Australian Politics Forum - Modern Monetary Theory (MMT)

Bobby.

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Re: Modern Monetary Theory (MMT)
Reply #465 - Apr 12^th, 2023 at 10:02pm

thegreatdivide wrote on Apr 12^th, 2023 at 9:55pm:

Bobby. wrote on Apr 12^th, 2023 at 9:41pm:

thegreatdivide wrote on Apr 12^th, 2023 at 9:33pm:

Bobby. wrote on Apr 12^th, 2023 at 9:18pm:

Except that we should never have had such draconian lockdowns then
we wouldn't have needed to print so much money.
The idea that we can print our way to prosperity is false.

Nonsense. Where were you when the govt. was faced with unemployment queues snaking around entire city blocks in the major cities?

Btw can you point to the paragraph in the Friedman article showing that his polices would cause a depression?

I read the first paragraph only to be reminded he was an originator of today's gruesome neoclassical economics....I despise the man.

So maybe you can point to the relevant passage, which highlights your comment re Frieman causing a depression.

And as for your comment about "printing to prosperity", that is sheer ignorance; learn how money is created, and by whom (plenty of pages in this thread).

A "depression" was my own opinion.

Aha, glad we sorted that out; reading about neoclassical economics is a complete and utter waste of time.

Quote:

I never believed in funny money.
Our money should have been backed by Gold -
if it was - an ounce of Gold would be worth over US $100,000
maybe even US$200,000 -
that's how much money they have printed - it's ridiculous.

Carry on, I can't force you to learn.

But you ducked addressing the position facing govts. in March 2020...governments like to avoid unemployed mobs rampaging in the streets for food and housing.

No I didn't -
the solution was to not have Draconian lockdowns not print a ship load of funny money.
The virus was nowhere near as bad as they made out.

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #466 - Apr 12^th, 2023 at 10:13pm

Bobby. wrote on Apr 12^th, 2023 at 10:02pm:

thegreatdivide wrote on Apr 12^th, 2023 at 9:55pm:

Bobby. wrote on Apr 12^th, 2023 at 9:41pm:

thegreatdivide wrote on Apr 12^th, 2023 at 9:33pm:

Bobby. wrote on Apr 12^th, 2023 at 9:18pm:

Except that we should never have had such draconian lockdowns then
we wouldn't have needed to print so much money.
The idea that we can print our way to prosperity is false.

Nonsense. Where were you when the govt. was faced with unemployment queues snaking around entire city blocks in the major cities?

Btw can you point to the paragraph in the Friedman article showing that his polices would cause a depression?

I read the first paragraph only to be reminded he was an originator of today's gruesome neoclassical economics....I despise the man.

So maybe you can point to the relevant passage, which highlights your comment re Frieman causing a depression.

And as for your comment about "printing to prosperity", that is sheer ignorance; learn how money is created, and by whom (plenty of pages in this thread).

A "depression" was my own opinion.

Aha, glad we sorted that out; reading about neoclassical economics is a complete and utter waste of time.

Quote:

I never believed in funny money.
Our money should have been backed by Gold -
if it was - an ounce of Gold would be worth over US $100,000
maybe even US$200,000 -
that's how much money they have printed - it's ridiculous.

Carry on, I can't force you to learn.

But you ducked addressing the position facing govts. in March 2020...governments like to avoid unemployed mobs rampaging in the streets for food and housing.

No I didn't -
the solution was to not have Draconian lockdowns not print a ship load of funny money.
The virus was nowhere near as bad as they made out.

So you claim, but the govt. certainly did not know that at the time, and had to quickly get rid of those centrelink unemployment queues

Cost: in the $billions, regardless of poorly targeted relief.

But your definition of 'funny money' is wrong; fiat money is backed by the nation's productive capacity, compared with bitcoin which IS funny money (based on a ponzi, in fact).

In fact all money is created out of nothing, but that doesn't mean all money is "funny money", just because it isn't backed by gold in the post gold-standard era.

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« Last Edit: Apr 13^th, 2023 at 12:22pm by thegreatdivide »

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #467 - Apr 13^th, 2023 at 12:32pm

On the news today:

(Commonwealth Bank) economist warns of collapse in household incomes due to high inflation and interest rates

And Chalmers is bleating about a "trillion dollar debt"- which he could authorize treasury to write-off with a few keystrokes, because a currency-issuing govt. is constrained by resources not money, obviously.

Labor will be turfed out at the next election if this keeps up, and deservedly so.

Note: interest rates can be maintained near zero; and inflation can be controlled by price controls in conjunction with rationing if required; and govt. subsidies for low income families on food, rent, and electricity can deal with the "collapse in household income" predicted by the Commonwealth Bank's gruesome neoclassical economist.

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« Last Edit: Apr 13^th, 2023 at 12:40pm by thegreatdivide »

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #468 - Apr 13^th, 2023 at 5:24pm

(critique of MMT by Peter Smith; cont. from #456)

"MMT is of very recent origin. It is a twenty-first-century theory; at least it is under the heading of MMT. Gravitas is added to a new theory if its origins can be traced to earlier times. The deeper its roots, the less likely it can be construed as faddish. According to its proponents, elements of MMT can be found in the work of economists of the past. Three are prominent.

The longest intelligible lineage of MMT goes back to “Chartalism”, developed by a German economist, Georg Friedrich Knapp, at the beginning of the twentieth century. Chartalism argues that money is primarily a creature of government and finds its value in exchange and as a store of value because government will accept it in discharge of debts it is owed.

Later in the century, Abba Lerner, a better-known economist in the then newly-minted Keynesian mould of the early 1940s, developed a theory of “functional finance”. Its central idea is that spending, taxing, borrowing and money issuance on the part of government should be “taken with an eye only to the results of these actions on the economy and not to any established traditional doctrine about what is sound or unsound”.

So far, so good.

Finally, Hyman Minsky, another well-known Keynesian economist, writing from the 1960s to the mid-1990s (he died in 1996), is brought into the frame by Wray in a working paper published by the Levy Institute in January 2018. It is not at all clear to me from Wray’s account that Minsky, if he had lived on, would have supported much of MMT. However, he did refer to circumstances in which there may be “a need to supplement private incomes with socially provided incomes, so that civility and civic responsibility are promoted”. Consistent with this, Wray argues that Minsky supported government having an “employer of last resort” role to reduce unemployment. As I will explain, this idea is an integral part of MMT, as also are the ideas stemming from Chartalism and functional finance.

Some orthodox Keynesians suggest that MMT is either saying things that are wrong or saying well-known things as though they are new. American economist Thomas Palley (“Critics of MMT are right”, Review of Political Economy, 2015) is a leading example. Leaving for now the assertion that MMT is saying things which are wrong, I don’t wholly agree that it is saying things which are all well known. Yes, there is nothing which doesn’t fall out of or can’t be derived from conventional economics. Nevertheless, some things are put in a way that has instructive novelty. This is certainly the case when it comes to taxation.

MMT has a number of interrelated elements. A good place to start is with taxation; specifically, with the proposition that government expenditure provides the wherewithal to pay taxes. Commonly this is put the other way around; that government taxes in order to fund its expenditure. But, MMT has a point and one that I admit to not having until now appreciated.

Well done, Peter!

To be cont....

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #469 - Apr 19^th, 2023 at 9:01am

Apparently Warren Mosler, former investment banker and co-founder of MMT, has said "there is no such thing as debt-free money".

But obviously a currency-issuing government with its own treasury and central bank, can finance public sector policies withour taxing or borrowing from the private sector, provided the necessary resources are available for purchase in the nation's own currency.

I think Warren is applying the banker's double-entry book-keeping debt and credit/liabilities and assets accounting methods, and hence concluding there is no such thing as "debt-free" money.

But he is wrong: the government can finance itself with debt free money as described above, because the government faces RESOURCE "opportunity costs", NOT repayment of bank-created debt-money (debt which must be repaid with interest).

[Note: most money in the economy is created when private banks write loans for credit-worthy customers (see prof. Keen's examination of this point***); bank managers don't check with their accounts department to see if the bank has sufficient customer deposits before making the loan...]

So I think Warren has quashed the implications of his own MMT discoveries (in his "7 deadly innocent frauds of economc polcy").

Which means he hasn't considered the possibility of controlling inflation, in a full employment, low interest rate scenario, by means of price controls, rationing, and subsidization of low-income households.

......

Today on ABC radio a job-seeker recipient expressed her disappointment with Albo; she noted that the government's exuse for not increasing the job-seeker payment now has been the same for the last 20 years, ie, "can't afford it".

Exposing the silliness of the idea that job seekers spending more money into the economy will cause excessive demand in the economy.

It won't, because supply of essentials is elastic and can quickly rise to meet demand (eg, food is already thrown out in supermarkets, and rent subsidies can be paid by a government issuing debt-free money, as examined above.

***"One of the great ironies of economics is that, while the public regards economists as experts on money, the issue of how money is created is still not settled within economics."

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« Last Edit: Apr 19^th, 2023 at 9:17am by thegreatdivide »

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #470 - Apr 19^th, 2023 at 2:44pm

To add to the previous post (#469), namely:

".....the government can finance itself with debt free money as described above, because the government faces RESOURCE "opportunity costs", NOT repayment of bank-created debt-money (debt which must be repaid with interest).

Iow, 'debt' shown in the Treasury's account ledgers can be made to disappear (magic....), because a money 'debt', unlike a real resource 'debt', is immaterial to a money issuer.

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thegreatdivide Gold Member Offline Australian Politics<br /> Posts: 12448 Gender:	Re: Modern Monetary Theory (MMT) Reply #471 - Apr 22^nd, 2023 at 10:19am https://billmitchell.org/blog/?p=60793 RBA Review Report ignores the real questions and proposes to entrench the failed Groupthink
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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #472 - Apr 22^nd, 2023 at 3:33pm

Dr. Steven Hail tweeted (re the latest recommendations for the RBA):

Unacceptable in a Democracy:......

"The RBA should continue to have operational independence for monetary policy.

The government should remove the power of the Treasurer to over-rule the RBA's decisions."

ie, rule by gruesome unelected neoclassical economists.

Philip Lowe gets paid big bucks to burden the least wealthy with interest rate rises, unemployment, and rent rises... while Chalmers is free to say "not my fault"....

.......

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thegreatdivide Gold Member Offline Australian Politics<br /> Posts: 12448 Gender:	Re: Modern Monetary Theory (MMT) Reply #473 - Apr 24^th, 2023 at 11:36am "Like it or not, economics has become the language of power. You cannot change the world without understanding it". — Ha-Joon Chang
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Ajax

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Re: Modern Monetary Theory (MMT)
Reply #474 - Apr 24^th, 2023 at 1:34pm

thegreatdivide wrote on Feb 27^th, 2022 at 4:56pm:

A timely discussion of how the economy works in China, the reasons for the West's demonization of China, and the status of MMT in China.

https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5jYXB0aXZhdGUuZm0vbWFjcm9uY2h...

Examining China with an MMT Lens with Yan Liang

"Macro and Cheese explores the progressive movement through the lens of Modern Monetary Theory, with hot and irreverent political takes, spotlights in activism, and the razor sharp musings of Real Progressives Founder and host Steve Grumbine".

"This week’s episode is another chapter in our mission to educate ourselves about modern China. Yan Liang specializes in Modern Money Theory, international trade and finance, and economic development, with a special regional focus on China. She is also the wife of friend-of-the-podcast Eric Tymoigne".

"Steve and Yan discuss the truth and misconceptions about the ongoing competition between the US and China. It has created winners and losers, with the working class in both countries affected by globalization. Trade war is class war."

(Spurts of aggressive punk music cease after c.1 mim.)

Do you know how the monetary system in the west works...????

Quote:

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Henry Ford

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1. There has never been a more serious assault on our standard of living than Anthropogenic Global Warming..Ajax
2. "One hour of freedom is worth more than 40 years of slavery & prison" Regas Feraeos

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #475 - Apr 24^th, 2023 at 1:58pm

Ajax wrote on Apr 24^th, 2023 at 1:34pm:

thegreatdivide wrote on Feb 27^th, 2022 at 4:56pm:

A timely discussion of how the economy works in China, the reasons for the West's demonization of China, and the status of MMT in China.

https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5jYXB0aXZhdGUuZm0vbWFjcm9uY2h...

Examining China with an MMT Lens with Yan Liang

"Macro and Cheese explores the progressive movement through the lens of Modern Monetary Theory, with hot and irreverent political takes, spotlights in activism, and the razor sharp musings of Real Progressives Founder and host Steve Grumbine".

"This week’s episode is another chapter in our mission to educate ourselves about modern China. Yan Liang specializes in Modern Money Theory, international trade and finance, and economic development, with a special regional focus on China. She is also the wife of friend-of-the-podcast Eric Tymoigne".

"Steve and Yan discuss the truth and misconceptions about the ongoing competition between the US and China. It has created winners and losers, with the working class in both countries affected by globalization. Trade war is class war."

(Spurts of aggressive punk music cease after c.1 mim.)

Do you know how the monetary system in the west works...????

Yes.

Quote:

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Henry Ford

Indeed.

I began the first MMT thread at Ozpol with the reference to China, only because:

"This week’s episode is another chapter in our mission to educate ourselves about modern China. Yan Liang specializes in Modern Money Theory"

Perhaps I should have started the thread with prof Stephanie Kelton's book 'The Deficit Myth' exposing the appalling state of current Western monetary orthodoxy.

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #476 - Apr 25^th, 2023 at 9:38am

Prof. Keen mourns the passing of post-Keynesian economist Victoria Chick.

https://profstevekeen.substack.com/p/farewell-vicky-chick?utm_source=post-email-...

"The thought that made Vicki's farewell both poignant and chilling for me was, will the Neoclassical mainstream of economics still be dominant when my day of internment arrives?"

excerpt:

Instead, Neoclassicals developed a twisted tale in which the Great Depression was caused, not by capitalism itself, but by the government. Specifically, they blamed the Federal Reserve for tightening monetary policy. Milton Friedman was the first to make this case, arguing, as Ben Bernanke put it, that:

Federal Reserve policy turned contractionary in 1928, in an attempt to curb stock market speculation… the main lines of causation [of the Great Depression] ran from monetary contraction—the result of poor policy-making and continuing crisis in the banking system—to declining prices and output.
(Bernanke 2000)

Bernanke echoed this explanation in an obsequious speech he made at Milton Friedman's 90th birthday function in 2002:

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.

"Bollocks. The real cause of the Great Depression was the collapse of a private debt bubble that the economics mainstream completely ignored. The Roaring Twenties roared because of a private-debt-fuelled Ponzi scheme that began in real estate and ended up in the Stock Market. The party came to an end when credit flipped from almost 10% of GDP in 1928 to almost minus 10% in 1933."

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #477 - Apr 25^th, 2023 at 3:29pm

https://www.abc.net.au/news/2022-08-18/economists-say-rba-should-have-raised-cas...

The Reserve Bank doesn't have enough information to make accurate interest rate calls, says former board member

Professor McKibbin says the Reserve Bank's understanding of the main drivers of inflation is incomplete and has led to policy error.

This policy error he and other economists say has led to haphazard interest rate decisions that have real-world consequences for millions of mortgage borrowers and renters.

...you're not kidding...

(linking rates to nominal wages rather than CPI, at least in supply-shock scenarios, might a better bet, says McKibbin).

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #478 - Apr 27^th, 2023 at 9:47am

A brief examination of the 'Quantity Theory of Money' (QTM):

http://www.boolean.org.uk/library/SRRIO_QTM.pdf

Theories of money.

(excerpt)

The commonly used QTM, proposed by Irving Fisher,
is as follows:

M.V = P.Y ... (i)
Where:
M is the volume of money;
V is the velocity of money circulation;
P is the average price of goods & services;
Y is the quantity of goods & services or, real income.

John Maynard Keynes, Arthur Pigou and Alfred
Marshall realized savings would reduce amount of
money in circulation and they therefore produced what
is known as the Cambridge Equation.

A version of this is shown below:
(M - s).V = P.Y... (ii) where s = savings

(cont).

"In 1975 Denis Healey, the Labour government Chancellor, altered macreconomic policy to one placing more emphasis on monetary policy instruments.
Since then investment and productivity in industry and
manufacturing declined and the balance of payments
for goods collapsed.
The aggregate demand paradigm promoted by Keynes
was taken up by monetarists making use of the Quantity Theory of Money identity (QTM) the guiding principle for monetary policy decisions with the objective of steering a path between inflation and deflation in the prices of goods and services.
The net result has been declining real wages and rising wealth of those dealing in asset holdings and asset trading."

..continued under the current crop of gruesome neoclassical economists running central banks.

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #479 - Apr 29^th, 2023 at 11:17am

https://www.9news.com.au/world/us-debt-budget-what-is-behind-the-looming-x-date-...

What's behind the looming 'x-date' on the US debt limit?

Why does the US have a debt limit?
Before World War I, Congress needed to approve each bond issuance.
The debt limit was created as a workaround to finance the war effort without needing a constant series of votes.
Since then, a tool created to make it easier for the government to function has become a source of dysfunction, stoking partisan warfare and creating economic risk as the debt has increased in size over the past 20 years.

How risky is the brinkmanship this time?

It looks alarming - and it's unclear how Biden, McCarthy and the Democratic Senate will find common ground.
A default could cause millions of job losses, a deep recession that would reverberate globally and, ironically, higher interest rates that would make it harder to manage the federal debt.
Biden called the plan that McCarthy unveiled last week "wacko," with a White House analysis showing that the spending caps would hurt schooling for children, healthcare for veterans, food aid for families and seniors and cause housing costs to climb for the country's poorest households.
The president's budget plan announced in March would
reduce deficits by nearly $US3 trillion over the next 10 years
**, primarily through tax increases on the wealth and corporations.
"America is not a deadbeat nation," Biden said.
"Take default off the table."

**irrelevent; the important thing is that the US economy remain productive.

The blind leading the blind - following neoclassical orthodoxy; and given this orthodoxy, greedy Republicans insist on paying less tax, reducing government spending, and hence increasing poverty.

Time is running out for hapless mainstream neoliberal politicians.

Today in Hobart PM Albanese was heckled by protesters for funding a $700 million football oval rather than public housing for homeless citizens. The 'honeymoon' is coming to an end.

This 'Left Wing' government can find half a $trillion to build nuclear subs and missiles to attack China - who has no intention of invading Oz - for the sole purpose of 'defending democracy' in Taiwan, which is none of our business.

And as poverty increases in Oz, the government will be busy enough defending democracy in Oz.....

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« Last Edit: Apr 29^th, 2023 at 11:30am by thegreatdivide »

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