Fortunately, lately I don't see any new article from the USA praising MMT.
I know it’s a popular boogeyman, but it’s pure fantasy.
The thing about MMT, is that it’s not about racking up gigantic debts per se, their thesis is that deficits and debt don’t matter in an absolute sense, but in relation to other monetary factors. Eg. once inflation picks up, then it becomes necessary to cut budget deficits.
Sheesh! How come anything touching on "what is money" gets goofy immediately?
Most of the world's monetary systems have been run under Monetarist theories for 40-ish years. Theory is now entirely at odds with observed realities. New theories gain ground.
National debts "exploded" a long time ago. Japan's exploded over a generation ago and most of western economies "exploded" 10-15 years ago. Except these explosions aren't explosions. Central banks continue to decree whatever interest rates they want, with no market pushbacks.
The monetarists and goldbugs have been screaming "inflation" constantly for 25+ years. That does not mean that their theory of inflation (national debt) is true. It isn't.
Argentina's monetary system hasn't.
I'd even say that "theories," is probably the wrong term. More "school of thought."
I would also point out that the USD/EUR/GPM/Yen/etc are "run under MMT" in the basic sense. They simply have different ideas about inflation.
Broadly, MMT thinks same year spending is the main inflationary mover. Monetarism thinks cumulative national debt is what impacts inflation.
I disagree if the assertion is that policy makers have been consciously crafting policy under MMT this whole time.
Isn't it the opposite, that it's impossible to pay off the debt without massive deflation? 'Paying off the debt' means reducing the money supply, which means money later is worth than money now. That never ends well.
Way 1 is what you described, which is directly paying off the debt. This is the path of austerity, high taxes, spending cuts, etc. Agreed that this never ends well.
Way 2 is that you reduce the value of the debt by reducing the value of the currency it is held in. This isn't really an option for most countries, but the US is unique in that it controls the world reserve currency and can directly print the debt away. This would be a far politically easier option as inflation is a complex phenomenon that can't simply be blamed on harsh austerity policies.
It does strike me that they are going to go with option 2. The political conditions for this aren't quite there yet, but you can see it forming with articles like the OP.
This doesn't seem like a real option, though. The United States doesn't simply print money, we issue debt to increase the money supply. If we just started literally printing new, unbacked money we'd immediately lose our reserve currency status and it would likely be the end of US global hegemony. Maybe the end of the US, period.
Meanwhile, using our standard practice of issuing debt to pay for it wouldn't work here because that would be exactly counter to the thing we're trying to do: reduce our debt.
I mean, you're illustrating my point here: QE is when the Federal Reserve buys bonds, which means it's not printing the money out of thin air. It's making money that is backed by debt. Same goes for reserves, that money isn't just dropped out of a helicopter with no strings attached, all that money introduced is backed by a commitment to repay it. So both of these avenues for increasing the money supply introduce corresponding debt. Using this 'printed money' to pay down the national debt would be like using one credit card to pay the balance of another.
This is true. However, the second half of this isn't always intuitive.
Bonds come with a commitment to redeem and pay an interest rate... but both commitments are in USD. Both USD and US bonds are accounts at the federal reserve. An institution holding bonds has an account, where they can buy a bond with a dollar or redeem a bond for a dollar. Their bond account will decrease by a dollar, and their dollar deposit account will increase by a dollar. No one's net position changes.
Imagine if the rules were reversed: the treasury mints coins, deposits them in the Fed and receives bonds which it can spend.
> Japan's exploded over a generation ago and
And how did that go?
> Most of western economies "exploded" 10-15 years ago.
Sure and they had 15+ years worth of runway to lower rates. So seems about right that they didn't have an issue while their strategy was still viable.
> That does not mean that their theory of inflation (national debt)
What does this even mean? Debt to GDP is ~130%. Seems like what most of them have been consistently predicting for years.
UBI certainly died as a subject as well. The "basic income" benefits wasn't even universal and exactly what everyone said would happen has happened.
I still think a fiscal conservative with an army of accountants could figure out UBI and make it work. Effectively it would greatly punish anyone who works under the table.
This is totally lost on me. Why? I don't see how any of the issues with UBI are accounting based. We already can spend money we don't have in the short term so nothing prevents transfer payments of any size in a purely logistical sense.
The issues with UBI are regressive redistribution, long term effects on the labor market, and long term effects on the currency. None of those are accounting issues.
So lets go back to what happens. Places like Switzerland or Germany have a labour participation rate of ~80%. So if you implemented UBI there. The 20% of people who were earning nothing or at most were on government services, now get a pay cheque. This will be by definition inflationary; but with such high labour rates and removal of those other services. The actual inflationary factor will be manageable. The probability of social movement increases obviously. So their participation rate near the beginning will drop.
The USA on the otherhand has about 60% participation rate and their government services are poor compared to the rest of the world. They in turn have made their military their welfare system. So if UBI implemented. Nearly have the country would be paying the other half of the country to sit at home.
What happened with covid? Less than 10% of people got cheques and we got >40% inflation eventually in the USA. So we can do the math. For a year or 2 of UBI at around 50% is more than 5x worse. So the USA would be looking at >200% inflation.
The army of accountants would be needed to make that 100x less.
>We already can spend money we don't have in the short term so nothing prevents transfer payments of any size in a purely logistical sense.
It's abundantly clear that isn't true. Hence the out of control every market and sky high inflation. That debt ceiling sure is hitting lots of heads lately for the USA.
>The issues with UBI are regressive redistribution, long term effects on the labor market, and long term effects on the currency. None of those are accounting issues.
Oh I completely agree those are concerns as well. The approach I have in mind is that if you manage it from the economic point of view, these longer term issues will be addressable at a later time. The entire welfare system would have to die. illegal immigration becomes far less of a problem. UBI would be only for citizens. The tax system could no longer be progressive.
UBI appears on face impractical or impossible. However, with said 'army of accountants' you could likely design something that works and possibly even beneficial. bviously a ton of work needed here.
> The army of accountants would be needed to make that(inflation) 100x less.
You seem to imply some black box where accountants are the input and reductions in inflation are the output. Can you explain to me what accountants are doing in this black box that affects inflation? Can you explain why more of these accountants fixes this problem to a greater degree(what is the marginal accountant doing here?)
I can tell you the answer though. This relationship doesn't exist. Inflation is not caused by a lack of accountants or accounting, therefor having more of them has zero impact on inflation.
I'm very open to hearing the specific mechanics of what these accountants are doing and changing my mind .
It seems to me that you may have a fundamental misunderstanding of what it is that accountants spend their time doing.