Comment by jfengel | Hacker News Reader

Comment by jfengel | Hacker News Reader

Parent Full thread

It may not actually be absolutely necessary to cut taxes. Under the (dubiously named) Modern Monetary Theory, you can just print the money. That causes inflation, but that's not necessarily the worst thing in the world. It encourages people to spend money rather than hoard it.

No, you don't need to worry about hyperinflation, the big bugaboo of Chicago/Austrian economists. Hyperinflation is associated with economic collapses like wars or industry failures, where suddenly goods are in short supply. What you get out of this is ordinary inflation, not hyperinflation. If you print 1% of your economy in new money, then you get 1% inflation. Hyperinflation is a different problem.

Ordinary inflation can be dealt with in a number of ways. Taxes are one of them: you don't pay down the debt but just burn the money. You don't need a separate account book for government debt: outstanding currency is government debt.

Not all economists buy this theory. It's not mainstream, but neither is it exactly fringe. I bring it up only because the notion of a separate government account book that has to be balanced is worth reconsidering. Ditch it, and there are tradeoffs that might be worth it -- including simplifying how you handle basic income.

MMT measures inflation by standard inflation measures such as consumer price index. Real Estate and land prices are not included. Look this way if you want to see where the newly printed money end up.

Btw inflation is intentionally underreported because the only way to repay government debts (under democracy) is by debasing currency and thus value od debts through inflation. It's just a hidden tax.

Your core assumption is that flooding the system with money will cause inflation. However, in many modern cases we do not see that occurring in the traditional sense. Recently CPI-based inflation is non existent in the large economies of the world, but asset inflation is, which exacerbates wealth/income inequality and leaves the potential for a Japanese-style "Lost Decade" (which has been going on for much longer than 10 years at this point).

Asset bubbles, misallocation of capital, and mortgaging the future to support the present are the pressing concerns with easy money that should be addressed.

If the money becomes worthless and quick to deflate won't people opt for hoard stuffs instead and do barter?

Perhaps if things get way out of control, but even then not entirely. People need money to pay taxes. Individuals wishing to avoid jail is a great way to ensure a large majority of the population uses your currency.

Austrian economists barely discuss hyperinflation. They instead endlessly talk about the distortive effects of inflation on the economy as a whole, such as decimating savings, and that the idea that a good economy is based on consumer spending is political gobbledygook believed by politicians who only listen to bad economists that tell them what they want to hear.

It would be interesting to have a discussion about some of the Austrian critiques of MMT or UBI on this site. I often see mischaracterizations and generalizations of those views here.

There is one such debate on youtube.

https://youtu.be/cUTLCDBONok

It's pretty fringe; virtually all economists either Disagree or Strongly Disagree with the theory[1]. When weighted by confidence, 72% of economists strongly disagree.

Also, this works both ways — if we can MMT unlimited money to fund spending, why pay taxes at all? We should, in theory, be able to cut taxes to 0 (or as close to 0 limited by real scarcity) and MMT the entire budget.

[1] http://www.igmchicago.org/surveys/modern-monetary-theory/

If you lower taxes to 0 then there will be no demand for your money because people will start using other currencies as a medium of exchange.

Forget about cutting taxes, MMT holds that we can in theory institute a regressive UBI program that gives cash to people == to their effective income tax (thereby zeroing it out). The only limit, per MMT, is real resource scarcity.

Now skip the extra step, and have bondholders just get paid back directly by the money printer.

Some of the write-in comments were interesting such as "there are some limits such as financing the entire world's output" and "this will make it impossible to sell more bonds". I would be interested to see a debate between a mainstream and MMT economist, to hear how a MMT supporter would address these critiques.

"this will make it impossible to sell more bonds"

Forget about actually cutting taxes directly, MMT holds that we can in theory institute a regressive UBI program that gives cash to people == to their effective income tax (thereby zeroing it out). The only limit, per MMT, is real resource scarcity.

In this implementation, the bonds are still being paid back via taxes, but those taxes are coming from the Fed's printing of money.

Reply on news.ycombinator.com