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
To accumulate with the wealthy, If you don't tax it away from them, they accumulate power, can control what the economy spends it's efforts on, and distort the resources allocation. This leads to people living under bridges and doing fentanyl while private equity dismantles hospitals and retailers. You can't massively deficit spend your way to prosperity, because deficit spending means not much taxation, and taxation is critically important to limit power accumulation.
I don’t agree that deficit spending is at issue. The US went into massive debt during WWII and the highest marginal tax on wealth was 90% post war for several decades.
per mmt: government debt is private wealth.
Interest based lending, is a different. Debt overhangs from an economic downturn (per Keen), or, from Creutz’s The Money Syndrome the product of interest itself.
It’s from Creutz that I learned of the Bractaete system, a fiat monetary system that operated on demurrage (a coin tax). It’s was form of Freigeld, of which another variant exists today in Cheimgauer, a stamp script.
These monetary systems are interest and inflation free. A central bank would be out of the businesses of price fixing interest and zero or negative interest has zero impact. Lending is driven by the motivation to avoid a tax on unused cash.
Not quite, government debt is private financial assets. But financial assets aren't wealth, we can all get rich (large money balances) without getting wealthy (many real assets). Deficit spending on wars or other immediate coordinated activities is I think a very different thing than 40 years of just pumping up the money supply and encouraging financialization. I don't think you disagree, I just think it's important to keep
@GhostOnTheHalfShell
The concepts separate, because there are definitely people who think govt spending means real wealth creation, but that's conditional on the right conditions being present in the economy. I don't think those conditions are there at the moment and they haven't been really for a while, you have to go back to at least pre 9/11.
@GhostOnTheHalfShell
Iike one example we could spend govt deficit on grants to community run nonprofit fiber optic and WISP internet service providers... But they have to compete with giant oligopolies pumped up by previous massive deficit spending and who have purchased laws making the community ISPs illegal! So we have to change that before that would be a successful way to deficit spend
true, along with the zoning laws changes Strong Towns advocates, the financing needed for infill to end the housing crisis and I think greening must come from municipalities. Until that financing exists, no small development sector can emerge to meet dire housing demand.
There’s so much work to be done at the local level. Financing all the small projects needed to meet housing demand, as StrongTowns describes. Funding non market housing. Adding municipal energy.
Ecological restoration and urban greening to adapt to extreme rainfall and other extreme weather mitigation. Food supply chain resilience, funding measures to ride out any global or national disruptions.
restoring libraries.
much more interesting than another luxury condo complex.
That might be changing, at least if municipalities want to solve their housing issues. Outfits like Urban3 have supplied the studies visualizing just what parts of a city makes money and which takes it. Looming financial insolvency in road maintenance is also sobering.
@dlakelan My own comment is the tax system is 1000x busted.
Demurrage is the primary missing ingredient in the US. It’s primary effect is to time limit the store of value function of money. Use it or lose 25% of its value, kinda like a coupon.
This policy could be fiddled so that normal people could keep stable savings up to a reasonable cap and paired with UBI, which could replace welfare. It does massively change how money is viewed. A means, not and end.
@GhostOnTheHalfShell
When I went back to undergrad for a second degree in 2005 I had to take a public speaking class... My final project was a speech on the critical importance of tax reform. My prof said I could do it but he doubted the audience of undergrads would connect with it... Maybe thats an indictment of the undergraduate education system more than my choice of topic 😅
One gripe of mine about economics, no surprise here, exceedingly loose in definitions. Absolute rubble of terms.
In grumpier moods I declare money as being that which has “this note is legal tender for all debts public and private” printed on it and every thing else is wealth. Some of it is liquid wealth, all those demand deposits (checking accounts etc) that are accepted as payment. A tangible currency is distinct from its digital from, in ways analogous to paper v e books.
Add comment