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Modern Monetary Theory (MMT): How Fiat Money Works

. I mean, I can create true hypotheticals where the money supply is shrinking and there could still be inflation.

this would almost never happen so who cares??? The objective is 0-2% inflation for maximum economic growth. So then lets move on.
 
In much the same way, powerful individuals reap the highest profits when the system is unbalanced..

silly liberal blather. In a capitalist system powerful people reap high profits only when they have the best invention in the world that people want to buy in order to improve their standard of living!
 
silly liberal blather. In a capitalist system powerful people reap high profits only when they have the best invention in the world that people want to buy in order to improve their standard of living!

And yet the highest paid CEO's on a perennial basis are in the finance industry....

To your other comment, If you can have inflation with a shrinking money supply it shows the weakness of the claim that more money always equals inflation.
 
And yet the highest paid CEO's on a perennial basis are in the finance industry....

whoops you got another one wrong! "But if the Occupy Wall Street protesters are in the wrong place to picket the titans on this list. Wall Street is conspicuously absent from the top 10. The highest paid “bankster” is Jamie Dimon of JPMorgan Chase, who comes in 12th at $42 million, while Larry Fink of BlackRock is 16th at $39.9 million. Goldman Sachs‘ Lloyd Blankfein is way down at $21.7 million.
 
If you can have inflation with a shrinking money supply it shows the weakness of the claim that more money always equals inflation.

actually no one ever said that more money = inflation. Do you know what subject you are on??
 
You are misinterpreting MMT here. There is always going to be a desire to net save (who doesn't want to net save?); but when the government doesn't run a sufficient deficit, people will not have the ability to net save. When the crisis hit and people started to lose their houses and jobs, they went into debt as a matter of necessity, not as a matter of choice. You could always manufacture a situation where people are forced to disburse their savings - just hold back enough government spending, and (in conjunction with our normal trade deficit) you will cause a crisis.

The aim of the job guarantee is to stabilize potential shocks (like 2008) by making sure that everybody has an income at all times. It is proactive, not reactive (as you suggested MMT was, above) when it comes to the government spending sufficiently. Were there a JG in 2008, the program (and therefore govt. spending) would have increased as people lost their private sector jobs, softening or eliminating the shock.

No, I am not misinterpreting MMT here.. These are things you said and Mosler says. But that's the POINT you are failing to grasp. That desire to save is ALWAYS there which means under MMT thought process (as you said in this very post), Deficits will always be. So that means when the economy is booming, you will run a deficit and when the economy is in the crapper, you will run a deficit.

Except here is the problem.. Deficit spending by Government doesn't equal increased real savings, it only increases Financial savings (crap that helps nobody at the bottom). MMT and Mosler are ASSUMING they are tied to the hip (we know this not to be true as we've seen over the last 8 years). By the way..the difference between Financial and Real savings? Real savings is anything which may serve as a capital good in the production of higher order goods.

Constant deficit spending void of any economy reasoning leads to massive inflation in some part of the economy. This means MMT is just the theory of speculation bubbles all the time. When bubbles happen you actually harm the poor and middle class as you are pushing them out of the market. Now if there are bubble 100% of the time then NOBODY at the lower levels will have the ability to save and move up in the class system.

No, JfC, Net Savings went down in 2008-2010, that means under MMT there would have been no increased spending as demand leakage went down. ;)

I suggest you (and others in this topic) actually read this.. I'll address rest of replies tonight.
 
No, I am not misinterpreting MMT here.. These are things you said and Mosler says. But that's the POINT you are failing to grasp. That desire to save is ALWAYS there which means under MMT thought process (as you said in this very post), Deficits will always be. So that means when the economy is booming, you will run a deficit and when the economy is in the crapper, you will run a deficit.

You don't have to run a deficit if you have enough net exports. Or enough borrowing for business investment. Either one can fill the demand gap.

Except here is the problem.. Deficit spending by Government doesn't equal increased real savings, it only increases Financial savings (crap that helps nobody at the bottom). MMT and Mosler are ASSUMING they are tied to the hip (we know this not to be true as we've seen over the last 8 years). By the way..the difference between Financial and Real savings? Real savings is anything which may serve as a capital good in the production of higher order goods.

Businesses will invest when there is sufficient demand, and they will sit on their money when there isn't. Deficit spending is not meant to fill our pockets with savings, it is meant to employ people and, in the process, boost demand. Net savings is just a by-product.

Constant deficit spending void of any economy reasoning leads to massive inflation in some part of the economy. This means MMT is just the theory of speculation bubbles all the time. When bubbles happen you actually harm the poor and middle class as you are pushing them out of the market. Now if there are bubble 100% of the time then NOBODY at the lower levels will have the ability to save and move up in the class system.

Absent deficit spending, you get unemployment. Which is worse? And where is the massive inflation? The stock market? Is that a bad thing?

No, JfC, Net Savings went down in 2008-2010, that means under MMT there would have been no increased spending as demand leakage went down. ;)

Now you purport to tell me what MMT means. Should I correct you on your Austrian views? Tell you where you are making mistakes, even though I don't spend much time thinking about Austrian economics?

I suggest you (and others in this topic) actually read this.. I'll address rest of replies tonight.

Already read it, and I know the history behind it, too. It's not scoring you any points.
 
whoops you got another one wrong! "But if the Occupy Wall Street protesters are in the wrong place to picket the titans on this list. Wall Street is conspicuously absent from the top 10. The highest paid “bankster” is Jamie Dimon of JPMorgan Chase, who comes in 12th at $42 million, while Larry Fink of BlackRock is 16th at $39.9 million. Goldman Sachs‘ Lloyd Blankfein is way down at $21.7 million.

I should not have said "CEO's" but finance in general is one of the highest paid sectors, yet it produces very little in the real economy (which was the point).
 
actually no one ever said that more money = inflation. Do you know what subject you are on??

I've had several conversations with Austrians who claim that money creation always leads to inflation.

I'm going to cherish this moment though. I suspect this will be the last time for a while that we agree on something.
 
No, I am not misinterpreting MMT here.. These are things you said and Mosler says. But that's the POINT you are failing to grasp. That desire to save is ALWAYS there which means under MMT thought process (as you said in this very post), Deficits will always be. So that means when the economy is booming, you will run a deficit and when the economy is in the crapper, you will run a deficit.

If the holders of US currency abroad decided that they no longer wanted to hold US dollars they could exchange them for their native currencies which would drive demand for those currencies higher and driving up their value meaning that they would receive less of their native currency for their US dollars. At some point spending that money back here in the US and acquiring things of real value would yield more than an exchange. This is a scenario I've seen more than one Austrian fear. What would the result be? Potentially, the government would have to respond to all that returning capital buy runing a surplus to drain off excess dollars to prevent inflation.

Except here is the problem.. Deficit spending by Government doesn't equal increased real savings, it only increases Financial savings (crap that helps nobody at the bottom). MMT and Mosler are ASSUMING they are tied to the hip (we know this not to be true as we've seen over the last 8 years). By the way..the difference between Financial and Real savings? Real savings is anything which may serve as a capital good in the production of higher order goods.

So here is all my savings (hypothetically). Can you tell me what is crappy financial savings and what is not?

Constant deficit spending void of any economy reasoning leads to massive inflation in some part of the economy. This means MMT is just the theory of speculation bubbles all the time. When bubbles happen you actually harm the poor and middle class as you are pushing them out of the market. Now if there are bubble 100% of the time then NOBODY at the lower levels will have the ability to save and move up in the class system.

The situation we find ourselves in today, the Fed has made the rent on dollars lower than the return on investment in the stock market. But that's not deficit spending.

MMT recognizes that the bottom 3/5th of the economy have been in recession since 1999, while to top 2/5ths have not. Over the last 17 years very little capital has made it's way into the hands of the bottom 3/5ths. Which shows what an abject failure supply side theory is. MMT recognizes this failure and promotes ideas that foster increased resources moved to those that would increase demand in the real economy most. Hence ideas like JG and BIG.

No, JfC, Net Savings went down in 2008-2010, that means under MMT there would have been no increased spending as demand leakage went down. ;)

Trying to isolate variables like that doesn't prove much. Between 1998 and 2008 the aggragate of Government spending + Exports - Taxes + Imports (GS+E) - (T-I) was negative $4.5t. From 2008-2010 the cumulitive of that same formula was $1.1t. Private sector borrowing (mortgages and consumer credit) was ~$3.4t from 2008-2010 it was -$53b. Now you want me to be surprised that deficit spending of $1.1t over 3 years right after the crash didn't increase private sector savings?

My apologies if there was another point being made and I missed it, I kinda nudged my way into your conversation with JFC.
 
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Potentially, the government would have to respond to all that returning capital buy runing a surplus to drain off excess dollars to prevent inflation.

.

or they could simply raise interest rates.
 
Constant deficit spending void of any economy reasoning leads to massive inflation in some part of the economy. .

I doubt thats true since govt spends so widely. The best policy is to make deficits illegal so politicians have to account to voters for their spending, will spend less, and thus distort our economy less.
 
or they could simply raise interest rates.

How would raising rates help at all if the money being spent in the economy isn't being borrowed but money held by foreign interests?

You are aware that China, Japan each have around $1t dollars in bonds and (I would guess) tens if not hundreds of billions in US FOREX reserves (not t-secs). Now if the Chinese gov decided to sell off its US Treasury securities what would it do with that money? It couldn't exchange it as it would be exchanging it mostly with itself because export nations import relatively little, the availability of it's dollars in the global market are limited. This is why the Chinese government creates new dollars to maintain a weak currency....

Obviously it could spend its US dollars on the world market, but in my hypothetical I imagined a world where US dollars had lost favor and other nations were fleeing the dollar as well. The Austrians I've spoken with all predict hyper-inflation.

Which of course is rubbish....

But your solution, raising interest rates would be just as worthless because the money being spent isn't borrowed, it's money other nations hold in t-secs and "cash". I don't know exactly how many US dollars are held abroad, but $2-$4t wouldn't surprise me. Hoever, we do know that foreign governments hold around $6t in t-secs

If other nations were to flee the dollar in unison, the only place to spend them would be here in the US. The demand for US products would spike. The result could be inflation driven by demand (demand-pull), which would be awesome as unemployment would drop, productivity would rise. Labor would be in high demand and workers would in turn be in a better place to demand higher wages. Exports would exceed imports and the government could cut way back on spending and would increase taxes which would act as literal fire-pit for excess US dollars.

Could there be inflation? Sure....Especially localized inflation on commodities (gold, silver, and other metals, energy ect....) which would likely be the target of foreign nations looking to spend. Would it be hyper-inflation? no, because we have the ability to expand our productivity to meet most of the demand. It's the difference between demand-pull and cost-push inflation.
 
I doubt thats true since govt spends so widely. The best policy is to make deficits illegal so politicians have to account to voters for their spending, will spend less, and thus distort our economy less.

The only thing that would distort our economy is making deficits illegal, meaning all growth in the money supply would come from the private sector, which, historically has shown that it cannot be sustained.
 
Isn't everything we do based on assumption or probability? I would agree that not all assumptions are equally valid, but every action we take, makes assumptions, so I'm not clear on why this claim should raise a single eyebrow.

We as individuals work on assumptions and previous knowledge but that doesn't mean economics models will be correct in future forecasting by using the same standards. Therein lies the rub. Assumptions in modeling leads to incomplete information or just plain wrong information.

Think of it this way.. if the economic models used since Keynes are so fantastic and right all the time, why are there still recessions? Because the models are wrong and have always been wrong.

Now if you want to claim that MMT makes irrational assumptions then, let's have them.....

I've made them several times in this forum. But I can go into it in more depth later.

MMTers sell snake oil based on two articles written in 1913 before the Federal Reserve Act. The author was A. Mitchell-Innes and the papers were 'What is Money?' and 'Credit Theory of Money'.

The whole idea is basis of the new Chartalism (MMT). We know what Mitchells-Innes wrote is wrong because he assumes money (currency) never gains value but we see this all the time in Forex Market in Fiat system. So His underlying premise is false.

Mmmmmm..ok?

What are you questioning?



We are faced with the study of something that evolves rapidly over time with the added problem that identifying changes can have serious economic consequences for certain individuals or groups.

Yes. That's the underlying issue.

I spent some time creating game economies in persistent worlds (online games that never reset). One thing I learned was that players got wealthy when they unbalanced the system. So while the player was highly motivated to unbalance the system, it was the developers job to maintain that balance.

Did you assume things as well when creating it? Did you set fix parameters in which allowed the players in the first place to get that imbalance? The answer is yes. So is it the fault of the player or the fault of the model you used?

In much the same way, powerful individuals reap the highest profits when the system is unbalanced. Using wealth to influence others to help tip that balance is a very real thing and something that makes it difficult to discern the difference between change in the economy and manipulation of it.

But is that the fault of the individuals or the system Government has created? Then the parameters are set by the designers then the issue isn't the market itself. For example... Corporate Welfare is not a natural economic phenomenon but it exists because of Government.



And no one is pinning any medals on any chests for the 6560% increase in salaries from 1913-2015, or the 1211% since 1971....

Oh.. you make a fatal mistake here. Real wages (adjusted for inflation), you are using nominal terms. Real vs Nominal Wages. Real wages have fallen.



Monetary inflation is irrelevant when not looked at relative to the things that people want. I mean, I can create true hypotheticals where the money supply is shrinking and there could still be inflation. So talking about inflation divorced from productivity and wages is like asking what direction you should go without knowing where you are going and when you have to be there.

But that's the point... that monetary inflation WILL EFFECT what people want. Buying apples at the Apple Blossom Festival will go up. Inflation occurs will occur even if productivity rises, falls or stays steady. It was proven during the late 1970s and the stagflation period. Also you should know this as well with creating gaming economies. If in a game you double the payout of doing a quest, you've introduced more money into the economy void of increased productivity.
 
You don't have to run a deficit if you have enough net exports. Or enough borrowing for business investment. Either one can fill the demand gap.

And this is false for two reason.

1) Having net exports doesn't mean there isn't a deficit. US ran deficits during peak net export periods.

2) It also is impossible in this age for the US to be a net exporter without killing the US dollar "reserve status". Since there is no Bretton Woods system which made US dollar default currency because of gold backing, the only reason today the dollar has that status is because we export dollars in the form of importing more stuff. Think of it as the “Dollar Trap”. We can't be a net exporter without destroying our currency as countries would have no need to hold dollars (or bonds) anymore.

Businesses will invest when there is sufficient demand, and they will sit on their money when there isn't. Deficit spending is not meant to fill our pockets with savings, it is meant to employ people and, in the process, boost demand. Net savings is just a by-product.

No, this is another flaw in thinking. Businesses actually invest ahead of sufficient demand and draw down when demand flattens out or declines (when supply outpaces demand). Think about it, can you produce a product without investment? No. Can you sell a product without investment? No. Tech companies do R&D all the time, that's investment. It's very cyclical.




Absent deficit spending, you get unemployment. Which is worse? And where is the massive inflation? The stock market? Is that a bad thing?

LOL, this is too funny. You've gone from saying I was wrong.. to now the way of rationalizing it. Unemployment happens no matter what and that's what you are failing to understand. Even FDR didn't rid the US of unemployment. He did creative accounting (reclassified people).

Do the poor and middle class have massive access to the stock market? No. So you destroy their ability to move up the totem pole and make rich, richer... congrats, you just described current mainstream economics.


Now you purport to tell me what MMT means. Should I correct you on your Austrian views? Tell you where you are making mistakes, even though I don't spend much time thinking about Austrian economics?

I am only repeating what I've read from words of Mosler and Wray in what they have had printed or heard from when they spoke and... Jfc, you said this in another topic. You brought up demand leakage. You brought up Mosler's position.

Already read it, and I know the history behind it, too. It's not scoring you any points.

I don't need to score points from you. To you points are just debts and free to spend.
 
I doubt thats true since govt spends so widely. The best policy is to make deficits illegal so politicians have to account to voters for their spending, will spend less, and thus distort our economy less.

You've seen the stock market and bond rates right? Or that little housing boom we had/still have?
 
We as individuals work on assumptions and previous knowledge but that doesn't mean economics models will be correct in future forecasting by using the same standards. Therein lies the rub. Assumptions in modeling leads to incomplete information or just plain wrong information.

Think of it this way.. if the economic models used since Keynes are so fantastic and right all the time, why are there still recessions? Because the models are wrong and have always been wrong.

Without getting into the philosophical nature of experience (everything we do based on what we sense and because we assume that our senses are, in fact giving us accurate information about the world, thus everything is an assumption at some level), I would argue that simply dismissing MMT based on the fact that it makes assumptions is meaningless as you've failed (at least in this debate) to quantify those assumptions.

However, I recognize what I think you are saying..... Take the example of anti-lock brakes. When they were first deployed it was assumed they would prevent x% of accidents. In practice they prevented less than expected because of unforeseen changes in human behavior, in that people that think they are safe they take more risk, however, that doesn't change the fact the anti-lock brakes prevent accidents.

Now in the case of MMT, perhaps you'd be kind enough to point out specifically these kinds of assumptions and where they go wrong.

Can you tell me if any of the following is based on a false assumption?

1) The federal government cannot become insolvent.

2) The federal government does not need to raise money via taxation in order to be able to spend.

3) The federal government never "has" or does "not have" dollars.

4) Federal budget deficits add to savings

5) Banks are not reserve constrained


Now these are just a few things I've thrown out. I could go on and on with things I think are pretty solid and should really be the things were debating when it comes to MMT, because the assumptions come from statements like the statements above. These aren't policy prescriptions, they are descriptions about how some of the aspects of our economy work. The assumptions come later.

Point is, let's stick with the underlying descriptions that lead to policy prescriptions, rather than focusing on the prescriptions without looking at the underlying claims.

I've made them several times in this forum. But I can go into it in more depth later.

Looking forward to it.

MMTers sell snake oil based on two articles written in 1913 before the Federal Reserve Act. The author was A. Mitchell-Innes and the papers were 'What is Money?' and 'Credit Theory of Money'.

I'm an MMT'er and I've never sold any snake oil......Again, your just going to have to be more specific about the claims in those papers.

The whole idea is basis of the new Chartalism (MMT). We know what Mitchells-Innes wrote is wrong because he assumes money (currency) never gains value but we see this all the time in Forex Market in Fiat system. So His underlying premise is false.

We can discuss that, but even if your right, you think that fundamentally undermines all of MMT? That is, if money gains value all of what MMT says is wrong?


Yes. That's the underlying issue.

Then all you have to do is point out where the evolution of money and human behavior undermine the numbered statements I made above because I don't see how any of them could change based on changes in human behavior. I'm open to the fact that underlying changes in our monetary system could change some or all of the aspects above, until there is a change, they are all still relevant.

Did you assume things as well when creating it?

Of course I did.

Did you set fix parameters in which allowed the players in the first place to get that imbalance?

I'd like to tell you I designed a system that was put into production that millions of people used, unfortunately that's not the case, however I am familiar with other systems that have been put in place and the reasons for their eventual failures.

I would account most failures in the economies of the MMORPG genre of games to the fact that developers are limited in ways the real economy is not, such that fixed perimeters are a necessity.

The answer is yes. So is it the fault of the player or the fault of the model you used?

I see what your driving at and even if I give you the answer your leading me to, we're going to have to transition back to how what your saying specifically applies to MMT.
 
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Cont.....
But is that the fault of the individuals or the system Government has created? Then the parameters are set by the designers then the issue isn't the market itself. For example... Corporate Welfare is not a natural economic phenomenon but it exists because of Government.

Now there is an assumption we can sink our teeth into.

Government is just like Anti-Lock brakes...On paper, it would seem to be the answer to most of our problems. In practice, human behavior distorts our best intentions and we're left right here debating why things are the way they are....


Oh.. you make a fatal mistake here. Real wages (adjusted for inflation), you are using nominal terms. Real vs Nominal Wages. Real wages have fallen.

It's not fatal, but I agree, that wasn't the point I was making, so fair enough, but why? That's what we are in disagreement about.


But that's the point... that monetary inflation WILL EFFECT what people want.

How so?

Buying apples at the Apple Blossom Festival will go up.

The price of apples isn't based on the rate of inflation, it's based on demand and I don't think that people demand more or less apples based on inflation, but a persons desire and ability to obtain what they want.

Inflation occurs will occur even if productivity rises, falls or stays steady.

Ok now I'm confused, monetary inflation or price inflation?

Price inflation, as I said, is driven by demand. The ability for a business to raise prices is based on competition and as we know human behavior.

In town there is a Lowes and Home Depot right across from each other. If home depot gets it's supply of 2x4's from a different supplier than Lowes, if home depots stock runs short, can they raise prices? If they do, will I pay more or go to Lowes?

The answer, as I'm sure we would agree is extremely complicated.

I might like Home Depot better

I might not want to get in my car because it's raining out

There could be quality differences between the two.


However, all other things being equal neither business can raise prices if the other does not. We know things aren't equal, so all we can do is study behavior and make assumptions based on what has been experience in the past. The trick in my mind, is incorporating new information. That is, assumptions are based on what we have experienced and observed. The problem comes (IMO) when new variables are entered into the equation but aren't accounted for.


It was proven during the late 1970s and the stagflation period. Also you should know this as well with creating gaming economies. If in a game you double the payout of doing a quest, you've introduced more money into the economy void of increased productivity.

So I'm not sure what you think was proven, I'll need more specifics...

As far as game economies, I could talk about them until your eyes glaze over, however I'd just say that, while there are many factors that are the same between real and game economies, there are many that are not.

The most important is that in the real world, governments create money and tightly control the incentives for borrowing via interest rates.

In most game economies, players, not developers are in control of money creation (faucets). Developers are given the task of removing money via sinks. There are good reasons for this, but too many to list here.

The government has a faucet (deficit spending) and a sink (taxes) both of which it can control. Additionally the Fed has policy tools at its disposal.



Having said all of that, I think what your saying has merit, if at least in part, in that, it's one thing to describe how the economy works, it's another thing to take that knowledge and apply it prescriptively.
 
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We as individuals work on assumptions and previous knowledge but that doesn't mean economics models will be correct in future forecasting by using the same standards. Therein lies the rub. Assumptions in modeling leads to incomplete information or just plain wrong information.

Think of it this way.. if the economic models used since Keynes are so fantastic and right all the time, why are there still recessions? Because the models are wrong and have always been wrong.

Yeah i don't think you know what modeling or simulating is if you claim that they assumptions always render them useless.

Models rely on assumptions to exist in any form. Of course they are always incomplete, there's only one complete model: history. We cannot simultaneously look at all of history to predict the future. We have to focus on some things and ignore others.

A model is only as good as its assumptions. However, modeling is used successfully all the time. Claiming that models are imperfect isn't a useful claim in this context. What you need to do is explain which assumption is false and why.

And pointing to the alleged failure of Keynesianism is bizarre- the economy isn't solely governed by its own, innate boom and bust cycles as evidenced by the oil supply shock. That was never claimed. However, it is rather obvious that Keynesianism has helped.
 
And this is false for two reason.

1) Having net exports doesn't mean there isn't a deficit. US ran deficits during peak net export periods.

That doesn't make my statement false. But go on....

2) It also is impossible in this age for the US to be a net exporter without killing the US dollar "reserve status". Since there is no Bretton Woods system which made US dollar default currency because of gold backing, the only reason today the dollar has that status is because we export dollars in the form of importing more stuff. Think of it as the “Dollar Trap”. We can't be a net exporter without destroying our currency as countries would have no need to hold dollars (or bonds) anymore.

Nor have I ever suggested that we should become a net exporter. I was merely trying to explain sectoral balances to you.

But if we did run a trade surplus, there are plenty of dollars out there in foreign hands already. There is no reason to believe that we would lose reserve status anytime soon. What currency would replace the dollar?

No, this is another flaw in thinking. Businesses actually invest ahead of sufficient demand and draw down when demand flattens out or declines (when supply outpaces demand). Think about it, can you produce a product without investment? No. Can you sell a product without investment? No. Tech companies do R&D all the time, that's investment. It's very cyclical.

The fact that you are poking around the edges of my words doesn't bode well for your argument.

If businesses don't anticipate sufficient demand, they won't invest. Better?


LOL, this is too funny. You've gone from saying I was wrong.. to now the way of rationalizing it. Unemployment happens no matter what and that's what you are failing to understand. Even FDR didn't rid the US of unemployment. He did creative accounting (reclassified people).

No, it's more of an "even if you were correct" statement.

Do the poor and middle class have massive access to the stock market? No. So you destroy their ability to move up the totem pole and make rich, richer... congrats, you just described current mainstream economics.

What? When have the poor ever had the means to save and invest? If I'm poor, I'm not looking for "massive" access to the stock market, I'm looking for a steady job with decent wages. How is guaranteeing a job destroying the poor? Or the middle class, for that matter?

If you have some magic formula for keeping money from the rich, please share, because I don't know of any economy where that has ever been the case. The difference between us seems to be that I want the govt. to guarantee jobs for the unemployed, and you don't. What difference does that make to the rich? How does your way make things any better?

I am only repeating what I've read from words of Mosler and Wray in what they have had printed or heard from when they spoke and... Jfc, you said this in another topic. You brought up demand leakage. You brought up Mosler's position.

But like I said before, you are repeating the words without understanding the context. Everything we have said still stands. But look at what you tried to do at the start of this post - you tried to claim I was wrong by saying that "having net exports doesn't mean there isn't a deficit," when I'm sure you know by now that there are not two, but three sectors to the sectoral balance equation. So either you don't understand MMT enough to criticize it, or you are making disingenuous arguments that you already know are invalid.

I don't need to score points from you. To you points are just debts and free to spend.

First of all, if you read that whole paper, congratulations. But if you did, and especially if you know Cullen's history, you would understand that he really isn't challenging anything substantive about MMT. You would also understand that my views are very, very close to his.
 
MMTers sell snake oil based on two articles written in 1913 before the Federal Reserve Act. The author was A. Mitchell-Innes and the papers were 'What is Money?' and 'Credit Theory of Money'.

The whole idea is basis of the new Chartalism (MMT). We know what Mitchells-Innes wrote is wrong because he assumes money (currency) never gains value but we see this all the time in Forex Market in Fiat system. So His underlying premise is false.

I have never heard of either of these articles, so I don't think that they are terribly central to MMT. But do you have some argument with the idea that dollars represent debt? I'm sure you have read enough to know how we think banking works - do you think there is something wrong there?
 
No, this is another flaw in thinking. Businesses actually invest ahead of sufficient demand and draw down when demand flattens out or declines (when supply outpaces demand). Think about it, can you produce a product without investment? No. Can you sell a product without investment? No. Tech companies do R&D all the time, that's investment. It's very cyclical.

This is a question/ issue that really irritates me....

And how do businesses and investors decide what to invest in?

Demand always exists, the question is, can you deliver what people want at the right price.

The innovation of the iPhone, wasn't that is created demand where none existed before. Apple identified things that people already wanted, even if they weren't asking for it by name. Apple simply found a way to converge several technologies into a small package and deliver it at a price people could afford. Do you think that companies develop products like these without conducting focus groups to try to measure potential demand. Do you think investors throw money at this stuff without a reasonable assumption of the potential demand and return on investment?

My job is to architect enterprise class data storage, visualization and compute systems, before the flash drive (hard drive) came out (hard drives that are 50 times faster than the older spinning disk), do you think there was a demand for faster hard drives? OF COURSE!!!

There is a reason there isn't a market for horse drawn carriages any more. Because there is no demand! No amount of investment or R&D will change that!
 
2) It also is impossible in this age for the US to be a net exporter without killing the US dollar "reserve status". Since there is no Bretton Woods system which made US dollar default currency because of gold backing, the only reason today the dollar has that status is because we export dollars in the form of importing more stuff. Think of it as the “Dollar Trap”. We can't be a net exporter without destroying our currency as countries would have no need to hold dollars (or bonds) anymore.

You understand that the limitation of selling bonds to finance debt is a self imposed limitation, right? I mean we could do away with the current system tomorrow and nothing would change (practically speaking).
 
And how do businesses and investors decide what to invest in?

mostly they guess which is why most businesses fail. Sometimes they do detailed focus group interviews to determine what people feel they want to buy and guess from there, other times they are sure their own guessing is correct without even asking consumers. Sony and Apple are probably 2 best examples of companies that controlled the future by inventing it. Proctor and Gamble is often seems as a marketing that markets the best packages based on what colors and patterns people like. But internally they too think of themselves and a technical innnovator
 
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