5 ms·

I understand that MMT is controversial. And I can’t quite bring myself to believe that MMT (magic money tree?) is possible. But I also watched the US and Europe

I understand that MMT is controversial. And I can’t quite bring myself to believe that MMT (magic money tree?) is possible. But I also watched the US and European governments use quantitative easing to bail out the financial sector and then again rescue the economy during Covid. Was QE not MMT in action? I’d appreciate enlightenment from someone who understands better.

exolymph 5y ago
QE is totally MMT in action, and it results in inflation.
- Biologist123 5y ago
  Did the inflation happen because there was no tax applied? From what I can understand (difficult as this space has been so politicized), money creation requires taxation in order to avoid inflation. But taxation is way more problematic than money creation, and so I wonder was the tool only half applied?
yung_steezy 5y ago
QE is central banks liquidising private assets to improve the balance sheets of large businesses. This gives them access to more capital and in theory allows them to invest more. It is controversial since the benefits of it are hard to measure. Since the money is not guaranteed to be spent we might expect it to be less inflationary than conventional government stimulus. Proponents of MMT are often arguing for conventional government stimulus. The basic idea is that the shape of the globalised economy is such that we have more deflationary pressures than were observed in the 20th century when standard monetary theory was conceived. Typically proponents argue that the government can assume a larger role in the consumer economy without adding inflationary pressure.
- Biologist123 5y ago
  Thanks for this answer. My understanding is that GFC QE created money to buy back gilts, substituting cash for other assets on bank balance sheets. The element of choice here is what seems to make it a species of MMT - the creation of money can be used for any purpose. I’m not arguing the point here - just trying to work it out. To my utter frustration, and like so many things, the concept MMT has been politicized, and it’s the usual suspects shouting at each other and creating so much noise, it’s difficult to discern and evaluate the signal.
midasuni 5y ago
Richard Murphy is a proponent of MMT and certainly leans towards the left. He explained recently how he feels QE 2008-16 (which led to asset price inflation) is different to QE in covid times. https://www.taxresearch.org.uk/Blog/2022/02/06/reversing-qe-could-be-a-recipe-for-economic-disaster/ https://www.taxresearch.org.uk/Blog/2022/02/06/reversing-qe-...

exolymph 5y ago

QE is totally MMT in action, and it results in inflation.

Biologist123 5y ago
Did the inflation happen because there was no tax applied? From what I can understand (difficult as this space has been so politicized), money creation requires taxation in order to avoid inflation. But taxation is way more problematic than money creation, and so I wonder was the tool only half applied?

yung_steezy 5y ago

QE is central banks liquidising private assets to improve the balance sheets of large businesses. This gives them access to more capital and in theory allows them to invest more. It is controversial since the benefits of it are hard to measure. Since the money is not guaranteed to be spent we might expect it to be less inflationary than conventional government stimulus. Proponents of MMT are often arguing for conventional government stimulus. The basic idea is that the shape of the globalised economy is such that we have more deflationary pressures than were observed in the 20th century when standard monetary theory was conceived. Typically proponents argue that the government can assume a larger role in the consumer economy without adding inflationary pressure.

Biologist123 5y ago
Thanks for this answer. My understanding is that GFC QE created money to buy back gilts, substituting cash for other assets on bank balance sheets. The element of choice here is what seems to make it a species of MMT - the creation of money can be used for any purpose. I’m not arguing the point here - just trying to work it out. To my utter frustration, and like so many things, the concept MMT has been politicized, and it’s the usual suspects shouting at each other and creating so much noise, it’s difficult to discern and evaluate the signal.

midasuni 5y ago

Richard Murphy is a proponent of MMT and certainly leans towards the left. He explained recently how he feels QE 2008-16 (which led to asset price inflation) is different to QE in covid times. https://www.taxresearch.org.uk/Blog/2022/02/06/reversing-qe-could-be-a-recipe-for-economic-disaster/ https://www.taxresearch.org.uk/Blog/2022/02/06/reversing-qe-...