Xae posted:

Because MMT is a joke.

Its a Charlatans version of Chartalism.

The core theory of MMT ('nee Neo-Chartalism) is that money derives value because it is used for taxation.

This is a false claim. Currencies exist that can not be used to pay taxes and they retain value.

When the foundation of your fiscal and monetary policy is a claim that is known to be objectively incorrect the rest is just axiomatic bullshit designed to tell people what they want to hear.

quote:

At issue is the nature of money and the inspiration for its use. The Metallists argue that money evolved as a means of reducing some of the inefficiencies of barter. Precious metals, they maintain, were collectively settled upon as a convenient medium of exchange, and money's value derived from its precious metal content. In contrast, the Chartalists argue that the use of money is based primarily on the power of the State and that its value derives from its usefulness in settling certain obligations to the State (in particular, tax liabilities).

LuciferMorningstar posted:

1. The original request was regarding empirical evidence of "an empirically established method for predicting the effects of inflation," or, in your words:

I therefore offered the evidence I identified. Overall, the evidence suggests government spending hasn't been linked to inflation.

quote:

E: I went back and looked again at the original request on page 1. The poster seemed interested in ensuring no inflation occurs. That's also not a realistic benchmark, since the US has an inflation target and too low inflation puts the country at economic risk.

If you want empirical evidence of an MMT-loving regime having employed functional policies, that's a different request from the one I responded to. This is one reason I feel you're not engaging in good faith. That evidence may be unavailable if no such regimes exist(ed).

quote:

MMT isn't doing away with the limitation you describe. There's no limitation to do away with. If we agree the U.S. has the authority to create money, then it logically follows they don't need to borrow or tax it from anyone if they don't want to. In fact, they had to create and distribute money in the first place for there to be anything to tax or borrow against. The US chooses to issue debt and extract taxes. These options are and will remain policy tools.

quote:

Another edit: you did catch the part where I said any spending carries inflationary risk, right?

quote:

Inflation is not a constraint. It's a response. There may be a point at which it would be more advisable to not spend money in favor of limiting inflation, but that doesn't mean policymakers would *have to.*

Dr Pepper posted:

Name one.

MixMastaTJ posted:

Did you actually read my post or just skip to the part that let you say "GOTCHA!"?

LuciferMorningstar posted:

I mean, you say this, but Obama, for example, is on record saying, "Well, we're out of money now." Elected officials trot out lacking of funding as being a reason for enacting (or not enacting) legislation. I think there's reason to believe people don't understand the system, or are at the very least willfully obscuring how it works.

Dead Reckoning posted:

The question isn't whether the act of the government handing someone $10,000 for a widget causes inflation, the question is whether it is (more) inflationary when the government gets that $10,000 by printing more money versus by taking that $10,000 out of the economy somewhere else via taxation.

quote:

You're not understanding the question then. By my understanding, the whole reason that "defects don't matter" according to MMT is because government spending is constrained by the need to avoid overinflation, rather than a fixed quantity of dollars. Stephanie Kelton explains it that way. If you're right, and government spending doesn't cause inflation even when you're printing money to do it, then MMT makes no sense because there is no constraint on the government printing eleventy trillion dollars to do everything at once. Spending would not be constrained by a fixed pool of dollars nor by the need to avoid inflation.

quote:

You are correct that our government currently has all these tools. Policymakers decided to insulate the part of the government with the ability to print money and set monetary policy from the part of the government that spends money, sets taxes, is susceptible to public pressure, and frequently needs to seek reelection. Do you have any thoughts on why our government might have been deliberately set up this way?

quote:

The total amount of debt issued over the fiscal year depends in large part on the decisions made by Congress and the priorities it chooses in its annual budget and appropriations process. Recently, Treasury has issued increasing amounts of debt as a result of the government response to the most recent economic downturn, along with other budgetary initiatives.

...

Congress sets a statutory limit on federal debt levels in an effort to assert its constitutional prerogatives to control spending and impose a form of fiscal accountability. At times, the debt limit has restricted the Treasury’s ability to manage the federal government’s finances.

quote:

Do you think that risk can be quantified in any rigorous way? Do you think that whether the money was printed without balance or counterbalanced by taxation changes the degree of inflationary risk?

quote:

Yes, policymakers allowing inflation to go unchecked (because it represents an abstract, collective risk) rather than increasing taxes or cutting spending (which is a specific risk to their reelection chances) is indeed a huge problem with the proposal to allow congress to print money.

Xae posted:

Any of the crypto currencies.

Debased coins during the western Roman empire.

Cigarettes in prison.

Somali Schilling after the central governments collapse.

Dr Pepper posted:

I knew you'd bring up bitcoin. Good to see you didn't disappoint me with your nonsense.

Roman coins had value because they were made of gold, Cigarettes is part of a barter economy. The Somali currency was used for taxes before the government collapsed.

Xae posted:

You asked for 1, I gave multiple.

Dr Pepper posted:

All modern currencies only have value because people treat them like they do...

Xae posted:

You just completely disagreed with your original point.

Dr Pepper posted:

No I haven't. You're confusing cause and effect.

The reason modern currencies are accepted as valuable is because people can pay their taxes on them. It's not the state looking at a random currency and going "Oh look this currency is valuable pay taxes with it" it's the state saying "We will pay out bonds in this and accept taxes with this" and the people going "oh it has value."

It's entirely arbitrary but it's how the world works today.

Ardennes posted:

Granted, taxes mean a currency has some type of minimal value but it doesn’t obviously mean it retains its full value. This is fairly obvious looking at any floating currency.

Family Values posted:

The IRS assesses income tax on an individual's entire income, not just the income denominated in USD. If you were paid entirely in bitcoin, you would still owe income tax at an exchange rate chosen by the IRS. So yes, taxes mean that all economic activity in the US happens in USD or can be convertible to USD. That counts as 'full value' to me.

Floating currencies don't really factor into this because the income is reported at the time the transaction takes place.

Xae posted:

Because MMT is a joke.

Its a Charlatans version of Chartalism.

The core theory of MMT ('nee Neo-Chartalism) is that money derives value because it is used for taxation.

This is a false claim. Currencies exist that can not be used to pay taxes and they retain value.

When the foundation of your fiscal and monetary policy is a claim that is known to be objectively incorrect the rest is just axiomatic bullshit designed to tell people what they want to hear.

quote:

Some money derives value because it is used for taxation.

Ardennes posted:

One issue is that the US could very well sustain deficits either from bonds or simply printing (ie increasing the money supply) more than any other economy on earth because we are the largest reserve currency. Other countries NEED to purchase dollars which essentially subsidizing their relative worth. It doesn't matter that a country is sovereign or not (it helps obviously) but that other countries are willing to absorb their currency in exchange.

Also, the reason the Yen hasn't inflated out of sign, is the nature of its debt. The vast majority of its debt is domestic, and help either by government or semi-government institutions (the Japanese Postal Savings bank) or corporations that have close links to the government. Therefore, it can spend because that debt is extremely stable and not lose Yen doesn't lose its reserve status.

It is why MMT may work in the US, but probably wouldn't work in, for example, Belarus without very high inflation. The demand for Belarussian Rubles is quite weak (in comparison to the US dollar) and Belarus needs to exchange in trade for imports (since autarky would absolutely not work). In contrast, the US probably could absorb that type of hit without the USD losing reserve status. Furthermore, Belarus doesn't have enough local demand for its own debt to subsidize increases to its money supply.

Essentially, it is a very conditional idea, although this is a forum dominated by Americans, so I guess it is a bit understandable.

Typo posted:

the key problem is that the USD might lose its reserve status within the next few decades as is, this trend speeds up if monetizing the federal budget creates expectations of currency volatility

Gnumonic posted:

There are two sorts of claims floating around in this thread, both by people who support and oppose MMT:

1) MMT is just a more accurate analysis of what we already do.

2) MMT is a panacea that will allow us to implement social programs without worrying about the cost.

I might be able to buy 1), but for the reasons Dead Reckoning and a few other posters have noted, 1) doesn't imply 2) and seems inconsistent with it. If it's just a new way of analyzing something and doesn't involve substantive policy changes at all then whether or not we should prefer it is an entirely academic question.

silence_kit posted:

I also don’t get how the theory is really that useful, except as a way to promote government spending if you don’t think about it too much. It seems to make similar kinds of predictions as the government budgeting type of thinking, except it involves a nebulous quantity (inflation risk).

Theory accuracy is not that useful if in order to take advantage of the theory’s improved accuracy, you need inputs to the theory which are not easy to estimate or obtain.

silence_kit posted:

I also don’t get how the theory is really that useful, except as a way to promote government spending if you don’t think about it too much. It seems to make similar kinds of predictions as the government budgeting type of thinking, except it involves a nebulous quantity (inflation risk).

Theory accuracy is not that useful if in order to take advantage of the theory’s improved accuracy, you need inputs to the theory which are not easy to estimate or obtain.

LuciferMorningstar posted:

I bolded the part where you misrepresent my position, again. At no point have I claimed government spending doesn't cause inflation under any circumstances. Additional government spending carries inflationary risk.

LuciferMorningstar posted:

The article I linked previously was a summary of a lengthier article (full text here). Relevant text from summary:

quote:

Across the board, we found almost no effect of government spending on inflation. For example, in our benchmark specification, we found that a 10 percent increase in government spending led to an 8 basis point decline in inflation. Moreover, the effect is not statistically different from zero.

Does our finding, by itself, imply that countercyclical government spending is ineffective at boosting output? Not necessarily. Our paper simply demonstrates that the inflation channel of government spending is not an empirically important way that this spending might affect the economy.

I think they're overselling with the benchmark thing, but the idea remains the same: they didn't find evidence of government spending creating inflation. The full text also has some discussion of the recent Recovery Act.

LuciferMorningstar posted:

The Treasury is dependent on Congress to raise the debt ceiling and authorize spending. The people who are most vulnerable to public pressure are the ones directing people to work the levers, here. From the Congressional Research Service:

LuciferMorningstar posted:

There is no proposal, here. Congress authorizes the creation of money. You just described the status quo.

theblackw0lf posted:

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.

MixMastaTJ posted:

Our level of deficit spending would suggest a 5 cent annual rate of inflation.

Dead Reckoning posted:

So what did you mean by this then?

LuciferMorningstar posted:

Overall, the evidence suggests government spending hasn't been linked to inflation. That does not mean government spending can never create inflation, though, which is one of the things you keep trying to claim. The evidence also suggests military spending is a policy area that tends to increase inflation, but other types of government spending may not. Again, this is based on things that have actually happened, and it's possible no country has yet met a condition where general government spending does drive inflation.

quote:

Not the department that physically prints the bills, dingus, the one that controls the money supply. The Federal Reserve is run by political appointees and supposed to be insulated from political pressure. Why do you think that is?

quote:

If MMT doesn't suggest any structural changes to the way we run our government, then why does it matter outside an academic context? Also, does this mean you think the OP was wrong when they said:

Typo posted:

where are you getting this from?

Xae posted:

Any of the crypto currencies.

Debased coins during the western Roman empire.

Cigarettes in prison.

Somali Schilling after the central governments collapse.

quote:

The Green New Deal will be financed in the way all federal projects over the past century have been financed: Congress will authorize necessary expenditures — direct spending, loans, loan guarantees, joint ventures, etc. — and the Treasury Department will then simply spend as instructed.

This is how the New Deal; the Second World War; the Apollo and Space Shuttle programs; and the Vietnam, Gulf, Afghan, and Iraq wars were financed. It is also how every significant tax cut — from the Kennedy era through the administrations of Reagan, Bush, and Trump — has been financed.

Because the federal government has the unique power to authorize Treasury spending — a fact any American can confirm simply by checking the signature on a dollar bill — popular pundit questions like “Where will the money come from?” are simply ill-formed, like asking where the points on a scoreboard “come from,” or where one might find a round square, or how one can drive a car without a toothbrush. They reflect simple ignorance, in other words, of how public finance “works.”

It is legitimate to ask, however, whether Green New Deal program costs will in some way necessitate new taxes. The answer to this question is, “very probably not, but it depends.” What “it depends” on is whether the renewed federal spending occasioned by the Green New Deal ends up exerting significant inflationary pressures in the macroeconomy that require taxation and/or bond issuances to absorb “excess money.”

If recent history is any indication, the chances of significant consumer price inflation pressures generated by the Green New Deal are virtually nil. The tax cuts of December 2017 injected nearly $2 trillion new dollars into our economy, and no such inflation has resulted. The Afghan and Iraq wars saw close to $3 trillion in new federal expenditures, and again, no such inflation resulted. The Fed has, in fact, sought since 2012 to bring U.S. consumer price inflation up to 2%, and has succeeded in doing so only several quarters in nearly seven years. Treasury securities markets, meanwhile, show virtually no “spread” between ordinary Treasuries and inflation-protected Treasuries, indicating that financial market participants see no threat of inflation on the horizon. Indeed, in nearly all of the “developed” world for the past several decades, not inflation, but deflation, has loomed as the primary threat to economic well being.

Add to these observations that the Green New Deal will boost the productivity of the American economy to new heights, and the threat of consumer price inflation recedes even further into the background. Inflation, as the old saying has it, is the problem of “too much money chasing too few goods.” A new green economy, producing solar panels and solar farms, windmills, hydroelectric plants, carbonneutral automobiles, refurbished buildings and infrastructure, and a host of other products will be an economy with plenty of new “goods” to absorb its new money.

Were inflation to return as a threat for the first time in half a century, there are time-honored ways of preempting it. These include not only taxes and bond issuances, but also “macroprudential” limits on bank over-lending and financial market speculation. Indeed, since the only “inflation” we’ve seen in recent decades has been in the form of financial market bubbles, which are simply asset price hyperinflations, we have good reason to tax more in those markets in any event.

This is one reason that Representative Ocasio-Cortez’s mention of possible tax raises for multi-millionaires and her support for a financial transaction tax make good sense quite apart from the Green New Deal. It must also be remembered that the new prosperity that the Green New Deal will bring to millions of Americans below the top of the income and wealth distributions will rapidly grow the nation’s tax base in any event, vastly expanding federal revenue even without raising marginal tax rates.

Green New Deal raises no new “pay for,” “inflation,” or “taxation” questions. It is on exactly the same footing as the original New Deal, our past and recent wars, and our recent tax-cutting binges where these questions are concerned. There is literally no more reason to wring hands about such things here than there was there. To suggest otherwise is simply misleading.

Furthemore, the question of how to pay for the Green New Deal must take into account the tremendous costs of inaction. We know scientifically that a plan of the scope and scale of the Green New Deal is the only thing that will stave off irreversible climate catastrophe and, with it, tremendous economic loss. Thus, we must ask not only what the Green New Deal will cost, but also what costs it averts — especially in light of the growth and prosperity it will create.

Splode posted:

Splode posted:

Where I get lost is how economic activity creates demand for more money, and how a government can spend (for example) $1 million and generate $1.5 million of "economic activity". How does this work?

quote:

By far the most effective policy options, according to this analysis, are temporarily increasing food stamps (1.73) and extending unemployment insurance benefits (1.64). Both of these policies target groups with low incomes and, as a result, high marginal propensities to consume. Permanent tax cuts benefiting mostly higher-income households, by contrast, have fiscal multipliers below 1: for every dollar "spent" (given up in tax revenue), only a few cents are added to real GDP.

theblackw0lf posted:

In this Green New Deal write-up by two economists, one who is an AOC adviser, there's an interesting section talking about the financing of it, which explains the MMT perspective of how government finances programs, and also touches on how they will deal any inflation that's created. So this addresses several posts I've seen on this thread

https://newconsensus.com/wp-content/uploads/2019/02/new_consensus_gnd_14_pager.pdf

LuciferMorningstar posted:

Yes, I think the OP was wrong with their original claim.