What is Modern Monetary Theory?
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- Опубликовано: 17 ноя 2024
- Can the government just print endless money with no consequences? Well… Maybe.
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The idea that money has to be backed in physical goods like gold or silver is a fading idealogy and our modern system of fiat currency ties the value of money to consumer confidence in the government that backs it.
Even with that said, printing endless money sounds like a bad thing, no? Well, possibly. It could lead to massive economic collapse and the devaluing of everyone's money. However, some economists think that if done right, governments can just keep printing money with few repercussions. That theory is known as Modern Monetary Theory, or MMT.
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Strange Stuff
Vishnu
MMT isn’t a thing to “switch to”. It is an alternate description of the system we already have.
george gammon agrees
Who is "we"?
@@TheSandkastenverbot Good question. The use of “we” is often left un examined. I meant counties with their own fiat currency and central banks. MMT does not apply to countries who’s currency is pegged to a a foreign one, or one that shares a currency with other countries such as the Euro.
MMT appears to be pretty inconsequential, if it is simply "the government doesn't need tax dollars, it can spend whatever it wants, but it needs to balance things out using tax". It is a different way of looking at things, but the end conclusion is the same. That is, tax needs to be raised to "fund government expenditure", which just means to "subtract dollars from the private sector so the government can throw its weight around, lest inflation occurs". Deficit spending can be done, just knowing it will cause inflation, but we do that anyway, that's standard Keynesian policy. An MMT-believing government won't operate much different from the current paradigm, because it still needs to keep expenditures roughly in line with tax if it wants to avoid inflation.
The idea is to use government “deficits” (in this case money printing) to control the money supply. A balanced budget = a stagnant money supply = deflation in the event of economic growth = recession. By tying the money supply directly to budget deficits, it should theoretically offer a clearer feedback loop for economists to measure in order to determine the appropriate level of government taxation and expenditure. Most MMT theorists believe that most modern governments already accidentally operate on a worse version of this principle and could function more effectively by adopting the MMT system. MMT argues that budget deficits should be the normal state of affairs.
@@J0.Flowersthey do indeed operate as if we never had the opportunity to vote these policy changes,by and for the people is another concept they can’t grasp.
It’s just Keynesian economics ignoring malinvestment so dumb politicians don’t have to be held accountable for their failures.
Get tangible assets and means of production at personal level to survive falling economy. Forget about gold or bitcoin.
Here are some examples :
1. Solar Power plant
2. Rain water collection system
3. Private farm that can grow food for your family
4. Ethanol plant for fuel
5. Tools, Machines and Spare parts + Workshop
6. Personal Library full of books on technical knowledge books (if the internet fails)
If the above produces positive equity then sure. If it produces negative equity then no. For example, you borrow 1 mil to create solar power plant. If you pay back the loan (+ interest) then the economy is positive, new money is created. If you default on the loan, then the economy is minus, money is destroyed. If you default on the loan but the bank was able to recover their money from selling the solar power plant, then its even, no new money is created.
I reached this conclusion like 10 years ago without ever hearing anything about MMT. It's so obvious, money is just a representative of how much value we have in the economy (resources+labor), you can print as much of it as you want as long as you have a counter balancing mechanisms to make sure you don't print too much and get inflation.
So by your logic "you can print as much as you want....unless it's too much." You funny.
@@RichZuHaus In the most simple terms, yes , pretty much. What's your logic? "I can only print as much as some shady banker tells me" ?
@@hansfrankfurter2903 what's logic? I go by whatever the party tells me
@@RichZuHaus I am the party comrade!
so essentially you can print as much as you want, as long as you keep pace with the size of your economy
MMT sounds like Keynesian economics in steroids...🤔
That would be Marxist economics.
Which is STILL capitalism
"When done right" are keywords we've yet to see.
We've already seen that large levels of deficit spending haven't resulted in hyperinflation in advanced economies multiple times over the past few decades. Both during the GFC and also now during COVID, central banks in advanced economies have pumped out trillions of dollars of liquidity into the markets and we've seen pretty much no general inflation (in fact, inflation has been below target during those times). This indicates that a "balanced budget" isn't actually necessary to maintain a low rate of inflation. and that the level of "government debt" has pretty much zero effect on the economy.
We know that there's other things that can decrease inflation - like increasing interest rates, increasing bank reserve requirements, or increasing taxation - so what if the goal is just to use those tools to keep inflation stable, and then let the government spend as much money as it needs to - with guidance from central banks?
@@Encryptsan is that because inflation is dependent on supply of goods too..?
@@Encryptsan there had been inflation in asset prices n financial assets. N according to non mainstream sources theres inflation in food prices too.
@@Learner5555 Financial asset prices aren't a measure of cost of living since they're irrelevant to day-to-day spending. CPI (which is typically what's used to measure inflation) takes food prices into account.
It's the "not the real communism" all over again. Once it fails, mmt proponents will just say "it wasn't done right that time" and set out to ruin more countries and generations.
MMT does not seem to recognize the nature of the US government and economy. Inflation looming? Just raise taxes and interest rates... no guarantee a tax hike will get through Congress, and if it does a tax rate hike does not guarantee a tax revenue increase. And what of the effect of interest rates on economic activity?
MMT as a basis for excessive money printing to solve problems is a fragile, complex system that assumes a predictable future and an authoritarian level of control over the economy.
MMT is not really a policy proposal but a theory of how money functions in a fiat monetary economy. Many proponents are deriving policy positions from it though. The theory itself doesn't ignore the political reality, but many proponents describing possible derivable solutions from MMT might.
MMT never says anything about excessively printing money. It cautions against anything that would cause inflationary pressure which is why it places huge emphasis on precisely WHAT tax and precisely WHEN to do it. Far more variables should be taken into account than we currently do. MMT also simply points out how a currency issuer has no purely fiscal constraints when it comes to spending. There are other very real constraints, like production capacity and inflation, but paying for stuff when you issue currency isn't one.
@@FriendOfN0ne yea exactly this, MMT even specifies this by that spending is not constrained by fiscal balance, BUT BY INFLATION.
@@naomisalama430 I would add that according to MMT spending is not constrained by inflation but by productive capacity. Printing in excess of productive capacity is what causes inflation.
@@mps09554 sure, but I mean that's basically just another way to frame it
Isn’t our govt already behaving as if MMT is true?
Absolutely that's what I'm saying. All the concerns of MMT as well are literally being played out. We're watching MMT play out, just not for the benefit of the populace.
Politicians have no incentive to do otherwise. In fact, it gets them votes to continue the crazy spending and printing. It's just a game of passing the hot potato on to the next guy.
MMT is not unlimited money printing. It still dictates limits on how much can be printed. Those limits are simply much higher than traditional economics would dictate. As I understand it, MMT spending limits are based on not triggering inflation, whereas traditional economics focus on balancing against taxation.
MMT is like when you keep losing at Monopoly and insist on changing the rules of the game so that you can borrow unlimited money in order to win.
Why should you ruin a solid game instead of accepting you just have to learn how to become a good player?
MMT is like when you learn how Monopoly is actually played so that the elite can't lie about and change the rules. When you have a monopoly on creating US dollars and people understand that, then would people be motivated enought to fight back against a cruel Government who pretends they never have money when it comes to the working class, can never create money on a keyboard to save a life.
Monopoly is a perfect example of MMT. All the money comes from the game, the game imposes liabilities on the players - taxes, fees, jail, property prices.
In order to receive money, players must go around the board - the game pays you to play. Without liabilities, without jail, without properties to buy, with no chance of bankruptcy, earning money is meaningless.
The bank doesn’t have to run a balanced budget. The bank’s deficit is the player’s savings.
The prices on the board are calibrated based on the price that the game pays you to play. $200 makes sense when the properties are within that range. In other monopoly games, prices are different but the relative values are the same for the most part.
In a digitized game of monopoly, there is no limit to the amount of money the game can create. Of course, changing the money supply without changing the amount of stuff to buy creates shortages and inflation (in trading property).
Interest rates don’t reduce inflation. The money supply does.
The two are directly linked?
I wish the PhD’s would quit trying to dump unproven ideas on a whole group of people. As my mentor, VP of OEM sales at Microsoft, once said “I listen to my MBA’s then typically do the opposite and am usually right.” I’ve witnessed this effect multiple times as companies roll out new approaches which typically don’t work. As a result I’ve never grown impressed with my degrees and question people that teach, in Ivy towers with no practical experience. Old saying “Those that can do. Those that can’t teach.”
Bingo!!!! You are 1,000% correct!!! MMT is the death of the USA… but that is what the Leftist want… and they control the education system…
Whatever economic idea you like best is also an “unproven theory.” You have to think of this like a physicist thinks. It doesn’t matter what you feel is right or what your personal experience suggests is true. It only matters what experiments and mathematics demonstrate.
“Explain to me how an increase in paper pieces can possibly make a society richer”
-Hans Hermann Hoppe
It's not the paper pieces, it's what can be exchanged for the paper pieces.
By buying up unused resources, and turning them into useful things.
Most idle resources are labor. Spending activates idle resources.
@@alexsch2514 it’s not always buying resources
@@alexsch2514 you would have to lend to the producer and consumer. At that point what value has been created?
But when the government has to collect taxes to keep inflation low, it cannot spend this money like today. The tax money will have to be taken out of the economy to prevent inflation. And the newly printed money cannot exceed the amount of money that can be taken out of the system by taxation. So the government cannot spend more than today.
MMT addresses precisely this. It's false to think taxes fund anything at all. The dollars are simply subtracted from the economy. Spending in fact always precedes taxing and borrowing, unlike mainstream economic claims. If it didn't then where did the money to tax/borrow come from in the first place? Spending is also done by the Federal Reserve crediting the correct accounts. It doesn't require anything more than some accounting. We would be much better off running continual deficits if the outcome was stable prices and high employment.
@@FriendOfN0ne Yeah but today the money is already out and people are using it in the economy. From today's point of view there is no difference between spending the collected tax money like today and the government printing money for spending and destroy the collected tax money (to prevent inflation).
@@jessicas6674 What do you mean by spending collected tax money? Taxes maintain demand for the currency and withdraw currency from circulation to prevent inflation like you said, but they're not needed for the government to spend.
@@FriendOfN0ne I think the government needs money for spending and there is no difference between spending the citizen's tax money directly or destroy the tax money and create new money for spending. I agree the government doesn't need taxes for its own spending as they could just print the money. But to prevent inflation they have to take the same amount of money out of the system and this would be just the same as in classical economics, don't you think?
@@jessicas6674 Absolutely. Overspending or too little taxation poses an inflation risk. This has everything to do with inflation and nothing to do with spending. Spending is done by the Reserve bank crediting the correct accounts. It isn't constrained by taxation.
Coming from the perspective of long-time familiarity with MMT and having seen many such introductory resources, I would rate this video as very good. It effectively does the work of getting someone from "What the heck even is MMT?" to a context where they could engage in an informed conversation about it. A lot of information is presented concisely and clearly with engaging visuals to underscore it. That's a big lift.
Of course it's not perfect--which is fine I wouldn't let the perfect be the enemy of the very good--and there are two specific items I'll highlight as jumping off points for further elaboration.
First at 0:16 and reiterated again at 7:36 the value of fiat currency is presented as depending on consumer sentiment in the government that creates it. From an MMT perspective this idea is true but incomplete in a way that leaves the value of fiat currency as rather mysterious and intangible. MMT describes the situation as one where a government, having sovereign authority over some territory and residents, uses that authority to tie its currency to the real economic output of the residents and territory. The value of fiat is real because the economic output it's attached to is real and the legitimacy of the government is recognized.
The US dollar has value because the US economy produces a lot of real goods and services and the US government is recognized as a legitimate and stable authority establishing its currency as a claim on that output.
So while fiat is a social construct we made up, it operates with the same real effects as government itself, laws, contracts, or national borders. All of which depend on sentiment to vest them with legitimacy while resting on a foundation of tangible residents/territory/goods and services. A collapse in the value of the currency wouldn't just be a shift in sentiment like lightning from a clear blue sky, it would be a consequence brought about by some collapse in the issuing government or the underlying real economy.
This is also related to the question of "why taxes?" In addition to being one tool in the toolbox for mitigating inflation taxes are also a tool for binding a government's currency to the output of real goods and services. With tax obligations that can only be satisfied in US dollars, US residents have incentive to offer their goods and services for sale in US dollars. This effect crowds in the US dollar vs alternative currencies and establishes the US economy as a basis for value of the US dollar.
Second is at 5:06 where the MMT job guarantee is introduced in somewhat of a "workfare" framing. Here I will just offer a link and defer to MMT economist Pavlina Tcherneva who put together a useful FAQ on the job guarantee that addresses the "workfare" question as well as many others: pavlina-tcherneva.net/job-guarantee-faq/
I know I'm a little late to this video but....
I think it is missing out on the importance of the tax system. Tax is, as I understand, where money goes to die.
The government pays for the health system, schooling, army, police force etc, this money is created by the central bank on the orders of that government. Straight away it is subject to tax, then the remainder of the salary is slowly taken back through the taxing on groceries, grocery stores, banks, transport, fuel....etc over time
The inflation problem is where the money is lost to tax havens, "inventive" accounting practices and criminal avoidance.
Selling bonds to raise money is actually just a vehicle of safe and secure investing for pension funds and the wealthy and for foreign countries to ease trade through currency liquidity.
@@euan1246 Yes to all that, while I'll also go on to say that inflation is a much more complicated story with multiple sources of purchasing power combining with the propensity to spend in various sectors and supply constraints.
Not so fast. Constant devaluation of currency causes your expenses to go up and up and up while your income doesn't quite keep up. However, billionaires will become trillionaires. Here is a hint: The price of bread was ten cents in 1776. It was also ten cents in 1913. Since then it has consistently got more and more expensive. What happened in 1913? Look into it.
@@carljensen5730 There's no reason I should care about nominal values per se or whether they change over the course of a century. The currency is just scorekeeping.
What I DO care about as a material improvement in society is an hour of my labor also nets me considerably better standard of living than it did in 1913.
We will always use the economic system that benefits the government, NOT the consumer(that’s us). MMT is by far the best system for the benefit of the government. Can’t wait for this to be abused and the people’s standard of living plummets👍
your standards are already plummington
@@durfdurffigan8680 yep. It’s unfortunate but at least the government can spend as much as they want
I don't find the idea of "spend first, then tax" all that challenging. There's no tax on "undollars". When colonial Virginia needed more money than the British would provide, they issued their own notes and established a redemption tax. When the tax came in they burned the notes. That's what federal taxation does. It burns the "revenue". You don't spend it or it wouldn't reduce debt or fight inflation. One would think that would be obvious, right? Since it's not, we can thank MMT for reminding us. 🙂
Gold and silver
Theres a mountain in my country that's 5% gold... We don't touch it, they won't let us
I can't eat either of those things
Are actually not worth much....
The facts are that if the government could print money with no consequences then anyone would also be allowed to print money without consequences which to anyone with any basic understanding of financial reality is clearly absurd.
If anyone thinks the government is somehow exempt from this financial reality then you should as why the MMT theory exclusively exempts ONLY the central government from having this facility since all government is not part of the central government and all of those non central at governments have real financial constraints that MMT wants to free central government alone from.
It all equates to the stupidity and hypocrisy of the MMT idea that the legal right to print money to pay for expenditure is just nothing more than a play for less accountability to the public and a politically based power grab..
MMT is just a description of the reality of how governments spend. Spending creates currency. Taxes and fees destroy currency. No serious MMT proponent believes this means the govt can create goods out of nothing. What you describe as "the MMT idea" is in fact what Richard Nixon brought in when abandoning Bretton Woods - and if you were to look at the world financial system at that time then you might understand why this made sense. You are still apparently still clinging to the myth that there is this independent of narional governance thing called the US $. The US $ is defined by govt.
@@citizenadvocate You are wrong because MMT is wrong.
The facts are Central banks do not create most of the money in the economy. Even in years they don't ctreate any new net money the government still spends and can deficit spend. The government does this because they rely on taxes as the funding for most of government spending and borrow money in situations where there is a budget deficit.
You say the 'MMT is just a description of the reality of how governments spend." The explanation is false since MMT claims government spending is not funded by taxes.
Try explaining how government spends if it is not tax money that it uses.
MMT also claims taxes destroy money but that too is false since government spends the taxes it collects. If it didn't then the government budget would always be in deficit (which it hasn't) and the total deficit would be almost all of the total spending. It never has been even half of that for the past 80 years or more. Most years it is a few perecnt of the total budget and some years None.
If you disagree then explain this: - If taxes do not fund government spending how did the US government spend over 35 trillion dollars in ten years when the money that the Federal Treasury got from the Federal reserve was only a fraction of that? I have shown you the figures for 2008 to 2016 and they show what the spending situation was over that time? Where did the money come from if not taxes?
The figures from 2008 to 2018 shows over 35 Trillion spent but less than a fraction of that shows on the Federal reserve's balance sheet.
In the years 2017 to 2019 the Fed's balance sheet fell from 4.5 trillion to less than 3.8 trillion.
Still waiting for your explanation of why your mathematics does not equate with reality!!
Try explaining why the actual figures do not equate to your version of reality .
@@citizenadvocate the $ isn't defined by the government, money is just a representation of supply and demand.
Well, that is your opinion. I like the MMT opinion, more. Your post tells me that you do not understand MMT. No MMT economist or supporter believes that there is no limit to government spending. What they do say is that it is a government's responsibility to spend at much as it takes to keep its economy running at full capacity at all times, no more, no less. They believe in balancing the economy over balancing the budget. Congress controls the purse strings. Currently, all bills that involve spending are sent before the Congressional Budget Office for review to see if they will cause a deficit in the budget. MMT suggests that they instead study a spending bill to see whether it is inflationary. Not all deficit spending is inflationary. If there are things for sale like unemployed people who want to work, idle manufacturing resources of unused and available raw materials, or other resources that if put to use would increase GDP the government can spend to use them without the worry of inflation and would actually grow our economy. No MMT economist would suggest anything different. I hate it when people write posts without having a clue of what they are talking about, don't you?
@@BanBb1 You make a suggestion of MMT "MMT suggests that they instead study a spending bill to see whether it is inflationary". How would that be done? There is no explanation as to the mechanics and it is therefore just a throw away dream like them saying "you can all have nice things".
This already exists in the US hence stimmies in 2020 and now rising interest rates. Dollar is backed by nothing. Like you said, what the gives the dollar it’s value is how people *think* it’s valuable. Somehow ppl *think* 31trillion of debt is okay, and the dollar has not completely collapsed
The dollar is the only thing that can satisfy a tax liability. Everyone needs it for this. If you don't pay your taxes what will happen? So keeping yourself out of prison does have value.
@@markmoses4646 Except that you can demand payment for everything in Bitcoin and pay in Bitcoin and when you pay your taxes convert the Bitcoin to dollars.
It doesn't have to be Bitcoin it can be any currency: rupee real,, rubles, yuan etc.
One only has to look at how the ( probably under reported ) blackmarkets in Soviet block countries indooars worked to see you are relying on nothing.
We pay 13% of the govt budget to interest on natl debt, just interest, not even principal. The same amount we spend on military, we spend on just the interest payments on our debt. But “we shouldn’t treat the national budget like a household budget” yeah okay.
This is how the government has been working all along
You are almost right. It started in 1913. Hint: The price of bread was ten cents in 1776. It was also ten cents in 1913. Since then it has consistently got more and more expensive. What happened in 1913? Look into it.
MMT looks at the mechanics of the monetary system and notice it works nothing like we are told it does. Economic orthodoxy is based on foundational myths that have no basis in reality. They have been told their assumptions are wrong repeatedly by the Bank of England for one, yet they refuse to update their obsolete notions about banks, lending, money creation, govt spending, taxes, bonds and debt. That's quite a lot of wrong. Funny how no one talks about how we can print infinite money to bail out banks and fund war. 14 years of QE for the banks, and trillions for war -- yet we can't spend a smidge on education because inflation and economic collapse. I call for 15 years of People's QE ✊🤑😁 Obviously we can afford it!
Money isn't just a government entity its the representation of supply and demand.
So taxes will be used to control inflation created by printing money? What's the point then? Why not just not print money and cut taxes?
because taxes take un needed money from people already struggling from suppressed wages.
That would increase money supply in two ways and thus increase inflation. You want to control inflation AND redistribute money to where it's more beneficial for the economy.
It’s simple, every single Fiat currency has collapsed - every single one. Got it!! 🙈🙊🙉
@@user-kh7eb7yy4q
Name one that has gone to its intrinsic value, which is zero?
What? No.. They haven't.
@@Tysca_ Name ONE Fiat currency that has existed for over a century ! Any one will do as long as it is a fiat currency.
@@benjones8977 I will name many :-. The Brazilian Cruzeiro ( late last century), The German Mark (in the 1920's), The Zimbabwe dollar (earlier this century), The Greek drachma (1944). Venezuela (today ) where nobody wants the currency.
Do you want more ? or are you convinced ?
No, not every single one.
Only the ones that are used by countries which are in debt, sane countries who don't give out welfare to people who don't contribute back will have a strong currency.
In Canada our PM embraced MMT and now inflation is destroying seniors fixed income power and inflating assets like housing out of the reach of young workers. How is MMT different than Roman coin clipping?
evidence?
Also just because someone does it wrong does it mean it doesn't work. The money should be printed responsibly.
Because politicians take good ideas and leave out the ones that are most important.
Socialism is going to socialism. Classic
The whole world is rattled by inflation due to the war in Ukraine and worldwide rising housing prices. Just compare the inflation rates of Canada and Europe. You gotta show us some proof of your statement why Canada is the only country where inflation was caused by MMT.
This is flawed in SO many ways. Don't be fooled by this. All you need to know is that as the currency is devalued your costs go up and up and up, yet your income doesn't go up accordingly. However, billionaires will become trillionaires. If you want to look into something interesting, look into how a loaf of bread cost ten cents in 1776 and still ten cents in 1913. Since then, YOU have lost purchasing power every year. What became law in 1913? Clue: FRB.
"If we stop printing money the economy will be hurt." That's like saying if an alcoholic stops drinking he will endure withdrawal, so you have to keep giving him drinks. That's not an argument against doing it. In the long run you will be better for making the change, even if you have to endure some suffering.
The difference between medicine and poison is the dosage.
Of course we can finance gov't without taxation by means of printing endless amounts of new money. What the hell, Venezuela and Zimbabwe have been doing it for years!
I hear they’re doing great!
I think that if you try this in a country and it fails that country will be really really screwed. Also if it fails those that are pushing it will still be llving the high life.
We just need to grow GDP by 7x to keep up with debt. Simple right?
Number 15: Modern monetary theory
Thank you for reinforcing the case for Bitcoins
It litteraly doesn't
I wish this guy didn’t misrepresent MMT like this.
How so?
@@ConcerningReality taxes don't actually mitigate inflation. all it does is just take money from one part of the economy (the taxpayer's wallet) into the government. the people who work for the government are payed tax money and then they'll use that money and spend it and it goes right back into the economy. raising taxes really does nothing to inflation except maybe make it worse. if you tax the poor and middle class, they'll have even less money to spend in an economy where things are already too expensive *because* of inflation and if you tax the rich, they'll just raise the prices of the things they sell further eroding your purchasing power.
@@sumirunihon Not if the government destroys the money.
Obviously we are already using MMT in the US.
3:15 The Japan and USA examples are technically correct, but you omitted the important fact that more than 95% of Japan’s debt is held in yens by the Japanese. And the US dollar is the reserve currency of the world, thanks to the FED willing to ship billions to foreign lands on short notice (literally in some cases).
I agree that a government may run some deficit, but sooner or later, people become wary of the money printing. Just go and ask the Argentineans.
FYI, Argentina currently holds a large debt with the IMF in foreign currency, but it wasn’t always the case in the past four decades. What has been constant is the chronic government deficit (giving the illusion to people of affording life beyond their means). Nowadays, no international investor wants to lend money to the country, and hyperinflation is a real threat at 200% annual inflation rate.
So, if the government can print unlimited amounts of money, why are we paying taxes?
That's explained in the video, but in this theory taxes are used as a way to control the monetary supply and inflation.
Taxes also make you need the States designated money token, which is what causes unemployment in the first place. A condition in which you need to look for work or sell your goods for the Governments IOU's. Anyone can create an IOU, which is just a promise/debt, some IOU's can circulate within a small area like Chucky Cheese's for example or Disney world dollars. US dollars can only be obtained from the US Federal govt, the money we have in our bank accounts got there because the Federal govt originally spent that money until it circulated and got into your bank account or it got there from someone taking out a bank loan.
So when taxes are taken out of the economy the question is to whom do they go to?
And this is why we are in a recession today.
1:50 .... wrong ! Governments aren't central banks
MMT means no nead for middle man (Central bank) it's a fiscal policy, but require fiscal responsibility balancing it so we don't have inflation
As an economics student and a classical liberal, this MMT thing is nightmare fuel.
Modern Monetary Theory more like Modern Monetary Myth.
MMT is just another way of saying "Run away inflation? Bring it on baby!" Nightmare fuel indeed my friend!
MMT is a dangerous concept that could have horrible consequences if implemented. The advocates of MMT don't understand the role of money and think that printing money amounts to the same as producing goods and services. Changes in the money supply distort prices in the marketplace causing misallocation of resources, which will lead to huge swings in the market. Please don't take this simpleminded concept seriously.
MMT isn't something to be implemented. The advocates of MMT understand the role of money more than any other school of economic thought.
MMT has never said printing money amounts to the same as producing goods and services. You don't have an actual argument so you need to setup strawmen to knock down.
Changes in money supply do not distort prices causing misallocation of resources. This is simple minded thinking. I was a business owner, I have never, ever looked at the money supply, right before I changed my prices, changed all my signs, reworked my POS system.
@@henrygustav7948 When you ran your business, how did you know whether rising prices resulted from changes in supply or demand, or they occurred because of monetary expansion?
MMT is pure BS.
"Dont have to worry about balancing their budgets"
Lol, Ask Liz Truss and Kwasi Kwarteng about it!
They ended their political life within 15 days in office.
"The mini budget"
Liz Truss:
On her fiftieth day in office, she stepped down amid a government crisis, making her the shortest-serving prime minister in British history
I can see how it could work in theory. But in practice, incompetent politicians will abuse it and destroy the economy.
It's like nuclear power, good when you can handle it. But we don't let just anyone run the nuclear power plants, for a reason.
Simply a government can't be indebted to it self like any other financial figure. For example you can't be in debt to yourself or a bank can't by indebted to itself
The government is in debt to the Central Bank and Investors who buy government bonds. Banks can be in debt to the Central Bank. Central Bank can not be in debt because it holds Government Bonds, so unless the government is bankrupt and can not raise taxes for some reason, the Central Bank will never be in debt. If the Central Bank makes a profit, by law it has to give this money to the government.
So who is winning in this system?
That's what the Greeks did, evaded whenever possible paying taxes and see what happened to it's economy. So likewise if the tax take does not limit government spending then the same thing will happen.
Well enjoy hyperinflation, it has already started
This is by far the best video I have seen on MMT. I finally feel like I understand the concept, thank you!!
Currency equals energy. We don’t have endless energy
Correctamundo! But when there's slack, as there often is, we can take it up. That energy we have.
Bitcoin: "Yes, MMT is great - keep on printing money"
You dummy. Bitcoin is the exact opposite of MMT lmao.
MMT is a horrible idea pushed by people who have very little economic understanding and will lead to tremendous pain and suffering for the people and destruction of the countries that adopt it. It would take me too long to write everything wrong about it, but to sum up, let me say that printing excessive money is a road of no return, because once inflation happens, the government has no way to deal with it without hastening the collapse.
P= M*V/GDP
Prices = money supply multiplied by velocity divided by GDP.
The massive increase in Money supply has not produced hyperinflation yet, because Velocity of money is very low as a result of the pandemic. If V doubles from where it is now (and that would still be low velocity by historical measures, the price of all goods and services would double.!!
If that happens, what will the government do? It cannot raise rates. Doing this would crash stock market bubble and would destroy the economy (paying 10% interest rate on a $30 trillion debt means $3 trillions in interest per year, which is more than the entire US tax revenue)
The government will not be able to raise taxes either. First, how much more in taxes will you raise? 10% more? That will probably never pass congress. If it does, it will bankrupt families, businesses, cause civil war, and still wouldn't be nearly enough to balance the budget.
4:43 traditional instruments like bonds (shows the word tax) and taxes ( shows the word bonds)...
MMT is possibly one of the worst economic theories to come out in the last few years, and they dared to name it "modern". And the worst part is that it is exactly like Keynesianism but worse
Macroeconomics isn't complicated - it's over engineered but really quite simple. Using that position as a cop out is crap.
"If the government does it right...." What a yuck! Only someone who lives in an ivory tower and contemplates their own navels all day could say this without the sentence being the punchline of a joke.
The govt doesn’t use taxes, and borrowing is for interest rate management.
But the naive think Govt borrowing is like household borrowing.
MMT doesn’t say endless spending, it says spend within the productive means. and the obvious sign is unemployment rate.
If you have full employment (2%) then that’s the goal.
But the wealthy don’t like low unemployment as they have to pay more in wages.
MMT teaches the average person more about economics than mainstream economists.
Hence the reason why the mainstream hates MMT.
MMT is just a way to keep the government in control and the people in slavery. If the people save enough money to stop working. The government can just print money and force the people back to work. Just keep the brass ring just out of reach. Money just becomes the task masters whip. Not a world I wish to live in. You better get back to work you don't have enough tokens to buy a loaf of bread. ANY MORE.
@@navall11 that is so ignorant.
A straight fact is;
If the non govt net saves then by accounting and economic fact, the govt becomes the net spender.
You cannot have have both net saving or net spending at once.
When the non govt sector net saves and the govt tries to save, then economic activity slows, welfare spending goes up, tax receipts fall and deficits happen.
this one being it
@@isawaturtle When exactly does the Government start the net saving. Seems like they haven't done that in the last 50 years...
@@squidlytv When the non govt sector decides to net spend.
You can’t have both sides of the monetary system being the same.
Plus the govt doesn’t have to save.
It creates the dollars.
MMT is an IQ test. No one who can gather and infer their own information (115) could possibly believe this theory. This is why I propose the use of IQ testing to select economists.
You sound like you think you sound very smart.
The irony of you saying this as you have Ronald Regan, the biggest supporter trickle down, as your pfp...
It definitely is. We are so entrenched in economic orthodoxy you need the cognitive ability to deconstruct your own understandings before reconstructing and comparing.
You are so right!
Smartest Reagan fan
Auctually Credit Money Is Tied to the Debt or Equity of an Organizations Master Budget Needs
I think it would be better to rely on the actual supporters of MMT to describe it. This video is loaded with a lot of language which treats MMT as a different approach to budgeting rather than an actual description of how sovereign money is created. If you understand the description then you recognize that the prescription is still a matter of economic choices that each country must determine for its own goals. What it really does is give lie to the concept of that govt is dealing with money like other actors in the economy. Sovereign currency issuers do not collect money like everyone else. Collecting currency is actually taking currency out of the hand of its citizens. It destroys money. It is not like everyone else competing for having enough to spend. It might be instructive to imagine that YOU rather than the federal govt had the exclusive right to issue currency. When you issue currency you are not borrowing it - you are creating it. And the economy needs it to be created so that everyone else has it. Much more to say - but you need to change your perspective of currency issuing - and I don't think the author of this video is there yet.
Not so fast. Constant devaluation of currency causes your expenses to go up and up and up while your income doesn't quite keep up. This creates more and more poverty. However, billionaires will become trillionaires. Here is a hint: The price of bread was ten cents in 1776. It was also ten cents in 1913. Since then it has consistently got more and more expensive. What happened in 1913? Look into it.
People want to learn about MMT from someone who is objective about it. A supporter tells you only half of the story. Even a discussion between a supporter and an opponent isn't as good because both only pick arguments that match their beliefs.
MMT is another word for banana money and monopoly money. Hello?
Such an asinine and evil idea.
And then we got inflation and recessions.
You got a few things wrong.
6:16 Italy didn't default because it gave up the lira...
MMT is crap, like the paper it's printed on.
Considering Brazil has it's own currency (Real) and we are in an economic (and health and political) crisis, could MMT serve as a way out to help create jobs and money for a mojoritively poor and uneducated population that has no money to stay at home during a pandemic, because the gov. says there is no money to spend (although corruption is happening as we speak, such as buying out the congress...)?
Yes
No. In br you print and it becomes inflation right away
No unless you want to see the country collapse
@@jommydavi2197 It kind of already is...
World wants US dollars to trade, no one except Brazilians use your currency so it will make you Zimbabwe where a 5 trillion note was worth few dollars.
Wow not one word is true... mmt strictly tightened Money creation to existing surplus/ unused capacities.
Haha... you glossed over over two important facts. The Central Bank needs to buy government bonds which is a loan to the government which creates new cash, this cash can be digitally created by the Bank itself or it can put in order to the BEP for printed notes. The bank can also provide old cash to be destroyed to be replaced with newly printed monies. The BEP can not just print cash and spend it. The Government does not set interest rates (imagine if they could, this would create a mess in every election year).
Yeah not quite.
Bonds are part of the old fixed exchange system and are only used for cash rate management not to fund anything.
PROBLEM! Everything I have seen on MMT equates Federal Reserve (or any Central Bank) with Government, but it's not. The Fed is privately owned and if that issues money and lends it to government MMT is flawed. Can anyone answer this?
You are correct, and I believe proponents of MMT want the government to take the powers the Fed has, ie the supply of money and also control of interest rates. This would eventually lead to a socialist/communist State.
What's happening today is an unspoken coordination between elite government and private entities to preserve and construct an oligarchy. The fed may be private but it has the same agenda as the most powerful companies and the federal government.
I think you need to say that MMT starts with the government creating a tax obligation, like property tax, and requiring that it be paid in its currency. The only way to get the currency is to work on things the government wants. hence, the tax is what gives the fiat currency value, and creates the incentive to work. All the government needs to care about is that there is enough money circulating to generate economic activity.
This doesn't make sense. Tax makes a currency less valuable, tax disincentivises work, it does not incentivise it. The idea that if you take away tax a currency will have no value makes no sense. The idea that a property "tax" can be imposed and this creatives incentive for people to work so that they can pay the tax means that this is not a tax, rather it's more like a peasants tribute to the king. A real tax will be based on property value, instead of just being a demanded sum, and property value will go down and prices in the economy will simply adjust if the government imposes such a tax.
The difference is that the tax is an obligation. You don’t have a choice to not pay tax.
@@behrensf84 It isn't how tax functions in the real world. In reality, income tax disincentivises work and disincentivises the use of the currency. The tax is also paid after you earn. It is not imposed before you earn. Property tax may incentivise the property to be used more efficiently, but it also incentivises the property to be sold off and for the value to decrease. None of this spells "tax creates demand and value for currency".
Totally wrong - Taxes do not provide any value for money. The evidence is in the fact that taxes did not and have not ever provided value for money in all of the economies where the money became worthless through inflation. Plenty of instances of that in the last 80 years.
The whole idea of taxes putting value into money is indicative of ignorance of historical facts.
They really want to lose the world currency to gold or bitcoin.
MMT is a tax and how they plan on paying for Social Security all entitlement spending like Social Security. Think of it this way. Real inflation is 20% or greater. Then they get they declare inflation at 7%. They then net a 13% tax devaluation. Then in 10 years, grandmothers check of $1500 a month will spend like $300. All this without casting a single vote.
Yes I want my private printer and Comp.
it would require intelligent angels at he helm in order to work.
MMT is the equivalent of me prior to going to rehab. "I don't have a drug problem, I can get drugs anywhere whenever I want."
Really? US and these other countries don't rely on other currencies?
Try to remove US dollar as World Currency.
Because if what you are saying is true. Countries don't need to convert to US Dollars.
Just ask for a US dollars without a conversion.
other nations: So, you're gonna pay me in your currency that you keep just pulling out of thin air whenever you need it? Nah, thanks...
this is gonna fail miserably. please, not on my dime.
News flash. That's already been happening lol. The U.S. already operates through MMT, and we're the world's reserve currency.
@@Obeywulf Is this the reddit version of crypto-bros who were certain it's not a bubble and completely sustainable?
@@franzmeier4472 is this where I think your witty because you think you know what you're talking about?
This is literally what has been happening ever since we got rid of the gold standard......
Wow, this is insane. I can't believe you people can't read between the lines. Yes, this causes inflation. We're seeing it now. 40-year record setting. If the Central Bank raises interest rates like it's supposed to above the rate of inflation to try and recapture the money supply, it will crash the economy. Even if they raise it a little bit, it screws businesses reliant on credit to fill their inventory. Then, if taxes are raised while trying to fight inflation and rising interest rates, everyone starts defaulting on their debts like mortgages. Sure, we don't have nearly as many junk mortgages on adjustable rates, but housing prices are 40% inflated. As long as the economy remained consistent, sure, these people could pay these inflated mortgage prices. But as inflation hits and wages stay stagnant, people cut back on all kinds of things. This leads to businesses closing, firing employees, and then people defaulting on mortgages. Just like in 2008, they will be underwater but for different reasons. Real estate is in a bubble. We have a perfect storm of insane quantitative easing, the Central Bank buying 2.5 trillion in mortgage-backed securities and another 8 trillion in treasury bonds, a supply shortage, corporations out bidding middle America for homes creating an artificial housing supply shortage, fake bull market stock prices because of the injection of created money into banks, record gas prices, potential war with russia, China taking taiwan, record gas prices, moratorium on domestic drilling expansion, cutting deals with Iran, Venezuela and Saudi Arabia which will drive us into more wars and then the potential of near historic interest rate hikes, food shortages coming because of Russian sanctions and fertilizer, frankly, we're screwed. And they know it. They're driving us into a digital dollar. Within 5 years, mark my word, they will abandon the current US dollar in Lou for a digital one.
Sure, if you want to believe that unicorns piss rainbows forever and ever and that's your source of food, by all means, let's see how that works out for you.
For those who studied economics in the real world, this is the financial situation of 2008 times 100. This is the purposeful collapse of the current monetary system and resetting us into a new one controlled by the elites. This is straight up slavery. The fact that you even think this is viable is insane. Clearly, you don't understand the real game that's being played. And you won't, until it's too late
If that's true, can the US allow all countries to print its own currency. And still be considered worth and valid.
Also it should not affect the country's inflation rate.
If not, you are just talking non-sense and subscribe to a theory that doesn't work.
Sounds more like USSR style of closed, government controls all, kind of economy.
Unemployed people will be government jobs cleaning up the community? So demand for cleaning supplies, and their prices, will go up, making it harder for private cleaning companies to make profits?
Not if it creates small businesses or individuals that also produce those cleaning products on their own, giving big companies competition to keep prices low. You know, how grocery stores used to work to compete for your business back in the day, before big corporate retailers controlled the pricing game.
So It's a giant tax scam?
Didn’t Italy blow out the Lira.
I would love to hear Marx opinion on MMT lol
We have enough people pointing out the flaws of capitalism.
Macroeconomic relationships are opaque - and so some actions may appear to elicit no response. But this is an illusion that perhaps only politicians believe.
If you start massively printing and "giving away" money (not investing), then it will always show up somewhere and at some distance.
There are situations where loose monetary policy is relatively safe and actually necessary. But you certainly can't take MMT and say "now I'm going to save all poor people!".
The US often doesn't realize that 60% of its currency is held by foreign banks in the form of reserves. Elect a progressive leftist savior and you'll soon find out they can sell those reserves too. (Ideally, please don't vote for Trump either - try someone ... normal for a change).
This sounds horrible on so many levels.
Have you read anything from MMT scholars before making this video? You see totally missrepresenting what MMT is.
You don't understand how much a trillion is. You can't understand it. And that is dangerous.
The only people who benefit from MMT are billionaires. Everyone else loses purchasing power and their income doesn't keep up. That is all you need to know.
The only people who have benefitted from the free market economy theory has been billionaires! Any economic theory can be abused and corrupted without any oversight, policing, or regulation. Its the lack of oversight (due to corporate america and billionaires infiltrating and/or buying most of the government to do their bidding) that has allowed this to happen.
Amazingly well made video
Bitcoin solves this.
This comment didn't age well.
@@marleybot9848 It will in the long term. Fiat money is not sustainable.
Your video is a very good example of Straw man fallacy... you are Straw man fallacy supper hard..
"Allah condemns exploitation, and He blesses charities. Allah does not love any disbelieving sinner."
Quran 2:276
With Islam no inflation and no poverty
How does this work in a cashless society ?
The same way it works now.
Most transactions are cashless.
@@coaldoubt2879 Exactly and everytime they try anything remotedly close to MMT we get inflation and banks begin to collapse . So its never going to work.
@@leighbrown5430 inflation only occurs when there is too much money chasing too few goods and services (and corporations price gouging)
They dumped trillions into the economy after the 2008 collapse and there was no inflation anywhere.
@@coaldoubt2879 Thats because the money didnt enter the economy proper , it sat on the balance sheets of the banks
@@coaldoubt2879 Also the definition of inflation is that expansion of the money supply . Price rises are an effect that occurs further down the line .
Nice framing, tax is not to pay for welfare, but for reducing inflation.
Its not just framing, its accounting reality. Federal taxes can not operationally pay for welfare.
This has been very successful in Canada. We were able to extract all the value from the poors by devaluing their currency. They happily complied in return for receiving a few one time cheques.
MMT types forget to mention that government is not a private corporation. You cannot ignore it or not deal with it.
If the government nationalised the banks it could make more loans than it collected in debt if we needed to increase the money supply or the other way around.
Your solution is looking for a non existent problem.
Italy own currency?
Before they joined the Euro they had the Lira
Seems it might boost the lower and middle class spending power. Inflation would effect everyone, but perhaps the wealthy would feel it more? I don't know. Just watching. But wouldn't that be sad for the super rich to lose some of their millions? Their response... We've up'd our standards... So up yours 😁😁
of cause not, inflation will always hit the lower/middle class harder. the rich can buy assets/stocks to out perform inflatoin.
Not so fast. Constant devaluation of currency causes your expenses to go up and up and up while your income doesn't quite keep up. This creates more and more poverty. However, billionaires will become trillionaires. Here is a hint: The price of bread was ten cents in 1776. It was also ten cents in 1913. Since then it has consistently got more and more expensive. What happened in 1913? Look into it.
The key point that is barely touched on is the taxing process to suck money out of the system. Increase cashflow, driving down the value of the USD, you have to spend more for international transactions to match their local currency and product value. So then, the only way to rectify this, is to suck a substantial amount of paper money out of cycle which means increasing taxes, to balance out or adjust for hyper inflation. As some say, “Tax the rich”. So then who do you tax if there are no rich left? The upper middle class become the next level of the “1%”. Therefore the long term game of MMT is to tax the middle and lower class of people.
This people is how you create communism and socialism in any country. Because, everyone will become hyper reliant on the government to make up the difference because poverty will be rampant. Consumer spending will fall because disposable income will be eliminated, tax revenue will continue to fall because people will be earning less and less because companies will start to fail, and the end result will be the population relying on the government to provide money directly from the print to balance out these issues.
Thx for your waffle, I data-dumped it as soon as I read it.
What the holy corporate economic propaganda mind suck did you just regurgitate?!?! That's the very narrative we have been force fed by our corporate rulers to believe is the truth.
Well said!
Venezuela tested mmt just look at them
lol @ the silly comments
@@henrygustav7948 but how can you say that mmt has bean tried for 3000 years and it has not worked. I know now we have more accurate data but how can you say that
@@sosleepy7965 5-6000 years not 3000 actually. Also its not something to be tried, just as the Earth revolving around the sun is not something we try but we know to be true empirically. Its just that our description has changed to fit reality that the Sun does not revolve around the Earth. So, what are you saying "has not worked" I don't understand?
Venezuel's problem is the immoral embargo on selling its oil. The US has captured the money that Venezuela earned with its oil and any amount of money will not bring goods which are being embargoed by the US to Venezuela. It is a failure of US foreign policy - not Venezuelan money policy.