Yes, The Debt Predicament Is Every Bit As Bad As You Fear

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  • Sat, Feb 09, 2019 - 01:41pm

    #21
    aladinangel

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    MMT's proponents would like you to think…

… that humanity has been continuosly run by fools over the last couple of millenia. They could have solved all their econimic problems very easily just by issuing more currency; instead, they weren’t smart enough to figure it out smiley. Do you really believe it ? Or, do you really believe that this magic “solution” hasn’t been tried before along our history ? Anybody cares to remember its results, every single freaking time ?

The results are simple, and always the same: debasement followed by the destruction of currency, savings and lifestyle due to an inflation running amok ! I just love how our modern economists pretend that there has been no-to-little inflation since 2009. Sure, the houses became unafordable (again) along with rents, tuitions, health care, while the price of food (for a much lower quality) and banking services went up significantly; other that that, everything’s peachy !

Remember, there is a good reason why MMT has been also called the “Magic Money Tree” theory… cool

  • Sat, Feb 09, 2019 - 02:10pm

    #22
    JohnH123

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    Dave,

When you say the “run, don’t walk” option, where are we to run to?

brushhog wrote:

All MMT does is describe modern monetary practice. The idea that the only constraints on borrowing are the effects it will have on the currency. This is true. Currently there is no attempt at shrinking the debt and, for all intents and purposes, the only limiting factor is how much we can borrow before lenders start demanding greater yield.

MMT seems to simply be an attempt to sum up our current irresponsible monetary practice into what seems like some kind of an intentional system that we embarked upon voluntarily instead of simply stumbling through and kicking the can down the road in order to avoid the consequences of our unsustainable actions.

Along with giving a big thumbs up to DaveF for his Rules for Rulers aligned critique of MMT, let me add to the part I’ve bolded above.

There are other limiting factors that need to be brought into the conversation, perhaps the biggest of which is that MMT is, at heart, something that Karl Marx would recognize and be proud of.  It is the self-deceit of central planners to believe that they can more accurately and elegantly direct spending to the right places, and the right parties, at the right time.

Sure, their efforts will be wrapped up in whatever is popular at the time.  If it were in play today there would be special funds directed towards the LGBT community, and to fight the scourge of Russian interference in US elections, and so forth.

Massive piles would be directed at the next generation of super-awesome weapons because China, and because Russia.

Soon we’d have to MMT our way out of the collapse of the next mega-financial institution(s) because systemic reasons.

All MMT represents is real purchasing power printed into existence which, by definition, has to come from somewhere.  As Dave pointed out, that “somewhere” is from existing savings and savers.

It’s just an accounting identity.

So MMT simply represents a gigantic scrum among those already in power to shift the new purchasing power this way and that way, like a gigantic fire hose held by children only with less precision and effectiveness.

I’m not saying this is any worse than having the Fed make the same decisions, but neither is it any better.  Sooner or later, whether via MMT or via some other approach, we’re going to have to face the simple truth that it’s not possible to borrow (or spend) at a faster pace than real wealth is generated via the growth of the underlying economy.  That, in turn, is limited by the availability of natural resources and the degree to which those are productively and effectively utilized.

So the real question is, “will MMT somehow be a more effective and productive way to spend money?”

On that front, I cannot find a single real-world example to drag this out of pie-in-the-sky academic noodling and into a solid format that can be debated.  That means I have to resort to my observations of human behavior and note that whatever “ism” is in place, people are people and those drawn towards the top are identically self-promoting, power-grabbing, and ego-driven no matter what sort of hierarchy they ascribe to.

  • Sun, Feb 10, 2019 - 07:16am

    #24

    davefairtex

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    worse than that

Chris-

I’m going to ever-so-slightly refine your “where would MMT be spent today”…

Token amounts would be spent – although they’d be allocated VERY LOUDLY AND PROUDLY – on LGBT issues (“fighting hate speech”, or some damn thing) as well as “countering Russian interference in our democracy.” (perhaps by improving computer security at the DNC and with the Democrat political machine so that emails detailing actual domestic election-rigging would never again be exposed to the public eye).

The vast majority of the MMT money would be sent to where it is needed most: to benefit the donor class.  Who might they be?  Defense.  Sickcare.  Banking.

You know, the places where the ex-politicians go to work once they are finished with “public service.”

Example: government-funded sickcare.  Everyone can get every service.  No rationing.  Available to both legal and illegal immigrants – why not, its a “human right.”  If you say otherwise – you’re a racist.  Every drug in the world is on the list.  Even those that cost $100,000 per pill.  [Not long afterwards, coincidentally, there are now a LOT of drugs that end up costing $100,000 per pill.]

Cui bono, you ask?  Duh, that would be the Sickcare industry, and all those politicans that go work there after “public service.”

That sends sickcare to 40% of GDP – a direct transfer from savers to the sickcare shareholders and executives.

To expect any other outcome is to expect a dog to refrain from eating a piece of meat that has accidentally fallen on the floor in the kitchen.  (Those who have dogs will know exactly what I mean.)

Honestly, I suspect the first cut of using MMT to fund the “green new deal” programs would actually be reasonably well spent.

Its just the second, and follow-on programs that would get progressively worse, as politicians realized that Free Money Was Available To Hand To Their Donors.

And just like that: dollar would turn to confetti.

Gold is the place to go in that instance.  This would be the goldbugs’ long-awaited moment, finally arrived.

  • Sun, Feb 10, 2019 - 02:21pm

    #25
    JohnH123

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    Kicking the Can even further?

Chris,

Thanks for your input. You have been predicting an imminent collapse for some time, and we have all been surprised at how far those in power have been able to continue to kick the can down the road.

Would MMT allow the government to kick the can down the road even further, perhaps for many more years, or does your timeline remain the same?

  • Tue, Feb 12, 2019 - 09:36am

    #26
    QQQBall

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    MMT allows the FED to not

MMT allows the FED to not admit the error of its policy.

  • Tue, Feb 12, 2019 - 05:38pm

    #27
    nedyne

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    Powell is very worried

It’s funny that Powell doesn’t even wait to be out of his chairman job before publicly saying he is ‘very worried’ about growing amount of US debt.

“I’m very worried about it,” Powell said at The Economic Club of Washington, D.C. “From the Fed’s standpoint, we’re really looking at a business cycle length: that’s our frame of reference. The long-run fiscal, nonsustainability of the U.S. federal government isn’t really something that plays into the medium term that is relevant for our policy decisions.”

 

However, “it’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face,” he added.

Source

  • Wed, Feb 13, 2019 - 10:30am

    #28
    Steven Kelso

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    MMT: Authoritarianism?

There’s a lot of good points about MMT here. I just wanted to make some additional points:
-The current Fed system prints money from nothing and the aristocracy benefits (primarily).
-Proposed MMT prints money from nothing and allegedly infrastructure (society) benefits.
-One central bank calling the shots for all 50 states (and the rest of the planet) vs. 50 state banks calling the shots for their state economies, in whatever way best benefits them.

The unspoken premise here is that MMT would look just like what the Fed does now. How do we know it doesn’t look like a more socialized version of the bank of North Dakota (the only state bank in the U.S.)? These banks can run counter-cyclical policies in favor of their constiuents (which they can see and hear) unlike Wall Street that has little to no consideration of community stakeholders in Flyover, NE.

Authoritarian politics and economics are unsustainable. That much should be clear by now. Humans work best in groups of 150 or less. Having one central government/bank dictate the strategy for millions is wholly irresponsible and psychopathic and will lead to the immisertion of millions. I agree with Chris that postions of power attract the power-hungry and that folks who occupy these positions will decide how the money is spent.

No real world examples? Whatever happened to the 2008 Minnesota Transportation Act (MTA)? They wanted to print some money to fix roads and bridges. Did nothing good come of that?

The discussion extends into a whole new paradigm. I often say, “If you’ve been to one American city, then you have been to them all.” I’m speaking of course of the Babylonian-type strip sprawl that pollutes the edge of every city bordering the interstate highway system. This type of demand-side economic freedom is also unsustainable. Decentralizing and dismantling neoliberalism extends to killing corporate franchises as seemingly benign as fast food restaurants. Granted, our society is highly specialized and we can’t have a widget manufacturer in every single community, that’s just a logistical reality, I suppose.

Corporations used to be temporary constructs to facilitate human endeavors. Perhaps money should be treated in the same manner: a limited, artifical construct used to facilitate human endeavors? Not an abstract instrument to collect in a vault for “savers” to horde. Yet, we see evidence of wealth disparity even in the earliest agrarian societies. I suspect the problem lies deeper than the monetary system.

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