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View Diary: How much longer can the Austerians and their puppets go on with their failed policies and lies? (125 comments)

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  •  Stiglitz gets it more than Krugman (6+ / 0-)

    per, e.g.,

    OMG, Stiglitz is Now an MMTer from Economic Policy Journal on 4/13/12
    which effectively updates
    this from Ralphonomics, 8/23/11
    vs this for Krugman:
    Paul Krugman vs. MMT: The Great Debatefrom John Carney on CNBC, 4/3/12
    Krugman's making steps, but he's not quite there.

    For more search for "stiglitz MMT" and "krugman MMT"

    United We Understand — e MMT unum

    by dorkenergy on Tue Jan 29, 2013 at 04:20:16 PM PST

    [ Parent ]

    •  Actually, Modern Monetary Theory (MMT) is also (11+ / 0-)

      known as "Chartalism" and is a post-Keynesian concept.  A pure Keynesian (of which I am close to one) does not accept that government debt does not matter, as it represents a risk on the future production of the nation.  The Keynesian model is counter-cyclical.  That is, government should pro-actively spend during economic recessions to stimulate economic activity and rein in excessive investment during bull markets by raising taxes to slow down an overheating economy (and pay down the debt to free up needed capital later).

      I have developed an idea that there is a kind of "string theory" to personal consumption spending and budgets, and government spending and budgets.  That is, while households cannot create production, governments can through targeted stimulative spending.  Therefore, having a national economy concern itself with paying off debt, while seemingly intuitive, is actually illogical.

      What I have not gotten from Chartalists is: what force limits the issuance of money?

      •  The "forces" that limit issuance of money (10+ / 0-)

        are REAL resources -- e.g, labor.

        From Stephanie Kelton's interview with Harry Shearer

        HARRY SHEARER: Okay, you did mention the “I” word, which I’m sure some people have been screaming at their radios for some time now. So let’s tackle it head on. If the government doesn’t need to tax and it doesn’t need to borrow in order to spend and it spends willy-nilly, people will say hyperinflation, wheelbarrows full of paper money just to buy a loaf of bread, the familiar images in our heads of the Weimar, which certainly still scares the Germans if nobody else. Inflation is a constraint. You’ve acknowledged that. How great a constraint is it?

        STEPHANIE KELTON: Well, it would be a significant constraint if we didn’t have the excess capacity and the millions and millions of unemployed workers. So you expect price pressures when your markets get tight, when you’re running your factories very near their capacity, when the labor market gets so tight that, you know, you have basically a job opening for every job seeker. Then you know you’re really close to full employment.

        You know, you don’t get hyperinflation by running your economy at full employment. Let’s not forget that under the Clinton years, the so-called Clinton boom, we had full employment in this country. We had as close as what I am comfortable referring to as full employment where we actually had one job vacancy for every job seeker. And that was the first time in 35 years that we’d achieved those kinds of numbers. Our inflation rate was so low, nobody even talked about inflation. Inflation was not even on the radar screen. We had high rates of growth of GDP, our unemployment rate officially was 3.7%. We had high growth, low unemployment, and modest inflation. So we did this before and we did it in the not-so-distant past.

        All I’m saying is that the way we’re running the economy right now, this is not fiscally responsible. This is dysfunctional finance. We’re getting everything wrong. We’ve got all kinds of room to run here and we can safely crank up aggregate demand. We can safely cut taxes on those that we think will be most likely to go out and spend, and that spending leads to the sales that then lead to job creation, and we can safely increase government spending on programs like infrastructure, education and the kinds of things that we believe generate real economic growth and prosperity and leave our children and grandchildren better off than they would be otherwise.

        So, in simple form, you issue money until you achieve full employment. Until that point, the resources are not oversubscribed, and hence, no inflation.

        The "Fear of Inflation" will be stoked by self-servers (or their acolytes and sycophants and other unknowing) who do not understand the modern monetary reality.

        United We Understand — e MMT unum

        by dorkenergy on Tue Jan 29, 2013 at 05:54:48 PM PST

        [ Parent ]

      •  Oh, and (7+ / 0-)

        per Chartalism

        can be viewed as both pre- and post-Keynesian.

        Chartalism is a descriptive economic theory that details the procedures and consequences of using government-issued tokens as the unit of money, i.e., fiat money. The name derives from the Latin charta, in the sense of a token or ticket.[1] The modern theoretical body of work on chartalism is known as Modern Monetary Theory or (MMT).

        MMT aims to describe and analyze modern economies in which the national currency is fiat money, established and created exclusively by the government. In MMT, money enters circulation through government spending; Taxation is employed to establish the fiat money as currency, giving it value by creating demand for it in the form of a private tax obligation that can only be met using the government's currency.[2][3] An ongoing tax obligation, in concert with private confidence and acceptance of the currency, maintains its value. Because the government can issue its own currency at will, MMT maintains that the level of taxation relative to government spending (the government's deficit spending or budget surplus) is in reality a policy tool that regulates inflation and unemployment, and not a means of funding the government's activities per se.

        The theory was presented by German statistician and economist G. F. Knapp in 1895,[4] with important contributions also by Alfred Mitchell-Innes. It was referenced in the 1930 Treatise on Money of John Maynard Keynes,[5] which cited Knapp and "Chartalism" in its opening pages.[6] Chartalism experienced a revival under Keynes and Abba P. Lerner,[7] and has a number of modern proponents.

        Also re households v governments, see the above Kelton interview for her phrasing.

        United We Understand — e MMT unum

        by dorkenergy on Tue Jan 29, 2013 at 06:25:58 PM PST

        [ Parent ]

      •  How do you save up infinity? the gov is never (3+ / 0-)
        Recommended by:
        aguadito, dorkenergy, DBunn

        richer, poorer, or saving.  It is dealing with the infinite numerical system.

        Save numbers in case the numerical system needs some help maintaining infinity?  :)

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