Modern Monetary Theory: Explained via Jon Stewart

[bomberfox]

Explain the difference between the Fed holding Treasuries and the Fed holding a trillion dollar coin.

What is the point of even minting it? Just make the accounting changes using a feather. This is why it seems pretty silly. The fed could just pick up a blade of grass and call it a trillion dollar grass lol! NFT bros are a bit ahead of ya on that one.

Wont do much about the debt nor make those who are currently impoverished any happier.

 

[JohnfrmClevelan]

What is the point of even minting it? Just make the accounting changes using a feather. This is why it seems pretty silly. The fed could just pick up a blade of grass and call it a trillion dollar grass lol! NFT bros are a bit ahead of ya on that one.

Wont do much about the debt nor make those who are currently impoverished any happier.

It won't do much about the debt? It takes the place of treasury debt instruments on the Fed's balance sheet.

Whether or not it makes those who are currently impoverished any happier is a function of what the government chooses to spend the money on. But at least they wouldn't be laboring under the misconception that the government is going into debt in order to spend.

 

[The Mark]

A big spenders wet dream. Scarlet O'hara: "I won't worried about massive deficits today, I'll worry about them tomorrow". "Running low on cash? Don't worry we'll print more".

It's not "worry about them tomorrow", it's "never worry about deficits".

Kinda?

 

[bomberfox]

It won't do much about the debt? It takes the place of treasury debt instruments on the Fed's balance sheet.

Whether or not it makes those who are currently impoverished any happier is a function of what the government chooses to spend the money on. But at least they wouldn't be laboring under the misconception that the government is going into debt in order to spend.

So this is all about what people are laboring under the misconception of.

 

[PoS]

What happened to the value of Beanie Babies over time? They have only become more rare, after all.

African countries are adopting crypto faster than their global counterparts - The Africa Report.com

Africa amassed $105.6bn worth of cryptocurrencies in forecasts for the year ending June 2021, with some markets on the continent being ranked in the top 20 Global Crypto Adoption Index

www.theafricareport.com

 

[mrjurrs]

I'm hooked on this show. This is (again) a brilliant discussion on Modern Monetary Theory, sparked by a Twitter discussion.

"But how do you pay for it?" (the phrase Jake Tapper employs against every progressive policy agenda)



He's an article if you don't want to watch the clip: https://www.businessinsider.com/modern-monetary-theory

Main tenets of Modern Monetary Theory​

The main tenets of Modern Monetary Theory are:

• Government deficits aren't inherently bad. According to the MMT theory, deficits don't matter as much as we think they do and aren't necessarily a signal of a shaky economy. If the government can simply create more money, then the government deficits can be easily fixed. This concept is a hallmark of MMT and one of the most controversial aspects of the theory.
  
  
• Governments can create more money without threat of economic collapse. Given the fact that money is no longer backed by gold and is more theoretical in the sense it can be created at any time, many MMT supporters believe that money can be created without tanking the economy. In 2005, former Federal Reserve Chairman, Alan Greenspan, followed that line of thought: "There's nothing to prevent the federal government creating as much money as it wants."
  
  
• Because the government is the creator of the currency, it doesn't need to adhere to the same individual budgeting principles. As individuals we know that our expenses shouldn't exceed our income or it'll lead to debt. Proponents of MMT say that the government doesn't need to abide by such standards since it's also the creator of the money and theoretically can create more.
  
  
• A federal jobs guarantee program is possible. Again, given the core tenet that the government can create more money, MMT theorists support the idea of a federal job guarantee as a way to stabilize the economy and put money toward human capital.
  
  
• The Federal Interest rate should be at 0%. Many MMT supporters believe that the "natural rate of interest is zero" and there should be no bond sales. On top of that, MMT supporters want to do away with the increasing and lowering of interest rates as they're ultimately not that relevant when it comes to growth and long-term business decisions.

Imo, point #3 has always been a huge strawman. Families don't budget like the government because families don't have the obligations govt does. Families would carry massive deficits if they were required to fund their share of transfer payments, military expenses, postal services etc.

 

[Bullseye]

It's not "worry about them tomorrow", it's "never worry about deficits".

Which is idiotic, at best.

Kinda?

Yep

 

[multivita-man]

Not "theoretically". The state can create as many dollars as it wants, but every dollar created devalues every existing dollar.

That's not always true. If money supply is too tight, and/or if there's a credit crunch and nobody is spending, then there's a fundamental problem with that as well. You can have deflation people are out of work and have no income, so in that sense, putting money into their pockets makes sense. It wouldn't devalue the dollar if the economy returns to life and shops begin hiring again.

There are no free lunches.

Now that is true.

 

[multivita-man]

I find libertarians to be a mix of nihilists and utopians, it really makes no sense except as an exercise in heckling. Remember the two old men in the balcony on Sesame Street? They were libertarians.

My take is that libertarians hate the complexity of living in an advanced society. Every economic libertarian I've ever known subscribes to libertarianism because they think it would make their lives easier: simpler tax forms, same tax rates for all, fewer rules to remember, fewer regulations to follow. I get it. I hate all the ****ing forms I have to fill out to do my taxes and when I've had executive responsibilities, I worried about random government agency audits and hated having to mark my calendar for remembering this date to file this and that form and so forth.

Complexity is the price we pay for living in a sophisticated, technologically advanced, convenient, comfortable, and mostly having good things at reasonable prices - with some caveats of course.

 

[JohnfrmClevelan]

So this is all about what people are laboring under the misconception of.

This whole section, Government Spending and Debt, is based around a misconception. 99% of it is a debate about the cost/benefit analysis of government spending vs. the very misunderstood "national debt."

 

[JohnfrmClevelan]

It's not "worry about them tomorrow", it's "never worry about deficits".

Kinda?

It's really "don't worry about the debt, because it's not real debt."

Deficits do tell us something. Mostly, how much money is being socked away and not used anymore. The government has to step in and deficit spend to make up for lost demand due to savings.

 

[bomberfox]

This whole section, Government Spending and Debt, is based around a misconception. 99% of it is a debate about the cost/benefit analysis of government spending vs. the very misunderstood "national debt."

Yes i get that but what you are saying is mint a coin just to satisfy some misconception right?

 

[JohnfrmClevelan]

Yes i get that but what you are saying is mint a coin just to satisfy some misconception right?

The reason to mint a platinum coin is to be able to deficit spend without increasing the debt - all without changing any laws. The idea that the nation goes into actual debt to spend is still incredibly widespread, even among economists who should know better. (I argue with one of these guys all the time on Twitter.) Right now, laws are in place that keep Treasury issuing bonds and the Fed operating "in the black," even though it's not necessary. Those laws would be a major pain to dispose of, if not politically impossible. So you go with the legal loophole, the platinum coin.

Demonstrating once and for all that the government doesn't borrow to spend would just be icing on the cake.

 

[ataraxia]

I've heard that slogan for decades. Investments pay returns and yet debt just keeps piling up and very little gets better.

The US economy has tripled in size since the great recession. Most of that comes from government investment and spending in infrastructure, security, law enforcement, roads, etc...

Now if you're not seeing any of that- it's only because GOP policies are getting all that money into the pockets of only a handful of people. Apparently there are a lot of people who are more productive economically, but don't want to see any of that extra money themselves. Oh well. In a democracy, the government does what the peole want, and the people get what they want and deserve.

 

[Bullseye]

The US economy has tripled in size since the great recession. Most of that comes from government investment and spending in infrastructure, security, law enforcement, roads, etc...

Now if you're not seeing any of that- it's only because GOP policies are getting all that money into the pockets of only a handful of people. Apparently there are a lot of people who are more productive economically, but don't want to see any of that extra money themselves. Oh well. In a democracy, the government does what the peole want, and the people get what they want and deserve.

LOL, said that you actually believe that. "yadda, yadda, GOP DID IT" is not sound economic logic.

 

[ataraxia]

LOL, said that you actually believe that. "yadda, yadda, GOP DID IT" is not sound economic logic.

Neither is saying government spending has done nothing. You know which governments spend nothing in investments and infrastructure? Somalia. Nepal. Afghanistan.

 

[Bullseye]

Neither is saying government spending has done nothing. You know which governments spend nothing in investments and infrastructure? Somalia. Nepal. Afghanistan.

Didn't say that. But government does develop the new products and services and create the good jobs that actually drive economic growth.

 

[bomberfox]

The reason to mint a platinum coin is to be able to deficit spend without increasing the debt - all without changing any laws. The idea that the nation goes into actual debt to spend is still incredibly widespread, even among economists who should know better. (I argue with one of these guys all the time on Twitter.) Right now, laws are in place that keep Treasury issuing bonds and the Fed operating "in the black," even though it's not necessary. Those laws would be a major pain to dispose of, if not politically impossible. So you go with the legal loophole, the platinum coin.

Demonstrating once and for all that the government doesn't borrow to spend would just be icing on the cake.

This makes the most sense.

 

[ataraxia]

Didn't say that. But government does develop the new products and services and create the good jobs that actually drive economic growth.

I think you meant to say “does not develop”, didn’t you?

Computers, airplanes, rockets, satellites, nuclear power, lasers, solid state physics, the discovery of DNA and genetic technology, the human genome project, cancer research, the internet, etc, etc… basically all the main technological foundations of the modern world and economy, were all initially spearheaded by government spending and investment. It was only once the technology was mature and its potential commercial uses became clear that the private sector stepped in.

For a more contemporary example: current research in high energy particle physics. There is some really weird new science coming out of that in places like Fermilab. What are its commercial applications? It’s not at all clear right now. So would you like government to stop spending taxpayer money in that and just leave it to private industry? At this embryonic stage of the science and technology, which private industry do you think is going to pursue it?

 

[ataraxia]

LOL, said that you actually believe that. "yadda, yadda, GOP DID IT" is not sound economic logic.

It is. The point is that the economy has growing rapidly since the 1980s. The entire US labor force is far more productive, and the size of the economy is orders of magnitude bigger.

But thanks to the Reagan Revolution in the 1980s, all that money has only been going to the top 5%. The inflation adjusted income of the entire rest of the economy has been completely stagnant. There has been no trickle down, or supply side economics, or whatever you like to call it.

So there’s understandably resentment, frustration, anger, rising xenophobia and calls for isolationism; anger at the “liberal elites”- all leading to things like the election of Donald Trump to fix it.

And what is the main substantive thing he does? That’s right, fight “socialism” and double down on the Reaganomics- cutting taxes on those “liberal elites” even more, further exacerbating the issue. Yeah, maybe getting even more money at the top will finally get something to trickle down now, right?

Well, we’re still waiting.

It’s a travesty.