4 ms·

I tend to trust the Fed as well. They saved us from total collapse in '08, and made the COVID recession the shortest one on record. I think after 40 years of pr

I tend to trust the Fed as well. They saved us from total collapse in '08, and made the COVID recession the shortest one on record. I think after 40 years of practice we're starting to get pretty good at this MMT thing.

satellite2 5y ago
MMT requires excess reserves to be absorbed by taxation. Taxation has not be increased since the beginning of the quantitative easing interventions. MMT has never been tested.
- amrocha 5y ago
  MMT isn't something you test, it's a framework for explaining what happens in economies. Regardless of what policy decisions are made, MMT has been very accurate at predicting market reactions.
  - AnimalMuppet 5y ago
    MMT isn't just an explanation. It's also predictions - if the Fed and the Treasury do X, the result will be Y. And even recommendations: if the circumstances are A, the correct policy response is B. Those things can be tested - and haven't been. So far, nobody has taken the policy recommendations where they differ from mainstream econ, and (to my knowledge) we haven't been in places where MMT's predictions differ from mainstream econ's.
    - amrocha 5y ago
      MMT does not make policy recommendations. Maybe the people behind it make recommendations based on the predictive power of MMT. MMT has been WAY better than mainstream economics at predicting market movements, most easily seen in Japan.
areoform 5y ago
I don't "trust" them, because I don't trust any small group of extremely smart people. It's easy for group think to occur, and for the group to construct brittle systems that go horribly wrong. If we had more eyes + more critiques, we could debug their thinking & see where it's going. That being said, the policy makers and the economists at the Fed are far more capable than most people think. They've gotten a lot right, and proven most naysayers wrong. But the question is, how long will that record last?
- bachmeier 5y ago
  I have complete confidence that the economists at the Fed are as qualified as anyone to be leading us right now. I have complete confidence that nobody has any way to know what the best policy is right now.
- dragonwriter 5y ago
  > If we had more eyes + more critiques, we could debug their thinking & see where it's going. The Fed is rather transparent (both with policy thinking and data), and I can't think of any area with more eyes and more critiques than US monetary policy.
  - nightski 5y ago
    Sure but they are laser focused on their mandate of low unemployment and price stability. What that means in a broader context is much more complex.
- ramesh31 5y ago
  >I don't "trust" them, because I don't trust any small group of extremely smart people. It's easy for group think to occur, and for the group to construct brittle systems that go horribly wrong. I should say "trust" in the sense that I trust my doctor to be infinitely more knowledgeable than myself with regards to health, to the point that I am able to confidently outsource my decision making to him. Not "trust" in the sense that you would blindly trust a family member or friend.
skylanh 5y ago
http://www.g8.utoronto.ca/finance/fm081010.htm http://www.g8.utoronto.ca/finance/fm081010.htm This is what it took to reverse 2008's recession. Every time I read this single page document I get a little shiver. Item #2 is by my interpretation has "any and all means" finality. ("2 Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.")
AlexandrB 5y ago
> They saved us from total collapse in '08 Who is "us" in this case? A lot of people lost their homes/savings. The primary entities saved were the same ones that caused the crisis in the first place. I think it's fair to argue that in the short term a collapse of several major banks might have hurt "the working class" worse. But the in the medium to long term I'm not sure that pulling out all the stops to fix the financial industry's fuckups was the right call.
- sauwan 5y ago
  > Who is "us" in this case? Not OP, but I'm guessing he's referring to people who rely directly or indirectly on the financial sector. Basically a vast majority of the worlds population. > A lot of people lost their homes/savings. Yes, agreed. Unless you are saying things couldn't have been worse for them, but I don't think you are based on the rest of what you wrote... > The primary entities saved were the same ones that caused the crisis in the first place. Was this the fed's decision? > But the in the medium to long term I'm not sure that pulling out all the stops to fix the financial industry's fuckups was the right call. I'd suggest that lack of prosecution and public take-overs were the biggest problem. From my perspective, the fed did what it needed to do within it's power. They couldn't let the major banks go under without systemic consequences. But you're right we should have prosecuted those liable, and failing too-big-to-fail institutions should have been publicly taken over and (arguably) re-privatized after the crisis. We didn't let markets work how they were supposed to.

satellite2 5y ago

MMT requires excess reserves to be absorbed by taxation. Taxation has not be increased since the beginning of the quantitative easing interventions. MMT has never been tested.

amrocha 5y ago
MMT isn't something you test, it's a framework for explaining what happens in economies. Regardless of what policy decisions are made, MMT has been very accurate at predicting market reactions.
- AnimalMuppet 5y ago
  MMT isn't just an explanation. It's also predictions - if the Fed and the Treasury do X, the result will be Y. And even recommendations: if the circumstances are A, the correct policy response is B. Those things can be tested - and haven't been. So far, nobody has taken the policy recommendations where they differ from mainstream econ, and (to my knowledge) we haven't been in places where MMT's predictions differ from mainstream econ's.
  - amrocha 5y ago
    MMT does not make policy recommendations. Maybe the people behind it make recommendations based on the predictive power of MMT. MMT has been WAY better than mainstream economics at predicting market movements, most easily seen in Japan.

areoform 5y ago

I don't "trust" them, because I don't trust any small group of extremely smart people. It's easy for group think to occur, and for the group to construct brittle systems that go horribly wrong. If we had more eyes + more critiques, we could debug their thinking & see where it's going. That being said, the policy makers and the economists at the Fed are far more capable than most people think. They've gotten a lot right, and proven most naysayers wrong. But the question is, how long will that record last?

bachmeier 5y ago
I have complete confidence that the economists at the Fed are as qualified as anyone to be leading us right now. I have complete confidence that nobody has any way to know what the best policy is right now.
dragonwriter 5y ago
> If we had more eyes + more critiques, we could debug their thinking & see where it's going. The Fed is rather transparent (both with policy thinking and data), and I can't think of any area with more eyes and more critiques than US monetary policy.
- nightski 5y ago
  Sure but they are laser focused on their mandate of low unemployment and price stability. What that means in a broader context is much more complex.
ramesh31 5y ago
>I don't "trust" them, because I don't trust any small group of extremely smart people. It's easy for group think to occur, and for the group to construct brittle systems that go horribly wrong. I should say "trust" in the sense that I trust my doctor to be infinitely more knowledgeable than myself with regards to health, to the point that I am able to confidently outsource my decision making to him. Not "trust" in the sense that you would blindly trust a family member or friend.

skylanh 5y ago

http://www.g8.utoronto.ca/finance/fm081010.htm http://www.g8.utoronto.ca/finance/fm081010.htm This is what it took to reverse 2008's recession. Every time I read this single page document I get a little shiver. Item #2 is by my interpretation has "any and all means" finality. ("2 Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.")

AlexandrB 5y ago

> They saved us from total collapse in '08 Who is "us" in this case? A lot of people lost their homes/savings. The primary entities saved were the same ones that caused the crisis in the first place. I think it's fair to argue that in the short term a collapse of several major banks might have hurt "the working class" worse. But the in the medium to long term I'm not sure that pulling out all the stops to fix the financial industry's fuckups was the right call.

sauwan 5y ago
> Who is "us" in this case? Not OP, but I'm guessing he's referring to people who rely directly or indirectly on the financial sector. Basically a vast majority of the worlds population. > A lot of people lost their homes/savings. Yes, agreed. Unless you are saying things couldn't have been worse for them, but I don't think you are based on the rest of what you wrote... > The primary entities saved were the same ones that caused the crisis in the first place. Was this the fed's decision? > But the in the medium to long term I'm not sure that pulling out all the stops to fix the financial industry's fuckups was the right call. I'd suggest that lack of prosecution and public take-overs were the biggest problem. From my perspective, the fed did what it needed to do within it's power. They couldn't let the major banks go under without systemic consequences. But you're right we should have prosecuted those liable, and failing too-big-to-fail institutions should have been publicly taken over and (arguably) re-privatized after the crisis. We didn't let markets work how they were supposed to.