Hi - MMT student here. This is a complete mischaracterization of MMT. When you say MMT gives a larger footprint to the government over the private sector, that's not true. It's says when congress authorizes new spending it's creating or "adding" new/fresh (electronic) dollars to the economy (bank recipients receiving NEW +net additional reserves), and not being "financed" by existing private sector dollars (reserves) already existing in someones bank account (ie the buyers account) - as the "crowding out investment" theory and fear mongering goes of increasing interest rates, etc. The easiest way to think of it on a macro banking level is new spending is NOT converting existing reserves in to securities ,aka investors holding liquid cash as reserves and using these reserves to purchase government bonds which ultimately moves their purchase amount from their reserve account in to their securities account as a bond with no net change to their account balance (like moving money from your checking account to your savings). neo classical econ incorrectly states that new spending taking money out of the economy to purchase the bonds, aka no longer moving money from your savings to your checking rather "using up" the total amount of reserves in the system thereby making them more scare and "driving up interest rates" and crowding out investment, etc.
The only way to "prove MMT wrong" is to either grossly misunderstand it, or to intentionally misrepresent it. No matter which this video is doing, it presents a completely distorted, unrealistic view of MMT's ideas. This guy either doesn't get it, or he doesn't want you to.
This guy's statement that MMT people say "the government doesn't have to worry about inflation" is the exact opposite of what MMT proponents actually say. MMT says inflation is in fact THE thing the government has to be concerned about. The government cannot be forced to default on any commitments denominated in its own floating exchange rate fiat currency, but if it spends in excess of the available labor or material resources available for sale in that currency, inflation will result. But ALL spending comes with an inflation risk. Excess bank credit issuance can drive prices up. There is nothing special in that regard about government spending. If, for example, severe supply shocks occur, inflation will result due to restricted supply regardless of what the government does.
But MMT is not saying anything new and even seems self contradictory. It’s a lens to encourage deficit spending because deficit spending doesn’t can somehow provide people with means, but it can’t do it too much because of inflation ? Economists are very much aware that inflation is a limit on fiscal policy and that it doesn’t matter how many treasuries it issues and how much money it moves around if output is not growing. So what is it? The core question of economics: is how do we make more output so everyone can be better off. MMT does nothing to answer this question and completely divorces money from its purchasing power in the real economy
But MMT is not saying anything new and even seems self contradictory. It’s a lens to encourage deficit spending because deficit spending can somehow provide people with means, but it can’t do it too much because of inflation ? Economists are very much aware that inflation is a limit on fiscal policy and that it doesn’t matter how many treasuries the government issues and how much money it moves around if output is not growing. If the government is borrowing and spending to put people to work and invest in infrastructure and other less attractive to the private sector but essential capital projects, then that is one thing and mainstream economics already recognizes the utility of government investment. So what is it that MMT is adding to the discourse? The core question of economics is: how do we make more output so everyone can be better off. MMT does nothing to answer this question and completely divorces money from its purchasing power in the real economy
@@nathaniel1670 That is absolutely false. Let me break it down. There are 3 (maybe more but these are the main ones if I am missing one which I don't think I am) ways we get money into the system. Fractional banking and Congressional appropriation, and The Fed buying up bonds. What MMT is saying is that you should be able to spend more in a way that not only builds things, but also helps people. Of those three ways of injecting money supply, there is one that hasn't been doing it's job. Congress. They are not appropriating money, and if they do, it is something so watered down or only gives more to the top earners. When Congress doesn't spend, generally the Fed has to do it for them, and that skews the monetary gains to the very top incomes/companies who own bonds. People on the lower end don't own bonds. Now if Congress wasn't so phobic about spending the Fed wouldn't have to buy back bonds to create new money
@@scpatl4now You’re so sure? Where are you getting your information from? Most of what you wrote is incorrect. The only entities that regularly create new money are banks. They use the fractional reserve system to create new money. The Fed only puts money in andand pulls money out of the economy, money that already exists. When the Fed engages in open market operations, it buys bonds on the market, not directly from the government. The money it buys the bonds with is money that already existed, it is not new money. If the fed were to run out of money to buy bonds with, there would be no more bond buying because the Fed cannot literally create money. It simply hoards it or spends it to change overall liquidity. There is the last issue of the government. It can technically only issue bonds or use taxes to fund itself. The issue with US bonds is that they are highly liquid. They technically are considered M2 but they effectively can "slip" into M1 because they are so liquid. When the government issues debt, and spends its newly acquired money, it is transferring purchasing power in the economy. The receiver of government expenditure money now has more purchasing power, but the bond buyer still maintains a lot of their original purchasing power because government bonds are liquid and almost function like money. They can easily resell it on the market for money or pay someone with it or buy goods with it. If congress starts spending too much money, it crowds out investors because the Fed will necessarily have to contract the money supply and raise rates to counteract the inflationary government spending. Those higher rates will discourage economic growth, and that has implications for everything from mortgage rates to employment. If Congress doesn’t spend and the government lessens its debt and deficits, the economy would in fact start to contract and the Fed would respond by buying bonds to increase the money supply. That is correct.This does effectively result in a money transfer to bond holders, but those bond holders tend to be institutional investors, not average citizens or even rich citizens. The issue with the federal government isn’t that it is spending too little, it is that the funds are misappropriated and its spending can and does often increase inflation because the spending isn’t going toward useful investments like infrastructure but is instead going to social security and the like so that people consume. So you get people having more money to consume more without increasing economic output, and possibly even worsening it since the government can crowd out investment. Someone in Kelton’s position should be very much aware of the independence of the Fed. She is either being deliberately dishonest about MMT and the inflationary effects of government spending or she is putting up powerful blinders and willfully deluding herself.
Clarification: El Salvador hasn't "pegged" their currency to the US dollar or Bitcoin. They've declared them both legal tender (US dollar in 2001, Bitcoin in 2021), i.e. the people can buy/sell in those currencies without having to pay capital gains tax etc.
And your point, for every bitcoin, you need to cash it in, otherwise all you have is bitcoin, can you pay your rent with bitcoin, purchase your groceries etc. Without a countries currency bitcoin is worthless, you need a countries currency to have anything in your wallet.
@@lexer_gacha2419 crypto cities will be working on solving these problems. It's very very early in the game. But technology will naturally progress as always. Btc is the tip of a huge iceberg.
@@lexer_gacha2419 This is just patently not true. I can purchase whatever I want with bitcoin so long as the seller is willing to accept it. You don't need a countries currency to do this. There are places around me that accept bitcoin for rent, and I can buy groceries with bitcoin because I have. Bitcoins value doesn't come from fiat currency, it's value is a social construct (i.e. what will someone give me for it), just like all currencies. The difference is that governments can't randomly print more bitcoin to suit their needs at the expense of the poor/middle class.
I feel this misrepresents MMT. In my research, MMT states governments (with a fiat currency not pegged to other currencies) can increase money supply as they wish. The only concern is inflation, however it also says inflation will not occur if the country has enough resources (human, natural, and capital resources) to increase output. Quantitative theory of money says price level x output = money supply x velocity. If money supply increases 10%, you will not get a change in price level if output increases by 10%. Everyone seems to ignore all this. The left says "oh we can spend whatever we want and anti-MMTers say printing money causes inflation. Both are ignoring what the the theory actually says.
Except you can't increase the money supply by 10% and simultaneously increase productivity by 10%. Generally speaking if you give someone 10% more cash they will just work 10% less.
Love how Prof Davies projects his own economic theory onto MMT and says that's how it is - as if monetarists won't end up "printing" money. What a joke of a professor
Yes, unfortunately there's a LOT of people on the left that looked at MMT, and somehow missed the part where they can't just keep growing the deficit and debt faster than the economy and not run into problems. If the whole premise is that money gets its value from economic output and resources, then you have to respect that as a constraint, otherwise you will eventually have hyperinflation or run into serious problems when you're no longer the reserve currency.
I did as was suggested and researched MMT for myself and read a bunch of stuff online, as well as Stephanie Kelton's book The Deficit Myth to actually try and understand it. My conclusion is that this video doesn't really explain why MMT is wrong at all. From what I have read and digested, one of the central pillars of MMT is the seemingly correct observation that monetarily-sovereign governments do not need to "balance the books" in order to work properly. This is extremely obvious when you just consider that the US, and the UK for instance, have run annual budget deficits for the majority of the last few hundred years. So any economist advocating budget surpluses to "pay down the debt" for its own sake is clearly talking nonsense. Another core tenet of MMT from what I understand is the sensible suggestion that government budget deficits are an artificial constraint, with the real, tangible constraint being the productive capacity of the economy and its ability to absorb deficit spending, etc. This certainly is a novel perspective, as governments all over the developed world have, for decades now, been artificially concerned with their deficits in and of themselves when actually they should be more focused on the REAL economic constraints of an economy - its capacity to produce the goods and services we all need and want. In many cases, increasing the deficit to invest in skills, machinery, infrastructure, healthcare provision, or anything else a country might require and has the physical capacity to accomplish, isn't a bad thing. Inflation will only occur if the government injects TOO much deficit spending at the WRONG things such that the actual real people doing the work that the money is paying for can't keep up and so prices will rise. But that has nothing inherently to do with a budget deficit.
Yes, and this argument about reducing consumer space is just trash. Government spending goes to people who work for the government in salary and wages - and guess what they do....they consume! And I don't think they consume from the public sector do they?
@@PressureOnJulian Government wages aren't market efficient since the government can print whatever it wants to pay the workers and has no competitors, so that money gets misallocated and thus does not feed or create efficient markets. In the same way that I could print a trillion dollars and pay only you the money. You'd buy what you want, but the food sector would collapse because you could only eat or store so much for yourself, and if you try to choose what food other people need, you wouldn't actually know as well as they do. In the meantime everyone else's savings become crap because of all the free money you just threw around.
@@EGarrett01 A monetarily-sovereign government with a fiat currency (USA, UK, Canada, Australia, China, EU as a block, etc) can ALWAYS meet its financial obligations. This is crucial since it means there's literally no way this type of government can be "forced" to default on debt payments or social security obligations through lack of funds, a luxury not enjoyed by countries such as France or Germany who are not monetarily-sovereign. The only way that happens for the UK or US etc is if the individuals in charge of the Treasury and government choose to take that path.
@@JGS2295 "Meeting your financial obligations" by printing up money is not necessarily "performing well" since government is in theory supposed to improve society. Printing up money to pay your debt is siphoning value out of American's savings. Do that too much and you'll have "met your obligation" while destroying your citizens' lives.
There is a lot of misrepresentation of mmt here. The irrefutable fact is that in a fiat economy with a sovereign currency(such as the US), the amount of money that can be spent is not limited by any commodity (such as gold) or by the debt ceiling. Like it or not, the government can 'print' as much money as it wants because it is not anchored to anything physical). The debt ceiling is an arbitrary limit. The real cause of inflation is indeed supply and demand of goods and services, not by the supply of money. That is why the federal reserve's monetary policies don't work, and in reality tend to increase inflation. In the 1970's they cranked up interest rates for a decade without effect. It reached 16.65%. The real cause was OPEC which raised the cost of oil to unseen heights in the US, which caused a supply side crises. The mmt stance is that fiscal measures are needed, not monetary. For example, to deal with the supply chain issues we saw after covid, training and hiring more licensed truck drivers would have helped. I will agree that it is a bit frightening to think of how congress might abuse this more accurate way of thinking about money.
The main claim of mmt is that "the only thing to worry about is inflation when offering cheap credit" Which is simply not true. A misallocation of resources propping up wasteful undemanded/lesser demanded industries, over consumption from lower rates, asset bubbles building a false sense of wealth, a misallocation of resources into present-oriented ventures at the detriment of our future, a discoordinated time-capital structure creating risk of long-term projects being unable to finish as foreseen, *and* consumer price inflation are issues of monetary expansion. They also define inflation differently. They define it as the cpi, & a terrible measure of it at that.
Your comment is a counter to a straw man argument of MMT. I agree the problems you listed are valid concerns. The nuance is that the theory works when we use actual inflation and not the one people that don’t understand economics use (CPI). I could find idiots that agree with your economic theories that would make it sound stupid also but then I’d be straw Manning also. Anyways all those things you mentioned would be reflected in actual inflation. My understanding is that MMT says the government could spend unlimited money without going bankrupt. This is true. The reason they shouldn’t is that it would cause inflation in the forms you describe. MMT is a valid theory which like any theory can be misinterpreted to justify stupid things. Just because stupid people like that lady misinterpreted it, doesn’t mean it isn’t valid. It’s better to say, yes MMT says you can spend unlimited money if you create an equal amount of goods and services to offset the money creation. However, the government has a horrible track record of doing this unlike businesses. So let’s keep the money with the businesses that can create $2 of goods and services with $1 of capital.
@Zachary Neilson You're not disagreeing with anything I said. I made the same point in my comment. You said that the government can spend as much as it wants, as long as it's offset by rising market demanded goods & services, then went to say that the government is terrible at doing this. That's exactly what I stated.
@@zacharyneilson9220 I was under the impression that you were countering his point but instead it sounded more like an agreement with a bit of explanation or I missed something?
@@austinbyrd1703 yeah I think we agree on the negative effects of government spending and also on the definition of inflation. My point of disagreement is that MMT doesn’t disagree with us and isn’t wrong. It’s the statists taking half of MMT that are wrong and defining inflation wrong. I understand that most people claiming to follow MMT are statists but that’s only because they only know half the equation. They heard government can spend unlimited money and not go bankrupt and stopped listening before the inflation part. I think our approach should be to explain why MMT supports limiting government spending as opposed to saying it is wrong…, because it’s not.
@@zacharyneilson9220 Inflation doesn’t care if you spend government issued dollars or bank issued credit money. The basic questions are: What should our government pay for when it issues our currency? What should banks fund when they issue loans? Who/what to tax to help regulate inflation and inequality by removing excess government spending from the private sector? What should interest rates be? You use government issued dollars to shop & settle our trade deficits, pay your bank back, pay tax & net save. While popular discourse about MMT is dominated by talking about government spending, MMT itself is just as concerned about the role of government chartered banks in our economy.
1 50, MMT does not say you can print as much money as you want without consequence. The restriction is the availability of resources, i.e., labour power and natural free resources in/on the ground. If these are in short supply, relative to the issued available currency, then you get inflation relative to the resource, the infinite being money, the finite being the resource. That is a terrible misquote off the bat. The reality is that it's not money as a fiat currency ( just digital numbers by decree) but a resource that determines a country's wealth.
MMT is not just about printing money. It is about the definition of money and its essence. Most countries target 2% inflation, and for that logically NEEDS to print more money... Moreover, as the economy expands and grows, it logically demands more money in circulation - if 100 people spend $100 a year, theoretically I need 10,000 in existence... but if my population grows to 150, and everyone spends $200, I need $30,000 in circulation... And this money can be created as A) national debt, or as B) a bank loan to an individual... this logically creates more debt, but who do we owe the money to? The state owes them to the central bank (FED), which is itself a state institution (in simple terms)... And to whom does the state pay interest? Again to itself... The private sector has a limit to how much debt it can safely create... So at some point you MUST have a government deficit to even be able to produce and print enough dollars... And at the same time, since the government's biggest creditor is the government, and the state can print any number of dollars for itself, there is a certainty that the state cannot go bankrupt... Of course, the problem of inflation and confidence in the currency remains, this is the limiting factor... To say that I can print money without restrictions is wrong, but anyway, it is also wrong to claim that the amount of the national debt (in the case of the US) has any real meaning...
Nicely said. Yeah, money isn't a resource, but a social relationship, a method of allocating resources, a measure of wealth, a method, an abstraction. So the numbers are just a tool that the economy uses.
No... the voodoo economics is the taxpayers narrative. Starting point where does the money come from for you to pay taxes given under law no one can create money but the Federal Reserve, or they would be imprisoned for counterfeiting. TAXES DO NOT PAY for Congress spending... rather Congress must spend as the monopoly issuer of the USD via the Federal Reserve before anyone has USD to pay TAXES. Learn how sovereign currency works... because the wealthy corporates certainly know and take advantage of it! We are not going to get out of the economic doldrums as long as we continue to be obsessed with the unreasoned ideological goal of reducing the so-called deficit. The “deficit” is not an economic sin but an economic necessity." ~ William Vickery Nobel Laureate. Vickrey was awarded the 1996 Nobel Memorial Prize in Economic Sciences Based on defintion of sovereign currency and the role of the Fed, apply some simple logic with basic accounting knowledge, and legislation which you can look up and it is clear that the taxpayers money narrative is one huge myth. a) The USA is a sovereign money nation... What that means is the USD is the currency issued by the USA. Sovereign money is legal tender issued by a monetary authority, in most cases by a nation-state's "independent" central bank. In the USA that is the Fed. b) Central Bank (The Fed) is an integral part of the financial and economic system. They are usually owned by the government and they are given certain functions by legislation raised by the Congress to fulfil. These include printing/creating money (which primarily occurs via key strokes in a computer every time they spend), operating monetary policy, lender of last resort (to the commercial banking system) and ensuring the stability of financial system. Ever hear of "supply bills" or "appropriation bills" those are the instructions from Congress to the Fed to fund spending by creation of money. Based on this information it is clear that the monopoly creator of the USD is the Congress via the The Federal Reserve. Making state and local Governments along with everyone else money users. And we know this because if anyone else tried to create the USD they'd end up in prison for counterfeiting. So from an understanding of sovereign money and the central bank, we know that logically USA along with other sovereign money nations must be a spend then tax economy... Congress spends money into existence. From an accounting prospective that creates a Liability for Government, and an asset for whomever the recipient of that Government spending is. As the Government is the source of money and the creation of money creates a Liability for the Government, we then know when people pay taxes it simply reduces that initial liability. Thus basic Accounting General Journal Ledger principles clearly show it is impossible for taxation to fund Congress spending. Note: Banks create credit not currency which they do under Government licence and we already know due to the function of the Central Bank that they underwrite that "credit"... lender of last resort. The mathematical equation of the above is Sectoral Balances which state: (G - T) = (S - I) - (X - M) The above linear equation states that government spending (G) minus taxation (T) will equal savings (S) minus investment (I) minus exports (X) minus imports (M). In general terms, whatever the federal government spends minus taxation, that exact amount will be deposited in and distributed between the domestic private sector and the external sector as income. We can now aggregate (put together) the right side of the equation using brackets and define two sectors: (G - T) = [(S - I) - (X - M)] In other words... The Federal government sector = The non-federal government sector OR quite simply put: The Federal government sector’s deficit is the non- federal government sector’s income. The Government's red ink IS the Private sectors black ink. A Government surplus = Private sector debt. AND as the Congress is the monopoly issuer of the USD they have no affordability issues as money is infinite. The restriction is the real resources including labour to produce or do the work not the money to finance the work.
To quote Harvard University "The most important misperception is that MMT is in some way outlining an ideal or a new regime that could be introduced. The reality is that MMT just describes the system that most countries in the world live under and have lived under since 1971, when the US president at the time, Richard Nixon, suspended the convertibility of the US dollar into gold. At that point, the system of fixed exchange rates-in which all countries agreed to fix their currencies against the US dollar, which was in turn benchmarked in price against gold-was abandoned. So since that day, most of us have been living in what we call a fiat currency system."
@@pamelakrause9311 money does not run the economy, production of goods and service does. As Government spending gets a bigger and bigger part of the economy you produce less of consumer goods and stuff get more expensive to the public in term of work hours, you have to work more and more Of course government will not default, but that does not mean your quality of life will not deteriorate in the process
@@pamelakrause9311 but you are corect, government does that since 71, and came up with a cool name now rather than trying to hide it. That’s why, other than technology, our life standards is basically the same, and stuff like housing, with our parents afford early in life is now but a dream to younger generations.
This is not accurate. Everyone should check out Economics Explained video for a more accurate summary of MMT. The first problem is in the title. Modern monetary theory is not a policy. It’s a theory. It’s a way of thinking about the economy not a prescription to solve public problems. The implication of MMT is that we can spend a lot more than we want, but that’s not necessarily central to theory of MMT. You say that MMT is rooted in Keynes. This is true, but misleading. Keynes is the founder of modern economic theory and monetary and fiscal policy. Literally everything is rooted in Keynes. Germany is the extreme exception. Not the rule. Hyperinflation does not happen in modern economies with a stable government. The Weimar Republic was unstable leading people to loose confidence, and thus loose confident in the central German bank, and finally loose confidence in the Reichsmark, leading to hyperinflation. As long as the US government remains stable is not on the brink of collapse (like Weimar Germany was) then people remain confident in US dollar. (Although to be entirely recent events last Jan 6 suggest that America might be on the brink of collapse). Davies criticism claiming “there will be more things that the government wants and fewer things that people want,” is fair but once again misleading. MMT does logically conclude that there should be more tanks than cars, but it also concludes that there should be more public health care than $800 bottles of insulin. Who do you trust more, the corrupt politician or the oil baron? I trust neither but I’ll argue that the public has more control over the politicians than CEOS. We need to watch our politicians carefully.
My understanding of monetary theory is as follows. The most important rule is that there is an ideal amount of money that should be in circulation at any given time. If there is too little money in circulation, it causes economic recessions and too much unemployment. If there is too much money in circulation, it causes inflation. When a nation is experiencing an economic recession and high unemployment, and businesses and individuals are not borrowing enough to increase the amount of money in circulation, then governments must borrow and spend that money. If there is already the ideal amount of money in circulation and the government sharply increases its borrowing and spending, then it will cause inflation, unless measures to decrease the money supply by an equal amount are simultaneously implemented. These measures could include raising taxes and/or increasing interest rates. This, of course, would result in a small shift in the labor force as labor that was previously going to private industry would now be going to the new government projects. I'm not sure if this understanding qualifies as MMT. I have to admit that I was surprised to hear Stephanie Kelton say that raising taxes to fight inflation is not part of MMT. Given this understanding, the question should be - Is the public benefit from the projects that the government is borrowing and spending to fund greater than the benefit from the labor those people who are now working on the government projects were doing before? If you're answering this question from a self-interest perspective, how you answer will depend a lot on how wealthy you are. If the government wanted to borrow and spend to make our dilapidated roads and bridges safe, I think everyone would agree that it would be in the best interest for everyone. But if the government wanted to borrow and spend money to pay for free community college or free no frills healthcare for everyone, and compensate for the increased money in circulation by increasing taxes and/or interest rates, than the wealthy, who can afford private high-quality healthcare and to send their kids to private high-quality universities, won't benefit from those programs, but would have to pay the higher taxes and/or interest rates. So they would be against it because it is a kind of wealth redistribution program.
This isn't a great representation of MMT. MMT does appear wrong, but not just for the reasons stated here. Kelton's own argument is that inflation is a problem, but that it can be controlled by managing demand, and therefore a role of state power should be to control aggregate demand to curtail inflation, while using increases in the money supply to fund state spending. So long as productivity increases outpaces inflation, that would work. The problem is that it wouldn't do that. The problem is that it relies on an omniscient government who can accurately predict aggregate demand, retain confidence in the value of US assets, including issued debt and the USD, and that there are idle resources available for the state to use that the private sector isn't using. In other words, MMT is fine if you think that the natural interest rate is zero, you think there's no such thing as opportunity cost for state use of real resources, and you trust the state to effectively and consistently use inflation targets responsibly instead of budget targets. Our government hasn't demonstrated a great efficiency in the use of our resources, or fiscal responsibility. I have no idea why any MMTer would think this is reasonable.
You're getting it wrong. Demand driven inflation has not really been a thing in developed nations and so controlling inflation with taxation is also not a thing. Could be one day, but for now it's not a thing. If you actually listened to Kelton and others you would know that there is not a single action to be taken to control inflation. Inflation is not straight forward. It can be caused by a variety of factors so the idea is to determine the cause before choosing an action.
@@gabethompson3211 Theres no world in which you can say "demand driven inflation has not really been a thing". That's highly contestable, and in some cases just flat out not backed by evidence. We have had both inflation and economic stagnation before, rather than coupled with and sustained by supply shocks. The 70s were a good example. Even if you ignore the evidence, that's a debated matter of public policy, but to argue that we simply don't see demand-pull is just absurd. The primary driver behind Keynesian stimulus is to manipulate and increase aggregate demand, to tolerate a rate of inflation in the short term and decrease unemployment. The whole point is to risk a demand-pull inflation in order to avoid cost-push. So I don't see how your contention has any ground to stand on, it's not backed by the evidence, and it's not even consistent with contemporary macroeconomic theory. I haven't even heard Kelton or Wray say anything like that. I did listen to Kelton, and as I said in my comment, assuming you can accurately gauge and determine the cause of inflation is begging the question. My point is that her argument is fundamentally tautological even if you accept the premise of MMT. Yes, if you know enough to solve a problem, you know enough to solve a problem. But Kelton's prescriptions specifically rely heavily on the assumption that we know exactly how to spot inflation, rises in the nominal price level, as compared to rises in the real price level caused by natural disasters or other shocks. This is highly contestable even historically, let alone in trying to predict the future. We don't know everything. Stable monetary policy is important for this reason, to let the market correct itself, because we don't know how to fix it better than it does on its own. Her prescriptions, however, should not be oversimplified to "just know how to do better lol". She focuses on increases in spending on jobs programs, measures to reach full employment, which assumes not only that we know what full employment is and that we want it (if it means Japan's situation, we don't), and also assumes a great deal of idle resources and that there's no opportunity cost to private industry that would decrease efficiency and productivity. In other words, she assumes that government spending is equal in productive value to private spending, and that government institutions have the capacity to set and manage inflation targets. I listened to every word, but that doesn't mean I agree. I listen to flat earthers too. Don't assume someone didn't listen just because they disagree. That kind of arrogance has no place in effective discourse.
Yes MMT is an absurd belief that relies on blind acceptence of an authority (government) that is headed by politicians having acquired by being voted in the specialist ability to know the costs of and benefits of doing every thing in the economy that produces goods and services people need. It is hard to believe anyone could be foolish enough to swallow this rubbish theory.
You say "therefore a role of state power should be to control aggregate demand to curtail inflation, while using increases in the money supply to fund state spending". How would any country do that even if they followed what you said ? It is Not possible to control ' aggregate' demand if there is increased demand created by the state spending. All that would happen is the state would have more spending and the private sector have less thus causing more poverty because the private sector is the wealth producer not the state. If the state was the wealth producer it would not need taxes at all but would live off it's own profits. So you have shot yourself in the foot by arguing against your own theory. Besides that the so called "aggregate demand " idea ignores the fact that in the real economy there are prices which are part of the component of the demand supply price concept and leaving out one part of that concept leads to all sorts of incorrect conclusions. So stating there is a thing called "aggregate demand" that can be manipulated is just nonsense. If you disagree then show one instance where prices do not exist in any purchase.
This video is pretty horrible for anyone wanting to understand how the US is financed. It presented tidbits of nonsense lol. MMT... forget the policy discussions... its description of the system is just basic reality. Not really debatable.
MMT is just a description on how the monetary system operates through the Treasury and federal reserve. Everytime the govt spends. It creates a deficit. Money is created out of debt through bonds and when commercial banks create loans/ reserve deposits out of thin air through prommisory note/ loan contact between the bank and the borrower. Doubt entry bookkeeping/ reserve accounting/ full and fractional reserve banking
Sure. But they use the issues with our system like deficit spending. To say deficit spending is a great idea. We need to balance the budget. And pay off our debt. That doesn’t simply mean raising taxes and or cutting spending. We can lower taxes to drive growth in certain sectors we can also increase spending if we expect to see a return in that spending. I mean increased spending and lowering taxes are basically one and the same. I’d argue lowering taxes is better in most cases. Then they only get the benefit if they’re productive and the government doesn’t take on the debt. But that’s not reasonable in emerging fields. I mean private crowdfunding is awesome. But there’s nothing wrong with the government funding some too. Like NASA was government funded and it’s contributed a ton to economic growth in the private sector. But yeah 30 trillion in debt with a 2 trillion dollar a year deficit where half of that is simply interest on the debt. That’s a serious problem that we need to get under control. I feel like we can get rid of a half trillion in wasteful spending. Then we’ll have to create growth and possibly raise taxes in certain areas. Even like a 2% federal sales tax. Or tax businesses like Walmart and grocery stores that use self checkouts for the use of those self checkouts at a rate that’s at least as high as the taxes that would be paid through payroll and by the employee that could be doing the job. But it wouldn’t bother me one bit if a business that employs more than 100 people would be required to pay $20,000 a year for each self checkout kiosk they have in their store. I’m sure that would be a significant amount of money. My local giant has at least 10 of them.
My biggest concern with MMT is the dynamic effects that have timescales of years or decades. Just as they say, "The market can remain irrational longer than you can remain solvent." That same concern applies to the economy 100x. As we are seeing right now, there are many complex interactions and threshold effects in a large economy that can hold back inflation. You can irresponsibly create an excessive amount of money happily for many years then suddenly lose control.
So how long are we talking? QE has been a thing for 15 years. One of the weird assumptions orthodox economists make is that your predictions will happen at a vague time in the future. 0 predictive power.
That's why MMT puts a lot of emphasis on assessing the risk of inflation associated with any piece of spending. Analyzing inflation risk is far more important than assessing deficit risk, which what what the US currently does
@@grimaffiliations3671as it should, but we need hard guard rails because politicians love buying votes and without hard rails they will run amok. That’s my fear
@@ashleystovalldaman If the spending they're doing helps imprive people's standards of living, and the relevant inflationary assessments have been done, then there is no problem with that spending
@@ChatwithMatt Ah yes, our courts should force you to accept Katie Bucks as compensation for some harm I may do to you. 🙄 You guys really need to try to understand really basic stuff if you’re concerned enough to comment about stuff.
As MMT explains, you are not ISSUER of the currency...so yes, you would be counterfeiting and go to jail. Your statement actually proves a key argument of MMT. Thanks for the example.
The way she describes increasing the money supply through human outcomes makes sense. Economists have been pushing for this type of support but politically it’s a scary thought. Most people in government don’t understand these frameworks, and you want to explain free money to the lay people. It takes time for these ideas to take hold and more people to get involved to successfully experiment further. There’s a lot of potential with these theories, from the perspective of building out the infrastructure to allow for a larger economy. The government doesn’t need perfect information to know that complex manufacturing, semiconductors and other technologies currently offshores are a valid form of investment.
You ‘invite’ people to compare and choose, but you only present Prof. Davies’ view. But here we go, anyway. One. US government can never default on her debts unless She simply chooses not to pay. Emphasis on ‘choose’. She will always have the funds because She has the ‘printing press’. She is the only entity on the planet in that position. ‘…raise the funds…’ Raise? She produced the funds in the first place. Thatcher was simply wrong when she said, ‘there is no public money. Only private’. Reality is, private money comes from the public. The public has the printing press. Private homes and businesses do not - under penalty of long hard prison time. Two. The only constraints where inflation is concerned are our access to employable resources - ‘stuff’ and people. Hint: we have plenty of both. We have a pile of unemployed people; a pile of work that needs to be done [infrastructure/healthcare/education etc]; and rusted out factories and resources that lie fallow because ‘the private sector’ sees no profit in employing them. And we’re sitting around waiting for investors to take an interest. WHY!?!? The money is the easiest part of the equation. We did it in WWII. We didn’t wait for ‘investors’ to build the weapons systems, cloth, feed, arm and train the troops, 'We The People' simply paid for them. How? Don’t tell nobody, but we printed the money and used things like rationing to avoid inflation. Not only did we not collapse as a result, but we won the war and emerged from the Great Depression. With 25 years of unprecedented growth - the Golden Age of Capitalism, it was called. Three. The difference between Japan and Weimar is sovereign control of… wait for it, RESOURCES - NOT JUST MONEY. As part of the demand for odious, impossible reparations the French invaded and took control of the Ruhr [Germany’s major industrial center]. Keynes warned the victors at Versailles against making these impossible to meet demands. He predicted they would lead to another war. He was correct; the result was horrific to say the least. No such thing is happening in Japan. They control their resources, and money. In fact, investors who attempted to take advantage of - what they saw as Japan’s impossible to manage debt - by betting against them [shorting Japanese bonds], wound up losing their shirts. The ‘deal’ was called, ‘The Widow Maker’. Interesting that Prof. Davies didn’t mention that. And finally. The US dollar is the international ‘Reserve Currency’ because of Her more than 800 military bases around the world. Gaddafi’s major crime was trying to get African nations to adopt a reserve currency independent of the dollar. That was the final straw. The reality of how money works is much more complex than the picture painted here. Even traditional Supply/Demand curves are beginning to show cracks when compared to observable reality. ua-cam.com/video/4epQSbu2gYQ/v-deo.html
The notion that the government can simply raise taxes to offset inflation completely ignores political realities. The Democrats can't even get their full caucus to agree on it now. It also ignores a well-understood intersection between politics and psychology: loss aversion. People are much more driven to avoid the financial loss if taxes than any kind of gain.
MMT does not rely on post hock taxation. And taxes are just one of our inflation management tools. Not the only one. I honestly do not understand folks who pretend to understand what MMT is when they obviously haven’t read any MMT stuff.
@@chrisg0901 Whatever. But MMT: Evaluate each spending proposal for its potential inflationary impact. If inflationary, add a tax offset within the legislation itself. Also MMT: We have a variety of inflation dampening tools: Suppressing bank lending - especially for speculative purpose - through credit guidance, issuing nonnegotiable household savings bonds, etc.
@@katiecannon8186 Randall Wray argues this explicitly. He argued that taxation is necessary to curb aggregate demand and reduce inflation. He's wrong, but the idea that this is some straw-man suggests either you yourself aren't up to date on MMT, or as usual, MMT doesn't actually mean any single coherent theory because it means different things to each proponent so all of them can handwave any concerns about it as "not real MMT".
@@VincentWeisTheThird Wray’s point is that taxes just *do* remove government issued dollars from the private sector. So, they reduce demand. So they reduce inflationary pressures that too much government spending may cause. So, you’re correct re Wray. And also, MMT explicitly relies on multiple inflation dampening tools. Just because you don’t understand this doesn’t mean anything other than you don’t understand this.
1:45 is not what MMT says at all. Typical for people to argue what they think it says and not what it actually says. good luck with your continued straw manning
I find MMT to be a good explanation of how the Fed functions, but not how it should ideally function. The MMT expert on here does do a good job at providing an example for why MMT will never work. The founding economist of MMT do say you can control inflation through taxation. The biggest supporters of MMT, politicians and economists, constantly demonstrate a complete ignorance of what MMT actually is.
MMT explains how our monetary system as a whole works: Treasury, Fed, and banks. Also, MMT understands that we used a variety of inflation dampening tools during WWII when we spent like crazy and kept inflation in check. Including suppressing bank lending (especially for speculative purpose).
@@LearnLiberty MMT is simply a description of how our monetary system works. With a few policy suggestions. But you guys need to focus on understanding how our monetary system works. You guys don’t have a basic understanding of how our monetary system works. That’s a problem
@@woodchuck003 I can’t help it if someone asks someone on who doesn’t understand what MMT is actually saying. So, for instance, MMT relies heavily on employing auto stabilizers to regulate inflation.
True MMT only allows Govt to print more money to EMPLOY the unemployed when there is high unemployment. Like when unemployment is above 5%. And the Govt wages (not unemployment) are below what the market pays most workers with the basic idea that employed people have an easier time getting a job than unemployed people. Therefore people will migrate back to private industry when jobs there become available. Basic theory of MMT is everyone will always have a job. Even Friedman believed there needed to be extra money printed every year in an amount slightly larger than GDP yearly growth. This would keep the economy from experiencing deflation.
Prices, as a whole, are simply the ratio of the number of dollars currently circulating and the amount of goods and services being sought after in the economy. Saying that inflation doesn't occur when you print money and inject it into circulation is like saying the ground doesn't get wet when it rains.
@@AusFirewing Which one? Ask me any question and I’ll try my best to answer. I’m no expert, but am pretty good at understanding MMT. If I don’t know the answer, I’ll provide links. Really, it’s important that as many people as possible have a basic understanding of how our monetary system works. There’s a reason politicians, talking heads and far too many economists don’t explain this to us. And that reason isn’t a good one.
So nothing is allowed to interfere with the idyllic worship of the free market and control by financiers. There is no such thing as perfect competition. We need national coordination of infrastructure projects and regulation of financial instruments. Fiat money has changed the world, which should not be controlled by an unregulated free market. The problem is created more by neoliberalism and MMT challenges this. It's not just a question of economics.
1:40 MMT literally says the only thing that matters is inflation. No MMT proponent suggests a government simply print money without regard to inflation, MMT argues the exact opposite, that it’s THE SINGLE MOST IMPORTANT THING.
What concerns me is this video is coming out as a response to raising the debt ceiling - where not doing so is a way to GUARANTEE the disasters it describes. Why aren't we focused on lowering the BUDGET?!? Through cost-cutting measures like negotiating prescription drug prices for Medicare/Medicaid, and reducing the defense budget by a third, and raising more revenue to cover the social programs through removing the Social Security tax ceiling? Better still, do the cost-cutting measures and amend the Constitution to replace income tax with a sales tax or, better still, a transaction tax, which weights the tax burden towards things individuals can control? It's scary we think we should fix things by not paying our bills rather than by making sure they are covered in the first place.
Some would argue that by letting ourselves hit that ceiling, it would force an otherwise politically expedient and unhelpful Congress to curtail increases in spending. Many people do want the budget to decrease. But increasing the debt limit won't do that. How many governments do you think ever operate UNDER budget sustainably? They always will find ways to hit the limit, because it's more politically profitable.
People on the Left whine about the defense budget, but never whine about social spending, which is more than double the defense budget. The defense budget is only about 1/5th of the federal budget. Social spending is more than half the budget. Cutting the defense spending will have little to no impact; we will still overspend. The social spending is what is always growing, and that is where cuts are required.
Mmt is a true policy outlook. Not to see it's the right thing to do. There are many different perspectives to policy choice, this is just one. The main problem I have with mmt is how it is marketed as infinite money hacks. Thinking about it this way will undoubtedly lead to more government market socialism and higher taxes. Mmt has a fully working method and it's justifiable on some grounds. Another issue is who's hand the infinite money printer is in. Obviously not all spending is built equally. Some of the best applications of mmt would be to support the internalisation of costs in market failures due to externalities and also to open new markets through education and research. Mmt must support growth otherwise the inflation craze by money printing will quickly turn into popped bubble and steep recession. Wise investments facilitate growth. Not money printing.
MMT is neither modern, solely monetary or a theory (which requires basic viability). It is neither more nor less than Moronic Magical Thinking. One (small) correction to the narrator. Every printed (or electronically created) dollar does not, in itself result in inflation. The problem is that fiat money has expanded materially more *than the increase in goods and services in the economy.* More than a century ago, this country enjoyed long-term and beneficial low level deflation as the increase in goods and services outpaced the increase in the money supply that stemmed primarily from gold mining (ah, the wonders of commodity money!). The reality (as the actual economics demonstrates) is that every dollar created and/or spent by government comes from the people either via taxation, devalued savings or higher consumer costs. It is simply the belief that there is some magical source of wealth (which is impossible for government to create) to be bestowed on the people (specifically those whose votes they are buying), without consequence. There are those who recognize MMT as an idiotic fairy tale and those who should have the sleeves of those stylish jackets retied behind their backs.
@@finchbevdale2069 It's really quite simple. There is no risk at all with today's electronic currency of there being a currency shortage - none. There is no chance that we will return to the days of company scrip which resulted from exactly that problem. What would happen is that, as normal economic growth increased the pool of goods and services available to consumers, the dollar would strengthen and there would be a period of gradual deflation which happened only once in US history - an incredibly prosperous period in the late 19th century. Savings would become more valuable, investment would increase and we would all be better off. There is no downside (except a very slight one to borrowers as the dollars they would need to pay off debts became more dear).
The video is dishonest and a default is impossible. The debt ceiling is elective and congress will not create a economic crisis for the sake of petty politics.
@@derekrethman5834 The first line of the video is something like "A global economic crisis could ensue if the government defaults on it's debt" This is just not a plausible outcome and they know that. It'll be another show with the two parties trying to score cheap political points but the outcome will be that they will fire up the printing press and avert the crisis. That's all it takes. What will the effect of the deficit spending be is a legitimate question. Again this is where I find the video to be dishonest. They know the difference between floating and fixed exchange rates. USD is a fiat currency with a floating exchange rate. Learn Liberty knows this. However they pretend that the effects of printing the money would have an effect as if USD were still pegged to gold. It isn't. They are liars.
@@gabethompson3211 irregardless of fixed vs free floating, inflating the supply will still have an effect. We cannot know the entire effect but we do know a lot through some theories like the Austrian business cycle. It highlights the expansion of credit as the reason why the boom bust cycle happens. And any more expansion through increased spending on part of the gov will create bigger bubbles that will crash even harder than any other in the past
@@derekrethman5834 Default is not the effect. Let's agree on that. In my opinion the Austrians have failed to move past the gold standard and they are not the people to pay attention to. If these theories were true we'd be seeing the results in America right? We'd be seeing examples of this somewhere. Explain Japan. Explain America.
I think the central issue is MMT is built on a different theory of value... For example, orthodox economics says the social contract is viable because of viable economics... whereas MMT flips it around. MMT is right about this... this is what is really being debated...
This whole video is a strawman. MMT says the limit to government spending is inflation. Inflation does not happen when you print 1 dollar more than you have. If they actually studied MMT they would know this.
The foundation of MMT is that government creates wealth through taxes. If that were true, absent of taxation, your product or service would have no value. No one would give you anything in trade for it. So, 1st try ending taxes. Then try ending people offering goods and services. See which one collapses the economy first.
Specifically it says that taxation is what puts value on the dollar. IRS accepts only US currency to pay taxes. Otherwise if we remove the US government who is assigning the value of the dollar? IE Who will sell you real goods for pieces of paper, that no one is obligated to accept? The origin story is who compels people to give the taxes on day 1 in order to form a government? The government has the monopoly of force to compel people to pay but before that who did? I agree without taxation the dollar would be useless but MMT does not propose to say anything on value or private aggreements. If anything MMT is fairly limited to government monetary relations versus many non MMT thinkers believe their theories encompass all of economy, value, etc.
@@toddodell70 the IRS was formed when the U.S. $ was backed by gold. It is dishonest to claim that the IRS put value on the $ it collected. So run the experiment both ways. 1. Dissolve the IRS. See if the economy continues to run on dollars. 2. Everyone stops providing goods and services (working). The U.S. keeps issuing dollars and recovering them through the IRS. MMT only appears to work if limited to a proportion of real value created by real goods and services.
@@01nmuskier The IRS is who collects, thats it. They have nothing to do with what the taxation is. Prior to IRS we had lots of excise taxation. Well unfortunately neither party agreed to your test. ( ie to tax, somehow stop markets ). However #1 should include stopping all Fed bonds. #2 If you stop all markets then there is no way to generate funds for taxation anyway. We disagree, you think that without the government people would still treat the US dollar just like today and I don't think so. MMT is specifically how the government monetary mechanics work. People can learn from that but its that the government does not need to collect taxes to spend ( or print ) money. Even selling bonds are a political choice.
@@toddodell70 ah, the MMT'ers move the goalposts again. YOU said IRS. Bonds are not taxes. You verified my point that the economy does not need taxes. You verified my point that MMT is currency manipulation. When you stand on the currency side of the MMT fence, you claim that government can just print infinite $. In the e commerce age, government can just direct deposit infinite $ into bank accounts. So the USD has no value (hyperinflation). Now, you need to jump onto the "taxes create wealth" side of the fence. It is a shell game of currency manipulation that steals value from people's labor in order to excuse limitless spending, which encourages fraud, waste, abuse, corruption. But sure. Keep shilling for the big guy. Keep working for the people who make your paycheck in October worth less than your paycheck in January. Move the goalpost again. We know your game.
Lol. You don’t “push” MMT because it’s just a description of how monetary system works. Also, you don’t understand what The Fed does. You gotta understand the basics before you can critique Fed policy. And there’s certainly critiques that can be made of Fed policy
I think the mistake is that we assume that demand is infinite and I honestly never thought that made any sense. We saw that during covid when oil went negative. Storage of goods is not unlimited, time is also not unlimited so there is a hypothetical cap on demand on how much goods and services can be consumed during a time period and companies that overproduce get heavily punished for doing so. What matters is correct estimation of supply and demand. Not the money. The use of government money is cumpolsory wherever you go, even if they have lesser value relative to the USD.
IMO Davies makes kind of a poor argument because everyone who supports MMT will of course think the money won't be used for tanks but for social services. The real issue is it's gutting the actual economy. Trying to print money to give to someone and pretending it means something when there isn't actual productivity that generated it in the first place is an illusion. A very dangerous one because in the process it undercuts actual productivity and leads to incredible abuse and corruption. You can't close Pandora's box.
I find it interesting u said that because thats how we got in this mess lol... Selling dreams and trying to fill the gaps with bubbles. Thats y bitcoin is taking off. I resolve we go back to the barter system but im not sure one half of the world wont destroy the other half. Capitalism is about knowing a price. We need to get back to understanding the VALUE of things
@@jesseesquire5807 agree with your points although not sure about the barter system -- makes us all poorer due to the friction. Better would just be non-government controlled money.
@@cyberjunk2002 but that's the thing.. does less "money" mean poorer? I feel like wealth would be based on tangible substance. I grew up in capitalism. Working for your share is fine but how many people would choose to work as opposed to those who would say "money doesn't pay bills anymore so fukk it"? These types of people will ruin the equilateral concept of Bitcoin still. Bartering services encourages a better quality American in my opinion. As long as there is a a conduit of currency... There are gonna be corrupt people to try and hoard it all.
@@jesseesquire5807 Money is not wealth. Assets are wealth. Money is a means of trade and holding value. Barter is a strange word and you'll have to define how you mean it. Barter/trade happens all the time; whenever you negotiate a price, whenever businesses trade service for service. But if you mean the tomato farmer is going to trade his tomatoes with GM for a truck, that will never work. "does less "money" mean poorer?" All things being equal, yes, it has to mean that. Less of any asset or value device means you are by definition "poorer". That does not mean you are "poor". After all, if you go from a billion dollars to having 900M, you are poorer, but hardly poor. And when you say money, you have to say instead currency. Having fewer US dollars can still be more than a larger number of Mexican pesos, for example. At any rate, like I said at the start, you seem to be confusing wealth with value. Money is a value device, assets are a wealth device.
@@droe2570you contradict yourself. If money is not wealth how with less money can you be poorer? Stupid really. Just admit money is and should be a store of value. That's the only way you put a value on your time, your life, your energy. MMT distorts that function of money.
This is your first video I somewhat disagree with. I believe that professor Davies was mostly correct and actually seems to understand MMT better than the girl presented as understanding it. However, MMT is actually a viable economic theory under my understanding of it but that girl is absolutely wrong about taxes. Taxes are one of the levers that offset inflation. Also, I think the policies recommended on this channel actually fit well in the MMT framework. The part where I disagree with professor Davies is that $1 of money printing will create inflation. If that printing is paired with $1 of production it will be neutral and if paired with $2 of production it could even be deflationary. Businesses and banks take advantage of this all the time. Borrow $1 for equipment that allows them to make $2 of goods and services. Here is why MMT supports the policies recommended by the channel. Even though the government could print unlimited money and never go bankrupt, they need to spend it in a way that creates an equal amount of goods and services to prevent inflation. As we know, the government doesn’t have a good track record of doing this. It’s better for businesses to create money by borrowing from banks because they are more likely to create enough goods and services to offset the money they borrowed. Also, 100% any country other than USA pegging their currency to the dollar instead of BTC is shooting themselves in the foot. As a US citizen, I appreciate them reducing the inflation I’d otherwise be experiencing even if we’d be fine without their subsidies.
Zachary, thanks for your comment! The negative side of MMT is that the government prints money when it needs it, not when it is necessary for the market. Also, during this process, the value of the funds owned by people and countries decreases, which puts the dollar in jeopardy as an international currency.
@@LearnLiberty I would say the negative side of reality is that the government prints money when it wants it. I agree that is a problem that causes inflation (decreased value of everyone holding that asset, USD in our case). My position is that MMT doesn't make the government print money, it only describes that it will cause inflation if it isn't used to increase goods and services a proportionate amount. I think the point of contention is that many MMT people are too optimistic about the governments future ability to spend effectively.
The USA went from sound money with the gold standard to this. The US can’t raise interest rates because of how much debt they owe. They can’t keep printing money or else we’ll get hyperinflation. Either way we’re fucked.
@@gabethompson3211 The United States used to be on a gold standard. The gold standard forced the United States to have to collect taxes if they wanted to pay for something. Nixon taking us off the gold standard allowed the government to print money in order to fund their expenditures. This introduced the inflation tax. A silent tax that takes away the purchasing power of the dollar. The United States is headed for hyperinflation if they don’t raise interest rates and pop all of these asset bubbles.
@@Sosa-gs3rz Japan has a debt to GDP ratio of over 250% and it's inflation rate in 2020 was -0.03%. America' debt to GDP ratio in 2020 was 133.92% and the inflation rate was 1.4%. I recall folks saying the same thing in 2008 with regards to the bailouts. The truth seems to be that the inflationary pressures are not coming and a need to raise interest rates is not coming either. With more than 10 years perspective on the global financial crisis I think that it is clear that the bubble was caused by bad lending practices and the collapse caused by shady financial products like credit default swaps. The gold standard or lack there of had nothing to do with it but a lack of regulation definitely did. Privately held debt can take down an economy. It has not been demonstrated that government debt can have the same effect. The inflation that we're seeing now is all connected to supply chain issues that relate to tariffs and COVID. It's not connected to extra government spending. I'll take a bet that hyperinflation is not on the horizon and I wonder how long until you admit that the Austrians are wrong? Why would tying the value of your currency to gold, a metal with few industrial applications, lead to better outcomes. I think the American economy has done rather well since they abandoned the gold standard.
@@gabethompson3211 The Austrians were wrong? The Keynesians have been feeding this propaganda into our schools for years. Japan is in the same boat as us but they have a longer rope because they still have a manufacturing sector. The 2008 financial crisis happened because of artificially low interest rates and quasi government entities. The low interest rates flooded the market with cheap liquor that made Wall Street drunk. Wall Street had no moral hazard because of government backed bank accounts. Big banks aren’t scared to gamble because even if they lost they knew the taxpayer would bail them out. The US has been better ever since we got off of the gold standard what planet are you on? Food prices have never been higher. Government subsidies that go to farming, schools, and healthcare have made them all unaffordable. This debt fueled economy is a fluke.
Don't often agree with Krugman, but he was dead on when he said MMTers are just playing calvinball. Any time any elemenent of MMT is criticized, they counter that you just didn't describe it properly.
Haha, unfortunately I do feel it wasn’t described properly. It’s not complicated so I don’t understand how it gets described so poorly all the time. I’m curious what you would criticize to MMT properly described. MMT says the government can spend unlimited money without default. This is a fact. It also says spending without an equal or greater amount of goods and services being created will cause inflation (not limited to CPI). Poor descriptions happen when statists hear the first part and disregard the second part. Businesses have been good at creating money by borrowing $1 and using it to produce $2 of goods and services. Government has historically created $2 and produced $1 of goods and services. I think the obvious conclusion to be drawn using MMT is to limit government spending and let free market banking control the money supply.
@@zacharyneilson9220 says under MMT, government can spend unlimited money. Then says the answer to MMT is the government spending limited money. 🤣 That's how we know it is a shell game.
@@01nmuskier Just because someone on a comments section may not be perfectly clear doesn’t mean anything The core of MMT is that the limit on both government spending and bank lending is availability of real resources for money to buy and inflation. Bank lending is further limited by our ability to pay our banks back in government issued dollars. The above should not be at all controversial Of course it gets more complicated, because economies are complicated But let me know when you understand how our government spent like crazy during WWII and kept inflation in check at the same time. When you understand this, you’ll have a better grasp of MMT
I think we all agree on the overall mechanics, but maybe disagree on the semantics. We need to separate the fiat government money from the actual goods and services. Sovereign governments can "print" money as much as it wants - but not without consequences. From the MMT perspective, how government "prints" is by deficit spending. They go through it using accounting. Let's say the government issues Treasury securities to meet the budget deficit - all that is not bought by the private sector can be bought by the Federal Reserve through primary dealers. That's like a Corporation taking out a loan from a bank that it owns, the corporation just increases its liabilities (loan) and assets (bank deposit), the bank does the same but reverse, and this bank can never go bankrupt. The implications are the same with regular economics - supply and demand. This is where we all get tripped up. When you increase the supply of money, you increase people's ability to spend which is demand. If the supply of goods and services cannot keep up with the demand, then you get inflation. However, if there is plenty of spare productive capacity, then the supply curve can move to meet that demand.
In a 3rd world country where output is limited, people are not well educated and very skilled, increasing the money supply will lead to a bidding up of the prices of already scarce goods and services. The solution is for them to manage their resources more wisely so that they can increase their productivity - education, skills training, infrastructure, modernization,. If a country is experiencing a demand shortage, that is when factories are mothballed, many people are unemployed and underemployed, printing more money can stimulate the economy without much inflation. Think of the Great Depression, there was plenty of productive capacity, but there was no jobs, many unemployed even if they were skilled and educated. Only when WW2 started did the Depression end, lots of money printed to build cars, trucks, guns, ammo, tanks, planes, and ships. Everybody had a job. There wasn't a lot of inflation, but there was inflation. After the war, all that excess money didn't create much inflation because the productive means of the country were used to create more goods and services like houses, cars, infrastructure, appliances, schools, hospitals, power plants, etc.
This is an example of the straw man fallacy. In this video they create a mistaken interpretation of MMT, that even MMTiers reject. Then they attack that caricature and end up believing they're correct.
@@katiecannon8186 your comment is nonsensical, do you know what money is, or federal reserve notes, or the difference between the two? The Gov't want another trillion dollars so they call the federal reserve (fr) to get it, the fr makes a leger entry for 1 trillion and poof, it exists, the the fr loans that "money" they created from nothing back to you and me WITH INTEREST. If there is a trillion dollars worth of stuff and the Gov't prints another trillion for free and adds it into the system the effectively make the first trillion in real goods and services, YOUR GOODS AND SERVICES, worth half as much. That is inflation. Right now real inflation, the amount of your wealth the government is intentionally taking from you is around 12 to 15 percent per year compounded. If you have any savings or a 401k and you hope to retire one day in 10 years you will have lost about 90% of your wealth. So, ya, not a fan of that.
@@pinnacleroofing9841 1/. That’s not how our monetary system works. 2/. Banks create most of our money supply. And inflation doesn’t care if you spend government issued dollars or your bank issued credit card. 3/. You’ve just been brainwashed into hating your government issued dollars & loving banks. Banks appreciate your undying concern over their bottom line at your expense
Question: To Whom are we in debt? The bondholders? What are bonds? Interest-bearing savings certificates. Where is this money now? In the economy. So if we pay all the national debt back, we have no economy in that currency. The Wienmar mark was exchanged for the land rent mark. Also, the Wirmaer Republic purposely inflated away the currency to try to get out of the reparations of WW1 by exclaiming; we're broke! France moved in on the industrial Ruhr valley to claim 'product'. Thus, there was the rise of authoritarianism to fill the void, as warned by Keynes. Japan has no inflation due to the money being saved by many who remember the 1990s; when currency is saved, it is retracted from circulation and has no value to the economy as it's not exchanged for products or services. If the Japanese savers all decided to buy land or a specific type of car if that could not be supplied in enough volume, the product/land would inflate; only then would a retraction of surplus money be required either by interest rates (neoliberal policy and regressive) or targeted taxation (Keynsian and progressive).
This entire video misrepresents MMT. MMT in no way claims that the Fed can just print as much as it wants. It merely claims that federal spending creates US dollars and that taxing destroys already creared dollars; that deficits provide the dollars that the privste sector and foreign countries use; and that federal "debt" is not money the government "owes" but money the private sector "owns" as savings.
You misrepresent reality just like MMT does. MMT is rubbish that is badly thought out !! Don't expect the MMT theorists to be able to do accounting or explain things like their claim of how taxes create a value and acceptance of money but when the money failed due to inflation in over 30 countries in the past 80 years there were also taxes that did not keep the money in any way valuable Even their own governments dumped their own currency in favor of another country's money. The ideas they push have failed time and time again.
@@TheControlBlue No, it is not. MMT scholars explicitly say (as do Allan Greenspan, Ben Bernanke, and the St Louis Fed) that the US government can create as much money it wants to and pay it to someone. And that is true. But MMT proponents caution that spending beyond the country's productive capacity would be inflationary. As long as we have unused resources, federal spending will not be inflationary. Besides, bank lending creates far more money than does federal spending. I know you want to blame MMT for anything that goes wrong with the economy, but bear in mind that a lot of things can cause inflation, even without expanded dollar creation.
In order for MMT to work it needs a couple of things : 1. Extremly more formality in economy 2. Extremly more bureaucracy to guarantee formality 3. Extremly more data analytics and trafic information to guarantee bureaucracy 4. Artificial inteligence to analise data ( couse human resources cant at this level ) 5. All this leads to FED regulating the taxes not the goverment to control inflation and the Banks acting as FED to decide who is going to take a loan. 6. Who takes a loan acording to a business plan and accomplish it 100% or more is not going to pay back the loan 7. Who takes a loan and fail to accomplish it totaly will be immediately closed 8. The data analytics its enormous and the most likely MMT can be applied is the State and Enterprenours ( in order for MMT to be applied in consumers it need an insane amount of data to be analised by AI ) 9. Wages can be controled thrugh indexing monthly 😁 ( means you may take a diffrent wage evry month but with the same purchaseing power ) Ps. its welfare that drives the system to be pushed to its limits and print money and couse inflation etc etc.
Congratulations, you've managed to pull nine nonsensical thoughts out of your arse with a liberal helping of spelling mistakes that really add a lovely sheen to the undertaking. All the best for your future endeavours on the internet.
@@yancowles liberal arse 😁 What i said, desperately needs like the perfect justice system and the liberals are far from just. They are a ideological garbage destroying not only the justice system. I dont think im liberal buddy, i just think capitalism is being stretched almost at its limits
Also it’s a pathetic mentality. Raising taxes on the consumers to hopefully mitigate the problem created by the government and corporate elite. Any citizen proposing raising taxes is a cuckold.
@@onebeanyboi9204 that money is simply being confiscated and redistributed by government. The physical dollars aren't being destroyed or removed from the economy. Printing/creating currency that isn't tied to any real world value devalues the currency and is the definition of inflation.
@@onebeanyboi9204 Are... are you assuming governments put the collected taxes in a pit and burn it? That collected money goes straight back to the economy, my friend. I don't think any country actually puts that cash in a vault.
@@crusaderACR Everything is done over the internet. You’d be surprised. Also MMT is not saying you can’t control inflation with the IOER, federal funds rates, and other interest rates… MMT provides the framework and informs the reader/person how the real economy of a fiat currency works. MMT also adheres to how our current banking system works. A home loan for example is done by a bank typing out the balance you have on a very secure excel sheet. No transaction between accounts are actually made.
If money is printed, then spent on interest bearing assets, and then it's paid back thus taking the money out of circulation again and using the interest towards the deficit you can get by without inflation. We're not though. We're printing money for consumption in the form of transfer payments. We're just consuming now at the price of consuming later. That is going to cause inflation to continue to climb.
Inflation is not bad if the value of the dollar increase. The value of the dollar increases if there are amount of goods/dollar being produced by those who accept dollars for payment, increase faster than the available amount of dollars in the money supply. Thus, a 3% rise in inflation is justified by a 3% rise in productivity. What matters today is whether the loans issued by printed money will pay for themselves.
It is still bad. The ones printing the money aren't adding any value to the system while feasting on those that are creating value. The issuing of any dollar should be bound to something finite and valuable like gold, or to any other value lik3 work, products services etc . and not just thin air.
@@mrroboto680 "The ones printing the money aren't adding any value to the system while feasting on those that are creating value. " This is technically true, but you can say the same thing about taxes, and most people are okay with it and understand the utility of collecting it.
@@GoldenRockefeller taxes are adding value, except the overhead lost by management/maintenance of the process and distribution. But as you say, there is a utility to some of it. The issue with taxes is the value added is not always fit what I value, or my society's value, which reduces it's utility. As for "the ones printing money not adding value" Mr. Robot mentioned. It's not the printing of the money that takes away the value. Double the money supply, the value stays the same, but the # of dollars something is worth increases. The issue is lag in the system, and not all areas inflate at the same rate. For example my wife recently got a 10% market adjustment in addition to her yearly raise. I have yet to receive such a market adjustment 😅. In effect, I am making less now, since my money is worth less. My house on the other hand has maintained its value by increasing in dollars.
@@LearnLiberty MMTers say that government funding is not a thing. They issue the currency. They pay for things by logging onto a computer and changing numbers on accounts at the fed. That is how the government spends. It's like saying that the guy keeping score at the football game needs to get the points before posting them on the scoreboard. The purpose of taxation is to drive the value of the currency. You should already know this if you're making videos like this.
I stumbled on MMT last year. I watched some lectures on it and listened to debates. I adhere to the Austrian School of Economics. MMT is somewhat logical in explaining the creation of money. But their policy plans are just STUPID
Am very curious as to what you think "MMT Policy" is? MMT factually describes how the monetary system works and doesn't have a "policy framework" in it...indeed, it is apolitical in so far as the core framework only describes how the economy works.
I came here with an interest in MMT, hoping to hear valid counter-arguments (I have doubts about it's application in the global south, for instance). I have to say, while I appreciate the attempt at neutrality, I am dissapointed, there is no balance in this debate (Keaton has just enough screentime to say "wait, there's more" before being cut off) and the arguments given by the video seem flimsly. MMT is not about printing more money, although the potential exists, and from what I've read inflation is absolutely still a thing in MMT, it's just handled differently. In my opinion better. The video states that "even one dollar is inflationary" but that discounts economic capacity and the potential for expansion of production, it discounts supply-side or demand-side inflation, it discounts stagflation. At its heart, from what I've read so far, MMT is an argument for the inclusion of fiscal policy in monetary policy. For instance if the housing market is causing inflation, through a high demand *and* weak supply, then fiscal policy to expand that supply can be anti-inflationary. It doesn't all have to be the one big crude lever of interest rates that we currently use, "cooling down" the economy while we are at risk of a recession, because that's the only tool we have. MMT suggests looking inside the basket of goods that produces CPI, and taking a more surgical approach. That might mean allowing more debt, it might not. Certainly, the thought that debt is bad is a school of thought that has had to radically shift over the years. It used to be thought that countries should have a debt-gdp ratio of 0.5/1. Then it was 1/1, now it seems a higher ratio is not that bad after all, and countries are not flooding to sell their reserve dollars at all, despite the US having crossed the rubicon. At the end of the day it's not that debt is good, it's rather that a country is not a household, and its budget should not be treated as a household budget. The "government choices vs consumer choices" point is particularly poor. If people want houses, demand is high, but supply is weak and consumers are competing with very large leasing corporations, the government is hardly supplanting consumer choice by fasciliating increased supply. Is all fiscal policy is somehow anti consumer choice? I hesitate to disagree so strongly with such an educated economist as Davies, but it frankly seems silly. Maybe there is an underlying faith in the perfection of The Market (capital M) as some objective fascilitator of ideal choice that I just don't share. The real world is messy, people want things and need things that they don't currently have. Fiscal policy can absolutely play a role, and it absolutely need not drown out consumer choice, I can't believe that's an argument. Are we drowning out consumer choice by providing schooling, healthcare, by funding vaccines, by investing in promising industries? Sheesh. MMT is not about printing money, it never was. I've never seen a paper by proponents of MMT or a video explainer saying we should just print money. MMT says the budget doesn't have to be balanced, that doesn't mean we can just print money and not worry. It's an easy stick to try to attack an interesting theory with, but it's cheap, lacks research. I'd rather hear more about countries that don't have monetary sovereignty, I'd like to hear more about the ratings agencies and their role and potential reactions to a non-balanced budget. I'd like to hear about government bonds and what happens to the financial markets if they are expanded. I'd like to hear about MMT's rather strange thoughts on imports and what that could do writ large. I'd like to hear about market guarantees and when that hasn't worked (because at times it certainly has worked). There are so many potentially good counter-arguments to MMT without needing to trivialise it into the straw man of "printing infinite money".
The Austrians have been saying hyperinflation is imminent for the last 40 years, isn't there any part of your brain that questions the theory that has been wrong consistently for that long?
Wow. Really terrible, even the video description is completely wrong. MMT did not come from Keynes. If anything it comes from Chartalism which predates Keynes. In fact Keynes mentions Chartalism. MMT was independently created by a guy named Warren Mosler. Also having the power to levy taxes has nothing to do with being able to print money. That whole paragraph is completely wrong. At 1:40 in the video Davies says MMT proponents say the government doesn’t have to worry about inflation. This is completely wrong, MMT says the thing that the government MUST avoid is inflation. MMT says the government doesn’t have to worry about the debt, what matters is keeping inflation under control. Davies appears to know very little about MMT and obviously didn’t read Kelton’s book or he wouldn’t make the statements he did.
Printing money is inflation. Not rising prices which are just an effect of inflation. Japan has spured inflation. Look at the cost of real estate in Japan. Imagine how much richer the average Japanese citizen would be if they hadn't inflated ....
it's one side (the most common side) of inflation, where increase in liquid capital causes a surge in demand. the other side is where product is decreased or slowed (say, during a lockdown), causing a dearth of supply.
MMT describes how the economy works. Our taxes do not come first to fund the national government. The government establishes the currency and then as needed, removes some from circulation
whenever the federal government spends it's spending new currency into existence. Whenever it taxes it's taxing existing currency out of existence. Just asked economist Professor Stephanie Kelton. Currency issuing governments don't need to find the money to pay for anything because they create it as they spend. How do you think dollars get into the economy.
None of whom who understand how our monetary system actually works. Nor do they understand the role of law, lawyers and court decisions in creating markets. So I’d suggest you listen to an interview with legal scholar of finance and corporate law, Katerina Pistor on her book “The Code of Capital”.
Legally the US is required to pay its debts first(senior position) then and only then they can fund the government. Other government agencies would have to be cut before they could actually default.
These are simply political choices since the Fed can always pay for whatever is for sale in U.S. dollars, including financing government programs or paying off debts. There is no practical limitation except political will, inflationary pressures, and the real physical constraints of the economy.
@ there is a clause in the constitution that says the debt of the United States will not be questioned. This will force them to print money rather than default. Monetizing the debt and causing the subsequent inflation accordingly
@ The government is paying interest on government bonds but there isn’t a scenario where everyone suddenly runs to re-denominate their Treasury bonds into greenbacks, and even if there were, the U.S. government can do that without a problem. The U.S. Treasury bond market (aka the national debt) is operated as a service to investors. But we don’t *need* to issue bonds if we don’t want to. Treasury bonds are not how we pay for government spending.
@ yes it is. That’s why we have refunding rounds in the treasury market. The treasury issues bonds that are bid on by 3 rd party investors while the FED is buyer of last resort. Could we just print the money to cover our bills in excess of our revenue? Yes but that would be exceedingly inflationary. So we pay the inflation tax in buying power. To the extent that the bond are bought w existing dollars it is not inflationary because it does not add to the money supply.
Gold failed because governments lied about actually being on the gold standard in the 70’s and caused inflation. I don’t want government to handle my currency anymore. I want independent currency. I want BitCoin
@@LegalAutomation How about a digital currency that is actually backed by something, like gold. A decentralized, non-government controlled currency isn't all that great if it's not backed by something in the real world. Something that has value that extends beyond its potential to record a transaction.
@@theakountant8444 That requires faith in the government to not just debase it again, which is unlikely. If we're going down the road of faith, then why not go with something more convenient in every way? Crypto
@@theakountant8444 I’m not opposed to gold… except that leaves the exact same problem of: who on the planet retrieves, stores, and does the bookkeeping? I don’t trust ANY government agency to do it. I don’t want it. I want decentralized currency without any central authority.
Critics and lay proponents of MMT tend to over simplify and focus on one or two variables when there are many variables at play, especially regarding inflation. There is no mention here of monopolistic price manipulation. No mention of availability of physical resources, infrastructure, labor. MMT is a way of understanding what has already been happening since we left the gold standard. If we strengthen supply and infrastructure, punish (tax) greed-flation and encourage competition (aka weaken monopolies) we can increase dollar circulation and/or US bonds issuances without devaluing the dollar.
They're acting like this has been a one-time experiment with MMT, but we've been doing MMT for decades already. Also, the idea that the USD will lose reserve currency status is bogus. It doesn't have to be perfect, it just has to be better than any other competitor currency, which it is. The strength of the US military and its tendency towards freeish markets is what distinguishes it from other theoretical holders of the reserve, unless you let someone convince you that the world will simultaneously agree that a Communist country like China is a better future bet towards currency stability over the US, which is a ridiculous thought. The power of "fiat" will be cemented when the US, like China, transitions its currency to a digital one.
False dilemma fallacy. You seem to be proposing that the Chinese Yuan is the only other option. Have you heard about EUR or GBP? Also, it'd be just stupid to just have USD as a reserve. That's why countries have other currencies as well. USD accounts for under 60% of the global currency reserves. EUR ~21%, GBP ~5%. If the USA just keeps printing this much money (and assuming others don't do the same), USD could lose the podium - and not to a communist country.
The digital US dollar will not be able to compete with Bitcoin as a preferred international currency unless the US hard-codes in an inability to print them at will. Including not coding in a pegging to the US dollar which they can already print at will. We know they won't do that so Bitcoin will become the reserve currency.
USD became international fiat money because the USA had the most considerable gold reserves. But today, money is not dependent on gold, and when other country sees that the USD is depreciating, the desire to use USD or save their money in this currency will be reduced. So MMT is harmful to State. I believe cryptocurrencies represent future money because they are decentralized and dependent on the market.
@@LearnLiberty You people must know that the debt ceiling is self imposed and the a default is impossible but your video starts with a very dishonest claim that the US is at risk of default. Please, if you have the courage of your conviction, can you advocate for your position without making videos that are full of lies. Inflation may result from the present monetary policy but default will only occur if congress decides not to print the money. Congress does have a tendency to play political games with the debt ceiling but default is not a real possibility and you have to know this already. Shame on you. Advocate for your position with honesty and integrity.
If you can only pay tax in a particular currency then that particular currency has intrinsic value to those who are required to pay that tax and you. In a society that values a regulated commons such as a quality legal system, clean food supply, good free roads, competent administration, etc. then through the imposition of taxes labour can be recruited for the provision of those needs in exchange for the settlement of tax debt. Within a democracy the coercion of taxation is determined by the collective or their representative while in an autocracy taxes are determined by other means. Makes sense.
For starters I'd like to point out the ways that this video is misleading. The debt ceiling is a self imposed limit on debt. Congress has decided to make default a possibility. This is elective. Deficit spending has already been going on for decades and what are the negative results? There certainly has been Austrian economists freaking out the entire time, but the results are a robust economy and a lot of growth. How much longer are you going to believe these people? It's far too simplistic to say that deficit spending is inflationary. It can be, but it can also be deflationary. America has the most expensive health care system in the world with far from the best outcomes. Socialized healthcare systems are far cheaper. Canada's system is about half price and everyone is covered. If government cut out the corrupt insurance and pharmaceutical companies by deficit spending prices would most likely go down and not up. To not believe that would be to ignore all the data from the countless numbers of models worldwide that exist in present day. There is no MMTer that thinks that you can just print money endlessly without consequence. Rather than believe that tax revenue is the limit, they believe that the resource base is the limiting factor. If a country has a food shortage and the government prints money and sends everyone a check to buy food with that will be inflationary because there isn't enough food to go around. If the government instead incurred the same amount of debt by importing food and developing crop yield boosting technologies it wouldn't be inflationary. My point is that inflation is oversimplified in this video. There are many other misleading things here. I think that most of what Dr. Davies says is complete nonsense. I think it's likely that he doesn't even believe the garbage that he's spewing. This stuff about production no longer catering to consumers is bonkers. What's your proof? Also the way that they take Stephanie Kelton's sound bite out of context and put it in their own framing is the stuff of political ads. If Learn Liberty had the courage of their conviction they wouldn't resort to such shady tricks. For the record if the government has outspent it's resource base and caused inflation the right thing to do, if that circumstance were to exist, would be to cut the spending and not to raise taxes. Taxes would be used to reduce aggregate demand in an overheating economy. If anyone would like to learn more there are many interviews on UA-cam. There's one done by Anthony Scaramucci. The Mooch seems to be a believer. Warren Mosler a guy worth listening to in my view. His success investing should make you think that he just might know what he's talking about. Every dollar in your pocket is a dollar that the government has spent into existence and has not yet taxed out of the economy. A national debt of zero is national wealth of zero. This stuff isn't even theory. It's the observations that the theory is based on.
Yes I would Disagree with this given that construction of housing development vs increase of population allows for that good(housing) to go up due to the lack of the housing supply what causes the lack of supply, the lack of Gov spending on affordable housing, what is creating the price of goods and services to go up the lack of USfood supply through manufacturing, and the fact the interest rates that are meant to cut down on "private sector borrowing" is not helping because the demand for currency isn't going down due to lack of Gov spending causing the cost of all goods and services to go up because not only to business have to pay interest on the credit they "Borrow" to buy the consumer inventory but they also have to pay extra on some commodities due to sanctions and wars keeping the growth of some commodities from being supplied either all together or in a timely way. and when we are taxed that's redeeming a Gov Liability not to fund future spending.
@@bradlarabell9412 Our legislative branch, both sides of the aisle and our executive branch sure seem to be moving the country in that direction. Have a great day.
Both schools are correct because they are different. The government may cause a deficit. Printing money doesn't cause a deficit, though it might cause imbalances. .
Then you will be gratified to learn that whats in this video isn't MMT and strongly suggest to read some actual MMT articles and books. Start with Deficit Myth.
Before accepting the sun as the center of our solar system, there was the rings in rings model for how other planets circled the earth, mmt is essentially that but for economics.
The Professor was almost immediately wrong. MMT Economists make it very clear that you absolutely DO have to worry about inflation. What you DON’T have to worry about are deficits and debt. This breakdown is wildly inaccurate.
Tim, thanks for your comment! I can't fully agree - deficit and debt are big problems, but inflation is very alarming because it significantly affects the economy's stability. Also, printing harms everyone and reduces the value of money that people hold. If you are interested in what Antony Davies says about the debt, watch the video: ua-cam.com/video/EPjrFjAxwlw/v-deo.html
This video fails to explain the difference between MMT and our current monetary system, which is "Central Banking". The US central bank, the Federal Reserve ("the Fed"), increases the money supply to accommodate population growth, and/or GDP growth, by taking newly-printed money to the Bond Market to buy "high-quality" bonds, because high-quality bonds maintain their value. (The bond-sale proceeds are deposited in thousands of bank accounts, which increases the Banks' excess reserves, which enables Banks to make more loans, which further increase the money supply, via fractional-reserve lending. But a couple years ago, the Fed temporarily reduced the reserve-ratio to 0%, so, presently there's no lending-constraint.) To fight inflation, the Fed retrieves money from circulation, at any time, by simply selling some of the high-quality bonds previously purchased, which reduces the money supply, and kills inflation. However, if the Fed sells too many bonds, a recession could result, like the infamous 1982 recession. MMT proponents argue that newly-printed money can be put into circulation by purchasing "goods", instead of bonds. The goods so purchased would provision government social programs, infrastructure, the military, hospitals, foreign aid, etc. But these "goods" can never be "re-sold" to retrieve money from circulation, if significant inflation ever threatened the economy. Instead, MMT proponents argue that reducing the money supply (to fight inflation) can be accomplished by issuing more Treasury Bonds, or raising taxes, to drain excess money from circulation. (MMT proponents acknowledge that the bond-sale proceeds and tax-proceeds must be destroyed, because spending said proceeds would put that money right back into circulation.) MMT proponents fail to acknowledge the obvious problem with raising taxes-or-debt to fight inflation, i.e., it needs to be to be done ASAP, before inflation becomes significant and re-establishes "inflationary-expectations", which was the plague of the 1970s. MMT proponents also fail to acknowledge the obvious problem hoisted upon taxpayers, if taxes were suddenly raised, because taxes are paid throughout the year, not in lump sums. Most taxpayers would be forced to tighten their belts, which reduces consumption, which reduces Aggregate Supply (a.k.a. GDP), which fans inflation (because there are fewer goods). How can I say this? Well, it already happened during 1970-1981, when the U.S. suffered through 3 "inexplicable" episodes of "stagflation" that no mainstream economist could explain. Only one economist, Robert Mundell, could explain the causation: Mundell explained that stagflation sadly resulted from backward economic policies, which I've simply parroted, above, without giving Mundell due credit until now. The problems with "borrowing-money-out-of-circulation" are also subtle, but just as dangerous.
The additional problem with MMT is that the money collected in taxes to pay off bonds has to actually be used for that purpose and politicians don't have a good record of using taxes to pay off bonds but have a long record of borrowing more and more and kicking the can down the road. MMT policy (Kelton) is printing more and more money to pay of previous bonds that mature. - Utterly stupid stuff that just increases debt and burdens taxpayers which resembles what happened in Zimbabwe early this century and is about to happen again. See their Zimbawe government bond scheme of a few years ago that paid stupidly high interest and now is resulting in what you might guess - another round of growing inflation
"Here's why" I watched this video three times. I couldn't find why. So far it seems like NOT increasing the debt ceiling is the bigger risk. Recent inflation is due to the limited supply-chain issues when world economies emerged from Covid lockdowns. And then there's the Russian invasion if Ukraine and the price of oil. But after almost a year of sanctions, Russia's economy hasn't collapsed. The Ruble is not a reserve currency but it IS a fiat currency. And then there's the world's richest people who hoard all their money in tax havens, shell companies and secretive bank accounts. If treasuries don't print money, there will eventually be none in circulation. Germany's currency in the 1920s was still based on gold. Japan's Yen currently is not.
Mmt is one of the most misrepresented subjects. Most of the thing the professor's says incorrectly mischaracterises mmt, I would says it's almost the opposite of what mmt is saying.
MMT is the biggest scam of our current times. There's no such thing as free lunches. This system only benefits the wealthiest and government institutions. Moreover, it devalues its currency. It's based only on the trust of the institutions and indirectly in the US military power. That's what they want, more taxes to fund the military industry complex and increase the dollar hegemony worldwide, as well as the oil sector in a global scale.
Spending in a deficit is very oxymoronic. There is no way around it. You pay off debts by making more, spending less, or both. A loophole or math formula will never change that.
@@zacharyneilson9220 For you to make a fortune on Bitcoin, it must be a complete disaster for some who were left carrying the bag when the market price finally crashes or corrects itself. And when bitcoin crashes, it crashes big.
🔥 Watch Prof. Davies' Latest Video: 7 MYTHS ABOUT THE GREAT DEPRESSION - ua-cam.com/video/q4ZMMH6LxXc/v-deo.html 🔥
Hi - MMT student here. This is a complete mischaracterization of MMT. When you say MMT gives a larger footprint to the government over the private sector, that's not true. It's says when congress authorizes new spending it's creating or "adding" new/fresh (electronic) dollars to the economy (bank recipients receiving NEW +net additional reserves), and not being "financed" by existing private sector dollars (reserves) already existing in someones bank account (ie the buyers account) - as the "crowding out investment" theory and fear mongering goes of increasing interest rates, etc.
The easiest way to think of it on a macro banking level is new spending is NOT converting existing reserves in to securities ,aka investors holding liquid cash as reserves and using these reserves to purchase government bonds which ultimately moves their purchase amount from their reserve account in to their securities account as a bond with no net change to their account balance (like moving money from your checking account to your savings).
neo classical econ incorrectly states that new spending taking money out of the economy to purchase the bonds, aka no longer moving money from your savings to your checking rather "using up" the total amount of reserves in the system thereby making them more scare and "driving up interest rates" and crowding out investment, etc.
Incredibly disingenuous smear of what MMT actually states. Wonder where your funding comes from to spread these lies hmm.... 🤔
The only way to "prove MMT wrong" is to either grossly misunderstand it, or to intentionally misrepresent it. No matter which this video is doing, it presents a completely distorted, unrealistic view of MMT's ideas. This guy either doesn't get it, or he doesn't want you to.
This guy's statement that MMT people say "the government doesn't have to worry about inflation" is the exact opposite of what MMT proponents actually say. MMT says inflation is in fact THE thing the government has to be concerned about. The government cannot be forced to default on any commitments denominated in its own floating exchange rate fiat currency, but if it spends in excess of the available labor or material resources available for sale in that currency, inflation will result. But ALL spending comes with an inflation risk. Excess bank credit issuance can drive prices up. There is nothing special in that regard about government spending. If, for example, severe supply shocks occur, inflation will result due to restricted supply regardless of what the government does.
But MMT is not saying anything new and even seems self contradictory. It’s a lens to encourage deficit spending because deficit spending doesn’t can somehow provide people with means, but it can’t do it too much because of inflation ? Economists are very much aware that inflation is a limit on fiscal policy and that it doesn’t matter how many treasuries it issues and how much money it moves around if output is not growing.
So what is it? The core question of economics: is how do we make more output so everyone can be better off. MMT does nothing to answer this question and completely divorces money from its purchasing power in the real economy
But MMT is not saying anything new and even seems self contradictory. It’s a lens to encourage deficit spending because deficit spending can somehow provide people with means, but it can’t do it too much because of inflation ? Economists are very much aware that inflation is a limit on fiscal policy and that it doesn’t matter how many treasuries the government issues and how much money it moves around if output is not growing.
If the government is borrowing and spending to put people to work and invest in infrastructure and other less attractive to the private sector but essential capital projects, then that is one thing and mainstream economics already recognizes the utility of government investment.
So what is it that MMT is adding to the discourse? The core question of economics is: how do we make more output so everyone can be better off. MMT does nothing to answer this question and completely divorces money from its purchasing power in the real economy
@@nathaniel1670 That is absolutely false. Let me break it down. There are 3 (maybe more but these are the main ones if I am missing one which I don't think I am) ways we get money into the system. Fractional banking and Congressional appropriation, and The Fed buying up bonds. What MMT is saying is that you should be able to spend more in a way that not only builds things, but also helps people. Of those three ways of injecting money supply, there is one that hasn't been doing it's job. Congress. They are not appropriating money, and if they do, it is something so watered down or only gives more to the top earners. When Congress doesn't spend, generally the Fed has to do it for them, and that skews the monetary gains to the very top incomes/companies who own bonds. People on the lower end don't own bonds. Now if Congress wasn't so phobic about spending the Fed wouldn't have to buy back bonds to create new money
@@scpatl4now You’re so sure? Where are you getting your information from? Most of what you wrote is incorrect.
The only entities that regularly create new money are banks. They use the fractional reserve system to create new money.
The Fed only puts money in andand pulls money out of the economy, money that already exists. When the Fed engages in open market operations, it buys bonds on the market, not directly from the government. The money it buys the bonds with is money that already existed, it is not new money. If the fed were to run out of money to buy bonds with, there would be no more bond buying because the Fed cannot literally create money. It simply hoards it or spends it to change overall liquidity.
There is the last issue of the government. It can technically only issue bonds or use taxes to fund itself. The issue with US bonds is that they are highly liquid. They technically are considered M2 but they effectively can "slip" into M1 because they are so liquid. When the government issues debt, and spends its newly acquired money, it is transferring purchasing power in the economy. The receiver of government expenditure money now has more purchasing power, but the bond buyer still maintains a lot of their original purchasing power because government bonds are liquid and almost function like money. They can easily resell it on the market for money or pay someone with it or buy goods with it.
If congress starts spending too much money, it crowds out investors because the Fed will necessarily have to contract the money supply and raise rates to counteract the inflationary government spending. Those higher rates will discourage economic growth, and that has implications for everything from mortgage rates to employment.
If Congress doesn’t spend and the government lessens its debt and deficits, the economy would in fact start to contract and the Fed would respond by buying bonds to increase the money supply. That is correct.This does effectively result in a money transfer to bond holders, but those bond holders tend to be institutional investors, not average citizens or even rich citizens.
The issue with the federal government isn’t that it is spending too little, it is that the funds are misappropriated and its spending can and does often increase inflation because the spending isn’t going toward useful investments like infrastructure but is instead going to social security and the like so that people consume.
So you get people having more money to consume more without increasing economic output, and possibly even worsening it since the government can crowd out investment.
Someone in Kelton’s position should be very much aware of the independence of the Fed. She is either being deliberately dishonest about MMT and the inflationary effects of government spending or she is putting up powerful blinders and willfully deluding herself.
@@nathaniel1670 That's a lot of writing for someone who has a fundamental misunderstanding how US currency works
Clarification: El Salvador hasn't "pegged" their currency to the US dollar or Bitcoin. They've declared them both legal tender (US dollar in 2001, Bitcoin in 2021), i.e. the people can buy/sell in those currencies without having to pay capital gains tax etc.
And your point, for every bitcoin, you need to cash it in, otherwise all you have is bitcoin, can you pay your rent with bitcoin, purchase your groceries etc. Without a countries currency bitcoin is worthless, you need a countries currency to have anything in your wallet.
@@lexer_gacha2419 crypto cities will be working on solving these problems. It's very very early in the game. But technology will naturally progress as always. Btc is the tip of a huge iceberg.
@@lexer_gacha2419 This is just patently not true. I can purchase whatever I want with bitcoin so long as the seller is willing to accept it. You don't need a countries currency to do this. There are places around me that accept bitcoin for rent, and I can buy groceries with bitcoin because I have. Bitcoins value doesn't come from fiat currency, it's value is a social construct (i.e. what will someone give me for it), just like all currencies. The difference is that governments can't randomly print more bitcoin to suit their needs at the expense of the poor/middle class.
Now I'm sitting here wondering why the CIA hasn't changed the regime in El Salvador.
@@nonyadamnbusiness9887 because politicians don’t see any monetary gain in doing so.
I feel this misrepresents MMT. In my research, MMT states governments (with a fiat currency not pegged to other currencies) can increase money supply as they wish. The only concern is inflation, however it also says inflation will not occur if the country has enough resources (human, natural, and capital resources) to increase output. Quantitative theory of money says price level x output = money supply x velocity. If money supply increases 10%, you will not get a change in price level if output increases by 10%. Everyone seems to ignore all this. The left says "oh we can spend whatever we want and anti-MMTers say printing money causes inflation. Both are ignoring what the the theory actually says.
what makes them think there's just idle production sitting around doing nothing? why on earth would that be the case?
In the real world it doesn't work like that. Imagine thinking that too much interventionism is good for the economy. Mises has explained it.
Except you can't increase the money supply by 10% and simultaneously increase productivity by 10%. Generally speaking if you give someone 10% more cash they will just work 10% less.
This sounds right but im a layman
@@cameronhoward99yeah and i guess too that if giving money to the poor just means they work less thats why they dont wanna do it.
Love how Prof Davies projects his own economic theory onto MMT and says that's how it is - as if monetarists won't end up "printing" money. What a joke of a professor
This video basically made an argument against our current politicians, not against modern monetary theory, which is a sound theory.
Yes, unfortunately there's a LOT of people on the left that looked at MMT, and somehow missed the part where they can't just keep growing the deficit and debt faster than the economy and not run into problems.
If the whole premise is that money gets its value from economic output and resources, then you have to respect that as a constraint, otherwise you will eventually have hyperinflation or run into serious problems when you're no longer the reserve currency.
I did as was suggested and researched MMT for myself and read a bunch of stuff online, as well as Stephanie Kelton's book The Deficit Myth to actually try and understand it. My conclusion is that this video doesn't really explain why MMT is wrong at all.
From what I have read and digested, one of the central pillars of MMT is the seemingly correct observation that monetarily-sovereign governments do not need to "balance the books" in order to work properly. This is extremely obvious when you just consider that the US, and the UK for instance, have run annual budget deficits for the majority of the last few hundred years. So any economist advocating budget surpluses to "pay down the debt" for its own sake is clearly talking nonsense.
Another core tenet of MMT from what I understand is the sensible suggestion that government budget deficits are an artificial constraint, with the real, tangible constraint being the productive capacity of the economy and its ability to absorb deficit spending, etc. This certainly is a novel perspective, as governments all over the developed world have, for decades now, been artificially concerned with their deficits in and of themselves when actually they should be more focused on the REAL economic constraints of an economy - its capacity to produce the goods and services we all need and want. In many cases, increasing the deficit to invest in skills, machinery, infrastructure, healthcare provision, or anything else a country might require and has the physical capacity to accomplish, isn't a bad thing. Inflation will only occur if the government injects TOO much deficit spending at the WRONG things such that the actual real people doing the work that the money is paying for can't keep up and so prices will rise. But that has nothing inherently to do with a budget deficit.
Yes, and this argument about reducing consumer space is just trash. Government spending goes to people who work for the government in salary and wages - and guess what they do....they consume! And I don't think they consume from the public sector do they?
@@PressureOnJulian Government wages aren't market efficient since the government can print whatever it wants to pay the workers and has no competitors, so that money gets misallocated and thus does not feed or create efficient markets. In the same way that I could print a trillion dollars and pay only you the money. You'd buy what you want, but the food sector would collapse because you could only eat or store so much for yourself, and if you try to choose what food other people need, you wouldn't actually know as well as they do. In the meantime everyone else's savings become crap because of all the free money you just threw around.
"Monetarily-sovereign governments do not need to "balance the books" in order to work properly."
Define "work properly."
@@EGarrett01 A monetarily-sovereign government with a fiat currency (USA, UK, Canada, Australia, China, EU as a block, etc) can ALWAYS meet its financial obligations. This is crucial since it means there's literally no way this type of government can be "forced" to default on debt payments or social security obligations through lack of funds, a luxury not enjoyed by countries such as France or Germany who are not monetarily-sovereign. The only way that happens for the UK or US etc is if the individuals in charge of the Treasury and government choose to take that path.
@@JGS2295 "Meeting your financial obligations" by printing up money is not necessarily "performing well" since government is in theory supposed to improve society. Printing up money to pay your debt is siphoning value out of American's savings. Do that too much and you'll have "met your obligation" while destroying your citizens' lives.
There is a lot of misrepresentation of mmt here. The irrefutable fact is that in a fiat economy with a sovereign currency(such as the US), the amount of money that can be spent is not limited by any commodity (such as gold) or by the debt ceiling. Like it or not, the government can 'print' as much money as it wants because it is not anchored to anything physical). The debt ceiling is an arbitrary limit.
The real cause of inflation is indeed supply and demand of goods and services, not by the supply of money. That is why the federal reserve's monetary policies don't work, and in reality tend to increase inflation. In the 1970's they cranked up interest rates for a decade without effect. It reached 16.65%. The real cause was OPEC which raised the cost of oil to unseen heights in the US, which caused a supply side crises. The mmt stance is that fiscal measures are needed, not monetary. For example, to deal with the supply chain issues we saw after covid, training and hiring more licensed truck drivers would have helped.
I will agree that it is a bit frightening to think of how congress might abuse this more accurate way of thinking about money.
The main claim of mmt is that "the only thing to worry about is inflation when offering cheap credit"
Which is simply not true. A misallocation of resources propping up wasteful undemanded/lesser demanded industries, over consumption from lower rates, asset bubbles building a false sense of wealth, a misallocation of resources into present-oriented ventures at the detriment of our future, a discoordinated time-capital structure creating risk of long-term projects being unable to finish as foreseen, *and* consumer price inflation are issues of monetary expansion.
They also define inflation differently. They define it as the cpi, & a terrible measure of it at that.
Your comment is a counter to a straw man argument of MMT. I agree the problems you listed are valid concerns. The nuance is that the theory works when we use actual inflation and not the one people that don’t understand economics use (CPI). I could find idiots that agree with your economic theories that would make it sound stupid also but then I’d be straw Manning also.
Anyways all those things you mentioned would be reflected in actual inflation. My understanding is that MMT says the government could spend unlimited money without going bankrupt. This is true. The reason they shouldn’t is that it would cause inflation in the forms you describe. MMT is a valid theory which like any theory can be misinterpreted to justify stupid things.
Just because stupid people like that lady misinterpreted it, doesn’t mean it isn’t valid. It’s better to say, yes MMT says you can spend unlimited money if you create an equal amount of goods and services to offset the money creation. However, the government has a horrible track record of doing this unlike businesses. So let’s keep the money with the businesses that can create $2 of goods and services with $1 of capital.
@Zachary Neilson You're not disagreeing with anything I said. I made the same point in my comment. You said that the government can spend as much as it wants, as long as it's offset by rising market demanded goods & services, then went to say that the government is terrible at doing this. That's exactly what I stated.
@@zacharyneilson9220 I was under the impression that you were countering his point but instead it sounded more like an agreement with a bit of explanation or I missed something?
@@austinbyrd1703 yeah I think we agree on the negative effects of government spending and also on the definition of inflation. My point of disagreement is that MMT doesn’t disagree with us and isn’t wrong. It’s the statists taking half of MMT that are wrong and defining inflation wrong. I understand that most people claiming to follow MMT are statists but that’s only because they only know half the equation. They heard government can spend unlimited money and not go bankrupt and stopped listening before the inflation part.
I think our approach should be to explain why MMT supports limiting government spending as opposed to saying it is wrong…, because it’s not.
@@zacharyneilson9220
Inflation doesn’t care if you spend government issued dollars or bank issued credit money.
The basic questions are:
What should our government pay for when it issues our currency?
What should banks fund when they issue loans?
Who/what to tax to help regulate inflation and inequality by removing excess government spending from the private sector?
What should interest rates be?
You use government issued dollars to shop & settle our trade deficits, pay your bank back, pay tax & net save.
While popular discourse about MMT is dominated by talking about government spending, MMT itself is just as concerned about the role of government chartered banks in our economy.
I have seen enough videos on MMT to realize that most critics make basic mistakes when they describe what MMT is about. Davies fits this profile.
So far, all I can tell about MMT is that no matter what you say about MMT, a MM theorist will show up to say you're wrong but not explain anything.
1 50, MMT does not say you can print as much money as you want without consequence. The restriction is the availability of resources, i.e., labour power and natural free resources in/on the ground. If these are in short supply, relative to the issued available currency, then you get inflation relative to the resource, the infinite being money, the finite being the resource. That is a terrible misquote off the bat. The reality is that it's not money as a fiat currency ( just digital numbers by decree) but a resource that determines a country's wealth.
Mmt just explains what happens. Anyone in the banking industry knows this.
MMT is not just about printing money. It is about the definition of money and its essence. Most countries target 2% inflation, and for that logically NEEDS to print more money... Moreover, as the economy expands and grows, it logically demands more money in circulation - if 100 people spend $100 a year, theoretically I need 10,000 in existence... but if my population grows to 150, and everyone spends $200, I need $30,000 in circulation... And this money can be created as A) national debt, or as B) a bank loan to an individual... this logically creates more debt, but who do we owe the money to? The state owes them to the central bank (FED), which is itself a state institution (in simple terms)... And to whom does the state pay interest? Again to itself... The private sector has a limit to how much debt it can safely create... So at some point you MUST have a government deficit to even be able to produce and print enough dollars... And at the same time, since the government's biggest creditor is the government, and the state can print any number of dollars for itself, there is a certainty that the state cannot go bankrupt... Of course, the problem of inflation and confidence in the currency remains, this is the limiting factor... To say that I can print money without restrictions is wrong, but anyway, it is also wrong to claim that the amount of the national debt (in the case of the US) has any real meaning...
Nicely said.
Yeah, money isn't a resource, but a social relationship, a method of allocating resources, a measure of wealth, a method, an abstraction. So the numbers are just a tool that the economy uses.
This is the real "voodoo economics".
Fairy tail economy
No... the voodoo economics is the taxpayers narrative.
Starting point where does the money come from for you to pay taxes given under law no one can create money but the Federal Reserve, or they would be imprisoned for counterfeiting.
TAXES DO NOT PAY for Congress spending... rather Congress must spend as the monopoly issuer of the USD via the Federal Reserve before anyone has USD to pay TAXES.
Learn how sovereign currency works... because the wealthy corporates certainly know and take advantage of it!
We are not going to get out of the economic doldrums as long as we continue to be obsessed with the unreasoned ideological goal of reducing the so-called deficit. The “deficit” is not an economic sin but an economic necessity." ~ William Vickery Nobel Laureate. Vickrey was awarded the 1996 Nobel Memorial Prize in Economic Sciences
Based on defintion of sovereign currency and the role of the Fed, apply some simple logic with basic accounting knowledge, and legislation which you can look up and it is clear that the taxpayers money narrative is one huge myth.
a) The USA is a sovereign money nation... What that means is the USD is the currency issued by the USA.
Sovereign money is legal tender issued by a monetary authority, in most cases by a nation-state's "independent" central bank. In the USA that is the Fed.
b) Central Bank (The Fed) is an integral part of the financial and economic system. They are usually owned by the government and they are given certain functions by legislation raised by the Congress to fulfil. These include printing/creating money (which primarily occurs via key strokes in a computer every time they spend), operating monetary policy, lender of last resort (to the commercial banking system) and ensuring the stability of financial system. Ever hear of "supply bills" or "appropriation bills" those are the instructions from Congress to the Fed to fund spending by creation of money.
Based on this information it is clear that the monopoly creator of the USD is the Congress via the The Federal Reserve. Making state and local Governments along with everyone else money users.
And we know this because if anyone else tried to create the USD they'd end up in prison for counterfeiting.
So from an understanding of sovereign money and the central bank, we know that logically USA along with other sovereign money nations must be a spend then tax economy... Congress spends money into existence. From an accounting prospective that creates a Liability for Government, and an asset for whomever the recipient of that Government spending is. As the Government is the source of money and the creation of money creates a Liability for the Government, we then know when people pay taxes it simply reduces that initial liability. Thus basic Accounting General Journal Ledger principles clearly show it is impossible for taxation to fund Congress spending. Note: Banks create credit not currency which they do under Government licence and we already know due to the function of the Central Bank that they underwrite that "credit"... lender of last resort.
The mathematical equation of the above is Sectoral Balances which state:
(G - T) = (S - I) - (X - M)
The above linear equation states that government spending (G) minus taxation (T) will equal savings (S) minus investment (I) minus exports (X) minus imports (M). In general terms, whatever the federal government spends minus taxation, that exact amount will be deposited in and distributed between the domestic private sector and the external sector as income. We can now aggregate (put together) the right side of the equation using brackets and define two sectors:
(G - T) = [(S - I) - (X - M)]
In other words...
The Federal government sector = The non-federal government sector
OR quite simply put: The Federal government sector’s deficit is the non- federal government sector’s income.
The Government's red ink IS the Private sectors black ink.
A Government surplus = Private sector debt.
AND as the Congress is the monopoly issuer of the USD they have no affordability issues as money is infinite. The restriction is the real resources including labour to produce or do the work not the money to finance the work.
To quote Harvard University "The most important misperception is that MMT is in some way outlining an ideal or a new regime that could be introduced. The reality is that MMT just describes the system that most countries in the world live under and have lived under since 1971, when the US president at the time, Richard Nixon, suspended the convertibility of the US dollar into gold. At that point, the system of fixed exchange rates-in which all countries agreed to fix their currencies against the US dollar, which was in turn benchmarked in price against gold-was abandoned. So since that day, most of us have been living in what we call a fiat currency system."
@@pamelakrause9311 money does not run the economy, production of goods and service does.
As Government spending gets a bigger and bigger part of the economy you produce less of consumer goods and stuff get more expensive to the public in term of work hours, you have to work more and more
Of course government will not default, but that does not mean your quality of life will not deteriorate in the process
@@pamelakrause9311 but you are corect, government does that since 71, and came up with a cool name now rather than trying to hide it.
That’s why, other than technology, our life standards is basically the same, and stuff like housing, with our parents afford early in life is now but a dream to younger generations.
This is not accurate. Everyone should check out Economics Explained video for a more accurate summary of MMT.
The first problem is in the title. Modern monetary theory is not a policy. It’s a theory. It’s a way of thinking about the economy not a prescription to solve public problems. The implication of MMT is that we can spend a lot more than we want, but that’s not necessarily central to theory of MMT.
You say that MMT is rooted in Keynes. This is true, but misleading. Keynes is the founder of modern economic theory and monetary and fiscal policy. Literally everything is rooted in Keynes.
Germany is the extreme exception. Not the rule. Hyperinflation does not happen in modern economies with a stable government. The Weimar Republic was unstable leading people to loose confidence, and thus loose confident in the central German bank, and finally loose confidence in the Reichsmark, leading to hyperinflation. As long as the US government remains stable is not on the brink of collapse (like Weimar Germany was) then people remain confident in US dollar. (Although to be entirely recent events last Jan 6 suggest that America might be on the brink of collapse).
Davies criticism claiming “there will be more things that the government wants and fewer things that people want,” is fair but once again misleading. MMT does logically conclude that there should be more tanks than cars, but it also concludes that there should be more public health care than $800 bottles of insulin. Who do you trust more, the corrupt politician or the oil baron? I trust neither but I’ll argue that the public has more control over the politicians than CEOS. We need to watch our politicians carefully.
My understanding of monetary theory is as follows. The most important rule is that there is an ideal amount of money that should be in circulation at any given time. If there is too little money in circulation, it causes economic recessions and too much unemployment. If there is too much money in circulation, it causes inflation. When a nation is experiencing an economic recession and high unemployment, and businesses and individuals are not borrowing enough to increase the amount of money in circulation, then governments must borrow and spend that money. If there is already the ideal amount of money in circulation and the government sharply increases its borrowing and spending, then it will cause inflation, unless measures to decrease the money supply by an equal amount are simultaneously implemented. These measures could include raising taxes and/or increasing interest rates. This, of course, would result in a small shift in the labor force as labor that was previously going to private industry would now be going to the new government projects. I'm not sure if this understanding qualifies as MMT. I have to admit that I was surprised to hear Stephanie Kelton say that raising taxes to fight inflation is not part of MMT.
Given this understanding, the question should be - Is the public benefit from the projects that the government is borrowing and spending to fund greater than the benefit from the labor those people who are now working on the government projects were doing before? If you're answering this question from a self-interest perspective, how you answer will depend a lot on how wealthy you are. If the government wanted to borrow and spend to make our dilapidated roads and bridges safe, I think everyone would agree that it would be in the best interest for everyone. But if the government wanted to borrow and spend money to pay for free community college or free no frills healthcare for everyone, and compensate for the increased money in circulation by increasing taxes and/or interest rates, than the wealthy, who can afford private high-quality healthcare and to send their kids to private high-quality universities, won't benefit from those programs, but would have to pay the higher taxes and/or interest rates. So they would be against it because it is a kind of wealth redistribution program.
This isn't a great representation of MMT. MMT does appear wrong, but not just for the reasons stated here. Kelton's own argument is that inflation is a problem, but that it can be controlled by managing demand, and therefore a role of state power should be to control aggregate demand to curtail inflation, while using increases in the money supply to fund state spending. So long as productivity increases outpaces inflation, that would work.
The problem is that it wouldn't do that. The problem is that it relies on an omniscient government who can accurately predict aggregate demand, retain confidence in the value of US assets, including issued debt and the USD, and that there are idle resources available for the state to use that the private sector isn't using. In other words, MMT is fine if you think that the natural interest rate is zero, you think there's no such thing as opportunity cost for state use of real resources, and you trust the state to effectively and consistently use inflation targets responsibly instead of budget targets.
Our government hasn't demonstrated a great efficiency in the use of our resources, or fiscal responsibility. I have no idea why any MMTer would think this is reasonable.
You're getting it wrong. Demand driven inflation has not really been a thing in developed nations and so controlling inflation with taxation is also not a thing. Could be one day, but for now it's not a thing. If you actually listened to Kelton and others you would know that there is not a single action to be taken to control inflation. Inflation is not straight forward. It can be caused by a variety of factors so the idea is to determine the cause before choosing an action.
@@gabethompson3211 Theres no world in which you can say "demand driven inflation has not really been a thing". That's highly contestable, and in some cases just flat out not backed by evidence. We have had both inflation and economic stagnation before, rather than coupled with and sustained by supply shocks. The 70s were a good example. Even if you ignore the evidence, that's a debated matter of public policy, but to argue that we simply don't see demand-pull is just absurd. The primary driver behind Keynesian stimulus is to manipulate and increase aggregate demand, to tolerate a rate of inflation in the short term and decrease unemployment. The whole point is to risk a demand-pull inflation in order to avoid cost-push. So I don't see how your contention has any ground to stand on, it's not backed by the evidence, and it's not even consistent with contemporary macroeconomic theory. I haven't even heard Kelton or Wray say anything like that.
I did listen to Kelton, and as I said in my comment, assuming you can accurately gauge and determine the cause of inflation is begging the question. My point is that her argument is fundamentally tautological even if you accept the premise of MMT. Yes, if you know enough to solve a problem, you know enough to solve a problem. But Kelton's prescriptions specifically rely heavily on the assumption that we know exactly how to spot inflation, rises in the nominal price level, as compared to rises in the real price level caused by natural disasters or other shocks. This is highly contestable even historically, let alone in trying to predict the future. We don't know everything. Stable monetary policy is important for this reason, to let the market correct itself, because we don't know how to fix it better than it does on its own.
Her prescriptions, however, should not be oversimplified to "just know how to do better lol". She focuses on increases in spending on jobs programs, measures to reach full employment, which assumes not only that we know what full employment is and that we want it (if it means Japan's situation, we don't), and also assumes a great deal of idle resources and that there's no opportunity cost to private industry that would decrease efficiency and productivity. In other words, she assumes that government spending is equal in productive value to private spending, and that government institutions have the capacity to set and manage inflation targets.
I listened to every word, but that doesn't mean I agree. I listen to flat earthers too. Don't assume someone didn't listen just because they disagree. That kind of arrogance has no place in effective discourse.
This was well said
Yes MMT is an absurd belief that relies on blind acceptence of an authority (government) that is headed by politicians having acquired by being voted in the specialist ability to know the costs of and benefits of doing every thing in the economy that produces goods and services people need. It is hard to believe anyone could be foolish enough to swallow this rubbish theory.
You say "therefore a role of state power should be to control aggregate demand to curtail inflation, while using increases in the money supply to fund state spending". How would any country do that even if they followed what you said ?
It is Not possible to control ' aggregate' demand if there is increased demand created by the state spending. All that would happen is the state would have more spending and the private sector have less thus causing more poverty because the private sector is the wealth producer not the state. If the state was the wealth producer it would not need taxes at all but would live off it's own profits.
So you have shot yourself in the foot by arguing against your own theory.
Besides that the so called "aggregate demand " idea ignores the fact that in the real economy there are prices which are part of the component of the demand supply price concept and leaving out one part of that concept leads to all sorts of incorrect conclusions. So stating there is a thing called "aggregate demand" that can be manipulated is just nonsense.
If you disagree then show one instance where prices do not exist in any purchase.
Gold standard era thinking in a fiat world
exactly
It’s no longer a fiat world. Globalism has outdated your theory. The value of a currency is so very relative now.
It's old but at least it makes sense.
Your nonsense is modern, but it is still nonsense.
This video is pretty horrible for anyone wanting to understand how the US is financed. It presented tidbits of nonsense lol.
MMT... forget the policy discussions... its description of the system is just basic reality. Not really debatable.
MMT is just a description on how the monetary system operates through the Treasury and federal reserve. Everytime the govt spends. It creates a deficit. Money is created out of debt through bonds and when commercial banks create loans/ reserve deposits out of thin air through prommisory note/ loan contact between the bank and the borrower. Doubt entry bookkeeping/ reserve accounting/ full and fractional reserve banking
Sure. But they use the issues with our system like deficit spending. To say deficit spending is a great idea. We need to balance the budget. And pay off our debt. That doesn’t simply mean raising taxes and or cutting spending. We can lower taxes to drive growth in certain sectors we can also increase spending if we expect to see a return in that spending. I mean increased spending and lowering taxes are basically one and the same. I’d argue lowering taxes is better in most cases. Then they only get the benefit if they’re productive and the government doesn’t take on the debt. But that’s not reasonable in emerging fields. I mean private crowdfunding is awesome. But there’s nothing wrong with the government funding some too. Like NASA was government funded and it’s contributed a ton to economic growth in the private sector. But yeah 30 trillion in debt with a 2 trillion dollar a year deficit where half of that is simply interest on the debt. That’s a serious problem that we need to get under control. I feel like we can get rid of a half trillion in wasteful spending. Then we’ll have to create growth and possibly raise taxes in certain areas. Even like a 2% federal sales tax. Or tax businesses like Walmart and grocery stores that use self checkouts for the use of those self checkouts at a rate that’s at least as high as the taxes that would be paid through payroll and by the employee that could be doing the job. But it wouldn’t bother me one bit if a business that employs more than 100 people would be required to pay $20,000 a year for each self checkout kiosk they have in their store. I’m sure that would be a significant amount of money. My local giant has at least 10 of them.
My biggest concern with MMT is the dynamic effects that have timescales of years or decades. Just as they say, "The market can remain irrational longer than you can remain solvent." That same concern applies to the economy 100x. As we are seeing right now, there are many complex interactions and threshold effects in a large economy that can hold back inflation. You can irresponsibly create an excessive amount of money happily for many years then suddenly lose control.
So how long are we talking? QE has been a thing for 15 years. One of the weird assumptions orthodox economists make is that your predictions will happen at a vague time in the future. 0 predictive power.
Only one concern, that it exists. Oppose at every cost. Just the term "deficit spending" should set off major alarms. Avoid at ALL costs. All costs.
That's why MMT puts a lot of emphasis on assessing the risk of inflation associated with any piece of spending. Analyzing inflation risk is far more important than assessing deficit risk, which what what the US currently does
@@grimaffiliations3671as it should, but we need hard guard rails because politicians love buying votes and without hard rails they will run amok. That’s my fear
@@ashleystovalldaman If the spending they're doing helps imprive people's standards of living, and the relevant inflationary assessments have been done, then there is no problem with that spending
Yeah next time I need to cover rent I'll just print it in my office......oh yeah if I do that I go to jail.
I think that is the biggest tell for any government policy. When they outlaw you doing it, but say they need to do it for your own good. LOL
@@01nmuskier Keynesian BS right lol.
@@ChatwithMatt Ah yes, our courts should force you to accept Katie Bucks as compensation for some harm I may do to you. 🙄
You guys really need to try to understand really basic stuff if you’re concerned enough to comment about stuff.
@@katiecannon8186 i hope you know its only a recent phenomenon that out currency is valued by faith and trust
As MMT explains, you are not ISSUER of the currency...so yes, you would be counterfeiting and go to jail. Your statement actually proves a key argument of MMT. Thanks for the example.
That Kelton quote is totally out of context. She is saying that taxation serves many purposes, not just warding off inflation.
The way she describes increasing the money supply through human outcomes makes sense. Economists have been pushing for this type of support but politically it’s a scary thought. Most people in government don’t understand these frameworks, and you want to explain free money to the lay people.
It takes time for these ideas to take hold and more people to get involved to successfully experiment further. There’s a lot of potential with these theories, from the perspective of building out the infrastructure to allow for a larger economy. The government doesn’t need perfect information to know that complex manufacturing, semiconductors and other technologies currently offshores are a valid form of investment.
It is funny why the question of debt does not come up when you spend for the military or for tax cuts mainly for the super rich.. .....Antony ?
You ‘invite’ people to compare and choose, but you only present Prof. Davies’ view.
But here we go, anyway.
One. US government can never default on her debts unless She simply chooses not to pay. Emphasis on ‘choose’. She will always have the funds because She has the ‘printing press’. She is the only entity on the planet in that position. ‘…raise the funds…’ Raise? She produced the funds in the first place. Thatcher was simply wrong when she said, ‘there is no public money. Only private’. Reality is, private money comes from the public. The public has the printing press. Private homes and businesses do not - under penalty of long hard prison time.
Two. The only constraints where inflation is concerned are our access to employable resources - ‘stuff’ and people. Hint: we have plenty of both. We have a pile of unemployed people; a pile of work that needs to be done [infrastructure/healthcare/education etc]; and rusted out factories and resources that lie fallow because ‘the private sector’ sees no profit in employing them. And we’re sitting around waiting for investors to take an interest. WHY!?!?
The money is the easiest part of the equation. We did it in WWII. We didn’t wait for ‘investors’ to build the weapons systems, cloth, feed, arm and train the troops, 'We The People' simply paid for them. How? Don’t tell nobody, but we printed the money and used things like rationing to avoid inflation. Not only did we not collapse as a result, but we won the war and emerged from the Great Depression. With 25 years of unprecedented growth - the Golden Age of Capitalism, it was called.
Three. The difference between Japan and Weimar is sovereign control of… wait for it, RESOURCES - NOT JUST MONEY. As part of the demand for odious, impossible reparations the French invaded and took control of the Ruhr [Germany’s major industrial center]. Keynes warned the victors at Versailles against making these impossible to meet demands. He predicted they would lead to another war. He was correct; the result was horrific to say the least.
No such thing is happening in Japan. They control their resources, and money. In fact, investors who attempted to take advantage of - what they saw as Japan’s impossible to manage debt - by betting against them [shorting Japanese bonds], wound up losing their shirts. The ‘deal’ was called, ‘The Widow Maker’. Interesting that Prof. Davies didn’t mention that.
And finally. The US dollar is the international ‘Reserve Currency’ because of Her more than 800 military bases around the world.
Gaddafi’s major crime was trying to get African nations to adopt a reserve currency independent of the dollar. That was the final straw.
The reality of how money works is much more complex than the picture painted here. Even traditional Supply/Demand curves are beginning to show cracks when compared to observable reality.
ua-cam.com/video/4epQSbu2gYQ/v-deo.html
IT’s better to study what you are critiquing first.
The notion that the government can simply raise taxes to offset inflation completely ignores political realities. The Democrats can't even get their full caucus to agree on it now. It also ignores a well-understood intersection between politics and psychology: loss aversion. People are much more driven to avoid the financial loss if taxes than any kind of gain.
MMT does not rely on post hock taxation.
And taxes are just one of our inflation management tools. Not the only one.
I honestly do not understand folks who pretend to understand what MMT is when they obviously haven’t read any MMT stuff.
@@katiecannon8186 it's spelled "post hoc"
@@chrisg0901
Whatever. But MMT: Evaluate each spending proposal for its potential inflationary impact. If inflationary, add a tax offset within the legislation itself.
Also MMT: We have a variety of inflation dampening tools: Suppressing bank lending - especially for speculative purpose - through credit guidance, issuing nonnegotiable household savings bonds, etc.
@@katiecannon8186 Randall Wray argues this explicitly. He argued that taxation is necessary to curb aggregate demand and reduce inflation. He's wrong, but the idea that this is some straw-man suggests either you yourself aren't up to date on MMT, or as usual, MMT doesn't actually mean any single coherent theory because it means different things to each proponent so all of them can handwave any concerns about it as "not real MMT".
@@VincentWeisTheThird
Wray’s point is that taxes just *do* remove government issued dollars from the private sector. So, they reduce demand. So they reduce inflationary pressures that too much government spending may cause.
So, you’re correct re Wray.
And also, MMT explicitly relies on multiple inflation dampening tools.
Just because you don’t understand this doesn’t mean anything other than you don’t understand this.
1:45 is not what MMT says at all. Typical for people to argue what they think it says and not what it actually says. good luck with your continued straw manning
I find MMT to be a good explanation of how the Fed functions, but not how it should ideally function. The MMT expert on here does do a good job at providing an example for why MMT will never work. The founding economist of MMT do say you can control inflation through taxation.
The biggest supporters of MMT, politicians and economists, constantly demonstrate a complete ignorance of what MMT actually is.
MMT explains how our monetary system as a whole works: Treasury, Fed, and banks.
Also, MMT understands that we used a variety of inflation dampening tools during WWII when we spent like crazy and kept inflation in check.
Including suppressing bank lending (especially for speculative purpose).
MMT is the monetary instrument to increase the money supply, but it has many adverse effects on the economy.
@@LearnLiberty
MMT is simply a description of how our monetary system works. With a few policy suggestions.
But you guys need to focus on understanding how our monetary system works.
You guys don’t have a basic understanding of how our monetary system works.
That’s a problem
@@katiecannon8186 I would be more concerned about your MMT advocate failing to explain MMT if you're a fan of the theory.
@@woodchuck003
I can’t help it if someone asks someone on who doesn’t understand what MMT is actually saying.
So, for instance, MMT relies heavily on employing auto stabilizers to regulate inflation.
True MMT only allows Govt to print more money to EMPLOY the unemployed when there is high unemployment. Like when unemployment is above 5%. And the Govt wages (not unemployment) are below what the market pays most workers with the basic idea that employed people have an easier time getting a job than unemployed people. Therefore people will migrate back to private industry when jobs there become available. Basic theory of MMT is everyone will always have a job. Even Friedman believed there needed to be extra money printed every year in an amount slightly larger than GDP yearly growth. This would keep the economy from experiencing deflation.
2:17 She makes a good point. Obviously everyone is wrong except her. I guess I'm on the MMT train now.
She talked a lot but said nothing
@@alt842 At least you could watch the whole answer: ua-cam.com/video/gcgDazSsyRw/v-deo.html
Then you'll realize that she do said a lot.
Don't fall for Learn Liberty shady tactics. That sound bite is taken out of context and an incomplete idea. Listen to everything she has to say.
@@FullHammer - That's a fair point. We should watch her entire clip. Unfortunately, she's still wrong.
In the full clip does she talk about unicorns and rainbows?
Prices, as a whole, are simply the ratio of the number of dollars currently circulating and the amount of goods and services being sought after in the economy. Saying that inflation doesn't occur when you print money and inject it into circulation is like saying the ground doesn't get wet when it rains.
You guys just pretend banks don’t exist.
Or that too much bank lending can’t cause inflation
Banks adore folks like you
Agreed! MMT means to increase the money supply, which causes growth in prices.
@@LearnLiberty
No. That’s not at all what MMT is.
@@katiecannon8186 You just gonna leave that assertion hanging without an explanation?
@@AusFirewing
Which one?
Ask me any question and I’ll try my best to answer. I’m no expert, but am pretty good at understanding MMT. If I don’t know the answer, I’ll provide links.
Really, it’s important that as many people as possible have a basic understanding of how our monetary system works.
There’s a reason politicians, talking heads and far too many economists don’t explain this to us.
And that reason isn’t a good one.
So nothing is allowed to interfere with the idyllic worship of the free market and control by financiers. There is no such thing as perfect competition. We need national coordination of infrastructure projects and regulation of financial instruments. Fiat money has changed the world, which should not be controlled by an unregulated free market. The problem is created more by neoliberalism and MMT challenges this. It's not just a question of economics.
This is a very big ad hom.
1:40 MMT literally says the only thing that matters is inflation. No MMT proponent suggests a government simply print money without regard to inflation, MMT argues the exact opposite, that it’s THE SINGLE MOST IMPORTANT THING.
What concerns me is this video is coming out as a response to raising the debt ceiling - where not doing so is a way to GUARANTEE the disasters it describes. Why aren't we focused on lowering the BUDGET?!? Through cost-cutting measures like negotiating prescription drug prices for Medicare/Medicaid, and reducing the defense budget by a third, and raising more revenue to cover the social programs through removing the Social Security tax ceiling? Better still, do the cost-cutting measures and amend the Constitution to replace income tax with a sales tax or, better still, a transaction tax, which weights the tax burden towards things individuals can control?
It's scary we think we should fix things by not paying our bills rather than by making sure they are covered in the first place.
Some would argue that by letting ourselves hit that ceiling, it would force an otherwise politically expedient and unhelpful Congress to curtail increases in spending. Many people do want the budget to decrease. But increasing the debt limit won't do that. How many governments do you think ever operate UNDER budget sustainably? They always will find ways to hit the limit, because it's more politically profitable.
People on the Left whine about the defense budget, but never whine about social spending, which is more than double the defense budget. The defense budget is only about 1/5th of the federal budget. Social spending is more than half the budget. Cutting the defense spending will have little to no impact; we will still overspend. The social spending is what is always growing, and that is where cuts are required.
@@droe2570 Actually, I pretty sure the defense budget is actually only 10% of the federal budget.
@@tungsten8332 I looked it up, and for 2020 it was 11%, so you are correct for last year.
@@droe2570 Was just correcting about the information but, everything else I pretty much agree with.
1:43 mmt economist have never said never worry about inflation, fed can print as much as they want. This is so far away from what mmt are saying.
Isn't MMT already in practice with quantitative easing, however the gains are going to the top 1%.
Yes. This channel is a billionaire propaganda mill.
MMT can also be used to distribute and balance wealth.
MMT is already the reality. The question is how will we use the power of fiat currency. Prof Davies wants us to continue thinking in the old ways.
Mmt is a true policy outlook. Not to see it's the right thing to do. There are many different perspectives to policy choice, this is just one.
The main problem I have with mmt is how it is marketed as infinite money hacks. Thinking about it this way will undoubtedly lead to more government market socialism and higher taxes.
Mmt has a fully working method and it's justifiable on some grounds. Another issue is who's hand the infinite money printer is in. Obviously not all spending is built equally. Some of the best applications of mmt would be to support the internalisation of costs in market failures due to externalities and also to open new markets through education and research. Mmt must support growth otherwise the inflation craze by money printing will quickly turn into popped bubble and steep recession. Wise investments facilitate growth. Not money printing.
Only in Washington is the answer to not being able to pay our current bills, is to spend more money.
MMT is neither modern, solely monetary or a theory (which requires basic viability). It is neither more nor less than Moronic Magical Thinking. One (small) correction to the narrator. Every printed (or electronically created) dollar does not, in itself result in inflation. The problem is that fiat money has expanded materially more *than the increase in goods and services in the economy.* More than a century ago, this country enjoyed long-term and beneficial low level deflation as the increase in goods and services outpaced the increase in the money supply that stemmed primarily from gold mining (ah, the wonders of commodity money!).
The reality (as the actual economics demonstrates) is that every dollar created and/or spent by government comes from the people either via taxation, devalued savings or higher consumer costs. It is simply the belief that there is some magical source of wealth (which is impossible for government to create) to be bestowed on the people (specifically those whose votes they are buying), without consequence. There are those who recognize MMT as an idiotic fairy tale and those who should have the sleeves of those stylish jackets retied behind their backs.
@@finchbevdale2069 It's really quite simple. There is no risk at all with today's electronic currency of there being a currency shortage - none. There is no chance that we will return to the days of company scrip which resulted from exactly that problem. What would happen is that, as normal economic growth increased the pool of goods and services available to consumers, the dollar would strengthen and there would be a period of gradual deflation which happened only once in US history - an incredibly prosperous period in the late 19th century. Savings would become more valuable, investment would increase and we would all be better off. There is no downside (except a very slight one to borrowers as the dollars they would need to pay off debts became more dear).
I hope you realize that Trump cutting taxes without corresponding budget cuts(which is what he did) is literally the exact same thing.
Would y'all be able to explore the topic of the pros and cons of a full or partial default?
The video is dishonest and a default is impossible. The debt ceiling is elective and congress will not create a economic crisis for the sake of petty politics.
@@gabethompson3211 what was dishonest? Also improbability does not negate that it might have positive and negative impacts
@@derekrethman5834 The first line of the video is something like "A global economic crisis could ensue if the government defaults on it's debt" This is just not a plausible outcome and they know that. It'll be another show with the two parties trying to score cheap political points but the outcome will be that they will fire up the printing press and avert the crisis. That's all it takes. What will the effect of the deficit spending be is a legitimate question. Again this is where I find the video to be dishonest. They know the difference between floating and fixed exchange rates. USD is a fiat currency with a floating exchange rate. Learn Liberty knows this. However they pretend that the effects of printing the money would have an effect as if USD were still pegged to gold. It isn't. They are liars.
@@gabethompson3211 irregardless of fixed vs free floating, inflating the supply will still have an effect. We cannot know the entire effect but we do know a lot through some theories like the Austrian business cycle. It highlights the expansion of credit as the reason why the boom bust cycle happens. And any more expansion through increased spending on part of the gov will create bigger bubbles that will crash even harder than any other in the past
@@derekrethman5834 Default is not the effect. Let's agree on that. In my opinion the Austrians have failed to move past the gold standard and they are not the people to pay attention to. If these theories were true we'd be seeing the results in America right? We'd be seeing examples of this somewhere. Explain Japan. Explain America.
I think the central issue is MMT is built on a different theory of value... For example, orthodox economics says the social contract is viable because of viable economics... whereas MMT flips it around. MMT is right about this... this is what is really being debated...
This whole video is a strawman.
MMT says the limit to government spending is inflation. Inflation does not happen when you print 1 dollar more than you have. If they actually studied MMT they would know this.
Ooooh this is a far right channel
In other words you are telling everyone you failed to understand and apply mathematics and need to go back to school.
The foundation of MMT is that government creates wealth through taxes. If that were true, absent of taxation, your product or service would have no value. No one would give you anything in trade for it.
So, 1st try ending taxes. Then try ending people offering goods and services. See which one collapses the economy first.
We already saw Somalia's government collapse completely in the very early 90's. Their GDP skyrocketed. Literally 800% growth over the next decade.
Specifically it says that taxation is what puts value on the dollar. IRS accepts only US currency to pay taxes. Otherwise if we remove the US government who is assigning the value of the dollar? IE Who will sell you real goods for pieces of paper, that no one is obligated to accept?
The origin story is who compels people to give the taxes on day 1 in order to form a government? The government has the monopoly of force to compel people to pay but before that who did?
I agree without taxation the dollar would be useless but MMT does not propose to say anything on value or private aggreements. If anything MMT is fairly limited to government monetary relations versus many non MMT thinkers believe their theories encompass all of economy, value, etc.
@@toddodell70 the IRS was formed when the U.S. $ was backed by gold. It is dishonest to claim that the IRS put value on the $ it collected.
So run the experiment both ways.
1. Dissolve the IRS. See if the economy continues to run on dollars.
2. Everyone stops providing goods and services (working). The U.S. keeps issuing dollars and recovering them through the IRS.
MMT only appears to work if limited to a proportion of real value created by real goods and services.
@@01nmuskier The IRS is who collects, thats it. They have nothing to do with what the taxation is. Prior to IRS we had lots of excise taxation.
Well unfortunately neither party agreed to your test. ( ie to tax, somehow stop markets ). However #1 should include stopping all Fed bonds.
#2 If you stop all markets then there is no way to generate funds for taxation anyway. We disagree, you think that without the government people would still treat the US dollar just like today and I don't think so.
MMT is specifically how the government monetary mechanics work. People can learn from that but its that the government does not need to collect taxes to spend ( or print ) money. Even selling bonds are a political choice.
@@toddodell70 ah, the MMT'ers move the goalposts again.
YOU said IRS.
Bonds are not taxes.
You verified my point that the economy does not need taxes.
You verified my point that MMT is currency manipulation. When you stand on the currency side of the MMT fence, you claim that government can just print infinite $. In the e commerce age, government can just direct deposit infinite $ into bank accounts. So the USD has no value (hyperinflation).
Now, you need to jump onto the "taxes create wealth" side of the fence. It is a shell game of currency manipulation that steals value from people's labor in order to excuse limitless spending, which encourages fraud, waste, abuse, corruption.
But sure. Keep shilling for the big guy. Keep working for the people who make your paycheck in October worth less than your paycheck in January.
Move the goalpost again. We know your game.
“Slavery is always noble”
-The first amendment
I think MMT should be pushed. The faster centralized banking collapses the better.
Lol.
You don’t “push” MMT because it’s just a description of how monetary system works.
Also, you don’t understand what The Fed does.
You gotta understand the basics before you can critique Fed policy. And there’s certainly critiques that can be made of Fed policy
The collapse of the central bank is possible without MMT as well.
@@LearnLiberty
You guys don’t understand what our central bank does.
You need to have a basic understanding of what it does before you can critique it
@@katiecannon8186 Enlighten us. We are listening.
@@martinszathmari1107 That bot won't because it's a shill
I think the mistake is that we assume that demand is infinite and I honestly never thought that made any sense. We saw that during covid when oil went negative. Storage of goods is not unlimited, time is also not unlimited so there is a hypothetical cap on demand on how much goods and services can be consumed during a time period and companies that overproduce get heavily punished for doing so. What matters is correct estimation of supply and demand. Not the money. The use of government money is cumpolsory wherever you go, even if they have lesser value relative to the USD.
IMO Davies makes kind of a poor argument because everyone who supports MMT will of course think the money won't be used for tanks but for social services. The real issue is it's gutting the actual economy. Trying to print money to give to someone and pretending it means something when there isn't actual productivity that generated it in the first place is an illusion. A very dangerous one because in the process it undercuts actual productivity and leads to incredible abuse and corruption. You can't close Pandora's box.
I find it interesting u said that because thats how we got in this mess lol... Selling dreams and trying to fill the gaps with bubbles. Thats y bitcoin is taking off.
I resolve we go back to the barter system but im not sure one half of the world wont destroy the other half. Capitalism is about knowing a price. We need to get back to understanding the VALUE of things
@@jesseesquire5807 agree with your points although not sure about the barter system -- makes us all poorer due to the friction. Better would just be non-government controlled money.
@@cyberjunk2002 but that's the thing.. does less "money" mean poorer? I feel like wealth would be based on tangible substance. I grew up in capitalism. Working for your share is fine but how many people would choose to work as opposed to those who would say "money doesn't pay bills anymore so fukk it"? These types of people will ruin the equilateral concept of Bitcoin still.
Bartering services encourages a better quality American in my opinion. As long as there is a a conduit of currency... There are gonna be corrupt people to try and hoard it all.
@@jesseesquire5807 Money is not wealth. Assets are wealth. Money is a means of trade and holding value. Barter is a strange word and you'll have to define how you mean it. Barter/trade happens all the time; whenever you negotiate a price, whenever businesses trade service for service. But if you mean the tomato farmer is going to trade his tomatoes with GM for a truck, that will never work.
"does less "money" mean poorer?"
All things being equal, yes, it has to mean that. Less of any asset or value device means you are by definition "poorer". That does not mean you are "poor". After all, if you go from a billion dollars to having 900M, you are poorer, but hardly poor. And when you say money, you have to say instead currency. Having fewer US dollars can still be more than a larger number of Mexican pesos, for example. At any rate, like I said at the start, you seem to be confusing wealth with value. Money is a value device, assets are a wealth device.
@@droe2570you contradict yourself. If money is not wealth how with less money can you be poorer? Stupid really. Just admit money is and should be a store of value. That's the only way you put a value on your time, your life, your energy. MMT distorts that function of money.
OHHHHHHHHHH SOMEONE IS GETTING SCARED 'CAUSE WE ARE UNDERSTANDING WHAT'S GOING ON, HAHAHAHAH 😂😂😂
This is your first video I somewhat disagree with. I believe that professor Davies was mostly correct and actually seems to understand MMT better than the girl presented as understanding it. However, MMT is actually a viable economic theory under my understanding of it but that girl is absolutely wrong about taxes. Taxes are one of the levers that offset inflation. Also, I think the policies recommended on this channel actually fit well in the MMT framework.
The part where I disagree with professor Davies is that $1 of money printing will create inflation. If that printing is paired with $1 of production it will be neutral and if paired with $2 of production it could even be deflationary. Businesses and banks take advantage of this all the time. Borrow $1 for equipment that allows them to make $2 of goods and services.
Here is why MMT supports the policies recommended by the channel. Even though the government could print unlimited money and never go bankrupt, they need to spend it in a way that creates an equal amount of goods and services to prevent inflation. As we know, the government doesn’t have a good track record of doing this. It’s better for businesses to create money by borrowing from banks because they are more likely to create enough goods and services to offset the money they borrowed.
Also, 100% any country other than USA pegging their currency to the dollar instead of BTC is shooting themselves in the foot. As a US citizen, I appreciate them reducing the inflation I’d otherwise be experiencing even if we’d be fine without their subsidies.
Zachary, thanks for your comment! The negative side of MMT is that the government prints money when it needs it, not when it is necessary for the market. Also, during this process, the value of the funds owned by people and countries decreases, which puts the dollar in jeopardy as an international currency.
@@LearnLiberty I would say the negative side of reality is that the government prints money when it wants it. I agree that is a problem that causes inflation (decreased value of everyone holding that asset, USD in our case). My position is that MMT doesn't make the government print money, it only describes that it will cause inflation if it isn't used to increase goods and services a proportionate amount. I think the point of contention is that many MMT people are too optimistic about the governments future ability to spend effectively.
The USA went from sound money with the gold standard to this. The US can’t raise interest rates because of how much debt they owe. They can’t keep printing money or else we’ll get hyperinflation. Either way we’re fucked.
Why isn't there hyperinflation already. Why should gold reserves have anything to do with the money supply?
ua-cam.com/video/aHcNvG34Q6Q/v-deo.html
@@gabethompson3211 The United States used to be on a gold standard. The gold standard forced the United States to have to collect taxes if they wanted to pay for something. Nixon taking us off the gold standard allowed the government to print money in order to fund their expenditures. This introduced the inflation tax. A silent tax that takes away the purchasing power of the dollar. The United States is headed for hyperinflation if they don’t raise interest rates and pop all of these asset bubbles.
@@Sosa-gs3rz Japan has a debt to GDP ratio of over 250% and it's inflation rate in 2020 was -0.03%. America' debt to GDP ratio in 2020 was 133.92% and the inflation rate was 1.4%. I recall folks saying the same thing in 2008 with regards to the bailouts. The truth seems to be that the inflationary pressures are not coming and a need to raise interest rates is not coming either. With more than 10 years perspective on the global financial crisis I think that it is clear that the bubble was caused by bad lending practices and the collapse caused by shady financial products like credit default swaps. The gold standard or lack there of had nothing to do with it but a lack of regulation definitely did. Privately held debt can take down an economy. It has not been demonstrated that government debt can have the same effect. The inflation that we're seeing now is all connected to supply chain issues that relate to tariffs and COVID. It's not connected to extra government spending. I'll take a bet that hyperinflation is not on the horizon and I wonder how long until you admit that the Austrians are wrong? Why would tying the value of your currency to gold, a metal with few industrial applications, lead to better outcomes. I think the American economy has done rather well since they abandoned the gold standard.
@@gabethompson3211 The Austrians were wrong? The Keynesians have been feeding this propaganda into our schools for years. Japan is in the same boat as us but they have a longer rope because they still have a manufacturing sector. The 2008 financial crisis happened because of artificially low interest rates and quasi government entities. The low interest rates flooded the market with cheap liquor that made Wall Street drunk. Wall Street had no moral hazard because of government backed bank accounts. Big banks aren’t scared to gamble because even if they lost they knew the taxpayer would bail them out. The US has been better ever since we got off of the gold standard what planet are you on? Food prices have never been higher. Government subsidies that go to farming, schools, and healthcare have made them all unaffordable. This debt fueled economy is a fluke.
Don't often agree with Krugman, but he was dead on when he said MMTers are just playing calvinball. Any time any elemenent of MMT is criticized, they counter that you just didn't describe it properly.
Antony Davies is brilliant.
Yeah because they didn't 🤷♂️
Haha, unfortunately I do feel it wasn’t described properly. It’s not complicated so I don’t understand how it gets described so poorly all the time. I’m curious what you would criticize to MMT properly described.
MMT says the government can spend unlimited money without default. This is a fact. It also says spending without an equal or greater amount of goods and services being created will cause inflation (not limited to CPI).
Poor descriptions happen when statists hear the first part and disregard the second part. Businesses have been good at creating money by borrowing $1 and using it to produce $2 of goods and services. Government has historically created $2 and produced $1 of goods and services. I think the obvious conclusion to be drawn using MMT is to limit government spending and let free market banking control the money supply.
@@zacharyneilson9220 says under MMT, government can spend unlimited money. Then says the answer to MMT is the government spending limited money. 🤣
That's how we know it is a shell game.
@@01nmuskier Just because someone on a comments section may not be perfectly clear doesn’t mean anything
The core of MMT is that the limit on both government spending and bank lending is availability of real resources for money to buy and inflation.
Bank lending is further limited by our ability to pay our banks back in government issued dollars.
The above should not be at all controversial
Of course it gets more complicated, because economies are complicated
But let me know when you understand how our government spent like crazy during WWII and kept inflation in check at the same time.
When you understand this, you’ll have a better grasp of MMT
No
I think we all agree on the overall mechanics, but maybe disagree on the semantics. We need to separate the fiat government money from the actual goods and services. Sovereign governments can "print" money as much as it wants - but not without consequences.
From the MMT perspective, how government "prints" is by deficit spending. They go through it using accounting. Let's say the government issues Treasury securities to meet the budget deficit - all that is not bought by the private sector can be bought by the Federal Reserve through primary dealers. That's like a Corporation taking out a loan from a bank that it owns, the corporation just increases its liabilities (loan) and assets (bank deposit), the bank does the same but reverse, and this bank can never go bankrupt.
The implications are the same with regular economics - supply and demand.
This is where we all get tripped up.
When you increase the supply of money, you increase people's ability to spend which is demand. If the supply of goods and services cannot keep up with the demand, then you get inflation. However, if there is plenty of spare productive capacity, then the supply curve can move to meet that demand.
In a 3rd world country where output is limited, people are not well educated and very skilled, increasing the money supply will lead to a bidding up of the prices of already scarce goods and services. The solution is for them to manage their resources more wisely so that they can increase their productivity - education, skills training, infrastructure, modernization,.
If a country is experiencing a demand shortage, that is when factories are mothballed, many people are unemployed and underemployed, printing more money can stimulate the economy without much inflation. Think of the Great Depression, there was plenty of productive capacity, but there was no jobs, many unemployed even if they were skilled and educated. Only when WW2 started did the Depression end, lots of money printed to build cars, trucks, guns, ammo, tanks, planes, and ships. Everybody had a job. There wasn't a lot of inflation, but there was inflation.
After the war, all that excess money didn't create much inflation because the productive means of the country were used to create more goods and services like houses, cars, infrastructure, appliances, schools, hospitals, power plants, etc.
Just print more money, because it worked so well for Weimar Germany
But this time it will be different.
Great sarcasm!
@@Junglelove20mm what is the result of 2+2?
@@S85B50Engine Did I ever tell you the definition of insanity?
Exactly
This is an example of the straw man fallacy. In this video they create a mistaken interpretation of MMT, that even MMTiers reject. Then they attack that caricature and end up believing they're correct.
MMT is basically having a stupid idea but thinking if you give it an official sounding name the idea somehow becomes valid
Stick to roofing bud!
You just hate the government issued dollars you use to shop, pay your bank back, pay tax and net save. Because you’re very smart
@@katiecannon8186 your comment is nonsensical, do you know what money is, or federal reserve notes, or the difference between the two? The Gov't want another trillion dollars so they call the federal reserve (fr) to get it, the fr makes a leger entry for 1 trillion and poof, it exists, the the fr loans that "money" they created from nothing back to you and me WITH INTEREST. If there is a trillion dollars worth of stuff and the Gov't prints another trillion for free and adds it into the system the effectively make the first trillion in real goods and services, YOUR GOODS AND SERVICES, worth half as much. That is inflation. Right now real inflation, the amount of your wealth the government is intentionally taking from you is around 12 to 15 percent per year compounded. If you have any savings or a 401k and you hope to retire one day in 10 years you will have lost about 90% of your wealth. So, ya, not a fan of that.
@@pinnacleroofing9841
1/. That’s not how our monetary system works.
2/. Banks create most of our money supply. And inflation doesn’t care if you spend government issued dollars or your bank issued credit card.
3/. You’ve just been brainwashed into hating your government issued dollars & loving banks. Banks appreciate your undying concern over their bottom line at your expense
Nice and clear
Question: To Whom are we in debt? The bondholders? What are bonds? Interest-bearing savings certificates.
Where is this money now? In the economy. So if we pay all the national debt back, we have no economy in that currency. The Wienmar mark was exchanged for the land rent mark. Also, the Wirmaer Republic purposely inflated away the currency to try to get out of the reparations of WW1 by exclaiming; we're broke! France moved in on the industrial Ruhr valley to claim 'product'. Thus, there was the rise of authoritarianism to fill the void, as warned by Keynes.
Japan has no inflation due to the money being saved by many who remember the 1990s; when currency is saved, it is retracted from circulation and has no value to the economy as it's not exchanged for products or services. If the Japanese savers all decided to buy land or a specific type of car if that could not be supplied in enough volume, the product/land would inflate; only then would a retraction of surplus money be required either by interest rates (neoliberal policy and regressive) or targeted taxation (Keynsian and progressive).
This entire video misrepresents MMT. MMT in no way claims that the Fed can just print as much as it wants. It merely claims that federal spending creates US dollars and that taxing destroys already creared dollars; that deficits provide the dollars that the privste sector and foreign countries use; and that federal "debt" is not money the government "owes" but money the private sector "owns" as savings.
You misrepresent reality just like MMT does.
MMT is rubbish that is badly thought out !! Don't expect the MMT theorists to be able to do accounting or explain things like their claim of how taxes create a value and acceptance of money but when the money failed due to inflation in over 30 countries in the past 80 years there were also taxes that did not keep the money in any way valuable Even their own governments dumped their own currency in favor of another country's money.
The ideas they push have failed time and time again.
@@Rob-fx2dw some lost a debate in their econ class.
@@durfdurffigan8680 Yo may have hit Mosler's and Kelton's nerve there.
That's not what they claim.
But that's what they want to *do*.
@@TheControlBlue No, it is not. MMT scholars explicitly say (as do Allan Greenspan, Ben Bernanke, and the St Louis Fed) that the US government can create as much money it wants to and pay it to someone. And that is true. But MMT proponents caution that spending beyond the country's productive capacity would be inflationary. As long as we have unused resources, federal spending will not be inflationary. Besides, bank lending creates far more money than does federal spending. I know you want to blame MMT for anything that goes wrong with the economy, but bear in mind that a lot of things can cause inflation, even without expanded dollar creation.
Dave Smith should be the LP Candidate for President 2024!!! Change my mind...
And Michael Malice for Press Secretary!!!
MMT=Magic Money Tree
In order for MMT to work it needs a couple of things :
1. Extremly more formality in economy
2. Extremly more bureaucracy to guarantee formality
3. Extremly more data analytics and trafic information to guarantee bureaucracy
4. Artificial inteligence to analise data ( couse human resources cant at this level )
5. All this leads to FED regulating the taxes not the goverment to control inflation and the Banks acting as FED to decide who is going to take a loan.
6. Who takes a loan acording to a business plan and accomplish it 100% or more is not going to pay back the loan
7. Who takes a loan and fail to accomplish it totaly will be immediately closed
8. The data analytics its enormous and the most likely MMT can be applied is the State and Enterprenours ( in order for MMT to be applied in consumers it need an insane amount of data to be analised by AI )
9. Wages can be controled thrugh indexing monthly 😁 ( means you may take a diffrent wage evry month but with the same purchaseing power )
Ps. its welfare that drives the system to be pushed to its limits and print money and couse inflation etc etc.
Congratulations, you've managed to pull nine nonsensical thoughts out of your arse with a liberal helping of spelling mistakes that really add a lovely sheen to the undertaking.
All the best for your future endeavours on the internet.
@@yancowles liberal arse 😁
What i said, desperately needs like the perfect justice system and the liberals are far from just. They are a ideological garbage destroying not only the justice system. I dont think im liberal buddy, i just think capitalism is being stretched almost at its limits
Raising taxes to lower inflation is just like throwing torches to put out a fire.
Also it’s a pathetic mentality. Raising taxes on the consumers to hopefully mitigate the problem created by the government and corporate elite. Any citizen proposing raising taxes is a cuckold.
Surely raising tax would mean people have less money. Less of a currency makes it more valuable no?
@@onebeanyboi9204 that money is simply being confiscated and redistributed by government. The physical dollars aren't being destroyed or removed from the economy. Printing/creating currency that isn't tied to any real world value devalues the currency and is the definition of inflation.
@@onebeanyboi9204 Are... are you assuming governments put the collected taxes in a pit and burn it?
That collected money goes straight back to the economy, my friend. I don't think any country actually puts that cash in a vault.
@@crusaderACR Everything is done over the internet. You’d be surprised. Also MMT is not saying you can’t control inflation with the IOER, federal funds rates, and other interest rates…
MMT provides the framework and informs the reader/person how the real economy of a fiat currency works. MMT also adheres to how our current banking system works. A home loan for example is done by a bank typing out the balance you have on a very secure excel sheet. No transaction between accounts are actually made.
If money is printed, then spent on interest bearing assets, and then it's paid back thus taking the money out of circulation again and using the interest towards the deficit you can get by without inflation. We're not though. We're printing money for consumption in the form of transfer payments. We're just consuming now at the price of consuming later. That is going to cause inflation to continue to climb.
Inflation is not bad if the value of the dollar increase. The value of the dollar increases if there are amount of goods/dollar being produced by those who accept dollars for payment, increase faster than the available amount of dollars in the money supply. Thus, a 3% rise in inflation is justified by a 3% rise in productivity. What matters today is whether the loans issued by printed money will pay for themselves.
It is still bad. The ones printing the money aren't adding any value to the system while feasting on those that are creating value. The issuing of any dollar should be bound to something finite and valuable like gold, or to any other value lik3 work, products services etc . and not just thin air.
@@mrroboto680 "The ones printing the money aren't adding any value to the system while feasting on those that are creating value. "
This is technically true, but you can say the same thing about taxes, and most people are okay with it and understand the utility of collecting it.
@@GoldenRockefeller taxes are adding value, except the overhead lost by management/maintenance of the process and distribution. But as you say, there is a utility to some of it.
The issue with taxes is the value added is not always fit what I value, or my society's value, which reduces it's utility.
As for "the ones printing money not adding value" Mr. Robot mentioned.
It's not the printing of the money that takes away the value.
Double the money supply, the value stays the same, but the # of dollars something is worth increases.
The issue is lag in the system, and not all areas inflate at the same rate.
For example my wife recently got a 10% market adjustment in addition to her yearly raise.
I have yet to receive such a market adjustment 😅.
In effect, I am making less now, since my money is worth less. My house on the other hand has maintained its value by increasing in dollars.
Libertarians should embrace MMT to fund government instead of taxes
It is not a good idea. It will be better to have a small government and a low tax rate.
@@LearnLiberty A low tax rate is a possibility under MMT. I find it hard to believe that you don't know that.
I am talking about government funding, not that low taxation and MMT can exist together.
@@LearnLiberty MMTers say that government funding is not a thing. They issue the currency. They pay for things by logging onto a computer and changing numbers on accounts at the fed. That is how the government spends. It's like saying that the guy keeping score at the football game needs to get the points before posting them on the scoreboard. The purpose of taxation is to drive the value of the currency. You should already know this if you're making videos like this.
@@LearnLiberty I’m saying we can fund the government entirely with MMT with 0% taxes. This is the libertarian’s wet dream
I stumbled on MMT last year. I watched some lectures on it and listened to debates. I adhere to the Austrian School of Economics. MMT is somewhat logical in explaining the creation of money. But their policy plans are just STUPID
Am very curious as to what you think "MMT Policy" is? MMT factually describes how the monetary system works and doesn't have a "policy framework" in it...indeed, it is apolitical in so far as the core framework only describes how the economy works.
I too would like to hear what you think mmt policy is?
I came here with an interest in MMT, hoping to hear valid counter-arguments (I have doubts about it's application in the global south, for instance). I have to say, while I appreciate the attempt at neutrality, I am dissapointed, there is no balance in this debate (Keaton has just enough screentime to say "wait, there's more" before being cut off) and the arguments given by the video seem flimsly.
MMT is not about printing more money, although the potential exists, and from what I've read inflation is absolutely still a thing in MMT, it's just handled differently. In my opinion better. The video states that "even one dollar is inflationary" but that discounts economic capacity and the potential for expansion of production, it discounts supply-side or demand-side inflation, it discounts stagflation.
At its heart, from what I've read so far, MMT is an argument for the inclusion of fiscal policy in monetary policy. For instance if the housing market is causing inflation, through a high demand *and* weak supply, then fiscal policy to expand that supply can be anti-inflationary. It doesn't all have to be the one big crude lever of interest rates that we currently use, "cooling down" the economy while we are at risk of a recession, because that's the only tool we have. MMT suggests looking inside the basket of goods that produces CPI, and taking a more surgical approach. That might mean allowing more debt, it might not.
Certainly, the thought that debt is bad is a school of thought that has had to radically shift over the years. It used to be thought that countries should have a debt-gdp ratio of 0.5/1. Then it was 1/1, now it seems a higher ratio is not that bad after all, and countries are not flooding to sell their reserve dollars at all, despite the US having crossed the rubicon. At the end of the day it's not that debt is good, it's rather that a country is not a household, and its budget should not be treated as a household budget.
The "government choices vs consumer choices" point is particularly poor. If people want houses, demand is high, but supply is weak and consumers are competing with very large leasing corporations, the government is hardly supplanting consumer choice by fasciliating increased supply. Is all fiscal policy is somehow anti consumer choice? I hesitate to disagree so strongly with such an educated economist as Davies, but it frankly seems silly. Maybe there is an underlying faith in the perfection of The Market (capital M) as some objective fascilitator of ideal choice that I just don't share. The real world is messy, people want things and need things that they don't currently have. Fiscal policy can absolutely play a role, and it absolutely need not drown out consumer choice, I can't believe that's an argument. Are we drowning out consumer choice by providing schooling, healthcare, by funding vaccines, by investing in promising industries? Sheesh.
MMT is not about printing money, it never was. I've never seen a paper by proponents of MMT or a video explainer saying we should just print money. MMT says the budget doesn't have to be balanced, that doesn't mean we can just print money and not worry. It's an easy stick to try to attack an interesting theory with, but it's cheap, lacks research.
I'd rather hear more about countries that don't have monetary sovereignty, I'd like to hear more about the ratings agencies and their role and potential reactions to a non-balanced budget. I'd like to hear about government bonds and what happens to the financial markets if they are expanded. I'd like to hear about MMT's rather strange thoughts on imports and what that could do writ large. I'd like to hear about market guarantees and when that hasn't worked (because at times it certainly has worked). There are so many potentially good counter-arguments to MMT without needing to trivialise it into the straw man of "printing infinite money".
I believe in Austrian economics but that is just me.
The Austrians have been saying hyperinflation is imminent for the last 40 years, isn't there any part of your brain that questions the theory that has been wrong consistently for that long?
Wow. Really terrible, even the video description is completely wrong. MMT did not come from Keynes. If anything it comes from Chartalism which predates Keynes. In fact Keynes mentions Chartalism. MMT was independently created by a guy named Warren Mosler.
Also having the power to levy taxes has nothing to do with being able to print money. That whole paragraph is completely wrong.
At 1:40 in the video Davies says MMT proponents say the government doesn’t have to worry about inflation. This is completely wrong, MMT says the thing that the government MUST avoid is inflation. MMT says the government doesn’t have to worry about the debt, what matters is keeping inflation under control.
Davies appears to know very little about MMT and obviously didn’t read Kelton’s book or he wouldn’t make the statements he did.
Printing money is inflation.
Not rising prices which are just an effect of inflation.
Japan has spured inflation.
Look at the cost of real estate in Japan.
Imagine how much richer the average Japanese citizen would be if they hadn't inflated ....
it's one side (the most common side) of inflation, where increase in liquid capital causes a surge in demand.
the other side is where product is decreased or slowed (say, during a lockdown), causing a dearth of supply.
MMT describes how the economy works. Our taxes do not come first to fund the national government. The government establishes the currency and then as needed, removes some from circulation
Most economists don't know how inflation works. Kelton in my view knows the situation very well.
MMT is the sophist's version of growing money on trees
whenever the federal government spends it's spending new currency into existence. Whenever it taxes it's taxing existing currency out of existence. Just asked economist Professor Stephanie Kelton. Currency issuing governments don't need to find the money to pay for anything because they create it as they spend. How do you think dollars get into the economy.
I encourage everyone who enjoys Davies to look into the work of Mises, Hayek, Rothbard, and other Austrian Economists.
None of whom who understand how our monetary system actually works. Nor do they understand the role of law, lawyers and court decisions in creating markets.
So I’d suggest you listen to an interview with legal scholar of finance and corporate law, Katerina Pistor on her book “The Code of Capital”.
While you're at it you should study migratory patterns of dinosaurs. It will be about as useful and relevant to your lives. Probably less misleading.
Study well. Easier to understand if you already own a lot of money. Pure evil.
Legally the US is required to pay its debts first(senior position) then and only then they can fund the government. Other government agencies would have to be cut before they could actually default.
These are simply political choices since the Fed can always pay for whatever is for sale in U.S. dollars, including financing government programs or paying off debts. There is no practical limitation except political will, inflationary pressures, and the real physical constraints of the economy.
@ Bukele President of El Salvador said the US collects taxes to hide the fact that they pay all their debts w borrowed money.
@ there is a clause in the constitution that says the debt of the United States will not be questioned. This will force them to print money rather than default. Monetizing the debt and causing the subsequent inflation accordingly
@ The government is paying interest on government bonds but there isn’t a scenario where everyone suddenly runs to re-denominate their Treasury bonds into greenbacks, and even if there were, the U.S. government can do that without a problem. The U.S. Treasury bond market (aka the national debt) is operated as a service to investors. But we don’t *need* to issue bonds if we don’t want to. Treasury bonds are not how we pay for government spending.
@ yes it is. That’s why we have refunding rounds in the treasury market. The treasury issues bonds that are bid on by 3 rd party investors while the FED is buyer of last resort. Could we just print the money to cover our bills in excess of our revenue? Yes but that would be exceedingly inflationary. So we pay the inflation tax in buying power. To the extent that the bond are bought w existing dollars it is not inflationary because it does not add to the money supply.
We need a gold based dollar, or needs to be tied to something of value.
Gold failed because governments lied about actually being on the gold standard in the 70’s and caused inflation. I don’t want government to handle my currency anymore. I want independent currency. I want BitCoin
@@LegalAutomation How about a digital currency that is actually backed by something, like gold. A decentralized, non-government controlled currency isn't all that great if it's not backed by something in the real world. Something that has value that extends beyond its potential to record a transaction.
I say let the market decide what's the best currency. Crypto really shows potential.
@@theakountant8444 That requires faith in the government to not just debase it again, which is unlikely. If we're going down the road of faith, then why not go with something more convenient in every way? Crypto
@@theakountant8444 I’m not opposed to gold… except that leaves the exact same problem of: who on the planet retrieves, stores, and does the bookkeeping? I don’t trust ANY government agency to do it. I don’t want it. I want decentralized currency without any central authority.
Critics and lay proponents of MMT tend to over simplify and focus on one or two variables when there are many variables at play, especially regarding inflation. There is no mention here of monopolistic price manipulation. No mention of availability of physical resources, infrastructure, labor. MMT is a way of understanding what has already been happening since we left the gold standard. If we strengthen supply and infrastructure, punish (tax) greed-flation and encourage competition (aka weaken monopolies) we can increase dollar circulation and/or US bonds issuances without devaluing the dollar.
One might argue that we already practice MMT. Since QE
YOUR FRICKIN KIDDING RIGHT? FED/CABAL DEBT SYSTEM ... OR FREE ENTERPRISE/MONETARY SYSTEM?
They're acting like this has been a one-time experiment with MMT, but we've been doing MMT for decades already. Also, the idea that the USD will lose reserve currency status is bogus. It doesn't have to be perfect, it just has to be better than any other competitor currency, which it is. The strength of the US military and its tendency towards freeish markets is what distinguishes it from other theoretical holders of the reserve, unless you let someone convince you that the world will simultaneously agree that a Communist country like China is a better future bet towards currency stability over the US, which is a ridiculous thought. The power of "fiat" will be cemented when the US, like China, transitions its currency to a digital one.
False dilemma fallacy. You seem to be proposing that the Chinese Yuan is the only other option. Have you heard about EUR or GBP?
Also, it'd be just stupid to just have USD as a reserve. That's why countries have other currencies as well.
USD accounts for under 60% of the global currency reserves. EUR ~21%, GBP ~5%. If the USA just keeps printing this much money (and assuming others don't do the same), USD could lose the podium - and not to a communist country.
The digital US dollar will not be able to compete with Bitcoin as a preferred international currency unless the US hard-codes in an inability to print them at will. Including not coding in a pegging to the US dollar which they can already print at will. We know they won't do that so Bitcoin will become the reserve currency.
USD became international fiat money because the USA had the most considerable gold reserves. But today, money is not dependent on gold, and when other country sees that the USD is depreciating, the desire to use USD or save their money in this currency will be reduced. So MMT is harmful to State. I believe cryptocurrencies represent future money because they are decentralized and dependent on the market.
@@LearnLiberty you cant pay taxes in crypto
@@LearnLiberty You people must know that the debt ceiling is self imposed and the a default is impossible but your video starts with a very dishonest claim that the US is at risk of default. Please, if you have the courage of your conviction, can you advocate for your position without making videos that are full of lies. Inflation may result from the present monetary policy but default will only occur if congress decides not to print the money. Congress does have a tendency to play political games with the debt ceiling but default is not a real possibility and you have to know this already. Shame on you. Advocate for your position with honesty and integrity.
If you can only pay tax in a particular currency then that particular currency has intrinsic value to those who are required to pay that tax and you. In a society that values a regulated commons such as a quality legal system, clean food supply, good free roads, competent administration, etc. then through the imposition of taxes labour can be recruited for the provision of those needs in exchange for the settlement of tax debt. Within a democracy the coercion of taxation is determined by the collective or their representative while in an autocracy taxes are determined by other means. Makes sense.
For starters I'd like to point out the ways that this video is misleading. The debt ceiling is a self imposed limit on debt. Congress has decided to make default a possibility. This is elective. Deficit spending has already been going on for decades and what are the negative results? There certainly has been Austrian economists freaking out the entire time, but the results are a robust economy and a lot of growth. How much longer are you going to believe these people? It's far too simplistic to say that deficit spending is inflationary. It can be, but it can also be deflationary. America has the most expensive health care system in the world with far from the best outcomes. Socialized healthcare systems are far cheaper. Canada's system is about half price and everyone is covered. If government cut out the corrupt insurance and pharmaceutical companies by deficit spending prices would most likely go down and not up. To not believe that would be to ignore all the data from the countless numbers of models worldwide that exist in present day. There is no MMTer that thinks that you can just print money endlessly without consequence. Rather than believe that tax revenue is the limit, they believe that the resource base is the limiting factor. If a country has a food shortage and the government prints money and sends everyone a check to buy food with that will be inflationary because there isn't enough food to go around. If the government instead incurred the same amount of debt by importing food and developing crop yield boosting technologies it wouldn't be inflationary. My point is that inflation is oversimplified in this video. There are many other misleading things here. I think that most of what Dr. Davies says is complete nonsense. I think it's likely that he doesn't even believe the garbage that he's spewing. This stuff about production no longer catering to consumers is bonkers. What's your proof? Also the way that they take Stephanie Kelton's sound bite out of context and put it in their own framing is the stuff of political ads. If Learn Liberty had the courage of their conviction they wouldn't resort to such shady tricks. For the record if the government has outspent it's resource base and caused inflation the right thing to do, if that circumstance were to exist, would be to cut the spending and not to raise taxes. Taxes would be used to reduce aggregate demand in an overheating economy. If anyone would like to learn more there are many interviews on UA-cam. There's one done by Anthony Scaramucci. The Mooch seems to be a believer. Warren Mosler a guy worth listening to in my view. His success investing should make you think that he just might know what he's talking about. Every dollar in your pocket is a dollar that the government has spent into existence and has not yet taxed out of the economy. A national debt of zero is national wealth of zero. This stuff isn't even theory. It's the observations that the theory is based on.
Yes I would Disagree with this given that construction of housing development vs increase of population allows for that good(housing) to go up due to the lack of the housing supply what causes the lack of supply, the lack of Gov spending on affordable housing, what is creating the price of goods and services to go up the lack of USfood supply through manufacturing, and the fact the interest rates that are meant to cut down on "private sector borrowing" is not helping because the demand for currency isn't going down due to lack of Gov spending causing the cost of all goods and services to go up because not only to business have to pay interest on the credit they "Borrow" to buy the consumer inventory but they also have to pay extra on some commodities due to sanctions and wars keeping the growth of some commodities from being supplied either all together or in a timely way. and when we are taxed that's redeeming a Gov Liability not to fund future spending.
If your goal is to turn the worlds greatest economy into a third world country, then it is valid.
Is the US a third world country? Because our monetary system is entirely how it is described here.
@@bradlarabell9412 Our legislative branch, both sides of the aisle and our executive branch sure seem to be moving the country in that direction. Have a great day.
Both schools are correct because they are different. The government may cause a deficit. Printing money doesn't cause a deficit, though it might cause imbalances. .
As frightening idea as I have ever heard. We seem to be headed for collapse, and are eager to get it done.
Then you will be gratified to learn that whats in this video isn't MMT and strongly suggest to read some actual MMT articles and books. Start with Deficit Myth.
Before accepting the sun as the center of our solar system, there was the rings in rings model for how other planets circled the earth, mmt is essentially that but for economics.
🤣🤣🤣 lol
The Professor was almost immediately wrong. MMT Economists make it very clear that you absolutely DO have to worry about inflation. What you DON’T have to worry about are deficits and debt. This breakdown is wildly inaccurate.
Tim, thanks for your comment! I can't fully agree - deficit and debt are big problems, but inflation is very alarming because it significantly affects the economy's stability. Also, printing harms everyone and reduces the value of money that people hold. If you are interested in what Antony Davies says about the debt, watch the video: ua-cam.com/video/EPjrFjAxwlw/v-deo.html
"MMT" is already how they finance the defense spending now, the issue is what the created money is spent on
This video fails to explain the difference between MMT and our current monetary system, which is "Central Banking". The US central bank, the Federal Reserve ("the Fed"), increases the money supply to accommodate population growth, and/or GDP growth, by taking newly-printed money to the Bond Market to buy "high-quality" bonds, because high-quality bonds maintain their value.
(The bond-sale proceeds are deposited in thousands of bank accounts, which increases the Banks' excess reserves, which enables Banks to make more loans, which further increase the money supply, via fractional-reserve lending. But a couple years ago, the Fed temporarily reduced the reserve-ratio to 0%, so, presently there's no lending-constraint.)
To fight inflation, the Fed retrieves money from circulation, at any time, by simply selling some of the high-quality bonds previously purchased, which reduces the money supply, and kills inflation. However, if the Fed sells too many bonds, a recession could result, like the infamous 1982 recession.
MMT proponents argue that newly-printed money can be put into circulation by purchasing "goods", instead of bonds. The goods so purchased would provision government social programs, infrastructure, the military, hospitals, foreign aid, etc. But these "goods" can never be "re-sold" to retrieve money from circulation, if significant inflation ever threatened the economy. Instead, MMT proponents argue that reducing the money supply (to fight inflation) can be accomplished by issuing more Treasury Bonds, or raising taxes, to drain excess money from circulation. (MMT proponents acknowledge that the bond-sale proceeds and tax-proceeds must be destroyed, because spending said proceeds would put that money right back into circulation.)
MMT proponents fail to acknowledge the obvious problem with raising taxes-or-debt to fight inflation, i.e., it needs to be to be done ASAP, before inflation becomes significant and re-establishes "inflationary-expectations", which was the plague of the 1970s.
MMT proponents also fail to acknowledge the obvious problem hoisted upon taxpayers, if taxes were suddenly raised, because taxes are paid throughout the year, not in lump sums. Most taxpayers would be forced to tighten their belts, which reduces consumption, which reduces Aggregate Supply (a.k.a. GDP), which fans inflation (because there are fewer goods). How can I say this? Well, it already happened during 1970-1981, when the U.S. suffered through 3 "inexplicable" episodes of "stagflation" that no mainstream economist could explain. Only one economist, Robert Mundell, could explain the causation: Mundell explained that stagflation sadly resulted from backward economic policies, which I've simply parroted, above, without giving Mundell due credit until now.
The problems with "borrowing-money-out-of-circulation" are also subtle, but just as dangerous.
Good synthesis of what varying theories and their consequences are. What are the consequences of borrowing out of the money supply?
The additional problem with MMT is that the money collected in taxes to pay off bonds has to actually be used for that purpose and politicians don't have a good record of using taxes to pay off bonds but have a long record of borrowing more and more and kicking the can down the road. MMT policy (Kelton) is printing more and more money to pay of previous bonds that mature. - Utterly stupid stuff that just increases debt and burdens taxpayers which resembles what happened in Zimbabwe early this century and is about to happen again. See their Zimbawe government bond scheme of a few years ago that paid stupidly high interest and now is resulting in what you might guess - another round of growing inflation
"Here's why" I watched this video three times. I couldn't find why. So far it seems like NOT increasing the debt ceiling is the bigger risk. Recent inflation is due to the limited supply-chain issues when world economies emerged from Covid lockdowns. And then there's the Russian invasion if Ukraine and the price of oil. But after almost a year of sanctions, Russia's economy hasn't collapsed. The Ruble is not a reserve currency but it IS a fiat currency.
And then there's the world's richest people who hoard all their money in tax havens, shell companies and secretive bank accounts. If treasuries don't print money, there will eventually be none in circulation.
Germany's currency in the 1920s was still based on gold. Japan's Yen currently is not.
Mmt is one of the most misrepresented subjects. Most of the thing the professor's says incorrectly mischaracterises mmt, I would says it's almost the opposite of what mmt is saying.
MMT is the biggest scam of our current times. There's no such thing as free lunches. This system only benefits the wealthiest and government institutions. Moreover, it devalues its currency. It's based only on the trust of the institutions and indirectly in the US military power. That's what they want, more taxes to fund the military industry complex and increase the dollar hegemony worldwide, as well as the oil sector in a global scale.
Spending in a deficit is very oxymoronic. There is no way around it. You pay off debts by making more, spending less, or both. A loophole or math formula will never change that.
Investing in Bitcoin is the best investment anyone can do this seasons, because Bitcoin investment made a lot of people millionaires
And people who lost money, lost a lot.
@@jasonbourne9819 correction. People that sold BTC too cheap trying to speculate lost money. No investors lost money with BTC.
@@zacharyneilson9220 For you to make a fortune on Bitcoin, it must be a complete disaster for some who were left carrying the bag when the market price finally crashes or corrects itself. And when bitcoin crashes, it crashes big.
What do you think about Ethereum as a better option for investment?