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Quite the contrary. Japan's money supply has grown considerably more slowly than other countries - reinforcing the relationship between money supply, economic g

Quite the contrary. Japan's money supply has grown considerably more slowly than other countries - reinforcing the relationship between money supply, economic growth, and inflation. > Thought experiment: If the government printed money to send unemployed people to uninhabited farmland to start cultivating it (in complete isolation from the rest of the economy) would it cause inflation for the rest of us who aren't connected? Sure, because those people can't actually spend the money they were given. But who would agree to be sent to said island? The incentive of getting paid is worthless if you can't spend your money on anything. If the government printed money to pay people to build wind farms with the restriction that they can't spend this money on anything, how many workers would accept this offer?

jppittma 5y ago
You're missing the point. The government can and should print money to turn unutilized resources in the economy into utilized resources. What's best for the economy is for every capable person in it to be generating stuff. Everything else is an abstraction around that end. In my thought experiment, there's simply more stuff in the economy because the government printed the money, and the whole is more prosperous for it.
- Manuel_D 5y ago
  Your thought experiment involves people working for free: being paid with money they can't actually use because they're isolated from the rest of the economy and can't spend that money. Nobody would agree to this. In practice, the people receiving the printed money would not be isolated from the rest of the economy and would be purchasing goods and services with their subsidies and driving up the prices of those products. You're right that if spending printed money created gains in production to match the increase in money supply it wouldn't result in inflation. That's correct, but I seriously doubt that this is how MMT would work out in practice. Most MMT evangelists aren't trying to get a favorable return on investment. They're looking to fund massive social spending programs like UBI, government healthcare, or decarbonization of energy production. To be clear, some of these are important projects but we shouldn't kid ourselves into thinking that printing trillions of dollars to pay for them isn't going to affect inflation. They're worth paying for because of the benefits they bring and disasters they avert, not because they're going to produce a return on investment.

jppittma 5y ago

You're missing the point. The government can and should print money to turn unutilized resources in the economy into utilized resources. What's best for the economy is for every capable person in it to be generating stuff. Everything else is an abstraction around that end. In my thought experiment, there's simply more stuff in the economy because the government printed the money, and the whole is more prosperous for it.

Manuel_D 5y ago
Your thought experiment involves people working for free: being paid with money they can't actually use because they're isolated from the rest of the economy and can't spend that money. Nobody would agree to this. In practice, the people receiving the printed money would not be isolated from the rest of the economy and would be purchasing goods and services with their subsidies and driving up the prices of those products. You're right that if spending printed money created gains in production to match the increase in money supply it wouldn't result in inflation. That's correct, but I seriously doubt that this is how MMT would work out in practice. Most MMT evangelists aren't trying to get a favorable return on investment. They're looking to fund massive social spending programs like UBI, government healthcare, or decarbonization of energy production. To be clear, some of these are important projects but we shouldn't kid ourselves into thinking that printing trillions of dollars to pay for them isn't going to affect inflation. They're worth paying for because of the benefits they bring and disasters they avert, not because they're going to produce a return on investment.