Thursday's blog post (23/05) is now posted (16:23 EAST) - Australian government proves it can end poverty, but refuses to, and is deliberately pushing more people into that state - https://billmitchell.org/blog/?p=61763#mmt
An inflationary spiral based on expectations. It is a very different one from a deflationary one.
In the case of supply chain disruption (think floods and drought) it's a supply shock and at best businesses have to scramble to adapt (invest etc) to get around the problem. But hammering COL demand is perverse.
In all cases, messing around with interest rates is largely an exercise in futility.
I have to wonder if jacking interest rates "fixes" inflation in the sense that improved bank balance sheets allow them to more casually extend business operating credit. In short, it's only through business investment that supply constraints are alleviated.
Interest rates cause inflation from those who can raise prices and austerity from those who cannot.
A thing I think he doesn't give enough attention to is the role the Fed DOES play. The Fed indirectly controls bank lending rate through a couple mechanisms. The first is whatever rules it has for declaring a bank solvent. They've eliminated reserve requirements but now it's something like a stress test or whatever. A bank can't keep lending
"The result is that the presence of taxes increases profits. The logic is that the payment of taxes forces wager to reduce their propensity to save out of income before taxes, even if the propensity to save out of income after taxes is unchanged."
😮 In brief, Graziani is saying that taxes don't affect corporate profits, but here taxes on us lumpen diminish our ability to invest in stocks say.
The remarkable aspect of mainstream economists is their persistence treating values in (digital) ledgers as actual instances of banknotes (physical paper) as their mental model, then selectively dropping the model.
Deficit spending, good, bad, or it depends? #mmt people seem to promote the idea that we can just deficit spend until the limit of inflation. This seems to me to be a wrong headed idea. On the one hand, it makes a huge difference what you spend on. Wars and subsidies for bad businesses vs housing, infrastructure, or quality scientific research for example. But the second point is that once you put money into the system it tends
File this under the heading economics is not even a dismal science, because mainstream economics isn’t even science. Economics could actually be a rigorous discipline, if orthodoxy can be kicked out.
“ In contrast to its attitude to private debt, which it ignores, mainstream economics obsesses about government debt. But this volte-face doesn't besmirch its record of being 100% wrong.”
I have to wonder about standard political talking points.
Dems crow of their budget cutting prowess to explain why the economy does better under them while hissing at Republican’s raising the deficit as an explanation of why the economy does less well. But MMT explains the opposite and I have to ponder that the reason is there’s a lag of a couple years.
So I started a mild side quest on Andrew Gelmans blog, where they are discussing Trump and politicians and started discussing deficit spending and such. I wrote several long posts describing how I think deficit spending drove inequality through amplifying the money supply and concentrating it into the hands of wealthy capitalists. I discuss debt and money creation and link to stuff I've found here from some of you #mmt types. https://statmodeling.stat.columbia.edu/2024/05/05/on-lying-politicians-and-bullshitting-scientists/#comment-2371714 and related comments @djl
There is now a film about Modern Monetary Theory. It appears to be available only in the USA and Canada for now.
"FINDING THE MONEY follows former chief economist to the Senate Budget Committee, Stephanie Kelton, on a journey through Modern Money Theory or “MMT”, to unveil a deeper story about money, injecting new hope and empowering democracies around the world to tackle the biggest challenges of the 21st century: from climate change to inequality."
"Before I show why he fails, I want to clarify what it means to say that banks create money “out of nothing” (Schumpeter 1934, p. 73). It definitely does not mean that banks create money via magic. What it means instead is that there is no other account from which a bank loan is financed, whereas there is such an account for a non-bank loan."
Question The EU’s rules about member budgets is a boat anchor on the common market’s vibrancy. It’s treatment of Greece a legend in contempt and harm to Greek EU members, ultimately inflicted on the EU at large.
Instead of (uselessly) messing around with interest rates, doesn’t it make sense for member states to purchase bonds from others?
Wednesday's blog post (01/05) is now posted (12:45 EAT) - The yen, podcast, and book announcement - all on International Workers' Day - https://billmitchell.org/blog/?p=61714#mmt