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Top US economist explains how MMT works
(media.mas.to)
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this post was submitted on 04 May 2024
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the_dunk_tank
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It's mostly that he clearly doesn't understand how this works even though he's in charge of the policy. Conceptually, mmt works because the government can just keep issuing as much currency as it wants. So, as long as the spending is done in its own currency there isn't a problem. However, the whole thing is built on trust in the system and if people stop losing faith in the value of the currency then the whole house of cards comes crashing down.
It's not built on faith but in authority. The reason the US can infinitely print money is because the dollar is the international reserve currency and the US imposed the dollar as the international reserve currency with military might.
Imagine there exist 100 dollars in the entire world. 50 dollars are in the US and the other 50 are in the rest of the world, the US has 50% and the rest of the world the other 50%. The US decides to print 25 dollars, now the world supply of dollars goes to 125. Now the US has 75 dollars and the rest of the world have 50 dollars, the US has 60% and the rest of the world has 40%. The value of each dollar goes down proportionally to the increase but guess what, the US doesn't feel the impact because it now has a bigger share of the money supply. Now add in that the demand in dollars is always increasing because international trade is always growing, unfortunately the value of the dollar is tied to the growth of international trade.
This is why dedollarization is an existential threat to the US, being able to print dollars infinitely and export the inflation has been their free lunch since WW2. When countries stop using the dollar for international trade, the dollar stops strengthening proportionally to the trade of said country, and when that happens the US finally feels the consequences of printing money.
The Deficit Myth uses a different reasoning that's more widely applicable to fiat currencies. Fiat currencies have value, are used in commerce, because you have to pay your taxes in them. You can't pay with Bitcoin, real estate, or commodities.
Inflation on the other hand is caused by basic supply and demand. Inflation happens when more people want to buy a good than is in supply. The most recent inflation in the US was caused by supply shocks due to covid and eventually the war in Ukraine. Because so much of our economy is monopolized, a few players were able to artificially raise their prices using the real inflation as a smoke screen.
Hypothetically a treasury could print, or swap some numbers in a spreadsheet, as much money as they wanted into existence and no inflation would occur. Assuming everyone was able to buy what they wanted at a fixed price.
at the very start of covid when things were extremely uncertain, mass death was kicking off, and people were scared, i saw this crazy video of anderson cooper interviewing someone from the federal reserve. the fed guy was promising that no matter what horrors were about to come with the pandemic, they would definitely play with the spreadsheet to keep things normal.
anderson cooper was literally crying tears of joy when he heard this. his face and eyes were all puffy and red. he was so relieved.
did anyone else see that interview? it's the only anderson cooper i've ever seen. not sure if it's his normal MO. more of like a jordan peterson thing.
i guess anderson cooper is an MMT guy lol
The Fed is a slightly different beast. They don't spend money into existence like the government does. They lend money into existence. Their primary lever is at what interest rate that lending is done. Anderson Cooper believes in the Chicago School, the poor sod. It's basically the premier economic theory of the US establishment