Modern Monetary Theory - NOT BORING page 1
FedUpWithFaith
31st January 2012, 05:18 PM
An epiphany is a wonderful feeling and they don’t happen too often in a big way. For many former Christians who become atheists, it’s sort of downhill from there. But I want to share an epiphany I’ve had in the last few years from a very unusual source – economics, the “dismal science”. Yeah, I know what you’re probably thinking – that’s fuckin’ boring and useless! Economics isn’t a real science. And for the most part, I’d agree with you. But there is more to it than that.
For me, it all started about 3 years ago when I was trying to make sense of the economic meltdown. I couldn’t understand why my conventional “wisdom” that most people and pundits shared seemed to be of no use or counter-productive. My investments were doing lousy and I wanted to fix this too. I begin studying and frankly, it was pretty turgid and boring. Then I came across a small heterodox school of upstart economists mostly from the US and Australia under the name of Modern Monetary Theory (MMT) and a recent offshoot called Monetary Realism (MR) that explains the real nature of fiat money and why present-day economic policy is mired in pretending we are still on the gold standard (abandoned in 1971). The implications of MMT to the nature and true meaning of money, debt, taxation and our ability to fund society’s needs changed more than just my view of economics. It has changed my politics and investing, which is now very successful again.
For those of you who’d like to read more, I recommend starting with Warren Mosler’s free PDF book called “The Seven Deadly Innocent Frauds of Economic Policy”
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf (http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf)
It’s written for the layman and you can tackle it in about an hour. It’s not incredibly well-written but if you’re unfamiliar with MMT, I think many of you who would never think economics or money could be fascinating will find it so.
If you want a deeper treatment, another place to start is at Pragmatic Capitalism here:
http://pragcap.com/resources/understanding-modern-monetary-system (http://pragcap.com/resources/understanding-modern-monetary-system)
Unlike most economic “theories”, most of MMT/MR is not really a theory but merely a factual description of real-world monetary functional finance. It is neither conservative nor liberal. Yet it is astounding to me that most of the economists and politicians we trust to run our economy seem completely unaware of these facts. There is a theory part of MMT (MR rejects it) called the Job Guarantee (JG) which is controversial and you can make up your own mind about. But however you come down on the idea of a job guarantee politicly, you should read how MMT utilizes it. If you aren’t familiar with MMT, it is a different ballgame from how other economic theories propose full employment and provides a useful perspective.
Enjoy!
For me, it all started about 3 years ago when I was trying to make sense of the economic meltdown. I couldn’t understand why my conventional “wisdom” that most people and pundits shared seemed to be of no use or counter-productive. My investments were doing lousy and I wanted to fix this too. I begin studying and frankly, it was pretty turgid and boring. Then I came across a small heterodox school of upstart economists mostly from the US and Australia under the name of Modern Monetary Theory (MMT) and a recent offshoot called Monetary Realism (MR) that explains the real nature of fiat money and why present-day economic policy is mired in pretending we are still on the gold standard (abandoned in 1971). The implications of MMT to the nature and true meaning of money, debt, taxation and our ability to fund society’s needs changed more than just my view of economics. It has changed my politics and investing, which is now very successful again.
For those of you who’d like to read more, I recommend starting with Warren Mosler’s free PDF book called “The Seven Deadly Innocent Frauds of Economic Policy”
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf (http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf)
It’s written for the layman and you can tackle it in about an hour. It’s not incredibly well-written but if you’re unfamiliar with MMT, I think many of you who would never think economics or money could be fascinating will find it so.
If you want a deeper treatment, another place to start is at Pragmatic Capitalism here:
http://pragcap.com/resources/understanding-modern-monetary-system (http://pragcap.com/resources/understanding-modern-monetary-system)
Unlike most economic “theories”, most of MMT/MR is not really a theory but merely a factual description of real-world monetary functional finance. It is neither conservative nor liberal. Yet it is astounding to me that most of the economists and politicians we trust to run our economy seem completely unaware of these facts. There is a theory part of MMT (MR rejects it) called the Job Guarantee (JG) which is controversial and you can make up your own mind about. But however you come down on the idea of a job guarantee politicly, you should read how MMT utilizes it. If you aren’t familiar with MMT, it is a different ballgame from how other economic theories propose full employment and provides a useful perspective.
Enjoy!
PermanentlyEphemeral
31st January 2012, 05:27 PM
I don't have time to read it all now but are they dismissive of inflation?
Do they take into account trade imbalances?
i.e Do they think that forgiving debt would eliminate Greece's problems?
eta
The average American couple earning a combined $100,000
per year will see their take-home pay go up by over $650 PER
MONTH which will help them meet their mortgage payments
and stay in their homes, which would also end the financial
crisis.This is nonsense. Most of the people foreclosed on were not in any financial shape to have a mortgage. no job interest only payments were a recipe for disaster.
The people giving approvals made more money the more they approved and since it wasn't their money... And where the people who provided the money didn't care either they were able to abuse a new statisical method and sell the garbage debt.
Do they take into account trade imbalances?
i.e Do they think that forgiving debt would eliminate Greece's problems?
eta
The average American couple earning a combined $100,000
per year will see their take-home pay go up by over $650 PER
MONTH which will help them meet their mortgage payments
and stay in their homes, which would also end the financial
crisis.This is nonsense. Most of the people foreclosed on were not in any financial shape to have a mortgage. no job interest only payments were a recipe for disaster.
The people giving approvals made more money the more they approved and since it wasn't their money... And where the people who provided the money didn't care either they were able to abuse a new statisical method and sell the garbage debt.
nostrum
31st January 2012, 06:32 PM
Thanks for posting it FUWF. I'll certainly read it. I've never found economics boring (loved it at uni and it guided my political leanings even further to the left) but yes I've never thought of it as a science in any way.
I'll post my thoughts when I read the links :thumbsup:
I'll post my thoughts when I read the links :thumbsup:
FedUpWithFaith
31st January 2012, 06:34 PM
I don't have time to read it all now but are they dismissive of inflation?
No, but if you read it superficially, as many critics (esp. the Austrians) you might come away with that impression
Do they take into account trade imbalances?
Yes, though you won't find a thorough enough treatment of that in the references I linked. You might be surprised to find out that trade imbalances can be good for the US in some ways, depending on your perspective. China does not have us over a barrel and they're not funding our government as the media would have you believe. That's all nonsense. Taxes don't pay for government and bonds are not necessary to "raise money" for goverment spending. MMT will tell you what the truth of this really is.
i.e Do they think that forgiving debt would eliminate Greece's problems??
MMT predicted the problems with the Eurozone over 15 years ago. The bottom line is that the EU will need to break up and enable Greece to regain monetary sovereignty or the EU will have to change it's structure to enable federalization of debt, as is possible in the US. Economics is not a morality play. Various MMT thinkers have argued for different solutions to the problem but debt "forgiveness" is only peripherally and indirectly considered. "Forgiveness" is a somewhat useless term. What is a structured default where bondholders take huge haircuts? Greece won't solve its problems through austerity. Austerity, wherever it is being applied, is making things worse. The nature of the balance sheet recession, which the US, Japan, UK, and Europe are now in gives the opportunity for a monetary "free lunch" which everybody refuses to eat and prefers to starve. What people don't realize is how money is created and destroyed. Trillions have been destroyed in deleveraging.
Read and keep an open mind.
The average American couple earning a combined $100,000
per year will see their take-home pay go up by over $650 PER
MONTH which will help them meet their mortgage payments
and stay in their homes, which would also end the financial
crisis.This is nonsense. Most of the people foreclosed on were not in any financial shape to have a mortgage. no job interest only payments were a recipe for disaster.
The people giving approvals made more money the more they approved and since it wasn't their money... And where the people who provided the money didn't care either they were able to abuse a new statisical method and sell the garbage debt.
If you'd stop skimming and put your prejudices aside, you'll realize your dismissal is more of a non-sequitor than an argument against MMT.
Remember that economics is not a morality play. For example, are you familiar with the "Paradox of Saving"? If you treat it that way, everybody gets hurt. In the US there were indeed many who blithely took advantage of predatory lending practices and took mortages they could not afford, or could barely afford. There is plenty of blame to go around. You are too dismissive of the quotation though and are wrong. Show me that "most" were not in a position to have a mortgage. It is untrue, except perhaps at the very beginning of the housing bust when the dregs defaulted first. The vast majority of defaults occurred later, by households that in normal economic times could indeed afford their mortgages (though some tenuously). I would blame the pernicious cycle more on the banksters and Wall Street, but it doesn't really matter.
The fact of the matter is is that we in the US chose to bail out Wall Street and the banks. Some sort of action was necessary to save the financial system from collapse and we are by no means out of the woods.
Whoever you decide to blame, consider this. It was politically and economically expediant to bail out Wall Street but extremely economic inefficient. Let's look at an example of Moe, Larry, and Curly. Moe lends Curly $5. Maybe Moe engaged in predatory lending to some degree, maybe he didn't. Maybe Curly couldn't really afford to repay the $5, maybe he could. This is about millions of Moes, Larrys and Curly though. So let's say Moe lends Larry $5 and then Larry lends Curly $5. Then an economic calamity hits and a bailout is needed to forestall collapse. Who does it make the most sense to bail out?
Was it Moe? Because that's what the US basically did - bail out Moe. And then Moe still decided to foreclose on Larry who was then forced to foreclose on Curly continuing the downward spiral. It would have made a lot more sense to bail out Curly in the first place thus preventing two foreclosures and Moes gets his money too.
What I'm about to say is not a prescription of MMT, though I think many MMTers would agree with me since it involves a more enlightened view of deficit and functional finance. Knowing what I know now, if I had been in charge of the US when the meldown hit I would immediately instituted mortage intervention much stronger than the form Obama has only much more recently championed. All mortgages with the potential to go underwater or with subprime rates (generally the most predatory) would have been reset to a much lower rate, let's say 4%. I would have enabled the government to subsize mortage payments to certain critical segments for 6 - 12 months, if necessary (if instituted, it probably would not be necessary to large degree) I would have instituted a bond market reinsurance floor for government subsidy/guarantee for all securitized mortgages that we not significantly tainted by predatory lending practices and let the rest fail and go through normal bankruptcy. And then I'd institute a lot more regulation to make sure this never happened again. This would have minimized the need to bailout any institutions deemed "too big to fail".
Would some deadbeat homeowers get helped in my approach? Yes. I'd approve it holding my nose just as we did for the Wall Street banksters, who deserved the bailout even less. I'd tolerate the stench to save the economy and get us back to growth.
No, but if you read it superficially, as many critics (esp. the Austrians) you might come away with that impression
Do they take into account trade imbalances?
Yes, though you won't find a thorough enough treatment of that in the references I linked. You might be surprised to find out that trade imbalances can be good for the US in some ways, depending on your perspective. China does not have us over a barrel and they're not funding our government as the media would have you believe. That's all nonsense. Taxes don't pay for government and bonds are not necessary to "raise money" for goverment spending. MMT will tell you what the truth of this really is.
i.e Do they think that forgiving debt would eliminate Greece's problems??
MMT predicted the problems with the Eurozone over 15 years ago. The bottom line is that the EU will need to break up and enable Greece to regain monetary sovereignty or the EU will have to change it's structure to enable federalization of debt, as is possible in the US. Economics is not a morality play. Various MMT thinkers have argued for different solutions to the problem but debt "forgiveness" is only peripherally and indirectly considered. "Forgiveness" is a somewhat useless term. What is a structured default where bondholders take huge haircuts? Greece won't solve its problems through austerity. Austerity, wherever it is being applied, is making things worse. The nature of the balance sheet recession, which the US, Japan, UK, and Europe are now in gives the opportunity for a monetary "free lunch" which everybody refuses to eat and prefers to starve. What people don't realize is how money is created and destroyed. Trillions have been destroyed in deleveraging.
Read and keep an open mind.
The average American couple earning a combined $100,000
per year will see their take-home pay go up by over $650 PER
MONTH which will help them meet their mortgage payments
and stay in their homes, which would also end the financial
crisis.This is nonsense. Most of the people foreclosed on were not in any financial shape to have a mortgage. no job interest only payments were a recipe for disaster.
The people giving approvals made more money the more they approved and since it wasn't their money... And where the people who provided the money didn't care either they were able to abuse a new statisical method and sell the garbage debt.
If you'd stop skimming and put your prejudices aside, you'll realize your dismissal is more of a non-sequitor than an argument against MMT.
Remember that economics is not a morality play. For example, are you familiar with the "Paradox of Saving"? If you treat it that way, everybody gets hurt. In the US there were indeed many who blithely took advantage of predatory lending practices and took mortages they could not afford, or could barely afford. There is plenty of blame to go around. You are too dismissive of the quotation though and are wrong. Show me that "most" were not in a position to have a mortgage. It is untrue, except perhaps at the very beginning of the housing bust when the dregs defaulted first. The vast majority of defaults occurred later, by households that in normal economic times could indeed afford their mortgages (though some tenuously). I would blame the pernicious cycle more on the banksters and Wall Street, but it doesn't really matter.
The fact of the matter is is that we in the US chose to bail out Wall Street and the banks. Some sort of action was necessary to save the financial system from collapse and we are by no means out of the woods.
Whoever you decide to blame, consider this. It was politically and economically expediant to bail out Wall Street but extremely economic inefficient. Let's look at an example of Moe, Larry, and Curly. Moe lends Curly $5. Maybe Moe engaged in predatory lending to some degree, maybe he didn't. Maybe Curly couldn't really afford to repay the $5, maybe he could. This is about millions of Moes, Larrys and Curly though. So let's say Moe lends Larry $5 and then Larry lends Curly $5. Then an economic calamity hits and a bailout is needed to forestall collapse. Who does it make the most sense to bail out?
Was it Moe? Because that's what the US basically did - bail out Moe. And then Moe still decided to foreclose on Larry who was then forced to foreclose on Curly continuing the downward spiral. It would have made a lot more sense to bail out Curly in the first place thus preventing two foreclosures and Moes gets his money too.
What I'm about to say is not a prescription of MMT, though I think many MMTers would agree with me since it involves a more enlightened view of deficit and functional finance. Knowing what I know now, if I had been in charge of the US when the meldown hit I would immediately instituted mortage intervention much stronger than the form Obama has only much more recently championed. All mortgages with the potential to go underwater or with subprime rates (generally the most predatory) would have been reset to a much lower rate, let's say 4%. I would have enabled the government to subsize mortage payments to certain critical segments for 6 - 12 months, if necessary (if instituted, it probably would not be necessary to large degree) I would have instituted a bond market reinsurance floor for government subsidy/guarantee for all securitized mortgages that we not significantly tainted by predatory lending practices and let the rest fail and go through normal bankruptcy. And then I'd institute a lot more regulation to make sure this never happened again. This would have minimized the need to bailout any institutions deemed "too big to fail".
Would some deadbeat homeowers get helped in my approach? Yes. I'd approve it holding my nose just as we did for the Wall Street banksters, who deserved the bailout even less. I'd tolerate the stench to save the economy and get us back to growth.
Jerome
19th January 2015, 11:07 PM
Yes. I'd approve it holding my nose just as we did for the Wall Street banksters, who deserved the bailout even less. I'd tolerate the stench to save the economy and get us back to growth.
:staregonk:
:staregonk:
Majiffy
19th January 2015, 11:27 PM
'bout three years late on this thread, Jerome.
Jerome
20th January 2015, 12:27 AM
A wizard is never late.
Did you really not understand the bump?
Did you really not understand the bump?
Majiffy
20th January 2015, 01:05 AM
...No?
nostrum
20th January 2015, 01:22 AM
if this thread were not boring, then why 5 posts in 3 years? :stuckup:
Adenosine
20th January 2015, 03:24 AM
Something something lizard.
gib
20th January 2015, 08:37 AM
...No?
:nada:
:nada:
OmicronPersei8
21st January 2015, 07:07 PM
Thanks for posting it FUWF. I'll certainly read it. I've never found economics boring (loved it at uni and it guided my political leanings even further to the left) but yes I've never thought of it as a science in any way.
I'll post my thoughts when I read the links :thumbsup:
How's that working out for ya?
I'll post my thoughts when I read the links :thumbsup:
How's that working out for ya?
nostrum
22nd January 2015, 01:13 AM
:gun:
1) I wasn't aware I had posted ITT.
2) I certainly did not read any of the links.
3 ) At the time I allegedly posted that, I wasn't aware of what a total fuckwit troll FUWF is. IMO, of course.
So, not working out well. Thanks for asking, though :ashamed:
1) I wasn't aware I had posted ITT.
2) I certainly did not read any of the links.
3 ) At the time I allegedly posted that, I wasn't aware of what a total fuckwit troll FUWF is. IMO, of course.
So, not working out well. Thanks for asking, though :ashamed:
Hermit
22nd January 2015, 08:42 AM
MMT's qualities, or lack thereof are not connected in any way with FUWF's character, who incidentally keeps looking in to this forum. The theory itself is not even novel. It's a simplified version of Keynesianism, and Keynesian economists themselves criticise it for the theoretical consequences of those simplifications.
Jerome
22nd January 2015, 04:37 PM
Because it has worked so well so far ..
European Central Bank (ECB) President Mario Draghi announced the launch of an open-ended, expanded monthly 60 billion euro ($70 billion) private and public bond-buying program on Thursday.
The long-anticipated introduction of euro zone government bond purchases, which could amount to as much as a trillion euros, will mean the ECB will join the U.S. Federal Reserve, Bank of England and Bank of Japan in launching a quantitative easing (QE) scheme.
The program will be open-ended, lasting until at least 2016, Draghi told reporters at his regular media conference on Thursday, and will start in March this year. The hope is that it will boost the region's painfully low inflation rate, which came in at an annual minus 0.2 percent in December.
http://www.cnbc.com/id/102354830
European Central Bank (ECB) President Mario Draghi announced the launch of an open-ended, expanded monthly 60 billion euro ($70 billion) private and public bond-buying program on Thursday.
The long-anticipated introduction of euro zone government bond purchases, which could amount to as much as a trillion euros, will mean the ECB will join the U.S. Federal Reserve, Bank of England and Bank of Japan in launching a quantitative easing (QE) scheme.
The program will be open-ended, lasting until at least 2016, Draghi told reporters at his regular media conference on Thursday, and will start in March this year. The hope is that it will boost the region's painfully low inflation rate, which came in at an annual minus 0.2 percent in December.
http://www.cnbc.com/id/102354830
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