Author Topic: Best MMT Explanation I've heard yet  (Read 693 times)

MidwestnRich

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Best MMT Explanation I've heard yet
« on: February 03, 2021, 08:06:14 AM »
It is deep in my nature since childhood to be afraid of the national debt and global economic collapse. My parents spent years prepping rather than investing, and now they're almost 70 and still must work. I reacted to that and decided that I'd rather error on the other side, and have been investing heavily for the last 10 years or so now (I'm 27 now).

The study of Modern Monetary Theory has had me thinking that maybe I'm not simply brushing the problems under the carpet. This video has been the best explanation of MMT I've found yet.

https://www.youtube.com/watch?v=3QYJjisPMQY&ab_channel=PensionCraft

hodedofome

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Re: Best MMT Explanation I've heard yet
« Reply #1 on: February 03, 2021, 09:07:43 AM »
This is a better explanation IMO. Cullen Roche knows his stuff, and where MMT has it right and where it has it wrong.

https://www.pragcap.com/monetary-realism/
« Last Edit: February 03, 2021, 10:08:11 PM by hodedofome »

ctuser1

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Re: Best MMT Explanation I've heard yet
« Reply #2 on: February 03, 2021, 09:11:14 AM »
This video is a little misleading in how it presents MMT.

(Disclaimer: I did not listen to the entire video, but skipped ahead a few times to understand the thrust of the arguments made.).

Look at this - much longer - video if you want to get a more balanced view:
https://www.youtube.com/watch?v=cUTLCDBONok

The video you posted is misleading because it puts forth an entirely one sided picture.

Yes, it is pretty stupid to deal with government deficits the same way we used to in the mercantile economy days, or when the vestigial hangover of the mercantile economic policy - i.e. the "Gold Standard" - was in vogue. Austrian economists that still survive in the present day like an endangered species like to pretend that government policies still follow mercantile economics. MMT clearly shows why they are - justifiably - going extinct.

That, however, does not necessary mean that the debt has zero actual implication on anything. MMT clearly talks about inflation being a controlling factor. CPI measures consumer inflation - which has been low through all the deficit spending. But that is not the only type of inflation. Asset inflation is also a real thing - ask any Millennial locked out of purchasing a home to understand why. And, at a certain point of deficit spending, consumer inflation may or may not be impacted. The jury is still out on the second part.

While MMT does clearly show the bankruptcy of the austerity mindset in the middle of a pandemic, or in the throes of the Great Recession, it does not necessarily follow that the debt-fueled binge should continue during the good times (== the $2Tln Trump tax cuts during the boom time, mainly going to the wealthy).

If anything, MMT seem to bolster Keynesian economic theory to me. That happens to be the most widely supported economic policy choice among professional economists anyway!
« Last Edit: February 03, 2021, 09:19:13 AM by ctuser1 »

Financial.Velociraptor

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Re: Best MMT Explanation I've heard yet
« Reply #3 on: February 03, 2021, 11:19:18 AM »
Thanks @ctuser1

I did my undergrad in Economics and was indoctrinated into some ideas that made me very leary of MMT.  I finally broke down and bought Mosler's book.  I knew he had made hundreds of millions of dollars from his theory and have a healthy respect for "skin in the game".  Mosler made a lot of sense to me.  Much of what I see on the interblabbersphere regarding MMT does not.  It's clear that most of the people who promote runaway deficit spending and quote MMT have not read or at least didn't understand Mosler. 

It is clear to me know that 1) we can print for more money than the Chicago or Austrian schools think 2) the amount we can print without inflation is NOT infinite and depends heavily on there being "slack" in productive capacity.

I have changed my position on deficit spending as a result.  While before, I was a big fan of a balanced budget or even a surplus; now I support deficit spending on items that increase future productive capacity such as infrastructure spending.  MMT may have come along just in time to save the environment from Capitalism.

lifeanon269

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Re: Best MMT Explanation I've heard yet
« Reply #4 on: February 03, 2021, 12:16:58 PM »
I fall somewhere between Austrian economics and MMT/Keynesian economics. I don't think either side, while sticking 100% true to their ideals, gets the entire economic picture correct. The economy is so unbelievable complicated and unpredictable, I don't believe anyone fully understands the full ramifications of any policy or outcome.

There video is indeed a good primer on MMT, but as others said, it only looks at it from MMT's viewpoint and ignores a few other critical parts. I do agree that austerity isn't and shouldn't always be the goal and maintaining a "balanced budget" isn't exactly prudent at all times. However, one thing that the video ignores is the idea of money itself and how that can impact ordinary people's lives when the government operates under MMT.

For example, the cantillon effect is the premise that money is not always fair and neutral. If the government is to operate under MMT policy, then that means that "money printing" (in all its forms) is being used as a means to control debt. However, that money and how it enters the economy is not fair or neutral and it is nearly impossible to "print money" and release it into the economy in a way that is fair and equitable. There will always inherently be those who receive the money first in its circulation and those who "receive" that money through its circulation later in that money's life cycle. Therefore, those that receive that money first will inherently benefit the most from that money prior to that money exerting its inflationary forces on the economy. It is those people that will receive the greatest benefit of that money. This is a big reason why there is such a wealth gap in our world under MMT because those who are closest to the money printing (ie, usually not the poor) are the ones that benefit the most.

As others have said as well, there is a limit to which MMT theory works in reality. Just because we can operate under continued deficits doesn't mean we can always operate under any kind of deficits. There are absolutely times that call for controlling the budget is prudent. At the moment our debt-to-GDP ratio is ~130 and that is far from being healthy even for MMT.

Then there is also the concepts around currency and the relationships and trade balances that take place between the countries of our world. The currencies of national governments don't exist in a vacuum and there are certain benefits that the US has as its place in the world as an economic powerhouse and the fact that its currency is a reserve currency for many nations around the world. This allows the US certain advantages when executing MMT for its budget and its citizens that wouldn't necessarily be available to other countries that don't have that same stature on the greater global economic stage.

In all, the video is a good primer on MMT, but at the same time my advice is to not become a subscriber to any single economic theory, but to try and understand the ideas of all of them as I think there are good ideas from each of them that are relevant at any given time.

MidwestnRich

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Re: Best MMT Explanation I've heard yet
« Reply #5 on: February 04, 2021, 10:46:01 AM »
Look at this - much longer - video if you want to get a more balanced view:
https://www.youtube.com/watch?v=cUTLCDBONok

That's was really good! I actually watched the whole thing.

ctuser1

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Re: Best MMT Explanation I've heard yet
« Reply #6 on: February 05, 2021, 06:55:11 AM »
Thanks ctuser1


Look at this - much longer - video if you want to get a more balanced view:
https://www.youtube.com/watch?v=cUTLCDBONok

That's was really good! I actually watched the whole thing.

I'm glad y'll found it useful.

I found that video very useful in understanding the premises of MMT as well. Most of the other things I have seen do not link things to the first principles like Mosler did in that video.

I sincerely wish that someday social sciences try to work really, really hard to banish ideology and focus entirely and completely on conclusions that can be supported, or at least indicated by the scientific method (hypothesis -> testing -> adapt hypothesis -> start over). Based on what I've read (I wasn't around back then) social sciences used to do this semi-correctly 50 years ago - not quite sure yet why that changed!