I would like to continue a conversation that was begun in another thread: post by a better world As long as the resources are available for the duration of the pandemic, the Federal government - the sole ISSUER of the $US dollar - can pay off the bill by simply creating the funds 'ex nihilo', via its treasury and reserve bank. Money is NOT a real or scarce commodity. It is a concept, a tool of governance. (link below) MMT: overcoming the political divide. | PoliticalForum.com - Forum for US and Intl Politics Orthodox economists don't want you to know, because they are paid by vested interests who want to ensure their own greater share of the nation's output. post by kazenatsu Here we go again, back to you imaginary MMT theory. For anyone who does not know, this theory of his basically goes something like "If we only had more money, it would help our economy operate more efficiently and increase output". He thinks government can print more money and that can somehow create wealth without just causing inflation. post by a better world For anyone who does not know, Kazenatsu is merely spouting the outdated, evil, neoliberal monetarist orthodoxy which claims money is a real scarce commodity. It is not. Money is merely a concept, a promise to supply resources (goods or services), and a tool of sovereign governance. [Note: there was no money in Boudicea's pre-literate Britain (even though Britain had entered the iron age c.1000BC). Money only appeared in Britain after Augustus ordered the Roman invasion in 43AD]. Interestingly this pandemic proves the sovereign currency-issuing government can and should create money 'ex nihilo' (just as private banks do when they write loans/create deposits); it is so utterly obvious in the present circumstances in which there is forced under-utilization of the economy's available resources and productive capacity, that the requirement for the public sector to tax or borrow money from the private sector to pay for covid related hospital 'costs' is utterly insane, the result of blindly following evil neoliberal monetarist orthodoxy. ( conversation started in The Covid Hospital Bill ) My question for you, a better world, is how you think more money will stimulate more production. If there is less money, won't prices be lower? So this change to the money supply shouldn't have too much of an effect on production, wouldn't you think? You write that "money is a promise to supply resources". Well, if you print more money, where are those additional resources going to come from? How exactly does that work? Why do you think more money would result in better utilization of the economy's resources? Or is it that you think lack of money supply is holding the economy back? If that's so, why would that be? Why do you think more money would stimulate more production? Wouldn't prices just increase in proportion to the increase in money, and so you'd get no additional production? Please explain some theory to me that would explain how this could be the case. Just explain how it would work. Why do you think more money would solve the issue of under-utilization, as you describe it?
we been printing money the entire Trump Presidency, it's been working pretty good - the fed was printing money like crazy, and the interest rate is almost zero, so add that on.... why stop now? the reality is, if we stop now.... we have another 1929... we already passed the point of no return the real issue is excessive foreign outsourcing of jobs and the excessive foreign importing of goods - but it's too late now to undo the course we are on
The only arguments I've been seeing from your side are anecdotal. "We did this at this time and didn't see any inflation here" I would like something that's a little bit more theoretical. An explanation of why this would work.
I think you're kind of talking about Keynesianism. I'm not sure that a better world's theory actually had so much to do with Keynesianism. (Classical Keynesianism relies on money that's already saved by government, or money that's borrowed by government and will be paid back at a later time)
we are almost 30 trillion in debt, the country is in debt, the corps are in debt, we either go bk or we print money, at this point that is the only two options as the ship is sinking - so we have to do something
You seem to be changing the topic now. And I have explained in past threads how trying to print your way out of debt could be very problematic. a better world's original argument didn't seem to have anything to do with dealing with the debt situation. Why don't we let a better world respond to this thread?
Note: if the economy IS fully utilizing all the nation's available resources and productive capacity, then more money won't stimulate more production, but it will cause inflation. Now I already explained to you the situation in a pandemic: we don't WANT to stimulate the the economy in a pandemic, we want to ensure the production of essential goods and services continues while the rest of the workforce is in lock down, to stop the spread of the virus. In that situation, the free market should be suspended, and the government's treasury and reserve bank should be authorized to change the digits in the bank accounts of essential and non-essential workers so they can continue to pay for essentials (food, internet access etc). Essential workers would continue to receive their same income as before the pandemic (A sales tax on discretionary goods might be required to avoid supply bottlenecks in the non-essential economy). I hope that's all clear. Now in normal times, ANY un/underemployment is a political choice, not an economic necessity, because there are enough resources and productive capacity to employ and reward all citizens of working age. The question is: how is this to be achieved. Obviously it cannot be achieved in a competitive free market ALONE, subject to competitive price pressures on both wages and sale prices. Therefore the public sector will need to act as 'employer of last resort', when market pressures in the private sector leave some workers without a job. Hence the need for the government to be authorized to create and spend its own money, to buy this unemployed labour and put it to work in socially beneficial employment, eg park maintenance, assisting the elderly etc. No. Less money in the economy means less effective demand, therefore firms reduce output, resulting in less employment. From the unused resources (inc.labour) in the economy, or from increased productivity, (or from a deliberate diversion of resources from say, 50% reduction in production, advertising, transport and sales of alcohol, or diversion from the vast financial industry casino ....releasing $trillions for more productive activity like R&D, or green infrastructure). The point is more money in the public sector; the private sector free market is rife with misallocation of resources, and doesn't employ everyone at above poverty wages. Note re money supply: the TOTAL money, whether created in the public or private sector, must not exceed the total output of the economy. That's the constraint. But you are still conceiving of the economy as a private sector construct ALONE. That is a political choice, not an essential economic reality. Speaking of which: How to Pay for It All: An Option the Candidates Missed | WEB OF DEBT BLOG (ellenbrown.com) (the above is a link) "Before the 2008-09 global banking crisis, China’s GDP increased by an average of 10% per year for 30 years. The money supply increased right along with it, created on the books of its state-owned banks. Japan under Prime Minister Shinzo Abe has been following suit, with massive economic stimulus funded by correspondingly massive purchases of the government’s debt by its central bank, using money simply created with computer keystrokes. No inflation in sight." "In the 20 years from 1998 to 2018, China’s M2 money supply grew from just over 10 trillion yuan to 180 trillion yuan ($26T), an 18-fold increase. Yet it closed 2018 with a consumer inflation rate that was under 2%. Price stability has been maintained because China’s Gross Domestic Product has grown at nearly the same fast clip, by a factor of 13 over 20 years". Ellen also mentions MMT: "In practice, something like “MMT” has reached a new level of sophistication these days, exemplified by Japan. . . . The Bank of Japan now holds government bonds amounting to more than 100% of GDP. In other words, the government has managed to finance itself “with the printing press” to the amount of about 100% of GDP, with no inflationary consequences. .
My question to you is why you think adding more money into the economy would make that economy better utilize it's "available resources" and "productive capacity". Is this simply about redistribution of purchasing power? If that's the case, then we certainly don't need more money to do that, it can be accomplished with taxes and cash transfers.
Can I ask a question? Is this type of policy idea you are advocating here inherently connected to MMT? I want to know whether or not I need to address it. I am trying to focus on MMT here.
It increases available purchasing power that is not earmarked for debt repayments. In a sense. But it's far from simple. But that would be really complicated, impair economic activity unless the taxes were very well designed, and involve counter-transfers to defray debt repayments and debt servicing costs, among other things. Issuing money is really simple.
Because the private sector NEVER fully utilizes available resources including labour. That's the natural outcome of competitive private sector free markets. So government money (not private bank money) is needed to fund the government's role as employer of last resort (ELR). Excess demand - if it arises at all - can be managed, eg, by sales taxes on discretionary goods. See above. Not redistribution of purchasing power, but restraint on discretionary spending if necessary, to avoid inflation. No cash transfers required, since everyone is employed at above-poverty level, in an MMT economy.
Government as ELR ....manifested by the Job Guarantee? Pure MMT, replacing the neoliberal NAIRU dogma with the NAIBER concept...***Buffer Employment Ratio.
But that's mainly because private producers are forced to support the rentier overclass, not because there is something inherently wrong with the private sector. No, the inefficiency inherent in rentier parasitism. Government money won't solve the problem of rentier parasitism. Take it to the bank. Pigovian taxes should be used in any case. There should be no need for other taxes that bear on production. And landowners will just charge that much more for permission to access the guaranteed above-poverty jobs.
Where we differ is your faith in the free market. We all have different capacities to contribute, while a free market requires us all to successfully compete.
It's rational understanding, not faith. No, there's nothing in the free market that requires anyone to be successful. The main problem with our current far-from-free market is that we all have to first pay the rentier class full market value just for permission to compete, and after paying the rentiers for doing and contributing nothing, those who have the least to contribute have nothing left over for themselves. If they didn't have to support the rentiers first, they'd have a much better chance of supporting themselves.
