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So... Re:mmt. Modern monetary theory seems to enjoy spooking people. Not sure that's a good thing. However... You can and should separate between "how X work

So... Re:mmt. Modern monetary theory seems to enjoy spooking people. Not sure that's a good thing. However... You can and should separate between "how X works" and "what should we do." Mmt has the best description of how fiat money works. A lot of this is at odds with existing institutional structure in both the US & EU. In any case, there is no contradiction between MMT and being conservative, anti-centralisation or any other value system. It is just a description of how bank money works. The powers still exist, they're just non-explicit currently. EU members can, in effect, print euros. As we saw in the Greek crisis, the ECB's actual role/power is making euros exchangeable for euros, regardless of country. This is very different to how these instructions were conceived, because they didn't understand the money system of their own time. Similarly, the US Fed-treasury complex doesn't represent where power and control actually are. The whole discourse becomes jumbled.

TacticalCoder 5y ago
> EU members can, in effect, print euros. As we saw in the Greek crisis, ... What do you mean? Greece half-jokingly threatened printing shitload of actual physical euros to pay back their public debt and the EU prevented them to do so. Greece defaulted. If EU members really could print, why did Greece default?
- dalbasal 5y ago
  I mean that when Greece says "I will put €x in your bank account", they can. They don't need to get those euros from somewhere else. They can just make them appear in your bank. That's why they can run deficits without running out of money. This is basically "where euros come from." They're spent into an economy by governments. The ECB keeps track of how much each government spends, less taxes collected. The diff becomes "national debt." Money owed to the ECB. The ECB decides interest rates, but this is basically just accounting. Greece will never have a persistent surplus, where ECB loans are paid down. Neither will other member states. So, interest "payments" just determine how fast the national debt grows. The ECB threatened to stop backing the Greek banking system, which basically would have turned euros in Greek banks into a divergent currency.
  - cogogo 5y ago
    > I mean that when Greece says "I will put €x in your bank account", they can. They don't need to get those euros from somewhere else. They can just make them appear in your bank. That's why they can run deficits without running out of money. The Greek government cannot create EUR by fiat. Only the ECB has that power. Any EUR that they could place into an individual entity's account would need to come from tax receipts or some kind of loan (Gov Bonds, loan from IMF etc.). Developed economies run deficits by issuing government bonds and selling them to the open market. If for whatever irrational reason there were infinite market appetite for Greek bonds there never would have been a debt crisis - they could have kept on raising money in the market and running a deficit. > This is basically "where euros come from." They're spent into an economy by governments. The ECB keeps track of how much each government spends, less taxes collected. The diff becomes "national debt." Money owed to the ECB. National debt for developed countries is mostly money raised by issuing government bonds in the international bond market. The ECB does not loan member states money directly. In extreme cases like the European Debt Crisis[0] they buy sovereign bonds in the open market (effectively a loan). Money is created by the ECB's interactions with the banking system [1], not government spending. > The ECB decides interest rates, but this is basically just accounting. Greece will never have a persistent surplus, where ECB loans are paid down. Neither will other member states. So, interest "payments" just determine how fast the national debt grows. The interest rate the Greek government pays on its debt is not determined by the ECB. It determined by the open market when they issue bonds. The interest rates the ECB sets [2] directly affect the banking system and not government borrowing rates. [0] https://en.wikipedia.org/wiki/European_debt_crisis https://en.wikipedia.org/wiki/European_debt_crisis [1] https://www.ecb.europa.eu/ecb/educational/explainers/tell-me-more/html/what_is_money.en.html https://www.ecb.europa.eu/ecb/educational/explainers/tell-me... [2] https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...
    - rsync 5y ago
      " ... Any EUR that they could place into an individual entity's account would need to come from tax receipts or some kind of loan ..." I think it is, explicitly, only the loan that is the source of the EUR in your example. I think MMT suggests this very simple relationship: Money is created by loans and destroyed by taxes. This is unexpected as most people think tax receipts somehow bolster the "account" of the government but what MMT is telling us is that the account has no significance because the government arbitrarily controls it.
lottin 5y ago
> Mmt has the best description of how fiat money works. Are you sure about that? As far as I know, MMT is considered an "unorthodox" theory (i.e. crackpot theory) by mainstream economists. https://en.wikipedia.org/wiki/Heterodox_economics https://en.wikipedia.org/wiki/Heterodox_economics
- dalbasal 5y ago
  It's certainly got some animated detractors. Notice though, that a lot of "orthodox" economsists tend to accuse mmt of being both crackpot and trivial. The trivial shot implies that it's trivially derrivate of Keynes. I'm not sure where mmt begins and ends. Currently, a lot of mmt is associated with guaranteed jobs ideas. I don't like that policy idea at all. That's why I caveat with "mmt's description of fiat money." Their description of central banking is far superior to monetarism and other "orthodox" theories of the past few decades. It's simpler, less abstract, more universal and more parsimonious with major, observable reality in more places. By comparison, all neokeynesian models if central banking are cludgey minstrosisies.
- chrisco255 5y ago
  I suspect that MMT is correct on a theoretical level, but on a pragmatic level, it's unenforceable and ignores certain realities, such as the fact that inflation is not evenly distributed yet tax rates are (across income levels). I also think that it does dangerously absolve policymakers of responsible deficit management under the banner of "deficits don't matter". It encourages a sort of drunken disregard for expenditures, with little attention paid to productivity of capital expenditures. But it is not a crackpot theory among central bankers.
  - dalbasal 5y ago
    Mmt's core doesn't have anything to enforce. It's a description, not a prescription. I agree that it's tangential to a lot of half baked ideas. So now, with inflation... Mmt explains why it is happening now, but didn't happen (eg) following the 2008 bailouts.
unmole 5y ago
I have not come across any solid resources that actually lay out the theory of MMT. Do you have any recommendations?

TacticalCoder 5y ago

> EU members can, in effect, print euros. As we saw in the Greek crisis, ... What do you mean? Greece half-jokingly threatened printing shitload of actual physical euros to pay back their public debt and the EU prevented them to do so. Greece defaulted. If EU members really could print, why did Greece default?

dalbasal 5y ago
I mean that when Greece says "I will put €x in your bank account", they can. They don't need to get those euros from somewhere else. They can just make them appear in your bank. That's why they can run deficits without running out of money. This is basically "where euros come from." They're spent into an economy by governments. The ECB keeps track of how much each government spends, less taxes collected. The diff becomes "national debt." Money owed to the ECB. The ECB decides interest rates, but this is basically just accounting. Greece will never have a persistent surplus, where ECB loans are paid down. Neither will other member states. So, interest "payments" just determine how fast the national debt grows. The ECB threatened to stop backing the Greek banking system, which basically would have turned euros in Greek banks into a divergent currency.
- cogogo 5y ago
  > I mean that when Greece says "I will put €x in your bank account", they can. They don't need to get those euros from somewhere else. They can just make them appear in your bank. That's why they can run deficits without running out of money. The Greek government cannot create EUR by fiat. Only the ECB has that power. Any EUR that they could place into an individual entity's account would need to come from tax receipts or some kind of loan (Gov Bonds, loan from IMF etc.). Developed economies run deficits by issuing government bonds and selling them to the open market. If for whatever irrational reason there were infinite market appetite for Greek bonds there never would have been a debt crisis - they could have kept on raising money in the market and running a deficit. > This is basically "where euros come from." They're spent into an economy by governments. The ECB keeps track of how much each government spends, less taxes collected. The diff becomes "national debt." Money owed to the ECB. National debt for developed countries is mostly money raised by issuing government bonds in the international bond market. The ECB does not loan member states money directly. In extreme cases like the European Debt Crisis[0] they buy sovereign bonds in the open market (effectively a loan). Money is created by the ECB's interactions with the banking system [1], not government spending. > The ECB decides interest rates, but this is basically just accounting. Greece will never have a persistent surplus, where ECB loans are paid down. Neither will other member states. So, interest "payments" just determine how fast the national debt grows. The interest rate the Greek government pays on its debt is not determined by the ECB. It determined by the open market when they issue bonds. The interest rates the ECB sets [2] directly affect the banking system and not government borrowing rates. [0] https://en.wikipedia.org/wiki/European_debt_crisis https://en.wikipedia.org/wiki/European_debt_crisis [1] https://www.ecb.europa.eu/ecb/educational/explainers/tell-me-more/html/what_is_money.en.html https://www.ecb.europa.eu/ecb/educational/explainers/tell-me... [2] https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...
  - rsync 5y ago
    " ... Any EUR that they could place into an individual entity's account would need to come from tax receipts or some kind of loan ..." I think it is, explicitly, only the loan that is the source of the EUR in your example. I think MMT suggests this very simple relationship: Money is created by loans and destroyed by taxes. This is unexpected as most people think tax receipts somehow bolster the "account" of the government but what MMT is telling us is that the account has no significance because the government arbitrarily controls it.

lottin 5y ago

> Mmt has the best description of how fiat money works. Are you sure about that? As far as I know, MMT is considered an "unorthodox" theory (i.e. crackpot theory) by mainstream economists. https://en.wikipedia.org/wiki/Heterodox_economics https://en.wikipedia.org/wiki/Heterodox_economics

dalbasal 5y ago
It's certainly got some animated detractors. Notice though, that a lot of "orthodox" economsists tend to accuse mmt of being both crackpot and trivial. The trivial shot implies that it's trivially derrivate of Keynes. I'm not sure where mmt begins and ends. Currently, a lot of mmt is associated with guaranteed jobs ideas. I don't like that policy idea at all. That's why I caveat with "mmt's description of fiat money." Their description of central banking is far superior to monetarism and other "orthodox" theories of the past few decades. It's simpler, less abstract, more universal and more parsimonious with major, observable reality in more places. By comparison, all neokeynesian models if central banking are cludgey minstrosisies.
chrisco255 5y ago
I suspect that MMT is correct on a theoretical level, but on a pragmatic level, it's unenforceable and ignores certain realities, such as the fact that inflation is not evenly distributed yet tax rates are (across income levels). I also think that it does dangerously absolve policymakers of responsible deficit management under the banner of "deficits don't matter". It encourages a sort of drunken disregard for expenditures, with little attention paid to productivity of capital expenditures. But it is not a crackpot theory among central bankers.
- dalbasal 5y ago
  Mmt's core doesn't have anything to enforce. It's a description, not a prescription. I agree that it's tangential to a lot of half baked ideas. So now, with inflation... Mmt explains why it is happening now, but didn't happen (eg) following the 2008 bailouts.

unmole 5y ago

I have not come across any solid resources that actually lay out the theory of MMT. Do you have any recommendations?