Shot in the Dark

Modern Monetary Theory

Joe Doakes from Como Park emails:

In the olden days, when gold and silver were currency, there was only so much metal so there could only be so much money. The government couldn’t create more money out of thin air, it had to tax citizens to obtain the money to run the government.

Lesko Brandon reminds us Milton Friedman no longer rules the world. The government can create as much money as it wants, simply by adding ones and zeros to bank accounts.

Fine. But then why am I paying taxes?

Joe Doakes

To show everyone who’s boss?

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Mitch Berg

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27 responses to “Modern Monetary Theory”

  1. Mammuthus Primigenesis Avatar
    Mammuthus Primigenesis

    Yet inflation was frequently a serious problem in those days. Also economic crashes and financial panics.
    Basing a currency on a precious metal does not prevent the government from borrowing and spending money.

  2. Emery Avatar
    Emery

    Bitcoin — a store of wealth, they tell me…

    I was assured Bitcoin was a store of value, or a hedge against inflation, or something about freedom against government tyranny or cheaper payments.

    I am beginning to think that these sociopathic ponzi libertarians without even basic knowledge of tech or economics might not have known what they were talking about.

  3. Mammuthus Primigenesis Avatar
    Mammuthus Primigenesis

    “I was assured Bitcoin was a store of value, or a hedge against inflation, or something about freedom against government tyranny or cheaper payments.”

    Who told you this? Why did you listen to them?
    Your record on giving financial advice — or of demonstrating a command of basic economics — is not unquestioned, Emery.

  4. bikebubba Avatar
    bikebubba

    MP, one interesting thing I noticed when I viewed a chart of the value of the dollar over time in the U.S. from 1787 to the present was that prior to fiat money, the major disruptions in the value of money were a sharp inflation during war followed by a sharp deflation in the ensuing peace.

    Now we can debate whether each war was justified, wise, or well formulated, but long and short of it is that the issues are, then as now, when good government becomes bad government.

  5. Emery Avatar
    Emery

    The problem with crypto is the now common mistake of equating nothing with something.

  6. Joe Doakes Avatar
    Joe Doakes

    Doesn’t address my fundamental point: if government spending is no longer limited, then we can send $40 billion to Ukraine and still give a free cell phone to every illegal alien so he can keep in touch with relatives back home while living in America for a few years waiting for his deportation hearing, and also subsidize fields of solar panels, and taxpayer funded abortions in Africa. Fine, but why am I paying for it?

    Americans spend 6 billion hours and $168 billion every year to comply with tax laws. Why? Reduce personal income taxes to zero. You don’t need my money, just run up the debt another couple of bucks. What’s the problem?

  7. bikebubba Avatar
    bikebubba

    Regarding why you’re still paying taxes, even if MMT were true, and hence taxes were not necessary, the left would still want to control you through your pocketbook and tax law. But reality is that in their heart of hearts, the left knows that MMT is not true, and hence they require a fallback position when they realize they’re getting too close to a Weimar event.

    And really, the history of the Weimar Republic (and Hungary, and Argentina, and Zimbabwe, and dozens of other countries who have tried to print their way to prosperity) ought to be required reading for anyone who thinks that we can do this. Time after time, it hasn’t ended well.

  8. Emery Avatar
    Emery

    Tax expenditures go up regardless of which party controls the purse strings. The composition may differ but nonetheless — they still rise.

  9. Mammuthus Primigenesis Avatar
    Mammuthus Primigenesis

    Yep, Bikebubba, the MMT theorists were pretty upfront about the goal of MMT being the separation of government spending priorities from taxpayer’s interests. If the government can print and spend as much money as it wants, taxpayer opposition to a lot of liberal projects goes away.
    But they won’t scrap these projects just because MMT has been discredited. Plan B is to make tax payer influence on federal spending plans. You must have noticed that a big chunk of the Dems plan to “save our democracy” is to dictate who and what you may or may not vote for.

  10. Emery Avatar
    Emery

    MMT, like many philosophies, works great on paper; in practice, not so much. Because at some point it butts up against human nature.

    In this case, the key points of MMT are (1) governments print money when they need it to buy stuff, and (2) you gotta collect the excess dollars later, somehow. It flips the script from “tax and spend” to “spend, then tax”. Problem is, spending is Economics, but taxing is Politics. We are great at the former but awful at the latter.

  11. Joe Doakes Avatar
    Joe Doakes

    MMT is exclusively the domain of the Brandon administration. He campaigned on it, remember?

    Are we now in agreement it was all a lie, the his administration knows they’re setting up America for a devastating crash which will take down the world economy with it, they they intend to cause global poverty and possibly war?

    But Democrats support them anyway?

    Why?

  12. Joe Doakes Avatar
    Joe Doakes

    Oh, wait, never mind. I figured it out.

    No mean tweets.

  13. Mammuthus Primigenesis Avatar
    Mammuthus Primigenesis

    MMT, like the Keynesian idea of government spending acting as a “governor” on the economy, requires that politicians enact taxation and spending policies prudently and rationally. This isn’t implied, Keynes says so in black and white. So does the originator of MMT, Warren Mosler.
    But of course politicians aren’t elected to enact prudent and rational taxation and spending policies. They are elected to promote the tax and spend policies preferred by their constituents, and if they don’t, they are replaced by a politician who will represent the preferred policies of the voters.

  14. Mr. D Avatar
    Mr. D

    Worth noting — the bitcoin stuff is a threadjack, but our resident troll eventually got back to the actual post topic. Progress of a sort. And yes, MMT is a particularly pernicious scam.

  15. Emery Avatar
    Emery

    ^ A true MMT advocate, as opposed to the ones jumping on the bandwagon and looking for “free money”, would say that tax does play an important macroeconomic purpose: the prevention of inflation. And they do not suggest that MMT can make an economy wealthier than its productive capacity will allow. They do say that MMT gives policy makers the tools to run the economy at closer to that capacity. So the assertion that inflation and tax end up playing a similar role is pure MMT, not a critique. A more insightful critique would focus on MMT’s limitations in an open economy. In an open economy excess demand leads not directly to inflation but to a current account deficit and financing by parties outside the economy whose tolerance for lending in local currency depends on the credibility of that local currency. The whole thing breaks down if the government is forced to borrow in foreign currency.

  16. Emery Avatar
    Emery

    @mr d: 🚨OT
    A new study found that people who score higher on dark tetrad personality traits — ie, Machiavellianism, narcissism, psychopathy, and sadism — tend to have more positive attitudes towards cryptocurrency.

    /People with dark personality traits tend to be more enthusiastic about Bitcoin, study finds/
    https://www.psypost.org/2022/05/people-with-dark-personality-traits-tend-to-be-more-enthusiastic-about-bitcoin-study-finds-63131

    Can’t wait for a bunch of angry crypto bros to fill the comments telling me I’m dumb and deserve to die in order to prove that they are not, in fact, sadistic psychopathic Internet trolls.

  17. Blade Nzimande Avatar
    Blade Nzimande

    The problem with crypto is the now common mistake of equating nothing with something.

    lol….that’s exactly what you do every time you scratch out your thoughts, rAT!

  18. Blade Nzimande Avatar
    Blade Nzimande

    Case in pojnt:

    “Can’t wait for a bunch of angry crypto bros to fill the comments telling me I’m dumb and deserve to die in order to prove that they are not, in fact, sadistic psychopathic Internet trolls.”

    “Fill the comments”
    LMAO…like anyone gives a fuck about your squeaks, rAT. There’s nothing there.

  19. Blade Nzimande Avatar
    Blade Nzimande

    “/People with dark personality traits tend to be more enthusiastic about Bitcoin, study finds/”

    And leftist scum tend to be mentally ill:
    PEW STUDY: WHITE LIBERALS DISPROPORTIONATELY SUFFER FROM MENTAL ILLNESS.
    Survey data from a 2020 Pew poll indicates that white liberals disproportionately suffer from mental illness versus their conservative counterparts.

    The study, which examined white liberals, moderates, and conservatives, both male and female, found that conservatives were far less likely to be diagnosed with mental health issues than those who identified as either liberal or even “very liberal.”

    Pathological lying, Narcissism, Dunning Kruger syndrome, multiple personalities….yup, you’re a leftist reprobate.

  20. Emery Avatar
    Emery

    Imagine when the hype is gone and the dust has settled… the realization you paid $60,000 for a piece of useless computer code. Or worse, if you dished out $400,000 for a digital image of a monkey. Suddenly you realize the bigger fool was you.

    So it’s not an inflation hedge… it’s not digital gold… it’s not a currency… what is it again?

    One thing is certain: when interest rates are at zero the cost of foolishness goes to the moon.

  21. Mr. D Avatar
    Mr. D

    Can’t wait for a bunch of angry crypto bros to fill the comments telling me I’m dumb and deserve to die in order to prove that they are not, in fact, sadistic psychopathic Internet trolls.

    Not aware of any “angry crypto bros” in this comment section, although I did see the Angry Crypto Bros open for the Gear Daddies at the Turf Club in ‘93.

    Meanwhile don’t flatter yourself — your persona here is strictly gelding Snidely Whiplash.

  22. Mammuthus Primigenesis Avatar
    Mammuthus Primigenesis

    One of the remarkable things about MMT, is that it makes both both micro and macro economics disappear. Micro economics is individuals making a free choice to trade a thing for a thing of greater value to them. Both the buyer and the seller receive value. Macro economics is simply the aggregated choices made by millions or billions of consumers.
    In MMT none of that matters. The only actor is the political state, which issues currency when the supply of money is too low, and takes it back with taxes when the supply of money is too high.
    How’s that working so far?

  23. Emery Avatar
    Emery

    I’ve been reading about MMT for several years and it’s been very disappointing to see MMT get hijacked by the left over the last few years. Taxes used to be important to withdraw money from the economy, reducing its supply to check inflation, but the new breed of MMT advocates argue that taxes should be used to reduce income and wealth inequality. It’s greatly dumbed down most discourse around the theory at its core.

  24. Mammuthus Primigenesis Avatar
    Mammuthus Primigenesis

    bikebubba on May 13, 2022 at 8:23 am said:

    MP, one interesting thing I noticed when I viewed a chart of the value of the dollar over time in the U.S. from 1787 to the present was that prior to fiat money, the major disruptions in the value of money were a sharp inflation during war followed by a sharp deflation in the ensuing peace.

    It’s not all about the value of the dollar. Empirical info shows that when the value of currency was tied to a precious metal, financial panics caused extreme drops in the value of things like labor and commodities compared to the period when currency value was set by central banks.
    Obviously I am not a gold bug. I know too much economic history 🙂 Many modern economic historians believe that slow economic growth of the Medieval period was a result of a shortage of currency (coined money). Interest rates in those days were very high, usually between 25 and 40 percent per annum.
    While most conservatives reference Adam Smith’s _Wealth of Nations_, sometimes I swear to God that I am the only conservative who has actually read the damn thing. Smith goes into great detail about how the value of the British pound and the French franc varied despite the fact that both were based on gold.
    It is really is a fascinating book, it delves into some of the really odd schemes and practices of making money when the value of everything was based on the value of gold.
    If you really think that the dollar is going to collapse, don’t buy gold, buy cases of spam. And Bullets.

  25. Joe Doakes Avatar
    Joe Doakes

    No True MMT Economist would . . . Oh, well it’s okay, then. MMTwill work. Just not as they are doing it.

    Like socialism. This time, things will be different. This time, it will work.

    And the solution to skyrocketing prices is skyrocketing taxes. That will help. True, that will suck money out if your family budget just when you need it most. But its for your own good.

    It’s all so clear now. Thanks, E.

  26. Emery Avatar
    Emery

    “The rumours of the death of the dollar are greatly exaggerated”.

    The USD is going nowhere anytime soon. When Japan and the Yen were riding high in the 80s, we heard the USD’s days were numbered. When the Euro was created, we heard of the impending death of the USD. When Crypto was brought to market, the USD was sent to Death Row. Yet, despite all the pitchforks and torches, the USD has not only survived, but thrived. The USD is the unit of currency for almost all international trade. If you are buying and selling, you need dollars to do it or you are in big trouble. Borrowing money? You need access to dollars or you are in big trouble. Just look at Russia. No, you are all going to need to get used to Washington, Lincoln and Franklin in your wallets for some time to come.

  27. Mammuthus Primigenesis Avatar
    Mammuthus Primigenesis

    The Swiss frank was worth 90 cents when Putin invaded Ukraine. Now it’s worth a dollar.
    Certainly the resident troll purchased invested heavily in Swiss francs back in February and made a neat 10% profit just a few months.
    Right? Right?

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