Yet Another Economist Throws Shade On The Disaster That Is MMT
- Thread starter Ponca Dan
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Once again, MMT isn't a "regime." It isn't something to be implemented. It's not part of any political system. It simply describes how our economy works. How Congress decides to spend or tax isn't MMT. Describes the effects of spending and taxing on the economy is MMT.
Medic, you know I respect and admire you as much as any other person on this board. You can be hilarious, you are passionate, you keep discussions going (sometimes long last time when they should end!). You are always worth reading.
But on this issue you are just flat in error. MMT is an economic theory that puts politicians in total control of how money (the medium of exchange) is dispersed. Expecting politicians to exercise ANY self control over spending and taxing is ludicrous. That’s the whole point of this essay. He calls it an “MMT regime” only in the sense that if it is ever enacted the politicians would be the “regime” in charge of implementing it. Your criticism of the term “regime” is disingenuous, surely you know we can see through that. I suspect you either didn’t read the article, or you read it until you found the word “regime” and decided that was all you needed to reject what he says. You would be far better served by explaining what errors you see in his writing. Something better than dismissing it because he used a word you think provided a chink in his armor.
Should the President not give any attention economics? He should just leave it to experts like you? Pretty much what got the world f'd up. Tell me with the exception of the GM'S Of the world how is America suffering under Trump economic policy?
Okay, he's a risk taker, not every deal works out.
Trump is a economic nationalist, you are a economic globalist. Problem is most of the world is economic protectionists so he is playing their game, you are someone that will let them rig their trade and then put no barriers to them and we get screwed over.
Politicians are already in total control of how money is dispersed. MMT describes that.
That has nothing to do with MMT. MMT simply describes the cause and effect.
Once again, MMT isn't something to be "enacted." It describes current reality.
No, his use of regime is disingenuous.
I read the entite article. It's clear he's misinformed.
The entire article is based on something that doesn't exist. MMT describes today. It isn't something anyone needs to enact. If you would separate your emotions regarding irresponsible government spending and the current macroeconomic system that currently exists, none of this would be difficult for you. MMT does nothing more than describe reality.
I reread the article, and counted his use of the term "regime" exactly once: "Even if an MMT regime reliably used taxes to fight inflation, it would be completely impractical." He then proceeds to show why it is impractical. For you to focus on one word out of about 2,000 as a reason to dismiss the argument is preposterous. But, that's OK. I don't expect you to be dissuaded from your belief. Hopefully others on this board will read the article and recognize its validity.
Dan, MMT is an economic theory. It isn't a green light to spend spend spend. I'm not dismissing his article over the word "regime." I'm dismissing it because he's looking for a zebra on a cow farm.
You are correct, it is a theory looking to be put into effect. It has such political luminaries as AOC and Bernie Sanders supporting it. (Why would socialists think MMT is a great policy?) Once put into effect it will be administered by a "regime" (what else would you call it?). Your cavalier dismissal of the article belies any attempt you have made to refute it. Simply saying "he's misinformed, "he's being disingenuous," He's looking for zebras" is not sufficient rebuttal. Please explain in some detail where his argument is in error, then we will have something substantial to discuss.
Is a one world government involved?
If a One World government isn't involved, I'm out.
This is what you keep getting incorrect. This is what the articles you post keep getting incorrect. It isn't "a theory looking to be put into effect." It's a theory that describes our CURRENT macroeconomics. MMT describes how things currently work in our fiat currency. It's already "in effect."
You and I can't have a substantial discussion about MMT until you realize MMT isn't some sort of financial scheme to be unleashed on the country. It isn't a blank check waiting for progressives to fill out. It does nothing more than describe what currently happens in the real world.
One. World. Government. Yes, MMT has recruited the shadowy underworld of the One. World. Government. You should definitely be in.
Yes, MMT does an excellent job of describing monetary theory as it is currently practiced. Virtually every economist I have read grants that. It's when it provides the "cure" for the mistakes of current policy that MMT goes off the tracks.
That's the whole point being made. MMT would replace current policy by eliminating the nominal independence of the central banks and putting total control of how much currency should be dispersed, and to whom it should be dispersed into the hands of politicians directly. Politicians would decide when there needs to be more currency dropped into the economy, which industries should be the recipients of the largess, whom - and how much - to tax to prevent the concern of inflation.
The politicians who would be making those decisions are the "regime" they are talking about..The whole article being linked discusses that. The whole point of the article is to describe what a convoluted mess that would make of the economy. If politicians can't be trusted with the system as it currently is, it is pure foolishness to believe that could be trusted to implement MMT, pouring money into the society on one end while taxing to eliminate money from the other..
Virtually every link I have provided has agreed that MMT does a good job of describing current monetary policy. It's the actual implementation of MMT that becomes an issue.
No, I’m not describing the status quo. The Fed has nominal independence from politicians in making monetary decisions. I use the word “nominal” because I fully recognize that politicians, particularly presidents, can browbeat the central banks into doing their bidding. We saw Trump jawbone the Fed just a month or two ago. MMT eliminates an independent body from making monetary decisions, and naively assumes that politicians and corporate executives will not resort to corruption. Which, considering the corruption and crony capitalism under the current system, makes advocates if MMT incredibly stupid or intentionally corrupt themstlves.
On paper MMT looks great because it ignores or misunderstands human nature, the incentive for powerful people to abuse their power for personal gain. Like socialism - actually like any government interference in a society’s marketplace - it would work until it quit working. And when it quit working it would turn into a disaster.
And if you don't think that Politicians currently decide when there needs to be more currency dropped into the economy, which industries should be the recipients of the largess, whom - and how much - to tax to prevent the concern of inflation, then I don't know what to tell you.
You don’t need to tell me anything. I said in my last comment that politicians do exactly that. The current corruption would be the JV team compared to what would happen under the application of MMT. If you can’t see that I don’t know what to tell you.
And yet another economist (Austrian School) explains the muddled thinking of MMT. When you think about it, it is no wonder advocates of socialism are so gung-ho on MMT. It promises something for nothing with no ill consequences of any kind! Socialist nirvana!
https://mises.org/wire/problem-modern-monetary-theory
https://mises.org/wire/problem-modern-monetary-theory
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[...]
According to this theory, the value of money is established because the State forces people to pay taxes with the money that the State has decided upon. The State taxes have to be paid with the money tokens issued by the State. The State also has the ability to control the value of money through its declaration of how much it is willing to pay for a certain commodity produced by the private sector. What we have here is a situation wherein the State exchanges empty tokens for goods and services produced by individuals. It then requires them to pay taxes with part of the tokens.
If one dissects the whole process, one discovers that it is about an exchange of worthless tokens for real goods and services (i.e. nothing for something).
i.e. the status quo.
In the MMT framework, the token money is seen as a receipt on the economy’s resources. A token money held by an individual is regarded like his claim on a portion of resources. wrong. money is a token for payment of taxes and government fees.
Individuals have exchanged goods and services for a receipt given to them by the government. In this way of thinking, individuals who have generated goods and services are acknowledged for this by the tokens issued to them by the government. In short, individuals are the owners of goods and services and can exercise their claim over these goods and services whenever individuals deem it is required.
We have seen that according to the MMT, money is a means to pay taxes, which also sets the money’s purchasing power and in turn makes it an accepted means of payment throughout the rest of the economy.
Is it true, however, that money is simply a means of payment? Do individuals pay with money or the goods and services they have produced? To ascertain what money is all about we have to establish its essence — its definition.
Defining Money
To establish the definition of money we have to ascertain how a money-using economy evolved. Money emerged as a result of the fact that barter could not support the market economy. The distinguishing characteristic of money is its function as the general medium of exchange. It has evolved from the most marketable commodity. On this Mises wrote,
There would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money.2
Similarly Rothbard wrote that,
Just as in nature there is a great variety of skills and resources, so there is a variety in the marketability of goods. Some goods are more widely demanded than others, some are more divisible into smaller units without loss of value, some more durable over long periods of time, some more transportable over large distances. All of these advantages make for greater marketability. It is clear that in every society, the most marketable goods will be gradually selected as the media for exchange. As they are more and more selected as media, the demand for them increases because of this use, and so they become even more marketable. The result is a reinforcing spiral: more marketability causes wider use as a medium which causes more marketability, etc. Eventually, one or two commodities are used as general media-in almost all exchanges-and these are called money.3
In short, money is the thing that all other goods and services are traded for. This fundamental characteristic of money must be contrasted with other goods. For instance, food’s characteristic is that it supplies the necessary sustenance to human beings. Capital goods’ characteristic is that it permits the expansion of the infrastructure that in turn will permit the production of a larger quantity of goods and services. Contrary to the MMT then, the essence of money has nothing to do with tax payments to the government. His definition, and MMT's assertion that what is used as money is what is used to pay taxes are not at all mutually exclusive.
Furthermore, money’s function is not a means of payment as argued by the MMT but as a general means of exchange. People pay with goods and services for other goods and services with the help of money. Money facilitates the payments of one good for another good. Also, contrary to the MMT money is not a claim on resources but just the general medium of the exchange. Literally no MMTer argues that money is not a means of exchange.
In addition, does it make sense that money emerged because of the need to pay taxes to the government? The State or a sovereign could by a decree force people to do what the State and sovereign wants. The sovereign does not require issuing some empty tokens in this regard. As far as I know MMT makes no claim on the origin and history of money, only its function in society today. But, yes, the government could just acquire good and services by decree, but it is much easier to manage things monetarily.
Also, could the sovereign force individuals to use tokens in the transactions among themselves? Why would anyone accept a token as a payment because government accepts these tokens as tax payments? The fact that dollars are legal tender for paying taxes and government fees establishes its value which is why it is an acceptable form of payment.
Mises Explains How the Value of Money is Established
In his writings, Mises had shown how money became accepted.4 He began his analysis by noting that today's demand for money is determined by yesterday's purchasing power of money. Consequently for a given supply of money, today's purchasing power is established in turn. Yesterday's demand for money in turn was fixed by the prior day's purchasing power of money.
[...]
Applying Mises’s framework, also known as the regression theorem, we can infer that it is not possible that money could have emerged as a result of a government decree or government endorsement or social convention. The theorem shows that money must emerge as a commodity.
What a rigorous way to determine how money works in the modern world.
On this Rothbard wrote,
In contrast to directly used consumers' or producers' goods, money must have pre-existing prices on which to ground a demand.The pre existing prices are government fees and taxes But the only way this can happen is by beginning with a useful commodity under barter, and then adding demand for a medium to the previous demand for direct use (e.g., for ornaments, in the case of gold). Thus government is powerless to create money for the economy; the process of the free market can only develop it.5
This will be news to the Fed and the US Treasury.
But how does all this relate to paper money? Originally, paper money was not regarded as money but merely as a representation of gold. Various paper certificates represented claims on gold stored with the banks. Holders of paper certificates could convert them into gold whenever they deemed necessary. Because people found it more convenient to use paper certificates to exchange for goods and services these certificates came to be regarded as money.
It follows then that it is only on account of the historical link to gold that the central bank's pieces of paper acquired purchasing power, not by government decree.
Tell that to Richard Nixon
The MMT Framework and Wealth Creation
In the MMT world, i.e. the world of today given that money is created by the government and given that the government is able to print freely as much money as it requires, the government by implication has command over unlimited amounts of real wealth. Absolutely not. This guy gives us a thousand words of goldbuggery only to drop this turd? The author strenuously established above that money is a means of exchange only to revert at the very end to "money=wealth." Wow Ponca Dan, you need to rethink your world view if this barely disguised sleight of hand is the best it has to offer.
If the government determines what should be regarded as money and what is going to be its value, No MMTer says that the government determines the value of money. Every MMTer explicitly specifies a floating exchange rate regime. This article is a joke an waste of time.this also means that the government dictates the rate of exchanges between money and goods and services. This means that prices are set by the government and bypasses market forces. Economic theory shows that such conduct leads to the inefficient use of resources and in turn leads to economic impoverishment. An example in this regard is the collapse of the former Soviet Union and the inability of planned economies such as Cuba and the North Korea to feed its people.
According to this theory, the value of money is established because the State forces people to pay taxes with the money that the State has decided upon. The State taxes have to be paid with the money tokens issued by the State. The State also has the ability to control the value of money through its declaration of how much it is willing to pay for a certain commodity produced by the private sector. What we have here is a situation wherein the State exchanges empty tokens for goods and services produced by individuals. It then requires them to pay taxes with part of the tokens.
If one dissects the whole process, one discovers that it is about an exchange of worthless tokens for real goods and services (i.e. nothing for something).
i.e. the status quo.
In the MMT framework, the token money is seen as a receipt on the economy’s resources. A token money held by an individual is regarded like his claim on a portion of resources. wrong. money is a token for payment of taxes and government fees.
Individuals have exchanged goods and services for a receipt given to them by the government. In this way of thinking, individuals who have generated goods and services are acknowledged for this by the tokens issued to them by the government. In short, individuals are the owners of goods and services and can exercise their claim over these goods and services whenever individuals deem it is required.
We have seen that according to the MMT, money is a means to pay taxes, which also sets the money’s purchasing power and in turn makes it an accepted means of payment throughout the rest of the economy.
Is it true, however, that money is simply a means of payment? Do individuals pay with money or the goods and services they have produced? To ascertain what money is all about we have to establish its essence — its definition.
Defining Money
To establish the definition of money we have to ascertain how a money-using economy evolved. Money emerged as a result of the fact that barter could not support the market economy. The distinguishing characteristic of money is its function as the general medium of exchange. It has evolved from the most marketable commodity. On this Mises wrote,
There would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money.2
Similarly Rothbard wrote that,
Just as in nature there is a great variety of skills and resources, so there is a variety in the marketability of goods. Some goods are more widely demanded than others, some are more divisible into smaller units without loss of value, some more durable over long periods of time, some more transportable over large distances. All of these advantages make for greater marketability. It is clear that in every society, the most marketable goods will be gradually selected as the media for exchange. As they are more and more selected as media, the demand for them increases because of this use, and so they become even more marketable. The result is a reinforcing spiral: more marketability causes wider use as a medium which causes more marketability, etc. Eventually, one or two commodities are used as general media-in almost all exchanges-and these are called money.3
In short, money is the thing that all other goods and services are traded for. This fundamental characteristic of money must be contrasted with other goods. For instance, food’s characteristic is that it supplies the necessary sustenance to human beings. Capital goods’ characteristic is that it permits the expansion of the infrastructure that in turn will permit the production of a larger quantity of goods and services. Contrary to the MMT then, the essence of money has nothing to do with tax payments to the government. His definition, and MMT's assertion that what is used as money is what is used to pay taxes are not at all mutually exclusive.
Furthermore, money’s function is not a means of payment as argued by the MMT but as a general means of exchange. People pay with goods and services for other goods and services with the help of money. Money facilitates the payments of one good for another good. Also, contrary to the MMT money is not a claim on resources but just the general medium of the exchange. Literally no MMTer argues that money is not a means of exchange.
In addition, does it make sense that money emerged because of the need to pay taxes to the government? The State or a sovereign could by a decree force people to do what the State and sovereign wants. The sovereign does not require issuing some empty tokens in this regard. As far as I know MMT makes no claim on the origin and history of money, only its function in society today. But, yes, the government could just acquire good and services by decree, but it is much easier to manage things monetarily.
Also, could the sovereign force individuals to use tokens in the transactions among themselves? Why would anyone accept a token as a payment because government accepts these tokens as tax payments? The fact that dollars are legal tender for paying taxes and government fees establishes its value which is why it is an acceptable form of payment.
Mises Explains How the Value of Money is Established
In his writings, Mises had shown how money became accepted.4 He began his analysis by noting that today's demand for money is determined by yesterday's purchasing power of money. Consequently for a given supply of money, today's purchasing power is established in turn. Yesterday's demand for money in turn was fixed by the prior day's purchasing power of money.
[...]
Applying Mises’s framework, also known as the regression theorem, we can infer that it is not possible that money could have emerged as a result of a government decree or government endorsement or social convention. The theorem shows that money must emerge as a commodity.
What a rigorous way to determine how money works in the modern world.
On this Rothbard wrote,
In contrast to directly used consumers' or producers' goods, money must have pre-existing prices on which to ground a demand.The pre existing prices are government fees and taxes But the only way this can happen is by beginning with a useful commodity under barter, and then adding demand for a medium to the previous demand for direct use (e.g., for ornaments, in the case of gold). Thus government is powerless to create money for the economy; the process of the free market can only develop it.5
This will be news to the Fed and the US Treasury.
But how does all this relate to paper money? Originally, paper money was not regarded as money but merely as a representation of gold. Various paper certificates represented claims on gold stored with the banks. Holders of paper certificates could convert them into gold whenever they deemed necessary. Because people found it more convenient to use paper certificates to exchange for goods and services these certificates came to be regarded as money.
It follows then that it is only on account of the historical link to gold that the central bank's pieces of paper acquired purchasing power, not by government decree.
Tell that to Richard Nixon
The MMT Framework and Wealth Creation
In the MMT world, i.e. the world of today given that money is created by the government and given that the government is able to print freely as much money as it requires, the government by implication has command over unlimited amounts of real wealth. Absolutely not. This guy gives us a thousand words of goldbuggery only to drop this turd? The author strenuously established above that money is a means of exchange only to revert at the very end to "money=wealth." Wow Ponca Dan, you need to rethink your world view if this barely disguised sleight of hand is the best it has to offer.
If the government determines what should be regarded as money and what is going to be its value, No MMTer says that the government determines the value of money. Every MMTer explicitly specifies a floating exchange rate regime. This article is a joke an waste of time.this also means that the government dictates the rate of exchanges between money and goods and services. This means that prices are set by the government and bypasses market forces. Economic theory shows that such conduct leads to the inefficient use of resources and in turn leads to economic impoverishment. An example in this regard is the collapse of the former Soviet Union and the inability of planned economies such as Cuba and the North Korea to feed its people.
"
In the MMT world, given that money is created by the government and given that the government is able to print freely as much money as it requires, the government by implication has command over unlimited amounts of real wealth.
If the government determines what should be regarded as money and what is going to be its value, this also means that the government dictates the rate of exchanges between money and goods and services. This means that prices are set by the government and bypasses market forces. Economic theory shows that such conduct leads to the inefficient use of resources and in turn leads to economic impoverishment. "
You may have been trying in other posts or threads to describe the mechanisms and behaviors that erode at the ability to accept the potential risk in behaving as if MMT is an unbounded observance with predictive power.
I found this article enjoyable. Only made it half through, but will probably finish later.
https://www.businessinsider.com/weekender-the-trouble-with-modern-monetary-theory-mmt-2011-1
Thank you, Brad. I had not seen this one. But, hell, there is such a tsunami of criticism of MMT it’s hard to keep up with it all.
Yeah, the Austrian School has only been around for about 100 years, and it’s proponents have won a couple of Nobel Prizes. What could they possibly know?
I just want to make an observation. Medic and a couple others have stated that MMT describes the current economic environment. I'd argue they were right under the Obama Fed fiscal policies where the Fed was ballooning its balance sheet (QE) in order to keep real interest rates near zero. In today's Fed, where its shrinking its balance sheet (QT) and pressuring rates to rise, I don't believe that reflects what I understand MMT to be.
I still disagree with MMT principle as I believe its highly inflationary and leads to the devaluing of currency, as well as questionable in its overall effectiveness. Obama and the Fed basically practiced MMT and managed to deliver the worst post-recession economic performance in presidential history, while doubling the National debt (although MMT would tell you the latter doesn't matter).
I still disagree with MMT principle as I believe its highly inflationary and leads to the devaluing of currency, as well as questionable in its overall effectiveness. Obama and the Fed basically practiced MMT and managed to deliver the worst post-recession economic performance in presidential history, while doubling the National debt (although MMT would tell you the latter doesn't matter).
it also assumes that the currency in use is the only alternative. It sort of works for America given that the dollar is the world's currency. But that status shouldn't be taken for granted, and if lost, MMT becomes an inflationary noose on the neck of the country.
Some good discussion.
I wonder what the impact of crypto would be on MMT descriptiveness should it ever be heavily adopted.
Economist George Segin offers his opinion of MMT and MMTers. Damn, it’s unbelievable how many professional economists can so thoroughly misunderstand the concept of MMT! Pilt and Medic obviously know more about it than they do!
https://www.alt-m.org/2019/03/20/mmts-big-coin-gambit/
https://www.alt-m.org/2019/03/20/mmts-big-coin-gambit/
This guy starts off well by quoting MMTers and making a good faith effort. He then falls off the rails.
His attempt at debunking chartalism is confused by his belief that somethings value it determined by people willing to hold it. It isn't, it is determined by people willing to exchange it. You can sell all of your dollars for euros, and then buy them back when it is time to pay taxes, but those dollars aren't worth 0 in the interim.
"To wit, if constraints on the government's ability to "spend and spend" are truly understood and acknowledged by MMTers at large, then why does Mosler say that "government debt is not true debt" and that "There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it?""
Because financial crises are monetary in nature and not real resource crises. They are the result of two little money chasing too many goods and services and there.
"At this point the MMTers resort to a situational defense. They pooh-pooh the idea that investor preference will ever shift away from $US debt and currency to a significant degree because the U.S. is, at this present point in time, still hegemonic and strong. In part they lean on the chartalist taxes and transactions argument - a leg of the stool we have already kicked out."
MMT applies to any country with a floating exchange rate currency, not just massive hegemons.
I don't think you have put much effort into understanding MMT then.
Were is all the inflation then?
