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Modern Monetary Theory: Or How I Learned To Stop Worrying and Love The Deficit: If you want the best explanation of MMT, read this article https://www.bloomberg.com/news/features/2019-03-21/modern-monetary-theory-beginner-s-guide The below is what I wrote a while back when I was still trying to understand MMT, some of which I need to go back and correct, now that I have a better understanding. But while there are a few things it gets wrong, I still think the general gist is correct. This discussion began in US Pol but as there was a lot of interest, people thought it best for there to be a separate thread. MMT has been around for quite a while, but is becoming more popular as more prominent figures, like Alexandria Ocasio-Cortez, have been discussing it. Here’s my attempt to give a brief primer on MMT. I’m new so might get things wrong, so feel free to correct me: Essentially the federal government of the US (and say Britain) is sovereign and controls it’s own currency. The value is backed by the federal government itself. Therefore when the government needs to spend money it just spends that money into creation. It doesn’t “take” the money from some reserve created by tax revenue and spend it. In fact you wouldn’t even have money to pay your taxes if the government hadn’t spent money into creation first. Instead the government, if say they wanted to build a bridge, just contacts the federal reserve says “hey we need you to put money into these bridge contractors bank accounts” the fed types into a keyboard and puts the money into the accounts,and voila, money is created and spent. Money is essentially created by a keystroke on a keyboard. One of the founders of MMT, likens it to a scorecard in a football game. When the scorekeeper changes the scoreboard, they don’t have to “take” the points from somewhere, they just change the board. That’s basically how the federal government works. Government contacts the fed, fed changes the numbers in someone’s bank account, and voila, money is created and spent. This means that theoretically, the government can just create and spend as much money as it wants. If this sounds strange or unusual, even Alan Greenspan said this is how the government works. When Paul Ryan was questioning him trying to get him to say that Social Security benefits aren’t secure and can run out, and so we should look at privatization models, this is what Greenspan said. https://www.youtube.com/watch?v=DNCZHAQnfGU quote:Alan Greenspan: "I wouldn't say the pay-as-you-go benefits [for Social Security] are insecure in the sense that there is nothing to prevent the Federal Government from creating as much money as it wants and paying it to somebody. You might be thinking then, so when I pay taxes, where does the money go? Actually the money is just deleted out of existence. In fact, if you were to bring cash to the IRS to pay your taxes, they would take your money, say thank you, and then shred it. Taxes just take money out of the economy, and delete it out of existence. This description is not really in dispute among most economists. It’s how our government works. If that’s the case though then why doesn’t the government just spend whatever it needs to, or for that matter why doesn’t the government just give everyone a million dollars? For that matter, why do we even need taxes? Answer is inflation. If the government puts too much into the economy, without also taking money out of the economy via taxes, you can see high inflation, even hyperinflation. This is essentially the speed limit on government spending, how much can we spend before we have to worry about inflation? However, if we look at our current economic environment, we actually have low inflation, even though we’ve been running substantial deficits. And there’s good reason to believe that actually we’re not deficit spending enough;. Furthermore, not all programs will have the same effect on initiation. There’s reason to believe for example, that Medicare For All actually would not increase inflation that much. And so there may be no reason to take money out of the economy to somehow “pay for it”. Another important element of MMT is their view of deficits. When the government runs a deficit, what that means is that they are putting more into the economy then taking out of the economy. So a government deficit actually means a surplus for the public economy. Now of course some surpluses are more beneficial then others. A mass tax cut for the rich gives a surplus to the wealthiest among us, but nothing for those below that. So not all deficit spending is beneficial. But on the whole, deficit spending is a positive thing, because that gives us surpluses in the economy If all this is true, it has massive ramifications for our debates, because this discussion of how we “pay for” programs is essentially irrelevant, at least from an economic perspective. A better question is, how do we ensure that what we want to spend doesn’t create high inflation? This also means that, and one reason I've become so enthused about it, that there’s little reason, economically speaking, why we can’t have an extremely generous M4A program, free college, GND, etc.. We can create ambitious programs, and not tie ourselves into knots figuring out how we’re going to pay for all of it. In fact it was learning about MMT that led me to embrace Bernie's generous M4A program. And given the current crisis we are in, especially regarding climate change, MMT is becoming popular at just the right time to help us address the urgent situation we're in. Now there is one huge wrinkle in all of this, is that while economically speaking we might need to pay for programs, politically we might need to. And that is because, as Karthun brought to my attention, that for a government program to be an entitlement, and not subject to the annual appropriations process, three must be some way that its fully paid for. I’m still not sure this is right, but it is something that gives me pause. But again, this is a political problem, not an economic one, and hopefully something that can be changed. So what are the disagreements with MMT? Well as mentioned before, there's not much disagreement with the descriptive elements of MMT. Even a National Review article a while back agreed that's how the monetary system of our government works. The disagreement is in more the application. For example, MMT skeptics say it doesn't seem feasible that the government could accurately predict how much inflation a program would cause. Or, given how hard it is politically to raise taxes, what happens when the program leads to inflation, but there's no political ability to raise taxes? So even though what MMT describes is correct, the critics say still best to act like we need to "pay for" programs in a sense. But of course MMT analysts have answers for those critiques. Anyway that's a brief description. Hope it was helpful. But as I said I'm new, so please feel free to critique it. Here are some resources for further analysis Seven Deadly Innocent Frauds of Economic Policy by Warren Mosler http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf Website on MMT: http://neweconomicperspectives.org/ Created by many of the founders of MMT. Youtube Channel “Deficit Owls” https://www.youtube.com/channel/UCWXGA051bB7uXlvsiGjvOxw Discussion of MMT on Planet Money, with Stephanie Kelton. https://www.npr.org/sections/money/2018/09/26/651948323/episode-866-modern-monetary-theory Also make sure to follow Stephanie Kelton on Twitter. She was an MMT skeptic, then became a a staunch advocate, and is now the most well known MMT economist out there. She was also economic advisor to Bernie Sander’s campaign, and now advises Alexandria Ocasio-Cortez theblackw0lf fucked around with this message at 19:53 on Mar 21, 2019 |
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Jan 24, 2019 03:08
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This is so hard to wrap your head around as a layman. I saw a comedian who said "I'm not $32,000 in debt, I'm just running a $32,000 budget deficit". My whole adult life I've been a left winger super pissed off about how whenever the right is in power they always deficit spend like a motherfucker, but they do it on fighter jets and tax cuts for their friends instead of on the common good. Then the left gets in to power and (sometimes) balances the budget but it still only marginally helps the needy. You'd think they would fire up all kinds of social programs and prove that helping the lower classes helps america.quote:why doesn’t the government just give everyone a million dollars? For that matter, why do we even need taxes? Answer is inflation. If the government puts too much into the economy, without also taking money out of the economy via taxes, you can see high inflation, even hyperinflation. This is essentially the speed limit on government spending, how much can we spend before we have to worry about inflation? Is this another way of saying that if everyone had money, everyone else would jack prices up on everything and the money would go down in value, rendering it moot? If so, how is that really so different than keeping tabs on dollars in vs dollars out, like an individual? It's so abstract but I can see how it's essential to understand. Help me out goons. LloydDobler fucked around with this message at 04:26 on Jan 24, 2019 |
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Jan 24, 2019 04:22
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LloydDobler posted:This is so hard to wrap your head around as a layman. I saw a comedian who said "I'm not $32,000 in debt, I'm just running a $32,000 budget deficit". My whole adult life I've been a left winger super pissed off about how whenever the right is in power they always deficit spend like a motherfucker, but they do it on fighter jets and tax cuts for their friends instead of on the common good. Then the left gets in to power and (sometimes) balances the budget but it still only marginally helps the needy. You'd think they would fire up all kinds of social programs and prove that helping the lower classes helps america. The fundamental difference is that you cannot create money, but the government can. So you *must* count your dollars in vs dollars out. The government can and does create money all the time, so it does not. And yes, it is a very hard concept to wrap your head around at first, since we generally think in terms of money being a “thing” or commodity when it is not any more.
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Jan 24, 2019 05:23
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The big and obvious difference is that lay people cannot create their own money. There is never a risk of the US somehow ending up in a situation where it literally can't pay its debt, whereas a normal person (or business or whatever) obviously can end up in that situation. So it's always just a question of whether the upsides of spending the money are greater than the potential downsides of inflation (which is basically as you describe; when there's more money circulating around in the economy, it can result in prices being raised and the money being worth less).
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Jan 24, 2019 05:27
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LloydDobler posted:Is this another way of saying that if everyone had money, everyone else would jack prices up on everything and the money would go down in value, rendering it moot? If so, how is that really so different than keeping tabs on dollars in vs dollars out, like an individual? The dollars going into and out of the government are only one factor influencing inflation. There's no reason to think that a balanced budget is necessarily optimal, it's just an arbitrary benchmark. It's like demanding that Blizzard "pay for" quest rewards by precisely modulating shop fees to match, coin-for-coin. Having said that, I don't really see the difference between MMT and Keynes.
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Jan 24, 2019 05:31
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PerniciousKnid posted:The dollars going into and out of the government are only one factor influencing inflation. There's no reason to think that a balanced budget is necessarily optimal, it's just an arbitrary benchmark. It's like demanding that Blizzard "pay for" quest rewards by precisely modulating shop fees to match, coin-for-coin. Yea that was actually my initial thought when I first heard about this. The difference from what I can tell so far is that Keynesian economics, at least currently, is neoclassical, and trusts more in markets to self regulate the economy. MMT is not neoclassical, and is called part of the post Keynesian school, and feels a need for a more active government role. One key difference for example is full employment. New Keynesian economics says that absent market irregularities (for example say monopolies), the market will tend towards full employment. MMT says actually that’s not the case, which is why a jobs guarantee is one of the programs many MMT thinkers have embraced. Here’s a couple articles I found touching on this http://heteconomist.com/one-of-the-fundamental-differences-between-modern-monetary-theory-and-new-keynesian-economics/ http://ralphanomics.blogspot.com/2012/05/difference-between-mmt-and-keynes.html It should be said we’re taking about Kenysian economics as practiced today, not Keynes himself. In fact some have said MMT is just a way of getting back to what Keynes originally meant. theblackw0lf fucked around with this message at 06:15 on Jan 24, 2019 |
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Jan 24, 2019 06:06
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Another difference with MMT and Keynes, I believe is that in Keynesian economics you deficit spend in economic downturns to boost the economy, but in times of economic prosperity, you tighten the belt and don’t deficit spend as much, to reduce the deficit. But in MMT there’s less of a concern to reduce the deficit. It’s not that deficits don’t matter, but there’s less concern then there is in Keynesian economics. At least that’s how I understand it.
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Jan 24, 2019 06:56
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So why do governments take loans to fund their spending if it's not neccessary to balance the money coming in and going out? Why do countries go bankrupt and default if they can just print the money?
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Jan 24, 2019 06:57
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Charlz Guybon posted:So why do governments take loans to fund their spending if it's not neccessary to balance the money coming in and going out? Probably should have clarified this in the beginning. This only applies to governments that are sovereign, who control their own currency, and who back their own currency. It doesn’t apply to a country like Greece for example, because they use the Euro.
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Jan 24, 2019 07:11
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theblackw0lf posted:Probably should have clarified this in the beginning. This only applies to governments that are sovereign, who control their own currency, and who back their own currency. It doesn’t apply to a country like Greece for example, because they use the Euro. Argentina defaulted in the 90s didn't it?
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Jan 24, 2019 07:16
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quote:Or, given how hard it is politically to raise taxes, what happens when the program leads to inflation, but there's no political ability to raise taxes? So even though what MMT describes is correct, the critics say still best to act like we need to "pay for" programs in a sense. But of course MMT analysts have answers for those critiques. This is what worries me about leaning too hard into a "print more money" approach. I have no idea whether MMT is legitimate on the merits, but it seems eminently possible that a country could end up in a scenario where the inflationary effects of printing money were under-accounted for and the only way out is a politically unpalatable tax increase. (Such a situation would almost certainly lead to printing more money, on the assumption that that's more palatable politically, and risks hyperinflation.) I haven't had time to dig through all the links, but is there currently an empirically established method for predicting which sorts of spending would not increase inflation? It seems like without such a method a much less risky approach would be to just tax the gently caress out of the rich.
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Jan 24, 2019 09:03
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Charlz Guybon posted:What about countries not in a currency union? Several reasons. International debt isn’t in local currency. Doesn’t matter how much you finagle with the value of the peso, if your debt is in US dollars you’re going to have to pay in US dollars. Interest rates are a huge factor too: the worse your situation, the higher the interest rates. Finally, in the specific case of Argentina, the government had pegged the value of the peso on the US dollar, which didn’t evolve alongside the Argentinian economy (when the peg was removed, the peso predictably crashed hard). Monetary policy is complicated as heck! What I’m interested in is what MMT has to say on the euro and the ECB. Anyone got some reading on that?
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Jan 24, 2019 09:09
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Charlz Guybon posted:So why do governments take loans to fund their spending if it's not neccessary to balance the money coming in and going out? At the end of the day, the cash still has to mean something. You need to be able to buy a loaf of bread. How much bread a buck gets you is entirely imagined by our market. It works because we believe it works. If people stop believing that some amount of dollars is worth a loaf of bread, which is a very fragile barrier, your economy is hosed. No one is going to go to a job for money they know is worthless, thus production halts, law enforcement halts and governments begin losing power. The government has to keep up the illusion that money has value so they go into debt. "Look how much debt we have! We're barely scraping by" does more to quell revolution than "lol, we're letting you guys die because we'd rather hoard a few trillion bucks"
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Jan 24, 2019 17:14
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Gnumonic posted:This is what worries me about leaning too hard into a "print more money" approach. I have no idea whether MMT is legitimate on the merits, but it seems eminently possible that a country could end up in a scenario where the inflationary effects of printing money were under-accounted for and the only way out is a politically unpalatable tax increase. (Such a situation would almost certainly lead to printing more money, on the assumption that that's more palatable politically, and risks hyperinflation.) It's worth remembering that you can also fight inflation with monetary policy, i.e. the Fed. My understand is that ultimately, the economy is a question of distributing scarce goods and services. If the government is buying everything up, then the private sector prices will increase due to scarcity. But if the government spending is activating underutilized resources, then supply as well as demand is increasing, so inflation would not be expected. Thus it's helpful to think of the government as influencing aggregate supply and demand, rather than in terms of cash flow. theblackw0lf posted:It should be said we’re taking about Kenysian economics as practiced today, not Keynes himself. In fact some have said MMT is just a way of getting back to what Keynes originally meant. As an economics minor from a prestigious Midwestern state university, I never did read past Keynes, so maybe that's why I was confused.
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Jan 24, 2019 17:48
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PerniciousKnid posted:It's worth remembering that you can also fight inflation with monetary policy, i.e. the Fed. Wait, so I'm confused about something. What would the point of the Fed be under MMT? I'm not an economist but I'm pretty sure that the fed influences monetary policy through buying and selling debt (i.e. treasuries). In a MMT-based system, why would the government issue debt at all? Isn't the central point of MMT that you don't need to "pay for" federal problems by issuing debt or raising taxes?
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Jan 25, 2019 00:06
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If taxes are just "deleting" money out of existence, what's the functional difference between taxing the rich at a higher rate, and simply paying the poor more generously? Like, would it be possible to get rid of inequality by paying everyone enough such that everyone is a millionaire?
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Jan 25, 2019 00:33
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I'm somewhat confused by how MMT handles national debt. Since the government is just creating and deleting money, is there any reason to issue bonds? I understand that this is an alternative means of manipulating the currency supply, but I'm not sure I understand how this aspect of the economy is approached in this theory. Another question. Say we could do an experiment. If we could create two United States of Americas, one with a national debt of zero, and another with a debt 500% as large as the real one has at present, what would be the economic effect of this difference on the two economies? How would they differ from the real existing USA?
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Jan 25, 2019 00:48
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DrSunshine posted:If taxes are just "deleting" money out of existence, what's the functional difference between taxing the rich at a higher rate, and simply paying the poor more generously? Like, would it be possible to get rid of inequality by paying everyone enough such that everyone is a millionaire? In the short run, yeah, you could. I assume the long run outcome would likely be somewhere between "economic collapse" and "now, but the numbers are 100 times larger." From a practical perspective, I figure "add more" has outcomes different from "take some out." It might be easier to balance by taking and reallocating (taxing, basically) than it is by adding here and there. I'm just speculating, though. Squalid posted:Another question. Say we could do an experiment. If we could create two United States of Americas, one with a national debt of zero, and another with a debt 500% as large as the real one has at present, what would be the economic effect of this difference on the two economies? How would they differ from the real existing USA? I think it's a question of why the debt is larger and if the larger debt actually represents additional productive "stuff" in the world. If tomorrow, the population were 500% as large, I figure you'd need 500% as much stuff in the economy to keep standards of living about the same. If the debt increased 500% tomorrow because the government just sold a bunch of bonds, the outcome is some people have a bunch more money than they used to. If there's 500% more stuff out there to consume, nothing much changes. There's probably not that much unrealized productive capacity in the U.S., though. The MMT take, I think, is the debt just reflects how much money the US government has pumped into the economy. That it's negative logically follows. The US government is the one giving away the dollars in the first place.
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Jan 25, 2019 01:31
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MMT didn't make sense to me until I realized it was basically stocks and flows in the trade thread. Taxes, spending, fed actions, these are all just flows or controls on flows some positive and some negative.
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Jan 25, 2019 02:15
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Gnumonic posted:Wait, so I'm confused about something. What would the point of the Fed be under MMT? I'm not an economist but I'm pretty sure that the fed influences monetary policy through buying and selling debt (i.e. treasuries). In a MMT-based system, why would the government issue debt at all? Isn't the central point of MMT that you don't need to "pay for" federal problems by issuing debt or raising taxes? Because if you *only* create money, you get inflation (well, if you create money too often and it's your only tool in the toolbox.) The Fed would still set interest rates, and use treasuries to move money from the private sector into the public sector if that was needed (to reduce the money supply, or to increase government spending in an inflationary period without making it worse by creating more money.)
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Jan 25, 2019 02:57
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Squalid posted:Another question. Say we could do an experiment. If we could create two United States of Americas, one with a national debt of zero, and another with a debt 500% as large as the real one has at present, what would be the economic effect of this difference on the two economies? How would they differ from the real existing USA? At a near zero real interest rate, there would be almost no difference.
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Jan 25, 2019 03:01
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Really happy to see a thread like this, good job.BrandorKP posted:MMT didn't make sense to me until I realized it was basically stocks and flows in the trade thread. Taxes, spending, fed actions, these are all just flows or controls on flows some positive and some negative. I think the concept of "sectoral balances" can be really useful for helping illustrate this point, and it might be worth throwing a reference to the concept into the op. DrSunshine posted:If taxes are just "deleting" money out of existence, what's the functional difference between taxing the rich at a higher rate, and simply paying the poor more generously? Like, would it be possible to get rid of inequality by paying everyone enough such that everyone is a millionaire? Ultimately there are still limits on government spending such as the stock of actual resources in the economy. At some point if you don't tax the rich or somehow regulate prices there are going to outspend everyone else and bid up prices on anything scarce. MMT doesn't solve the problem of scarcity it just gives us a more accurate perspective on how government finances work.
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Jan 25, 2019 03:10
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BrandorKP posted:MMT didn't make sense to me until I realized it was basically stocks and flows in the trade thread. Taxes, spending, fed actions, these are all just flows or controls on flows some positive and some negative. yeah this is how I try to make sense of macro econ stuff. It makes mentally visualizing what's going on a lot simpler. Lumpy posted:At a near zero real interest rate, there would be almost no difference. What if it is not near zero? Basically, I'm trying to understand how MMT handles bond payments. So the principle of the government creating and destroying money in MMT makes a lot of sense to me. Where I start to get confused is when its proponents start saying deficits don't matter in today's economy. This is because when the US deficit spends, it also issues interest carrying bonds. These bonds take cash out of the economy, but with the promise of giving more cash in the future to the bond holder. As with all assets, the vast majority of these bonds are owned either directly or indirectly by the one percent. Therefore as the national debt increases, the government will have increasing obligations to give money to the owners of capital. As debt increases, the proportion of government money going to this class should increase. This should produce inflation that weakens the buying power of people who don't have any assets, as an increasing proportion of cash should be flowing to those who already have wealth. The state can use inflation to reduce the value of the debt by printing money. Still it means the level of debt remains important and has to be managed and constrained. Of course central banks can just buy government bonds themselves, which I guess makes them disappear effectively? Macro is all very confusing.
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Jan 25, 2019 03:19
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Squalid posted:yeah this is how I try to make sense of macro econ stuff. It makes mentally visualizing what's going on a lot simpler. If I'm understanding correctly, if it was decided that the federal government would run on MMT terms there would be no bonds. They'd "print" a bunch of money through the Federal Reserve to pay off existing debt (all at once? unclear if this would just generate huge inflation) then not issue anymore. New deficit spending would be paid for through money printing.
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Jan 25, 2019 03:21
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LuciferMorningstar posted:In the short run, yeah, you could. I assume the long run outcome would likely be somewhere between "economic collapse" and "now, but the numbers are 100 times larger." Helsing posted:
These posts were helpful, and answered my question. Thanks! One other followup, then, because this is really interesting to me, and as an economic layman I'm just sort of speculating, or shooting from the hip. Say some hypothetical country A then artificially puts a ceiling on prices so the rich couldn't outbid everyone? What would happen? Like is inflation really a problem still?
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Jan 25, 2019 04:34
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Badger of Basra posted:If I'm understanding correctly, if it was decided that the federal government would run on MMT terms there would be no bonds. They'd "print" a bunch of money through the Federal Reserve to pay off existing debt (all at once? unclear if this would just generate huge inflation) then not issue anymore. New deficit spending would be paid for through money printing. That makes sense, but I've never heard anyone say anything like that before.
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Jan 25, 2019 05:41
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Squalid posted:yeah this is how I try to make sense of macro econ stuff. It makes mentally visualizing what's going on a lot simpler. Bonds are set in nominal terms (except for TIPS), so for longer duration government debt inflation is actually the biggest destroyer of wealth. Nobody hates inflation more than bond holders. Part of the reason why inflation hawks are so often associated with the Republican Party (and why Trump's complaints about Powell raising rates are kinda hilarious) is because of the bond bear market back in the day.
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Jan 25, 2019 06:25
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DrSunshine posted:Say some hypothetical country A then artificially puts a ceiling on prices so the rich couldn't outbid everyone? What would happen? Like is inflation really a problem still? Shortages if supply can't meet the (presumably increased) demand. I guess it depends on what you're putting a ceiling on, though. If you were to just make one arbitrary thing cheaper, people would probably just stop making that thing. You're moving toward a command economy with this sort of thing. If you're thinking of a scenario in which the government gives everyone some amount of money and tries to fix prices on goods and services related to "core living expenses," you're basically hoping the private sector will provide enough goods and services at your defined price points and that you didn't make a mistake that will result in the economy turning into a roaring dumpster fire.
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Jan 25, 2019 06:34
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theblackw0lf posted:You might be thinking then, so when I pay taxes, where does the money go? Actually the money is just deleted out of existence. In fact, if you were to bring cash to the IRS to pay your taxes, they would take your money, say thank you, and then shred it. You can pay taxes in cash, do they actually do that?
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Jan 25, 2019 07:07
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Squalid posted:yeah this is how I try to make sense of macro econ stuff. It makes mentally visualizing what's going on a lot simpler. How do we teach this to other people? As fast as possible and multi-disciplinary. Helsing I'd like your opinion here too. How do we spread the ability to think in terms of systems?
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Jan 25, 2019 07:29
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Badger of Basra posted:If I'm understanding correctly, if it was decided that the federal government would run on MMT terms there would be no bonds. They'd "print" a bunch of money through the Federal Reserve to pay off existing debt (all at once? unclear if this would just generate huge inflation) then not issue anymore. New deficit spending would be paid for through money printing. Actually bonds still have a use, it's a solid investment and a safe haven for your cash. That's why US Treasury bonds have low/negative yields. And as previously stated it helps with maintaining the kayfabe of money being valuable. Paying of all sovereign debt would crash the world economy. What does happen is that the Fed would buy all bonds that need to be issued but lack a buyer. This is the "Whatever it takes" stated by the ECB during the Euro crisis, the loving over of the PIIGS countries (especially Greece) was absolutely unnecessary. Still there is the problem for smaller states that they need dollars for oil and stuff, and this limits their options. Also I want to note that the hyperinflation of neither Weimar nor Zimbabwe was accidental. In Zimbabwe's case it was that or (worse) starvation.
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Jan 25, 2019 14:31
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Owlofcreamcheese posted:You can pay taxes in cash, do they actually do that? Bills cost money to print so I would doubt it, but the point is that you don't need to take the actual money from the tax office and give it to the programs in a big sack with a dollar sign on it. The specific bills and coins don't matter, it's just how many dollars, real or computerised, you have in circulation at the time. If you need it you can borrow against yourself, basically, by just asking your central bank to create money, and you can "pay off" your own "debt" by taxing people and then not spending it. And as long as everyone continues to believe a dollar is worth more or less a dollar in the process, this is all fine.
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Jan 25, 2019 15:52
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OwlFancier posted:Bills cost money to print so I would doubt it, Yeah, I get the conceptual idea that the money you pay in tax and the money the government spends isn't the same money, but the idea they actually physically go out of their way to physically destroy the currency if you pay in cash seems really silly and doesn't sound like it'd be a thing. Like, if your tax bill was $57.26 do they have to bring out the smelter to make sure to melt the quarter and penny down? Probably not.
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Jan 25, 2019 16:03
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I mean depending on where you are it might be cheaper to just throw all the cash collected in Hawaii into a big incinerator rather than shipping it back to the US when it piles up. I think it's more to illustrate the concept though, you don't have to keep track of the fine details, very specifically you definitely don't need to keep track of every penny because it doesn't matter what happens to them, economically speaking. The reason the government would count things down to the penny is because everyone else who doesn't have their own currency, has to. OwlFancier fucked around with this message at 16:09 on Jan 25, 2019 |
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Jan 25, 2019 16:05
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OwlFancier posted:I mean depending on where you are it might be cheaper to just throw all the cash collected in Hawaii into a big incinerator rather than shipping it back to the US when it piles up. I think it's more to illustrate the concept though, you don't have to keep track of the fine details, very specifically you definitely don't need to keep track of every penny because it doesn't matter what happens to them, economically speaking. I am sure it's the same as anything else and the pennies just get put in a bank and then get recirculated. Similarly I am sure no one is actually literally gathering tax dollar accounts in a file then hitting "delete". Like it's good to think of taxes and spending as being relatively decoupled but I don't think anyone is doing any of the hyper literal super theatrical steps where someone actually enacted that stuff in the real world. It's just "it's better if you think of this stuff as if that is what happens' not "this literally is how it works"
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Jan 25, 2019 18:06
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Badger of Basra posted:If I'm understanding correctly, if it was decided that the federal government would run on MMT terms there would be no bonds. They'd "print" a bunch of money through the Federal Reserve to pay off existing debt (all at once? unclear if this would just generate huge inflation) then not issue anymore. New deficit spending would be paid for through money printing. T-bills have an incredibly stabilizing effect on the market, and it would be a good idea to keep issuing them. Think of it as just another service the government provides for the common good. But the government could decide how many bonds to issue by directly measuring that stabilizing force, instead of trying to tie it to spending. It also factors into US soft power by interlinking our economy with most other nations.
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Jan 25, 2019 22:25
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Just a note about why Dollars have value since it's been mentioned a few times already. The general understanding is that dollars have value because you are taxed in dollars. The government won't accept your 15% of your sheep wool as your tax payment thus you are forced into the market to exchange your wool for dollars to make your tax payment. If you don't make your tax payments for a long enough period of the time the state will come and lock you up. As long as the state can require its taxes be paid via force it can maintain its currency's value.
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Jan 25, 2019 22:52
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Man, being able to pay taxes in bushels of wheat, amphorae of oil, or bales of sheep wool was the best. I miss the good old days. 
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Jan 25, 2019 22:56
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DrSunshine posted:Man, being able to pay taxes in bushels of wheat, amphorae of oil, or bales of sheep wool was the best. I miss the good old days. Yeah, an unfortunate side effect is what Marx called Commodity Fetishizaiton. By being force to exchange the product of your labor into money which you then use to buy something else you start to lose track of the social relationships of production. You think of the value of goods in relation to the value of other goods instead of the human relationships of who makes what and who works for whom.
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Jan 25, 2019 23:24
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Herewaard posted:Just a note about why Dollars have value since it's been mentioned a few times already. This is correct
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Jan 26, 2019 01:21
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