3 ms·

When I say three contradicting meanings of "money printing" I mean it. MMT predicts that if you print money you don't necessarily end up printing money but if

When I say three contradicting meanings of "money printing" I mean it. MMT predicts that if you print money you don't necessarily end up printing money but if you print money you definitely end up printing money. People don't understand the difference between printed money and printed money that was printed. It should be pretty obvious. If the central bank prints money but the government doesn't print money then no money was printed except when people withdraw their printed money into printed money. If however the government does print money it will definitely cause inflation (classical economists and MMTists agree). It is especially likely if the government prints money into the form of printed money. Also MMTists think "MMT" shouldn't be done as it is too much like printing money because MMT is a theory of money and accounting and not a theory of printing money unlike "MMT". I don't know why I wrote this. I believe in accounting identities which are sort of MMTish so I knee jerk when people violate accounting identities by building straw men and reusing the same words to use completely different meanings for the same of political framing. For god's sake you can't even use money printing in its original meaning anymore. Aka governments physically creating money to increase the money supply without supplying goods in return which as I mentioned above is a bad idea. You know the difference between the various types of "money printing" that distinguishes them from the political framing is that the ones done the most have a sort ratcheting mechanism that forces the money to come back eventually. In other words, if there was no threat of deflation, via negative interest or whatever mechanism of your choosing, then the mechanism of money creation would unwind and the money would disappear on its own without causing inflation. Alas we don't live in that world. Deflation is scary and must be avoided so we are stuck on this inflation treadmill until people wake up and accept mitigations to the dangers of deflation which then gives central banks, governments , businesses and private citizens more leeway to steer the economy towards their preferences and away from permanent inflation and money supply increases. So the inflation treadmill it is...

than3 4y ago
I agree the corruption of language is an ongoing problem, and its often done to mislead and is easy to come to incorrect conclusions, which makes communicating about these things tangibly all the more difficult. As for the ratcheting mechanism you speak of, that is simply tax revenue, but it only ratchets when taxes are collected, and if you have tax loopholes where you don't pay taxes it doesn't necessarily ratchet (i.e. inheritance, income, etc). In terms of math, a percentage of a percentage never actually gets to 0, it approaches a limit over time, so there is always a certain degree of expansion, and that expansion is often offset by population growth. Hitting the limits of growth (for the planet) adds additional complications. From what you've said, I think you don't really understand how deflation occurs aside from the theory which there's a lot of crap out there, so that's understandable. Anytime the debt % of GDP exceeds a certain point, a bubble is created, and when rates tighten coupled with the bubble pressures you get deflation. There is often a period of reflation afterwards, if the issues that sustained the downward pressure are corrected but sometimes they aren't. Japan for example has been in a self-sustaining deflationary cycle for decades, and has only kept it under control through foreign investment and debasing their currency via yield control (effectively negative rates against their future). There's a book series of case studies called Big Debt Crises by Bridgewater, it thoroughly covers inflationary, deflationary, and hyper-inflationary debt crises, it covers the specific mechanics and has accurate charts for the periods of these crises, where they actually happened. I think you'd cut through a lot of the misunderstanding from reading it. The lever to print money to buy stressed assets only works up to a point (debt as a percentage of GDP), then it typically breaks down as the store of value loses credibility and value in the eyes of those holding it (usually sometime after reaching a 3:1 ratio which is where effects start to become noticeable to the average person). The Great Depression was a deflationary depression, and it was caused by a bubble that was created, where debt reached 125% of GDP at its peak. A minor 250bp rate tightening (because leverage ratios were smaller back then), triggered the deflation. Initially it was bad, but they managed (in the reflation stage) largely by unpegging the currency from gold, buying stressed assets with domestic debt, and negative interest rates over many years. The banks loaning assets were also tightly controlled at that time. Currently banks are not very controlled, the depository requirements have been removed (see FDIC website, its at 0%), technically its no longer fractional reserve, and the reporting indicates they are loaning more debt into existence than they have assets (for the past several years). When they fail (when the bubble pops), the government makes the survivors whole and divvies up the assets to the survivors. Assuming of course there are survivor banks. They are too big to fail, and while the Fed is supposed to be the only money printer, the large banking institutions are so centralized that they've effectively usurped this indirectly. The shortfall in returns and production is always paid in inflation. There's a part of that curve where this is manageable, once you exceed that part (as a % of GDP), you get into those self-sustaining cycles similar to Weimar or Argentina, or deflation, or a little of both from a whipsaw. Actions are taken based on lagging indicators; so effectively this becomes just another form of the economic calculation problem (which remains unsolved), where the knifes edge gets closer and closer until you miscalculate (because futuresight doesn't exist). I thought it was an interesting observation that a problem normally only found non-market socialism systems can be seen in unbacked fiat based monetary systems.

than3 4y ago

I agree the corruption of language is an ongoing problem, and its often done to mislead and is easy to come to incorrect conclusions, which makes communicating about these things tangibly all the more difficult. As for the ratcheting mechanism you speak of, that is simply tax revenue, but it only ratchets when taxes are collected, and if you have tax loopholes where you don't pay taxes it doesn't necessarily ratchet (i.e. inheritance, income, etc). In terms of math, a percentage of a percentage never actually gets to 0, it approaches a limit over time, so there is always a certain degree of expansion, and that expansion is often offset by population growth. Hitting the limits of growth (for the planet) adds additional complications. From what you've said, I think you don't really understand how deflation occurs aside from the theory which there's a lot of crap out there, so that's understandable. Anytime the debt % of GDP exceeds a certain point, a bubble is created, and when rates tighten coupled with the bubble pressures you get deflation. There is often a period of reflation afterwards, if the issues that sustained the downward pressure are corrected but sometimes they aren't. Japan for example has been in a self-sustaining deflationary cycle for decades, and has only kept it under control through foreign investment and debasing their currency via yield control (effectively negative rates against their future). There's a book series of case studies called Big Debt Crises by Bridgewater, it thoroughly covers inflationary, deflationary, and hyper-inflationary debt crises, it covers the specific mechanics and has accurate charts for the periods of these crises, where they actually happened. I think you'd cut through a lot of the misunderstanding from reading it. The lever to print money to buy stressed assets only works up to a point (debt as a percentage of GDP), then it typically breaks down as the store of value loses credibility and value in the eyes of those holding it (usually sometime after reaching a 3:1 ratio which is where effects start to become noticeable to the average person). The Great Depression was a deflationary depression, and it was caused by a bubble that was created, where debt reached 125% of GDP at its peak. A minor 250bp rate tightening (because leverage ratios were smaller back then), triggered the deflation. Initially it was bad, but they managed (in the reflation stage) largely by unpegging the currency from gold, buying stressed assets with domestic debt, and negative interest rates over many years. The banks loaning assets were also tightly controlled at that time. Currently banks are not very controlled, the depository requirements have been removed (see FDIC website, its at 0%), technically its no longer fractional reserve, and the reporting indicates they are loaning more debt into existence than they have assets (for the past several years). When they fail (when the bubble pops), the government makes the survivors whole and divvies up the assets to the survivors. Assuming of course there are survivor banks. They are too big to fail, and while the Fed is supposed to be the only money printer, the large banking institutions are so centralized that they've effectively usurped this indirectly. The shortfall in returns and production is always paid in inflation. There's a part of that curve where this is manageable, once you exceed that part (as a % of GDP), you get into those self-sustaining cycles similar to Weimar or Argentina, or deflation, or a little of both from a whipsaw. Actions are taken based on lagging indicators; so effectively this becomes just another form of the economic calculation problem (which remains unsolved), where the knifes edge gets closer and closer until you miscalculate (because futuresight doesn't exist). I thought it was an interesting observation that a problem normally only found non-market socialism systems can be seen in unbacked fiat based monetary systems.