Debunking MMT

[JohnfrmClevelan]

No, and this is where you fail in understand Bonds and Dollar relationship. They are not the same thing. A bond is a future IOU which pays FUTURE INTEREST (it's why people buy bonds). A Dollar is created from an IOU (debt) but pays no interest so they exchange excess dollars for a Bond as to get a return and to protect value against inflation such as the interest paid or TIPS.

In a normal debt situation, the borrower isn't able to simply exchange I.O.U.s for whatever it is they are borrowing at any time and in any quantity, and in either direction. And the holder of a normal I.O.U. can't normally treat that I.O.U. as the thing he has loaned out. If you hold a U.S. bond, you still have spending power, because you can easily turn it into dollars. They really don't serve to limit anyone's ability to spend.

You think I hold bonds out of the goodiness of my heart? No, I want to collect interest instead of collecting no interest or paying higher taxes.

If you were really interested in interest, you would invest in something that pays better interest. If you hold U.S. bonds, you are interested in 100% safety, just like holding dollars. And the interest isn't enough to stop you from spending, if there was something you wanted to buy.

 

[JohnfrmClevelan]

Don't we already have a near 100 page thread discussing MMT in sometimes great long paragraphs? These threads make my head hurt, they just end up degenerating into a handful of people, usually John vs Austrian/Modern Right/Jaeger, smashing their heads together going round in circles not getting anywhere, with both sides using increasingly elaborate literary acrobats to try and catch the other side out.

Compare these MMT threads to the one on supply-side economics. There isn't much of an argument to be made for SSE, and it's evident in the thread. MMT threads, on the other hand, are full of thoughtful points and evidence.

Mainstream economic theories are full of problems, more than I care to list. If you want to start a thread on whatever economic school of thought you believe to be "correct," have at it. But I doubt it will fare as well as MMT in debate.

 

[JohnfrmClevelan]

How do you not know the US Government can't buy Treasuries without a primary broker buying it first. The Fed can't go buy treasuries out right. They have to buy them from Banks (primary broker).

That hardly makes a difference in practice.

 

[Fenton]

Japan is its own separate story. In one aspect they are showing the world how difficult it is for government spending and monetary policy to cause inflation, they've been trying to do it for several years now and can't.

The idea that they aren't growing is really the wrong argument to make. They have similar growth rates to the U.S. but also have economic measurements that far surpass the US.

They also have an aging demographic that is saving and not spending, or has stopped earning, so it makes it look like they are not growing, when on a per capita basis they are.

Meanwhile their spending programs have done exactly what MMT says it would do: reduce employment, increase wages and not cause inflation:

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So if people are using Japan as an attack against MMT, then they are simpleton idiots.

Why do you people always resort to personal attacks ?

People are using Japan to prove just how ineffective Fiscal stimulus is at growing economies.

If you don't like Japans example then we can use Obama's stimulus as a example of failed fiscal stimulus

Question, why did Japan raise their sales tax ? Sovereign debt is a myth, right ?

 

[Ellis_G]

Compare these MMT threads to the one on supply-side economics. There isn't much of an argument to be made for SSE, and it's evident in the thread. MMT threads, on the other hand, are full of thoughtful points and evidence.

Mainstream economic theories are full of problems, more than I care to list. If you want to start a thread on whatever economic school of thought you believe to be "correct," have at it. But I doubt it will fare as well as MMT in debate.

I haven't read the SSE thread but it must be coping somewhat to reach 60+ pages , but honestly there really isn't many thoughtful points and evidence in the MMT threads. For example you couldn't properly explain why we'd bother with taxes if MMT is true, other than 'politicians are stupid', which I agree with, but that doesn't take into account that the politicians get advised by actual economists , and they still don't do this, and 'taxation drives demand for the currency' which I again debunked as a load of nonsense.

The only reason MMT 'fares well' is because you refuse to accept any evidence against it, and don't budge on your position. The MMT threads are poor threads.

 

[Fenton]

Compare these MMT threads to the one on supply-side economics. There isn't much of an argument to be made for SSE, and it's evident in the thread. MMT threads, on the other hand, are full of thoughtful points and evidence.

Mainstream economic theories are full of problems, more than I care to list. If you want to start a thread on whatever economic school of thought you believe to be "correct," have at it. But I doubt it will fare as well as MMT in debate.

Like your evidence that proves Businesses don't respond to tax incentives ?

Oh wait, you never posted any evidence. I posted evidence to the contrary but you just posted your " thoughtful " opinion, which was just wrong.

 

[JohnfrmClevelan]

I haven't read the SSE thread but it must be coping somewhat to reach 60+ pages ,

Sadly, that's the level of reasoning that we are fighting against. "Well, I haven't read the thread, but it's long, so they must have a good point..."

Read the thread, and you will see what I mean.

...but honestly there really isn't many thoughtful points and evidence in the MMT threads. For example you couldn't properly explain why we'd bother with taxes if MMT is true, other than 'politicians are stupid', which I agree with, but that doesn't take into account that the politicians get advised by actual economists , and they still don't do this, and 'taxation drives demand for the currency' which I again debunked as a load of nonsense.

I haven't seen you successfully debunk anything, actually. Maybe you didn't understand the explanation (which was given already).

The only reason MMT 'fares well' is because you refuse to accept any evidence against it, and don't budge on your position. The MMT threads are poor threads.

No, the opposition (most of it, anyway) is poor.

The MMT guys here are the ones who understand the mechanics of the economy. We know how money is created, we know how reserve banking operates, we know how the U.S. funds itself. If you don't know the mechanics behind those things, you can't put up a reasonable argument against MMT. The rest of it is basically Keynesian economics, and the opposition fares no better against Keynes. (Enter Fenton, screaming about the CRA and Japan. That's your team.)

 

[Fenton]

Sadly, that's the level of reasoning that we are fighting against. "Well, I haven't read the thread, but it's long, so they must have a good point..."

Read the thread, and you will see what I mean.



I haven't seen you successfully debunk anything, actually. Maybe you didn't understand the explanation (which was given already).



No, the opposition (most of it, anyway) is poor.

The MMT guys here are the ones who understand the mechanics of the economy. We know how money is created, we know how reserve banking operates, we know how the U.S. funds itself. If you don't know the mechanics behind those things, you can't put up a reasonable argument against MMT. The rest of it is basically Keynesian economics, and the opposition fares no better against Keynes. (Enter Fenton, screaming about the CRA and Japan. That's your team.)

This is your team...

CRA is irrelevant and please prove your assertion that Businesses do not respond to tax incentives.

Post evidence, not your baseless opinion.

 

[Ellis_G]

Sadly, that's the level of reasoning that we are fighting against. "Well, I haven't read the thread, but it's long, so they must have a good point..."

Read the thread, and you will see what I mean.



I haven't seen you successfully debunk anything, actually. Maybe you didn't understand the explanation (which was given already).



No, the opposition (most of it, anyway) is poor.

The MMT guys here are the ones who understand the mechanics of the economy. We know how money is created, we know how reserve banking operates, we know how the U.S. funds itself. If you don't know the mechanics behind those things, you can't put up a reasonable argument against MMT. The rest of it is basically Keynesian economics, and the opposition fares no better against Keynes. (Enter Fenton, screaming about the CRA and Japan. That's your team.)

Well we can just use that logic against the MMT threads, they're long so they must be coping well. They're not at all, you can't answer simple questions about the theory you so dearly love, I haven't read the majority of the US Debt Myth thread, but what I have you've been struggling, and quite badly. There's a reason there are only 3 or 4 of you MMT nuts on here despite thousands of posts from you lot trying to convince other people into your way of thinking, and it's because it's a load of nonsense, and does NOT apply to the real world.

No you explanation is insufficient, you couldn't accurately even show that taxation drives demand for a currency, because your logic is not sound. People do not demand the dollar because they get taxed in it, they demand it as it facilitated the exchange of goods and services that help survival in their own country where the currency is used, then foreign people demand the currency as the US is deemed by that person/people that it is a good country to invest in to make money. Taxation simply doesn't drive demand for a currency. It's a silly statement. #

So you think that Japan needs even more deficit spending to 'fix' its economy then? As deficit spending is what you MMTers promote, even suggesting that a country having 0 debt leads to it citizens having no money, which is so daft it's unreal.

 

[Critter7r]

This is your team...

CRA is irrelevant and please prove your assertion that Businesses do not respond to tax incentives.

Post evidence, not your baseless opinion.

I think you meant to post this in the SS thread.

 

[Critter7r]

Well we can just use that logic against the MMT threads, they're long so they must be coping well. They're not at all, you can't answer simple questions about the theory you so dearly love, I haven't read the majority of the US Debt Myth thread, but what I have you've been struggling, and quite badly. There's a reason there are only 3 or 4 of you MMT nuts on here despite thousands of posts from you lot trying to convince other people into your way of thinking, and it's because it's a load of nonsense, and does NOT apply to the real world.

No you explanation is insufficient, you couldn't accurately even show that taxation drives demand for a currency, because your logic is not sound. People do not demand the dollar because they get taxed in it, they demand it as it facilitated the exchange of goods and services that help survival in their own country where the currency is used, then foreign people demand the currency as the US is deemed by that person/people that it is a good country to invest in to make money. Taxation simply doesn't drive demand for a currency. It's a silly statement. #

So you think that Japan needs even more deficit spending to 'fix' its economy then? As deficit spending is what you MMTers promote, even suggesting that a country having 0 debt leads to it citizens having no money, which is so daft it's unreal.

Oh, how surprising, another argument in absolutes. Taxation is one of the drivers of the demand for dollars, it is not, and was not presented as, the ONLY driver.

 

[Fenton]

I think you meant to post this in the SS thread.

No I meant to to reply to Johns post.

 

[jaeger19]

Oh, how surprising, another argument in absolutes. Taxation is one of the drivers of the demand for dollars, it is not, and was not presented as, the ONLY driver.

Oh come now.. that's bull.

What the heck debate have you been on? What has been the MMTers "go to" when someone brings up that the demand for dollars can change? Their go to is always "as long as the government accepts dollars in taxes.. then there will be demand".

 

[Absentglare]

How do you not know the US Government can't buy Treasuries without a primary broker buying it first. The Fed can't go buy treasuries out right. They have to buy them from Banks (primary broker).

(Hint: where do the dollars come from?)

 

[Absentglare]

Why do you people always resort to personal attacks ?

People are using Japan to prove just how ineffective Fiscal stimulus is at growing economies.

If you don't like Japans example then we can use Obama's stimulus as a example of failed fiscal stimulus

Question, why did Japan raise their sales tax ? Sovereign debt is a myth, right ?

What has happened to Japan that was bad as a result of the increased spending ?

 

[Critter7r]

Oh come now.. that's bull.

What the heck debate have you been on? What has been the MMTers "go to" when someone brings up that the demand for dollars can change? Their go to is always "as long as the government accepts dollars in taxes.. then there will be demand".

Well, it is a pretty compelling reason, I won't deny.

But 350 million people in the US requiring the continued viability of the dollar in order to continue living life as they know it is a pretty good reason too. The difference is that I won't get sent to jail for not paying my electric bill.

And my layman reasoning goes like this ... (because I have no formal training in anything)

The sheer number of outstanding US bonds ensures that there are LOTS of people interested in the long-term future viability of the dollar, too. They want to cash that bond in when it matures and get the dollars they were promised. The dollar is a self-fulfilling prophecy and an irony all in one. The more debt we have, the more people are invested in the future viability of the dollar, which makes the dollar stronger, which causes more people to invest, which gives us more debt, which creates more people that are interested in the future viability ....

 

[MrWonka]

The Lighthouse | Debunking Modern Monetary Theory (MMT) & Understanding it First

All of this seems to be banking on the assumption that people who advocate for MMT believe deficits don't matter at all, and that we can just print infinite money. Obviously that is not really the case. What MMT is actually saying is that moderate deficits are not a big problem, and in times of economic struggle even large short term deficits should not be feared. If however you are running large deficits when the economy is already rolling a long quite well you risk creating bubbles.

We saw this during the Bush administration. He ran deficits when the economy really wasn't doing that bad at all in order to fund unnecessary wars while giving tax cuts to his rich friends. This created a climate where venture capitalists had so much money laying around that they didn't know what to do with it so they started loaning it out to high risk borrowers

What Keynesian's, and most MMT advocates would say is that a good balance is important. Using these types of accounting tricks in the short term to maintain a stable economy is fine, but they cannot be used to drive the economy long term. However by using them to keep the economy stable you make consumers and investors more confident in your economy which ultimately leads to more purchasing and more investing.

With respect to this notion that governments are not like households. That is true, but realistically most households in America even responsible ones have debt. In fact usually it's significantly more debt than what they make in a year. So long as that debt leaves you with a valuable commodity like a house or a college degree, and so long as you can reasonably afford to pay it off over time that's not a bad thing. The same is true of government. The difference is that the debt that the government accrues pays for a healthy economy. That in and of itself is a valuable commodity that can feed back into the government in the form of taxes. So long as you have confidence your gdp will grow in the future having debt today is not a bad thing.

Take me for example. I have way more debt than I'd like. A decent chunk of it is even what I would consider bad debt. However as a Software Developer I have confidence that my Salary still has room to grow significantly over the next decade or two. I'm still making significantly less than what the average Developer in the United States makes and barring a major catastrophe I will be able to pay it all down even though it sucks right now.

 

[Ellis_G]

Well, it is a pretty compelling reason, I won't deny.

But 350 million people in the US requiring the continued viability of the dollar in order to continue living life as they know it is a pretty good reason too. The difference is that I won't get sent to jail for not paying my electric bill.

And my layman reasoning goes like this ... (because I have no formal training in anything)

The sheer number of outstanding US bonds ensures that there are LOTS of people interested in the long-term future viability of the dollar, too. They want to cash that bond in when it matures and get the dollars they were promised. The dollar is a self-fulfilling prophecy and an irony all in one. The more debt we have, the more people are invested in the future viability of the dollar, which makes the dollar stronger, which causes more people to invest, which gives us more debt, which creates more people that are interested in the future viability ....

And we've actually come full circle again, this is just another example of MMTer's going round and round in circles against positions they can't win against. You know what keeps the dollar relevant and valued over the long term? The economic performance of the US economy, not some pie in the sky nonsense about taxes. Why is this concept so difficult for the left who are obsessed in sucking on the government teet?

 

[Critter7r]

And we've actually come full circle again, this is just another example of MMTer's going round and round in circles against positions they can't win against. You know what keeps the dollar relevant and valued over the long term? The economic performance of the US economy, not some pie in the sky nonsense about taxes. Why is this concept so difficult for the left who are obsessed in sucking on the government teet?

How so? Did you miss the part where I said, " ...350 million people in the US requiring the continued viability of the dollar in order to continue living life as they know it is a pretty good reason too"? That'd be the US economy.

But again, you can't be put in jail for not engaging in private sector commerce.

 

[MrWonka]

You know what keeps the dollar relevant and valued over the long term? The economic performance of the US economy,

But what keeps the US economy performing so well is confidence in the U.S. economy, and what improves confidence in the U.S. economy? Stability. And what helps maintain that stability in the short term? MMT.

 

[Fenton]

But what keeps the US economy performing so well is confidence in the U.S. economy, and what improves confidence in the U.S. economy? Stability. And what helps maintain that stability in the short term? MMT.

Lol....WHAT ??!!

MMT is maintaining short term stability in our economy ??

How exactly ? Be specific.

 

[MrWonka]

Lol....WHAT ??!!

MMT is maintaining short term stability in our economy ??

How exactly ? Be specific.

By keeping recessions from growing too deep, and bubbles from becoming too big. Unfortunately Politicians like George W Bush can sometimes throw that balance off with unnecessary tax cuts, and unnecessary spending in foreign countries, but for most of the last eighty years it's worked quite well.

When demand falls off causing a down turn you prop up demand with government spending and policies that encourage more private spending. When demand gets to high you reduce government spending and go with policies that encourage more saving. It's similar to correcting an out of control car. If it starts to slide one way you turn against the slide to correct it. If you turn with the slide you likely roll the car. Bush turned with the slide, that's why president Obama had to so massively correct for it to straighten things out.

 

[JohnfrmClevelan]

Well we can just use that logic against the MMT threads, they're long so they must be coping well. They're not at all, you can't answer simple questions about the theory you so dearly love, I haven't read the majority of the US Debt Myth thread, but what I have you've been struggling, and quite badly. There's a reason there are only 3 or 4 of you MMT nuts on here despite thousands of posts from you lot trying to convince other people into your way of thinking, and it's because it's a load of nonsense, and does NOT apply to the real world.

Why don't you explain how the real world works, then?

No you explanation is insufficient, you couldn't accurately even show that taxation drives demand for a currency, because your logic is not sound. People do not demand the dollar because they get taxed in it, they demand it as it facilitated the exchange of goods and services that help survival in their own country where the currency is used, then foreign people demand the currency as the US is deemed by that person/people that it is a good country to invest in to make money. Taxation simply doesn't drive demand for a currency. It's a silly statement. #

That's not the kind of demand we mean. If you have to pay taxes in a certain currency, and the government makes payments in a certain currency, then that will force people in that country to use that currency, at least to some extent. That's why there are lots of different currencies in use around the world, and even relatively weak ones are still relevant.

So you think that Japan needs even more deficit spending to 'fix' its economy then? As deficit spending is what you MMTers promote, even suggesting that a country having 0 debt leads to it citizens having no money, which is so daft it's unreal.

I don't know why everybody is so focused on Japan, as if Japan were proof that MMT was incorrect. Japan has made a lot of mistakes that MMT would never suggest. On the other hand, MMT does the best job of describing what is happening in Japan, why interest rates are low, inflation is low, etc. Mainstream economics fails miserably at that.

 

[JohnfrmClevelan]

By keeping recessions from growing too deep, and bubbles from becoming too big. Unfortunately Politicians like George W Bush can sometimes throw that balance off with unnecessary tax cuts, and unnecessary spending in foreign countries, but for most of the last eighty years it's worked quite well.

When demand falls off causing a down turn you prop up demand with government spending and policies that encourage more private spending. When demand gets to high you reduce government spending and go with policies that encourage more saving. It's similar to correcting an out of control car. If it starts to slide one way you turn against the slide to correct it. If you turn with the slide you likely roll the car. Bush turned with the slide, that's why president Obama had to so massively correct for it to straighten things out.

Actually, MMTers have no problem with Bush's tax rebates, as they mostly went to the lower end. We generally consider Clinton's surpluses to be a mistake that probably led to the recession of 2001. Bush's big mistake was in allowing banks to operate too freely, which led to the mortgage crisis.

 

[JohnfrmClevelan]

...As deficit spending is what you MMTers promote, even suggesting that a country having 0 debt leads to it citizens having no money, which is so daft it's unreal.

Again, you fail to grasp the proper point.

All money is debt. Every dollar in your pocket and in your bank account was created either through government deficit spending or bank loans. So while you may not be in debt, you only hold dollars because somebody else is in debt.

And in our present system, the government is the only entity that can create base money, and banks need base money in order to operate.