Modern Monetary Theory

Discussion in 'Markets & Economies' started by mmm....shiney!, Sep 14, 2019.

  1. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I first came across Modern monetary Theory a couple of months ago in a televised debate (a discussion really) between Robert Murphy and Austrian theorist and Warren Mosler the founder of MMT. It was a rather droll affair on the whole and I struggled to get a hook on what MMT is about.

    I think I’m still struggling but I’ve just downloaded Mosler’s “Soft currency economics” booklet to get some traction on this theory.

    Interestingly, the first page says that sovereign nations cannot go bankrupt unless they choose to. How’s that for starters? So the USA, Australia, New Zealand China can all avoid bankruptcy - unless their central banks (and politicians) choose to default.
     
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  2. leo25

    leo25 Well-Known Member Silver Stacker

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    I posed this video in the YouTube thread a few months ago, but it got no traction.
    Warren Mosler is way off the mark regarding the talk at 51min. In some areas he is very naive.



    First half of this was good too.
    Important part @16:40. The function of taxation is not to fund government spending, but to enforce you use the fiat currency. That's why when the FED (federal reserve note) was establish in 1913, so was the tax system.

     
    Last edited: Sep 15, 2019
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  3. leo25

    leo25 Well-Known Member Silver Stacker

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    MMT makes more sense then the current model in play today. And of course any country that has the ability to print can't go bankruptcy, they can destroy their economy if abused but can't go bankruptcy.
     
  4. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I’m just reading about it and trying to get a grasp before I turn to the renowned Austrians for their take on it.

    Agree, from what I’ve read so far MMT seems to have a good grasp on why central bank fiscal policy doesn’t work AND why racking up debt doesn’t seem to send nations bankrupt.

    The problems I have with the theory so far is it seems that 1. they have no problem with government issuing a monopoly currency 2. they have no problem with the State confiscating a portion of the productive wealth of individuals without their consent 3. money to them appears to be nothing more than digits on a computer screen as opposed to the stored value of the outcome of productive endeavour.
     
  5. leo25

    leo25 Well-Known Member Silver Stacker

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    Think this point divides people the most. For me i see no reason why local currency/credit needs to be a store of value. You are free at anytime to convert your currency/credit to something else if you want it to store value over time. (be it gold, land, art, scotch etc...)
     
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  6. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Let me clarify my statement, money should be the stored value of your current/past productive effort, it’s a credit you receive for meeting the needs of someone else. You do something someone likes, they give you $$. And yes, that money can take any form. I’m fond of sexual favours. :p

    From my understanding MMT advocates printing money first, then creating value with it later.
     
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  7. leo25

    leo25 Well-Known Member Silver Stacker

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    Yep that's my understanding. It's also the current monetary theories view too. I guess currencies have always really acted that way.

    MMT is more or less how the system is now, just without all the shell games.
     
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  8. leo25

    leo25 Well-Known Member Silver Stacker

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    I guess it's more complicated then that today since all companies use debt to start a company/produce goods. In today's world the debt gets reduced over time due to inflation. If companies today had the pay back the debt in "true" value, then most companies will go bust. That's why governments and central banks are so scared of deflation or even very low inflation.
     
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  9. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Since they came off a gold standard anyway. Or private currencies issued as promissory notes. I guess that’s why it’s called Modern Monetary Theory. :)

    So if we get rid of the State and use private currencies backed by reserves, or go back to gold backed money and keep the State or even start using cryptos then MMT is no longer relevant?
     
  10. leo25

    leo25 Well-Known Member Silver Stacker

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    Not necessarily, gold standard was still a value set by government and not the free market. Only difference now is it's no longer pegged to a currency (thought the peg was always broken) and instead has a floating market value to a currency. You have to go back much further in time to get to the point you are referring to. I guess the word "Modern" is relative. Some say 10yrs, some say 100yrs, some say 1000yrs.

    Currency today is backed by reserves. You can exchange it for any "reserves" you want. I'm guessing you mean if it was pegged to something at a fixed price. Then you would just be describing what the "gold standard" was meant to be, but corruption played its hand. You see the loop you get into :confused:
    Even if you could maintain a currency with a fixed true value, over time a small percentage of people will hold most of the currency/control to the point where people will revolt and you start all over again.

    Now if you got rid of a standardized currency completely, then maybe you could get to the system you are talking about. But the issue is that system doesn't really work on large scale populations with a lot of specialisation. Also i would imagine it would be very hard to fund large long term projects.

    I think the core of the issue is how do you get the majority of the population to educate theirself so they don't get screwed over? That's the real puzzle.
    Remember most people like having someone control things for them, that way they have more time to watch reality shows and sports. (or for the young ones, play fortnite and watch Vblogs):D
     
  11. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    ^ probably why liberatarian Austrians argue against monopoly currencies and are in favour of competing currencies ala cryptos.
     
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  12. leo25

    leo25 Well-Known Member Silver Stacker

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    Well I'm happy to do that :) Just need to convince the remaining 99%. Though i think at this stage it's easier to just wait for a complete social/economic collapse.

    After seeing this ad I've got a feeling we don't have to wait long. :eek:

    img.jpg
     
    Last edited: Sep 15, 2019
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  13. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    So, assuming that they’re correct and sovereign nations cannot default unless by choice, the implications for gold is that it’s not likely to be a currency or back a currency while we have central banks.

    And government bonds become a safer investment than many have come to believe?
     
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  14. leo25

    leo25 Well-Known Member Silver Stacker

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    Again not necessarily :) There are other political reasons gold could be used in some way. One example could be China want's to gain more trust and influence to use the Yuan as a reserve currency, they might bring gold into the picture. Though it will be superficial, just like the Bretton Woods system was. It was just there to suck people in.

    Regarding the Bond market, yep that's been overblown. It can't go bust because governments that issue their currency can always issue more credit, though it's not a great thing to buy either (more so in some countries). But in reality there are only two options atm for large Trillion dollar capital to pile into without causing massive market disruption, stocks or bonds. If you think there will be inflation you pick stocks, if you think deflation you pick bonds.

    I think we are heading into deflation and i think it's by design in order to implement new global monetary and political structural changes. Deflation/market crashes are always used as stepping stones to implement new controversial rules to the game.

     
    Last edited: Sep 15, 2019
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  15. willrocks

    willrocks Well-Known Member Silver Stacker

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    In its simplest terms, MMT means the government prints money without restraint.

    Sure, the current system doesn't work, but I can't imagine a world where MMT wouldn't be more abused, and simply as a way to expand the government's powers.
     
  16. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    And your thoughts on the gold price then?
     
  17. leo25

    leo25 Well-Known Member Silver Stacker

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    To be honest I don’t know. That’s why I hedge. Short to medium term could go down, but long term like most commodities will either hold its value or go up.
     
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  18. leo25

    leo25 Well-Known Member Silver Stacker

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    Governments can issue as much debt as they want now. MMT doesn’t change that, it just makes it more transparent. That’s why even with interest rates at next to zero they have no issue offloading new debt. The other half of that story is central banks have always made sure there is enough new credit to accommodate new government debt.
     
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  19. harry_mr

    harry_mr Member

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    MMT is the flavor of the month. It is just that a 'Theory'. When it fails they will say 'don't worry we have another theory' :confused:.
     
  20. leo25

    leo25 Well-Known Member Silver Stacker

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    Everything is just a theory. What’s your point? Also again MMT doesn’t really change anything. Personally I don’t understand why it’s really discussed, apart from explaining how things are done now.

    It’s like saying when a kid finds out his parents buys him gifts and not Santa its a new thing. The only thing new is his understanding how the gift gets under the tree and that it’s really his dad that drinks the glass of scotch left out for Santa.:)

    Btw thanks for the video link.
     
    Last edited: Sep 15, 2019
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