Squalid posted:

yeah this is how I try to make sense of macro econ stuff. It makes mentally visualizing what's going on a lot simpler.


What if it is not near zero? Basically, I'm trying to understand how MMT handles bond payments.

So the principle of the government creating and destroying money in MMT makes a lot of sense to me. Where I start to get confused is when its proponents start saying deficits don't matter in today's economy. This is because when the US deficit spends, it also issues interest carrying bonds. These bonds take cash out of the economy, but with the promise of giving more cash in the future to the bond holder. As with all assets, the vast majority of these bonds are owned either directly or indirectly by the one percent.

Therefore as the national debt increases, the government will have increasing obligations to give money to the owners of capital. As debt increases, the proportion of government money going to this class should increase. This should produce inflation that weakens the buying power of people who don't have any assets, as an increasing proportion of cash should be flowing to those who already have wealth. The state can use inflation to reduce the value of the debt by printing money. Still it means the level of debt remains important and has to be managed and constrained.

Of course central banks can just buy government bonds themselves, which I guess makes them disappear effectively? Macro is all very confusing.