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Well, it seems half the people criticising MMT say it's a vacuous re-statement of how things already work, and the other half say it's wrong and discredited :p.

Well, it seems half the people criticising MMT say it's a vacuous re-statement of how things already work, and the other half say it's wrong and discredited :p. What does it actually advocate that has been discredited? I get the impression MMTers want to erase the distinction between central banks and the government, and basically run everything with fiscal policy, letting the government decide how big its deficits are instead of effectively the fed deciding. Is that right? I mean, that would work in principle, right? It would just be a bad idea because the decision is best made by an independent entity rather than the government, which has short-term incentives that may lead it to make bad decisions about spending (usually: too much). And maybe it would be a bad idea because interest rates are a more reliable lever for controlling the money supply than tax and expenditure rates? I mean, if that's the case, it's not super obvious. And since these things haven't been tried, I don't suppose it's those things that have been discredited. From what I see, people are saying MMT has been discredited because large government deficits have led to high inflation recently. But this seems off to me - MMT doesn't say infinite deficits are possible, they're saying the deficits are limited by inflation. Which is true and we're now seeing the consequences of exceeding that limit.

cykros 4y ago
Allowing elected officials to control the money supply is a bit like allowing children the decision to determine how much candy they can eat. These are people who have shown time and again willingness to take short term gains that come with long term expenses because of the fact that ultimately it'll be their successor's problem (who often is a member of the other party anyway). The whole point of the Fed is to attempt to have an adult in the room that can decide it's time to put the bag of candy back in the cabinet, or bring it out when it's use as a motivator is helpful in ramping up an otherwise sluggish economy. At the end of the day, the premise that infinitely growing debt isn't the end of the world is probably sound, provided that its rate of growth is kept in check. Avoiding a situation where the money supply goes exponential is crucial. Unfortunately... https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL looks a lot like some charts I remember from 8th grade algebra. That we likely just need to fix the trajectory rather than actually bring down the money supply should offer some solace, but those used to the sugar high of the last decade or so are likely in for a rude awakening over the next few years -- and whether that awakening is enough to rip apart civil society may ultimately be something that remains to be seen.

cykros 4y ago

Allowing elected officials to control the money supply is a bit like allowing children the decision to determine how much candy they can eat. These are people who have shown time and again willingness to take short term gains that come with long term expenses because of the fact that ultimately it'll be their successor's problem (who often is a member of the other party anyway). The whole point of the Fed is to attempt to have an adult in the room that can decide it's time to put the bag of candy back in the cabinet, or bring it out when it's use as a motivator is helpful in ramping up an otherwise sluggish economy. At the end of the day, the premise that infinitely growing debt isn't the end of the world is probably sound, provided that its rate of growth is kept in check. Avoiding a situation where the money supply goes exponential is crucial. Unfortunately... https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL looks a lot like some charts I remember from 8th grade algebra. That we likely just need to fix the trajectory rather than actually bring down the money supply should offer some solace, but those used to the sugar high of the last decade or so are likely in for a rude awakening over the next few years -- and whether that awakening is enough to rip apart civil society may ultimately be something that remains to be seen.