Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
MMT - Modern Monetary Theory
Old 10-11-2019, 03:14 PM   #1
Dryer sheet aficionado
 
Join Date: May 2011
Posts: 27
MMT - Modern Monetary Theory

Bouncing around the web after reading the Fed is going to start buying $60 billion worth of Treasury bills per month next week I ran into an interesting article about MMT.

https://carnegieendowment.org/chinaf...lmarkets/80054

"Advocates for modern monetary theory argue that, for a sovereign country with its own currency, there is no inherently unacceptable level of government debtóthat country does not automatically begin to collapse when debt reaches 90 per cent of GDP, or even 200 per cent of GDP. The country appropriates what it believes is necessary for domestic programs, regardless of revenue."

The author goes on to state this is an unfair description of MMT and explains why. I'll be honest, I never understood this stuff and after reading the article still don't. But I've read numerous times the US debt to GDP ratio is irrelevant. You can't compare it to how the american household manages its finances given that the US can just print, ahem, perform QE.

Do you agree with the above quoted statement?
__________________

11522914 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-11-2019, 04:01 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 3,209
One way to test such a theory is to take it to the extreme. What if the US printed then handed $1 billion to every citizen? There would be massive distortion of every market. Well, printing a smaller amount and injecting it into the economy distorts things too. A distorted market eventually pops.
__________________

GrayHare is offline   Reply With Quote
Old 10-11-2019, 04:07 PM   #3
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,757
Quote:
Originally Posted by GrayHare View Post
One way to test such a theory is to take it to the extreme. What if the US printed then handed $1 billion to every citizen? There would be massive distortion of every market. Well, printing a smaller amount and injecting it into the economy distorts things too. A distorted market eventually pops.
Giving a $1B to each citizen is much different that a government printing money to build infrastructure and providing jobs.

Inflation is caused by too much money chasing too few goods. Providing good jobs to people that work would never cause inflation, unless it causes wages overall to increase. Giving a small amount or money to a lot of people only decreases the incentive to work, it does not cause inflation. When the incentive to work is 0 (Working less taxes = not working benefits), then you have huge issues.

Most government debt can be eliminated and there would be no repercussion. Wiping the SS debt clean is one of those types of debt.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 10-11-2019, 05:54 PM   #4
Recycles dryer sheets
bolt's Avatar
 
Join Date: Jun 2008
Posts: 146
Quote:
Originally Posted by 11522914 View Post
Bouncing around the web after reading the Fed is going to start buying $60 billion worth of Treasury bills per month next week I ran into an interesting article about MMT.

https://carnegieendowment.org/chinaf...lmarkets/80054

"Advocates for modern monetary theory argue that, for a sovereign country with its own currency, there is no inherently unacceptable level of government debt—that country does not automatically begin to collapse when debt reaches 90 per cent of GDP, or even 200 per cent of GDP. The country appropriates what it believes is necessary for domestic programs, regardless of revenue."

The author goes on to state this is an unfair description of MMT and explains why. I'll be honest, I never understood this stuff and after reading the article still don't. But I've read numerous times the US debt to GDP ratio is irrelevant. You can't compare it to how the american household manages its finances given that the US can just print, ahem, perform QE.

Do you agree with the above quoted statement?
As you inquired: Watch Greenspans guy* after he says it.


Financial cartels on this planet will not allow any country with resources to have its own FIAT currency. I know of none.
They're all linked to the USAs Dollar's implied value these days. Interesting times indeed.
https://upload.wikimedia.org/wikiped..._Mechanics.pdf

Afaik...
During the Civil war in the mid-1850s the primary reason France sold supplies to both Blue/Grey sides together, was although north was favored the souths currency was a higher x% cotton currency. Should it plummet in value after the war cotton was a valuable commodity. Cottons also had a meteoric rise in last few yrs .

I mentioned before elsewhere that MMM/Modern Money Mechanics book, and some of JPerkins books might assist your understanding. Hope that info helps, or not.
Thats my understanding, might be incorrect. Might not be also.
Good luck!
__________________
It ainít what you donít know that gets you into trouble. Itís what you know for sure that just ainít so.
bolt is offline   Reply With Quote
Old 10-12-2019, 06:27 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 9,446
I have read a few pieces about MMT and it makes some sense. The theorists don't argue that you can flood any arbitrary amount into the economy just that you can do a lot more while watching inflation as a constraint. They would argue that the great recession was a good opportunity for a much bigger investment in infrastructure. I have no idea whether they are more right than traditionalists but I wouldn't advocate that the US ever abandon it's sovereign fiat currency.

As for Greenspan's assertion, he would be correct except that political games of chicken could throw us into default as long as Congress maintains an idiotic debt ceiling. The debt should be whatever it takes to fund the spending that gets authorized.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 10-12-2019, 09:42 AM   #6
Full time employment: Posting here.
 
Join Date: Jun 2016
Posts: 862
If the fed can print all the money the UST needs
why do we pay taxes?
Spock is offline   Reply With Quote
Old 10-12-2019, 10:33 AM   #7
Recycles dryer sheets
 
Join Date: Feb 2017
Location: Weatherford Texas
Posts: 392
Delete
Attached Images
File Type: jpeg Screenshot_20191012-113135_Chrome.jpeg (65.2 KB, 18 views)
__________________

__________________

Retired June 1, 2018

RE AA 65/35
Ed B is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
MMT coming soon to an economy near you? gcgang Stock Picking and Market Strategy 44 05-21-2019 05:58 PM
Niall Ferguson Interview on Deficit and Monetary Policy haha FIRE and Money 11 07-13-2010 06:48 PM
Newbie question about MPT (Modern Portfolio Theory) Van FIRE and Money 6 05-10-2006 06:09 PM

» Quick Links

 
All times are GMT -6. The time now is 03:11 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×