Modern Monetary Theory

I realize this forum is largely empty, but here is hoping that there are still some armchair economists with something to say about Modern Monetary Theory:

To summarize, MMT posits that nations with full control over their currency, such as the U.S., can print money as needed for the general welfare. Inflation would be kept in check by a measure of unemployment and by keeping supply and demand properly balanced. If inflation were to occur, it could be taxed back, government spending reduced, and the money supply thereby reduced.

It is supported by such prominent politicians such as AOC and Bernie Sanders. Personally, I don’t buy it. I believe it would lead to hyperinflation, unemployment, and the loss of the US dollar as the world reserve currency. We would be, to put it delicately, f****d.

Any thoughts for or against?

Printing currency is not that useful.

The amount of wealth will not change if you print more money.

I would rather support the ban of luxury items.

That being said, printed money can be given to the poor and only in that sense would it benefit anyone. But the fact that you have to print it again and again to keep giving it means endless inflation.

I agree— simply printing currency does not create wealth. Wealth comes from resources, goods, services, labor, invention, and innovation.

That's an interesting topic, I wonder if any of you stumbled upon any comprehensive article why the gold standard was not good enough and we had to abandon it?

The main reason I hear is that it couldn't meet the demand for money, but this idea seems kinda shaky to me.

Economics is my least favorite topic. I did read Fullers { 1895 - 1983 } 1983 book Grunch of the Giants ---large seller in China when it came out--.

The the golden rule is made by those who own the gold i.e. all of the resources and power. I came across this below a quick search.

..." After my many discussions with David Martin, and my life long quest to really understand at an embodied level the global financial system, and value, I returned to GRUNCH last week, for about the forth time. And having just read John Perkins, “Hoodwinked”, the message is the same.

...No, its not a conspiracy, but a system built on the insatiable desire for greed and power, at the cost of anything, by a small group of people. The real cost, the poverty of most of the world. The loss of pristine environments. Endless debt. It is tragic. "....

.." In his usual inimitable way, Bucky said that the GRUNCH of giants and their very actions of raping and pillaging the worlds people and resources, has of course its own precessional effect. In other words, the side effect of their actions may be the very action that reveals all that is NOT true.
This will be a good thing. Painful maybe, as people realise that their presumed “wealth” is not really of any value. "...

Oh you can read the book GRunCH here without having to purchase it.

Error, does not compute.

Today the value of paper notes is tied basically to a promise to pay back backed by basically the GDP of the USA. The only problem with this is that government spending is calculated as GDP, leading to a circular loop of reserves funding further reserves. It's what will make the next economic crash, when it happens, become monumentally worse than the one in 1930. The crash will happen exactly when the country starts to slip in it's Moody's credit rating as the Debt to GDP ratio reaches a point where lenders are no longer willing to trust the USA to pay them back.

That's actually very interesting, thanks for the perspective, I will try to dive deeper into the rabbit hole.

2 main drivers today are causing the credit rating to slip. Partisan gridlock when passing a budget and a rising debt to GDP ratio, where we are at around 130% today. Anything over 100% is considered less than stable.

The alarm bells were first sounded in 2011.

What happened in 2011? The effects of the financial crisis?

2011 link

My general understanding of the MMT argument is something like:

“Insofar as most U.S. debt is dollar-denominated, it is possible to simply create dollars to pay off debts, and the demand for dollars will normally be sufficiently high that it doesn’t cause the dollar to crash. To the extent that it creates inflationary effects, the U.S.’s costs of living are substantially driven by market power, so price controls can limit the effects of inflation without being distortionary, as when market concentration is high, price controls can be more efficient. After all, capitalist economies are rarely at full employment.”

In general, I’m pretty unconvinced by this argument. Fundamentally, I think it confuses the natural level of output in the economy to the optimal level of output. Even if market concentration is so high that economies are not truly at their maximum potential, in a world of market concentration, issuing more dollars will cause prices to rise. And I don’t think price controls can solve this problem easily -- setting optimal price controls requires tons of information about market concentration in different markets, which is hard to get, and the political economy of price controls often makes them impractical, or last far longer than they need to. I think industry-level market concentration should be targeted and mitigated, but a broad-based use of price controls as a blunt instrument to fight inflation seems possibly misguided, and could induce severe shortages.