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Even without MMT you could have easily argued that government should have made that decision.
I'm debating with people that don't think MMT is real Kelvin.
As I see it, you can either run society for the benefit of capitalism (the Tories), or capitalism for the benefit of society (Labour I would hope).
If the second idea doesn't get a decent chance periodically then the people in power are setting themselves up for a revolutionary change, which will not be televised.
Once again MMT is not an opinion.
do all economists agree with it? I there any proof? Or is it like all other economic theories just that - a theory?
Of course its an opinion. It might be one shared by many and with persuasive argument for it but it remains an opinion
I think possibly the point stevextc is trying to make, albeit rather unclearly, is that printing a huge amount of money could cause inflation.
I would agree it's a theoretical possibility and may happen in some circumstances. Back in 2008, the era of massive quantitative easing, I was concerned about this, being primarily a prudent saver (some would say, being fortunate in my situation). I wasn't pleased to hear that people who had stupidly and greedily lost billions were going to be bailed out by new money that would in principle dilute my own savings.
However, the QE happened, to the tune of many billions, (trillions?). And the inflation....didn't happen. I'm better off now (in real terms) than I was then, even though none of the QE money was thrown in my direction. The last year or two might have put a bit of a dent in that, but that's another story and not caused by anyone printing money.
I may have been naive and uneducated at the time (after decades of being told "money doesn't grow on trees"), but at least I learnt something from watching how events turned out.
No it's not an economic theory. The theory in the title implies a description rather than a theory.
And no, some economists still believe we borrow from the private sector.
Some left-leaning ones too.
BoE data shows that to be bullshit. I don't know how you can argue with COVID spending being directly funded by the BoE. Proof - the government spent 350BN of money to support COVID without any private money. It's all there on the balance sheet.
It's an accurate description of the way a currency issuing government spends.
Not an economic theory like the laffer curve.
But let's face it economists still argue the toss on Brexit too.
Of course its an opinion.
It's a very useful model. And not one worth arguing about... we know governments spend money before they "raise" it... it's announced every budget in the UK. But ultimately it still matters WHAT the government spends money on, and WHO they let extract and keep that money. The how much will continue to be the same old story... lots of nonsense about balanced budgets while finding endless funding for whatever is the priority of the government, and cutting where it doesn't matter to them... which in the case of many politicians is anything that can't be used to funnel money upwards it seems.
[ EDIT : it also matter who they tax, and how much ... although talk of "tax and spend" upsets the new MMT recruits no end ... so "spend and tax" it is ... just don't let them talk as if it's "spend and spend" without being challenged ]
Of course its an opinion. It might be one shared by many and with persuasive argument for it but it remains an opinion
Which bit of MMT is an opinion?
It’s a very useful model. And not one worth arguing about… we know governments spend money before they “raise” it. But ultimately it still matters WHAT the government spends money on, and WHO
Kelvin - the reason people/MPs cite not to do good things for society is more often than not - we can't afford it.
MMT eradicates that argument. So you have to be prepared to explain it.
Look at this thread for many examples.
theory
A set of statements or principles devised to explain a group of facts or phenomena, especially one that has been repeatedly tested or is widely accepted and can be used to make predictions about natural phenomena.
So its an economic theory and your opinion it is right is just that. an opinion
glad to have cleared that up
MMT stands for Modern Monetary THEORY
So its an economic theory and your opinion it is right is just that. an opinion
glad to have cleared that up
You're having a go because of the word Theory in the title?
It's not an economic theory.
It's a description. It got saddled with that title 25+ years ago.
So what? Just read it as description.
MMT stands for Modern Monetary THEORY
A theory is a system of explanations that ties together a whole bunch of facts. It not only explains those facts, but predicts what you ought to find from other observations and experiments.
That's the common understanding of Theory in this context.
Glad we cleared that up again Tjagain.
the reason people/MPs cite not to do good things for society is more often than not – we can’t afford it
When very often we can't afford not to do it! And still we don't do it. And then pay the price. For decades. We're paying the price now. All that money "saved" not transitioning at speed away from fossil fuels... we're paying the price of that short sightedness. All the money "saved" not paying into the EU budgets... we're paying the price of that. All the money "saved" cutting education budgets... we're paying the price of that. All the money "saved" doing away with contigenancy in the NHS and shutting down epidemic preparedness... boy we paid for that. The "cost" of all these "savings" is hitting us hard.. and it's barely started... the biggies are only starting to bite.
It was and is the wrong thing to do. Tell me how raising interest rates changes a supply side driven energy issue? Other than putting people out of work to stifle demand.
The energy crisis in the UK isn't supply related, it's price structure related, That's why we're still in it and others aren't, but that's an aside. UK unemployment has continued to decrease, but hey, keep going. Does raising rates not signal to the orthodoxy (as perhaps you and Liz Truss would view them) that there's a hand on the tiller?
I would prefer a governments and central banking system that makes its first priority the well-being of its bloody citizens and not the markets.
Can you prove it's not doing that by sacrificing short term pain to stop/ameliorate something worse in the future?
Governments enable markets not the other way around.
It can and does work both ways.
What are you talking about? What is a sovereign debt crisis in the context of a country that issues its own currency? Who gives a toss about credit rating agencies?
There're plenty of examples of this in history, India, Venezuela, Argentina. What happens when people aren't willing to buy government bonds at low rates due to risk? We raise the rates, yes? How far can you take this? Has ANYONE really pushed the bounds of MMT? Do you really want us to be first? With this group in charge?
You seem to forget the victim in all of this the low-waged worker. Where do they feature in your defence of well paid economists? You’ve lost sight of the actually victims here.
I've really not, but I'm trying to fix the problem, not treat the symptoms. His salary is irrelevant, his experience and expertise are relevant. He's suggesting a path that WILL help, maybe not in 6 months, but a little longer certainly it's better than the track we're on.
MMT is saying and would have said ten years ago invest in your energy infrastructure – we can afford it whilst monetarists would be arguing about how we can’t afford it.
See, I don't think it would, because MMT places responsibility with politicians and they're almost as short term thinkers as you seem to be. 10 years ago we were emerging from one financial crisis, energy was cheap, climate change seemed to barely register in the public consciousness, we were finally out of Iraq, Russia hadn't invaded Crimea and the Arab spring had just ended. No one was thinking about energy. Well - Japan was. You'd have ended up with £200bn on HS2. Money well spent.
Its not proven or accepted by all economists is it? that makes it a theory
Can you prove it is right? No you cannot. Does every economist agree? No they do not
I only dip in and out because i do not know enough economics to debate it but even then I have seen you contradict yourself
I understand you are wedded to this theory but that it all it is. Evolution is a theory even tho its almost universally accepted - thats because you cannot prove it MMT is far from universally accepted.
Use for favourite seach engine and you will find plenty of critiques from highly qualified economists
Unless and until that is addressed we are just pouring more money to the rich.
So your solution to the problem of money being transferred from the poor to the rich is to stop all government spending and abolish money? I admire your radicalism, but it's actually much simpler than that. All we have to do is tax the rich and give that money to the poor in the form of public services, infrastructure, tax reliefs etc.
Steve you're very mixed up on this. I totally agree that we have a huge problem with income and wealth inequality. But that's got nothing to do with how money is created, govt borrowing or trade balances. It's got everything to do with the nature of capitalism and specific govt policy which favours the rich over everyone else. You're conflating two separate issues and drawing the wrong conclusion.
There’re plenty of examples of this in history, India, Venezuela, Argentina. What happens when people aren’t willing to buy government bonds at low rates due to risk? We raise the rates, yes? How far can you take this? Has ANYONE really pushed the bounds of MMT? Do you really want us to be first? With this group in charge?
Not going to happen.
Bonds are not central to the spending of government money. It happens afterwards as a policy decision that they are not compelled to take - to drain money out of the private sector.
You don't need to push the bounds of MMT + it's a process that happens every day without issue for the last 40 years. Yet again do you really understand MMT? And what it is?
There’re plenty of examples of this in history, India, Venezuela, Argentina.
And the examples are usually debt denominated in a foreign currency.
We don't have that problem. We are sovereign in terms of spending.
The energy crisis in the UK isn’t supply related, it’s price structure related, That’s why we’re still in it and others aren’t, but that’s an aside
I call bullshit on that. Price structure is a feature of supply and demand.
We barely produce any of our own energy - that in itself is an energy crisis.
10 years ago we were emerging from one financial crisis, energy was cheap, climate change
The irony of emerging from a crisis which was funded with new money creation in a debate about how MMT doesn't work.
The irony of emerging from a crisis which was funded with new money creation in a debate about how MMT doesn’t work.
😂
I often wonder where all the MMT-critics think the money came from to bail out the banks? The Iron Bank of Braavos presumably?
I understand you are wedded to this theory but that it all it is. Evolution is a theory even tho its almost universally accepted – thats because you cannot prove it MMT is far from universally accepted.
Use for favourite seach engine and you will find plenty of critiques from highly qualified economists
Critique of what?
The counter model is probably monetarism. But that's not really a description of government spending. More a way of controlling money I guess.
And it blissfully ignores the massive COVID spending.
I will throw it back to you -MMT described the funding on COVID support - how else was it funded?
You seem keen on disproving it - so show me.
Some people are just hell bent on not accepting it appears, or as usually the case don't understand it themselves.
https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/
This is the only fully resourced description of how the BoE finances government spending that I know.
It's extremely detailed.
Read it and see if you agree?
I think possibly the point stevextc is trying to make, albeit rather unclearly, is that printing a huge amount of money could cause inflation.
It's one option.. or thing that might happen as a way the system will rebalance if you are a net importer.
The overall point is there is no such thing as free food/energy etc. at some point it has to be paid for. (On a national scale, I'm not saying you can't forage and make your own birch oil)
The real point is something will happen at some point to balance. To take an example or the Icelandic govt would just have printed a load of money...
In a way it reminds me of a YTer vanlife guy who's convinced using electric heating charged off the alternator in his van is FREE ... just because you don't see where the leak is doesn't mean there isn't a leak.
In this case there is an absolutely huge leak where the system simply siphons this "free money" off to the superrich where it becomes money they use to buy stuff either in the UK or not... but it's real to the extent they can buy stuff with it.
Tell me how raising interest rates changes a supply side driven energy issue?
Energy is predominately traded in USD
We need to make sure that we kept parity between the GBP and USD
Once the Federal Reserve increased their rates we had to follow, otherwise there would have been big exodus of funds to the US seeking higher rates of returns on secure bonds.
You'll notice the correlation between lowering wholesale energy prices and the improvement in the exchange rate.
Energy is predominately traded in USD
We need to make sure that we kept parity between the GBP and USD
Again hence the need for spending on our energy infrastructure.
The government can always subsidise energy as it did.
Keeping parity between the USD and GBP is not a done deal by governments. There is way too many factors on currency speculation to believe we control that.
For instance at the moment dollar strength is regressing as traders move into riskier assets.
And given the GBP/USD has dropped for the best part of 15 years or more I'd say there's no parity.
[ EDIT : it also matter who they tax, and how much … although talk of “tax and spend” upsets the new MMT recruits no end … so “spend and tax” it is … just don’t let them talk as if it’s “spend and spend” without being challenged
That's just flippant.
The sequence is important. Otherwise that would confirm taxes fund spending which is a central tenant to MMT.
And no one who understands MMT says spend and spend.
When Starmer gets his position and he says we can't afford to do the things that you would like Kelvin I hope you remember MMTs value in explaining why we can Kelvin.
The order is important. But it is what already happens. We have spending policy and taxation policy, and the government spends and then recovers tax. That is what already happens. The whole “balance” of tax and spend still matters though, and MMT covers that. Berating politicians when they talk about the choices they want to make on our behalf because they don’t talk MMT (because they want people to understand them) doesn’t get us anywhere. We can talk of investment, and then using taxation to ensure that doesn’t get taken and kept by the rich… that’s plain speaking. For example investing heavily in the energy production, storage and distribution of the future… while also reassuring that tax loop holes will be closed and excess profits reigned on to prevent that investment just making the richest far richer. When talking about spending, also address taxation…
Of course it is only fair to accept that quite possibly we are living beyond our means both persoally and nationally. I know so many people who owe tens of thousands purely because of luxuries such as new cars, holidays, whopping great tellies and phones that cost them many hundreds of quid. We as a society have become used to things we haven't earned. We cannot have a decent health service if we don't pay for it yet we then expect even more from it. A national minimum wage should not allow for this. Nor should benefits. Your luxuries are your own responsibility.
There are so many people struggling to live but I do wonder, but of course can't prove or even attempt to, just how many people hitting the food banks are making poor decisions?
We, as a country, demand so much and, compared to what we actually need, expect.
To blame one part of the governemnt is just childish. Labour can't fix this. All they will do is make a few greedy sods happy by taking from one sector of society to give it to those most noisy. Supported by those who have no clue and experience of life. And in a way that will be even more unfair as they will penalise those who work hardest and most profitably (in a wide way) and more to the point prop up those who fail to contribute to the national exchequer.
For most of us, accepting being poorer is no big deal, maybe we should actually live by our mouths and be a bit more socially aware.
Those of use riding around on a couple of grands worth of MTB, travelling to ride it etc are not in any honest way able to comment as if we can afford to do that we have money to spare.
MMT is just Keynesian economics on Steroids.. it's a theory, not a set of facts. I'm actually sympathetic to a lot of it's ideas, but there are limits to how far you can push it otherwise even a comparatively strong economy like the UK can end up in a mess like Venezuela et al (tho' to a lesser degree).
How far you can push depends on a lot on political policy, and the sympathy of the markets that impact currency valuations, inflation rate etc. to that polocy. The government has made a series of really bad policy calls since 2008, leaving the UK economy weaker and less competitive. Labour won't be able to fix that in 10 minutes but at least they can change direction, and start to address the underinvestment that's made the UK poorer than it should be.
At the other end of the spectrum is Steve who's veering dangerously close to the 'real money' of the gold standard. While a few people on the internet might think that's a good idea, stagnation, increased inequality, and a lot of other inevitable nasty side effects of it mean it's real nonsense, and then you'll really get to see Marx's theories up close. Real world economies are NOT like a household budget. As long as you can maintain growth you'll get some inflation, and historic debt can be shrunken...
If the second idea doesn’t get a decent chance periodically then the people in power are setting themselves up for a revolutionary change, which will not be televised.
Revolution ?. Never, this isnt France, or one of those other 3rd world countries....
And besides, that chap in the wheelchaire doesn't need half the money society originally deemed he needed to live on.
"So Can I then still have my DeLongi bean to cup ?."
"Excellent"
Revolution ?. Never, this isnt France, or one of those other 3rd world countries….
Revolutions always come because of necessity, never choice . Given choice the status quo will always triumph.
The question is do we still have choices? Can we continue with the past?
.
"Revolution is a struggle to the death between the future and the past"
Fidel Castro
I call bullshit on that. Price structure is a feature of supply and demand.
We barely produce any of our own energy – that in itself is an energy crisis.
Then you clearly know naff all about what you’re talking about. Currently over 60% and within 5 years closer to 80% of our electricity is/will produced from renewables. It’s cheap, but is priced at the rate for gas, as that’s what’s contracted. The actual rate for production is tiny. This is a fabrication and is A reason why other economies don’t have the same, persistent energy cost crisis.
More than 50% of our gas and 65-70% of our oil is domestically sourced. Policies could be put in place to protect the cost of that supply during times of crisis, thus preventing a dramatic inflation and vast oil company profits in the UK.
MMT is just Keynesian economics on Steroids..
MMT is an observational description on how economies work.
Keynesian economics is what comes after, a model for changing the economy with investment.
They are not the same thing, just as structural engineering science is not a house.
Reading what Pill apparently said made sense. We are all worse off for whatever reason but no one is willing to accept it. If everyone one took a small % hit (yes I know that this will adversely affect the poorest more) then we could ride it out.
But
Companies (start there because it's cyclic and your politics will decide where you start) are being charged more but need to keep the profit margin up so in turn charge more for goods. Everything is more expensive which pushes inflation up The consumer sees the cost go up feels (and is) worse off so asks for a pay rise. Government sees inflation go up which is bad for votes so gets BoE to put rates up which......
The killer is the huge multi nationals sitting on massive profits at a cost to the customer and because they drive to make more profit year on year they help drive the inflationary cycle. Oil companies and utilities companies sitting on billions of customers money and profiting from inflation and a weaker pound. I'll bet they buy in strong dollars, do an internal conversion and sell in weak pounds.
the UK can end up in a mess like Venezuela et al
How much of Venezuela's economic woes are down to internal economic mistakes, and how much due to being punished by the international community, led by the USA, for daring to be socialist? How come Venezuela always gets used as an example of "failure" and not any of the south American countries that imposed the extreme Chicago school neoliberalism?
“Revolution is a struggle to the death between the future and the past”
Yeah, says every revolutionary leader, so long as the deaths are other people. All revolutions manage is to change who the elite's are.
"I warn you that you will have pain–when healing and relief depend upon payment.
I warn you that you will have ignorance–when talents are untended and wits are wasted, when learning is a privilege and not a right.
I warn you that you will have poverty–when pensions slip and benefits are whittled away by a government that won’t pay in an economy that can’t pay.
I warn you that you will be cold–when fuel charges are used as a tax system that the rich don’t notice and the poor can’t afford.
I warn you that you must not expect work–when many cannot spend, more will not be able to earn. When they don’t earn, they don’t spend. When they don’t spend, work dies."
Neil Kinnock 1983 (How prescient and lots laughed at him and re-elected the monster).
Revolutions always come because of necessity, never choice . Given choice the status quo will always triumph
Nice but not actually true.
Chew
Energy is predominately traded in USD
We need to make sure that we kept parity between the GBP and USD
Or not? Apparently the government prints more £££ and we can just convert those into $$$ .. if the exchange rate is unfavourable we can just print more £££ indefinitely to buy more oil/food etc. without any consequences???
^^^
That might be tongue in cheek? but the basic premise seems we can just print money and other nations will give us goods in return for it and it never needs to be paid back.
I will throw it back to you -MMT described the funding on COVID support – how else was it funded?
You seem keen on disproving it – so show me.
Some people are just hell bent on not accepting it appears, or as usually the case don’t understand it themselves.
This is like asking for proof of the non existence of a specific deity or being continually asked to prove why perpetual motion doesn't work AND then claiming it's because they don't understand or because god/thor/isis whomever won't prove they exist by doing something like appearing and doing something like carving a 200' high "hello world" with lightning bolts on live TV because we just need to believe.
Let's simplify this and have a sovereign casino... that prints its own chips...
When you are inside the casino you can use chips/exchange chips for food or whatever and when you finally leave you can convert your chips into a currency you can use outside the casino.
Whilst you are in the casino you can buy some food for a mate who's run out of chips and tell him he owes you the value back in the real world and even take some chips out you can sell to someone else in the car park at parity or take back with you when you go again.
This is all good as the casino has its own farm providing the food, brewery, distillery and such and the casino can even buy the food you buy at the casino food with a local farmer who likes gambling so much he'll just take the chips at face value and he was going anyway he loves gambling so much so he'll just drop off the tons of food items as a favour.
The employees all love it so much they work for chips they can spend on the slot machines.... they don't need clothes and such as the free energy machine keeps it all nice and toasty...
all this is working then one day the casino free energy machine breaks and they have no power and the service company doesn't want paying in chips but something it can use to pay it's employees and buy the materials it needs to make more free energy machines... the casino say's well just print more chips and you can have £2 chips for ever £1 but the free energy machine company wants money to pay its workers and buy materials no more chips
but the basic premise seems we can just print money
No, the premise is that we can print some money to pay for stuff but not too much otherwise it becomes worth less as you say. You have to control the supply to maintain the price like anything else - diamonds, or oil for example.
Don't forget, MMT is not a system, it's an alternative description of the system we already have that might help us use it better.
You're outlining the problems faced by any modern economy, the trick is how to stop that happening and that's what MMT is interested in. All money is made up as you describe. There isn't really an alternative.
No, the premise is that we can print some money to pay for stuff but not too much otherwise it becomes worth less as you say. You have to control the supply to maintain the price like anything else
Which leads us back to the main question of how much?
And what things should it be spent on?
Indeed.
Perhaps it's been explained earlier, but has anyone explained WHY I (or you for that matter) should "just accept" being poorer?
As far as I'm concerned, this shit show is not of my making.
Perhaps it’s been explained earlier, but has anyone explained WHY I (or you for that matter) should “just accept” being poorer?
Sovereignty.
Perhaps it’s been explained earlier, but has anyone explained WHY I (or you for that matter) should “just accept” being poorer?
So the asset owning class can continue to get richer, know your place serf!
Revolutions always come because of necessity, never choice . Given choice the status quo will always triumph
Nice but not actually true.
When in reference to the People, as in the comment "this isnt France, or one of those other 3rd world countries" course it is. People don't support the forcible overthrow of a government because everything is working fine and they just fancy a change.
Popular revolutions are always because of necessity and the belief that the existing status quo is no longer an acceptable option.
Osborne admitted that austerity was nothing to do with 'reducing the debt.' Austerity is about changing the relationship between capital and labour whereby more goes to capital, aka profiteering. Capital has not invested because cheap labour was so freely available and so we have fallen behind. I'm just back from Transylvania and life there seemed much more comfortable and loads of locals on top range bikes. The Tories have done a reverse midas but when Starmer says 'we have to make difficult decisions' he means more austerity and privatisation and by 'growth' Reeves means Thatcherite trickle down. By saying Labour will freeze prices they are simply locking in the losses people have experienced.
Strikes and protests will be the only mechanisms to deliver improvements for the majority and invariably governments (Tory and Labour) will introduce legislation to limit strikes, pickets, protests and the police will be given more money and weapons to beat back dissenting voices.
Once again this all comes down to education. Most people have no idea what they are voting for - even those who actually make an effort which is a pretty small segment.
Most people vote for candidates from the same party every election so they have a pretty good idea what they are voting for.
Although obviously they might not know details of specific policies. Anyone who is currently saying that they will vote Labour next election doesn't really know what specific policies they will be voting for. But that's not because of lack of education.