[wat0n]

I'm sorry you feel bad about being wrong. Consider this an opportunity for personal growth.

Being wrong about what, exactly?

I already gave you the definition of "pension". It's not my fault if you didn't understand it.

@Steve_American how does MMT do away with demographic trends?

[Steve_American]

Being wrong about what, exactly?

I already gave you the definition of "pension". It's not my fault if you didn't understand it.

@Steve_American how does MMT do away with demographic trends?

wat0n, funny you should ask. Prof. Bill Mitchell's blog post today is mostly about this exact "problem".

He says that the demographics is a problem, but not a financial problem. The Aust. or US Gov., can according to MMT, always buy anything for sale in its currency. Always.
MMT asserts that money paid as taxes is destroyed on receipt. And all spending is made with new dollars being spent into existence just by being spent. Yes, this assertion seems extreme. [Warren Mosler told about the time in Colonial Virgina when it printed money and imposed a tax to make the people accept the paper money so they could pay the tax. Are you with me so far? Then, when the people paid their taxes, the officials noted that and gave them a receipt, and then burned the money instead of having to protect it from theft overnight.]
The idea that the Gov. needs money before it can spend money is a holdover from the gold standard.

So, the problem that Bill sees is -- will there be enough real resources and enough trained labor (doctors, nurses, nursing home workers, etc. to take care of the old people?
Bill points out that no amount of money can buy stuff that doesn't exist and pay doctors to work now, if they still need 4 more years of training.

Bill says that we should be expanding the training program now to train the workers we will need as more people retire. Not closing training centers because Aust. needs to have a surplus to save now, so it can send later. Aust. can always spend because it issues the A$.

The link ==>> https://billmitchell.org/blog/?p=61097#comment-133977

Yes, I know MMT is hard to wrap your head around, if you have studied the BS econ. taught in schools.

.

[wat0n]

@Steve_American so the US can always print the money to pay for SS. Is that what you're saying?

[Steve_American]

@Steve_American so the US can always print the money to pay for SS. Is that what you're saying?

Basically, yes.

AFAIK, you thought that Trump just "printed" the money when he added $8T to the national debt in just 4 years. So, we are, in your opinion, already printing money like crazy.

Also, I proposed 2 tax increases and 1 tax rate reduction, so I thought I was raising close to the required amount of money for the ongoing payment changes.

I'm not the only one who has said this. I have seen with my own eyes, a video of Alan Greenspan testifying under oath to Congress. Paul Ryan asks him something like, "Wouldn't it be more secure if Soc. Sec. was privatized than it is now?" Greenspan replied something like this, "Well, the US can always pay any bill that it must pay. However, the real question is, will the real resources be there for the retirees to buy with the money?"

This is exactly the real problem that Bill points to in his blog post that I linked above.

Link to the video ==>> 1.5 min. long

.

[wat0n]

@Steve_American Trump was not fiscally responsible, he just got lucky.

But seigniorage can't go on indefinitely without causing inflation.

[Steve_American]

@Steve_American 1] Trump was not fiscally responsible, he just got lucky.

2] But seigniorage can't go on indefinitely without causing inflation.

1] Trump got lucky how? I guess you mean he didn't have much inflation. But, there was some inflation before Biden took office. So, maybe you mean lucky because it was blamed on covid. Also, real experts point out that the 1st fiscal t=year of a president's term still has the budget from the previous president in place.

2] wat0n, so eventually someday there will be inflation and, like now, conservative experts will blame it on money "printing" through deficit spending for many years. But, like now the future inflation will likely have other main causes.

Japan didn't have inflation for 30 years before the covid shortages caused some inflation there. You must know in your heart that Japan's inflation had little to nothing to do with its 240% ration of Debt/GDP and everything to do with covid shortages.
.

[wat0n]

1] Trump got lucky how? I guess you mean he didn't have much inflation. But, there was some inflation before Biden took office. So, maybe you mean lucky because it was blamed on covid. Also, real experts point out that the 1st fiscal t=year of a president's term still has the budget from the previous president in place.

Trump was lucky because 1) he didn't have to deal with inflation, 2) he didn't have to deal with bond vigilantes. But he was not fiscally responsible at all, he had unnecessarily high budget deficits partly as a result of his tax cuts.

I am also focusing on the pre-pandemic deficits, which were also high. At least COVID was a legitimate excuse for posting deficits.

2] wat0n, so eventually someday there will be inflation and, like now, conservative experts will blame it on money "printing" through deficit spending for many years. But, like now the future inflation will likely have other main causes.

Japan didn't have inflation for 30 years before the covid shortages caused some inflation there. You must know in your heart that Japan's inflation had little to nothing to do with its 240% ration of Debt/GDP and everything to do with covid shortages.
.

Japan didn't have inflation because of its broken banking system.

And just like you provide Japan, I can provide you with Argentina, Weimar Germany, Zimbabwe, post-war Hungary, several Latin American countries in the 1970s and 1980s, etc - all of which had inflationary issues due to large expansions in money supply. Latin America itself is special as, even outside the hyperinflations of the 1970s and 1980s, it had inflation problems due to (again) constantly expanding money supply at a quick pace.

[Steve_American]

Trump was lucky because 1) he didn't have to deal with inflation, 2) he didn't have to deal with bond vigilantes. But he was not fiscally responsible at all, he had unnecessarily high budget deficits partly as a result of his tax cuts.

1] I am also focusing on the [Trump's] pre-pandemic deficits, which were also high. At least COVID was a legitimate excuse for posting deficits.



2] Japan didn't have inflation because of its broken banking system.

3] And just like you provide Japan, I can provide you with Argentina, Weimar Germany, Zimbabwe, post-war Hungary, several Latin American countries in the 1970s and 1980s, etc - all of which had inflationary issues due to large expansions in money supply. Latin America itself is special as, even outside the hyperinflations of the 1970s and 1980s, it had inflation problems due to (again) constantly expanding money supply at a quick pace.

1] OK, yes, Trump had high deficits before covid. But, were they at that time causing inflation? IIRC, No, it was the covid shortages that caused the inflation and then other non-money supply caused made it worse.

2] I do not know how the Japanese banking system, broken or not, could according to your theory of economics (which ever one it is) have blocked the inflation that almost 30 years of large deficits and a growing debt to GDP ratio were supposed to be causing.

3] I'll say this again for the Lurkers (because you, wat0n, clearly don't believe this), the conservative think tank, The Cato Institute, put out a report about all the cases of hyperinflation in "history" (I think they meant that they have enough info on). I have linked the report on this site 2 times. The report says that there are 57 cases. In every case, including Weimar Germany and Zimbabwe, the cause was not the money supply, rather, the cause was shortages of critical things like food and energy. Warren Mosler has explained in a video I linked to on this site recently, why Argentina has an inflation problem.
. . As for Latin America and Argentina, Lurkers, all these nations have large national debts denominated in dollars to the IMF and WB. So, it is those debts that are driving their inflation.

And I point out that MMT says that its assertions only apply to nations that have their own fiat currency, float that currency, and don't borrow in any other currency, I'd add don't exist under stupid rules like all the nations in the EU & EZ that must not have large national debts or they will be punished by the EU or they use the euro, that is not their own currency. So, every example you "provided" doesn't meet the criteria that MT gives for nations to be able to grow its national debt without financial limit. But, MMY does still have a limit. it is "are there still labor and real recourses to do what is being gone. If there is not both of these things avilble to the nation, then the shortahes will cauuse inflation.
. . So, MMTers do agree that someday there will be shortages and they will cause inflation, unless the Gov. acts to reduce the deficit or in some other way. But, shortages always cause inflation unless there are laws to stop it. For example, when a hurricane is coming the prices of tarps and plywood, etc. to cover windows, etc, will increase, and there is no increase in the local money supply to explain this.

The people like PufferFish and wat0n, etc., who respond to my arguments, mostly never refute my assertions with evidence. They 1st, just asset that I'm wrong because their theory says so. And then after I show again some evidence that they are wrong, they disappear, apparently because they can not point to any evidence that shows I'm wrong. They never show why I'm wrong.
. . Later, they come back and act as if they have already shown how I'm wrong and just assert that the large ongoing deficit will someday grow the money supply enough to cause inflation, and this automatically causes inflation.
, , They ignore counter facts, like the one in the Cato Inst. report, that all cases of hyperinflation were caused by shortages. Or, that owing debts in dollars that you can't create will always get you in trouble.

[SpecialOlympian]

Being wrong about what, exactly?

I already gave you the definition of "pension". It's not my fault if you didn't understand it.

@Steve_American how does MMT do away with demographic trends?

You're waton, you can't even figure out how to do an avatar or a signature.

Figure our what you should feel bad about and talk to me later, loser. You suck shit, nobody cares about you, and you can't even identify yourself on a forum. YOU figure out why you suck and then report to me.

[wat0n]

1] OK, yes, Trump had high deficits before covid. But, were they at that time causing inflation? IIRC, No, it was the covid shortages that caused the inflation and then other non-money supply caused made it worse.

They weren't causing inflation because there was still some slack, yes, despite the low unemployment.

2] I do not know how the Japanese banking system, broken or not, could according to your theory of economics (which ever one it is) have blocked the inflation that almost 30 years of large deficits and a growing debt to GDP ratio were supposed to be causing.

Ever heard of zombie banks?

3] I'll say this again for the Lurkers (because you, wat0n, clearly don't believe this), the conservative think tank, The Cato Institute, put out a report about all the cases of hyperinflation in "history" (I think they meant that they have enough info on). I have linked the report on this site 2 times. The report says that there are 57 cases. In every case, including Weimar Germany and Zimbabwe, the cause was not the money supply, rather, the cause was shortages of critical things like food and energy. Warren Mosler has explained in a video I linked to on this site recently, why Argentina has an inflation problem.
. . As for Latin America and Argentina, Lurkers, all these nations have large national debts denominated in dollars to the IMF and WB. So, it is those debts that are driving their inflation.

And I point out that MMT says that its assertions only apply to nations that have their own fiat currency, float that currency, and don't borrow in any other currency, I'd add don't exist under stupid rules like all the nations in the EU & EZ that must not have large national debts or they will be punished by the EU or they use the euro, that is not their own currency. So, every example you "provided" doesn't meet the criteria that MT gives for nations to be able to grow its national debt without financial limit. But, MMY does still have a limit. it is "are there still labor and real recourses to do what is being gone. If there is not both of these things avilble to the nation, then the shortahes will cauuse inflation.
. . So, MMTers do agree that someday there will be shortages and they will cause inflation, unless the Gov. acts to reduce the deficit or in some other way. But, shortages always cause inflation unless there are laws to stop it. For example, when a hurricane is coming the prices of tarps and plywood, etc. to cover windows, etc, will increase, and there is no increase in the local money supply to explain this.

The people like PufferFish and wat0n, etc., who respond to my arguments, mostly never refute my assertions with evidence. They 1st, just asset that I'm wrong because their theory says so. And then after I show again some evidence that they are wrong, they disappear, apparently because they can not point to any evidence that shows I'm wrong. They never show why I'm wrong.
. . Later, they come back and act as if they have already shown how I'm wrong and just assert that the large ongoing deficit will someday grow the money supply enough to cause inflation, and this automatically causes inflation.
, , They ignore counter facts, like the one in the Cato Inst. report, that all cases of hyperinflation were caused by shortages. Or, that owing debts in dollars that you can't create will always get you in trouble.

Sounds like a load of bullshit.

Also, many of the countries I mentioned had and still have fiat currencies. Argentina is now considering dollarizing precisely because of its chronic high inflation.

[Steve_American]

1] They weren't causing inflation because there was still some slack, yes, despite the low unemployment.



2] Ever heard of zombie banks?



3] Sounds like a load of bullshit.

4] Also, many of the countries I mentioned had and still have fiat currencies. Argentina is now considering dollarizing precisely because of its chronic high inflation.

1] I don't get where this supposed "slack" came from. The US had large deficits from 2008 until 2021 and covid arrived. Why was this not enough to already have eliminated any slack? Do you think you can wave your hands around and assert that there was slack, and the lurkers will just believe you? I call Bull Sh!t on this.

2] I've heard of them, but I don't understand them. You will need to explain to me and the 150 lurkers, just how zombie banks allowed Japan to have the highest deficits in the advanced world for 30 years resulting a debt to GDP ratio of 240%, and have less than 0.5% inflation for the 30 years.

3] Now, you have been reduced to calling BS, instead of actually making an argument to show why it is BS.

4] I admitted that the nations have fiat currencies. But, do they float it or do they peg it to the dollar? I know that they have borrowed dollars from the IMF and WB. So, they are like the Weimar Republic needing to somehow get dollars to make payments, or the IMF just demands that they increase their interest rates, and Warren Mosler explained how doing that causes inflation.
. . I know that you can't see that raising interest rates can all by itself increase inflation.

[SpecialOlympian]

Getting Social Security at 63-70 is fucking sweet and built into most people's retirement planning, for the few that have it.

Instead of making people waste their lives at work for more years, I have as simple solution: tax the fuck out the rich, the people most dependent on society.

I'm sure this hasn't been brought up because you're all idiots and i'm a financial genius. As of this year, only $160,200 of your income is taxable for Social Security. After that, you don't pay tax toward SSID.

Let's increase that income limit to a cool $10 billion and let all the rich people eat shit. They need us, but we don't need need them. And lets tax that to 99% of all income after the first billion. And why not force capital gains on unsold stock while we're at it if we're talking about billionaires? They're clearly not using the money if they have that much, might as well do something with it.

What the fuck are the wealthy going to do? Go to a place where wealth isn't important? Hardly. We have them by the balls.

This is my simple solution to lowering the retirement age to 50 and solving all of Social Security's liquidity problems.

[wat0n]

1] I don't get where this supposed "slack" came from. The US had large deficits from 2008 until 2021 and covid arrived. Why was this not enough to already have eliminated any slack? Do you think you can wave your hands around and assert that there was slack, and the lurkers will just believe you? I call Bull Sh!t on this.

There are different measures.

For instance, the employment rate among people 15-64 only reached the pre-subprime crisis at the end of 2019:

https://fred.stlouisfed.org/series/LREM64TTUSM156S

And the overall employment rate (including, particularly, senior citizens) was still a lot lower than before the subprime crisis:

https://fred.stlouisfed.org/series/EMRATIO

Are you saying this isn't evidence there was still some slack?

The latest wave of high inflation was the result of the combined effects of supply chain issues (that have been only partially alleviated) and demand pressure (a result of the combined effects of the stimulus to deal with the lockdowns and the earlier than expected reopening, the latter of which was pretty much impossible for economists to predict since the decision to reopen would depend on unknowns like vaccine uptake, vaccine effectiveness, new variants appearing, etc)

2] I've heard of them, but I don't understand them. You will need to explain to me and the 150 lurkers, just how zombie banks allowed Japan to have the highest deficits in the advanced world for 30 years resulting a debt to GDP ratio of 240%, and have less than 0.5% inflation for the 30 years.

Zombie banks are banks that only exist due to government help (be it through lax monetary policy or direct government subsidies). They do some lending, often to not too profitable businesses, but they will tend to keep large reserves because - well - they are half dead.

https://www.investopedia.com/terms/z/zombie-bank.asp

3] Now, you have been reduced to calling BS, instead of actually making an argument to show why it is BS.

If there are more currency bills in the economy, does their value remain the same, go up or go down?

4] I admitted that the nations have fiat currencies. But, do they float it or do they peg it to the dollar? I know that they have borrowed dollars from the IMF and WB. So, they are like the Weimar Republic needing to somehow get dollars to make payments, or the IMF just demands that they increase their interest rates, and Warren Mosler explained how doing that causes inflation.
. . I know that you can't see that raising interest rates can all by itself increase inflation.

It's the other way around, actually. They'd try to peg them to the USD or some other lower inflation currency, but when they couldn't maintain the peg anymore they would do away with it and let inflation materialize.

[Steve_American]

There are different measures.

For instance, the employment rate among people 15-64 only reached the pre-subprime crisis at the end of 2019:

https://fred.stlouisfed.org/series/LREM64TTUSM156S

And the overall employment rate (including, particularly, senior citizens) was still a lot lower than before the subprime crisis:

https://fred.stlouisfed.org/series/EMRATIO

1] Are you saying this isn't evidence there was still some slack?

2] The latest wave of high inflation was the result of the combined effects of supply chain issues (that have been only partially alleviated) and demand pressure (a result of the combined effects of the stimulus to deal with the lockdowns and the earlier than expected reopening, the latter of which was pretty much impossible for economists to predict since the decision to reopen would depend on unknowns like vaccine uptake, vaccine effectiveness, new variants appearing, etc)


3] Zombie banks are banks that only exist due to government help (be it through lax monetary policy or direct government subsidies). They do some lending, often to not too profitable businesses, but they will tend to keep large reserves because - well - they are half dead.

https://www.investopedia.com/terms/z/zombie-bank.asp


4] If there are more currency bills in the economy, does their value remain the same, go up or go down?


5] It's the other way around, actually. They'd try to peg them to the USD or some other lower inflation currency, but when they couldn't maintain the peg anymore they would do away with it and let inflation materialize.

1] So, you are asserting that from 2001 until 2021, i.e. for 20 years, the US Gov. ran large deficits, and yet by 2020 there was still slack in the economy and so still low inflation. Just from my memory, during those 20 years the total deficit was well over $10T. It seems like your supposed automatic inflation caused by more bills in the economy will take a long time to materialize.
. . Perhaps, it is better for the people to have 20 years of extra prosperity than to have 29 years of austerity,

2] Can you please respond to my assertion that the SF-Fed put out a report that just about 0,4 percentage points of the 7% inflation was caused by the covid "stimulus" spending. 0.4/7= 5.6%. Do, the SF-Fed said that just 5.7% of the 7% inflation was caused by the over $5.5T stimulus and other spending like on vaccines.
. . I'd certainly take the trade of 20 years of more prosperity and then just 0.4 % additional inflation over 20 years of austerity and then 6.6% inflation for a few years.
. . So, actually, your "confident" assertion that the inflation was in large part [you didn't say 'large' but you implird it] caused by the stimulus spending is not supported by the facts.

3] Do you have a link about those banks keeping large reserves and so making less loans?
. . AFAIK, Japanese banking laws are much like US and other western banking laws. That is, banks don't lend reserves or their depositors' money. They are functionally limited by any thing except a shortage of credit worthy customers wanting loans. Banks create the money they lend out.
. . And anyway, how does banks making less loans keep inflation low in your theory?

4] The founding MMTers assert that the effect of adding "more bills into the economy" depends on other factors. A main factor is the desire of people to save, this includes the foreigners who sell more to the US than they buy. If they send the dollars right back to the US by buying something then the dollars are returned to the economy. If they sit on the or buy US bonds then they save their dollars. Another factor is the amount of competition in the economy. In an ideal market, when there is more demand form more income in the economy, corps respond by increasing their production to get some of those dollars, and don't raise their prices to get more dollars, because their competition will get the dollars with their lower priced products. The major factor is the availability of additional labor and real resources to the nation, that can be used to increase production.
. . So the answer is -- it depends.

5] So, your examples of nations that have inflation from deficit spending are nations that don't meet the required criteria stipulated by MMTers. If they peg their currency then the Gov. must act to defend the peg. These actions are inflationary.
. . IMHO, the problem that Latin American nations have is the terms of trade are dictated by the advanced nations, These rich nations buy low and sell high to poor nations. So, they have a trade deficit. Under the gold standard, a continuous trade deficit would fairly soon drain all the gold out of a nation that had a trade deficit every year.
. . So, the proble is not deficit spending it is the continuous trade deficit.
. . The IMF & WB lend to them so they can keep buying, but this is unsustainable. The IMF & WB should just give the grants or maybe buy their bonds with no intent to ever use the currency to buy up assets in those nations. Instead, just keep buying their bonds without limit. Of course, this is the same as giving them grants for free.
. 10733 views

[wat0n]

1] So, you are asserting that from 2001 until 2021, i.e. for 29 years, the US Gov. ran large deficits, and yet by 2020 there was still slack in the economy and so still low inflation. Just from my memory, during those 20 years the total deficit was well over $10T. It seems like your supposed automatic inflation caused by more bills in the economy will take a long time to materialize.
. . Perhaps, it is better for the people to have 20 years of extra prosperity than to have 29 years of austerity,

You have to look at the deficits as percentage of GDP.

There are distinctions to be made within those 20 years. There were, after all, recessions in 2001, 2008-2009 and 2020 so it's no surprise deficits were higher during and for a few years after those recessions.

The problem isn't those years but posting large deficits even in "good" years when the recovery was at full speed and slack was lower, even if there was still some. Both Bush and Trump did that.

2] Can you please respond to my assertion that the SF-Fed put out a report that just about 0,4 percentage points of the 7% inflation was caused by the covid "stimulus" spending. 0.4/7= 5.6%. Do, the SF-Fed said that just 5.7% of the 7% inflation was caused by the over $5.5T stimulus and other spending like on vaccines.
. . I'd certainly take the trade of 20 years of more prosperity and then just 0.4 % additional inflation over 20 years of austerity and then 6.6% inflation for a few years.
. . So, actually, your "confident" assertion that the inflation was in large part [you didn't say 'large' but you implird it] caused by the stimulus spending is not supported by the facts.

Would you please post a link?

3] Do you have a link about those banks keeping large reserves and so making less loans?
. . AFAIK, Japanese banking laws are much like US and other western banking laws. That is, banks don't lend reserves or their depositors' money. They are functionally limited by any thing except a shortage of credit worthy customers wanting loans. Banks create the money they lend out.
. . And anyway, how does banks making less loans keep inflation low in your theory?

Yes, lending less means (if you want to see it that way) a lower money supply than otherwise.

Those banks are insolvent, and only survive thanks to government help. It is not surprising, then, they become concerned about the risk that depositors may want their money back than they'd otherwise be.

4] The founding MMTers assert that the effect of adding "more bills into the economy" depends on other factors. A main factor is the desire of people to save, this includes the foreigners who sell more to the US than they buy. If they send the dollars right back to the US by buying something then the dollars are returned to the economy. If they sit on the or buy US bonds then they save their dollars. Another factor is the amount of competition in the economy. In an ideal market, when there is more demand form more income in the economy, corps respond by increasing their production to get some of those dollars, and don't raise their prices to get more dollars, because their competition will get the dollars with their lower priced products. The major factor is the availability of additional labor and real resources to the nation, that can be used to increase production.
. . So the answer is -- it depends.

So if the Fed decided not to increase money supply (M1) and not change the deposit ratios, what would happen to the value of existing bills in the long run (on average)?

5] So, your examples of nations that have inflation from deficit spending are nations that don't meet the required criteria stipulated by MMTers. If they peg their currency then the Gov. must act to defend the peg. These actions are inflationary.
. . IMHO, the problem that Latin American nations have is the terms of trade are dictated by the advanced nations, These rich nations buy low and sell high to poor nations. So, they have a trade deficit. Under the gold standard, a continuous trade deficit would fairly soon drain all the gold out of a nation that had a trade deficit every year.
. . So, the proble is not deficit spending it is the continuous trade deficit.
. . The IMF & WB lend to them so they can keep buying, but this is unsustainable. The IMF & WB should just give the grants or maybe buy their bonds with no intent to ever use the currency to buy up assets in those nations. Instead, just keep buying their bonds without limit. Of course, this is the same as giving them grants for free.
. 10733 views

It's the other way around. The pegs were deflationary, and would eventually prove impossible to defend. Those pegs were deflationary because:

1) They would peg their currencies at very appreciated values so imports would be relatively cheap
2) They would force governments balance their budgets or at least keep deficits in check without resorting to seigniorage.

[Steve_American]

You have to look at the deficits as percentage of GDP.

There are distinctions to be made within those 20 years. There were, after all, recessions in 2001, 2008-2009 and 2020 so it's no surprise deficits were higher during and for a few years after those recessions.

The problem isn't those years but posting large deficits even in "good" years when the recovery was at full speed and slack was lower, even if there was still some. Both Bush and Trump did that.



1] Would you please post a link?



Yes, lending less means (if you want to see it that way) a lower money supply than otherwise.

2] Those banks are insolvent, and only survive thanks to government help. It is not surprising, then, they become concerned about the risk that depositors may want their money back than they'd otherwise be.


3] So if the Fed decided not to increase money supply (M1) and not change the deposit ratios, what would happen to the value of existing bills in the long run (on average)?


4] It's the other way around. The pegs were deflationary, and would eventually prove impossible to defend. Those pegs were deflationary because:

1) They would peg their currencies at very appreciated values so imports would be relatively cheap
2) They would force governments balance their budgets or at least keep deficits in check without resorting to seigniorage.

1] I thought I had saved that report and I found it. The link to the FRB-SF is i
https://www.frbsf.org/economic-research ... -to-1960s/

Below is a quote from Stephanie Kelton's article the summarizes the points.

Furman [wrongly, see below] says he believes that “90 percent of inflation is the result of excess demand driven by fiscal and monetary policy.” It’s not that he dismisses supply-chain disruptions, bottlenecks in shipping and trucking, or even the massive shift in consumer demand that aggravated these logjams. It’s just that he attributes most of our supply-side woes to excessive demand-side stimulus—a too much money problem.

That’s not what researchers at the Federal Reserve Bank of San Francisco found back in October, nor is it consistent with what Mark Zandi and his team at Moody’s Analytics published just last week.
[The red text in the link is clickable to go the to source.]

Here’s the gist of what economists at the San Francisco Fed found:

“In an effort to stabilize the U.S. economy through the severe disruptions caused by the COVID-19 pandemic, Congress passed a series of packages amounting to the largest macroeconomic fiscal relief since the New Deal of the 1930s. Beginning with the $2.2 trillion CARES Act in March 2020 and followed by $900 billion of additional relief in December, the relief effort continued into 2021 with the passing of the $1.9 trillion American Rescue Plan (ARP) this past March.

By the time the ARP was passed, the economy had at least partially recovered from the pandemic. The later timing and large size of the ARP stirred debate about whether it is causing an overheating of the economy and fueling a sustained increase in inflation…[as] For example, former Treasury Secretary Larry Summers stated…(sic)

Our analysis suggests that the ARP is projected to cause a transitory increase in the vacancy-to-unemployment ratio, which translates into a core inflation rate that is about 0.3 percentage point higher per year through 2022.”


In other words, the much-maligned $1.9 trillion fiscal package that supposedly got us into this mess is barely adding to inflation. Mark Zandi agrees:

[The twitter image by Mark Zandi was not copy&paste-able. So go to the link to see it.]

Link is => https://stephaniekelton.substack.com/p/ ... roblem?s=w


2] Since banks don't lend their depositors' money, just how does being so conservative making loans that they don't lend to good risks, make the bank more solvent

3] How can the Fed decide not to increase money supply (M1)? The Congress passes the budget, and the budget sets the size of the deficit. Also, M1 includes dollars lent by banks, so how can the Fed stop banks from lending?
. . If the Fed can't limit bank loans [or has never tried to do that] then the question is only theoretical. So, what the theory predicts is only as accurate as the theory is accurate. Your MS Eco. theory is very inaccurate. I don't know what MMT would predict.

4] You are just reasserting your claim.
The 2 "Theys" seem to refer to different things. The 1st one seems to refer to the national Govs., and the 2nd one seems to refer to the IMF or WB.

In any case MMT doesn't apply to nations the peg their currency nor to nations that owe dollars to the IMF or WB. And like I said, the terms of trade force constant trade deficits on them, so of course they will have financial problems.

Lurkers, if you are that interested in how poor nations can use MMT, then you can dig deep into Bill Mitchell's blog. He says that he has studied this problem.

.

[wat0n]

1] I thought I had saved that report and I found it. The link to the FRB-SF is i
https://www.frbsf.org/economic-research ... -to-1960s/

Below is a quote from Stephanie Kelton's article the summarizes the points.


Link is => https://stephaniekelton.substack.com/p/ ... roblem?s=w

I wonder if the SF Fed would reach the same conclusions now that we're past the inflation peak.

2] Since banks don't lend their depositors' money, just how does being so conservative making loans that they don't lend to good risks, make the bank more solvent

Those banks are not solvent to begin with. Their fear is that they could face bank runs if the public believed they'd lose government support.

3] How can the Fed decide not to increase money supply (M1)? The Congress passes the budget, and the budget sets the size of the deficit. Also, M1 includes dollars lent by banks, so how can the Fed stop banks from lending?
. . If the Fed can't limit bank loans [or has never tried to do that] then the question is only theoretical. So, what the theory predicts is only as accurate as the theory is accurate. Your MS Eco. theory is very inaccurate. I don't know what MMT would predict.

The Fed can choose to tighten money supply, as it started doing early 2022.

Indeed, you can see this in terms of both the money base and the total M1 supply:

https://fred.stlouisfed.org/series/BOGMBASE
https://fred.stlouisfed.org/series/M1NS

4] You are just reasserting your claim.
The 2 "Theys" seem to refer to different things. The 1st one seems to refer to the national Govs., and the 2nd one seems to refer to the IMF or WB.

In any case MMT doesn't apply to nations the peg their currency nor to nations that owe dollars to the IMF or WB. And like I said, the terms of trade force constant trade deficits on them, so of course they will have financial problems.

Lurkers, if you are that interested in how poor nations can use MMT, then you can dig deep into Bill Mitchell's blog. He says that he has studied this problem.

.

Weird to see MMT somehow not applying to most countries. Sounds like a not too useful theory then.

[Steve_American]

1] I wonder if the SF Fed would reach the same conclusions now that we're past the inflation peak.


2] Those banks are not solvent to begin with. Their fear is that they could face bank runs if the public believed they'd lose government support.


3] The Fed can choose to tighten money supply, as it started doing early 2022.

Indeed, you can see this in terms of both the money base and the total M1 supply:

https://fred.stlouisfed.org/series/BOGMBASE
https://fred.stlouisfed.org/series/M1NS


4] Weird to see MMT somehow not applying to most countries. Sounds like a not too useful theory then.

1] While looking for the link you wanted, I saw more recent numbers. The SF-FED said that about 33% if the inflation over the months was from the covid spending, IITC.

2] And, why would the Gov. pull the rug from under them after all this time. it would be stupid because it would hurt the citizens and the economy, an unlike western Govs., Japan want full employment and the citizens to do well. So, the banker should not fear that. Where did you get the idea that they do fear that? Did you see someone say that?

3] So, exactly how does the Fed do it?

4] It shows me that you don't read my posts very well. I have listed the 3 requirements at least 5 times in threads on this site over several years. including earlier in this thread.

OTOH, I find it strange that your theory is applied to Japan even though it obviously is different. Also, you think the same theory applies to all other nations and don't care that some have to borrow from the IMF & WB, and so have rules forced on them. Also, I find it strange that you don't care that your theory has failed many times to predict important economic events, like the GFC/2008.

[Rancid]

Taxes should only pay for the military and nothing else.

military first!

[wat0n]

1] While looking for the link you wanted, I saw more recent numbers. The SF-FED said that about 33% if the inflation over the months was from the covid spending, IITC.

That sounds more like it. 33% is fairly substantial in all.

2] And, why would the Gov. pull the rug from under them after all this time. it would be stupid because it would hurt the citizens and the economy, an unlike western Govs., Japan want full employment and the citizens to do well. So, the banker should not fear that. Where did you get the idea that they do fear that? Did you see someone say that?

It's not impossible. Why did the Bush admin refuse to bail Lehman Brothers out? It had done so for Bear Sterns.

That risk can perfectly suppress lending.

3] So, exactly how does the Fed do it?

Open market operations.

4] It shows me that you don't read my posts very well. I have listed the 3 requirements at least 5 times in threads on this site over several years. including earlier in this thread.

OTOH, I find it strange that your theory is applied to Japan even though it obviously is different. Also, you think the same theory applies to all other nations and don't care that some have to borrow from the IMF & WB, and so have rules forced on them. Also, I find it strange that you don't care that your theory has failed many times to predict important economic events, like the GFC/2008.

The theory applies differently for Japan because of the zero lower bound. It's not possible, in practice, for central banks to set a negative nominal interest rate.