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Old 02-20-2019, 05:52 AM
Danny B Danny B is online now
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MMT does NOT increase the debt

The BS is flying thick about what a crackpot idea MMT is. Here are a couple of comments on the text of an article at Zero Hedge. The article is about how MMT ruined Zimbabwe and Venezuela and Germany.

The continued argument against MMT expressed in the above article and others of its ilk is total nonsense. Money is permissive and directive but not causative. It is the old idea of "pushing on a string" when the Fed relaxes monetary policy. You can offer money but you can't make people take it if they see no way to put it to use. But by refusing to offer money the Fed surely can shut down economic activity by denying the means of payment for worthwhile and useless investment alike.

This is the essence of the issue. So long as people have something they wish to do there will be a demand for money. The critical issue is whether the things they wish to do are worth the doing. If the things are not worth doing the money will not be wasted. Money is simply an abstraction which passes from one hand to another directing the usage of real resources. It is the real resources that will be wasted.

It is important to distinguish all expenditure and that includes expenditure under MMT as to whether it is a worthwhile expenditure of real resources or if it is not. It is clear that MMT will waste resources if wielded by irresponsible hands, but this is not a criticism of MMT. It is a criticism of governmental competence which is a different thing. Articles like the one above constantly mix competence with the theory to the detriment of the theory. This only creates disingenuous propaganda against MMT. This class of argument generally arises from those who are determined to starve the economy of sufficient aggregate demand to maintain full employment. Power comes from restricting the money supply to those who have money to loan.

It is certainly true that governments are usually in desperate need of finding money to spend when they are hell bent on spending for political motives that have no underlying value. Governments always resist stopping whatever it is they are doing because of large political constituencies that demand continuation. If they are failing they will throw whatever resources they can find into that continuation.

Restricting the use of resources is, however, no panacea. Most resources will decay if not used. Factories and equipment rust and people forget their skills as they go unused. One really does not have the option of not using resources. One must be vigilant to see they are used well and in sufficient quantity. This idea is generally ignored.

One side in this debate wants to conserve resources until paid for by equivalent value already in existence. If this were really necessary no economy could grow or shrink. In fact there could be no economies at all for all economies are called into existence out of nothing.

The idea of there always existing a preceding value is antithetical to the very concept of growth. True growth is from an accounting perspective completely ex nihilo and is validated only by producing new money to represent it. The actual increase in value occurs completely in the real sector insulated from the financial sector. It is accounted for crudely by the measure of profit. A measure which can easily be distorted by other economic and financial considerations. A concept of real profit is needed which reflects real revenue minus real cost. That real profit is then given a financial value through representation in new money. This is necessary because assigning a concept of real value over a collection of heterogeneous items independently of a concept of money is effectively impossible.

The other side is sure or pretends to be sure that whatever is done will be golden. All expenditure will produce only real profit. There are no real costs so all the money spent will create real value which is equivalent to the expenditure itself. One can write off all sunk costs at zero value. If this is true there can be no inflation. These people proceed without evidence or from outright fraud. Neither is an acceptable attitude but the first is more pernicious for it is commonly believed. The second is merely laughable.

The MMT rests upon the idea that whatever is worth doing will receive proper validation in monetary terms. The money is only there to grant permission to proceed. Violation of this idea is contrary to all sensible expenditure, not just MMT. It is also the basis of the pernicious assumption that preceding value must be offered for newly created value. The assumption exists that the offered value will be equal to the newly created value in real terms. This need not be true when money is used to equate values. It is the effort to keep it at least approximately true that is important.

The idea that we are anywhere near the full or, more importantly, the efficient use of real resources is nonsense. The government has been cooking the statistics for years. Aggregate demand has been suppressed for years. The rate of return on real investment on the whole has been suppressed. This is evident in the prevailing low interest rates which do not stimulate real investment. The idea that we are anywhere near full employment is laughable. Look to the participation rate.

Moreover, it is increasingly clear that there is very little in the US worth employing labor to do. Business can find nothing to do with the Fed's output of green but to buy back their stock. The movement to offshore investment since the 1970's is indicative of falling domestic returns. The idiocy of the Green New Deal is a major and very observable argument for the idea that the US is incapable of doing anything but waste resources. The US is determined to "save" the planet at the expense of the human race. Fracking is constantly accused of producing oil at excessive cost. Operations to loot foreign countries such as Syria and Venezuela are indicative of the mindset of government towards domestic investment. Why build it when you can steal it abroad?

No doubt MMT will be introduced for truly reprehensible motives, but that is not the fault of MMT. It is the fault of those who advocate it who would wield it irresponsibly. The greatest virtue of MMT if it survives this abuse will be to destroy the idea that equivalent value must already exist before new value is made. As stated above growth cannot occur if this point of view is strictly held. New growth is not a financial construct but comes out of labor, capital, technology and organization. Finance creates new money to represent its coming into existence and assigns a value in financial terms which can be recognized by the financial system. This number need not be correct so there can be either inflation or deflation. There is no preexisting value involved.

2nd;
The inflation in Weimar Germany was due to a triangular flow of debts incurred due to Versailles Treaty. Also, the Reichsbank was privatized under the Dawe's (an American) plan.

It was bear raiders shorting the Mark, which caused the hyperinflation. It actually took taking the Reichsbank back under government control (under the Chancellorship) to stop the hyperinflation using rentenmarks and not allowing shorts.

Whenever you do a short, you have to borrow new marks into existence i.e. they are loaned into existence against dollars, or gold or some foreign currency. This is how the new money came to be "printed." Dudley doesn't know squat.

With regards to Venezuala, it is import dependent and has dollar debts. By not allowing the sale of oil, the Venezuala loses their FX, which puts pressure on their exchange rate, which then allows it to be bear raided. Sound familiar?

Let's compare: Russia has plenty of FX, little in the way of dollar debts, and they are making stuff themselves. No way a bear raider can screw over Russia with hyperinflation, although they tried with the sanctions.



Oh and then the Zimbabwe canard. These retards always bring up Zimbabwe. Jeez. It is an African country run by Negroes. Say no more. They killed off their white farmers, and hence their money no longer matched goods and services production. They killed off their economy, so somehow that is MMT?

https://www.zerohedge.com/news/2019-...a-and-zimbabwe
The article talks about the huge and increasing debt load with MMT.
Bill Gates, who slammed MMT as "Crazy talk" saying that the theory's core principle of "not worrying about the deficit"
There is NO deficit if the treasury just prints fresh money.
But it will come and bite you. The people you owe the money to, you will have a problem." You don't owe money yo anybody. THAT is the problem for bankers.
"suggests that a government like the U.S. needn’t worry about debt at all. As long as it borrows in its own currency, there is no risk of default or bankruptcy. It can spend as much as it wants on any projects,
THEY DON'T BORROW.
Alas, there is no free lunch. For one, the economy might not have enough resources — in the form of workers and industrial capacity — to meet the combined demand from the government and the private sector. The result would be inflation, as too much money chased too few goods and services.

Fueled by income and strong consumer demand, demand-pull inflation occurs when the economy demands more goods and services than are available.
If U.S. debts were to keep growing, at some point the Fed would face a dilemma. It could increase interest rates to maintain foreign (and domestic) demand for dollar assets, at the cost of damping U.S. economic growth.
How stupid do you have to be to believe that U.S. debts will keep growing if the treasury PRINTS instead of borrowing?
The U.S. economy is operating pretty close to capacity — especially in the labor market
BS to the max.
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