Tuesday, July 23, 2019

MMT Link Roundup

Favorable

Education about economy critical for coming election

This Economic Theory Could Be Used To Pay For The Green New Deal
"Too often, people get a whiff of MMT, they don't read the literature, and they somehow arrive at the takeaway that MMT is about printing prosperity," Kelton said. "And of course when people hear printing money, they go straight to Zimbabwe or Weimar Germany."

Those are notorious cases of hyperinflation. But Kelton argues that runaway prices are only a danger when demand outstrips the real resources in an economy — the people, machines and raw materials. If there's idle capacity, MMT maintains that additional government spending does not trigger inflation. . . .

[The belief that Japan's high public debt would raise interest rates] "cost both me and my clients or anyone who was stupid enough to follow me money," [bond trader James] Montier recalled. "It was one of the worst trade positions I have ever suggested in my entire life."

He says MMT offers better financial forecasts and helped him understand why interest rates in the U.S. have stayed low, despite growing government deficits.

Taxes for Revenue Are Obsolete (from 1946!)
The necessity for a government to tax in order to maintain both its independence and its solvency is true for state and local governments, but it is not true for a national government. Two changes of the greatest consequence have occurred in the last twenty-five years which have substantially altered the position of the national state with respect to the financing of its current requirements.

The first of these changes is the gaining of vast new experience in the management of central banks.

The second change is the elimination, for domestic purposes, of the convertibility of the currency into gold. . . .

The public purpose which is served should never be obscured in a tax program under the mask of raising revenue. . . .

[Instead, a government should use taxes:]
  1. As an instrument of fiscal policy to help stabilize the purchasing power of the dollar;
  2. To express public policy in the distribution of wealth and of income, as in the case of the progressive income and estate taxes;
  3. To express public policy in subsidizing or in penalizing various industries and economic groups;
  4. To isolate and assess directly the costs of certain national benefits, such as highways and social security.

Critical

Rethinking fiscal policy: Progressive US politics meets radical economics
The most intuitively attractive part of the MMT message is that if the economy is running below capacity, policy should aim at stimulus, and this should come through fiscal expansion. Put like this, it is not so far from the Keynesian ideas so relevant in the 1930s. Mainstream economists, however, are cautious or even sceptical, informed by the post-World War II periods when politicians proved reluctant to rein in excessive budgets. Nevertheless, MMT’s ‘free-lunch’ message of limitless budget funding will go on attracting advocates of big-ticket expenditure.
Good over, but le sigh: budgets are not limitless: the real economy is always a limit on spending. However, there are no financial limits to deficits.

The Stupid! It Burns!

AOC Chief of Staff: Green New Deal 'Wasn't Originally a Climate Thing at All'
Many activists have dismissed the cost as irrelevant, because climate change poses an existential risk to humanity. This relies on climate predictions that have proven false time and time again, and a myth of scientific consensus on the issue. Liberals [!] attempting to use modern monetary theory to dismiss the cost are also misguided. [embedded links omitted; emphasis added]

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