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Gave Up on MMT


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2016 May 18, 6:16am   10,088 views  40 comments

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I love the thesis.

However, 90% of their people are ego maniacs who have no back ground in economics and don't care that they're losing.

I really want this economic thesis to have some legs but &$)_# as soon their people speak it ruins everything.

For MMT to grow it needs to muzzle most of it supporters and their leaders need to be more versed in Modern Day Economics and have a understanding of demographics

Frustrating to watch them the last 3 years.

However, life is too short to deal with people who need economic intervention

#Economics

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1   indigenous   2016 May 18, 6:25am  

You are Keynesian?

2   _   2016 May 18, 6:30am  

indigenous says

You are Keynesian?

In some aspect of the economy the distribution of government support is needed

I love the MMT thesis of federal support for city jobs but for some reason they think we have 24 Million Americans who have been sitting at home watching porn and playing apps and now they stick their noses out to all the job openings in America and won't work until they get paid more.

It's a horrible economic thesis, they look like Gold Bugs when they talk economics.

Of course Bernie Sanders rejected them

I can do a much better job of promoting this economic theory than any of their people.. they're too emotional invested in thesis to see what is wrong with their sale pitch

They don't even understand the basics of unemployment claims and job openings.

I took 3 years to study them all and their sentence structure is very telling of who they're by nature

It's very frustrating because there is a place for this but they ruin it by opening their mouth

3   indigenous   2016 May 18, 6:37am  

Friedman is the creator of the floating exchange rate.

How would your views change if the dollar was not king anymore?

4   _   2016 May 18, 6:40am  

indigenous says

How would your views change if the dollar was not king anymore?

In real terms the amount borrower-ed is so low becuase the demand for this is actually so little

It's the MMT bugs that make this into some non economical realitory theory that they can create inflation with their low level jobs that might not even amount to 500K people totally nation wide

In their arrogance they say .. well when inflation comes back we will reduce the spending

Now, I have heard some really ego egocentric economic theories before... However, this one the best .

But... there is no modern day country this century that can out do the dollar

China is in demographic hell
Russia as well
Europe is a mess
The rest are too small to even put up a fight

Dollar is king for a reason

5   indigenous   2016 May 18, 6:52am  

You don't think inflation will come back because of the king dollar status, I'm guessing.

Many people say that China will be the revenant. I guess the thing is these things take a long time to play out.

It seems to me that engine of America's success is the market and the government inhibits far far more than it enhances.

6   _   2016 May 18, 6:54am  

indigenous says

You don't think inflation will come back because of the king dollar status, I'm guessing

Globalization, Technology, Debt and Demographics have killed inflation

Now with a strong young demographic push we might get some more inflation in the next decade

However, the last thing I am worried about here in America is core inflation taking off

7   indigenous   2016 May 18, 6:57am  

How does debt kill inflation?

8   _   2016 May 18, 7:03am  

indigenous says

How does debt kill inflation?

The ability of debt = Takes the Creations of Too many dollar chasing to many few goods away by the creation of supply of goods

Obviously in certain cases such as housing, that doesn't apply.

However, core inflation is dead

Malthus was wrong

9   indigenous   2016 May 18, 7:12am  

That assumes the debt is invested in something that produces products or services. Not sure that is the case with QE.

You are saying technology is the reason that Malthus was wrong and why you are not worried about core inflation.

10   _   2016 May 18, 7:14am  

indigenous says

Not sure that is the case with QE.

Why I have stayed the course on my thesis on #QE

11   indigenous   2016 May 18, 7:25am  

Fair enough.

Many say that the investment in small business is at an all time low, in the US.

Because of demographics? or malinvestment? or just not the case?

12   _   2016 May 18, 7:30am  

indigenous says

Because of demographics? or malinvestment? or just not the case?

I will say this.

In a few years we will have a massive young work force and they will create some small business growth

However, it's harder and harder to take on risk and still pay the bills.

I signed a contract with a housing tech company Zenehome.com which is now moving to another company.

However, these were kids, engineers writing code and it was a risk for them to take on this challenge and still make money to live.

Need some capital and that capital is getting more and more difficult to obtain.

If there is one thing that I wish to see, more risk taking and more creation of small business. This is where the federal government can really step in to provide more capital

13   indigenous   2016 May 18, 7:35am  

Logan Mohtashami says

This is where the federal government can really step in to provide more capital

Instead they support the crony TBTF types. IOW a transgression against the very engine that created the higher standard of living.

14   indigenous   2016 May 18, 7:57am  

Logan Mohtashami says

Why I have stayed the course on my thesis

BTW what is your thesis?

15   _   2016 May 18, 8:01am  

indigenous says

BTW what is your thesis?

#QE wouldn't have the economic impact because the demand curve of this cycle was limited with demographics.

Low rates didn't push the curve of housing sales growth as they thought it would have. Same thing with low gas prices, people thought that would be a big boost to retail sales.

That's not how economics work, banks don't lend out excess reserve, banks now lend out to demand and the demand curve was never going to be strong.

Now, on a bright note. The Recent Fed White Paper acknowledged this so we won't see QE4 in this cycle if anything it made a case for fiscal stimulus

Some times you need to fail badly to know why you were wrong

16   indigenous   2016 May 18, 8:21am  

Good thesis.

Logan Mohtashami says

it made a case for fiscal stimulus

Equally specious

17   _   2016 May 18, 8:25am  

indigenous says

Good thesis.

If housing economist, the Fed and analyst understood this better they wouldn't be running around trying to find excuses of low sales demand

Demographics are much more powerful than low rates. Hopefully, praying that this is understood in this cycle

18   _   2016 May 18, 8:29am  

Debating MMT economist, I can see that they weren't versed in demographic economics because they believed housing sales are so awful and they make the assumption that home sales are bad because people don't make enough money and that 1996-2007 was all just a bubble.

Tsk Tsk..... Most called for a recession talking away on twitter that falling deficits are recessionary economics not that it just runs with a business cycle

19   indigenous   2016 May 18, 8:50am  

Yes you have pointed out that demographics trump any theories, that is hard to disagree with.

That chart portends this.

The Austrians say that business cycles are a result of government intervention.

20   Heraclitusstudent   2016 May 18, 12:48pm  

Logan Mohtashami says

Malthus was wrong

Malthus was absolutely right. We can't grow exponentially forever and it is an obvious fact.

21   _   2016 May 18, 12:50pm  

Heraclitusstudent says

Malthus was absolutely right. We can't grow exponentially forever and it is an obvious fact.

He never could have imagined the technology advances and globalization itself

This is why we have the line... never say never

22   MisdemeanorRebel   2016 May 18, 3:24pm  

Logan Mohtashami says

He never could have imagined the technology advances and globalization itself

Technology can't fundamentally change the underlying physics and biology of the planet. You can't have unlimited exponential growth on a finite world.

The reason we haven't been visited or conquered by aliens is probably because there is no way to remotely approach lightspeed, period.

Also, those increased yields are a function of increased inputs, many of which are finite, like fertilizer, and create their own effects on the food chain (eg, nitrate runoff into waterways, killing fish and acidifying the oceans, reducing other food sources).

23   Heraclitusstudent   2016 May 18, 3:48pm  

thunderlips11 says

Logan Mohtashami says

He never could have imagined the technology advances and globalization itself

Technology can't fundamentally change the underlying physics and biology of the planet. You can't have unlimited exponential growth on a finite world.

Exactly. We only temporarily boosted production to continue exponential growth through the 20th century.
Space, water, energy are constraints that just can't grow, let alone grow exponentially.
Therefore Malthus was right.
We are heading toward a wall.
And we are pretty close to it now.
The perspective of adding an other 5 billions human beings on this planet by the end of the century should scare the shit out of everyone.
Global warming is a pretty mild problem in comparison.

24   _   2016 May 18, 3:54pm  

What you two said above.. people have been saying for decades and yet Humans consume more goods and services in the last 20-30 years than the last 5,000 years combined

We are going to win this battle and Malthus was wrong as his followers have been wrong since 1920.

Humans found a way...:-)

25   indigenous   2016 May 18, 4:17pm  

thunderlips11 says

Technology can't fundamentally change the underlying physics and biology of the planet.

In Malthus' defense the chart for technology looked like the chart for population back then i.e. it was flat not showing a hint of the exponential growth to come.

You seem to missing the power of technology and guys like Norman Borlaug which enabled the resources to expanded exponentially.

I would guess that this planet could support 100 billion people maybe more. Look at this chart

26   indigenous   2016 May 18, 4:20pm  

thunderlips11 says

Technology can't fundamentally change the underlying physics and biology of the planet.

In Malthus' defense the chart for technology looked like the chart for population back then i.e. it was flat not showing a hint of the exponential growth to come.

You seem to missing the power of technology and guys like Norman Borlaug which enabled the resources to expanded exponentially.

I would guess that this planet could support 100 billion people maybe more. Look at this chart

Logan Mohtashami says

27   indigenous   2016 May 18, 4:21pm  

Logan Mohtashami says

Need some capital and that capital is getting more and more difficult to obtain.

With interest rates very low, indicating that money is very plentiful, why is that?

28   _   2016 May 18, 4:24pm  

indigenous says

With interest rates very low, indicating that money is very plentiful, why is that?

Banks have limits on what they can give because openings up a business is always a risky bet anyway.

Federal side of the equation can take losses on the books and not even blink.

If I was King for a day, that would be one of the things I would, Which is actually a MMT thesis ...

But a Non Religious Middle Eastern Republican with a Scottish name will never be king, not even for a day. :-)

29   indigenous   2016 May 18, 5:50pm  

Logan Mohtashami says

capital is getting more and more difficult to obtain.

My question is why is it getting more difficult to obtain?

30   MisdemeanorRebel   2016 May 18, 6:36pm  

Logan Mohtashami says

Looks like the population of wolves on an island, until they eat all the deer.

31   indigenous   2016 May 18, 7:03pm  

thunderlips11 says

People don't realize that alot of fertilizer comes directly from fossil fuel, and cannot be replaced by renewables like solar.

You are betting against technology, not a smart bet.

Maybe you should try some courses over at the Mises institute.

32   _   2016 May 18, 7:29pm  

Now allow me to retort :-)

33   _   2016 May 18, 7:32pm  

34   _   2016 May 18, 7:34pm  

35   _   2016 May 18, 7:37pm  

For a soft patch in prime labor force growth coming off the Great Recession

Not bad at all

36   _   2016 May 18, 7:42pm  

US total #oil demand (weekly estimates) is running at 20.2m b/d. Really, really strong for this time of year

37   _   2016 May 18, 7:50pm  

Total construction is actually back to previous peak

38   _   2016 May 18, 7:52pm  

Commercial and industrial loans at all banks rise to $2.057 trillion

39   _   2016 May 18, 8:02pm  

Once you adjust it to demographics then it makes sense, obviously the weakest sales demand curve is in housing.

40   anonymous   2019 Feb 20, 12:54am  

A recent Wall Street Journal article that tried debunking MMT effectively supported it.

Bill Black: Modern Monetary Theory Is On the March (#MMT)

Modern Monetary Theory (MMT) continues to advance rapidly. We are past the first phase of reaction (first they ignore you), deeply into the second phase (then they attack you), and expanding the ranks of the third phase (then you win). We are very early in the third phase, winning with increasing numbers of people, but still a minority view.

One of the proofs of MMT’s advances is a nearly respectable treatment by the Wall Street Journal as the feature of a news article. The other major proof is the pathetic efforts of MMT critics quoted in the article to attack MMT. The article, implicitly, admits that MMT scholars have repeatedly proved correct in their predictions that the existing and projected U.S. fiscal budget deficits would not trigger damaging shortages of real resources that will cause damaging levels of inflation. The article, implicitly, admits that nations with fully sovereign currencies are vastly less vulnerable to economic injury from budget deficits.

The article implicitly admits that MMT opponents’ predictions have failed and that reality has repeatedly falsified their archaic monetary theories that described nations living under the gold standard and therefore lacked a fully sovereign currency.

In theory, high debt levels should cause interest rates to rise. That’s because investors will demand higher returns to compensate for the risk they take on when the government borrows at unsustainable levels or because they worry that so much debt could trigger inflation. The need to finance such high levels of debt also makes less money available for other investments.

In practice, investors are happy to keep lending to the U.S. in good times and bad, regardless of how much it borrows. In 2009, for instance, when the Obama administration’s stimulus efforts sent federal deficits rising to almost 10% of GDP, the highest since World War II, the interest on 10-year Treasury securities remained below where it had been before the recession.

Many Republicans warned the U.S. was pushing itself to the brink of a fiscal crisis and pressed Mr. Obama to rein in spending. Economists debated how much debt a nation could hold before it crimped growth. In one paper, Harvard University economics professor Carmen Reinhart and Kenneth Rogoff, a former chief economist at the International Monetary Fund, found that countries with debt loads greater than 90% of GDP tended to have slower growth rates.

Those three paragraphs demonstrate the falsification of archaic monetary theory. First, in the most important policy predictions in the lifetime of virtually all living economists, the archaic theory failed every predictive test and led to policy proposals that were spectacularly harmful. Second, and even more implicitly, MMT’s predictions proved correct and MMT scholars’ policy advice proved accurate and exceptionally helpful in reducing the severity and length of the Great Recession. The article reports as if there were only one monetary theory – the archaic one.

Third, the article does not explain that Reinhart and Rogoff’s ‘finding,’ as MMT scholars predicted and demonstrated was false. The journalists should have given special kudos to graduate economic students at U. Mass for demonstrating the falsity of what Reinhart and Rogoff “found.” Their data also showed, consistent with MMT and contrary to Reinhart and Rogoff, that nations with fully sovereign currencies showed far greater resilience.

Fourth, the first paragraph of the article quoted above inadvertently demonstrates the key weakness of archaic monetary theory substituting conclusory adjectives to ‘prove’ the point that their theory asserts. What are “high debt levels?” How much “higher” interest rates do government bond investors supposedly demand in response to “high debt levels?” (Note that the archaic model piles undefined adjective upon adjective to build their strawman arguments.) What supposedly represents “unsustainable levels” of government debt? Again, the one effort to convert these vague adjectives into a real standard produced Reinhart and Rogoff’s embarrassing fake fiscal cliff.

Fifth, the last sentence of the first paragraph quoted above wins the prize for piling on vague adjectival ipse dixitsas a substitute for any evidence.

The need to finance such high levels of debt also makes less money available for other investments.

One, MMT shows that governments with fully sovereign currencies do not “need” to “finance” their debt. Two, what does the phrase “such high levels of debt” mean? Three, how much “less money” is “available.” Four, what “other investments” supposedly will lack “money?” MMT makes clear that a nation with a fully sovereign currency cannot lack “money” to undertake “investments.” MMT makes clear that real resource constraints can actually serve as constraints. Scholars, and finance professionals, overwhelming agree with MMT on the issue of real constraints. Five, the journalists did not inform their readers that MMT scholars correctly predicted that the fiscal stimulus program responding to the Great Recession would not “crowd out” access to finance. The reality is that corporations are sitting on unprecedented amounts of cash and engaging in record stock “buybacks” – so the “crowding out” prediction of archaic monetary theorists was, again, falsified.

The journalists then create two false contrasts – status and ideology. They note that “prominent” economists agree that MMT scholars’ predictions proved correct.

Now, some prominent economists say U.S. deficits don’t matter so much after all, and it might not hurt to expand them in return for beneficial programs such as an infrastructure project.

“The levels of debt we have in the U.S. are not catastrophic,” said Olivier Blanchard, an economist at the Peterson Institute for International Economics.

The journalists implicitly contrast Blanchard with Stephanie Kelton.

Some left-wing economists go even further by arguing for a new way of thinking about fiscal policy, known as Modern Monetary Theory.

Note that MMT scholars are not “prominent,” even if like Kelton they have held high positions of authority and even if like Kelton, Randy Wray, Mat Forstater, and Scott Fullwiler they have predictive records, demonstrated for two decades; that are the envy of the most “prominent” economists in the world. It is no insult to Blanchard to point out that each of the four MMT scholars that did key work at UMKC got the most important macroeconomic issues of our lives correct, while the IMF leadership largely got those issues wrong.

Note that Blanchard is at the Peterson Institute. Pete Peterson is a Wall Street plutocrat who created an institute to push his ultra-right wing deficit hysteria and odes to austerity in order to push for the privatization of Social Security – Wall Street’s greatest dream. Blanchard’s macroeconomic conversion based on reality falsifying Peterson’s worship of austerity speaks well of Blanchard. The journalists treat Blanchard as free of any ideology, while defining Kelton as exemplifying “left-wing economists.” Ideology does not define MMT or the scholars who identify with MMT. MMT began as an accurate description of how fully sovereign, partially sovereign, and non-sovereign currencies actually operate and the implications of those differences for proper policy. MMT does not answer whether we should fund particular government projects – it addresses the capacity and results of funding such projects. These are common, but unworthy journalistic tactics.

Here is the journalists’ response to Kelton’s explanation of MMT. The response grudgingly admits that MMT scholars’ predictions about the most important macroeconomic issue of all living economists’ lives proved correct.

So far the runup in government debt has not led to steep price increases. Inflation has stayed at or below the Federal Reserve’s target for most of the past quarter century.

Yes, “so far” (over a decade), but hyper-inflation might be right around the corner! Of course, interest rates on U.S. debt and inflation are both low and the Fed has been consistently unable to meet its (very low) inflation target goal because inflation and interest rates have been exceptionally low for over a decade despite increased federal debt. Notice that the journalists revert to misleading adjectives – “the runup in government debt has not led to steep price increases.” It has not led to any meaningful “price increases.” Indeed, inflation, for a decade after stimulus, remains so miniscule that the Fed views the inflation rate as too low – not too high. The Fed, despite aggressive monetary policies designed to increase inflation to the Fed’s target rates, has consistently failed to do so.

The best part of the article, however, was its implicit demonstration that MMT’s severest critics have nothing. Ad hominem attacks demonstrate that economists follow lawyers’ guidance – when the facts are strongly in my favor I pound the facts, when the law is strongly in my favor I pound the law, and when the facts and law are against me, I pound the table.

Alan Auerbach, an economist at the University of California at Berkeley, says the MMT view “is just silly” and could lead to unwanted or unexpected inflation.

Here is the great thing about attacking scholars’ theories that are “just silly” – it is simple to point out the theoretical and recurrent predictive failures that a “silly” theory inevitably produces. Auerbach had his chance, but he pounded the table because he has nothing. The truth is that Auerbach has never read the MMT scholarly literature. We know this because Auerbach, like Blanchard, has moved increasingly into greater agreement with MMT’s precepts and policies. Auerbach’s attacks on MMT are purely ad hominem because they are based on a strawman view of MMT of his own creation not informed by reading the scholarly MMT literature.

Next, the WSJ article went to the laziest critique – one that ignores MMT precepts to attack MMT.

Meantime, Greece and Italy are two recent examples of countries that appear to have hit thresholds where high debt loads lead to higher interest rates and economic pain. The U.S. may have such a threshold too, just not yet seen.

Greece and Italy do not have sovereign currencies. MMT scholars, particularly Kelton, predicted that the creation of the euro would cause great harm to European nations with weaker economies such as Greece and Italy. Japan, which has had debt levels nearly three times recent U.S. debt ratios, cannot produce even modest inflation despite stringent efforts. The WSJ reduces itself to the equivalent of warning that there “may” be dragons beyond some point on the map!

The journalists end with a ‘parade of horribles.’ If the dragons were they real, they would falsify ‘modern macro’ rather than MMT.

By continuing to run large deficits, says Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, the U.S. is slowing wage growth by crowding out private investment, increasing the amount of the budget dedicated to financing the past and putting the country at a small but increased risk of a future fiscal crisis.

Market interest rate signals can be misleading and dangerous. By blessing the U.S. with such low rates now, he says, financial markets just might be “giving us the rope with which to hang ourselves.”

Goldwein has no known relevant scholarly record. He is a minor Pete Peterson operative. His “crowding out” assertion is bunk in general and his compounding assertion that it explains weak wage growth compounds its baseless nature. Nothing has crowded out private investment. Despite record low interest rates for over a decade, deliberate management choicesnot to invest in new plant and equipment and R&D and instead to do unprecedented levels of stock buybacks designed to raise the value of corporate CEOs’ shares have limited private investment. Goldwein does not even attempt to support his assertions with data or logic.

Instead, the facts force Goldwein into a startling charge that falsifies all of his neoclassical economic nostrums, not simply his Pete Peterson debt hysteria. Neoclassical economics and finance predicts that creditors’ anticipation of future inflation largely drive present longer-term interest rates. This is essential for modern macro’s bedrock rational expectations theory. In his desperate effort to resurrect the validity of his debt hysteria in the face of supposedly catastrophic debt levels producing exceptionally low long-term interest rates, Goldwein tosses neoclassical economics’ most sacred cows (efficient markets and rational expectations) into the trash by pronouncing that “market interest rate signals can be misleading and dangerous.”

Put aside for the moment the hypocrisy of the fact that debt hawks have proclaimed for decades that nearly every small increase in interest rates is a clarion signal that the markets believe that government debt has reached such high levels that severe inflation is imminent. In every modern case, reality has falsified these myths.

My colleagues and I have been making the point for decades that “market interest rate signals can be misleading and dangerous.” Interest rates for extremely risky and fraudulent loans are, prior to financial crises, frequently glaringly too low. First, the overall level of interest rates for lending becomes too low when an asset-pricing crisis is growing. Second, the risk ‘spread’ between highly risky and low risk assets typically falls to ludicrously low levels as an asset-pricing crisis nears the “Minsky moment.” The problem is not the capital markets’ inability to take into appropriate account future inflation, but the fact that markets encourage asset-pricing bubbles that render “interest rate signals … misleading and dangerous.” Markets are frequently grotesquely inefficient and rational expectations theory is irrational.

It would be wonderful if Pete Peterson’s operatives joined us in fighting neoclassical fictions that Peterson has long spread. It would be wonderful if Pete Peterson’s operatives joined us in fighting epidemics of “control fraud and predation” and warning against the bubbles that those pathologies hyper-inflate. It is these fraud epidemics that hyper-inflate bubbles that are the Achilles’ “heel” of capital markets, core neoclassical theories, and financial crises. The firms that finance the fraud-inflated asset bubbles fit the metaphor about giving the private sector the “rope” with which they will hang the economy.

Capital markets have not displayed recurrent critical failures in modern times about anticipated inflation. The opposite is true. One of the best predictors of serious recessions are inverted yield curves. Yield curves invert overwhelmingly based on future expectations of overall interest rate movements, rather than asset-specific credit risks

https://www.nakedcapitalism.com/2019/02/bill-black-modern-monetary-theory-march.html

Once again the comments section for this on Naked Capitalism worth your time to read

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