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semi interesting but would not want to be the first country to try it out. debt doesn’t matter because you can always just print more money, so inflation is the only thing that matters?
sounds like a recipe for dilution. the cost of debt would become much more expensive. in that sense, it could theoretically regulate itself, as you would stop taking on debt when it became too expensive. on the other hand, i think that human nature is not geared toward this type of structure because of our generally lackadaisical attitude toward the cost of debt institutionally and personally.
i also have strong misgivings about our options for institutional intervention should something go awry. toggling the inflation rate seems like we are skirting the banks as an intermediary, and the government is really on the hook for everything. at least in our current system, where interest rate is the toggle, the risk is shared between the central banks and commercial and investment banks. so there is a first line of failure to warn us before we are truly fucked. on the other hand, this line of failure, being profit-oriented, is possibly more subject to mismanagement and fraud.
i don’t know all that much though, just a few thoughts i had that someone smarter can start with (or not if they’re garbage lol)
Love that you brought this up. Following this
The theory is only applicable to the US because only the US debt is its own currency. Don't see any other country having the ability to try it.
On your point on debt. It's interesting and I agree. It also means that if private investment goes down and the feds increase their footprint in the economy (which is why they'll print money in the first place) more of the US could turn into a publicly owned economy.
i haven’t done enough reading on it, but you made me think of a question - once the extra money is printed, where does it go? still to the central bank to lend out with interest? you make it seem like it would be directly invested by the treasury (or the mint?!)
and when you say private investment going down, what do you mean? stock market pulling back? gdp shrinkage? is MMT something that would theoretically be implemented only in response to certain conditions?
Yes, the idea is that the government will directly spend that money.
I was going off of your point that debt will become expensive - so private investment will go down.
The politicians who have jumped on the MMT bangwagon want to trigger it when there is a need to reshape the economy according to certain goals that the market isn't pursuing. For example green new deal.
ah, i see what you’re saying. the reason i don’t think this is a good idea is because i think we are going to run up to a point where the stuff that we talked about implementing (e.g. green new deal) via MMT has been implemented, and we get to a point where we are basically frozen. we will, at some point, need additional capital for something new. but at that point, we won’t be able to juice the economy by printing anymore money, because inflation will be too high already, and private enterprise won’t be able to help out, because debt will be so expensive. so we will have some issue that we can’t yet foresee that we need to handle by freeing up capitol, but no way to do it without sending huge shocks through the system (e.g. curbing inflation drastically to decrease the cost of debt and transfer more investment back to the private sector). unless MMTers really think that once implemented, all problems, foreseen and unforeseen, will be resolved - that’s pretty nutty imo.
some people might not mind giant shockwaves in the economy. they might consider them natural (e.g. no-deal brexit, no stimulus to alleviate 08 financial crisis, etc), and/or that the more quickly they happen, the faster the recovery. i don’t really share that sentiment.
Question: Do you think there is a correlation between the recent popularity of MMT & the “All Growth, All Debt” start up business models?