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Disagreement? Literally nowhere in either of your comments did anyone actually explain how government spending is deflationary. There is nothing to disagree wi
by VirusNewbie 2y ago
Disagreement? Literally nowhere in either of your comments did anyone actually explain how government spending is deflationary.
There is nothing to disagree with, no claims were made!
- hgomersall 2y agoThe comment was a response to burning money. What does that have to do with deflation?
- VirusNewbie 2y agoAre you seriously asking what reducing the money supply has to do with deflation?
- hgomersall 2y agoFriedman was a charlatan and monetarism was trivially debunked when he came up with it. The 60 years since have not been any more kind to it. Don't confuse stocks with flows. The whole idea of money supply as a useful metric needs to be put to bed; one would have thought the 13 years post GFC would have made that apparent. (Of course, the Austrians have a peculiar notion that inflation can by definition only be considered as such if it's associated with increased money supply. Another reason to ignore them completely)
- VirusNewbie 2y agoHuh. So if I understand correctly, if we halved the money supply tomorrow, the price of everything would stay the same?
- kelseyfrog 2y agoHow would you halve the money supply?
- VirusNewbie 2y agoit's a thought exercise. I'm asking if you think that would the consequences be?
- hgomersall 2y agoBetween 2008 and 2020 M2 pretty much doubled and prices barely moved anywhere. This was intentional policy for the purpose of increasing inflation which stayed doggedly around zero. What does this tell us? Pretty much nothing because money supply is a useless measure. What would happen if we halved it? Dunno, but to achieve that, stuff has to happen, and depending on that stuff, you might get price changes. I expect if the gov engaged in QT to achieve it, very little would happen.
- VirusNewbie 2y ago>Between 2008 and 2020 M2 pretty much doubled and prices barely moved anywhere Except Real estate prices more than doubled. Also the Dow went from ~11k to 32k . So almost triple.
- hgomersall 2y agoAnd yet the price of a cabbage stayed exactly the same. Oh, we also had close to zero interest rates, might that have something to do with peoples' appetite for higher mortgages and shares over bonds?
- VirusNewbie 2y ago>Oh, we also had close to zero interest rates, might that have something to do with YES! YES! YOU ARE CORRECT, THAT'S MY POINT. Lowering the interest rates is how you EXPAND THE MONEY SUPPLY.
- hgomersall 2y agoBut that doesn't suggest that the critical variable is money supply. It just suggests there's a correlation. There are plenty of ways of increasing the money supply that does nothing at all. Pursuade the fed to give me a trillion trillion dollars and I'll show you by not spending it (though I might spend a few mil for keeping it safe, but that's not going to do much).
- kelseyfrog 2y agoGovernment spending being deflationary is not a claim MMT makes. > and putting it towards (wasteful) government programs to "burn it" in a sense. This claim isn't congruent with the idea of MMT. One way to look at MMT is asking, does our government have to operate like it has a checking account, or can our economy act like an MMORPG economy? For example, Blizzard has no obligation to collect coin before distributing coin. Blizzard thinks in terms of coin sources and coin sinks and adjusts source and sink policy in response to aggregate demand and player engagement goals.