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How wrong is the impression that the main difference between MMT and how we do things now is that with MMT no one is wasting time asking "how will we pay for that?" Right now the excuse for blocking things like M4A or free college is basically imagining some coffer somewhere in the Fed that's going to run out. In, like, super simple terms, MMT seems like it's just acknowledging that things don't work like that, and so we'll just go ahead and do those things and then raise taxes to offset the inflation from the flood of cash.
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Jan 28, 2019 03:01
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I am extremely skeptical that convincing people of 1 but not 2 would be worse than the present state of affars which is clearly not stable or livable for an overwhelming majority of people. Your choice in that instance is not present stability vs the prospect of future instability but great present instability interspersed with periods of things not actually being on fire but still being lousy.
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Jan 28, 2019 03:02
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Let me say this a different way: Imagine it's 100 years from now and everyone is thinking in terms of MMT. And space president proposes program X and program Y that each cost 1 trillion space dollars. They feed these programs into their totally nonpartisan, 100% accurate calculators and get an answer of how much tax will need to be raised to counteract the inflation a trillion in spending might cause. Option 1: it will always come out to be 1 trillion dollars in taxes. Give or take some minor percentage. To spend a trillion we need to raise ~a trillion. In which case it simply seems like a semantic extra level that simply obfuscates things. Were adding MMT simply made things more complicated to speak about and made it less obvious that taxes should exist. While not really changing anything about how things function. Option 2: the computers will spit out an answer different than 1 trillion. Which could be like, half a trillion or two trillion or zero or anything depending on the specifics of the programs. In which case it's an interesting though, but what if project X and Y are a war with jupiter and full space medicare. I feel like no particular reason to assume the big number will go to the thing I am ideologically against and the little number would consistently go to things I like. What if MMT says that wars are free forever but X good thing actually would need a dollar for dollar matching to be paid for. What if a politician SAYS MMT says that and a different one says it doesn't? It doesn't feel guaranteed it will give answers I like and it doesn't feel clear how I will even know what the answers are except by trusting whoever says what I would have liked anyway. What is the case that MMT could give me a desirable scenario? Except the implausible "well it will always simply work out it means everything you like is free and nothing you dislike is" and how is any person supposed to weigh any idea as good or bad under it? Where the relationships are far too complex and nonlinear to ever be graspable. "this costs 1 billion dollars, make bill gates pay 1 billion dollar" seems like it at least is followable as a concept and fair even if it is not optimized efficiency.
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Jan 28, 2019 03:29
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CrypticTriptych posted:So there are two facts/concepts here that you would need to convince people of: OwlFancier posted:I am extremely skeptical that convincing people of 1 but not 2 would be worse than the present state of affars which is clearly not stable or livable for an overwhelming majority of people. Your choice in that instance is not present stability vs the prospect of future instability but great present instability interspersed with periods of things not actually being on fire but still being lousy. Nah!! posted:How wrong is the impression that the main difference between MMT and how we do things now is that with MMT no one is wasting time asking "how will we pay for that?" Right now the excuse for blocking things like M4A or free college is basically imagining some coffer somewhere in the Fed that's going to run out. In, like, super simple terms, MMT seems like it's just acknowledging that things don't work like that, and so we'll just go ahead and do those things and then raise taxes to offset the inflation from the flood of cash. The description of the MMT model is that government expenditures don't have to be related to revenues, because the limitations on their ratio are macroeconomic forces, rather than a fixed quantity of dollars. This is something that I don't think there has been any disagreement on, and seems eminently true to me. The subsequent policy argument from the left is that we can have generous social programs without having to find a direct source of dollars fo them, and that this is fine as long as inflation doesn't get out of hand. This is true, but it doesn't directly follow from the previous paragraph: an equally valid understanding would be, "we can keep cutting taxes on corporations and billionaires while providing our current level of services, and this doesn't matter as long as inflation doesn't get out of hand." MMT shortcuts the "how will you pay for M4A and free college" attack with "defecits don't matter!", but really it moves the question to, "what will we do to cool off the economy if printing a poo poo load of money to pay for M4A and free college starts causing runaway inflation?", the answer to which is apparently, "take the money directly out of the accounts of rich people and corporations with the press of a button." From a political perspective, "we need to collect money from taxpayers at a higher rate so that we can pay for M4A and free college" vs "we need to delete more money from people's accounts so that we have room to print money for M4A and free college without causing runaway inflation" is a distinction without a difference. It still doesn't solve the problem that voters want the same or higher levels of service, lower taxes, & cuts only to foreign aid, and political scientists have yet to find any education that will convince them otherwise.
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Jan 28, 2019 03:47
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The problem is, you're still viewing things from a traditional lens. The traditional lens is "government programs are a necessary evil and taxes are how we pay for them." MMT isn't just "government programs are a necessary evil and inflation is how we pay for them and taxes is how we pay for inflation." The point is we don't NEED to ask "how do we pay" at all. Government programs are a function of a healthy government. Your economy needs economic growth to survive and the only way you get that is by the government printing money. Taxation's SOLE purpose is deflation and tax cuts are for inflation. We ask "should we fund program x?" entirely on the merits of program x. We fund M4A because we need M4A. We cut military spending because we don't need all these tanks. Edit: in fact, how sure are we that M4A will cause inflation? There's a chance that M4A would improve overall health, increasing the effectiveness of our workforce and reducing the overall spending by the government on healthcare. If people are spending more time at work, they're paying more in taxes, and if the government winds up paying less for healthcare, that leads to deflation. In other words, what if it actually needs to be payed for with tax CUTS? MixMastaTJ fucked around with this message at 05:29 on Jan 28, 2019 |
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Jan 28, 2019 05:16
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Dead Reckoning posted:Except if you convince people of 1 but not 2, the inevitable result is massive spending and massive tax cuts. Basically this. The status quo is that politically, fiddling with spending without fiddling with taxes is somewhat difficult because voters expect some token attempt at balancing the books. Ideally, if everyone understood MMT, voters would instead expect some attempt at keeping inflation under control, which from what I'm reading here would likely look similar from their end (more spending ~= more taxes). However, people are short sighted. People becoming aware of one more way to mortgage the future is not necessarily good. Additionally, OwlFancier posted:the present state of affars which is clearly not stable or livable for an overwhelming majority of people edit to add: MixMastaTJ posted:The point is we don't NEED to ask "how do we pay" at all CrypticTriptych fucked around with this message at 05:30 on Jan 28, 2019 |
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Jan 28, 2019 05:18
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How does all of this take into account actual instances of hyperinflation? As in, what would this system do differently than the scenarios that produced hyperinflation? I'm no economist and expert in this topic Also, since currencies float against each other in international exchanges -- does everyone in the world need to embrace MMT for those rates to remain stable?
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Jan 28, 2019 06:19
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CrypticTriptych posted:This doesn't seem true. We still need to ask this, except that under MMT we pay for things in inflation points instead of dollars. If we want a reasonable level of inflation, we will still need to make big compromises. Maybe there's some easy gains to be had by switching perspectives -- programs which cost a lot of dollars but not many inflation points become comparatively much cheaper -- but in the end a balance still has to be struck or the economy will go into a spiral. Except the relationship between government spending and inflation is extremely abstract. There isn't a magic inflation points calculator. As pointed out earlier, a government surplus means the private economy is losing money. You NEED an amount of government spending to at least keep up with economic growth, otherwise you get deflation. Yes, these things could cause inflation, but if it's a system we NEED then there isn't any benefit on trying to "pay" for it ahead of time. Like, do you think we'll wait till we can "pay" for military services if another country invaded us? Obviously not: we'd deal with the immediate necessity and deal with economic ramifications after things stabilize. Why aren't we taking the same lens to healthcare, poverty or education?
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Jan 28, 2019 06:38
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There isn't a magic inflation calculator but I bet we could come up with some reasonably educated guesses.MixMastaTJ posted:Yes, these things could cause inflation, but if it's a system we NEED then there isn't any benefit on trying to "pay" for it ahead of time. Like, do you think we'll wait till we can "pay" for military services if another country invaded us? Obviously not: we'd deal with the immediate necessity and deal with economic ramifications after things stabilize. Why aren't we taking the same lens to healthcare, poverty or education? The reason we're not on a total war footing to establish fully-funded programs to handle healthcare, poverty, etc. is because people don't think it's worth doing. The problem is not sufficiently dire to them. It's not worth the taxes / deficit increase. Under MMT, they'd argue it's not worth the taxes / inflation increase instead. It would all be the same, all the same arguments apply, except people would say "become the next Zimbabwe" instead of "bankrupt the nation". The only place things would be different are for programs which cause disproportionately more/less inflation for a given amount of dollars spent.
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Jan 28, 2019 08:37
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CrypticTriptych posted:The only place things would be different are for programs which cause disproportionately more/less inflation for a given amount of dollars spent. You mean like healthcare, quality of life improvements for the working class and education?
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Jan 28, 2019 09:03
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MixMastaTJ posted:Edit: in fact, how sure are we that M4A will cause inflation? There's a chance that M4A would improve overall health, increasing the effectiveness of our workforce and reducing the overall spending by the government on healthcare. If people are spending more time at work, they're paying more in taxes, and if the government winds up paying less for healthcare, that leads to deflation. In other words, what if it actually needs to be payed for with tax CUTS? This is pretty much exactly what I mean. Under a conventional understanding a 10 dollar program requires 10 dollars of tax money and has clear (but politized) places to get tax money, uniformly, across any possible program. Under this framework it's just this forever. Any program could require a raise or a lowering or no change taxes at all. Then the rest of history will just be everyone announcing every single project as one of those ones that is tax lowering and their opponents as tax raising forever and ever. And it's even worse than current forms of lying because with something as abstract as inflation or deflation I or any layman literally does not have any tools to even judge who is or isn't lying about it, maybe all the projects I hate really are the tax lowering ones and the project I like will need huge taxes to counter inflation, I don't have any reason to claim otherwise except "I'd hate that!"
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Jan 28, 2019 13:30
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MixMastaTJ posted:
Above, I made an effortpost about the production possibility curve and other such things. But I will try to summarize it. What is your supply of unused medical services? How many unemployed or underemployed doctors, nurses and medical personnel are there? How many empty hospital rooms? How many medicines sitting in a closet, untouched? If you have 500 billion dollars worth of doctor time a year, doctors sitting in empty examining rooms, twiddling their thumbs, then that is how much money you can give to medical programs before you see inflation. But you can't take one trillion and give it to these programs because the supply doesn't exist. That is the point when inflation hits. In a really simplified analogy: say you want Fig Newtons. You go to your local grocery store with 50 dollars and buy half the Fig Newtons on the shelf. With 100 dollars, you can buy all of the Fig Newtons. But if you had 200 dollars, you would still only be getting the same amount of Fig Newtons, because that is all there is on the shelf. So the question with any type of Medicare for All program is, what is the slack capacity? Do we have a lot of trained doctors in already built hospitals, sitting there doing nothing? Then the government can "create" money to pay for their services, which are already there. But the government can't "create" money to pay for things that don't exist.
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Jan 28, 2019 15:40
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Dead Reckoning posted:
Who would have thought Donald Trump would be the President to make MMT mainstream? Thinking about some things in terms of MMT, Federal Student loan payments are effectively a tax. Paying your loans takes money out of the economy. I wonder how much of the cost of issuing new loans is offset by the revenue from people paying them back?
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Jan 28, 2019 16:31
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CrypticTriptych posted:So there are two facts/concepts here that you would need to convince people of: If you did 1 then the value of the dollar would be 0 in short order because its value is only derived from the fact that you have to pay taxes in dollars. Owlofcreamcheese posted:Option 2: the computers will spit out an answer different than 1 trillion. Which could be like, half a trillion or two trillion or zero or anything depending on the specifics of the programs. In which case it's an interesting though, but what if project X and Y are a war with jupiter and full space medicare. I feel like no particular reason to assume the big number will go to the thing I am ideologically against and the little number would consistently go to things I like. What if MMT says that wars are free forever but X good thing actually would need a dollar for dollar matching to be paid for. What if a politician SAYS MMT says that and a different one says it doesn't? It doesn't feel guaranteed it will give answers I like and it doesn't feel clear how I will even know what the answers are except by trusting whoever says what I would have liked anyway. This is why we have democracy, presumably. What's your guarantee now that the government won't do things you hate with your taxes? Mine is caging toddlers. MMT doesn't "say" anything. It's up to the government to direct spending. quote:It doesn't feel guaranteed it will give answers I like How does the classic notion of how taxes work guarantee answers you like? Dead Reckoning posted:"we can keep cutting taxes on corporations and billionaires while providing our current level of services, and this doesn't matter as long as inflation doesn't get out of hand." Not really because that just encourages money to pool and be hoarded by a very small number of individuals which is very bad for several reasons, one of which is inflation. Part of proper taxation is seeking to ensure that money flows and that you don't have 10 billionaires and tens of thousands of homeless people on the other end of the spectrum. It's more desireable that instead of no taxes or some very low flat tax, that we'd have a progressive tax system that starts at 0 and quickly ramps up to ~95% past say two million dollars annually (all forms of income combined). You want to be rebalancing and shifting such that currency doesn't accumulate past any sensible purpose. Part of taxation would also ideally be to mitigate income inequality, which is another empirically bad thing for an economy to have. MixMastaTJ posted:Except the relationship between government spending and inflation is extremely abstract. Also this, yeah. We really need to stop looking at inflation like some linear thing where if gov't spends $1 trillion then $1 trillion must come from the private sector to "pay for it" otherwise there will be $1 trillion worth of "inflation" and you haven't done anything in the end. That's not accurate. Gov't spending doesn't spur inflation so directly. Inflation is money supply growing faster than the economy. If $1 trillion of gov't spending spurs $1.5 trillion of economic activity in the private sector then there isn't any inflation from the $1 trillion of spending. The government can also capture money by doing things like selling bonds and treasuries, taxes aren't the only sink. COMRADES fucked around with this message at 18:16 on Jan 28, 2019 |
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Jan 28, 2019 17:52
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COMRADES posted:Not really because that just encourages money to pool and be hoarded by a very small number of individuals which is very bad for several reasons, one of which is inflation. Money hoarding causes deflation, not inflation. It's like, the primary causes of deflation and the main part of a deflationary spiral. So under MMT anything that encourages significant money hoarding/accumulation would need to be matched with a tax CUT, not an increase, to keep the economy steady. Or you could pay for a government program which would be inflationary by giving existing money to already rich people that would use it to increase savings instead of spending it? Which just gets weird. even if the math works out that is what I mean by "it might give you answers you don't like"
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Jan 28, 2019 18:16
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Owlofcreamcheese posted:Money hoarding causes deflation, not inflation. It's like, the primary causes of deflation and the main part of a deflationary spiral. So under MMT anything that encourages significant money hoarding/accumulation would need to be matched with a tax CUT, not an increase, to keep the economy steady. Er yes I meant to say deflation. But it doesn't change anything else of what I said I think. Why would you want to encourage any kind of hoarding or accumulation at all or give money to the rich to control inflation? It would be the government's function to reduce inflation by capturing money back from the private sector. e: I think giving existing money to already rich people who increase savings would be deflationary... I dunno I think you're way overthinking it to be honest. It already functions like this due to the nature of how the Fed and the banking system work, it's just that the politicians are morons and/or grifters who want to enrich their already wealthy friends. Delthalaz posted:Also, since currencies float against each other in international exchanges -- does everyone in the world need to embrace MMT for those rates to remain stable? The same way they float against each other now already. It's just based on the relative strength of their economies and their economic output. Dollars aren't backed by anything right now, other than the "full faith and credit" of the US government. Same with Euros, Yen, etc. If the US government collapsed entirely tomorrow then the US dollar would be worthless. COMRADES fucked around with this message at 18:28 on Jan 28, 2019 |
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Jan 28, 2019 18:19
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Delthalaz posted:How does all of this take into account actual instances of hyperinflation? As in, what would this system do differently than the scenarios that produced hyperinflation? I'm no economist and expert in this topic In MMT inflation is controlled by raising taxes, raising interest rates, and reducing discretionary spending. Those are the same tools we use now to control inflation. Hyperinflation is almost always caused by a government holding debt denominated in a foreign currency and then being unable to service that debt when its economy cools. This isn't something that the US needs to worry about because the US borrows in dollar-denominated debt.
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Jan 28, 2019 18:24
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MMT also points out that it isn't just the Fed that creates money - banks do this as well when they loan money. They are required to hold a certain reserve back but otherwise they are free to loan money out, and thus via the power of fractional reserve banking they can take a deposit of $10k and create four $25k loans distributed to four different people (depending on what the reserve requirement is obviously; I don't want to look up the actual % requirement at the moment - you get the point). They are creating money supply out of thin air in this way. This is actually where most of the money supply comes from right now, not the government printing money. Thus if you're worried about inflation but don't want to raise taxes, you could do something like increase the reserve ratio COMRADES fucked around with this message at 18:39 on Jan 28, 2019 |
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Jan 28, 2019 18:32
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Also to really hammer in that gov't spending doesn't equal a linear increase in inflation... https://www.stlouisfed.org/on-the-economy/2016/may/how-does-government-spending-affect-inflation quote:Federal Reserve Bank of St. Louis That's because a dollar of gov't spending can (and typically does) yield more than a dollar of economy activity in the private sector. COMRADES fucked around with this message at 18:40 on Jan 28, 2019 |
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Jan 28, 2019 18:34
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glowing-fish posted:Above, I made an effortpost about the production possibility curve and other such things. But I will try to summarize it. Healthcare isn't a "supply/demand" issue like Fig Newtons. If I want a Fig Newtons and the store is out I buy off brand cookies. If I have a gunshot wound and can't get a doctor, I die. The problem at present isn't lack of hospitals and doctors- it's the average citizen being priced out of needed procedures. It sounds like the implication you're making is "well, if the free market says they should die, they should die." Furthermore, Medicare doesn't work like that? We don't just give money to hospitals and cross our fingers. If the hospitals aren't able to fullfil a medical service they don't get the money for it. That money for a procedure that can't be met never enters the economy. MixMastaTJ fucked around with this message at 18:59 on Jan 28, 2019 |
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Jan 28, 2019 18:51
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Family Values posted:In MMT inflation is controlled by raising taxes, raising interest rates, and reducing discretionary spending. Those are the same tools we use now to control inflation. Hyperinflation is almost always caused by a government holding debt denominated in a foreign currency and then being unable to service that debt when its economy cools. This isn't something that the US needs to worry about because the US borrows in dollar-denominated debt. OK, I guess I'm still confused. Is MMT something that can only be practiced by the US government because it can print dollars? And should governments not issue bonds at all -- just create dollars (or whatever the local currency is) and spend them?
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Jan 28, 2019 19:37
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Delthalaz posted:OK, I guess I'm still confused. Is MMT something that can only be practiced by the US government because it can print dollars? MMT can be practiced by any government that prints its own currency, but yeah for example Greece can't because they are on Euros and they don't control the Euro. This was one of the reasons they had/have a crisis - they owe loans in Euros and Germany and the other creditors want payment which requires Greece to make severe cuts to government services (which the people are pissed off about, understandably). You know that the US government issues bonds to spend money, a kind of "loan" since the bonds are purchased on the open market. What you don't maybe realize is that the Fed often turns around and buys those bonds back from the open market with money it just creates. With regard to MMT, bonds are used to remove money supply from the economy to counter inflation. COMRADES fucked around with this message at 19:50 on Jan 28, 2019 |
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Jan 28, 2019 19:45
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Delthalaz posted:OK, I guess I'm still confused. Is MMT something that can only be practiced by the US government because it can print dollars? Any nation that issues its own currency could use MMT. Yes we should continue selling bonds because US debt is an important market stabilization tool. It's just that we could decide how much debt to sell by directly measuring its stabilizing effect rather than trying to tie it to spending.
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Jan 28, 2019 19:54
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MixMastaTJ posted:Healthcare isn't a "supply/demand" issue like Fig Newtons. If I want a Fig Newtons and the store is out I buy off brand cookies. If I have a gunshot wound and can't get a doctor, I die. But Healthcare is a supply and demand issue in any system because the ability to meet demand is constrained by, among other things, geography and time. If an ED-209 goes on a rampage in my city the otherwise normal supply of gunshot doctors will get overwhelmed and some people simply won't get treatment, regardless of financial status. Similarly, getting bit by a coral snake in Florida is a likely death sentence because the cost of the antivenom, combined with the rarity of the bites, has resulted in the antivenom no longer being produced and available in Florida. And I don't see how changing the mechanism of government spending would change that calculus - sure, the government could fund sufficient antivenom production, but using your "build fewer tanks instead" option, why would they? If MMT has abstracted spending enough why wouldn't every project simply wind up funded to the max?
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Jan 28, 2019 20:06
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Zachack posted:but using your "build fewer tanks instead" option, why would they? If MMT has abstracted spending enough why wouldn't every project simply wind up funded to the max? Also "build fewer tanks" is the conventional understanding, under MMT the answer on how to pay for medicine could be to build fewer, more or the same number of tanks with no particular clarity on how to even know what the answer is.
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Jan 28, 2019 20:11
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Owlofcreamcheese posted:Also "build fewer tanks" is the conventional understanding, under MMT the answer on how to pay for medicine could be to build fewer, more or the same number of tanks with no particular clarity on how to even know what the answer is.
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Jan 28, 2019 20:19
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twodot posted:It may be the case that you personally can't understand the inflationary effect of building tanks that provide no actual economic utility, but please stop pretending like other people couldn't understand that. (Hint: it is extracting resources out of the economy while also increasing the money supply) That would be deflationary. I mean, imagine if we made tanks by gluing a bunch of quarters together then having them go get blown up or sit in a field somewhere forever if you want to realize why.
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Jan 28, 2019 20:27
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twodot posted:It may be the case that you personally can't understand the inflationary effect of building tanks that provide no actual economic utility, but please stop pretending that other people couldn't understand that. (Hint: it is extracting resources out of the economy while also increasing the money supply) The sight of tanks sparks joy, so they do not get thrown out.
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Jan 28, 2019 20:28
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Owlofcreamcheese posted:That would be deflationary. I mean, imagine if we made tanks by gluing a bunch of quarters together then having them go get blown up or sit in a field somewhere forever if you want to realize why. No, that's inflationary. This is almost literally Keynes' 'dig holes in the ground to bury gold' thought experiment.
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Jan 28, 2019 20:33
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MixMastaTJ posted:Healthcare isn't a "supply/demand" issue like Fig Newtons. If I want a Fig Newtons and the store is out I buy off brand cookies. If I have a gunshot wound and can't get a doctor, I die. There's an ongoing staffing crisis in healthcare. Even if the government stuffs money into the hands of potential patients, doctors and nurses can't really work much faster. There would need to be, as glowing-fish called it, slack capacity available to be bought. If the capacity isn't there, the hospital will just raise prices until they're just barely full again -- ideally this incentivizes more hospitals, doctors, and nurses in the long run, but in the short run the existing hospitals earn more money for the same work and not many more people get treatment. Medicines OTOH I would guess have more slack, and their production is certainly easier to ramp up in the short term. COMRADES posted:Also to really hammer in that gov't spending doesn't equal a linear increase in inflation... OK, so under MMT, is the "cost" of a gov't program = ($ gov't spends) - ($ economic activity generated)? Because that number can and has been studied for many major programs -- foodstamps, NASA, etc. and would be possible to discuss in concrete terms. We could do effective cost/benefit analysis with that.
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Jan 28, 2019 20:48
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CrypticTriptych posted:OK, so under MMT, is the "cost" of a gov't program = ($ gov't spends) - ($ economic activity generated)? Because that number can and has been studied for many major programs -- foodstamps, NASA, etc. and would be possible to discuss in concrete terms. We could do effective cost/benefit analysis with that. Just  if you think determining the true cost and economic activity generated by a government program is something that can be trivially done in a consistent and non-partisan manner.
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Jan 28, 2019 20:59
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Dead Reckoning posted:Just Um, actually fiscal multipliers are pretty well studied.
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Jan 28, 2019 21:05
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CrypticTriptych posted:OK, so under MMT, is the "cost" of a gov't program = ($ gov't spends) - ($ economic activity generated)? Because that number can and has been studied for many major programs -- foodstamps, NASA, etc. and would be possible to discuss in concrete terms. We could do effective cost/benefit analysis with that. As far as I understand it, that's accurate. E: the concept is definitely fuel for the Keynesian perspective
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Jan 28, 2019 21:13
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Family Values posted:No, that's inflationary. This is almost literally Keynes' 'dig holes in the ground to bury gold' thought experiment. keynes' claim about burying gold and then digging it up wasn't that that would cause inflation, what are you talking about?
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Jan 28, 2019 21:23
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Maybe you first should explain what you think inflation means. Does stimulating the economy lead to inflation?
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Jan 28, 2019 21:36
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Family Values posted:Maybe you first should explain what you think inflation means. Does stimulating the economy lead to inflation? Is this seth rogan explaining gluten? inflation is a very simple term with a clear meaning, it's a fall in purchasing power of a unit of money. stimulating the economy can make inflation or not make inflation or make deflation depending what you are doing.
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Jan 28, 2019 21:43
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Government projects (like building tanks) should DIRECTLY create inflation- imagine the economy like a funnel. Government spending pours water in the top, water flows out the bottom as taxes. When the government buys a tank, they're adding more funds to the economy but the private sector won't have any new labor. Once the tank is built, the builders will go out and spend their cash and the tank will collect dust. The only extra taxes the government will be able to take out (deflating the economy) is what they just poured in anyway. Now, if that tank were used to capture new land for the private sector, valued greater than what was spent on the tank, it would have a net effect of deflation.
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Jan 28, 2019 22:11
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MixMastaTJ posted:Except the relationship between government spending and inflation is extremely abstract. There isn't a magic inflation points calculator. As pointed out earlier, a government surplus means the private economy is losing money. You NEED an amount of government spending to at least keep up with economic growth, otherwise you get deflation. It seems like the whole point of hyping MMT is to give cover for massive, unfunded expenditures on social programs in the hope that, by the time it becomes necessary deal with the consequences of that spending, the programs will be popular enough that raising taxes or reducing spending elsewhere are the only politically viable options. COMRADES posted:Part of proper taxation is seeking to ensure that money flows and that you don't have 10 billionaires and tens of thousands of homeless people on the other end of the spectrum. It's more desireable that instead of no taxes or some very low flat tax, that we'd have a progressive tax system that starts at 0 and quickly ramps up to ~95% past say two million dollars annually (all forms of income combined). You want to be rebalancing and shifting such that currency doesn't accumulate past any sensible purpose. Family Values posted:In MMT inflation is controlled by raising taxes, raising interest rates, and reducing discretionary spending. Those are the same tools we use now to control inflation. Family Values posted:Hyperinflation is almost always caused by a government holding debt denominated in a foreign currency and then being unable to service that debt when its economy cools. This isn't something that the US needs to worry about because the US borrows in dollar-denominated debt.
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Jan 28, 2019 22:21
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theblackw0lf posted: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. I just want to point out for the sake of completeness that inflation and hyperinflation are very different things. Inflation, even high inflation, does not cause or risk hyperinflation. Neither do inflation and hyperinflation have the same causes, effects or solutions. Inflation is an increase in general price level over time and has (also depending on your economic ideology) multiple causes, such as an increase in money supply (without a commensure increase in demand for money, aka economic activity) a price/wage spiral or unemployment. Inflation is infinitely preferably to deflation for a healthy economy (as under conditions of deflation people start hoarding their money and then poo poo breaks down, kinda like how austerity is a government "hoarding" its money and causing poo poo to break down) so central banks try to shoot for the ideal of a low % of inflation with their monetary policies. Hyperinflation is what happens when people lose confidence in the value of money en masse. That is, they believe the money currently in their possession will be completely worthless within a very short period of time, and so they all try to convert it into something with value (either another currency or something with intrinsic value, like food) immediately so that they are not the suckers left holding. This is comparable to a stock crashing after investors all lose confidence. The result is that everyone who possessed that currency loses. As people continue to incur tax obligations and continue to get paid in that currency however, if a government is particularly stubborn, this hyperinflationary spiral can continue for a long time, with the famous comical results of billion dollar bank notes and such. So in other words, this is what happens when people all decide that this particular currency is really just some nicely coloured fancy paper with no further meaning, which tends to be caused by massive political instability (on the order of magnitude of not believing a country will exist in the form that it does in the very near future) or deliberate political fuckery of a government with its currency, like when Weimar Germany decided to blow up its currency as a way to get out of Versailles reparation payments and resist French occupation of the Ruhr. So "wildly increasing the money supply" can indeed lead to hyperinflation, but only if a bunch of other requirements are met as well. Requirements like the increased money not being offset with an increase in economic activity or taxation, or a loss of ability (or at least credibility) of the issueing government to employ force to collect its taxes. You'll note that a large majority of hyperinflation occured in countries either at war, under occupation, during or immediately after a revolution (including the fall of communism under this), or just after a massive war they came out on the losing side of. In my view it is clear that hyperinflation is actually more of a symptom of an underlying problem (which we should be wary of and avoid) than a specific problem we should be wary of in itself. Orange Devil fucked around with this message at 22:40 on Jan 28, 2019 |
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Jan 28, 2019 22:32
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Dead Reckoning posted:OK, but how do you get people to agree to raise taxes or reduce discretionary spending when the relationship between policy decisions and inflation is abstract? Discretionary spending usually goes down automatically when the economy heats up. A hot economy means more people working, which means fewer welfare recipients. quote:Someone can go ahead and correct me if I'm wrong, but part of the reason the US is able to find buyers for dollar denominated debt is because control of the federal reserve is in the hands of technocrats, rather than congress being able to print another billion dollars every time they have an idea. What do you think happens right now when congress decides to spend (where 'spend' might include cutting taxes, like they did last year)? That's not in the hands of the technocrats at the Fed. Yet somehow we're still able to find buyers for T-bills. Family Values fucked around with this message at 22:45 on Jan 28, 2019 |
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Jan 28, 2019 22:42
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