Comment by ocius
2 months ago
Just as a side note because you mentioned it in relation to DOGE: the US government cannot go bankrupt in its own currency. As long as prices are kept in check, there is no reason not to create more money. The fact that the US has to pay interest on it doesn't change that. If the government decides to spend more money than it takes in, the money is simply created by the central bank (through the detour of bonds). If you are interested, read up on Keynesian economics and Modern Monetary Theory.
I'm far from understanding economics but my understanding is that Modern monetary theory is a somewhat fringe theory that gained some advocates especially before post pandemic inflation while Keynesian economics is although maybe a bit modified from the original largely accepted as part of the base of mainstream economics. They are very different. Also vast majority of countries have central banks and spend more then then save, it's hardly specific to the US (although the US gets cheaper rates because of its position)or a major concern (at least if the debt to GDP percentage doesn't grow too high, or if you're Japan).
push it too far and inflation goes up though. It's "the dosage makes the poison". Then, printing even more money leads to hyperinflation, etc, etc
Ill fill in the blank - pushing it to far_________ inflation goes up
You meant to add " and in particular if other countries start refusing it because it has the same value as toilet paper, except the dollar will leave your butt stained of black in, when used for bathroom purposes,"
And if you are more interested, you can go and life in a country in which this non sense has been applied, like Zimbabue, Venezuela or Argentina.
You take the richest and most prosperous countries on Earth and you make it miserable beyond recognition.
The Us is an outlier in this regard. Other countries have had major inflation and currency collapse. It's why predictions of 'US debt collapse' never come true although it is a real risk elsewhere.
If the US is an outlier.... then it's fine for the US to continue down this path?
Like in this supposed age of a US government spending crisis the dollar is extremely strong compared to other currencies. Where is the hyperinflation? How many decades will we need to wait?
Exactly. There was a time when the British pound was the world's reserve currency (coinciding of course with British global hegemony). Fast-forward to today and the UK's GDP per capita[1] is lower than the poorest US state's[2].
1. https://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom
2. https://en.wikipedia.org/wiki/List_of_U.S._states_and_territ....
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Japan has been at it for several decades. The US seems to have a debt of 120% of GDP, and Japan of 250% of GDP, so I guess you're still good for a few decades more?
"As long as prices are kept in check" Hello?
MMT'ers act like they've discovered some new concept. MMT is not economics; its political spin, propaganda, down playing the harsh realities of economics (not just "late stage capitalism" or whatever the kids call resource constraints nowadays.)
MMT isn't a set policies. It's a description of how money works, when you have fiat currency.
Government is a source of money. Taxation is a sink. Too much money in the system you get inflation, not enough deflation.
When you can print money taxation is just a way of controlling the amount of money in the economy almost by definition because you don't need tax to fund yourself when you can create money. Bonds just provide a stable financial instrument rather than a source of funding because you can literally just print money if you wanted to.
The constraint on money is mainly inflation, and government debt and tax is used to control the money supply.
That's it.
Odd that you think "late stage capitalism" describes resource constraints. It's really more a term to describe the bizarre economic consequences of increasing degrees of financialization turning every sector of the economy into speculative theatre.
MMT is an elaborate way of describing the process of taxing investment capital away from existing capitalists such that the state can invest it itself. You may complain that the state would invest that capital poorly (others would counter that private VCs already do it poorly), but the essential economics of it is dead simple.