American Economics Thread

[Bellum_Romanum]

Perhaps one of the reasons why the US government isn't that at all worried about deficits, printing money etc. is due to what the author of this apparently popular book "The Myth Deficit" along with other economist is the firm belief in MMT.

I do not know enough about this subject of MMT or economic theories for that matter to provide my own opinion. I am curious to know what some of you think of this topic, especially the content of this podcast linked below. I mean if the printing of money isn't a cause for concern, the debt, and deficit as a nothing burger then why are these metrics unapplicable to other countries say like China? Thoughts?

 

[Suetham]

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[Strangelove]

 

[9dashline]

Perhaps one of the reasons why the US government isn't that at all worried about deficits, printing money etc. is due to what the author of this apparently popular book "The Myth Deficit" along with other economist is the firm belief in MMT.

I do not know enough about this subject of MMT or economic theories for that matter to provide my own opinion. I am curious to know what some of you think of this topic, especially the content of this podcast linked below. I mean if the printing of money isn't a cause for concern, the debt, and deficit as a nothing burger then why are these metrics unapplicable to other countries say like China? Thoughts?

SleepyStudent on Steroids!

This guy is 100% retarded, just read some of his babble:

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Can you generate inflation? Yeah. Sure, yeah. Easy. Just be an idiot, right? Now, does this apply to the United States? No. That’s where it gets entirely different.

All that would imply that there is a huge amount of what we call ‘slack’ in the economy. (Also) think about the fact that we’ve had, since the 1990s, across the OECD, by any measure, full employment. That is to say, most people who want a job can actually find one, and at the same time, despite that, there has been almost no price pressure coming from wages, pushing on into prices, to push up inflation.

Most people don’t understand what inflation is. You get all this stuff talked by economists and central bankers about inflation and expectations and all that, but you go out and survey people and they have no idea what the damn thing is. Think about the fact that most people talk about house price inflation. There is no such thing as house price inflation. Inflation is a general rise in the level of all prices. A sustained rise in the level of prices. The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other. That is singularly not an inflation.

So, what’s going to happen coming out of Covid is there will be a big pickup in spending, a pickup in employment. I think it’s (going to be) less than people expect because the people with the money are not going to go out and spend it because they have all they want already.

Now, does that mean that there’s going to be what we used to call bottlenecks? Yeah, because basically firms run down inventory because they’re in the middle of a bloody recession. Does it mean that there are going to be supply chain problems? Yes, we see this with computer chips. So, what’s going to happen is that computer chips are going to go up in price. So, lots of individual things are going to go up in price, and what’s going to happen is people are going to go “there’s the inflation, there’s that terrible inflation,” and it’s not. It’s just basically short-term factors that will dissipate after 18 months.

The first thing is, what’s your alternative to the dollar unless you’re basically going to go all-in on gold or bitcoin?

So what’s your alternative (to the Dollar)? Buy yen? No, not really. You’re going to buy Chinese assets? Well, good luck, and given the way that their country is being run at the moment, if you ever want to take your capital out. I’m not sure that’s going to work for you, even if you could. So you’re kind of stuck with it.

Mechanically there’s another problem. All of the countries that make surpluses in the world make surpluses because we run deficits. One has to balance the other. So, when you’re a Chinese firm selling to the United States, which is probably an American firm in China with Chinese subcontractors selling to the United States, what happens is they get paid in dollars. When they receive those dollars in China, they don’t let them into the domestic banking system. They sterilize them and they turn them into the local currency, which is why China has all these (dollar) reserves. That’s their national savings. Would you like to burn your reserves in a giant pile? Well, one way to do that would be to dump American debt, which would be equivalent to burning your national savings.

The central bank then has a problem because it’s got a liability – (foreign) cash rather than an asset. So, what’s the easiest asset to buy? Buy another 10-year Treasury bill, rinse and repeat, rinse and repeat.

Basically, if your economy grows faster (than the rest of the world because you are) the technological leader, your stock markets grows faster than the others. If you’re an international investor, you want access to that. (That ends) only if there were actual real deep economic problems (for the US), like, for example, China invents fusion energy and gives it free to the world. That would definitely screw up Texas. But short of that, it’s hard to see exactly what would be these game-changers that would result in this.

I give the inflation problem a one in ten. Psychologically, I am predisposed therefore to discount inflation.

 

[9dashline]

Perhaps one of the reasons why the US government isn't that at all worried about deficits, printing money etc. is due to what the author of this apparently popular book "The Myth Deficit" along with other economist is the firm belief in MMT.

I do not know enough about this subject of MMT or economic theories for that matter to provide my own opinion. I am curious to know what some of you think of this topic, especially the content of this podcast linked below. I mean if the printing of money isn't a cause for concern, the debt, and deficit as a nothing burger then why are these metrics unapplicable to other countries say like China? Thoughts?

He has zero concept of what money really is, what is causing inflation, and money's relationship to energy.... His whole argument is that inflation doesn't apply to the US because US dollar is global reserve currency and nothing can or ever will replace the petrodollar hegemony and even if wages doesn't rise as much the free market will ultimately take care of the issue, and China must buy more and more US debt or else the Chinese economy will implode or collapse, blah blah blah.... Guy has never heard of Dual Circulation or BRI


Here is MY treatise on the Energy/Money relationship:

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I think the biggest reason the West/US is in steep rapid decline is because the world as a whole has begun to run out of cheap energy. As EROEI keeps diminishing America as the world's tax collecting hegemony that overstretched during the era of plentiful resources will be structurally hit the hardest, ironically.

Modern money derives almost entirely it real purchasing power (and thus value) from the energy that enables the underlining "work/force/productivity multiplier effect" in the context of the society in which it exists in. Modern "money" is a claim on existing energy deposit's future ability to do "work". Put another way, money as a claim on energy, specifically, it is the ability to use the money to apply that energy to do productive work in the future. (When the money is spent/exchanged/actualized in the context of a society that still has readily access to available net energy for use)

At the end of the day "Net Energy" is what counts because it alone powers all the other non-energy sectors of the economy. And all of the goods and services in the modern economy, without exception, require such an energy input.

As that societies/civilizations primary energy sources dwindle and/or its EROEI (total net usable energy in terms of Energy Returned on Energy Invested) threshold declines, then so does that society’s money likewise deflate and devalue.

The same unit of money will be able to fetch less energy, produce less work, contribute to less productivity, and thus enable less real economic activity etc

From here on out globally the world will have less net energy available globally for productive use. What's not shown is that globally we are using up more and more energy to get less and less.

In such a situation, using money to measure economic activity is like using an ever-shrinking ruler/yardstick to measure the dimensions of your physical property and volume of your tangible assets.... even as you get poorer and had to sell off more of your things, if your ruler or measurement device is shrinking at a faster pace then it would still appear by all measurements you were well off (for example using money to measure GDP as a signifier of the health or status of a nation or global economy when in fact the dollar is constantly losing its purchasing power)

As a result, long term, that nest egg you saved up (401k, social security, retirement, investments) is not going to be there for you for the simple fact that the global useable energy is gone... The raw purchasing power of money was always almost entirely inflated by the availability of cheap and abundantly high-quality energy (and the “work/productivity multiplier effect” derived thereof) and the assumption that it would always be the case of remaining exercisable and actualizable into perpetuity...

When the quality and quantity of energy available to us continues to decline and decrease, then proportionately so does the value or purchasing power of the money that we hold... for that money was a mere representation of the 'multiplier-effect' of energy/work and the resulting productivity that cheap energy had amplified and enabled. But with the energy depleted so too does our money become worthless.

We are essentially, for all intents and purposes, living in a so-called fractional reserve energy economy. In that there is not a commensurate amount of energy set aside or locked away for each unit of money invested, printed or saved.

Energy is priced on the basis of output vs consumption demand, even as the total global reserves themselves are starting to run empty/dry but as long as it can be pumped out at roughly the same rate then the price stays relatively stable... But this false stability is misleading because the total remaining extractable/usable net energy reserves in the world are already far less than the amount of total money out there in circulation and in terms of monies saved up or in the form of investments, retirement funds, profits earned and accumulated etc etc

Energy is being priced by an economic system that relies upon the assumption that the very instruments of what it is relying on to price will always exists into perpetuity.

The dollar was decoupled from the gold standard when it was exposed that Fort Knox vault was empty and there was in fact no gold left, the parallel is that global energy reserves underground are all but empty and depleted especially when accounting for the remaining paltry net usable energy that can still be realistically extracted. But unlike back in the 70s when the US government cheated the peoples of the world with the financial con, this time around there is no tricking the second law of thermodynamics, and robbing Peter to pay Paul by printing to no tomorrow does not more energy make.

As access to energy peaks and declines (as globally it did back in 2019) and EROEI threshold diminishes, the same amount of nominal dollars is now actually worth less and less. This becomes a double problem when we still try to price energy in terms of dollars and use classic economic models to try and forecast the future. Imagine pumping fuel into your car gas tank but as you are pumping it the price per gallon keep going up in real-time. But what would your total price come out to be? It now also depends on the rate of your pump and how fast price of energy goes up.

Energy is the prerequisite to all economic activity and indeed all life itself, in a decreasing EROEI world, money loses ability to accurately price/value the remaining energy thus causing a viscous cycle of energy being monetarily cheaper than it should otherwise be, which again in turn contributes to propping up the value of money itself -- (recall that modern money derives almost entirely it real purchasing power (and thus value) from the underlining "work/force/productivity multiplier effect" in the context of the society in which it exists in. ) -- which it itself in turn means it only serves to accelerates and compounds the errors in pricing or accounting for subsequent consumption of energy and the remaining energy and so on and so forth...

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[Bellum_Romanum]

SleepyStudent on Steroids!

This guy is 100% retarded, just read some of his babble:

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Can you generate inflation? Yeah. Sure, yeah. Easy. Just be an idiot, right? Now, does this apply to the United States? No. That’s where it gets entirely different.

All that would imply that there is a huge amount of what we call ‘slack’ in the economy. (Also) think about the fact that we’ve had, since the 1990s, across the OECD, by any measure, full employment. That is to say, most people who want a job can actually find one, and at the same time, despite that, there has been almost no price pressure coming from wages, pushing on into prices, to push up inflation.

Most people don’t understand what inflation is. You get all this stuff talked by economists and central bankers about inflation and expectations and all that, but you go out and survey people and they have no idea what the damn thing is. Think about the fact that most people talk about house price inflation. There is no such thing as house price inflation. Inflation is a general rise in the level of all prices. A sustained rise in the level of prices. The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other. That is singularly not an inflation.

So, what’s going to happen coming out of Covid is there will be a big pickup in spending, a pickup in employment. I think it’s (going to be) less than people expect because the people with the money are not going to go out and spend it because they have all they want already.

Now, does that mean that there’s going to be what we used to call bottlenecks? Yeah, because basically firms run down inventory because they’re in the middle of a bloody recession. Does it mean that there are going to be supply chain problems? Yes, we see this with computer chips. So, what’s going to happen is that computer chips are going to go up in price. So, lots of individual things are going to go up in price, and what’s going to happen is people are going to go “there’s the inflation, there’s that terrible inflation,” and it’s not. It’s just basically short-term factors that will dissipate after 18 months.

The first thing is, what’s your alternative to the dollar unless you’re basically going to go all-in on gold or bitcoin?

So what’s your alternative (to the Dollar)? Buy yen? No, not really. You’re going to buy Chinese assets? Well, good luck, and given the way that their country is being run at the moment, if you ever want to take your capital out. I’m not sure that’s going to work for you, even if you could. So you’re kind of stuck with it.

Mechanically there’s another problem. All of the countries that make surpluses in the world make surpluses because we run deficits. One has to balance the other. So, when you’re a Chinese firm selling to the United States, which is probably an American firm in China with Chinese subcontractors selling to the United States, what happens is they get paid in dollars. When they receive those dollars in China, they don’t let them into the domestic banking system. They sterilize them and they turn them into the local currency, which is why China has all these (dollar) reserves. That’s their national savings. Would you like to burn your reserves in a giant pile? Well, one way to do that would be to dump American debt, which would be equivalent to burning your national savings.

The central bank then has a problem because it’s got a liability – (foreign) cash rather than an asset. So, what’s the easiest asset to buy? Buy another 10-year Treasury bill, rinse and repeat, rinse and repeat.

Basically, if your economy grows faster (than the rest of the world because you are) the technological leader, your stock markets grows faster than the others. If you’re an international investor, you want access to that. (That ends) only if there were actual real deep economic problems (for the US), like, for example, China invents fusion energy and gives it free to the world. That would definitely screw up Texas. But short of that, it’s hard to see exactly what would be these game-changers that would result in this.

I give the inflation problem a one in ten. Psychologically, I am predisposed therefore to discount inflation.

It's going to be an interesting time to see how well Mark's argument is going to hold up or look like within the time frame he expects which is 18 months.

It seems that Mark's analysis like all analysis aren't free of personal bias or tainted by his own preferences in economics and political ideology.

It's also interesting to note that much of many so called experts on areas where hard science is not involved, the blather don't configure China into their analysis, and if they do it's done belatedly, a footnote, and if it must be included it'll be in a negative fashion to essentially be used as the scapegoat for their systems failure.

It's a bit concerning to sort of realize that a lot of American thinking or so called "strategic thinking" are actually mostly HOT AIR. Has the American mind athropied or is suffering from inertia? Which is why we see or can observe their actions being made are sort of done quixotically and in my opinion rudderless.

There's a coherent and consistent strategy alright and that's a consistency in creating bogeyman in order to create a condition for their people to coalesce and be manipulated into doing their military-security-political-industrial complex. I am just gobsmacked when thinking about this thing. It is kind of scary.

 

[Suetham]

I do not know enough about this subject of MMT or economic theories for that matter to provide my own opinion. I am curious to know what some of you think of this topic, especially the content of this podcast linked below. I mean if the printing of money isn't a cause for concern, the debt, and deficit as a nothing burger then why are these metrics unapplicable to other countries say like China? Thoughts?

The trigger for MMT's launch to notoriety was the "Green New Deal," an environmental project for the United States created by the more progressive wing of the Democratic Party.

The pledges include, in addition to more spending for environmental protection (which includes, without exaggeration, the abolition of air travel), a renewal of infrastructure, full employment, "free" public health for all and, above all, the promise of a monthly income for all those who "don't want" to work (note: it's not just for those who "can't" or "can't" work, but also those who just aren't willing to work)

The promoters of this project cited Modern Monetary Theory as the framework that allows all these sublime desires to magically become practical. In other words, TMM would be the elixir that will finance this entire public spending plan.


The points that TMM defends


MMT maintains that the government can spend freely, and that large deficits and public debts do not matter when the economy is not at full capacity.

It also claims that the state, as the sovereign issuer of currency, cannot go bankrupt because it creates money whenever it spends. Insufficient saving does not constrain public spending, as budget deficits automatically have private savings as a counterpart.

Representatives of this theory claim that the issuer of the country's currency cannot go bankrupt because the sovereign state can always create as much money as it needs to honor its debt. The function of taxation is not to "earn revenue" for the government, but rather to be an instrument to force the public to use sovereign currency as money (according to the theory, currency acceptance stems from the fact that it can be used to pay taxes). Additionally, taxation would also have the function of withdrawing money from the economy when it became excessive and began to put pressure on prices.

In other words, currency is debt and not primarily a medium of exchange. MMT's logic says that since the government creates money from its own spending, taxation is not necessary to finance state activity. The main function of taxation is to motivate the use of the national currency and obtain its general acceptance, because it is this unit of account that the state recognizes as a means of paying taxes. In addition, taxation has a regulatory function to divert excess demand and modify individual behavior.

All public spending can be financed either by direct printing of money or by borrowing from the government, as government bonds are only as good as the currency the sovereign state issues. The state, therefore, can issue debt and then print money to pay off this debt.

Public debt, moreover, is not a problem, as it represents "financial wealth in the private sector", which invests in it. Therefore, public sector spending not only does not absorb savings, but, on the contrary, generates income for the private sector. Government spending and budget deficits do not lead to lower private investment and do not require a higher tax burden in the future. The government is free from any fiscal constraint because it can always create as much money as it needs.

For all these reasons, the government should not conduct its finances like a family, which needs income before spending. A government that issues fiat money as the legal tender of a country does not need taxes and borrowing to spend.

"Deficits don't matter" is the fundamental mantra of Modern Monetary Theory. Budget deficits do not pose a problem for the performance of the economy when there is supposedly unused economic capacity. On the contrary: they are beneficial. As public spending leads to money creation, it itself creates the savings needed to finance the budget deficit. Consequently, the government (or its Central Bank) can set the interest rate at any level it wants, preferably at zero.

The true meaning of all this is the belief that scarcity does not exist.

For MMT promoters, the national debt is not debt in the conventional sense, but represents the accumulated deficits of the past and, as such, is a record of the net amount of currency that the federal government has created over time. Understanding this power of money creation means abandoning the restrictions of debt ceilings and renouncing the requirement for a balanced budget. Adopting this view would free government from false restrictions and pave the way for full prosperity.

Freed from the shackles of financial restraint, the federal government could restore the country's infrastructure, invest in health and education, guarantee internal and external security, guarantee wages for those who do not want to work, and, at the same time, solve the social security problem.

The utopian vision says that, with the application of Modern Monetary Theory, any nation would reach full employment and end up with poverty.

Want a practical example of this theory from the last century?

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[9dashline]

It's going to be an interesting time to see how well Mark's argument is going to hold up or look like within the time frame he expects which is 18 months.

It seems that Mark's analysis like all analysis aren't free of personal bias or tainted by his own preferences in economics and political ideology.

It's also interesting to note that much of many so called experts on areas where hard science is not involved, the blather don't configure China into their analysis, and if they do it's done belatedly, a footnote, and if it must be included it'll be in a negative fashion to essentially be used as the scapegoat for their systems failure.

It's a bit concerning to sort of realize that a lot of American thinking or so called "strategic thinking" are actually mostly HOT AIR. Has the American mind athropied or is suffering from inertia? Which is why we see or can observe their actions being made are sort of done quixotically and in my opinion rudderless.

There's a coherent and consistent strategy alright and that's a consistency in creating bogeyman in order to create a condition for their people to coalesce and be manipulated into doing their military-security-political-industrial complex. I am just gobsmacked when thinking about this thing. It is kind of scary.

The video you linked to was first posted back on Jul 21, 2020..... even that article he rehashed was published last May 2021.
There is not 18 months left in his prediction lol of so-called transitory inflation...

 

[caudaceus]

The main function of taxation is to motivate the use of the national currency and obtain its general acceptance, because it is this unit of account that the state recognizes as a means of paying taxes

Somehow I'm thinking that MMT and Woke will be the harbinger of new imperialism or something like that.

 

[Bellum_Romanum]

The trigger for MMT's launch to notoriety was the "Green New Deal," an environmental project for the United States created by the more progressive wing of the Democratic Party.

The pledges include, in addition to more spending for environmental protection (which includes, without exaggeration, the abolition of air travel), a renewal of infrastructure, full employment, "free" public health for all and, above all, the promise of a monthly income for all those who "don't want" to work (note: it's not just for those who "can't" or "can't" work, but also those who just aren't willing to work)

The promoters of this project cited Modern Monetary Theory as the framework that allows all these sublime desires to magically become practical. In other words, TMM would be the elixir that will finance this entire public spending plan.


The points that TMM defends


MMT maintains that the government can spend freely, and that large deficits and public debts do not matter when the economy is not at full capacity.

It also claims that the state, as the sovereign issuer of currency, cannot go bankrupt because it creates money whenever it spends. Insufficient saving does not constrain public spending, as budget deficits automatically have private savings as a counterpart.

Representatives of this theory claim that the issuer of the country's currency cannot go bankrupt because the sovereign state can always create as much money as it needs to honor its debt. The function of taxation is not to "earn revenue" for the government, but rather to be an instrument to force the public to use sovereign currency as money (according to the theory, currency acceptance stems from the fact that it can be used to pay taxes). Additionally, taxation would also have the function of withdrawing money from the economy when it became excessive and began to put pressure on prices.

In other words, currency is debt and not primarily a medium of exchange. MMT's logic says that since the government creates money from its own spending, taxation is not necessary to finance state activity. The main function of taxation is to motivate the use of the national currency and obtain its general acceptance, because it is this unit of account that the state recognizes as a means of paying taxes. In addition, taxation has a regulatory function to divert excess demand and modify individual behavior.

All public spending can be financed either by direct printing of money or by borrowing from the government, as government bonds are only as good as the currency the sovereign state issues. The state, therefore, can issue debt and then print money to pay off this debt.

Public debt, moreover, is not a problem, as it represents "financial wealth in the private sector", which invests in it. Therefore, public sector spending not only does not absorb savings, but, on the contrary, generates income for the private sector. Government spending and budget deficits do not lead to lower private investment and do not require a higher tax burden in the future. The government is free from any fiscal constraint because it can always create as much money as it needs.

For all these reasons, the government should not conduct its finances like a family, which needs income before spending. A government that issues fiat money as the legal tender of a country does not need taxes and borrowing to spend.

"Deficits don't matter" is the fundamental mantra of Modern Monetary Theory. Budget deficits do not pose a problem for the performance of the economy when there is supposedly unused economic capacity. On the contrary: they are beneficial. As public spending leads to money creation, it itself creates the savings needed to finance the budget deficit. Consequently, the government (or its Central Bank) can set the interest rate at any level it wants, preferably at zero.

The true meaning of all this is the belief that scarcity does not exist.

For MMT promoters, the national debt is not debt in the conventional sense, but represents the accumulated deficits of the past and, as such, is a record of the net amount of currency that the federal government has created over time. Understanding this power of money creation means abandoning the restrictions of debt ceilings and renouncing the requirement for a balanced budget. Adopting this view would free government from false restrictions and pave the way for full prosperity.

Freed from the shackles of financial restraint, the federal government could restore the country's infrastructure, invest in health and education, guarantee internal and external security, guarantee wages for those who do not want to work, and, at the same time, solve the social security problem.

The utopian vision says that, with the application of Modern Monetary Theory, any nation would reach full employment and end up with poverty.

Want a practical example of this theory from the last century?

Please, Log in or Register to view URLs content!

What if the Jai Hind crowd adopts this line of thinking and applies this to their economy?