how they view fractional reserve banking.
- kizer 5y ago
  Thank you for that explanation.

legitster 5y ago

> Proponents of MMT also advocate spending to maintain full employment, to the point when inflation occurs, at which point it becomes necessary to cut deficits. This is basically the same conclusion as Keynesianism or even Fiscal Theory. The difference is these other theories actually care about when inflation will occur. Meanwhile MMT kind of handwaves it away with "we'll know when we get there". And it only took about 5 feet out the driveway to find it. > Also, anyone who says things like “it means money printer go brrr” likely has spent close to zero time actually attempting to understand even basic facts about MMT, and likely gained anything they know about MMT from memes or shallow criticism. It doesn't help that most vocal proponents of MMT to tend to treat it like an infinite money glitch hack of the economy. And to be fair, the only insight MMT provides over more mainstream economic models is that deficit spending could be much higher than it is.