/r/mmt_economics

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This is a place to post links and discuss topics relating to Modern Monetary Theory (MMT).

Economics can be a fractious discipline. Remember to judge arguments on merit, and not opinion. Offer constructive criticism first (and perhaps 2nd/3rd/4th, etc).

Just as important: if your argument contains opinions, expect criticisms. Enjoy!

For a good getting started resource, you might consider starting here: https://activistmmt.org

This economics subreddit primarily discusses monetary systems and monetary economics, especially Modern Monetary Theory (a.k.a. neochartalism): a descriptive theory about the procedures and consequences when the economic unit of account and exchange is centrally issued.

Never heard of this? Try this quick synopsis

MMT in easy diagram format! Part 1 & Part 2


Subreddit Rules

  1. All submissions must be related to MMT.

  2. Link submissions must use quality, original sources and their original headlines

  3. Open insults, personal attacks and harassment will be removed

  4. Political accusations, labeling, sophistry, strawmen, disinformation will be removed

  5. Yellow Card: Persistent violation of rules will result in a warning, after which further violations will result in a user ban


Modern Monetary Theory:


  • Modern states, with sovereign control over a fiat currency, face no budgetary constraint. Given policy goals of (1) Full employment, and (2) stable prices, Government should allow full use of monetary and fiscal tools to ensure we approach both goals.

  • The funds to pay taxes and buy government securities comes from government spending. There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it. Whatever the deficit (which is purely an accounting term) happens to be in approaching the aforementioned goals - that's what it should be.

  • For a video seminar "crash course" on MMT @ Modernmoneynetwork.org:
    The "Money" series


Relevant Wikis:



Recommended Blogs:




"In the real world, banks extend credit, creating deposits in the process, and look for the reserves later." Holmes, Federal Reserve of Boston, p. 73


“The neutrality of money is clearly rejected... since any creation of money increases the spending ability of a well-defined group of agents, which means that the effects it exerts on the price level cannot be neutral.” Graziani, The Monetary Theory of Production, p. 21


"An interesting feature of the overdraft economy is that it clearly shows that money and high powered money are endogenous variables, which cannot be under the control of the central bank." Lavoie, Univ. of Ottawa , p. 16


"Taxes function to regulate aggregate demand, and not to raise revenue per se." Warren Mosler

/r/mmt_economics

9,648 Subscribers

5

Does anyone have this paper or something similar?

So, I was trying to explain to my dad how the interest rate on bonds is determiner by the deposit interest that the fed gives banks for reserves and how the amount of debt the government has doesn't really effect the interest rates on bonds. There is this paper

Fullwiler, S. (2020). When the Interest Rate on the National Debt Is a Policy Variable (and “Printing Money” Does Not Apply).

which I can only really find with a paywall. Do you have this or a similar source explaining the relationship between bond interest rates and reserve deposit interest rates?

2 Comments
2024/11/30
18:04 UTC

4

At what value MOVE index start to negatively affect the Collateral Multiplier?

Credit providers operate by the Collateral Multiplier, which causes lending expansion or contraction depending on the Bond market volatility (MOVE index). Is there a boundary value of the MOVE index below or above which Collateral Multiplier starts to get affected negatively or positively, respectively?

2 Comments
2024/11/29
08:04 UTC

6

Do you think studying mainstream economics is a must to study mmt and post-keynsian economics?

or can I just study them straight away without knowing mainstream economics clearly?

12 Comments
2024/11/28
07:28 UTC

6

Division of labor as a source of money value

I understand that the money story as taught to me in university textbooks is a fairy tale. Money did not historically originate from people wanting to trade and finding barter inefficient deciding on a common commodity to account universally for all products and services. That never happened and we know that never happened.

However

It sure seems to me that division of labor, labor specialization, by definition drives demand for redistributive forces, currency being one possibility for that. Everything I’ve read about the first civilizations in the near east as well as pre-Colombian societies in the New World is pretty definitive that temple culture and central religious organizations were major economic agents of redistribution which allowed for specialists in metallurgy and other non-agricultural crafts to flourish. Obviously hunter-gatherer culture involved redistribution amongst the tribe so it’s not surprising the first civilizations basically copied that concept but bigger.

Once a chartist monetary system is in place in a society though (and it didn’t take long for that to happen) it seems that a high degree of labor division adds value to the state currency in addition to just tax liabilities. Basically: money has value because of what you can’t otherwise provision without it. You can’t personally provision a reduction in tax liabilities (legality lol) thus state issued money has value. Similarly if you can’t provision yourself with the basic necessities for survival, as most of us cannot, you must obtain the means of exchange of those who can in addition to your current tax liabilities.

What this seems to imply is that even though money didn’t originate with labor specialization and trade, the large scale division of labor resulting from temple culture or other redistribution regimes provides a fertile environment for monetization. A sovereign currency issuer could sustain a much higher debt / GDP ratio amongst a highly specialized labor force than a collection of otherwise self sufficient groups, the former needing money to fulfill their means of survival and the latter needing only enough money to pay the tax.

Curious if this has been discussed in MMT literature.

11 Comments
2024/11/25
04:03 UTC

3

Simple idea of the concept

Money won’t help a military if there is no weapons to buy.

Weapons: arrows, guns, bullets, sharpening stones, bodies. Anything that can be bought for the strategic purpose of achieve the goal.

Military is generally thought of the last bastion of governments. Private military? Kind of a scary thought. Although, we are there. Companies like blackwater and other “security” forces. Basically, who has a right to military force in this world but governments?

The same thing applies to ALL government functions. To all societal functions.

We cannot save money for the future if there is nothing to buy in the future.

We have this individual idea that the individual can and should save for his/her own future, but all together, we cannot save for that future. We can only build what we think we need in the future. We can build as public ownership, or build as private ownership.

Money is never the issue; it is the utility of resources available. Concrete, steel, wood, labor.

We waste so much by virtue of “money.”

Unemployment is wasted labor. We are saying “we can’t think of a single thing for you to do in the system, so we just won’t use you.”

The entire finance, insurance, real estate sector is a waste of human capital. Watching stocks in a Schrödinger’s bull market. Taking from some, paying out to another, skimming their “share” for income, hoping to beat the entire market.

But that’s the crux. Beating the market. We have based the USA system on beating the market. The only way to beat our market is to make others lose. Our social policy for retirement is based entirely of “robbing” people in a noble sense of long term gambling on the rise and fall of ownership interests in the various economic players.

But the money in total comes directly from the government. If there was one noble company(who ultimately acts as the current economy of separate players), who were able to monopolize the entire economy, with only one stock to sell/buy/invest, then the only growth of that company in terms of dollars is when the federal government puts more dollars in.

Rant derailed.

12 Comments
2024/11/22
18:03 UTC

5

is the default on bank loans a strange edge case, or am i horribly missing something?

this has been bothering me for a while, so i'm just gonna throw it out there...

lets say i default on my mortgage. my bank loses the value of its asset, (which is the promissory note that says i will pay). it gets the real asset (the house) back, but it still takes financial loss on the loan.

however....

that money for my mortgage was already created by my bank, and is now circulating. Is this anything other than indestructible bank money that can never be 'destroyed' or 'redeemed' or whatever? And isn't this a permanent addition to the money supply?

i think either im missing something, or all the loan defaults in history are still out there... and they're piling up baby.

maybe it's just whatever, peanuts and no big deal?

anyway, had to ask.

edit: mmt tells us that the private sector cannot create the net financial assets to have savings, hence the deficit, etc. Isn't this an edge case where the private sector would have some ability to save? (prolly not a lot, but still)

24 Comments
2024/11/21
23:47 UTC

15

What are the top MMT books / articles / materials to read today?

My favorite so far are Mosler’s Seven Deadly Innocent Frauds https://www.moslereconomics.com/wp-content/powerpoints/7DIF.pdf

Stephanie (Bell) Kelton’s Do Taxes and Bonds Finance Government Spending? https://www.jstor.org/stable/4227588

And though not an MMT economist, David Graeber’s Debt: The First 5000 Years is a great read from an MMT perspective

16 Comments
2024/11/21
00:02 UTC

3

Is there a data source for Chinese PBoC and Commercial Banks Total Assets?

Looking for a source to obtain the value of the Chinese Central Bank's (PBoC) assets. In addition, Chinese commercial banks total assets are of interest. The source needs to have frequently updated data, e.g. Weekly. Any help?

0 Comments
2024/11/20
12:14 UTC

3

The federal debt doesnt matter but what about state debt?

states cant print their own currency. so what about their debt crisis. should the federal government be giving states more free money to help the ones trapped in debt

19 Comments
2024/11/10
01:51 UTC

1

U.S. Post-Biden Economy

Is it too facile to post a question like, "How is the Trump presidency going to be for the economy?" (Add in Republican control of House and Senate as well.) 1- economists are saying the deficit will explode through his policy proposals (sounds like a good thing. 2- D.T. is claiming he wants to make the government fund itself by taxing imports and stop taxing income altogether (closer to Mosler's ideas than the current tax system). And 3- labor's ability to organize could be squashed.

15 Comments
2024/11/06
23:02 UTC

4

A quick questions about the UK Treasury

Does the DMO assess every instance of deficit spending and only issue gilts if that spending can be proven to be inflationary? Or does it issue gilts regardless of if that deficit spending is inflationary or not?

9 Comments
2024/11/06
15:51 UTC

13

looking for an MMT beginner study group

Hi, I'd like to ask questions and learn with someone who is about my same level: beginner.

I have read a few of the books for beginners and watched a few youtube videos.

I'm especially interested in inflation / cost of living and bond sales. I'm on the US Pacific time zone, but can join zoom calls at various times.

I have looked and asked for an MMT discord but cannot find one.

Thanks,

Peter

11 Comments
2024/11/05
21:47 UTC

6

Demonizing debt and low interest rates

It appeares weird to me that mainstream economists and central bankers think that low interest rates can boost the economy. On the one hand they say low interest rates lead to more people or businesses taking an loan and going into debt to spend, while on the other hand we demonize going into debt as the worst thing one can do. Especially when they talk about how government debt is bad and should be avoided at all costs. The media is complicit in this because they spread the narrative that debt in general is bad. Then they wonder why no one is taking a loan. I just wanted to point out this contradiction because it's so obvious, but only came to my mind recently.

22 Comments
2024/11/01
09:23 UTC

16

Money creation of a country in the eurozone?

This MMT sub seems to be more about US economics but I hope someone can help me out.

If we take Germany for example. In my understanding the German government finances itself by issuance of government bonds. They are sold to private banks. No new money is created with this step.

New money is only created when the European Central Cank (ECB) buys the government bonds from the private banks. This is my understanding at least.

I think in Germany 25% percent of government bonds are held by the ECB. The rest are in the pirvate sector. So in my understanding the German State financed itself until now by creating 25% percent new money and 75% existing money. Is this correct? At first I thought everytime the government spends money, new money is created by the issuance of bonds, or am I wrong?

I would be very glad if someone can answer my questions or can link an article or paper.

Thanks.

14 Comments
2024/10/29
14:33 UTC

9

How does a government surplus happen?

This is my first time posting ever on here so I apologize if it sounds weird or confusing. I just watched "Finding the Money" this weekend. It was absolutely fantastic. I do have one nagging question thought and its far more likely due to my lack of understanding. If our tax dollars are in fact just burned as soon as we pay them, and the government doesn't rely on tax revenue for spending, then how does a surplus happen? Is a surplus just as arbitrary as a deficit? I appreciate any help understanding this, thanks!

31 Comments
2024/10/28
08:59 UTC

6

USA laws and policies which prevent the Federal Reserve from creating new reserves for the Treasury?

I want to ask a question regarding https://www.levyinstitute.org/pubs/op\_72\_.pdfOne-Pager|No. 72 If Government Can Print Money, Why Does It Borrow? May 8, 2024 L. RANDALL WRAY

Is it possible to meet the Fed regulations and still not sell bonds?

1/ USA Treasury must have a positive balance

2/ USA Treasury cannot sell bonds directly to the Fed

Are there any other reddits, forums, or discord servers where I can ask this question directly?

12 Comments
2024/10/27
18:45 UTC

3

Full audio: John Harvey reading Contending Perspectives: Chapter 5: Austrian economics [EDITED]

2 Comments
2024/10/27
13:13 UTC

2

State Taxes

How does MMT (Modern Monetary Theory) explain State Taxes

Okay. So. As I understand it (I'm not an economist, quite a layman tbh) My understanding is - according to MMT - Taxes are not a revenue for the government to use. They spend money into the economy and then taxes it. Tax in this description is an engine to keep money moving, it's a social incentive, etc. but the government does not need my taxes to spend money. In fact any money the government spends did not come from taxes. If this is the case, how does that work at the state level. If the federal govt is the issuer of the currency and the taxer of the currency - what are state taxes!?!? Does the state get revenue from my taxes that they spend??? The state isn't the issuer of the currency, I think, right?? Bit confused on this if someone could explain how MMT would explain this.

24 Comments
2024/10/24
03:26 UTC

5

Questions about Inflation

Hello, following questions dont relate directly to MMT, but I think it stills fits the subreddit because they came to me reading economics who refer to MMT themselfes.

1.I read that we should seek an increase of wages of the productivity increase + targeted inflation. This makes a lot of sense to me, but we all know this hasnt happened in the last 50 years because wages didnt rise like productivity did. If we would implement sensible wage increases from now on, the working class still wouldn't reach the level of income it would be at without the last 50 years of slow wage increase. My question is: should we compensate for the last 50 years and let the wages rise even faster, or should this be avoided because of inflation?

  1. Imagine very high inflation like we had last year, lets say 10%. Imagine productivity increased by 1% and targeted inflation is 2%. What would be the optimal wage increase? Inflation + productivity would be 11%. I read this is not adviceable because of wage-price-spiral. Targeted inflation + productivity increase would be only 3%. The working class would be a lot poorer and the economy would take a heavy hit.

What is the optimum? Are there formulars do calculate this you guys believe in?

I hope you understand my questions and excuse my english. Thank you.

8 Comments
2024/10/22
13:38 UTC

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