Modern Monetary Policy

Yep I am about to bore the crap out of my reader…..when it comes to economics the average person glazes over and goes to that “happy place” in the mind until the talk is finished.

But I feel I need to drop some info on my readers……there has been much in the MSM about the Green New Deal and the proposals by a couple of candidates about taxing the rich……

I want to give my reader a look into the policies and the economics of them…..

First the call to “Tax The Rich”……

I don’t consider myself an MMTer, but there is a basic Keynesian concept which has been associated with MMT, which is both true and important. For the federal government, taxes are not about raising revenue, taxes are about reducing consumption to prevent inflation.

The point is that the federal government does not need taxes for revenue, since it can just print money. It instead taxes to create the room in the economy for government spending. This view is sometimes wrongly taken as a “get of jail free” card, where the government can spend whatever it wants without worrying about raising revenue.

That could be true in a deep downturn. However, if the economy is near its full employment level of output, where additional demand will lead to rising inflation, we are pretty much back in the world where we need taxes to offset spending. Any major increase in government spending will lead to higher inflation, unless we have higher taxes or have some other mechanism to reduce demand in the economy.

Next how about that Green New Deal that is getting the conservs lathered up to the point that they resurrect a fear from the 1950s……

Much of the Democratic Party, including almost the entire pack of contenders for the Democratic presidential nomination, has embraced the concept of a Green New Deal (GND). This is an ambitious plan for slashing greenhouse gas emissions, while at the same time creating good-paying jobs, improving education, and reducing inequality.

At this point, the specific policies entailed by these ambitious goals are largely up for grabs, as is the question of how to pay for this agenda. One way of paying for it, borrowing from the economic doctrine know as Modern Monetary Theory (MMT), is that we don’t have to.

Modern Monetary Theory argues that a government that prints its own currency is not constrained in its spending by its tax revenue. Some on the left have argued that we can just print whatever money we need to finance a GND. This claim does not make sense.

All this is possible…it will NEVER fly with conservs who live and die on tax cuts……a real shame….for this countries needs big ideas once again…..the Repubs are NOT those people.

17 thoughts on “Modern Monetary Policy

  1. One of the oligarchs noted it’s looking like the time the peasants charge the bastions with their torches and pitchforks raised! LOL! Soylent green for everyone! I want anything by J.S. Bach played at my euthanasia ceremony.

    1. You notice those people talk a mean game but have little to no action to solve the problems….I want Segovia played at mine….LOL chuq

      1. I view it as attempted deflection so that when the pitchforks and torches appear on the horizon, the revolting peasants will find the oligarch crouched and shittiung himself in a corner, remember he spoke fancy, soothing words to make them happy, then move on to the next oligarch, leaving the fancy talker unscathed but befouled.

  2. That balance of staying rich whilst keeping the workers in their place seems to not be too difficult to maintain these days. I wonder what it would take to get Mr Average reaching for his pitchfork? Perhaps shut down the TV stations, then people might start thinking again.
    Best wishes, Pete.

  3. So if we can merely print more money the deficit and debt are of no real consequence ? But I cannot shake off the feeling that living beyond one’s means leads to eventual catastrophe. Seems taxing prosperity to control inflation is a very peculiar remedy. Without a profit motive innovation and progress would stagnate.

    1. The debt arises when we fight wars we cannot afford and then cut taxes to help the M-IC become more profitable….we will run a deficittaxes are revenue and without revenue……as simple as a household budget….chuq

  4. I don’t know what to do or where to turn in this taxation matter. Somewhere there must be a book that tells all about it, where I could go to straighten it out in my mind. But I don’t know where the book is, and maybe I couldn’t read it if I found it. Warren G. Harding

  5. The GND at this point is just a House resolution proposal. Has no teeth even when passed but it would resolve a spirit of intent to begin legislation on the elements and areas contained therein. I have no immediate caveats other than to meet each piece of proposed legislation down the line with scientific input, the anticipated results, and the application in our free market. Common sense stuff. This can’t be about a bunch of tree-huggers or save-the-whales bunch (not to diss them at all necessarily, but they are more “impulsive” at times).

    Regarding the willy-nilly of just printing money… much of the strength of the US dollar is in the fact that there’s a universal acceptance that it is based on the “full faith and credit” of the US government. Our money is no longer redeemable or exchangeable for gold or silver from Ft. Knox. It’s backed on the faith of all goods and services produced here. Simply printing money to pay bills would inevitably lead to a dilution of that faith down the line.
    From another source…

    “A dollar bill used to say “This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury or at any Federal Reserve Bank.” Look at a dollar bill today. It simply says; “This note is legal tender for all debts, public and private.” In other words, you can’t redeem it for “lawful money. A dollar bill is not lawful money, but rather “legal tender.”

    So we attach our taxation to the economic output, and thusly create a budget rather than a deep well of printing more. Now.. I do not know enough about economics at all to debate all the economic theories.. so whether all this is right or wrong is not for me to decide. I earn dollar “credits” that can be converted to paper, or not, and I give that paper, or transfer those credits, to other people, places, and things that accept that paper and credit. I am happy with that. 🙂

    1. I was in West Berlin when the US dollar was taken off the gold standard. My team and I hadn’t had a chance to convert some dollars for DM, and found ourselves in need of transportation back to the place we were staying. We told the taxi driver we didn’t have DM, but could he possibly accept US dollars for the ride, knowing it might be a bit of time for an exchange rate to be worked out. He had no problem at all, noting he trusted the US dollar, that he’d eventually get his money. He gave us 1,60 DM to the dollar, which came pretty close to what it initially exhanged for once things settled out.

  6. Printing money and running up debt does have consequences. At some point the consequences are very severe and the people most damaged are those with the fewest assets and income. That is a road no country should go down.

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