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I'm somewhat confused by how MMT handles national debt. Since the government is just creating and deleting money, is there any reason to issue bonds? I understand that this is an alternative means of manipulating the currency supply, but I'm not sure I understand how this aspect of the economy is approached in this theory. Another question. Say we could do an experiment. If we could create two United States of Americas, one with a national debt of zero, and another with a debt 500% as large as the real one has at present, what would be the economic effect of this difference on the two economies? How would they differ from the real existing USA?
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Jan 25, 2019 00:48
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| # ¿ May 15, 2024 16:59 |
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BrandorKP posted:MMT didn't make sense to me until I realized it was basically stocks and flows in the trade thread. Taxes, spending, fed actions, these are all just flows or controls on flows some positive and some negative. yeah this is how I try to make sense of macro econ stuff. It makes mentally visualizing what's going on a lot simpler. Lumpy posted:At a near zero real interest rate, there would be almost no difference. What if it is not near zero? Basically, I'm trying to understand how MMT handles bond payments. So the principle of the government creating and destroying money in MMT makes a lot of sense to me. Where I start to get confused is when its proponents start saying deficits don't matter in today's economy. This is because when the US deficit spends, it also issues interest carrying bonds. These bonds take cash out of the economy, but with the promise of giving more cash in the future to the bond holder. As with all assets, the vast majority of these bonds are owned either directly or indirectly by the one percent. Therefore as the national debt increases, the government will have increasing obligations to give money to the owners of capital. As debt increases, the proportion of government money going to this class should increase. This should produce inflation that weakens the buying power of people who don't have any assets, as an increasing proportion of cash should be flowing to those who already have wealth. The state can use inflation to reduce the value of the debt by printing money. Still it means the level of debt remains important and has to be managed and constrained. Of course central banks can just buy government bonds themselves, which I guess makes them disappear effectively? Macro is all very confusing.
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Jan 25, 2019 03:19
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Badger of Basra posted:If I'm understanding correctly, if it was decided that the federal government would run on MMT terms there would be no bonds. They'd "print" a bunch of money through the Federal Reserve to pay off existing debt (all at once? unclear if this would just generate huge inflation) then not issue anymore. New deficit spending would be paid for through money printing. That makes sense, but I've never heard anyone say anything like that before.
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Jan 25, 2019 05:41
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What do the proponents of MMT think about the modern Japanese economy? IIRC they have maintained high deficits alongside very low unemployment and low inflation for the past two decades.
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Jan 27, 2019 17:32
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LuciferMorningstar posted:Your whole post seems to be a lot of words to ask "What if leadership just makes bad decisions over and over and then bad things happen?" That's not a new risk. What if the President throws a fit and shuts down the government? What if leadership oversells the importance of paying off the national debt and drives the country into economic downturn? Well it certainly doesn't mitigate all the risks but under the current system a lot of control over macro policy has been outsourced to the Federal Reserve. My impression is a lot of economists have a very dim view of politicians with short term interests in their reelection sitting in the economies driver seat.
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Jan 27, 2019 22:29
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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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plogo posted:Going down that road seems like a fools errand. Determining the inflationary impact of any given program after the fact is extremely difficult, forecasting the impact of individual programs is gonna be an educated guess at best. Yeah it’s my understanding that macroeconomics can only make very approximate estimates of the effect of big fiscal policy. That’s not a weakness of MMT, every economic paradigm will have the same problem. That doesn’t mean you can’t make predictions you just have to prepared to adjust policy on the fly depending on outcomes.
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Jan 30, 2019 22:06
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I found this example helpful and interesting. Macroecon is weird! One soundbite I heard not long ago on the radio, in reply to the question "what's wrong with running up the national debt?" was "Well you have to pay it back." Can someone help me understand what is really meant by paying back the national debt?
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Jan 31, 2019 01:13
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Owlofcreamcheese posted:The national debt is really bonds. You can walk into a bank, say you want to buy a treasury bond and they will sell you one. then after ten years you hand the bond back and they give you 2.8% more money. Yeah, this is basically how I already understand things. I guess I'm just trying to use this thread to feel out how economists generally and MMT people specifically think about the effects of national debt for the US economy. I also want to try and work through the consequences of various methods for managing debt. We can use inflation to devalue existing bonds. However who is it that ends up losing out on the value of that interest? If it is mostly rich capitalists, then inflation could be a progressive way to control debt levels. If the effect is concentrated on pensioners or elderly people living off savings, then the effect is going to be more negative. Obviously the impacts will be mixed, I just wonder where it is concentrated. Also, is there any scenario where MMT people would want the government to run a surplus?
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Jan 31, 2019 01:42
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Could you give an example of how taxes might increase inflation? I’m having trouble imagining it
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Mar 6, 2019 20:45
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| # ¿ May 15, 2024 16:59 |
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Helsing posted:A tax on fuel could increase costs throughout the economy which might be passed on to consumers in the form of a price increase. Yeah that makes sense, a consumption tax has an effect similar to inflation by increasing consumer prices. However I'm skeptical that that would have implications beyond the specific product that was taxed, as it would also necessarily decrease the money supply.
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Mar 6, 2019 21:46
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