All rage against MMT
The fallacy of Modern Monetary Theory
Here's the thread on #MMT (Modern Monetary Theory) and why it is an impossible utopia.
@StephanieKelton @paulkrugman want to make you believe it is the future. In reality, it's just some paradox created by theoreticians living in their offices.
Where does MMT come from?
"MMT was developed by Mosler and bears similarities to older schools of thought like functional finance." This was a purely theoretical exercise.
How does MMT work?
The core idea of MMT is that governments with a fiat currency of their own (USD for the US) can print as much money as they want.
They should print as much as necessary for their expenses because they cannot go broke or be insolvent (they print more to pay the debt).
Anyone in their right mind would say that it is impossible because the debt would balloon and inflation would skyrocket.
But MMTers have these 3 arguments:
1. Large economies (US, EU, JP,..) can have a large deficit for a long time without having issues financing themselves.
2. Big countries never defaulted because of high debt. The collapse we imagine is just a hoax invented to frighten us. (I am not making this up)
3. A budget surplus is harmful and is causing recessions.
4. Money created is just money put in the economy and 'given' to the people.
MMTers say that inflation is not a problem because if there start to be inflation, governments can simply increase taxes. Example in the screenshot.
You start to see the issue?
In reality, it is much more difficult than this to implement. You need to deal with a population that is already upset with high prices. If you have elections, for example, it will be easier to hand-in checks. With the risk that this could make inflation spiral out of control.
MMTers claim that money is injected into the economy. This is most of the time not true. When the Fed is “printing”, it is a reserve swap. Banks, by lending, inject money into the economy.
It is explained in this thread 👇🏻
Usually, QE inflates assets. Indeed, as yields of safe assets decrease, market participants are looking for returns. The extra money goes, in part, into commodities.
Just look at the chart, it is impressive. This impacts bottom-line prices for companies & consumers.
During COVID the US government went full MMT & distributed stimulus checks. This spurred demand like never before & created imbalances in the supply chain networks that won't be fixed before 2023. This creates critical supply-demand imbalances, driving prices higher.
So here is the situation:
🔹 High level of inflation
🔹 Taxes to decrease consumption and thus inflation
Do you see what is wrong now? Who do you think will be affected?
Yes, the most vulnerable ones.
What do serious economists think about MMT?
Bank de France concludes that "MMT is based on an outdated approach to economics and that the meaning of MMT is a more that of a political manifesto than of a genuine economic theory"
So yes, MMT is just a political myth created by the elites to justify increasing wealth disparity and saving failed states of their responsibilities.
To conclude, I want you to watch this video. Try to answer these questions: “How a piece of paper can make society better?” “If every central bank in the world is capable of printing as much paper, why didn’t solve the problem of poverty?”
You said: "The core idea of MMT is that governments with a fiat currency of their own (USD for the US) can print as much money as they want."
This isn't accurate:
'Do I believe the solution to all our problems is to simply spend more money? No, of course not. Just because there are no financial constraints on the federal budget doesn’t mean there aren’t real limits to what the government can (and should) do. Every economy has its own internal speed limit, regulated by the availability of our real productive resources—the state of technology and the quantity and quality of its land, workers, factories, machines, and other materials. If the government tries to spend too much into an economy that’s already running at full speed, inflation will accelerate. There are limits. However, the limits are not in our government’s ability to spend money, or in the deficit, but in inflationary pressures and resources within the real economy. MMT distinguishes the real limits from delusional and unnecessary self-imposed constraints.” - Stephanie Kelton
The tooth fairy maybe real also!