Question For @07Pilt

[Ponca Dan]

I read this and thought he makes a very compelling case for why there is inflation and why it’s not going away anytime soon without severe pain. You are the MMT advocate on this board, and you have said on more than one occasion the US has been practicing MMT for years. It is my understanding that MMT theory says it cannot create inflation, that the government must tax the extra money on the back end, which I take to mean the people paying the tax are the ones at the end of the pipeline, and they get double whammied by facing the inflation and then taxed on top of it to make it go away.

At any rate, since MMT says it cannot cause inflation, and since you say we have been practicing MMT for years, and since there is damaging inflation at our doorstep, can you explain what happened?

Like I said earlier I think this guy ticks all the boxes, but he is rabidly opposed to MMT. So the question is: why do we have inflation when we were told it could not happen? These are honest questions, by the way, I’m looking for an MMT explanation. And - please! - speak in easy to understand English! I’m a simple vacuum cleaner salesman, neither an academic nor an intellectual, and definitely not well schooled in economics.

One last thing: I’m not looking for an explanation on why this guy is wrong, I’m looking for MMT’s explanation. Appreciate it in advance!

A Time for Reckoning

"We’ve reached the end of the road, and found that the people who must ultimately pay for unlimited government is us. Whether through taxes or inflation, pay we will." ~ Antony Davies

www.aier.org

 

[Medic007]

It is my understanding that MMT theory says it cannot create inflation

At any rate, since MMT says it cannot cause inflation

Wrong X 2

 

[2012Bearcat]

It's nuanced.

 

[Ponca Dan]

Wrong X 2

I don’t want to get sidetracked from the question. My understanding of MMT is that there will not be inflation because Treasury will burn all the excess money that filters back into its hands and taxes what’s left. If that’s incorrect I apologize. But I still would like to know why MMT says we are suffering from inflation. I’m more than ready to have you explain it if you know, it doesn’t have to be Pilt.

 

[Medic007]

I don’t want to get sidetracked from the question. My understanding of MMT is that there will not be inflation because Treasury will burn all the excess money that filters back into its hands and taxes what’s left. If that’s incorrect I apologize. But I still would like to know why MMT says we are suffering from inflation. I’m more than ready to have you explain it if you know, it doesn’t have to be Pilt.

That's way incorrect and doesn't even sound logical, Dan.

Excess government deficit spending (creation of new dollars) is one of the drivers of the current inflation, especially emerging from all the disruptions caused by covid.

 

[Ponca Dan]

That's way incorrect and doesn't even sound logical, Dan.

Excess government deficit spending (creation of new dollars) is one of the drivers of the current inflation, especially emerging from all the disruptions caused by covid.

The author of the link explains creation of new dollars without a corresponding increase in goods and services is the *primary* driver of inflation, which has been the mantra of economists since time immemorial. I am sure I have read that MMT says the gov can print all the dollars it wants, and if MMT theory is properly applied inflation will not happen. If I am correct on that account I am curious where MMT theory was not properly applied. I hope you understand this is an honest attempt to follow MMT theory and not an attempt to have an argument. I seem to remember last time we talked about this you got mad at me thinking I was just trying to frustrate you, which was not the case and surprised me greatly. So I’m feeling I’m walking on eggshells a little bit. If you’re getting frustrated say so and I’ll shut up.

 

[Medic007]

The author of the link explains creation of new dollars without a corresponding increase in goods and services is the *primary* driver of inflation, which has been the mantra of economists since time immemorial. I am sure I have read that MMT says the gov can print all the dollars it wants, and if MMT theory is properly applied inflation will not happen. If I am correct on that account I am curious where MMT theory was not properly applied. I hope you understand this is an honest attempt to follow MMT theory and not an attempt to have an argument. I seem to remember last time we talked about this you got mad at me thinking I was just trying to frustrate you, which was not the case and surprised me greatly. So I’m feeling I’m walking on eggshells a little bit. If you’re getting frustrated say so and I’ll shut up.

Yes, too many dollars chasing too few goods is definitely a driver of inflation which is what I said in my previous post.

Dan, there's no such thing as "MMT theory was not properly applied." There's nothing to "apply." MMT explains our current fiat currency system. How politicians use deficit spending is an entirely different animal.

 

[Ponca Dan]

Yes, too many dollars chasing too few goods is definitely a driver of inflation which is what I said in my previous post.

Dan, there's no such thing as "MMT theory was not properly applied." There's nothing to "apply." MMT explains our current fiat currency system. How politicians use deficit spending is an entirely different animal.

Just so I’m clear: an MMT economist explains inflation and its causes the same way as an Austrian school economist, or a Chicago school economist or a Keynseyan economist? And does an MMT economist offer the same “cure” for inflation as the others?

 

[Medic007]

Just so I’m clear: an MMT economist explains inflation and its causes the same way as an Austrian school economist, or a Chicago school economist or a Keynseyan economist? And does an MMT economist offer the same “cure” for inflation as the others?

What do those offer as a "cure" for inflation?

 

[Ponca Dan]

What do those offer as a "cure" for inflation?

I think the author of the link I posted in the OP says it better than I could. I’m not trying to wiggle out of an explanation, I’m not sure I could say it with the clarity he uses. That aside, my whole purpose in starting the thread was to learn what MMT has to say about why we have inflation and what to do to stop it independent of what other economic schools say.

 

[Medic007]

I think the author of the link I posted in the OP says it better than I could. I’m not trying to wiggle out of an explanation, I’m not sure I could say it with the clarity he uses. That aside, my whole purpose in starting the thread was to learn what MMT has to say about why we have inflation and what to do to stop it independent of what other economic schools say.

To learn that, you have to understand what MMT is and what it isn't. This gal does a pretty good job breaking things down in terms I understand...

How Do You Solve A Problem Like Inflation?

Happy New Year! I’ve enjoyed writing this newsletter and expect to have a lot to say on a wide range of topics in 2022. Last year, I devoted a lot of space to the legislative process and how the “pay for game” gummed up the debate over President Biden’s economic

stephaniekelton.substack.com

In particular...

"So here’s what the so-called “MMT experiment” has shown: (1) The mechanics of government finance work precisely the way MMT has always described. (2) The federal government is not revenue constrained. (3) There was no need to raise taxes in order to finance trillions in new spending. (4) Interest rates do not spike as a natural consequence of rising debt and deficits. (5) There was no crowding out of private spending and no difficulty finding buyers for new US Treasuries. The “experiment” confirmed these core tenets of MMT.

There was, however, a big move up in inflation following the passage of the March 2021 fiscal package. And this has led some people to ask whether the emergence of high inflation means that the MMT experiment has failed. The answer is an unequivocal no.

Why?

Because MMT offers a descriptive framework—a lens—through which to evaluate fiscal and monetary policy. MMT did not urge the Fed to do $120 billion in asset purchases every month. MMT did not write the $2.2T CARES Act. It did not advise Congress to launch the payroll protection program, to send out $1,200 checks or to provide $600/week in federal unemployment compensation. A framework cannot do those things. An MMT economist can."