[PeterPrinciple]

Folks,

Somtime times you have to get into the mind of liberals to understand what they are thinking. Another posting here had a reference to Modern Monetary Theory so I chased the rabbit. Did not find reference to this in search. A general search shows activity in academics and bloggers.

If you do some research and thinking on this you will see that this is the theory our govt is operating under. It is the new fashionable economic theory adopted by the elites.

This is only one of many sourced, but do some research and reading because the idea is GROWING.

[PeterPrinciple]

In this case, wikipedia has some good background information.

http://en.wikipedia.org/wiki/Chartalism

Folks, this is going to require thinking, get out your thinking caps.

[delapaz]

see also chartalism: link It's fascinating to see a theory which makes Keynesians look sane and sober-minded. There have some correct ways of looking at fiat money, but in real world terms, I think MMT is beyond dangerous.

[GOPJ]

Liberals think it's all ‘funny money’ - that contruct works as long as ‘funny money’ will buy the world's labor and production. The flaw is it only works when a country has earned reserve currency status. A status our grandparents eared for us... If a liberal doubts this they can look at Haiti and try to explain why Haiti can't do the same with their 'money'...

[GOPJ]

Liberals think it's all ‘funny money’ - that construct works as long as ‘funny money’ will buy the world's labor and production. Two groups have to accept the illusion - the producers and consumers.

The flaw is it only works when a country has earned reserve currency status. A status our grandparents eared for us... If a liberal doubts this they can look at Haiti and try to explain why Haiti can't do the same... buy it all with ‘funny money’...

[the invisib1e hand]

whether you like it or not, it certainly puts things in perspective.

[Thane_Banquo]

Why does the government have to issue debt (as under the gold currency regime) when it doesn’t need the money in the first place? It generates money, so neither taxes nor loans made via debt contribute to government funds.

This is such sophistry. The guy who wrote this should simply note that when the government issues debt, the amount of currency in its Treasury increases. So therefore debt does contribute to government funds.

[Thane_Banquo]

Spending beyond the economy’s total productive capacity is what leads to inflation. This additional money cannot buy any new products or services (there’s no way to make them since we’re at full capacity), so it goes toward bidding on existing products and services and therefore raises their prices.

The author claims this new theory is distinct from Keynesianism, and then posits one of the central tenets of Keynesianism. If this statement is true, stagflation cannot happen and the 1970's are just a figment of our imaginations.

[Southack]

MMT, Keynesian, and Monetarist theories are all fatally flawed. For one thing, none of them take into account private credit availability even though all of the world’s major economies are credit-based.

The problem with the government simply printing money...or with the government borrowing money...is that either action destroys more private credit than whatever new money was either borrowed or printed.

Thus, government over-spending leads to deflation...a slower speed of money...because that over-spending (above tax revenues) destroys access to private credit.

[DaxtonBrown]

“Spending beyond the economy’s total productive capacity is what leads to inflation. “

This is moronic thinking. What is important about money is it’s information carrying capacity, period. Arbitrary fluctuations, whether for pump priming or whatever are devastating to information content. Any fixed rule will work, whether it is inflationary or deflationary, as long as it is fixed. But politicians like to steal, so they can’t keep with a constant fiat currency but debase it in an accelerating way. That’s where gold comes in, because it is stable, but it is also subject to fractional banking.

So in short, that’s why you have revolutions, to purge the kings/bankers when they steal too much. The idea that central bankers can know how much money to pump in to keep the economy at full roar is absurd Keynesianism which we are now experiencing in full fail mode.

[muttmutt]

Folks, MMT is a model. It’s a way of attempting to understand the complex interactions between inflation, employment, interest rates and deficit. It is not policy and it is certainly not policy in the current economy. In fact, just the opposite. We’re attempting to “cut” our way to prosperity in the mistaken belief that deficits matter during recessions. The failed belief in “expansionary austerity” has already caused a wide swath of economic destruction in Europe and we’re doing it here too.

MMT simply offers a different way to think about the relationship between various key variables in our complex, modern economy.