MMT False Counterpoint #1 - Inflation/Hyperinflation

[DA60]

MMT is yet another theory championed by macroeconomic ignoramuses who do not understand how the real world works and propose theory after theory that makes the world a happy place without having to deal with all that 'free market' awfulness.

It's Moocher's Paradise.

And it will never work in the long run.

Why? Because fiat money is only worth what people think it is worth. And if people think it is worthless, it IS worthless.

The only reason fiat currencies have lasted so long is a) they were starting from nothing...it takes a long time for an entire marketplace to completely collapse. And b) almost every country did it at the same time. If everyone's currency is garbage, then they all can look valuable.

We are at the beginning of the closing stage now (or the end of the middle stage). The central banks are taking over the economies...they have to as governments have run out of ammunition (almost).
Japan is a good example of a strong economy that is slowly being destroyed by a fiat currencies and central bank intervention.

It could take a decade...it could take two or even more.

But eventually a major currency will lose people's respect. And then it will start to snowball (IMO).

This will all end EXTREMELY badly, IMO.


And when it does, if I am still alive, I am probably going to make a ton of money on it (just like I did - relatively speaking - during the housing crash. Though I lost a ton during the dot.com crash...I had not learned yet)


MMT is what happens when people who do not understand real world macroeconomics...think they do.
You cannot learn about macroeconomics from a textbook or a professor...you HAVE to learn about it in the real world.
Because economics is not just about numbers...it's mostly about people and emotions.

 

[ludin]

What a dodge that was. You clearly can't admit that no one with any authority over their country's economy follows MMT.

there is a reason that no one follows mmt it is economic suicide.

the reason that bonds exist etc is to give people a tradable value for their dollar.
IE you buying this bond today we will pay that back with tax revenue generated by our economy.
it actually means something.

now who in their right mind would buy a bond if the government just went ol yea here is some cash we just printed?
it would be worthless. no one would trust the government or their ability to pay it's bond holders.

the value of the dollar would plummet on that alone.
cost of good would go up as it would cost us more dollars to buy those goods.

what is worse no one would trust our bonds to be paid in good faith.

 

[Fenton]

I suppose you've identified some things that they do with USD directly. I'd say so what. You still didn't recognize the bonds they DID buy nor did you recognize that somebody else still holds those dollars after any exchange is done.

The Fed is a larger holder of US debt than China ( holds 64 % more than China ) and China's not in the bussiness of buying allot of US debt currently

As China Dumps Treasuries, World Sees No Better Place for Refuge - Bloomberg


They accrue enough forex reserves just by buying dollars from their exporters

So who buys the debt necessary to pay for MMTs full employment guarantee ?

Do we just monetize that debt ? Or should it come straight from the Treusury ?

Or should we just abaondon this MMT lunacy all together and just incentivize new private sector investment in our economy ?

I wish we would as a Nation wide initiative because Texas is getting a little crowded these days

 

[ludin]

Actually it very well can be very bad.

Again, the US Dollar is not operating in a vacuum. For the last time, our currency competes and is subject to investment sentiment. It is possible lose fiscal and monetary policy credibility because of actions devoid of these factors you *continually* ignore.

The thought exercise is compelling, just as compelling as the rational that any nation that has absolute control over their currency cannot go bankrupt. However, reality sets in for the very reasons I have been mentioning with just about every post.

no it isn't the value of the dollar is paired against other currencies. the forex market is very volatile and hard to navigate.
a friend of mine learned this the hard way. however the value of the dollar is based on the perception of how it is doing
against other currencies. with the dollar being the reserve currency it has a bit of a heads up.

also the US market tends to be way more stable than other markets even given out recessions.
we don't have to deal with the regional conflicts etc of other nations.

while technically the US can't go bankrupt what the Fed an treasury can do is drive the dollars
value into the dirt.

they can do this buy having way more money in the system with no demand.

a country has to manage it's finances it was one of the reason that the credit agencies dropped our credit rating.
the debt is getting to high.

another report came out that in about 10 years social spending and the national debt interest will consume the tax receipts that we bring in.
that the rest of the government will have to be funded by loans.

 

[jaeger19]

There have been several pro and anti MMT threads at this point, yet all I see from the anti-MMT folks are tactics and fallacies to avoid actual debate. I would like to compile a list of all of the lame arguments used against MMT so they can be easily referred to and used the nullify those that just want to toss deception and uncertainty into the threads.

To kick it off, I thought I’d start with inflation.

The false argument is this: The more money you print, the more it loses its purchasing power.

There is very little truth in this, both in theory and in evidence.

To start we should define inflation:


So we’re talking about the purchasing power or the value of money.

You don’t have to get fair in that Wikipedia article to see how people jump the gun and yell “inflation!”

And that is what people cling to. Unfortunately they need to read the ENTIRE paragraph:

So there’s a couple of counter examples, and more importantly a consensus view at the end. Inflation is about money supply OUTPACING economic growth, not the money supply itself.

With this, one way you could define inflation is:
“When demand outpaces supply”

Unfortunately the couterpoint conveniently holds supply constant and then comes up with some hyperbolic senario of drastically increasing the money supply by “giving everybody a million dollars” or similar. First, the only reason that supply of goods and services would stay constant is if the resources required to make those goods were somehow constrained. We might be low on natural resources (unlikely), low on labor (low unemployment), etc. But if those constraints do not exist, then there is NO REASON to believe that the supply of goods wouldn’t expand to meet the new demand. So even in absurd hyperbolic scenarios this isn’t really a problem. Of course short term, inflation probably would occur since it’s not as easy to increase supply as it is to increase the money supply. The good news is that “giving everybody a million dollars” is never going to happen and has never been suggested so I’m not sure why the counter argument even uses it.

That said it may be better to think of inflation as:
“Demand outpacing our productive CAPACITY”

As long as we have the capacity to produce more goods, there is little reason to fear inflation.

For those that would like to add to this and cover things like Weimar and Zimbabwe in how they are terrible example of money supply and better example of constrained production I would appreciate it.

I think right there is your problem.

Inflation is not simply "when demand outpaces supply"
Or "demand outpacing our productive capacity".

Orphan slug made several good points. But let me add this.

Why do we have inflation now? Why have we had a long period of inflation? Is demand currently outpacing productive capacity?

Has demand been consistently outpacing productive capacity?

 

[Absentglare]

Actually it very well can be very bad.

Again, the US Dollar is not operating in a vacuum. For the last time, our currency competes and is subject to investment sentiment. It is possible lose fiscal and monetary policy credibility because of actions devoid of these factors you *continually* ignore.

The thought exercise is compelling, just as compelling as the rational that any nation that has absolute control over their currency cannot go bankrupt. However, reality sets in for the very reasons I have been mentioning with just about every post.

It sounds like the only qualm you have is the impact it would have on investor sentiment. I don't value stability in the dollar so much that i would cater to those investors at the expense of our own economic growth...

Frankly, i find it hard to understand why we should care if people don't want to invest in dollars because of some fear that we're irresponsible. What reason is there to kowtow on domestic policies for the sake of international investors...?

 

[OrphanSlug]

It sounds like the only qualm you have is the impact it would have on investor sentiment. I don't value stability in the dollar so much that i would cater to those investors at the expense of our own economic growth...

Frankly, i find it hard to understand why we should care if people don't want to invest in dollars because of some fear that we're irresponsible. What reason is there to kowtow on domestic policies for the sake of international investors...?

That is the theory talking, not the practice. Investment can be from this nation or outside of this nation, bonds are auctioned to the public. And I think you know all of this despite these arguments to the contrary.

 

[jaeger19]

It sounds like the only qualm you have is the impact it would have on investor sentiment. I don't value stability in the dollar so much that i would cater to those investors at the expense of our own economic growth...

Frankly, i find it hard to understand why we should care if people don't want to invest in dollars because of some fear that we're irresponsible. What reason is there to kowtow on domestic policies for the sake of international investors...?

Because as goes international investors so to goes the US investors.. and the value of the dollar.

You might not think it matters... but to the general populace, the fiscal health of the US.. or debt and deficit DO matter.. and that means they will spend/invest/save according.. we has a huge effect on our economy.

 

[jaeger19]

MMT is yet another theory championed by macroeconomic ignoramuses who do not understand how the real world works and propose theory after theory that makes the world a happy place without having to deal with all that 'free market' awfulness.

It's Moocher's Paradise.

And it will never work in the long run.

Why? Because fiat money is only worth what people think it is worth. And if people think it is worthless, it IS worthless.

The only reason fiat currencies have lasted so long is a) they were starting from nothing...it takes a long time for an entire marketplace to completely collapse. And b) almost every country did it at the same time. If everyone's currency is garbage, then they all can look valuable.

We are at the beginning of the closing stage now (or the end of the middle stage). The central banks are taking over the economies...they have to as governments have run out of ammunition (almost).
Japan is a good example of a strong economy that is slowly being destroyed by a fiat currencies and central bank intervention.

It could take a decade...it could take two or even more.

But eventually a major currency will lose people's respect. And then it will start to snowball (IMO).

This will all end EXTREMELY badly, IMO.


And when it does, if I am still alive, I am probably going to make a ton of money on it (just like I did - relatively speaking - during the housing crash. Though I lost a ton during the dot.com crash...I had not learned yet)


MMT is what happens when people who do not understand real world macroeconomics...think they do.
You cannot learn about macroeconomics from a textbook or a professor...you HAVE to learn about it in the real world.
Because economics is not just about numbers...it's mostly about people and emotions.

Bingo. Circle gets square.

 

[Moderate Right]

I think you need to first understand what "MMT" actually is.

The trouble is you think it is a description of how things work but it is actually the liberal description of how things work. The "description" only applies to liberal philosophy.

 

[Moderate Right]

Let me explain to you - a fallacy is an error in logic that somebody hundreds or thousands of years ago classified and gave a name to in order to mitigate distracting and pointless arguments in a debate.

Pointing out a fallacy is not a dodge - it's an exercise to avoid wasting everybody's time on nonsense.

Yep. That's a dodge allright. Whenever you guys can't answer a question you say the question is irrelevant. The only relevant questions are the ones you have a slick liberal answer for. I can do that to but I'm more honest than you guys who have to deflect every question you are afraid to answer.

 

[pdog]

Yep. That's a dodge allright. Whenever you guys can't answer a question you say the question is irrelevant. The only relevant questions are the ones you have a slick liberal answer for. I can do that to but I'm more honest than you guys who have to deflect every question you are afraid to answer.

Questions are not part of a debate. Assertions are. If I were to hold your hand going back to your question and rephrasing it so it was an assertion things would go like this:

You:
I believe MMT is bogus because nobody else is doing it.


Me:
Not only is your assertion too general for the topic of inflation, but it is a band-wagon fallacy. If you do not no what a fallacy is in this context, it is when you attempt to pass off B.S. as a logical argument. If you do not know what a band-wagon fallacy is, it's when you assume that because everybody else is doing it, it must be the right answer. This is easily disproven throughout history, with concepts such as the "world is flat", gravity, geocentrism, vaccinations, and many "popular" myths.



Is there any hope for you getting how this work? Is there a free set of steak knives for hitting 3000 post without actually debating?

 

[pdog]

I think right there is your problem.

Inflation is not simply "when demand outpaces supply"
Or "demand outpacing our productive capacity".

That is my rephrasing of "However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth. "

If my rephrasing is not correct, what is wrong with it?

Why do we have inflation now? Why have we had a long period of inflation? Is demand currently outpacing productive capacity?

Has demand been consistently outpacing productive capacity?

Please make an assertion and support it.

 

[Absentglare]

The trouble is you think it is a description of how things work but it is actually the liberal description of how things work. The "description" only applies to liberal philosophy.

Oh- i could swear you were whining about how liberal politicians DON'T endorse MMT (as though that's something other than an appeal to authority fallacy).

 

[Moderate Right]

Questions are not part of a debate. Assertions are. If I were to hold your hand going back to your question and rephrasing it so it was an assertion things would go like this:

You:
I believe MMT is bogus because nobody else is doing it.


Me:
Not only is your assertion too general for the topic of inflation, but it is a band-wagon fallacy. If you do not no what a fallacy is in this context, it is when you attempt to pass off B.S. as a logical argument. If you do not know what a band-wagon fallacy is, it's when you assume that because everybody else is doing it, it must be the right answer. This is easily disproven throughout history, with concepts such as the "world is flat", gravity, geocentrism, vaccinations, and many "popular" myths.



Is there any hope for you getting how this work? Is there a free set of steak knives for hitting 3000 post without actually debating?

The trouble is you guys think that 99% of the world is stupid and unknowledgable in economics and that only you 1% know the real truth. Sounds like someone who belongs in the rubber room where you can't hurt yourself.

 

[jaeger19]

That is my rephrasing of "However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth. "

If my rephrasing is not correct, what is wrong with it?



Please make an assertion and support it.

since you don't want to debate.. fine.

We have had inflation.and we continue to have inflation and we are nowhere near our productive capacity.

Historical Inflation Rates: 1914-2016 | US Inflation Calculator

Industrial Production and Capacity Utilization

 

[JohnfrmClevelan]

since you don't want to debate.. fine.

We have had inflation.and we continue to have inflation and we are nowhere near our productive capacity.

Historical Inflation Rates: 1914-2016 | US Inflation Calculator

Industrial Production and Capacity Utilization

I know that I've answered this before, but here it goes again; prices creep up (and down) for lots of reasons. There are occasional shortages, oil prices are not within our control, droughts, wars, interest, etc. That's going to happen no matter what. The inflation that we need to be aware of (but not paranoid of) is demand-pull inflation, where the dollar loses value and the price of everything goes up. That happens when demand outstrips our ability to meet that demand, across a range of products.

Now you can stop asking this particular question.

 

[Moderate Right]

I know that I've answered this before, but here it goes again; prices creep up (and down) for lots of reasons. There are occasional shortages, oil prices are not within our control, droughts, wars, interest, etc. That's going to happen no matter what. The inflation that we need to be aware of (but not paranoid of) is demand-pull inflation, where the dollar loses value and the price of everything goes up. That happens when demand outstrips our ability to meet that demand, across a range of products.

Now you can stop asking this particular question.

But this is exactly what is wrong with MMT. It doesn't take into account all of those inflationary things that we have no control over. We can't run up a national debt of 250 trillion dollars, print money up the ying yang and then have occasional shortages, oil prices that are not within our control, droughts, wars, interest, etc.

 

[pdog]

since you don't want to debate.. fine.

We have had inflation.and we continue to have inflation and we are nowhere near our productive capacity.

Historical Inflation Rates: 1914-2016 | US Inflation Calculator

Industrial Production and Capacity Utilization

Its not that I don't want to debate, I just don't want to make your assertions for you. Questions are not assertions.

Are you asking why do we have what economists refer to as "good" inflation? It's because there are productivity pressures that are ever present. Land is a good example of that. I see that John listed a lot of others. The key is not to make sure there is no inflation, but to make sure inflation does not go beyond fed targets and the target has never been 0%.

 

[pdog]

But this is exactly what is wrong with MMT. It doesn't take into account all of those inflationary things that we have no control over.

It does just as much as the next economic model. Even more so - inflation is the primary metric for determining the level of spending. I'm pretty sure that was actually covered already. Where did you see otherwise?

We can't run up a national debt of 250 trillion dollars, print money up the ying yang and then have occasional shortages, oil prices that are not within our control, droughts, wars, interest, etc.

Of course we can if the GDP is 250 Trillion dollars. The rest of what you list are all issues in any type of economy.

 

[Moderate Right]

It does just as much as the next economic model. Even more so - inflation is the primary metric for determining the level of spending. I'm pretty sure that was actually covered already. Where did you see otherwise?


Of course we can if the GDP is 250 Trillion dollars. The rest of what you list are all issues in any type of economy.

Well, I guess we have it in black and white now. You're perfectly fine with extending the national debt from 20 trillion dollars up to 250 trillion dollars. Then (or sooner) when inflation rears it's ugly head, our economy will tank and we will still owe 250 trillion dollars. The national debt doesn't just go away when inflation hits, it's still there and I wouldn't want to be around when the economy tanks and then we still owe 250 trillion dollars at the worst possible time. Oh, wait a minute, I forgot you guys say that national debt isn't real debt anyway because we drive fiat cars or something like that. Oh no, it wasn't fiat cars, it was those fiat money trees planted in back of the treasury. Ever hear of a drought or bug problems killing trees? What happens when the money trees die?

Maybe it's time for another refresher course:

https://www.youtube.com/watch?v=IYRwpgrUcpw

 

[DA60]

Well, I guess we have it in black and white now. You're perfectly fine with extending the national debt from 20 trillion dollars up to 250 trillion dollars. Then (or sooner) when inflation rears it's ugly head, our economy will tank and we will still owe 250 trillion dollars. The national debt doesn't just go away when inflation hits, it's still there and I wouldn't want to be around when the economy tanks and then we still owe 250 trillion dollars at the worst possible time. Oh, wait a minute, I forgot you guys say that national debt isn't real debt anyway because we drive fiat cars or something like that. Oh no, it wasn't fiat cars, it was those fiat money trees planted in back of the treasury. Ever hear of a drought or bug problems killing trees? What happens when the money trees die?

That is the major problem with MMT; it's right until it isn't...and then it's a disaster.

It's like saying you don't need to diet when you are fat and then you have a heart attack and you say 'OOPS'...but by then it might be too late to fix it.

MMT is fine if it works, but if it doesn't it could be disastrous.

Whereas the worst thing that happens with 'austerity' is things don't boom as much as maybe they could have and we end up with less debt.
Hardly doomsday.


It surprises me how so many MMT'er's are so desperate to take this huge chance and yet are so incredibly oblivious to what happens if they are wrong (see Japan since 1991).

 

[JohnfrmClevelan]

That is the major problem with MMT; it's right until it isn't...and then it's a disaster.

It's like saying you don't need to diet when you are fat and then you have a heart attack and you say 'OOPS'...but by then it might be too late to fix it.

MMT is fine if it works, but if it doesn't it could be disastrous.

Whereas the worst thing that happens with 'austerity' is things don't boom as much as maybe they could have and we end up with less debt.
Hardly doomsday.

You might want to rethink that bit about austerity not being much of a problem.

• Unemployment rate in EU countries 2016 | Statistic

 

[Moderate Right]

That is the major problem with MMT; it's right until it isn't...and then it's a disaster.

It's like saying you don't need to diet when you are fat and then you have a heart attack and you say 'OOPS'...but by then it might be too late to fix it.

MMT is fine if it works, but if it doesn't it could be disastrous.

Whereas the worst thing that happens with 'austerity' is things don't boom as much as maybe they could have and we end up with less debt.
Hardly doomsday.


It surprises me how so many MMT'er's are so desperate to take this huge chance and yet are so incredibly oblivious to what happens if they are wrong (see Japan since 1991).

The great part is, austerity isn't even really necessary if we keep our financial house in order in the first place.

 

[pdog]

The great part is, austerity isn't even really necessary if we keep our financial house in order in the first place.

In order with what? A balanced budget?