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Modern Monetary Theory (MMT) (Read 96645 times)
thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #795 - Mar 13th, 2024 at 3:01pm
 
MeisterEckhart wrote on Mar 13th, 2024 at 2:46pm:
thegreatdivide wrote on Mar 13th, 2024 at 2:39pm:
MeisterEckhart wrote on Mar 13th, 2024 at 2:28pm:
thegreatdivide wrote on Mar 13th, 2024 at 2:19pm:
I already noted that if treasury has done a stock-take of the nation's resources which are available for purchase, then treasury (the issuer of the nation's currency) can buy those resources by crediting the bank accounts of the sellers (including labour) ....with money created out of thin air as described above.   



That does not explain 'out of thin air', you've just moved it.

'Out of thin air' is a metaphor that characterises the creation or appearance of something that is not based in reality, or a supernatural event.

What does 'out of thin air' mean in the context you're using it?


It means  a bank manager doesn't have to duck around to the bank's vault to see if the bank has enough money, when a creditworthy customer walks in seeking a loan.

The customer can receive the money on the spot -  money created out of thin air -  if he was able to convince the manager he is credit-worthy, regardless of the quantity of the bank's  customers' deposits. 


That is not the context in which you are using it.


Well...it is; surely I have to right to describe the way and the context in which I am using the phrase (ie "ex nihilo")

What is your objection to the bank manager presenting a bank cheque for $100k created out of thin air?   

Quote:
You are referring to currency-issuing governments that can create money out of thin air.


Ah....yes; actually I am demanding that a sovereign currency-issuing government has the same money creation privileges as that granted to private banks.

Then the difference  between public (government) money cf.  private sector 'bank' money, is the latter is interest-bearing and must be repaid, not so in the case of the  former.



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MeisterEckhart
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Re: Modern Monetary Theory (MMT)
Reply #796 - Mar 13th, 2024 at 3:30pm
 
When totalitarian/authoritarian governments create money out of thin air, they do so for self-interest and without regard to the necessary resources being available for purchase (by the government), to avoid inflation.

How is a currency-issuing government creating money out of thin air if it is backed by the necessary resources being available for purchase (by the government), to avoid inflation? Wouldn't that be issuing money for exactly the reasons money is intended - to represent real, verifiable value?
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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #797 - Mar 13th, 2024 at 5:37pm
 
MeisterEckhart wrote on Mar 13th, 2024 at 3:30pm:
When totalitarian/authoritarian governments create money out of thin air,


Not the topic.....


Quote:
they do so for self-interest...


No,  Xi has reiterated common prosperity as the nation's goal, including an acknowledgement  "houses are for living in, not investment vehicles" (after the Evergrande disaster; in contrast Oz is learning nothing from its own housing ponzi - we are heading toward a generation locked out of home ownership). 

Quote:
How is a currency-issuing government creating money out of thin air if it is backed by the necessary resources being available for purchase (by the government), to avoid inflation?


In the same way private banks can ONLY (wisely) issue interest bearing 'bank money' created out of thin air when lending to (hopefully) credit-worthy customers, so the currency-issuing government can ONLY issue money created out of thin air to purchase the resouces sought by the government, when those resources are available.

Quote:
Wouldn't that be issuing money for exactly the reasons money is intended - to represent real, verifiable value?


Apparently it still hasn't clicked with you: the value is in the real resources, not in the money which is merely a convenient measurement of the value of real resources.

Imagine if humans were instinctively cooperative and loving toward our own species, instead of instinctively competitive and ready to go to war...

In that case, we would all be contributing to the developmnet of the nation's economy according to our different abilties,  and enjoy sharing  the rewards of the resulting economic development - without recource to money at all.

Now you should be able to understand the difference between the 'value' of money (the 'lubricant' that massages self-interest and competition), real resources, and "real verifiable value" which is nothing to do with money, eveything to do with the capacity to support and advance the quality of life. 
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MeisterEckhart
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Re: Modern Monetary Theory (MMT)
Reply #798 - Mar 13th, 2024 at 5:48pm
 
So the context behind creating money out of thin air is simply the banal statement that money in itself is not directly and necessarily linked to any specific thing of value and, by that, is effectively created 'out of thin air' such that 'too much' or 'not enough' is largely indefinable.
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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #799 - Mar 14th, 2024 at 7:39am
 
MeisterEckhart wrote on Mar 13th, 2024 at 5:48pm:
So the context behind creating money out of thin air is simply the banal statement that money in itself is not directly and necessarily linked to any specific thing of value and, by that, is effectively created 'out of thin air' such that 'too much' or 'not enough' is largely indefinable.


Well.. wrong on all counts, but you are edging toward an understanding....

1. The term 'creating money out of thin air' is simply a description of the operation; someone in a bank (or the central bank) types some numbers into a person's bank account.

In the case of the currency-issuing government, it means the government doesn't need to tax or borrow in order to spend money into the economy, just as a private bank doesn't need customers' deposits before the bank can write loans (lend money). Hence: "money created out of thin air.

Note: taxes do the reverse, ie they destroy money (take it out of circulation), a tool the govt. might need if inflation is a problem (see below) .

So Kelton's statement could read:

"The currency-issuing government can fund government spending without taxing or borrowing from the private sector (usually done by selling govt. bonds), provided the resources the government seeks are available for purchase by the government, to avoid inflation."

That means Chalmers who is bleating today about needing to achieve a 'balanced budget' is talking  nonsense; he needs to make sure the teachers and the builders etc the government wants are available - by spending first.   


2. I covered "value" in my previous post.

3. Re "'too much' or 'not enough' is largely indefinable":

What is definable is a continuous  full-employment economy which maximises the nation's productivity, in the absence of inflation.

So MMT envisages a JG (Job Guarantee), with the minimum above poverty wage in the economy; with a  ZIRP (zero interest rate policy). 

All defined.

Rather than using the blunt instrument of raising  interest rates, the government ( having reclaimed it's rightful authority from the so-called 'independent' central bank) can introduce taxes or price controls if inflation appears in the economy (for whatever reason; eg good resource management will avoid demand inflation, while supply problems will require other fixes).

The resource constraint must of course be accounted for at all times, to avoid inflation. 






   
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« Last Edit: Mar 14th, 2024 at 7:51am by thegreatdivide »  
 
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Frank
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Re: Modern Monetary Theory (MMT)
Reply #800 - Mar 14th, 2024 at 7:46am
 
Quote:
3. Re "'too much' or 'not enough' is largely indefinable":

What is definable is a continuous  full-employment econonmy which maximises the nation's productivity, in the absence of inflation.



Cheesy Cheesy Cheesy

The Soviet Union had full employment and work wasn't just a righ but a duty.
North korea still has total employment.
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MeisterEckhart
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Re: Modern Monetary Theory (MMT)
Reply #801 - Mar 14th, 2024 at 7:55am
 
Frank wrote on Mar 14th, 2024 at 7:46am:
Quote:
3. Re "'too much' or 'not enough' is largely indefinable":

What is definable is a continuous  full-employment econonmy which maximises the nation's productivity, in the absence of inflation.



Cheesy Cheesy Cheesy

The Soviet Union had full employment and work wasn't just a righ but a duty.
North korea still has total employment.

And while the Soviet Union projected the image of full employment, the reality was that it didn't matter if that employment was not necessarily productive.
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MeisterEckhart
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Re: Modern Monetary Theory (MMT)
Reply #802 - Mar 14th, 2024 at 7:57am
 
Quote:
So Kelton's statement could read:

"The currency-issuing government can fund government spending without taxing or borrowing from the private sector (usually done by selling govt. bonds), provided the resources the government seeks are available for purchase by the government, to avoid inflation."

It does, at least, clarify the original statement.
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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #803 - Mar 14th, 2024 at 8:59am
 
Frank wrote on Mar 14th, 2024 at 7:46am:
TGD: What is definable is a continuous  full-employment econonmy which maximises the nation's productivity, in the absence of inflation.

Frank: "The Soviet Union had full employment and work wasn't just a righ but a duty.
North korea still has total employment".


They were/are entirely command economies.

MMT relates to government spending in mixed economies, via intelligent planning alongside blind (self-interest-driven) 'invisible hand' markets.
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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #804 - Mar 14th, 2024 at 9:13am
 
MeisterEckhart wrote on Mar 14th, 2024 at 7:55am:
Frank wrote on Mar 14th, 2024 at 7:46am:
Quote:
3. Re "'too much' or 'not enough' is largely indefinable":

What is definable is a continuous  full-employment econonmy which maximises the nation's productivity, in the absence of inflation.



Cheesy Cheesy Cheesy

The Soviet Union had full employment and work wasn't just a righ but a duty.
North korea still has total employment.

And while the Soviet Union projected the image of full employment, the reality was that it didn't matter if that employment was not necessarily productive.


Just shows how successful their 100% command economy was; even in a cold war with the US, and an economy that was never more than half the size of the US, they launched the first satellite ever - and had a virtual UBI, as you say.

Re the JG (in a mixed economy):  there is always useful work to be done, so its better to have everyone who wants a job to be employed and participating in the economy, with all the benefits of receiving above poverty payment as reward.
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MeisterEckhart
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Re: Modern Monetary Theory (MMT)
Reply #805 - Mar 14th, 2024 at 9:23am
 
thegreatdivide wrote on Mar 14th, 2024 at 9:13am:
MeisterEckhart wrote on Mar 14th, 2024 at 7:55am:
Frank wrote on Mar 14th, 2024 at 7:46am:
Quote:
3. Re "'too much' or 'not enough' is largely indefinable":

What is definable is a continuous  full-employment econonmy which maximises the nation's productivity, in the absence of inflation.



Cheesy Cheesy Cheesy

The Soviet Union had full employment and work wasn't just a righ but a duty.
North korea still has total employment.

And while the Soviet Union projected the image of full employment, the reality was that it didn't matter if that employment was not necessarily productive.


Just shows how successful their 100% command economy was;

Well, it did collapse as an unintended consequence of glasnost and perestroika, so...
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Frank
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Re: Modern Monetary Theory (MMT)
Reply #806 - Mar 14th, 2024 at 9:27am
 
thegreatdivide wrote on Mar 14th, 2024 at 8:59am:
Frank wrote on Mar 14th, 2024 at 7:46am:
TGD: What is definable is a continuous  full-employment econonmy which maximises the nation's productivity, in the absence of inflation.

Frank: "The Soviet Union had full employment and work wasn't just a righ but a duty.
North korea still has total employment".


They were/are entirely command economies.

MMT relates to government spending in mixed economies, via intelligent planning alongside blind (self-interest-driven) 'invisible hand' markets.

Ah.

So what IS the value of the  'invisible hand' markets that makes them worth keeping?

Why are they better than government-planned economies?

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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #807 - Mar 14th, 2024 at 9:29am
 
MeisterEckhart wrote on Mar 14th, 2024 at 9:23am:
thegreatdivide wrote on Mar 14th, 2024 at 9:13am:
MeisterEckhart wrote on Mar 14th, 2024 at 7:55am:
Frank wrote on Mar 14th, 2024 at 7:46am:
Quote:
3. Re "'too much' or 'not enough' is largely indefinable":

What is definable is a continuous  full-employment econonmy which maximises the nation's productivity, in the absence of inflation.



Cheesy Cheesy Cheesy

The Soviet Union had full employment and work wasn't just a righ but a duty.
North korea still has total employment.

And while the Soviet Union projected the image of full employment, the reality was that it didn't matter if that employment was not necessarily productive.


Just shows how successful their 100% command economy was;

Well, it did collapse as an unintended consequence of glasnost and perestroika, so...


As a result of losing an arms race with an economy twice it's size, but having  launched the first satellite and first man into space.
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MeisterEckhart
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Re: Modern Monetary Theory (MMT)
Reply #808 - Mar 14th, 2024 at 9:35am
 
thegreatdivide wrote on Mar 14th, 2024 at 9:29am:
MeisterEckhart wrote on Mar 14th, 2024 at 9:23am:
thegreatdivide wrote on Mar 14th, 2024 at 9:13am:
MeisterEckhart wrote on Mar 14th, 2024 at 7:55am:
Frank wrote on Mar 14th, 2024 at 7:46am:
Quote:
3. Re "'too much' or 'not enough' is largely indefinable":

What is definable is a continuous  full-employment econonmy which maximises the nation's productivity, in the absence of inflation.



Cheesy Cheesy Cheesy

The Soviet Union had full employment and work wasn't just a righ but a duty.
North korea still has total employment.

And while the Soviet Union projected the image of full employment, the reality was that it didn't matter if that employment was not necessarily productive.


Just shows how successful their 100% command economy was;

Well, it did collapse as an unintended consequence of glasnost and perestroika, so...


As a result of losing an arms race with an economy twice it's size, 

As we learn in the school playground: Rule number 1 - don't take on the big guys.
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thegreatdivide
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Re: Modern Monetary Theory (MMT)
Reply #809 - Mar 14th, 2024 at 9:37am
 
Frank wrote on Mar 14th, 2024 at 9:27am:
thegreatdivide wrote on Mar 14th, 2024 at 8:59am:
Frank wrote on Mar 14th, 2024 at 7:46am:
TGD: What is definable is a continuous  full-employment econonmy which maximises the nation's productivity, in the absence of inflation.

Frank: "The Soviet Union had full employment and work wasn't just a righ but a duty.
North korea still has total employment".


They were/are entirely command economies.

MMT relates to government spending in mixed economies, via intelligent planning alongside blind (self-interest-driven) 'invisible hand' markets.

Ah.

So what IS the value of the  'invisible hand' markets that makes them worth keeping?


There's no power like self-interest.....

Quote:
Why are they better than government-planned economies?


Better than command economies? Because the latter fail to harness the power of self-interest.

BUT:

"free markets are good servants, but bad masters".

eg does the community need another hospital, or another casino?.....
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