MIND OVER MATTER: Goverment Has Unlimited Cash, Per Radical Left Wing Theory

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MIND OVER MATTER: Goverment Has Unlimited Cash, Per Radical Left Wing Theory

Post by Riddick » 03-05-2018 04:05 AM

Even five-year-olds understand what a dollar is, right? That’s what you give the nice lady standing behind the counter before she hands you that choco swirl ice cream cone—an object with an intrinsic value, redeemable for goods or services.

HOWEVER. and by contrast, through the lens of 'Modern Monetary Theory' a dollar is nothing else than a liability issued by the US government, which promises to accept it in payment of taxes. That dollar in your pocket represents a debt owed you by the federal government. Money isn’t a lump of gold but rather it's an IOU.

This mildly metaphysical distinction ends up having huge practical consequences—It means the federal government, unlike you and me, can’t run out of cash. It can run out of things money can buy—which will drive up their price and be manifest in inflation—but it can’t run out of money.

As says Sam Levey, a graduate student in economics who tweets under the name Deficit Owls, "Macy’s can’t run out of Macy’s gift certificates." Although rarely heard on mass media, among economists this viewpoint is not particularly controversial.

“Most mainstream, non-ideological economists would agree the US needs more infrastructure investment, and the best way to finance that is through public borrowing,” says Oxford economist Simon Wren-Lewis. "Most people think austerity is mainstream macroeconomics, although it is not. Those who are anti-austerity look for some alternative theory, which MMT provides."

In MMT there’s no cause to worry about the size of a government deficit, in fact, they do no harm, and they are actually beneficial. In simple terms, it takes the old "To Make Money You Gotta Spend Money" adage and spins it radically for today, this way:

Every economy has two sectors, the private sector and the public or government sector. When the government spends more than it taxes, it runs a deficit. And that public sector deficit inevitably means a surplus for the private sector. In order to accumulate money, the private sector needs a government deficit.

A school of economics increasingly influential on the Left, MMT says our delusional panic over government budget deficits is a misguided and atavistic remnant of the gold standard. MMT gives progressives reason to believe high price tags shouldn’t deter the US from instituting wide-ranging social reforms like Medicare For All.

Seen as its sole downside, MMT disciples do think deficit spending could lead to inflation. That is what happened in the 1960s, when LBJ refused to raise taxes to pay for the Vietnam War and his Great Society, even as the private sector was booming. The result was rising inflation in the 1970s, one of several economic factors that led to the election of Ronald Reagan.

But for the past 35 years, inflation has been negligible. The Federal Reserve has been consistently undershooting its own 2 percent inflation target since it was adopted in 2012. Right now, deflation is a bigger threat to the global economy.

Official US unemployment, though relatively low, masks long-term wage stagnation and a huge number of discouraged workers. 20 million employed want full-time work yet can’t get it. While favoring just about any fiscal stimuli including infrastructure spending and/or tax cuts, the MMTers signature policy is a federally funded but locally administered job guarantee.

Anyone who wants work, full- or part-time, would be paid $15 an hour on projects deemed valuable by their local community. This might mean building roads, but it might also including caring for the elderly or working at daycares. Needed services would be provided and unemployed and underemployed people could find work.

To those who fear increased government spending will "crowd out" private sector investment, a MMT advocate might reply that crowding out can occur only when the economy is already operating at full capacity. Today, stagnant wages and low interest rates indicate the economy still has plenty of slack before inflation kicks in.

Ten years after the financial crisis, the American economy remains in sorry shape. The good news is, not only can it fix it, MMT says all it would take to create jobs and build a better America is to end all the hand wringing over government deficits.

According to MMT fear of them comes from profound misunderstanding of the nature of money. For MMT faithful, it's frustrating to see how too few Americans take mind of the obvious: What really matters is government needs to spend MORE, not less.

FULL STORY

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Re: MIND OVER MATTER: Goverment Has Unlimited Cash, Per Radical Left Wing Theory

Post by kbot » 03-05-2018 07:12 AM

"What's mine is mine and what's yours is mine......" Get with the program Riddick.
"The dogma lives loudly within you. And that’s of concern ......"

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Let's Have Another Cup O' Coffee... AND Let's Have Another PIECE O' PIE!

Post by Riddick » 03-14-2018 11:28 AM

kbot wrote:
03-05-2018 07:12 AM
"What's mine is mine and what's yours is mine......" Get with the program Riddick.
Hey, why not? "Share The Wealth," right? Just around the corner / There's a rainbow in the sky / It's a pie lover's dream, as Penn & Teller so accurately illustrate -


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