MMT: overcoming the political divide.

Discussion in 'Economics & Trade' started by a better world, Mar 12, 2020.

  1. a better world

    a better world Well-Known Member

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    (written by Bill in early March, when the global economic system was confronting total collapse):

    ""Now it is different. This crisis has the potential to wipe out the middle classes and the professional classes. And suddenly, who would have thought – the nation state is apparently back, all powerful and being begged to intervene. It is wake up time. Now no-one can be unclear about the fiscal capacity of the state. They now know that politicians who claim they don’t have enough money to do things were lying all along."

    Bill is here assuming his readers know that when he speaks of "the state's fiscal capacity", he is talking about the capacity of the currency-issuing state to issue debt free money, by changing the digits in the bank accounts of whoever it is deemed appropriate, to enact specific public policy.
     
  2. scarlet witch

    scarlet witch Well-Known Member Donor

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    90% of your post is just blah blah blah & sarcasm...most uninteresting to me, much prefer people who get to the point.

    How is this
    proof that MMT is the holy grail? Here's a newsflash... if they don't want to pay back the debt they have to inflate it away... AND if they want to inflate the debt away they are going to have to increase interest rates at some point....now enter the mountains of household debt. You are making a BIG mistake if you assume interest rates will always stay low.

    The Keynesians have forced us down this path & eventually their rubbish made up theories are going to come crashing down.... like it does every time they debase a currency over the course of human history. In the meantime people like yourself will eat the bullshit like candy... oh yum yum give me more of the new fantasy MMT because it sounds so good.... until the pile up. Go back in history and you will see how today's economic circumstances mimmic the 1920 depression.


    as for this comment
    .. ..what can possibly go wrong :rolleyes: How quickly people forget, how many times in history are we going to stand at the same cross roads and choose exactly the same road of printing money until it is worthless, because we've done it many times before with the exact same outcome.
     
    Last edited: Jun 29, 2020 at 2:12 AM
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  3. kazenatsu

    kazenatsu Well-Known Member Donor

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    All money is based on debt. If you issue more money not based on debt, you dilute the value of the entire pool of money. You get an inflationary effect. (inflationary relative to what it would be like if that money wasn't there)


    I do not know exactly what you mean by "the state issuing debt free money".
     
    Last edited: Jun 29, 2020 at 2:33 AM
  4. kazenatsu

    kazenatsu Well-Known Member Donor

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    In my many years of life on this earth, I've noticed that some people never seem learn. There have been members on this forum actually arguing that the country spending and getting into more debt is good thing, or even that inflation is a good thing. They will get into an intense debate arguing that point, and refuse to change their minds despite all the arguing in the world.
     
    Last edited: Jun 29, 2020 at 2:37 AM
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  5. Zorro

    Zorro Well-Known Member

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    Magic Money Theory means the government no longer needs our approval to spend. The Totalitarians love the concept!
     
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  6. a better world

    a better world Well-Known Member

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    It's not, it just shows how orthodox economists have been forced by current circumstances to accept that massive government debt MUST be incurred in some circumstances like the present (unless you want people to starve...).

    Yes, you are describing the dilemma faced by orthodox economists, who accept the present neoliberal system in which all debt - private AND public, is owed to private financiers.
    The solution requires government to issue its own non-interest bearing debt.

    No. Keynes was abandoned during the stagflation of the 70's, which seemed to indicate that Keynes no longer worked (as it had worked in the 2 decades following the war) . But the Chicago School failed to identify the causes (oil price inflation and competition from emerging Asia) and came up with the wrong solutions.

    Wrong again; it's neoliberalism that has been in operation since the 80's. and yes it this current neoliberal orthodoxy that is going going to come crashing down.

    No. You've lost the plot. Nobody's debasing the currency. Whether MMT or neoliberal. It's just the debt will become unrepayable if rates rise too much, under neoliberal orthodoxy.

    Addressed above, Weimar, Zimbabwe, Venezuela have nothing to do with the present situation facing the world.
     
  7. a better world

    a better world Well-Known Member

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    On the contrary, MMT enables citizens to vote for public policies they desire.
     
  8. a better world

    a better world Well-Known Member

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    Quite so...

    MMT argues the government doesn't NEED to issue interest-bearing debt. And we all agree - orthodox economists included - inflation c.2% is not a problem.
     
    Last edited: Jun 29, 2020 at 4:47 AM
  9. kazenatsu

    kazenatsu Well-Known Member Donor

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    Is that a 0.2% (zero point two percent) ?

    If so, yes, I agree. 0.2% inflation is not really a problem. Just like 0.2% deflation should not be a problem, theoretically. (The problem is we've come to expect inflation, unfortunately)
     
    Last edited: Jun 29, 2020 at 5:05 AM
  10. a better world

    a better world Well-Known Member

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    Except when it is issued by the public sector, whether as actual notes, or digits in bank accounts.

    No. That's just the obsolete quantity theory of money. If the resources the government wishes to buy are available for purchase, and the resulting government spending leads to an increase in the economy's productive capacity eg via better education, there is no devaluation.

    Addressed above.

    The currency issuing government has its own treasury and (with minor changes to legislation) central bank, enabling it to issue notes and change digits in bank accounts, unlike private sector banks that issue interest bearing debt (deposits) when they write loans for credit worthy customers.
     
    Last edited: Jun 29, 2020 at 5:08 AM
  11. kazenatsu

    kazenatsu Well-Known Member Donor

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    Your statement is very misleading. It could be, in those situations, but in reality right now is not.
     
    Last edited: Jun 29, 2020 at 5:08 AM
  12. a better world

    a better world Well-Known Member

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    That's right. MMT certainly recognises a (minor) change of rules is required to enable treasury and central bank to issue debt free, ie non-interest-bearing money.

    a note about money: from the article on the Bank of Canada

    http://understandingcanada.ca/2019/11/much-ado-about-1974-the-bank-of-canada-in-the-70s/

    "money is imaginary and there is absolutely nothing limiting the government from creating as much as the public needs other than an ideological choice. To say we don’t have enough money is to say we don’t have enough imagination, or as another reformer put it, “worrying about where to get the money is like having a conversation and worrying about running out of words”. The ONLY limits to the economy outside of nature itself are people and resources, any other arbitrary limit, like money, is self-imposed".

    MMT recognises that the debt-based neoliberal economy financed by private banks alone is unsustainable, because the interests of private banksters are not the interests of the general public.

    Re inflation: most central bank governors of any economic school aim for c. 2.0% inflation.

    OTOH, MMT economists would work to ensure avoidance of excess demand on resources in the economy, bearing in mind the economy's (actual or potential) productive capacity.
     
    Last edited: Jun 29, 2020 at 8:08 AM
  13. Lil Mike

    Lil Mike Well-Known Member

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    Then that post explained nothing, it's merely a screed by a believer. I thought you were actual going to post some study.

    You Failed again.
     
  14. Lil Mike

    Lil Mike Well-Known Member

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    He means, just printing it instead of borrowing it. But he thinks that won't cause inflation because of Magical Monetary Theory.
     
  15. kazenatsu

    kazenatsu Well-Known Member Donor

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    The US is both printing money (in a sense) and borrowing it right now.
    I don't think they could print anymore without us seeing inflation.
     
  16. kazenatsu

    kazenatsu Well-Known Member Donor

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    Well, look, a better world, I think there might be something to what you're saying.

    DennisTate (whacky as he is, I know) posted this useful link some time ago:
    https://www.michaeljournal.org/arti...story-of-banking-control-in-the-united-states

    Basically what they're saying is if the Treasury is going to borrow money and get the Fed to give it to them by printing money, it may be better for them to do it directly themselves rather than have to pay an interest rate to the Fed.


    (That being said, it's important to point out that in such a situation the amount of new money being issued by the Fed isn't 1 on 1 proportional to the amount of inflation that will be caused, since the new money issued is being backed by debt, it's just not backed proportionally to the degree the old money was, because if it was, the Treasury would have turned to the private marketplace rather than having to go to the Fed. Or in other words the Fed is subsidizing the interest rates on this debt, but that must be paid for in inflation)
     
    Last edited: Jun 29, 2020 at 2:50 PM
  17. Zorro

    Zorro Well-Known Member

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    JFK did this.

    [​IMG]
    JFK "United States Note"

    vs

    [​IMG]
    A Federal Reserve Note.
    Months later, JFK was dead, and later his Executive Order was reversed by his successors.

    Under JFK (at at various other times), a limited number of debt-free United States Notes were issued by the U.S. Treasury and spent by the U.S. government without any new debt being created. In fact, each bill said "United States Note" right at the top. ly,

    If you pull a dollar out of your wallet today it says "Federal Reserve Note". Normally, the way our current system works is that whenever more Federal Reserve Notes are created more debt is also created.
     
  18. scarlet witch

    scarlet witch Well-Known Member Donor

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    Bernanke was a Keynesian...??? how do you reconcile it with your abandoned statement.

    The currency was debased in 71 by Nixon...what did you say about a lost plot?

    :lol:
     
  19. kazenatsu

    kazenatsu Well-Known Member Donor

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    Yes, the government can do this.

    The notes (in this sort of situation) mainly derive their worth from the power of taxation, since you need the notes to pay the taxes on any transaction.

    Of course there is a huge danger of inflation if the government is not very responsible with the amount of currency they issue.
    You basically get a 1 to 1 inflationary effect, which is not even the case with currency issued by a Central Bank.

    I suppose that might be what a better world was referring to by "debt free money".
     
    Last edited: Jun 29, 2020 at 9:40 PM
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  20. a better world

    a better world Well-Known Member

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    Yes, NOW you are in the picture, at last.

    As you say, fiat currency (whether notes or digits in computers) "mainly derives its worth from the power of taxation, since you need the notes to pay the taxes on any transaction".
    That's within a given nation.
    Externally, the comparative value of the currency depends on the resources and productive capacity of the given nation, cf other nations.

    (Witchie is still hung up "commodity backed" currency)

    As for inflation, you said :

    Note: in MMT, inflation is the central issue, for the very reason you state in that first sentence, underlined by me.

    But your 2nd sentence is still beholden to the obsolete quantity theory of money.

    So long as resources are available for purchase, and productive capacity/potential is realised, the government can also create wealth - alongside the private sector - by issuing its own currency.

    Without causing inflation, because the economy's productivity has increased.


     
  21. a better world

    a better world Well-Known Member

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    To you and Witchie....who refused to explain how the mere fact of government changing digits in the bank accounts of laid off workers, to keep these workers alive during the pandemic (ie so they can buy food and pay utilities bills), would cause inflation:

    The conversation has moved on, see following posts by Zorro and Kazenatsu, and my summation in #595.

    Now back to the long article on Canada and MMT, there is a lot in there to consider.

    http://understandingcanada.ca/2019/11/much-ado-about-1974-the-bank-of-canada-in-the-70s/
     
    Last edited: Jun 29, 2020 at 10:56 PM
  22. a better world

    a better world Well-Known Member

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    from the above article:

    "WE’RE BEING LIED TO. Not necessarily intentionally, most politicians have been deeply indoctrinated in neoliberal logic, through their education and institutional experiences (the Washington Consensus is a great example), and very few understand even the rudimentary basics of the monetary system, so it’s very likely they don’t even know they are spreading a falsehood. Every time a Canadian federal politician says “We don’t have the money” it’s a lie, like when Trudeau told an injured veteran “You’re asking for more than we’re able to give right now” that is complete and utter bullshit.

    "We are being denied much needed public works and services in order to maintain and strengthen the supremacy of the private sector while weakening and gutting the public sector".

    There is quite literally NO LIMIT to the funds the BoC can create for the government, and no constraints on that creation, not taxes, not bond sales, not interest rates, not debt levels. The government readily admits to this “As the nation’s central bank, the Bank [of Canada] is the ultimate source of liquid funds to the Canadian financial system and has the power and operational ability to create Canadian-dollar liquidity [money] in unlimited amounts at any time.” and yet when funding is needed politicians will still do the where-do-we-get-the-money dance as if money were some scarce physical commodity instead of merely numbers in a computer. DON’T BE FOOLED! Everyone should care about our leaders lying to us in order to deny our collective needs.

    As economist John Kenneth Galbraith said in his treatise on money:

    “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.”

    From “Money: Whence it Came, Where it Went”, 1975 by J.K. Galbraith


    ..........
    And don't be fooled by the inflation narrative of orthodox neoliberal economists.
    Inflation is cause by too few resources, not too much money.
     
    Last edited: Jun 29, 2020 at 11:41 PM
  23. a better world

    a better world Well-Known Member

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    Bernanke was a neo-Keynesian, actually nothing to do with Keynes (long story).

    Nixon finally abandoned the gold standard, yes, but vis a vis other currencies there was no change, since everyone was now in the same boat.

    "Fiat money is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it".

    (Note: a problem with that statement is that in our neoliberal system government is forbidden to issue debt free money, though it certainly could (with minor rules changes to treasury and central bank. However the definition of 'fiat' is accurate).

    Anyway if you want to learn, read the posts following yours.

    Meantime, how can government changing digits in bank accounts of laid-off workers during this pandemic - to enable purchase of food and payment of utility bills and rent, by said laid-off workers, cause inflation?
     
    Last edited: Jun 30, 2020 at 2:24 AM
  24. bringiton

    bringiton Well-Known Member

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    False. Commodity money and fiat money are not.
    Only if supply increases more than demand, reducing the monetary unit's purchasing power.
    That's not what "inflationary" means.
    Commodity or fiat money that is issued by the state and circulates without being owed to anyone.
     
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  25. a better world

    a better world Well-Known Member

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    An excellent article from professor Bill Mitchell today, exploring all the issues we have been examining on this board lately (with a revealing conclusion):

    http://bilbo.economicoutlook.net/blog/?p=45314&cpage=1#comment-68564

    Apparently the government has no money but then has plenty
    .......


    "There is now a line of critics who acknowledge the validity of core MMT principles but think they are too dangerous for people to broadly share in that knowledge.

    Why?

    Because we apparently have reached a point in history where we hate dictators and eulogise the benefits of democracy (à la Churchill in the Commons on November 11, 1947 – “democracy is the worst form of Government except for all those other forms that have been tried from time to time”), but don’t want the politicians we elect to have the flexibility to advance our well-being.

    Or in simpler language – “because we don’t trust politicians”.

    This amounts to a world where the elites can manipulate the fiscal capacity of the state to advance their own interests (procurement contracts at will, bailouts when they mess up, etc) but if we want to do something about unemployment or poverty then the rest of us has to be held in this fictional (mainstream) world that appeals to our instincts of fear and uncertainty.

    And, of course we then are encouraged to distrust politicians and so it goes.

    My view is that once we expose these myths, more sensible political discourse can take place*.

    And if we do not like our government – that is they go crazy with their spending capacity – then we throw them out of office (in Australia, every three years of so).

    They can hardly destroy the nation in three years.

    I also think that if the standard of political dialogue was improved, higher quality candidates would seek election and push out the time-serving careerists who dominate all political parties.

    It is an extraordinary world where we accept a deception because knowing the truth might require us to act differently (become more politically engaged and demand quality political behaviour).

    *other than the excruciating 'more tax - less tax' debates in our current parliaments.




     

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