Give Scott Bessent credit for calling out the fed rate hikes for its regressive stimulus for the rich while hurting the poor. That said, its still beyond silly to see people still think MMT and QE are one and the same. Also Joe Wiesenthal's piece about MMT is a must read too.
MMT is correct about the mechanics of money creation. However, its problem as well as every other present monetary theory left, right and center is, its a palliative instead of the paradigm change we urgently need to resolve the anomalies (chronic individual austerity, chronic erosive inflation and pissing and moaning about the seeming double bind modern economies struggle with, but never finding a resolution) of the present paradigm. In other words we need ACTION. ACTION, WE NEED CHANGE AND WE NEED IT REEEEAAAL FAST! Thats what a new paradigm, a new operant applied concept accomplishes.
The present paradigm is Debt Only as in the Burden to Repay/Debt as the Sole/Monopolistic Form and Vehicle for the Creation and Distribution of New Money.
A new paradigm requires an entire policy program because economics is complex and humanity is not an entirely rational or ethical species. However there IS a single policy that implemented mathematically resolves the above anomalies all by itself. That policy is a 50% Discount/Rebate at retail sale. This policy is the very expression of the new monetary paradigm (Direct and Reciprocal Monetary Gifting) and its point of implementation, (retail sale) is actually a new macro-economic insight as in the single aggregatively/universally participated in point in the entire economic process and hence is the perfect place to implement a monetary policy. Thank you non-Nobel prize committee for economics.
Once again, I'm left wondering whether anyone, anywhere, has a theory of inflation that (a) makes a lick of sense and (b) is capable of generating predictions about inflation that aren't wrong.
Here, I'm wondering specifically about the idea that high interest rates, by putting a lot of interest income into the hands of the wealthy people who receive the bulk of it, can be, have been, or will be, inflationary. Is there any empirical evidence that this is, was, or ever will be true?
It's possible, I suppose, to imagine wealthy people using their interest income windfalls to bid up the price of stuff that can be bid up, like real estate, art, stocks, NFTs, and, maybe, commodities like oil, wheat, and soybeans. Is there any actual evidence to suggest that this is happening, or has happened? And how could the availability of extra interest income even begin to affect the prices of most retail consumer goods and services -- groceries, laptops, washing machines, hotel rooms, airfare -- whose prices are not established by auctions but rather by retailers (and, indirectly, their suppliers)?
And interest income on treasury debt is taxable federally. That would seem to blunt the impact of interest windfalls to some degree, no? Maybe recipients of those windfalls might be inclined to use them to make tax-deductible charitable donations to offset their income tax liabilities. I have no idea. Does anyone?
I mean, does anyone have any clue as to what rich people actually do with the interest they receive on their Treasuries?
Here's I think a balanced assessment of the effect of the Fed's rate hikes since 2022: As MMTers say, contrary to popular beliefs, the rate hikes didn't affect private domestic investment (except residential investment) because corporations make their investment decisions based, not on interest rates, but on future demand. So corporations invested as usual, the government spent as usual, and consumers spent as usual, so the economy has been almost on the expected track for years now.
So they don't have much evidence that the increased interest payments have been accelerating the economy(therefore inflation as well), and the economy has been just "on track". My point is the most important point where MMT is right is higher interest rates won't dip private domestic investment (except residential investment) IMO
Interesting to hear these views, although I wonder how they square with his "3-3-3" program (which unfortunately sounds a bit too much like weirdo Herman Cain's 9-9-9 program a few years ago).
But his call to get the deficit down to 3% of GDP seems antithetical to the growth agenda. He can possibly get to 3% but, paradoxicallly, that happens if he doesn't worry about the level of the deficit per se, and ensures that gov't fiscal policy enhances the economy's productive potential.
Joe's explanation is very good. But it highlights one MMT explanation that I find confusing or vague: "shortage of real resources." I find it hard to know exactly what that means.
Without explaining that more, here a possible alternative, starting at the top.
1. In our ~purely monetary buy-and-sell economy, spending (is what) causes production. Ask any producer why they produce stuff.*
2. So to a first approximation, more spending just causes more production.
But if spending bangs against production-capacity limits, there can be more "leakage" into higher prices (P) vs more production (Q). Think: Covid shutdown.
This might be where "real resource" constraints bite: on producers. But the overwhelmingly dominant "input to production" is people's hours, abilities, skills, knowledge, etc.* The "human-capital" services that people sell to firms when they work for wages.
People naturally hear "real resources" and think of bauxite mining or whatever. And in my reading MMT does little to correct that understanding.
So just sayin', I think people would understand better and more correctly if instead of "real resources," we talked about production capacity. (This also transparently ties inflation to labor supply/demand — naturally leading to either MMT's job-guarantee preference, or my preferred universal income.)
* And really: what accountants actually survey and measure for "GDP" is just…spending. https://fred.stlouisfed.org/graph/?g=1BSbh "Real-world" "production" is an *imputation* from that measure. If people spent $100B on massages, there *must* have been $100B worth of massages "produced." Right?
** Can't resist a swipe at Marx: if the "means of production" is overwhelmingly people as opposed to drill presses and factories, "controlling the means of production" takes on a very different import and aspect.
I'm sure a lot of people would say that a 50% Discount/Rebate at retail sale would cause way over consumption. Let me address this. First, doubling purchsing power does not ipso facto result in a 100% increase in consumption/economic through put. Not everyone is going to eat twice as much or buy twice as many hand bags or pairs of under wear as they did before. Second, most people will probably want to do what most do with additional income which is invest. This could be encouraged and rationally directed by the government creating 5-6% eco/energy & Infrastructure bonds. Third, on top of this being a smart thing to do voluntarily we could implement a sliding scale percentage of required investment of gifted money into these same bonds. A gift of investment is still a gift and so aligns with the new monetary paradigm. Fourth, amend the FED's charter so their mandate goes from hand-maiden or bail bondsman of the banks to overseer/guarantoor of the planet's future.
Fascinating and not quite what I had been anticipating. And thanks very much for the interview link.
Give Scott Bessent credit for calling out the fed rate hikes for its regressive stimulus for the rich while hurting the poor. That said, its still beyond silly to see people still think MMT and QE are one and the same. Also Joe Wiesenthal's piece about MMT is a must read too.
MMT is correct about the mechanics of money creation. However, its problem as well as every other present monetary theory left, right and center is, its a palliative instead of the paradigm change we urgently need to resolve the anomalies (chronic individual austerity, chronic erosive inflation and pissing and moaning about the seeming double bind modern economies struggle with, but never finding a resolution) of the present paradigm. In other words we need ACTION. ACTION, WE NEED CHANGE AND WE NEED IT REEEEAAAL FAST! Thats what a new paradigm, a new operant applied concept accomplishes.
The present paradigm is Debt Only as in the Burden to Repay/Debt as the Sole/Monopolistic Form and Vehicle for the Creation and Distribution of New Money.
A new paradigm requires an entire policy program because economics is complex and humanity is not an entirely rational or ethical species. However there IS a single policy that implemented mathematically resolves the above anomalies all by itself. That policy is a 50% Discount/Rebate at retail sale. This policy is the very expression of the new monetary paradigm (Direct and Reciprocal Monetary Gifting) and its point of implementation, (retail sale) is actually a new macro-economic insight as in the single aggregatively/universally participated in point in the entire economic process and hence is the perfect place to implement a monetary policy. Thank you non-Nobel prize committee for economics.
good one!
Once again, I'm left wondering whether anyone, anywhere, has a theory of inflation that (a) makes a lick of sense and (b) is capable of generating predictions about inflation that aren't wrong.
Here, I'm wondering specifically about the idea that high interest rates, by putting a lot of interest income into the hands of the wealthy people who receive the bulk of it, can be, have been, or will be, inflationary. Is there any empirical evidence that this is, was, or ever will be true?
It's possible, I suppose, to imagine wealthy people using their interest income windfalls to bid up the price of stuff that can be bid up, like real estate, art, stocks, NFTs, and, maybe, commodities like oil, wheat, and soybeans. Is there any actual evidence to suggest that this is happening, or has happened? And how could the availability of extra interest income even begin to affect the prices of most retail consumer goods and services -- groceries, laptops, washing machines, hotel rooms, airfare -- whose prices are not established by auctions but rather by retailers (and, indirectly, their suppliers)?
And interest income on treasury debt is taxable federally. That would seem to blunt the impact of interest windfalls to some degree, no? Maybe recipients of those windfalls might be inclined to use them to make tax-deductible charitable donations to offset their income tax liabilities. I have no idea. Does anyone?
I mean, does anyone have any clue as to what rich people actually do with the interest they receive on their Treasuries?
Here's I think a balanced assessment of the effect of the Fed's rate hikes since 2022: As MMTers say, contrary to popular beliefs, the rate hikes didn't affect private domestic investment (except residential investment) because corporations make their investment decisions based, not on interest rates, but on future demand. So corporations invested as usual, the government spent as usual, and consumers spent as usual, so the economy has been almost on the expected track for years now.
So they don't have much evidence that the increased interest payments have been accelerating the economy(therefore inflation as well), and the economy has been just "on track". My point is the most important point where MMT is right is higher interest rates won't dip private domestic investment (except residential investment) IMO
Interesting to hear these views, although I wonder how they square with his "3-3-3" program (which unfortunately sounds a bit too much like weirdo Herman Cain's 9-9-9 program a few years ago).
But his call to get the deficit down to 3% of GDP seems antithetical to the growth agenda. He can possibly get to 3% but, paradoxicallly, that happens if he doesn't worry about the level of the deficit per se, and ensures that gov't fiscal policy enhances the economy's productive potential.
Joe's explanation is very good. But it highlights one MMT explanation that I find confusing or vague: "shortage of real resources." I find it hard to know exactly what that means.
Without explaining that more, here a possible alternative, starting at the top.
1. In our ~purely monetary buy-and-sell economy, spending (is what) causes production. Ask any producer why they produce stuff.*
2. So to a first approximation, more spending just causes more production.
But if spending bangs against production-capacity limits, there can be more "leakage" into higher prices (P) vs more production (Q). Think: Covid shutdown.
This might be where "real resource" constraints bite: on producers. But the overwhelmingly dominant "input to production" is people's hours, abilities, skills, knowledge, etc.* The "human-capital" services that people sell to firms when they work for wages.
People naturally hear "real resources" and think of bauxite mining or whatever. And in my reading MMT does little to correct that understanding.
So just sayin', I think people would understand better and more correctly if instead of "real resources," we talked about production capacity. (This also transparently ties inflation to labor supply/demand — naturally leading to either MMT's job-guarantee preference, or my preferred universal income.)
* And really: what accountants actually survey and measure for "GDP" is just…spending. https://fred.stlouisfed.org/graph/?g=1BSbh "Real-world" "production" is an *imputation* from that measure. If people spent $100B on massages, there *must* have been $100B worth of massages "produced." Right?
** Can't resist a swipe at Marx: if the "means of production" is overwhelmingly people as opposed to drill presses and factories, "controlling the means of production" takes on a very different import and aspect.
Oh and a Q: Shouldn't the Kelton curve be based on Gov deficit:GDP ratio, rather than debt? Thx.
I'm sure a lot of people would say that a 50% Discount/Rebate at retail sale would cause way over consumption. Let me address this. First, doubling purchsing power does not ipso facto result in a 100% increase in consumption/economic through put. Not everyone is going to eat twice as much or buy twice as many hand bags or pairs of under wear as they did before. Second, most people will probably want to do what most do with additional income which is invest. This could be encouraged and rationally directed by the government creating 5-6% eco/energy & Infrastructure bonds. Third, on top of this being a smart thing to do voluntarily we could implement a sliding scale percentage of required investment of gifted money into these same bonds. A gift of investment is still a gift and so aligns with the new monetary paradigm. Fourth, amend the FED's charter so their mandate goes from hand-maiden or bail bondsman of the banks to overseer/guarantoor of the planet's future.