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MixMastaTJ posted:While on a local level the cost for a widget might drop quote:overall the goods and services available in the economy will drop, meaning each dollar now has less spending power. The problem is that when you combine the two, you get a deflationary spiral, because goods and services in the economy drop, people's income drop (people lose their jobs etc) so they have less money to spend, and are less willing to spend money. So prices for goods drop further and the net result is still deflationary. That's why in recessions (goods/services drop) you tend to get zero inflation or deflation, while in boom times inflation increases. https://www.investopedia.com/terms/d/deflationary-spiral.asp quote:A deflationary spiral typically occurs during periods of economic crisis, such as a recession or depression, as economic output slows and demand for investment and consumption dries up. This may lead to an overall decline in asset prices as producers are forced to liquidate inventories that people no longer want to buy. Consumers and businesses alike begin holding on to liquid money reserves to cushion against further financial loss. As more money is saved, less money is spent, further decreasing aggregate demand. At this point, people's expectations regarding future inflation are also lowered and they begin to hoard money. Consumers have less incentive to spend money today when they can reasonably expect that their money will have more purchasing power tomorrow. This btw is exactly why deflation is way worse than inflation for the average person who needs a job. Typo fucked around with this message at 07:23 on Mar 7, 2019 |
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Mar 7, 2019 07:19
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Germany was not a wealthy power in the 1920s, and certainly wasn't the economic powerhouse it is today. The hyperinflation was just one symptom of many that came from the government disintegrating, not what caused that disintegration. I highly recommend The Wages Of Destruction if ww2 and economics are your cup of tea. Splode fucked around with this message at 07:54 on Mar 7, 2019 |
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Mar 7, 2019 07:52
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Splode posted:Germany was not a wealthy power in the 1920s, and certainly wasn't the economic powerhouse it is today. The hyperinflation was just one symptom of many that came from the government disintegrating. I highly recommend The Wages Of Destruction if ww2 and economics are your cup of tea. hyperinflation was intentional because the government was trying to use it as a way of not paying reparations to the allied powers
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Mar 7, 2019 07:53
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Yeah, and there were armed political paramilitaries fighting in the street. It's not a relevant example of inflation causing problems in the modern us economy because you have to ignore two different elephants in the room, one who died in ww1 and the other with a very tiny moustache
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Mar 7, 2019 07:56
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Typo posted:The problem is that when you combine the two, you get a deflationary spiral, because goods and services in the economy drop, people's income drop (people lose their jobs etc) so they have less money to spend, and are less willing to spend money. So prices for goods drop further and the net result is still deflationary. Hm. Good point. I guess in terms of the economy you're looking at it wouldn't cause inflation. I think, though, if you were looking at it from the perspective of some other currency, which remains stable, the spending power of the resceeding dollar would drop? Like, if a business typically takes Euros or USD and they see the US in a deflationary cycle they would require more USD for their goods while the price in Euros would remain stable. It seems intuitive to me that GDP dropping with a constant amount of currency would cause inflation but maybe I'm off base. Splode posted:Germany was not a wealthy power in the 1920s, and certainly wasn't the economic powerhouse it is today. The hyperinflation was just one symptom of many that came from the government disintegrating, not what caused that disintegration. I agree, Germany is a bad example. It's the one MMT critics love, though. But yeah, I don't think there's any reason to suspect hyperinflation could occur in any high income nation without some other severe economic crisis.
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Mar 7, 2019 18:55
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CNBC headline giving me a good laugh: "Fed doesn't have to worry about high inflation, and that's a problem."
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Mar 7, 2019 19:26
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MixMastaTJ posted:Technically any tax will reduce consumption, universally lowering demand and thus reducing economic growth. If a hypothetical tax on real estate speculation resulted in lower rental and housing prices then the additional income going to renters and home buyers might be more than enough to compensates for the reduced income accruing to home owners and landlords. I think the impact of any given tax needs to be assessed based, as much as possible, on the actual economic circumstances under which the tax would be applied. Typo posted:taxes can cause inflation if you assume there's no propensity to consume at the individual/household level and you take the money and the government spends it Or you could have a scenario where supply chain bottlenecks mean that a decrease in demand doesn't stop an increase in prices. Imagine the (extreme example) of the price of bread during a famine. People might be dying en masse, farmable land might be decreasing, and aggregate demand might be plummeting but the handful of people still capable of producing food could raise prices.
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Mar 7, 2019 19:28
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Helsing posted:If a hypothetical tax on real estate speculation resulted in lower rental and housing prices then the additional income going to renters and home buyers might be more than enough to compensates for the reduced income accruing to home owners and landlords. Oh, for sure. I was just describing the most direct effect. Like, that hypothetical tax would directly cause some amount of recession but it would indirectly spur a net economic growth. The point is more a sales tax on off brand food is liable to cause greater amounts recession than would be offset by the cash removed from the economy. So if you used a tax like that to "pay" for some program, you'd effectively hit the economy with an inflation double whammy. There's still a value to vice taxes but they should be passed for that value, not to "pay for x."
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Mar 7, 2019 22:36
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Infinite Karma posted:Inflation is a good thing, because it eases debts and increases liquidity in the economy. It also devalues savings and capital, while not devaluing labor (hypothetically), transferring power from the haves to the have-nots. Those are politically loaded statements, but are still good faith arguments, even if you don't want that outcome. I think the economy adapts. In Chile, for example, transactions for all sorts of things - real estate, annual contracts of many kinds, taxes, even fines - are demoninated in special inflation-adjusted units (UF or UTM). The inflation risk is shifted onto consumers instead of being assumed by lenders or the owners of capital. Were US policy to be more aggressive about causing inflation I imagine similar arrangements would become more common. Not accusing anyone in this thread, but a lot of people seem to make the leap that "MMT, therefore we can spend whatever we want" and I don't think there's any way that can be right.
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Mar 8, 2019 14:17
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MixMastaTJ posted:I think, though, if you were looking at it from the perspective of some other currency, which remains stable, the spending power of the resceeding dollar would drop? Like, if a business typically takes Euros or USD and they see the US in a deflationary cycle they would require more USD for their goods while the price in Euros would remain stable. I edited because I think I'm not sure if I understand this statement correctly specifically, what do you mean by "their" goods, goods produced in the US being sold to Europe, or goods produced by Europe sold to the US? because what you seem to be getting into is the effect currency evaluation and devaluation has on international trade quote:It seems intuitive to me that GDP dropping with a constant amount of currency would cause inflation but maybe I'm off base. The key equation in quantitative theory of money is: MV=PQ https://en.wikipedia.org/wiki/Equation_of_exchange basically the nominal money supply is only one part of the equation that which effects prices, if the "velocity of money" (i.e how often people spend money) is low, then prices don't go up or even go down if V drops. Think about it like this, if someone locks up a large percentage of money in the system in bank vaults and never touch them, then it has no effect in increasing prices. In recessions, that's exactly what people do: because people want to save to cushion against further "bad things" when GDP is dropping. So they lock their money up in bank vaults. Typo fucked around with this message at 18:18 on Mar 8, 2019 |
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Mar 8, 2019 18:04
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Typo posted:I edited because I think I'm not sure if I understand this statement correctly Okay, thanks. Yeah, I was describing international trade but I guess if price of widgets in the US drop that would actually have a deflationary effect if anything. So, for MV=PQ, rise in P is inflation, right? So technically any sales tax is directly inflationary and either spending will rise to accommodate it or transactions will drop.
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Mar 8, 2019 22:45
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This is a bad poll https://twitter.com/videotroph/status/1105979080330149889 Here are the two questions quote:Thirty-six percent of economists disagreed, and 52% strongly disagreed with the statement "Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt." (Two percent had no opinion.) What's wrong with these poll questions class? theblackw0lf fucked around with this message at 21:49 on Mar 14, 2019 |
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Mar 14, 2019 21:47
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This may be the best explanation of MMT from a mainstream publication (and one of the best from any publication) I've seen https://www.bloomberg.com/news/features/2019-03-21/modern-monetary-theory-beginner-s-guide
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Mar 21, 2019 19:42
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theblackw0lf posted:This is a bad poll 'always' and 'as much as they want'?
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Mar 21, 2019 20:32
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theblackw0lf posted:This may be the best explanation of MMT from a mainstream publication (and one of the best from any publication) I've seen Their simple description is bad because it emphasizes a connection to debt that doesn't make sense: quote:MMT proposes that a country with its own currency, such as the U.S., doesn’t have to worry about accumulating too much debt because it can always print more money to pay interest. So the only constraint on spending is inflation, which can break out if the public and private sectors spend too much at the same time. As long as there are enough workers and equipment to meet growing demand without igniting inflation, the government can spend what it needs to maintain employment and achieve goals such as halting climate change. They go on to say this, though: quote:The reason the government doesn’t need to sell treasury securities, or levy taxes, to spend money is that the central bank, under the control of the treasury, can pay for everything by conjuring up electronic money. Under their own assertions, a country with its own currency doesn't need to worry about debt because it doesn't need to accrue the debt in the first place. If a country wants to sell Treasuries as a tool to achieve policy goals, that's fine. But such a country needs neither to tax nor accrue further debt to spend more money. There's no need to assert some connection between government spending and accumulating debt on which it will have to pay interest, especially when you're giving someone some language they can trot out for their friends.
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Mar 22, 2019 01:03
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MMT still seems like lame libertarian garbage where we pretend we don't need to tax the rich and instead can just get everything for free with no tax is theft. (but actually just paying for things by taxing mostly non rich people with inflation instead in a way that hides who's paying)
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Mar 22, 2019 01:12
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Owlofcreamcheese posted:MMT still seems like lame libertarian garbage where we pretend we don't need to tax the rich and instead can just get everything for free with no tax is theft. (but actually just paying for things by taxing mostly non rich people with inflation instead in a way that hides who's paying) this is a misunderstanding
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Mar 22, 2019 01:13
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GreyjoyBastard posted:this is a misunderstanding Paying for things via inflation is taking people's wealth, but it is less direct than a tax, and disproportionately effects people with fixed incomes or simple assets. Just having a regular old tax lets you actually tax the people that should be taxed and rebate the people that shouldn't be. an inflation based "tax" just makes the poor guy's dollar worth less (but probably not the rich guy's stock option)
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Mar 22, 2019 01:25
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MMT doesn't advocate for "paying" for programs with inflation, it merely says that the government's ability to spend is constrained by the need to avoid excessive inflation. Besides which, most MMT economists advocate for a variety of taxes, including taxes aimed specifically at curbing wealth inequality. The politicians championing MMT are also calling for an increasing top income tax rates to 70%.
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Mar 22, 2019 03:11
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Owlofcreamcheese posted:Paying for things via inflation is taking people's wealth, but it is less direct than a tax, and disproportionately effects people with fixed incomes or simple assets. Just having a regular old tax lets you actually tax the people that should be taxed and rebate the people that shouldn't be. an inflation based "tax" just makes the poor guy's dollar worth less (but probably not the rich guy's stock option) Like Helsing just said, inflation is what happens if you spend but don't tax. The whole idea of MMT is that you balance out the inflows of central bank cash into the economy with outflows from taxes. Inflation is what happens when the levers are aligned badly, not as a natural consequence. The reason it's different from orthodox economics is because those two numbers don't have to equal zero to avoid inflation.
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Mar 22, 2019 03:17
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Owlofcreamcheese posted:MMT still seems like lame libertarian garbage where we pretend we don't need to tax the rich and instead can just get everything for free with no tax is theft. (but actually just paying for things by taxing mostly non rich people with inflation instead in a way that hides who's paying) This is actually true in the sense the first time i came across 0% tax lets just print money for everything was on some crazy libertarian website 10 yrs ago or something
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Mar 22, 2019 03:24
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Infinite Karma posted:Like Helsing just said, inflation is what happens if you spend but don't tax. Im pretty sure this is not the idea of MMT
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Mar 22, 2019 03:29
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Good to see intellectual heavyweights Typo and Owlofcreamcheese have really brought their A game to this discussion.
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Mar 22, 2019 15:04
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Thank you comrade development of socialistic monetary policy continues onwards
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Mar 22, 2019 17:00
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It's pretty badass that MMT is simultaneously libertarian and socialist at the same time.
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Mar 22, 2019 18:07
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perhaps it is left libertarianism
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Mar 22, 2019 18:34
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It's neither. I think it's important to separate the descriptive components from the policy proposals.
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Mar 22, 2019 18:41
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It's funny because most of the criticisms of MMT are not even about features exclusive to MMT. Like balancing spending against inflation, that's already a part of mainstream (Keynesian) economics.
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Mar 22, 2019 18:52
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Here's a question: could widespread knowledge of MMT undermine the conditions that allow MMT to apply to the US government in the first place? It seems like for the MMT analysis of the US to continue to be true, the US needs to continue to maintain people's faith in the dollar. If we ever get to a point where the government says "I would like to pay for a thing using this dollar I have just popped into existence" and the person they are trying to pay says "hold on, I know about this, I will only accept payment in euros/pounds/camels/whatever", we're hosed and have to go back to balancing inflows and outflows again?
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Apr 27, 2019 06:30
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AFAIK, not really. The U.S. can print more dollars right now, and you can still buy things with the Yuan despite the Chinese government putting their thumb on the scales. The danger would be Congress causing volatility or inflation through mismanagement.
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Apr 27, 2019 06:46
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If USD inflation gets so bad people stop wanting to accept it as payment, we're in trouble, but the solution to that is for policy makers to not make USD inflation so bad people stop wanting to accept it as payment. Which (again) is a thing our government needs to care about under any sort of economic analysis, because inflation exists independent of how you examine macroeconomics.
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Apr 27, 2019 07:02
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VostokProgram posted:Here's a question: could widespread knowledge of MMT undermine the conditions that allow MMT to apply to the US government in the first place? It seems like for the MMT analysis of the US to continue to be true, the US needs to continue to maintain people's faith in the dollar. If we ever get to a point where the government says "I would like to pay for a thing using this dollar I have just popped into existence" and the person they are trying to pay says "hold on, I know about this, I will only accept payment in euros/pounds/camels/whatever", we're hosed and have to go back to balancing inflows and outflows again? The danger of widespread knowledge of economic policy suddenly springing into existence is pretty close to 0. People don't care to understand how currency works.
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Apr 28, 2019 16:14
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Family Values posted:It's funny because most of the criticisms of MMT are not even about features exclusive to MMT. Like balancing spending against inflation, that's already a part of mainstream (Keynesian) economics. MMT is right in an immediate empirical sense, it's precisely the keynesian assumptions held by left-wing MMTers that cause them to draw incorrect conclusions from the immediate reality that they understand well. And because no one's letting them anywhere near political power, they can't exactly test those keynesian hypotheses and deepen their theory either. And they won't gain political power, long term anyway, because they represent the interests of no political power bloc. The core issue at stake is the keynesian hypothesis applied by left-wing MMTers that investment leads profits, that state investment can set the rate of profit to what is necessary to keep capitalists reinvesting their wealth into production of all the concrete goods that society needs. Looking more closely at the essentially correct MMT assertion that the state can always do that with regard to goods sold in the currency that it controls reveals the error: for the former to follow from the latter, you would either need a world state to match the world economy or a closed national economy with a population that is content with what it can produce without resorting to imports. (And even with that, currency is just an allocation mechanism, profit/surplus is generated in production, in the restriction of the production of common consumption goods in relation to production of means of production and luxury goods, so in lean times it's either empty pockets or empty stores for the mass of people. While it's a general social law, it's as intense as it gets in a system of production for profit for a social elite even if it's of a sort that can prevent recessions.) Basically, left-wing MMT prescriptions used for pseudo-socialist purposes would invite an economic counterattack capable of shutting down the environment that their implicit assumptions require, namely that society can curtail the escape of foreign currency from the economy so that the relative value of its currency stays at a level where production that consumes foreign inputs is generally profitable. See, if it's not profitable, even if the state either takes up the unprofitable production or subsidizes the producers so that they make a profit, that represents a flow of value escaping out of the country through the buying price of those inputs. It's of course fine as long as it's balanced out by a counterflow of value through profitable exports, like Venezuela balanced its import subsidies with oil exports, but once it becomes generalized in the economy, it puts further downward pressure on the relative value of your currency in the world market and forces the economy into either austerity (importing fewer goods and/or reducing costs for exports and foreign investors) or a loop of accelerating devaluation of the local currency. Nowadays it's a regular policy tool to start this kind of loop through a calculated economic blockade aimed at crashing the supply of core inputs and/or the foreign demand of core outputs, throwing international currency flows off balance and making the stability of the currency being attacked dependent on active central bank operations. Such operations are ultimately limited by its foreign currency reserves and once the reserves start running out and frugality is forced on it, the hard decisions begin. So ultimately MMT will almost certainly be left as a description of how things are now rather than something that will be used long-term to consciously benefit society: those who can apply it would prefer to discredit it for anyone but themselves and those who want to better society can be denied MMT as a tool.
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May 21, 2019 13:25
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Rich people are incentivized to gently caress us all over if we try to make things better? Hmmmmmmm
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May 21, 2019 13:43
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uncop posted:MMT is right in an immediate empirical sense, it's precisely the keynesian assumptions held by left-wing MMTers that cause them to draw incorrect conclusions from the immediate reality that they understand well. And because no one's letting them anywhere near political power, they can't exactly test those keynesian hypotheses and deepen their theory either. And they won't gain political power, long term anyway, because they represent the interests of no political power bloc. The chief issue here is that the US is not really like other economies because it is the chief reserve currency and that in the past, monetary expansion does not seem to have a tremendous effect on inflation. You could certainly argue that a country with a much weaker currency and few foreign reserves would be in poor shape, and it really couldn't rely on MMT without facing outflows or be forced to subsidize imports. That said, the big arguement is in the US itself, so it is a different situation. Btw, one could argue also that continued MMT would eventually force other countries to drop the USD...but the movement on that front has been historically very slow and if anything it is more likely that the US would face social unrest before that became an issue.
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May 21, 2019 13:46
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Ardennes posted:The chief issue here is that the US is not really like other economies because it is the chief reserve currency and that in the past, monetary expansion does not seem to have a tremendous effect on inflation. You could certainly argue that a country with a much weaker currency and few foreign reserves would be in poor shape, and it really couldn't rely on MMT without facing outflows or be forced to subsidize imports. That said, the big arguement is in the US itself, so it is a different situation. Btw, one could argue also that continued MMT would eventually force other countries to drop the USD...but the movement on that front has been historically very slow and if anything it is more likely that the US would face social unrest before that became an issue. Yeah places like the USA, Eurozone, Japan, Australia and so on follow a different ruleset than middle- and low tier economies because everyone is begging to get their bonds when they aren't otherwise using their currencies. But that is dependent on them staying under their common international institutional framework. If one decided to go a way that those institutions severely disagree with, all bets would be off. The USA is of course safe as long as it doesn't lose its superpower status, but that status rests on mutual benefit in a way that couldn't be replaced by simple military coercion, so like you say, a lot of risks exist in unilaterally adopting a new monetary paradigm for the world currency. They would have to negotiate an update to the framework and that'd require more than a fluke of a political victory in a single country. New winds would have to be blowing all around like when the neoliberal framework was implemented.
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May 21, 2019 14:37
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We've been doing MMT for years (decades?) it's just that instead of funding things the population actually needs we spend it on idiot grift programs for rich people and also tax breaks for rich people and also hand outs for rich people when they destroy their companies and the economy. Instead of Keynesian stimulus we do trickle down but the end result is the government is still injecting tons of money into the economy - just at the top versus an even distribution. Like hello lol we have a massive gov't deficit that only grows every year and there is no danger of default unless the gov't does it on purpose to own the libs or whatever. I don't get why it is adopting a new monetary paradigm versus just recognizing that this is how it already functions. Moridin920 fucked around with this message at 18:14 on May 21, 2019 |
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May 21, 2019 18:11
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Moridin920 posted:We've been doing MMT for years (decades?) it's just that instead of funding things the population actually needs we spend it on idiot grift programs for rich people and also tax breaks for rich people and also hand outs for rich people when they destroy their companies and the economy. Instead of Keynesian stimulus we do trickle down but the end result is the government is still injecting tons of money into the economy - just at the top versus an even distribution.
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May 21, 2019 19:16
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Moridin920 posted:I don't get why it is adopting a new monetary paradigm versus just recognizing that this is how it already functions. Good catch, I meant to say monetary policy paradigm, MMT certainly isn't going to transform money. Here's the line of thought: The current monetary policy gospel is independent central banks beholden to an international financial technocracy that demands inflation targeting primarily through manipulating interest rates in response to the unemployment rate getting too low or high. MMT considers central bank independence a political farce in service of anti-democratic moneyed interests and demands integration of central bank powers under parliamentary or executive control, rejects inflation targeting as a meaningful policy goal, manipulation of interest rates an ineffective tool at that anyway, and consoders full employment to be the least that we can do. Basically it's inconceivable, humiliating and unacceptable to the ruling institutional technocracy, and especially when applied to debtor countries, also a considerable threat to the profits of the private financial enterprises that the people in the technocracy come from and get cushy jobs in. It cannot permit alternatives to itself and has the tools to sabotage attempts as long as it manages to isolate its targets as rogue countries that are going to bring ruin to the rest. uncop fucked around with this message at 19:56 on May 21, 2019 |
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May 21, 2019 19:50
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uncop posted:The current monetary policy gospel is independent central banks beholden to an international financial technocracy that demands inflation targeting primarily through manipulating interest rates in response to the unemployment rate getting too low or high. I see. Thanks!
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May 21, 2019 23:07
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