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8th April 2019, 07:31 PM | #1 |
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Isn’t the real name of MMT actually “Cheat Code Economics”?
Alexandria Ocasio-Cortez is a fan of a geeky economic theory called MMT: Here's a plain-English guide to what it is and why it's interesting
This can't be good. Isn't this the just print more money idea? I thought we all got over that one by 3rd grade! |
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Scott "Permaculture is a philosophy of working with, rather than against nature; of protracted & thoughtful observation rather than protracted & thoughtless labour; & of looking at plants & animals in all their functions, rather than treating any area as a single-product system." Bill Mollison Biome Carbon Cycle Management |
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8th April 2019, 08:23 PM | #2 |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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8th April 2019, 08:29 PM | #3 |
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Let's keep it simple:
if you take out a big loan that you won't be able to take back in your lifetime and spend it on blow and hookers, your heirs will rightly be upset. If you spend it on protecting your valuable house from the effects of climate change, your heirs might be very thankful for your foresight. The sense of printing money is dependent on how that money is spend or invested. |
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8th April 2019, 08:45 PM | #4 |
a flimsy character...perfidious and despised
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Since I'm past 60 and I have no heirs, I vote for the "hookers and blow" party.
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Being the victim of genocidal atrocities does not give you free reign to commit your own genocidal atrocities. When Republican politicians were young, they were the kids who watched James Bond movies and said "I want to grow up to be just like [insert name of villain here]." |
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8th April 2019, 08:52 PM | #5 |
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“Don’t blame me. I voted for Kodos.” |
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9th April 2019, 05:01 AM | #6 |
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Do they advertise with that?!
http://www.internationalskeptics.com...6#post12642646 |
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/dann "Stupidity renders itself invisible by assuming very large proportions. Completely unreasonable claims are irrefutable. Ni-en-leh pointed out that a philosopher might get into trouble by claiming that two times two makes five, but he does not risk much by claiming that two times two makes shoe polish." B. Brecht "The abolition of religion as the illusory happiness of the people is required for their real happiness. The demand to give up the illusion about its condition is the demand to give up a condition which needs illusions." K. Marx |
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9th April 2019, 06:39 AM | #7 |
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Did the democratics finally come up with an answer to the Laffer-curve?
I guess I will have to read up on MMT after all. |
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9th April 2019, 06:45 AM | #8 |
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This is the short version:
https://www.cnbc.com/video/2019/03/0...ry-theory.html |
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9th April 2019, 06:46 AM | #9 |
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"We are enjoined, no matter how uncomfortable it might be, to consider ourselves and our cultural institutions scientifically — not to accept uncritically whatever we’re told; to surmount as best we can our hopes, conceits, and unexamined beliefs; to view ourselves as we really are." - Carl Sagan |
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9th April 2019, 06:55 AM | #10 |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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9th April 2019, 07:07 AM | #11 |
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Quote:
eta: here https://www.cnbc.com/video/2019/03/0...ry-theory.html |
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9th April 2019, 09:54 AM | #12 |
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That video has a lot of factual errors.
The first one is where Stepanie Kelton says, "the US currency comes from the US government. It can't come from anywhere else". This is just plain wrong. The US currency comes only from the Fed (via quantitative easing). The Fed will only create as much currency as it believes is necessary to stop the economy from stagnating. They could even do the reverse in an inflationary environment (sell bonds to mop up the excess currency in the economy). Comparisons with Japan are invalid because most of the Japanese national debt is owed to its citizens. In the US a significant proportion of the debt is held overseas which means wealth going out of the nation to service this debt. Debt owed to Social Security is also a time bomb waiting to go off. When the number of retirees reaches a critical mass, not only will the SS tap be turned off but the government will have to find a way to service this debt so that pensions can be paid. The Fed is unlikely to monetize much this debt for fear of creating too much inflation. I'm not saying that printing money (eg by borrowing directly from the Fed) is bad but it should not be left in the hands of politicians. They have no will to stop the presses once inflation rears its head. |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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10th April 2019, 07:05 AM | #13 |
Penultimate Amazing
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https://www.investopedia.com/ask/ans...t-money-us.asp
Quote:
Definition of currency 1a : circulation as a medium of exchange something (such as coins, treasury notes, and banknotes) that is in circulation as a medium of exchange b : paper money in circulation c : a common article for bartering |
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10th April 2019, 07:07 AM | #14 |
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Quote:
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"We are enjoined, no matter how uncomfortable it might be, to consider ourselves and our cultural institutions scientifically — not to accept uncritically whatever we’re told; to surmount as best we can our hopes, conceits, and unexamined beliefs; to view ourselves as we really are." - Carl Sagan |
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10th April 2019, 08:57 AM | #15 |
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This is an incomplete definition. Only a small percentage of US currency is in the form of notes and coins. The bulk of it is the balances in individual bank accounts. One can transfer part of their balance to somebody else without anybody touching a note or coin.
You know that this is true - unless you still visit your suppliers and hand over cash to pay your bills. |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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10th April 2019, 09:20 AM | #16 |
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"We are enjoined, no matter how uncomfortable it might be, to consider ourselves and our cultural institutions scientifically — not to accept uncritically whatever we’re told; to surmount as best we can our hopes, conceits, and unexamined beliefs; to view ourselves as we really are." - Carl Sagan |
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10th April 2019, 08:17 PM | #17 |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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10th April 2019, 10:35 PM | #18 |
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"We are enjoined, no matter how uncomfortable it might be, to consider ourselves and our cultural institutions scientifically — not to accept uncritically whatever we’re told; to surmount as best we can our hopes, conceits, and unexamined beliefs; to view ourselves as we really are." - Carl Sagan |
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10th April 2019, 10:47 PM | #19 |
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Correcting myself - there was a QE3, as well, of which I was unaware. I was in "sit back and watch for signs of inflation" mode after QE2, because I was trying to figure out which schools of economic thought were definitely just pseudoscience. I entered this journey into answering the question of "What's going on with economics?" 100% agnostic.
My first question was "Which schools of economic thought saw the magnitude of the housing bubble and predicted an incredibly severe recession in 2006 or before?", and I found this, written in 2006: https://michael-hudson.com/wp-conten...dToSerfdom.pdf
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10th April 2019, 11:32 PM | #20 |
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Loans to banks tend to be short term so QE is the main vehicle that the Fed uses to increase the money supply. However, this is just "base" money. Most of the money in circulation is created by commercial banks when they make loans.
The government borrows money to fund the shortfall between tax revenue and expenditure (including military expenditure) so the total amount of money isn't changed by the government activities. As you have discovered most bank loans are for property investments which bumps up property prices. That is where most of the inflation is. |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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10th April 2019, 11:33 PM | #21 |
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"We are enjoined, no matter how uncomfortable it might be, to consider ourselves and our cultural institutions scientifically — not to accept uncritically whatever we’re told; to surmount as best we can our hopes, conceits, and unexamined beliefs; to view ourselves as we really are." - Carl Sagan |
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11th April 2019, 01:58 AM | #22 |
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It is difficult to get exact numbers and most references include bank account balances in the money supply making it more difficult to tell how much base money alone is being produced.
One reference that might help is https://www.investopedia.com/article...-recession.asp:
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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11th April 2019, 02:16 AM | #23 |
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11th April 2019, 02:25 AM | #24 |
Penultimate Amazing
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Quote:
https://www.investopedia.com/article...ive-easing.asp
Quote:
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11th April 2019, 03:24 AM | #25 |
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It's not as different as you might think.
Quote:
Instead of just fine tuning the money supply, the Fed went for a big expansion of it. Unfortunately, the banks didn't respond by creating more loans so its effect was limited. |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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11th April 2019, 05:24 AM | #26 |
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They didn't create more loans because there wasn't any demand for them. Banks don't just "create loans". They need people looking for them. I guess they might have been trying to re-inflate the housing bubble/"market", or they might have known exactly how it was going to go and they were trying to keep what people were calling "zombie banks" afloat and breathe life back into them.
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11th April 2019, 05:57 AM | #27 |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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12th April 2019, 12:19 AM | #28 |
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I suppose it's a matter of perspective whether we should consider foreign holdings of U.S. public debt to be significant? So, of total public debt ($22T) about $6.3T is owed to foreign and international investors, but that is still less than what the combined Fed and intragovernmental holdings are at $8T.
The thing to note here is that even if foreign investors own U.S. bonds, all payments relating to such holdings are still going to stay within the U.S. So when we say that "wealth is going out of the nation", we should keep in mind that the actual money flows involved stay within U.S. borders; it's only the title to such holdings that change. I'm also not sure if we should consider Social Security to be a "time bomb"? Obviously there's not going to be a funding problem, i.e., as in rolling over such securities. Hence it all depends if the interest on those securities paid is going to cause inflationary havoc … which, in turn, depends on the productive capacity of the whole economy. In Japan they don't even bother to go through the market when redeeming bonds held by the central bank, they just swap maturing bonds for new ones straight away (called the Bank of Japan Switch). The same can probably be applied to SS as well? |
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12th April 2019, 12:28 AM | #29 |
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The "time bomb" thing is a completely false narrative concocted by people who hate the New Deal and SS, and then it's mindlessly echoed by under-informed and misinformed media. That's all there is there.
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12th April 2019, 03:16 AM | #30 |
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Are you trying to say that there is no net cost to servicing foreign held debt? Even if no USD actually left the country, I can think of heaps of ways that the foreign holders can get their "pound of flesh" - not to mention risks such as bond dumping.
As long as more money flows into SS than leaves it, everything is fine and dandy. When that is no longer the case, it will present problems that will require difficult solutions. Missing the point. It's not that there is a SS or "new deal" but that the government is taking its money. |
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12th April 2019, 04:19 AM | #31 |
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Quote:
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"We are enjoined, no matter how uncomfortable it might be, to consider ourselves and our cultural institutions scientifically — not to accept uncritically whatever we’re told; to surmount as best we can our hopes, conceits, and unexamined beliefs; to view ourselves as we really are." - Carl Sagan |
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12th April 2019, 04:48 AM | #32 |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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12th April 2019, 04:55 AM | #33 |
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It was a typo, sorry! LIFT the cap. https://www.aft.org/resolution/lift-cap-social-security
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12th April 2019, 05:25 AM | #34 |
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Where will the money come from to lift the cap? Do you think that the Fed will just write a blank check to cover it?
You have it backwards again. SS doesn't borrow money, the government borrows from SS. Technically it is an "intra-government debt" but in this case millions of future pensions depend on the government being able to service this debt. |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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12th April 2019, 08:14 AM | #35 |
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The cap which currently exists is on what is paid IN to social security. INcome above a certain threshold is not taxed. That's the cap which can be lifted so social security will not need to be cut in the future.
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12th April 2019, 09:17 AM | #36 |
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Maybe I misread your link:
"RESOLVED, that the American Federation of Teachers will support the augmentation of the Social Security Trust Fund by calling upon Congress to eliminate the cap on Social Security wages, currently at $128,400, and urges its locals to do the same." Social Security does not sit on a pile of cash. It is required by law to invest any surplus in government securities:
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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12th April 2019, 09:32 AM | #37 |
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Yeah, this is more clear:
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12th April 2019, 10:31 AM | #38 |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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12th April 2019, 10:41 AM | #39 |
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"We are enjoined, no matter how uncomfortable it might be, to consider ourselves and our cultural institutions scientifically — not to accept uncritically whatever we’re told; to surmount as best we can our hopes, conceits, and unexamined beliefs; to view ourselves as we really are." - Carl Sagan |
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12th April 2019, 11:06 AM | #40 |
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That part is true. In my research of SS I found a number of web sites that said that the SS trust fund is or will be insufficient to meet its obligations to retirees (meaning that the tax payer will have to pick up the slack). And that is assuming that the government will always be able to service its debt to SS.
I couldn't find any consistent numbers though so I haven't included any links. |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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