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Monetarily speaking -- what's next?
Of course we'll have a little more info tomorrow on the Fed meeting, but I'm genuinely curious, long-term, how we get ourselves out of the mess of printing trillions of dollars...
Any predictions (going back to gold standard, negative rates, etc.)? |
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phopstar
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| Total Posts: 9 |
| Joined: Jul 2020 |
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This new low inflation environment may allow us to to begin printing MMT style. Probably our best chance at propping up growth and reducing inequality.
https://en.wikipedia.org/wiki/Modern_Monetary_Theory |
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JTDerp
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| Total Posts: 73 |
| Joined: Nov 2013 |
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MMT as a sustainable 'policy' is mystifying to me, unless some fancypants quant-engineered instruments can shore up the loose ends w.r.t. deficits, steepening of the UST yield curve, etc.
Then again, I've only read the fluff pieces about it, and the occasional headline about Dalio or another HF bigwig supporting it. |
"How dreadful...to be caught up in a game and have no idea of the rules." - C.S. |
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rftx713
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| Total Posts: 128 |
| Joined: May 2016 |
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| JTDerp - the crux of MMT is that spending/payments increase money supply, taxes decrease it. So I believe taxes would be that instrument. |
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JTDerp
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| Total Posts: 73 |
| Joined: Nov 2013 |
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In that basic limited sense, doesn't seem much different than the current schema...the core argument I've read about it is that deficits don't matter, so long as you're a sovereign entity issuing IOUs amongst your own populace. But it seems 'sovereignty' involves some semantics.
It's been said that Repubs are borrow-&-spend, Dems are tax-&-spend. I guess as long as foreign holders of US debt don't rush for the exits at the same time, we can keep kicking the can on that front. But that's headed for politics which I don't want to stir in this enough-of-a-hijack from someprimetime's intent. |
"How dreadful...to be caught up in a game and have no idea of the rules." - C.S. |
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nikol
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The root of the problem is that many people, perhaps, including FED, focus on Dem vs Rep or China vs US vs Russia struggles, instead of thinking about the meaning of money or money generation process.
Simple question: if you remove generation of/access to tangible assets, then what your money will be about?
If I have bread, meat and vegetables from my farm and guns to protect me, who do I need? Of course, things are more complex (I need to buy gun, bullets, plow etc.), but you get the flavor. |
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rftx713
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| Total Posts: 128 |
| Joined: May 2016 |
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JTDerp - sorry to keep hijacking but *if I remember correctly* MMT grew out of a desire to explain the economy / monetary system as it already exists, not describe some theoretical. I believe that’s why we wound up with the extremely oversimplified “deficits don’t matter.” It’s not that they don’t matter, it’s that there’s no reason to tie current taxes to levels of productive spending. If the economy can absorb the new spending without much inflation (which evidence would show to likely be the case in today’s world), then current tax income doesn’t matter much. And if inflation starts to increase, tax those sectors more while simultaneously reducing direct payment/credit/whatever to that area.
Put differently - if the world is so desperate to deploy capital that pensions will rush into subprime ABS, then it probably won’t do much harm to fund free healthcare and education (arguably some of the lowest hanging economic fruits) even if the deficit increases a lot in the short run.
Just stating my understanding of the theory from a few of the MMT papers I read a few years ago, not necessarily my personal beliefs (though I’m inclined to agree).
Regarding what this means for the future, I think there’s 3 outcomes in the US:
GOP maintains control = keep juicing the fire short run while creating long-term damage. Per usual GOP strategy. Monetary policy is more of the same.
Dems win, act per usual = economy recovers normally monetary policy is more of the same but fiscal situation improves.
Dems win, act boldly = economy recovers strongly. Fiscal situation strengthens significantly (bold targeted investments in high growth areas), Fed feels less pressure to stick to what had already been done = possibly negative rates for a short period. |
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JTDerp
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| Total Posts: 73 |
| Joined: Nov 2013 |
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> MMT grew out of a desire to explain the economy / monetary system as it already exists, not describe some theoretical.
The basic tenets *as I perceived them* appeared to at least partially-describe activities that have existed for the past several years.
Interesting info, thanks for the color. |
"How dreadful...to be caught up in a game and have no idea of the rules." - C.S. |
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JTDerp
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| Total Posts: 73 |
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I see that none other than Aaron Brown of the phorums has reviewed a recently-released book/advertising piece about MMT, 'The Deficit Myth' by Stephanie Kelton, on Amazon. Hopefully I'm not putting words in his mouth, but it seems he's not sold on her perspective about it, anyway.
I still come back to the question of where/when the proverbial pound(s) of flesh will ultimately be taken/taxed out of the common citizenry's hindquarters as deficits balloon and/or foreign creditors would like to liquidate bonds/dollar (i.e. if we're still in a 'zero-sum game' where things still have to ultimately balance-out, in absence of yuge value creation/innovation by US industries). I suspect there will be some sleight-of-hand by the gov't & banks/multinationals to both fulfill obligations to creditors and keep the 'commoners' oblivious...but that's erroneous.
I'm skeptical of such a system/theory's ability to ward off inflation and not increase the siphoning of financialization from the 'real economy'...not that the existing systems have been doing a stellar job of that for the past several years.
Changing the measurement/scope of 'inflation' is always a handy magic trick. /rant |
"How dreadful...to be caught up in a game and have no idea of the rules." - C.S. |
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