Home » xyzzy » Dungeon » Modern Monetary Theory (or, how I stopped worrying about the natl debt.)
Re: Modern Monetary Theory [message #90324 is a reply to message #90323] Mon, 13 May 2019 10:28 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Illuminati (1st Degree)
If this is any help Kingfish, or any other interested person. Here's a visual put together that is pretty nice to get a nuts and bolts idea of operation MMT theory espouses. Take a look & scratch your head. I did, then it made sense. If it's any solace to what one's political orientation is. The MMT economists make a point to explain their economic study as more of a "lens" focusing more on how a sovereign issuer of a currency actually works in any existing economy, rather than how they feel it should be looked upon. What ever is made of it politically, is in the eye, or the political PAC's of the beholder.
https://www.youtube.com/watch?v=bTZGU9s0idM
Re: Modern Monetary Theory [message #90333 is a reply to message #88755] Mon, 13 May 2019 23:24 Go to previous messageGo to next message
Newjack is currently offline  Newjack
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Viscount
I watched your recommended video a couple of times, Rusty. I'll admit, I'm really confused. Laughing I love learning about stuff like this, so I'm going to watch it again and see if I can wrap my head around the concepts.
Re: Modern Monetary Theory [message #90335 is a reply to message #90333] Tue, 14 May 2019 09:57 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Right on Newjack. The fact your open and interested in this subject matter is a kick for me even. The principal economists involved with this concept today are L.Randall Wray, Stephanie Kelton, William Black and Bill Mitchell. With a special nod to Michael Hudson, whom is a fascinating historical economist. His latest book deals with ancient cultures and their way of dealing with debt. Which they utilized a method of debt forgiveness called Jubilee. Looking up any of these principals can open your mind to some very interesting concepts that you won't encounter listening to the orthodox so called financial guru's. I also take a smidgen of pride in knowing these people have been involved with the economics program at a local university just a few blocks from my home. Part of the underlying issues expressed with training future economists are the lack of historical underpinning of the various economic disciplines and the homogeneous concepts promoted in their training. Good luck unraveling this stuff and feeling secure that future generations aren't on the hook paying off today's or tomorrow's debt. Or, shall I say. Our investment savings account.
Re: Modern Monetary Theory [message #90410 is a reply to message #90335] Fri, 07 June 2019 10:40 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Nice... Here's an article addressing just this schism of orthodox economic thinking and teaching being done at the college level. Slowly, the paradigm of rigid capitalistic celebration, (neoliberalism), taught with blinders on to a thinking towards it's improvement are incrementally being implemented. A heterodox view. When the square peg is realized it won't hammer into the round hole without negative societal consequence over and over again. Maybe with some adjustment with better trained economists, the politician can be guided over to the sand box with the easier fitting peg to pound on. Hands clasped in prayer.
https://www.rdwolff.com/heterodox_economics_at_john_jay_college
Re: Modern Monetary Theory [message #91626 is a reply to message #90410] Wed, 25 March 2020 19:09 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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The current Covid-19 pandemic shows explicitly what MMT has been pointing to for decades. Sovereign governments with fiat money can cover whatever is needed and the issue of the national debt is just a number. If it bothers one to comprehend it's size. Don't look at it. It's serving a purpose, and in the instance of the current situation. A life line from certain personal and national devastation and hardship. When this all blows over, the memory of this special trick that only the federal government's can do needs to be kept renewed in the national dialog. Because invariably, some ape will contend we have to tighten our belts, be prudent and go full austerity to pay it down for future generations. Australian economist Bill Mitchell from his 'Billy blog'. http://bilbo.economicoutlook.net/blog/?p=44547
Re: Modern Monetary Theory [message #91660 is a reply to message #91626] Sat, 04 April 2020 09:58 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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In pre biblical times in the middle east and surrounding kingdoms. Debt would be cancelled when it got too large to be paid. It was know as Jubilee. After WWII, Germany had it's wartime debt cancelled, rubbed out, and it's economy came back from the ashes of war. Michael Hudson, an economist and historian gives a good argument to why this ancient practice should be practiced again. https://michael-hudson.com/2020/04/npr-cov-19-and-america-is-strapped/
Our current POTUS should understand this quite well. He's used debt cancellation with his business failures several times in the form of bankruptcy.
Re: Modern Monetary Theory [message #91680 is a reply to message #91660] Sat, 11 April 2020 13:05 Go to previous messageGo to next message
Wayne Parham is currently offline  Wayne Parham
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I've been meaning to chime-in on this thread for months. It is very interesting to me. And what I like about the people here is that I think we can have a respectful discourse, even if we don't agree. Might even sway opinions or at least be food for thought.

I understand laissez-faire economics and I understand Keynesian economics. Both of those are about a century old now. Or I guess I should say John Maynard Keynes presented his ideas around 100 years ago, which sort of countered the notion of laissez-faire thinking. But both still consider the economy to be a sort of closed system having finite resources. The difference is how to use those resources.

If I understand you right, Rusty, I think you are describing an idea that the economy shouldn't be tied to resources. Is this what you are saying? Or maybe you're not saying that economy shouldn't be tied to resources, but rather making an observation that it isn't? Or are you saying something else entirely?

To me, economic models should consider all resources, including commodities and labor sources. And economic models should also consider all requirements, using a sort of wish-list that prioritizes wants and needs.

But the problem, of course, is the complexity of the system. There is a large number of unknown initial conditions, which makes it a true chaotic system. It is the very definition of the Butterfly Effect. Economics is stochastic, so any analysis must be done statistically, looking for patterns. I don't think a deterministic model of economics makes any sense at all.
Re: Modern Monetary Theory [message #91681 is a reply to message #91680] Sat, 11 April 2020 15:40 Go to previous messageGo to next message
Rusty is currently offline  Rusty
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Thank you Wayne for your input. From my limited understanding of MMT, is that resources ARE the 'limit' to which a sovereign government with it's own fiat currency can expect to be able to infuse into an economy with it's debt through expenditures. Showing up then as inflation. Out of scarcity of resources. But tying debt loosely to fiscal policy by implying debt in and of itself is an inflationary process is more of an assumption of the strict misinterpretation of this closed system tied to capitalism. Assuming debt that is personal, local and states debt are equal to that of sovereign governments debt. As we are now finding out whom we are depending on to get through the current dilemma. MMTr's have found that sovereign currency issuing government's have a higher 'capacity' to issue debt before it becomes inflationary. They point to Japan's high debt to GDP ratio. That in itself would point towards a trend towards being inflationary. But the Japanese have not experienced this. They do not use MMT theory and have adopted in the past and recently austerity measures to reduce their debt. Slowing their economy. MMT implies this as shooting oneself in the foot.
In economics as in any disciplines. Interpreting statistics can be used to prove a point. But they can be cherry picked and given disregard to tailor the results that fit the orthodoxy as interpreted. There are quite a few variants in the orthodoxy. MMT doesn't change the orthodoxy, it merely says what is already there. Recognize this and move on to make the predictions more accurate. Because the predictive qualities that have been used in the orthodoxies have been notoriously inaccurate.
A nice simple explanation of MMT by one of the new textbook authors, L. Randall Wray.
http://neweconomicperspectives.org/2020/01/alternative-paths-to-mmt.html#more-11647
Re: Modern Monetary Theory [message #91684 is a reply to message #91681] Sat, 11 April 2020 16:14 Go to previous messageGo to next message
Wayne Parham is currently offline  Wayne Parham
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I think I understand your point now. You're saying that MMT proposes that we (as in, America) can inject more money - not just by printing it but by supplying more resources and/or labor - into the economy without adverse results. I think this is pretty much the same as Keynesian economics, yes? No?
Re: Modern Monetary Theory [message #91685 is a reply to message #91684] Sat, 11 April 2020 17:23 Go to previous messageGo to previous message
Rusty is currently offline  Rusty
Messages: 403
Registered: May 2018
Location: Kansas City Missouri
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The government 'spends' into the economy. Government debt is the private sectors savings and profit. Resources, (materials, labor) are simply what are utilized by the private sector, and are the only 'limiting factor' to what the government can spend towards before inflation accrues. The government has to spend before it can tax. I love Wrays example of the colonial American redemption taxes.
Quote:
I like several things about this example. First, it is clear that the colonies spent the notes first, then collected them in taxes. They could not possibly have collected paper notes in taxes if they had not first spent them because there were no other paper monies around.
The Keynesian economists go apoplectic over the core of MMT.

Quote:
If I say that the heterodox approach insists that injections are causally prior to leakages, you all recognize that from fundamental Keynesian theory.

And if I say that government spending is an injection and taxes are a leakages, everyone understands.

But when I say that government spending is logically prior to taxes, heterodox economists suddenly get all dazed and confused.

If I say government has to spend first before taxes can get paid, I'm called crazy.

Government spending cannot be financed out of taxes--it must precede taxes. It is one of the injections that creates income that can be used to finance leakages such as saving and taxes.
The link given is a very good thumbnail sketch of what MMT is.
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