I didn’t want to read this and then move on without commenting. Absolutely there are significant problems with using interest rate policy to attempt to regulate the economy—it is monetary policy that is bankrupt!
I wonder if you have considered how MMT explains inflation (and what to about it)?
Regardless the challenges in front of us argue for fiscal policy intervention in the economy.
There is good work by post-Keynesians that shows that inflation is driven by conflict, because people are hiking prices from fear, opportunism, or necessity. Where there is already massive concentration of ownership (monopolies, cartels, oligopolies) this is amplified.
The entire current explanation for inflation, that governments create inflation from fiscal spending, makes no sense in the context when, say, Canadian deficits are in the tens of billions and the Canadian economy is in the thousands of billions.
The monetary "stimulus" doesn't take the distribution of wealth and income into consideration , so it has completely different effects on different people and different parts of the economy. Central bankers call it "printing money" but it's not creating money for government to spend on programs, it's banks extending more credit in the form of loans, mostly mortgages, with different interest rates, terms and amounts depending on their ability to service the debt.
This debt is mostly used to bid up the price of existing assets (usually non-productive ones like housing), which increases the cost of overhead and inflationary pressures across the economy.
The way to deal with this is to restructure debts, which effectively acts to create new equity across the economy.
What I was taught in my macro courses--that inflation and the money supply were directly related, a central tenet of monetary policy--is demonstrably and factually not true. MMT (David Moser, Stephanie Kelton et al) argue that inflation is simply the result of goods in short supply and that government spending in any form does not "cause" inflation in any sense *unless* governments are trying to purchase more goods than are available in the economy. Government deficits are not a problem because they are actually private sector surpluses... for any country that issues its own currency that is not something to worry about.
MMT argues for targeted government spending to both "unblock" supply bottlenecks (a source of inflation due to supply shortages) as well as to make the economic outcomes more equitable.
I got started on MMT when the big "quantitative easing" that occurred in the wake of the 2008 meltdown caused absolutely no inflation response despite a massive increase in the money supply.... MMT's predictions about the economy actually make sense and can be verified.
In 2017, I wrote a paper - which is in this substack - about Central Banks being engines of inequality, and mentioned what actually happened to get us out of the Depression, in which the Bank of Canada played a direct role.
One of the issues claimed by MMT is that you don't need to worry about trade surpluses, and I think that's a mistake. But yes, I've had drinks with Randy Wray who patiently explained MMT to me.
I didn’t want to read this and then move on without commenting. Absolutely there are significant problems with using interest rate policy to attempt to regulate the economy—it is monetary policy that is bankrupt!
I wonder if you have considered how MMT explains inflation (and what to about it)?
Regardless the challenges in front of us argue for fiscal policy intervention in the economy.
There is good work by post-Keynesians that shows that inflation is driven by conflict, because people are hiking prices from fear, opportunism, or necessity. Where there is already massive concentration of ownership (monopolies, cartels, oligopolies) this is amplified.
The entire current explanation for inflation, that governments create inflation from fiscal spending, makes no sense in the context when, say, Canadian deficits are in the tens of billions and the Canadian economy is in the thousands of billions.
The monetary "stimulus" doesn't take the distribution of wealth and income into consideration , so it has completely different effects on different people and different parts of the economy. Central bankers call it "printing money" but it's not creating money for government to spend on programs, it's banks extending more credit in the form of loans, mostly mortgages, with different interest rates, terms and amounts depending on their ability to service the debt.
This debt is mostly used to bid up the price of existing assets (usually non-productive ones like housing), which increases the cost of overhead and inflationary pressures across the economy.
The way to deal with this is to restructure debts, which effectively acts to create new equity across the economy.
What I was taught in my macro courses--that inflation and the money supply were directly related, a central tenet of monetary policy--is demonstrably and factually not true. MMT (David Moser, Stephanie Kelton et al) argue that inflation is simply the result of goods in short supply and that government spending in any form does not "cause" inflation in any sense *unless* governments are trying to purchase more goods than are available in the economy. Government deficits are not a problem because they are actually private sector surpluses... for any country that issues its own currency that is not something to worry about.
MMT argues for targeted government spending to both "unblock" supply bottlenecks (a source of inflation due to supply shortages) as well as to make the economic outcomes more equitable.
I got started on MMT when the big "quantitative easing" that occurred in the wake of the 2008 meltdown caused absolutely no inflation response despite a massive increase in the money supply.... MMT's predictions about the economy actually make sense and can be verified.
In 2017, I wrote a paper - which is in this substack - about Central Banks being engines of inequality, and mentioned what actually happened to get us out of the Depression, in which the Bank of Canada played a direct role.
One of the issues claimed by MMT is that you don't need to worry about trade surpluses, and I think that's a mistake. But yes, I've had drinks with Randy Wray who patiently explained MMT to me.