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The Deficit Myth (MMT) by Stephanie Kelton

This is a quite interesting book, worth reading, by a former economic advisor to Bernie Sanders.

Higashiyama

Comments

  • MsMorrisineMsMorrisine Posts: 24,874 ✭✭✭✭✭

    warning just in case

    Don't Get Political

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  • JimnightJimnight Posts: 7,736 ✭✭✭✭✭

    :)

  • jmski52jmski52 Posts: 20,694 ✭✭✭✭✭
    edited September 15, 2020 5:57AM

    What "self-imposed limit is she talking about? I don't see no self-imposed limits by the Fed or Congress, either one. They do whatever suits their purposes. Money for nothin', but only for the select few on top and the useful idiots on the bottom.

    Arbitrary picking of winners & losers, having exactly nothing to do with productive enterprise.

    Does the book cover malinvestment due to misallocation of all the free money? I think not.

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • WCCWCC Posts: 764 ✭✭✭✭

    MMT is just another rationalization to justify stealing someone else's property or work effort. That such foolishness is actually believed as a potential "solution" is also an indication that those who otherwise should know better are aware that exponential debt increases are approaching the "end game".

    It could in theory work in an economy composed of robots who act like most economists occasionally believe. It's never going to work in one populated by actual humans beings.

  • dpooledpoole Posts: 5,770 ✭✭✭✭✭

    MMT works as long as interest rates are low.

    But not after that.

  • HigashiyamaHigashiyama Posts: 1,425 ✭✭✭

    Thanks for the various comments above; I absolutely agree with the sentiments expressed.

    However, the book is worth reading as a fairly slick presentation of a deeply flawed "theory" aimed at a naive audience. The author herself, though almost certainly sincere, is rather naive.

    Although we should definitely take @MsMorrisine 's caution seriously -- don't get political -- it is interesting to read reviews of the book; both liberal and conservative commentators point out errors and errors of omission. Yet, the book and MMT have a following and it does not take a stretch of the imagination to expect that this following may grow. The basic idea (that currency issuers have not fully used the power inherent in being able to create money to 'invest' in infrastructure and solve social problems) could easily become intoxicating.

    As is often the case, flawed theories have elements that are correct, and this may make them more salable. That is certainly true with MMT. @dpoole points to an interesting issue, which Stephanie Kelton actually claims to address in the book. Basically she says that with the new found understanding provided by MMT, the Federal government, not the markets, will control interests rates, for the benefit of all!

    Higashiyama
  • MsMorrisineMsMorrisine Posts: 24,874 ✭✭✭✭✭

    @Higashiyama said:
    could easily become intoxicating.

    aren't they already?

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  • derrybderryb Posts: 30,376 ✭✭✭✭✭
    edited September 15, 2020 12:57PM

    @Higashiyama said:
    Basically she says that with the new found understanding provided by MMT, the Federal government, not the markets, will control interests rates, for the benefit of all!

    Benefit for all? Good luck wid dat.

    Government control is a not a "new found" understanding. Control has been the purpose of governments from the day they were created, rarely for the benefit of all, usually for the benefit of a few. It is why there are three economic classes of people in a society.

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  • WCCWCC Posts: 764 ✭✭✭✭

    When it comes to their own pocket book or ideology, most people believe what they want to believe, not because it is true or there is a reason to believe it.

    With MMT specifically, somehow these proponents have convinced themselves that there is something uniquely different about the US Federal Reserve and government which doesn't apply to most (if any) others. It isn't just that these other places borrowed in a foreign currency that resulted in the subsequent economic problems. It's that no one can live indefinitely beyond their means. This applies to individuals, countries and every level in-between.

    End result?

    It's what I said before. The standard of living of the typical American is destined to decrease and for most, noticeably. Same outcome most everywhere else. The only thing suspending reality is artificially low interest rates and collectively, the lowest credit standards in history.

    Fiscal stimulus, QE and MMT can only postpone reality where the future consequences will be even worse.

  • GoldenageGoldenage Posts: 147 ✭✭✭
    edited September 16, 2020 2:56AM

    Interesting points.

  • PerryHallPerryHall Posts: 39,301 ✭✭✭✭✭

    MMT stands for Magic Money Tree. :D

  • jmski52jmski52 Posts: 20,694 ✭✭✭✭✭

    MMT works as long as interest rates are low.

    But not after that.

    It only "works" in the sense that the numbers don't blow up immediately.

    The caveat is that in order to keep rates low, even more money has to be created, exponentially in order to roll over even more debt - thus insuring a blowup.

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • derrybderryb Posts: 30,376 ✭✭✭✭✭

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  • PerryHallPerryHall Posts: 39,301 ✭✭✭✭✭

    MMT stands for Magic Money Tree. :D

  • HigashiyamaHigashiyama Posts: 1,425 ✭✭✭

    @derryb said "The true endgame for MMT"

    Stephanie Kelton would presumably observe that the Venezuelans missed the part about using tax policy (and other measures) to mute inflation.

    Higashiyama
  • meluaufeetmeluaufeet Posts: 586 ✭✭✭

    Mostly tax policy, yup.

  • derrybderryb Posts: 30,376 ✭✭✭✭✭
    edited October 9, 2020 5:56PM

    The reality of MMT

    100,000-Bolivar Bills Worth Just $0.23.

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  • derrybderryb Posts: 30,376 ✭✭✭✭✭
    edited October 9, 2020 6:08PM

    @Higashiyama said:
    @derryb said "The true endgame for MMT"

    Stephanie Kelton would presumably observe that the Venezuelans missed the part about using tax policy (and other measures) to mute inflation.

    Just how much tax can be collected from a population earning poverty wages who are already collecting massive government subsidies? Taxes can be a policy only when the population has the money to pay them. MMT requires a capitalistic economy where there are taxable incomes and even then ever growing taxes will eventually reduce the economy to a socialist existence.

    Socialism works until you run out of other people's money.

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  • s4nys4ny Posts: 1,518 ✭✭✭

    MMT will result in inflation in commodity prices. Watch nickel and copper especially. Inflation has not been too noticeable in the US yet because of very low interest rates and currently high unemployment. Inflation is now delayed by COVID and its effect on employment. Delayed, but not postponed.

  • derrybderryb Posts: 30,376 ✭✭✭✭✭
    edited October 14, 2020 1:47PM

    "They see Modern Monetary Theory as the answer – create money at will under the new theory that there will never be inflation." -- Martin Armstrong

    MMT is the 'solution' to having run out of other people's money.

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  • HigashiyamaHigashiyama Posts: 1,425 ✭✭✭

    @derryb, you should read the book, you'd find it entertaining.

    Stephanie Kelton does mention this Margaret Thatcher quote, and, of course, says that Thatcher just didn't get it. Kelton says that if you can print money, you don't need anyone else's money. You just go ahead and print. After that, if inflation begins to creep up, then you might start taxing people to mop up excess money in the system.

    Higashiyama
  • derrybderryb Posts: 30,376 ✭✭✭✭✭
    edited October 14, 2020 10:33PM

    @Higashiyama said:
    @derryb, you should read the book, you'd find it entertaining.

    Stephanie Kelton does mention this Margaret Thatcher quote, and, of course, says that Thatcher just didn't get it. Kelton says that if you can print money, you don't need anyone else's money. You just go ahead and print. After that, if inflation begins to creep up, then you might start taxing people to mop up excess money in the system.

    I've read enough about MMT to know it is a dangerous replacement for monetary discipline and restraint, as is QE. Like QE it is an effortless, temporary 'solution' for leaders without the guts to do what is right. It is just a different shoe kicking the same can a little further down the road. It only delays the day of reckoning. The longer that delay the worse the reckoning. Imagine where we would be now if we had bit the bullet and applied a proper, painful fix to the 2008 crisis.

    Kelton is the one who doesn't get it. MMT simply replaces "other peoples money" with "nobody's money:"

    • If you recklessly print money you make it worth less (and eventually worthless). We have seen this without MMT. MMT will only expedite and worsen the day of reckoning - the death of the dollar.
    • Inflation will always appear when there is more money chasing the same amount of what it is spent on. In recent years it has been chasing assets and only because it has not been put into the hands of the buyers of goods and services. As more effort is made to put this new "nobody's money" into consumer hands, prices in goods and services will rise accordingly.
    • Reducing inflation by taking away the ability to spend by increasing taxes is terrible plan - the delay between tax increases that reduce disposable income and the eventual reduction/stabilization in prices will adversely affect the consumers' quality of life. Paul Volcker proved that the best cure for inflation is to reduce consumer debt by raising interest rates. Tax hikes take away money that people have (and need). Raising interest rates only takes away their immediate access to money that they will have in the future. Volcker made them wait until they earned the money, far less painful than tax increases yet very effective in controlling inflation simply by reducing demand.
    • MMT will increase the occurrence of boom/bust economic cycles. Each cycle throws the economy into further turmoil causing leaders to recklessly grasp for the next form of QE/MMT. Desperation has put us in the economic fix we now find ourselves in.

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  • jmski52jmski52 Posts: 20,694 ✭✭✭✭✭

    MMT also circumvents the process of prioritizing government spending and makes reckless social engineering experiments much easier.

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • derrybderryb Posts: 30,376 ✭✭✭✭✭
    edited October 18, 2020 5:27PM

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  • dpooledpoole Posts: 5,770 ✭✭✭✭✭

    The Covid pandemic has required massive infusions of cash to keep people afloat. Well and good.

    However, the seduction of injecting massive infusions of cash to deal with whatever may terrifyingly be here to stay, for all Congressional and presidential leadership hereafter. Who will be left standing with any clout to say them nay?

  • blitzdudeblitzdude Posts: 3,045 ✭✭✭✭✭

    It's just paper and some random numbers on a computer screen. Print away, and don't forget to send me and the misses another stimulus welfare check. I need a new zero turn and end of season is the best time to buy. Thanks!

  • MeltdownMeltdown Posts: 7,260 ✭✭✭✭✭

    @blitzdude said:
    It's just paper and some random numbers on a computer screen. Print away, and don't forget to send me and the misses another stimulus welfare check. I need a new zero turn and end of season is the best time to buy. Thanks!

    Load back up on more of that gutter metal Blitz! You know you can't help yourself. :D

  • blitzdudeblitzdude Posts: 3,045 ✭✭✭✭✭

    @Meltdown said:

    @blitzdude said:
    It's just paper and some random numbers on a computer screen. Print away, and don't forget to send me and the misses another stimulus welfare check. I need a new zero turn and end of season is the best time to buy. Thanks!

    Load back up on more of that gutter metal Blitz! You know you can't help yourself. :D

    If she breaks back down under $20 it will be tempting. Guess I'm a sucker for punishment. lol

  • derrybderryb Posts: 30,376 ✭✭✭✭✭

    Ha, I can remember when the mention of "QE Forever," like price manipulation, was just another conspiracy theory. LOL

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  • blitzdudeblitzdude Posts: 3,045 ✭✭✭✭✭

    @derryb said:
    Ha, I can remember when the mention of "QE Forever," like price manipulation, was just another conspiracy theory. LOL

    Must of been before my time here. My only recollection of conspiracies involved, the comex is imploding. JPM owns so much silver they are gonna make the price go to the moon, Bulguaria is set to take over the world etc.

  • derrybderryb Posts: 30,376 ✭✭✭✭✭

    Pretty bad when Japanification of the US economy is actually the best outcome we can now hope for

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  • derrybderryb Posts: 30,376 ✭✭✭✭✭

    Well, they can't print gold:

    New Gold Standard: Orderly or Chaotic?

    "The dollar collapse has already begun and the need for a new monetary order is now emerging. I believe it will involve gold. The question is whether it will be an orderly process resulting from a new monetary conference, or a chaotic one."

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  • HigashiyamaHigashiyama Posts: 1,425 ✭✭✭

    Rickards often has some interesting things to say.

    One comment in the piece posted by @derryb above: when thinking about the decline of the dollar, we should look at the history of the British pound. For all practical purposes, US dollar hyperinflation is a zero probability event. A long and occasionally painful decline is quite possible.

    As crazy as it may seem to mainstream finance people, it is not out of the question that gold may play some role in a new global currency agreement. We will definitely not go back to anything that resembles the 19th century gold standard or even Bretton Woods. But, gold might help to mute rivalry of the dollar and the renminbi, both of which have serious issues as long term reserve currencies.

    Higashiyama
  • jmski52jmski52 Posts: 20,694 ✭✭✭✭✭

    For all practical purposes, US dollar hyperinflation is a zero probability event.

    How many trillion dollar bailouts for people, states, corporations, hedge funds, junk bond funds, ETFs and municipalities will it take before people figure out that they're being had and they lose complete confidence in the US currency?

    The Ctrl Prt key does seem to be stuck. John Williams notes unemployment at 28% - more than the Great Depression, and 60% of the lost jobs are said not to be coming back. Doesn't seem to bode well for the tax base in most places.

    The bailout money seems to be going mainly into the stock market, which begs the question as to whether or not company profitability justifies the rise, since actual sales performance isn't driving the increases. It's an amazing phenomenon, but it's not real.

    Be advised.

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • rcmb3220rcmb3220 Posts: 922 ✭✭✭

    @jmski52 said:
    For all practical purposes, US dollar hyperinflation is a zero probability event.

    How many trillion dollar bailouts for people, states, corporations, hedge funds, junk bond funds, ETFs and municipalities will it take before people figure out that they're being had and they lose complete confidence in the US currency?

    The Ctrl Prt key does seem to be stuck. John Williams notes unemployment at 28% - more than the Great Depression, and 60% of the lost jobs are said not to be coming back. Doesn't seem to bode well for the tax base in most places.

    The bailout money seems to be going mainly into the stock market, which begs the question as to whether or not company profitability justifies the rise, since actual sales performance isn't driving the increases. It's an amazing phenomenon, but it's not real.

    Be advised.

    I don’t think you know what “begs the question” means

  • jmski52jmski52 Posts: 20,694 ✭✭✭✭✭

    I don’t think you know what “begs the question” means

    I had to look it up, and I see nothing wrong with my usage of "begs the question". When money is created out of thin air and the majority of it goes into the stock market when the main economic event seems to be high unemployment, it does not seem logical that stocks would be valued higher without commensurate increase in sales and/or earnings.

    What is YOUR interpretation? Do you somehow see higher profitability from lower sales numbers, layoffs, bailouts and cutbacks in company spending? Please explain.

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • meluaufeetmeluaufeet Posts: 586 ✭✭✭

    Stephanie Kelton -- MMT and the Deficit Myth (w/ Marshall Auerback) Via Real Vision

  • rcmb3220rcmb3220 Posts: 922 ✭✭✭

    @jmski52 said:
    I don’t think you know what “begs the question” means

    I had to look it up, and I see nothing wrong with my usage of "begs the question". When money is created out of thin air and the majority of it goes into the stock market when the main economic event seems to be high unemployment, it does not seem logical that stocks would be valued higher without commensurate increase in sales and/or earnings.

    What is YOUR interpretation? Do you somehow see higher profitability from lower sales numbers, layoffs, bailouts and cutbacks in company spending? Please explain.

    It means one is assuming or restating their conclusion without actually supporting it with any facts.

    It doesn’t mean a statement that raises a question that is just begging to be asked.

  • jmski52jmski52 Posts: 20,694 ✭✭✭✭✭

    Merriam-Webster defines "begging the question" as "to pass over or ignore a question by assuming it to be established or settled." In other words, it means that you're stating as fact what you are trying to prove.

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • jmski52jmski52 Posts: 20,694 ✭✭✭✭✭

    It appears to me that Stephanie 1) believes in unconstrained government spending and 2) has never run a business.

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • derrybderryb Posts: 30,376 ✭✭✭✭✭
    edited October 30, 2020 6:44AM

    Modern Monetary Theory is nothing new, just a new name. It is intended, by it's marketing "experts," to bring an updated, positive outlook to old, negative issues such as "runaway debt, endless printing and QE." That magical word "Modern" ain't gonna do the trick. If we were to call it what it is, Dollar Destruction, it just might get properly addressed and eventually fixed.

    The FED's balance sheet (the true measure of Quantative Easing) is up 90% in the last 13 months. Not very promising for a "recovering economy" or its currency. Unfortunately that which affects our currency affects all of us.

    One must realize that the financial press is not exempt from the corrupt corporate ailments that have destroyed the reliability of the mainstream press. Of course, destroying the reliability of information we receive is small potatoes to destroying the currency we trade in and depend on.

    No currency can be "infinite." History has shown, for different reasons, they all have a breaking point. That said, there is no good reason to purposely expedite its demise.

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  • jmski52jmski52 Posts: 20,694 ✭✭✭✭✭

    John Rubino gives a fairly good summation of the debt problem and its inevitable endpoint, in a recent interview with Greg Hunter on USAWatchdog.

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • Rooster1Rooster1 Posts: 375 ✭✭✭

    Yep, I think we are all going down like a turd in a well, it will float for a while and then deteriorate and fall to the bottom.

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  • derrybderryb Posts: 30,376 ✭✭✭✭✭

    MMT?

    Simon Black calls it "classic empire arrogance."

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