MMT proponent Chris Brown for DNC national leader to face President Trump in 2020.

[DennisTate]

Is it over rated? I wouldn't really talk about MMT in terms of ratings, but rather decide whether it is a good explanation for how the economy works.

I'm fairly knowledgeable with respect to MMT and the first thing I'd like to say is that I think the name "Modern Monetary Theory" is an awful name for what MMT actually is.

It is "modern" in the sense that it describes the system of money that we've had in place since 1974 (also known as chartalism).

It is "monetary" only in the sense that it talks about money.

However the word theory is entirely inappropriate. It is not a "theory" in that it's a "best guess" or a "hunch", nor is it a theory in the more scientific sense (as in a theory of gravity), as in a well-reseached group of ideas created to explain a group of facts and confirmed through experimentation.

Anyone that knows much about economics knows that it's not a science, strictly speaking. It is more closely related to the field of accounting.

So for what it's worth, I agree with your assessment with respect to the name MMT. In my own conversations, I rarely talk about the school of thought I belong to and stick to addressing the facts as best I understand them.

If MMT is anything, its just a detailed description of how our modern money system works. The hard part of understanding and accepting MMT as a description is that in some ways is a bit counter intuitive because when the US system of money changed in 1974 (the US government no longer pledged to back the currency with gold), it was impossible to completely reinvent the system. There were very subtle changes made, but those subtle changes had profound impact on the way our money system works today. Unfortunately, those changes were not made part of any school or university curriculum. The old system has continued to be taught and it's lead to profound confusion.

Now, having said all of that, the ideas of MMT are completely divorced from any political party. Both parties approach the problem of the economy wrongly and each has aspects which are correct (confused yet?), but each does it in a different way.

One of the mistakes I see people make when discussing economics is that they conflate facts about the economy with political policy.

For example, spending=income. That's an accounting fact, when spending happens, someone else earns and income. What the rate of minimum wage is, or if there should be a minimum wage at all, is a political economic policy. It's best to stick with the descriptive facts and come to some sort of understanding, then discuss policies supported based on that understanding. It's just important to remember that MMT does not support policy, but people that understand and support MMT do.

In Christian terms, Jesus is the son of God. This is a Christian fact.

But....

Churches should be a sign of our reverence for God:

Churches should be humble before God:

These are two examples of Christian policies.

Point here being, that what a church should look like is more a matter of Christian policy between denominations rather than a fact....

If you know what I mean.

Now the bible might have something to say about this (I really don't know - but remember that's not really the point here) if it did, than in a hypothetical conversation with another Christian, you'd want to discuss the facts of Christianity before confusing the facts with ideas that are more driven by policiy.

I hope that makes sense.

Wow!!!!

Thank you Econ4Every1..... There are two verses in scripture that to my thinking fit extremely well with my understanding of MMT.

Genesis 11:6

"And the LORD said, Behold, the people is one, and they have all one language; and this they begin to do: and now nothing will be restrained from them, which they have imagined to do."

The context of this verse is negative....... people had united to built a city and a tower and the Creator knew that it would not be long before the earth would again be filled with violence... so the languages were confused but.... there is a positive side to this verse. If we humans could unite around a number of positive goals that were win - win - win - win for 99% of people..... we could accomplish those goals IF.......

..... wisely directed money was added to the formula.

Ecclesiastes 10:19

"A feast is made for laughter, and wine maketh merry: but money answereth all things."

Again the context is negative... if people choose to party... they will have to pay for it.... but I do believe that wise ol" King Solomon had a keen understanding of how money...... could be used to address... .virtually any issue or question that King Solomon decided to address.

 

[DennisTate]

It's neither monetary nor fiscal. It simply describes these systems in some detail.

I'd be happy to "defend" ideas promoted by MMT, though I don't really like to think about it in those terms. I would rather "discuss" them....

I have concluded that MMT can be used to explain how to finance:

Unified Theory of Modern World Problems??!!

To summarize....
the world is facing the threat of rising ocean levels...... and the Christian Bible predicts a time when the deserts will be turned green.... so rather than a carbon tax I have been thinking that we should finance large scale desalination of ocean water to produce food even in deserts.

Every cubic meter of ocean water that is desalinated and added to the water table of Israel, Jordan, Saudi Arabia, Australia or California.... makes life safer for residents of New Orleans, New York, Miami and many other cities all around the world.

 

[DennisTate]

I have center-right political views. Although Trump wasn’t an ideal candidate for president when he ran, I voted for him anyway because Hillary would have been much worse for America. It was a “lesser of two evils” type of vote.

I don’t know who Chris Brown is, so I can’t comment on whether I want to see him run against Trump in 2020. Honestly, I would like to see Oprah Winfrey, who expressed interest in a presidential run, face off against Trump next election. I know the Republicans would be victorious if she became the Democrat nominee for president. Basically, it would be an easy win for the GOP.

The more that I think about it.... the more that I hope Oprah will enter the Presidential race..... she will keep this positive and win - win - win - win for all Americans if possible.......


President Trump wants to open some cans of worms that somebody like Mr. Chris Brown could explain at a level unlike any other high level elected official that I know of........


Trump Calls For Auditing the Fed

 

[DennisTate]

It's neither monetary nor fiscal. It simply describes these systems in some detail.

I'd be happy to "defend" ideas promoted by MMT, though I don't really like to think about it in those terms. I would rather "discuss" them....

Econ4Every1..... do you think I am being naive to worry so much about a serious devaluation of the USA Petro-dollar?

Am I incorrect to think that MMT offers a theoretical basis for financing massive projects such as:


Turning deserts green and saving New Orleans and Florida...

 

[Yekcidmij]

..... do you think I am being naive to worry so much about a serious devaluation of the USA Petro-dollar?

As is the answer to everything in economics - it depends. For example, if you hold 100% of your assets in US Dollars, then a devaluation of your assets probably wouldn't benefit you. But there are scenarios where you could benefit from a falling USD.

It also depends on why the USD is "devaluing." Currencies are measured relative to other currencies and, given flexible exchange rates, the biggest contributor to currency values is economic activity. If the economy is strong, the currency is strong. If the economy is weak, the currency is weak. Of course, this relationship is probably based on future expectations, so if the economy is expected to be strong in the future, the currency will strengthen and vice versa. Other major determinants are relative interest rates and relative inflation (and these three factors are not really independent of one another).

Am I incorrect to think that MMT offers a theoretical basis for financing massive projects such as:


Turning deserts green and saving New Orleans and Florida...

Just don't forget that the government still has a constraints on it's spending, and one of those constraints is inflation. Ignoring for a moment the legal framework of the relationship between the government and central bank and assume that the central bank and government are identical entities, then the government could create currency and spend on whatever it wanted. But it does still have budget constraints at least in the form of inflation. If the government went on some massive project paid for by deficit expansion, it might result in inflation.

In any case, MMT is really simply an accounting identity (one that's turned into a quasi-internet cult if you ask me):

(I - S) + (G - T) + (X - M) = 0

But an accounting identity does not describe dynamic systems. It does not describe the relationship between government spending and demand for savings, loanable funds, foreign currency, etc...

A couple of the assumptions of MMT are that there will always be some demand for currency since the government receives taxes in it's own currency and since the currency is legal tender. But these seem a little dubious. It seems to me that there is nothing that prevents market participants from changing preferences and resorting to another form of currency, making the domestic currency "legal tender" in name only. If the government were to lose fiscal credibility, market participants may resort to some other form currency. In this case inflation itself isn't the constraint, but the result of another constraint of fiscal credibility.

Additionally, while it is true that you must pay your taxes and that the government collects taxes in it's own currency, using this as the basis for an economic theory seems a little too static. Imagine a scenario where the government loses fiscal credibility and market participants change preferences for other forms of currency. What is the likelihood that the government would be able to effectively collect taxes? In this case, we see yet another constraint of enforce-ability. Imagine if the tax collectors are being paid in a currency that is hyperinflating due to a loss in fiscal credibility. Would you even be able to find tax collectors to hire? Would those workers be able to effectively collect taxes? Would other government workers be able to effectively enforce tax collection on the population? Using MMT, who knows.

It could also be the case that in order to spend by issuing new currency, the government would have to ignore existing legal frameworks. This could result in the loss of legal credibility. Losses of legal credibility could be particularly damaging.

So even though the government spends and collects taxes in currency it creates there seems to be constraints beyond inflation in some abstract sense as a rise in aggregate prices. It's also constrained by fiscal credibility, legal credibility, and collection credibility, and those things are determined by something more than an accounting identity.