Causes and Consequences of Modern Monetary Theory | Lucas M. Engelhardt
18K views · Jul 28, 2022 · News & Politics
Comments · 314
@neilanderson891 · 3 years ago (edited)
At <a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=133">2:13</a>, speaking about being fair and accurate in discussing MMT, Paul Krugman is mentioned as criticizing a theory in Austrian Economics without fully understanding of it. I'd like to add that J.M.Keynes blasted Say's Law yet didn't fully understand it, nor did he describe it accurately.
10
@tusharkaushik0405 · 2 years ago
The lecture discusses Modern Monetary Theory (MMT), its historical context, and critiques from an Austrian perspective. It explains MMT's views on money creation through government spending and the implications for inflation and resource allocation. The speaker emphasizes the importance of understanding the origins and definitions of money, while also addressing potential flaws in MMT's theoretical framework.<br><br><br>Highlights:<br><a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=148">02:28</a> Modern Monetary Theory (MMT) is a framework for understanding how money operates in economies with sovereign fiat currencies. It combines older economic theories to explain the nature of money and its implications.<br> -MMT emphasizes the importance of fiat currency and government control, particularly in nations like the United States and the United Kingdom. This control shapes how money functions in the economy.<br> -The credit theory of money is a key component of MMT, suggesting that money originates from credit transactions rather than being a physical commodity. This perspective reshapes our understanding of economic interaction.<br> -Historical examples like tally sticks illustrate how money has been understood and utilized over centuries. These examples serve to highlight the evolution of monetary systems and their societal roles.<br><a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=364">06:04</a> The tally stick system was an early method of recording debts using notched wooden sticks, which later evolved into a form of currency. This method exemplified how credit instruments can function as a medium of exchange.<br> -The tally stick system involved cutting notches to represent different amounts of money, creating a tangible record of debt that could be divided between creditor and debtor. This ensured both parties had matching records.<br> -Modern monetary theorists argue that money originates from credit systems rather than barter economies, highlighting the historical importance of debt records in the development of currency. This perspective challenges traditional views of money's origin.<br> -The state theory of money posits that government involvement is essential to unify monetary systems, ensuring all debts are recognized consistently across the economy. This creates a hierarchy of money, with government-issued currency at the top.<br><a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=729">12:09</a> Modern monetary theory challenges traditional views on money creation, asserting that government spending directly generates new money, rather than relying on prior tax collections. This perspective reshapes our understanding of fiscal policies and their implications on the economy.<br> -The circular flow diagram illustrates the economy's operation, showing money flow between firms and consumers, but modern monetary theory critiques this by questioning initial money creation. This critique emphasizes the need to explore how money enters the system.<br> -Historical examples, like colonial Virginia's zero-coupon bonds, illustrate how governments can issue money to manage deficits, aligning with modern monetary theorists' views on money creation through spending. These examples support the notion of proactive fiscal measures.<br> -Deficits can lead to inflation if they compete for limited resources in the economy, which raises concerns about managing government spending effectively. This relationship highlights the importance of balancing fiscal policies with resource availability.<br><a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=1091">18:11</a> The discussion highlights the concept of a job guarantee program as a central idea in Modern Monetary Theory (MMT), emphasizing its potential to address unemployment without causing inflation. This approach suggests that the government can offer jobs to unemployed individuals, thereby stabilizing the economy while not competing for private sector resources.<br> -Various economists support the job guarantee concept, showcasing its significance in MMT discussions. This reflects a shared belief in government intervention to create employment opportunities.<br> -The speaker discusses the importance of understanding real resource allocation rather than merely focusing on funding programs. This perspective encourages a deeper analysis of economic impacts.<br> -The differentiation between credit money and money substitutes is explored, emphasizing Ludwig von Mises' theories. This distinction helps in understanding the complexities of monetary systems.<br><a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=1453">24:13</a> Money serves as a universally accepted medium of exchange, fundamentally rooted in credit and social value. Its definitions as an IOU or measurement of value highlight complexities and limitations in understanding money.<br> -The credit theory of money posits that any IOU can be considered money, reflecting relationships and obligations among individuals. This perspective emphasizes the role of trust and acceptance in monetary transactions.<br> -Alfred Mitchell Innes's contributions suggest that money is primarily a credit instrument, challenging traditional definitions and emphasizing the importance of institutional context in defining money.<br> -The hierarchy of money indicates varying degrees of 'moneyness', where state money is most accepted, showcasing the importance of widespread acceptance in the value of different monetary forms.<br><a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=1816">30:16</a> The video critiques Modern Monetary Theory (MMT), emphasizing that it overlooks the importance of historical context and the value of commodity money. It suggests that credit instruments existed before money, challenging the MMT perspective.<br> -The video discusses the concept of intertemporal barter, where credit instruments existed in pre-monetary economies, complicating the understanding of money's origins. This challenges MMT's claims about barter.<br> -It addresses the exclusion of commodity money in MMT, raising questions about the classification of cryptocurrencies like Bitcoin, which some argue have intrinsic value beyond credit instruments.<br> -The discussion includes historical examples, such as the use of cigarettes as currency in POW camps, illustrating the complexity of monetary systems and the limitations of MMT's framework.<br><a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=2178">36:18</a> Major world currencies have historical ties to gold or silver, impacting their value in the foreign exchange market. Understanding these connections is crucial for comprehending modern monetary theory and its implications.<br> -The ten currencies discussed account for 90% of foreign exchange trades, highlighting their significance in global finance. This concentration reveals the interconnectedness of major economies.<br> -The demand for money is influenced by future tax obligations, suggesting a relationship between governmental policies and individual financial behavior. This aspect raises questions about monetary stability and value perception.<br> -Historical examples, such as colonial Virginia's paper money, illustrate how currencies can be viewed as bonds rather than mediums of exchange. This perspective challenges traditional views on currency functionality.<br><a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=2542">42:22</a> Having idleness can serve a practical purpose, allowing individuals to be ready for unexpected situations like emergencies. This concept highlights the distinction between true idleness and being in reserve for future opportunities.<br> -Unexpected events, like emergencies, demonstrate the need for individuals to have resources available even when they seem idle. This highlights the importance of preparedness.<br> -The idea of pseudo-idleness shows that individuals may appear inactive while waiting for job opportunities, reflecting a deeper understanding of unemployment in the economy.<br> -Preferred idleness, such as that of individuals like the speaker's grandmother, shows that not everyone desires employment, and sometimes idleness contributes to well-being.
2
@WaxMeister · 2 years ago
"Price/Value" Price is objective while Value is subjective. For a transaction to complete the two components must come together. However, there is a "social/subjective" differential which can result in the same article being transacted at different prices ergo - 'money is (also) a social unit of the measurement of value" - I would like to spend less for something to get more value.
@azdjedi · 2 years ago
<a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=1560">26:00</a> Here's an idea I just had about Value. Objects don't have intrinsic value, the value comes from the subject aka a human being. OK. So that means when we say, in a spiritual/self-esteem context that "you are valuable" and "you can not give what you do not have", etc etc....what that's really describing is all the same concept. We <b>ARE</b> value itself. The value we impose onto an object COMES from us. We are literally THE value in the transaction...we're only projecting it onto the object. Neat.
@denniss3980 · 1 year ago
Simple explanation of MMT, the balance on your credit card doesn’t matter as long as you can make the minimum payment
1
@greogewestmann4913 · 2 years ago
<a href="https://www.youtube.com/watch?v=50qB4wtUITE&t=809">13:29</a> It's not just historical, If you were to spend the time and research exactly what is happening in stead of telling a story about the need to borrow.<br>MMT explains first how the system works, it's not philosophy or ideology, it is how in reality the currency moves.
1
@BanBb1 · 4 years ago
The biggest fallacy that the critics of MMT make is saying that MMT supports endless government spending. MMT is quite clear that for governments that issue their own sovereign currency it is their responsibility to spend as much as it takes to keep our economy running at full capacity at all times, no more, no less. Spending more is inflationary, spending less leads to unemployment and recession. A government deficit is actually a surplus for someone in the private sector because it represents money spent in our economy and not taxed back. A government surplus is a deficit to the private sector because the government taxed back more than it added to our economy through spending. How more simple can this be? Now that you know this, listen to this presentation again.
43
@WaxMeister · 2 years ago
Here is where I agree and so do MMT supporters (like the Federal Governments), simply printing money and pushing it into the economy which has limited "resources" will only create inflation. If the Government suddenly needed 25% more of the countries crop of wheat to support a new program and the wheat industry has limits of production (land, machinery, transportation, human resources etc.) to assure the government their additional 25%, the wheat industry would divert product from the public sector to the government sector thus creating and artificial increased demand from the public which is always met with inflationary pressures - very simple! So, even though a Government can, they must be careful to not over tax (yes, it's a pun) the system by making demands on resources that may be be met without diverting from one sector to the other by simply creating the money to do it - it's a far more complicated dance than just "poof! more money".
2
@ChannelMath · 2 years ago (edited)
All this "criticisms" like "money is never defined" are irrelevant semantics at worst, and misunderstanding of MMT at best. My response to "what is the definition of money?" is the same as Newton's answer to the natural philosophers about gravity: "I described all it does and exactly how it works, what more could you want?". Money is a system that includes these institutions, processes, etc., and MMT describes how it works.<br>As for "what is being ultimately measured by the value of a dollar?", if you missed Mosler's answer, you should still be able to figure out the answer if you actually engaged with the theory: It's whatever the government wants it to be. If the government demands $1 in taxes per year, and offers $1 to anyone to dig a 6-foot hole, then that necessarily is the value of a dollar. If the government changes it's mind and says it's only paying 50 cents for a hole, then the dollar is now worth twice as much (it's worth two holes dug), and twice as many holes WILL be dug (assuming the population can physically dig that many holes in a year), because the taxpayers have no choice but to dig the holes or go to jail. The government sets the value of a dollar. It is in complete control of the currency, ultimately
4
@neilanderson891 · 3 years ago (edited)
Under a Gold Standard, central banks create more liquidity for the economy by buying gold with newly-printed money. The newly-printed money is deposited by the gold-sellers into their banks, which instantly recognize it as "Excessive Reserves", which allows the banks to make more loans. The gold is held by the central bank in it's portfolio, and can be used to "redeem" paper money (which the Bank of England was famous for doing) or sold in the gold market to retrieve large sums of money from the economy, to fight inflation. <br><br>One problem with the Gold Standard is that gold is a commodity whose price is supposed to be stable (unchanging) as a means of exchange. Unfortunately, the "real value" of gold is constantly changing due to increases & decreases in gold's supply & demand. Demand for gold comes from a lot of industries (art, electronics, dentistry, aero-space, high tech, etc) but under any kind of Gold Standard, the biggest demand is the need for gold in monetary system. So, going 'on' the Gold Standard should result in raising gold's value, and going 'off' the Gold Standard should result in lowering gold's value. Arbitrage was the reason France sent a warship to New York's harbor to transport gold to France (which was owed to France) in the 1970s.<br><br>Under a Fiat Monetary System, central banks create more liquidity for the economy by buying "high quality" bonds with newly-printed money. The bonds are held by the central bank in its portfolio, and can be sold back to the bond market to retrieve money from circulating in the economy, to fight inflation. The newly-printed money is deposited by the bond-sellers into their banks, which recognize it as "Excessive Reserves", which allows the banks to make more loans. There's two problems with the Fiat Currency System: (1.) Most folks don't realize that fiat currencies are backed by the scarcity of the currency, and therefore they get scared easily, and (2.) Most monetary and government officials don't seem to realize that the scarcity of fiat money needs to be carefully maintained. During the Bretton Woods System, the US government expected the Federal Reserve to keep printing more dollars than they should have, which, after a few decades, resulted in France sending the warship into New York harbor. Many economists jokingly blame one man, Benjamin Strong, for the 1929 Great Depression ... because Strong died in 1928. Strong was one of the only people who truly understood how the fiat monetary system works and would never have allowed the mistakes that were made in 1929-1930, and which were publicly admitted by Fed Chair Benjamin Bernanke around 2010 or so. The few other people who were knowledgeable, like Strong was, were not in positions of power, nor influence, and could not successfully oppose the cries of <b>Moral Hazard</b> that literally paralyzed the Fed from fulfilling its promise to be the Lender of Last Resort, in 1929. <br><br>There are several problems with MMT, and chief among them is the fact that it's proponents don't seem to realize that MMT is incompatible with a central bank. Or, perhaps they do recognize this as a problem, but chose not to mention it to the public. Evidence: (1.) MMT promises to "spend money into existence", which means MMT would literally use "newly printed dollars" to pay for all the programs Congress authorizes, which means that the Fed's Bond portfolio would never be filled with bonds that could be resold to retrieve money from circulation to fight inflation, and (2.) MMT Proponents have long-touted two "new" ways to retrieve money from circulation whenever inflation threatens to ruin the party: (a.) Tax the "excess money" out of the people's pockets and purses, or (b.) Borrow the "excess money" out of the people's pockets and purses. <br><br>Unfortunately, MMT proponents have apparently failed to dissect the causes of the inexplicable stagflation that hit the US three times, from 1970 to 1981, which no mainstream (i.e., Keynesian) economists were ever able to explain. However, it was easily dissected by Noble Laureate Robert Mundell, when his mere "classical theories" labeled him and his ilk as mere "fringe" economists. According to Dr.Mundell: Keynesian theory of the 1970s mistakenly held that the economy could be stimulated with an easy-money fiscal policy, and inflation could be prevented with higher marginal-taxes. Easy-money did lead to inflation as expected, but higher-marginal taxes reduced incentives to increase Aggregate Supply. Anyone with a high income (Doctors, Lawyers, Celebrities and such) would prefer spending more time with family than paying the highest tax rates. So, although high-earners had less money to spend, low interest rates encouraged investment (i.e., spending). The US economy stagnated, which reduced Aggregate Supply, which helped inflation continue, leaving the mainstream Keynesian policy-makers so mystified that they doubled-down on their prescription. Sad but true.
1
@longnewton1 · 2 years ago
Isn’t value measured by the price? So value lives in the minds of buyers and what buyers will pay indicates what that value is worth in monetary terms.
@kimpersson6577 · 3 years ago
As is all too common in monetary/economic debates/discussions, the pre-requisite for any meaningful resolution of the current (and upcoming) financial catastrophes is not even mentioned. And that pre-requisite is the nationalization/public ownership of a country's central bank for the public good thereby eliminating the payment of interest. A public entity/bank can create money out of thin air just as well as any private source and has no need to pay interest to itself. Properly implemented and enforced financial industry regulation (ex. Glass/Steagall) is also an absolute must to restrict human greed and avarice. The common interests of the 99% must over ride those of the 1%. Call it what you will, but it is just plain common sense and its comeback is long overdue.
5
Up next
The Political Economy of Hans-Hermann Hoppe | David Gordon
misesmedia · 4.2K views
L. Randall Wray - Modern Money Theory for Beginners
St. Francis College · 310K views
Economist warns Modern Monetary Theory is dangerous
ReasonTV · 119K views
The Gold Standard versus Fiat Money | Joseph T. Salerno
misesmedia · 18K views
The Robber Barons and the Progressive Era | Tom Woods
misesmedia · 80K views
Rothbardians vs "Free Bankers" on Fractional Reserve Banking | Robert P. Murphy
misesmedia · 18K views
Everything You Want to Know About Modern Monetary Theory
Bloomberg Television · 102K views
Austrian Economics versus Keynesian Macroeconomics and Modern Monetary Theory | Shawn Ritenour
misesmedia · 16K views
"How I Learned to Stop Worrying and Love the National Debt" - A Conversation with Frank Newman
ModernMoneyNetwork · 13K views
Bill Mitchell: Demystifying Modern Monetary Theory
New Economic Thinking · 152K views
MMT Is Misunderstood | Warren Mosler
Money & Macro Talks · 86K views
Left Out: Michael Hudson on Junk Economics
Democracy At Work · 95K views
The US-China Summit wasn’t what you’ve been told - Varoufakis & Munchau | The Econoclasts
UnHerd and Econoclasts · 163K views
Could 'Modern Monetary Theory' Save the World? | Ash Sarkar meets Stephanie Kelton
Novara Media · 166K views
Michael Hudson: Marxism, Economic Parasites, and Debt Cancellation
Robinson Erhardt · 90K views
An Austrian Critique of the New MMT Documentary
misesmedia · 26K views
Marxist Monetary Theory (Ft. Bill Mitchell)
1Dime Radio · 26K views
Profiting Without Producing: How Finance Exploits Us All -- A lecture by Costas Lapavitsas
Boston University · 39K views
Richard Wolff: Trump, Hitler, and the End of the American Empire
Robinson Erhardt · 3.5M views
What is modern monetary theory
Richard J Murphy · 210K views