MMT - Modern Monetary Theory

[11522914]

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/chinafinancialmarkets/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?

 

[GrayHare]

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.

 

[Senator]

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.

 

[bolt]

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/chinafinancialmarkets/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/wikipedia/commons/4/4a/Modern_Money_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!

 

[donheff]

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.

 

[Spock]

If the fed can print all the money the UST needs
why do we pay taxes?

 

[Ed B]

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