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Post by Handy on Oct 9, 2020 10:00:39 GMT -5
I have no idea what Japan was using. I read a hint and only a hint that Japan MIGHT HAVE used some MMT. It is my fault for not checking it out more. What I personally often observe is boom cycles where people think the boom is going to continue so they over buy or over speculate and a bust cycle follows. The "Railroad Bubble" in the 1800/1900, "DOT.COM Bubble" in the 1999/2001 and the "Real-estate Bubble" in 2007-2008 and others are examples of people thinking one thing and something else happening mostly because of over speculation. To me MMT is based on a speculation that the government CAN and will control inflation and all of the other potential down sides to what happened in many other governments where the government issues lots on fiat money. Fiat money is just IOU's on government printed paper if things hit the skids hard enough. Most people have faith the economy will not get that bad, so there is an uneasy trust in times like this. I would not want to live in Venezuela in the past couple of years where the government tried to print their way out of financial problems. To me economics goes back to the beginnings of animal life or maybe even single cell organisms. It took some form of energy to sustain life for a cell. Then some thing consumed that first cell and the supply and demand curve started. Without something producing or growing physically, how can a fiat currency make the things that comprise an economy (goods and services)? OK money can create an incentive to produce goods and services but to me some group is going to manipulate the system and make it work for them better than it works for most of the people and then it collapses. One example I have often observed is teenag drivers and cars. Give the kid a car and they don't take care of the car very well. Make the kid earn the money to buy a car, they get less car but it seems to last longer. I think this analogy applies to adults and also to the common people in government. I know it doesn't look like it applies to many "Wall Street" types. Show me where MMT or part of MMT worked and I will consider learning more about it. My other thought is I should know something about MMT to recognize something similar to protect myself from fraud or a scam. The US 1930's depression hit my family hard. After WWII my dad died and it was back to living on next to nothing. I quit highs chool to go to work for minimum wage for several years to support myself and my mother. Then I got drafted and Uncle Sam paid me $68 a month. I sent $40 a month home so my mother could live. My brother and sisters helped my mother when they could. In my working life I had 2 major financial set backs related to work injuries and was off work for 3.5 yrs total. I have reasons to be conservative. Right now, life is the best financially as it has ever been because I lived conservatively most of my life. I am also big risk adverse and it has worked for me. My short term frustrations are earning 1/10 of 1% in a savings account and comparing a boring company that sells sand and gravel with a dividend of 3%. Will the sand and gravel sales continue so the company can continue to pay 3% or will the stock price go down and the 3% payout get eaten up by the declining stock price. OK, maybe I am a short sighted person sometimes. Another economic issue might be future employment. Some futurists predict a 25% loss of jobs due to increasing productivity per individual. Maybe that is a case for MMT to work out some of the problems. I can understand some of the numbers presented but I think the motivations and emotions behind MMT are less predictable.
I know this post is all over the place, sorry for the mess of ideas but it tells you where I came from and why I resist something like MMT.
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Post by Handy on Oct 10, 2020 8:29:23 GMT -5
Wiki's MMT
edit I just finished reading the link. There is too many variables (nu-proven=theoretical examples) of MMT for me to comprehend. I can understand a short time period where MMT can help an economy recover but I still doubt it would be used for the good of most people and not benefit a small circle of people that would manipulate the process to their exclusive benefit.
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Post by mirrororchid on Oct 16, 2020 4:56:48 GMT -5
Wiki's MMT
edit I can understand a short time period where MMT can help an economy recover but I still doubt it would be used for the good of most people and not benefit a small circle of people that would manipulate the process to their exclusive benefit.
Demand-side economics posits that MMT that doesn't spread benefit sufficiently widely will not help an economy improve, but it isn't exclusive. The 2017 tax cuts, for example were spread widely, but were greatly skewed to maximum benefit for the uber wealthy. It helped spur the economy a little. It also helped well connected plutocrats. An economy that functions sufficiently well can benefit everyone and if the uber rich like it a little better than most people, I'm not sure I care. MMT may be used in the future (maybe even now?) to give constant, small stimulus to the economy to nudge it steadily along rather than wait for the bust cycle. We've been working with fiat currency for fifty years with a lot of opposition to MMT and fiat currency itself for much of that time. If we haven't focused on executing MMT well, it may be because of the naysayers that said it wasn't a good idea at all. The Federal Reserve's targeting of a maximum inflation rate of 2% struck me as a very good sign. Gold bugs and plutocrats used to rule teh day by espousing NO inflation as the goal. They have been overcome by those who see zero inflation as a promoting force that causes DEflation. (Ifyou miss a 2% target, you may brush up against negative rates, but aiming for zero means deflation on a regular basis. We can cover the hazards of deflation later if that's a key interest you or another reader has. |
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Post by mirrororchid on Oct 16, 2020 5:51:10 GMT -5
I have no idea what Japan was using. I read a hint and only a hint that Japan MIGHT HAVE used some MMT. It is my fault for not checking it out more. Perhaps not all your fault. Many accuse Japanese economics of harnessing MMT as of 2013 (see the chart of Japan's recovery. Coincidence?) and Japan denies it in furious terms. But if it walks like a duck and quacks like a duck, object all you want.
asia.nikkei.com/Opinion/Modern-Monetary-Theory-threatens-revolution-in-economic-thinking
What I personally often observe is boom cycles where people think the boom is going to continue so they over buy or over speculate and a bust cycle follows. The "Railroad Bubble" in the 1800/1900, "DOT.COM Bubble" in the 1999/2001 and the "Real-estate Bubble" in 2007-2008 and others are examples of people thinking one thing and something else happening mostly because of over speculation. To me MMT is based on a speculation that the government CAN and will control inflation and all of the other potential down sides to what happened in many other governments where the government issues lots of fiat money. The dot.com bubble was actually inflation and wild speculation all accomplished with PRIVATE money, as was a great deal of the housing boom. In 1993, Bill Clinton passed a massive tax increase, the opposite of printing money. .com was largely the result of an economic expansion fueled by consumption spurred by technological innovation and the extreme improvement in the marketing of existing products so more people were made aware of and desired products and services. A second tax increase, smaller in scope around 1996 or 97 might have tempered the absurd investments in reckless profitless ,com companies, but by then Republicans were in charge of Congress and tax increases were off the table.Fiat money is just IOU's on government printed paper if things hit the skids hard enough. Most people have faith the economy will not get that bad, so there is an uneasy trust in times like this. I would not want to live in Venezuela in the past couple of years where the government tried to print their way out of financial problems. I'd sooner describe T-bills / treasury bonds as the IOUs. A paper bill is a measures of purchasing power. It's the same whether it's in your hand or in a bank account as a number on a computer. That's why we don't have to mail paper to Amazon to buy stuff. The paper is not necessary. Someday it may be rare we use it. (if we aren't there already!)To me, economics goes back to the beginnings of animal life or maybe even single cell organisms. It took some form of energy to sustain life for a cell. Then some thing consumed that first cell and the supply and demand curve started. Without something producing or growing physically, how can a fiat currency make the things that comprise an economy (goods and services)? OK money can create an incentive to produce goods and services but to me some group is going to manipulate the system and make it work for them better than it works for most of the people and then it collapses. Addressed to some degree in my previous reply to your shorter note.
One example I have often observed is teenage drivers and cars. Give the kid a car and they don't take care of the car very well. Make the kid earn the money to buy a car, they get less car but it seems to last longer. I think this analogy applies to adults and also to the common people in government. I know it doesn't look like it applies to many "Wall Street" types. Show me where MMT or part of MMT worked and I will consider learning more about it. My other thought is I should know something about MMT to recognize something similar to protect myself from fraud or a scam. The 2003 stimulus (they didn't call it that) of tax cuts, two wars, and Medicare part D was a massive deficit spending measure (deficit spending is creation of money, spread out of thirty years as T Bills. But it's still MMT.) This was skewed towards the wealthy which inspired the wild real estate speculation through 2007. As real estate values grew and early investors (rich people) saw their gains, regular joes thought they could join in and started buying homes. Not so bad, but then they started going into debt to get bigger houses than they needed or could realistically afford. To further fuel the market and feed commissions of real estate brokers and the investment vehicles that fed on real estate sales (CDOs), people who had no significant funds were offered absurd loans they couldn't possibly afford. Home equity loans juiced the economy further as people who already had homes started buying stuff with loans taken out on their houses, fueling an economic recovery from 2004-2008, but much if it was based on debt that had to be repaid which slowed the economy badly. ... I have reasons to be conservative. Right now, life is the best financially as it has ever been because I lived conservatively most of my life. I am also big risk adverse and it has worked for me. That is really smart, because you and I cannot print money to pay back debt. Nothing but a nation that prints its own money can hope to use MMT. Conservative economics is usually prudent. What comprises such economics for governing bodies (companies, non-profits, HOAs, county or state governments) (tax/spending balance) is another topic.My short term frustrations are earning 1/10 of 1% in a savings account and comparing a boring company that sells sand and gravel with a dividend of 3%. Will the sand and gravel sales continue so the company can continue to pay 3% or will the stock price go down and the 3% payout get eaten up by the declining stock price. Interest rate determination is not specifically an MMT phenomenon. Low low interest rates are a method governments use to signal people to use money, not save it. All investment involves risk. Bonds are very low risk, so they tend to give very low pay. Thus, you are tempted to take your chances with dividend paying stocks. I'd ask what the payout ratio of your sand and gravel company is. If they take a massive hit to earnings, can they afford the 3% dividend. Maybe you don't care if the price tanks. You ware making the same money. The dividend shoots up if the price plummets. The increased dividend can coax more buyers and put a floor under that stock.OK, maybe I am a short sighted person sometimes. Another economic issue might be future employment. Some futurists predict a 25% loss of jobs due to increasing productivity per individual. Maybe that is a case for MMT to work out some of the problems. That gets into the "Guaranteed Income". That may count as a form of MMT. I'd have to tease that apart if you asked me. I sooner believe that jobs will switch. Self-checkout now replaces four cashiers with one cashier that can troubleshoot the self-checkout stations. This is more skilled work and you can afford to pay that cashier more. It's also likely a more interesting, less tedious job less prone to repetitive stress injury. I'm glad to lose those three jobs. But we may need a bit more MMT to goose the economy to produce new products or services that will employ the three offloaded people. Health care and child care are badly undermanned. Perhaps some level of support can be constructed to push people into those employment fields.
I can understand some of the numbers presented but I think the motivations and emotions behind MMT are less predictable.
The demand side is a true hazard to MM and a potential source of backlash. People currently think taxes pay for services. They think the national "debt" must be paid off. If they knew how MMT works, the tolerance for austerity and fiscal restraint would ebb and inflation could become a risk if patterns start to reward generosity from the federal coffers instead of necessity. This is why if MMT catches on and there's too much understanding by the people least likely to understand potential harms, I'll stop trying to educate people about it and let the conservatives dominate the airwaves with deception again. Its a intellectual stimulus of my own. You want to increase the people's understanding enough to not tolerate suffering by the masses, but not enlighten so many people as to create an unstoppable demand for luxuries instead of adequate necessities. The result of such a world could be humans ravaging the world of resources and consuming everything there is like mindless locusts. We need people to be comfortable, but not materialistic.
I know this post is all over the place, sorry for the mess of ideas but it tells you where I came from and why I resist something like MMT.
Macroeconomics gets messy. So many threads tie together in a messy cluster like Christmas lights that were just tossed in a box the year before. It's not just you.
Like I said. eight years I spent on this. There are forces in play that try to make macroeconomics more opaque than it is, so learning about it is a minefield of agendas and incentives. |
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Post by Handy on Oct 16, 2020 7:17:55 GMT -5
Mirrororchid, thank you for that in-depth reply. I will have to read it again to understand more of what you say about MMT is good. Right now the part that hit me the hardest is: You want to increase the people's understanding enough to not tolerate suffering by the masses, but not enlighten so many people as to create an unstoppable demand for luxuries instead of adequate necessities. The result of such a world could be humans ravaging the world of resources and consuming everything there is like mindless locusts. We need people to be comfortable, but not materialistic. Back to consumerism. Several years ago I was reading articles about "Affluenza: The All-Consuming Epidemic" (2001, revised in 2005, 2014). These works define affluenza as "a painful, contagious, socially transmitted condition of overload, debt, anxiety, and waste resulting from the dogged pursuit of more".
I will agree with the electronic versions of money and text has sped up things and saved resources. I also know some of that electronic data (no paper required) gets printed, be it for temporary or permanent reports.
About MMT, I also read that MMT is nothing new and one website explained other economic ideas already contain MMT components and then the site listed which components were similar. bottom line it (economics) is/are complicated.
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Post by Handy on Oct 16, 2020 13:29:52 GMT -5
Mirrororchid
I don't know where I posted about the gravel stock ( MDU ) I have. It is actually a gas-electric utility stock that makes money selling gravel and doing road construction under a different business name. The price fluctuates between $18 and $28-$32/share. I buy if it is under $21 and sell "if I catch it" above $26 to $28. Right now the price is $23.72 and it pays a dividend of 3.5%. Go to www.finviz.com/ and look at the numbers. Use the finviz screener too. I will read more about MMT. I just finished an article about the oil industry giving money to campaigns. The famous saying "Follow the Money" has some merit.
Mirrororchid
I'd sooner describe T-bills / treasury bonds as the IOUs. A paper bill is a measures of purchasing power. OK, that is a better example of an IOU.
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Post by mirrororchid on Oct 19, 2020 6:28:07 GMT -5
Mirrororchid
The price fluctuates between $18 and $28-$32/share. I buy if it is under $21 and sell "if I catch it" above $26 to $28. Right now the price is $23.72 and it pays a dividend of 3.5%. "Channel trading" right? That always struck me as plausible if you were diversified.
I've done that maybe four times in my life, just the one time when a great stock hit a low for a stupid reason.Go to www.finviz.com/ and look at the numbers. Use the finviz screener too. I have for a few years now. I use it to identify stocks with a good payout ratio and yield.
I will read more about MMT. I just finished an article about the oil industry giving money to campaigns. The famous saying "Follow the Money" has some merit.
As if macroeconomics isn't a wide enough field. Now campaign finance? You are fearless. |
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Post by Handy on Oct 19, 2020 8:57:52 GMT -5
Mirrorchild
Now campaign finance? When I get 10 campaign pieces of mail every day from the same 10 people trying to get elected and find out this election cycle ~11 billion dollars was spent, YES I notice the waste. www.opensecrets.org/elections-overview/cost-of-election?cycle=2020&display=T&infl=N"Channel trading" right?OK, channel trading, I just thought of it as "with in a range trading" or "cyclical range." My problem is I know when to buy but I miss the selling signals so most of my buys are more focused on the dividends.
I haven't looked at Canada's political spending.
I did some reading about "tar sands" and companies to invest in. Not something I see as good for the planet but I realize some people stand to gain a lot of money.
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Post by mirrororchid on Oct 19, 2020 20:25:59 GMT -5
Mass mailings and TV commercials are expensive. When I get a lot of mail and see a lot of commercials for a candidate, I think "Boy howdy, that guy owes a lot of favors. Let's look at his opponent whose friend handed me a plain Xerox flyer at the supermarket. It pays to look at the candidates you've never heard of, maybe through The League of Women Voters. Their Q&As use candidate answers verbatim. No editing. No misquotes. And for teh less worthy candidates, no content. A candidate dodging questions to the LWV is a red flag for me. One of our president's main appeals was he claimed to be rich and he could self-finance so he wouldn't owe anybody. But then he didn't spend his own money and has raised millions so... even when they CAN be free of influence, they sometimes choose to be bought. When you find an honest public servant. Help him/her/zer. Donate. Talk them up. Volunteer. They're out there. Usually below the rank of Congressman. At that level, you're almost forced to sell at least a little of your soul. Oops. While not partisan, this is slipping away from economics, isn't it? |
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Post by Handy on Oct 20, 2020 2:18:00 GMT -5
Good points Mirrororchid.
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Post by mirrororchid on Oct 21, 2020 5:54:57 GMT -5
mirrororchidIf Japan used MMT their economy (stock market averages) seemed to suffer for the past 10 or 20 years
Like I said, economics seems like a "it depends on the situation" and some of the answers and solutions have to be tried to see if they work or fail, so there is much risk moving forward. I am not much of a risk taker so I go on past outcomes.
I'm going to sharpen our focus and hit each point you raised over the next two months. (you think I'm kidding.) When are you under the assumption Japan was using MMT? When it was NOT using MMT, what were they using? NIKKEI Index
 Rewind. %E3%83%8E%E3%83%9F%E3%82%AF%E3%82%B9%2C" rel="nofollow" target="_blank">en.wikipedia.org/wiki/Abenomics#:~:text=Abenomics%20(%E3%82%A2%E3%83%99%E3%83%8E%E3%83%9F%E3%82%AF%E3%82%B9%2C%20%E5%AE%89%E5%80% %E3%83%8E%E3%83%9F%E3%82%AF%E3%82%B9%2C,Japan%20from%202012%20to%202020. Abenomics refers to the economic policies implemented by the Government of Japan led by the Liberal Democratic Party of Japan (LDP) since the December 2012 general election. They are named after Shinzō Abe, who served a second stint as Prime Minister of Japan from 2012 to 2020. After Abe resigned in September 2020, his successor, Yoshihide Suga, has stated that his premiership will focus on continuing the policies and goals of the Abe administration, including the Abenomics suite of economics policies.[1]
As you say. Try things and see what works. Perhaps 2012 to 2020 was better than what they were doing from about 1989-2011? The spike in 1988 was likely a result of an unsustainable bubble, so there's not much praise for whatever came in 1986. Interestingly, the increase in growth 1984-1986 does not look dissimilar to Abe's economy, so maybe that trend is sustainable? Or maybe it has to level off. (more on that another day) Abenomics is based upon "three arrows" of monetary easing from the Bank of Japan (lowering interest rates), fiscal stimulus through government spending (likely through "borrowing" aka issuing treasury bonds), ... The Economist characterized the program as a "mix of reflation, government spending and a growth strategy ...since the Japanese government decided to raise the country's consumption tax rate to 10 percent, he expressed his concern that the tax hike could deal a more devastating blow to Japanese economy than expected. In 1997, the Japanese government raised the rate to 5 percent from 3 percent to tackle its debt of 50 percent of its GDP at that time, promising that the tax hike would be offset[27] by income-tax reforms. But the tax hike ended up making the domestic consumption stumble, pushing the economy into recession. The country fell into[28] a deflationary trap. Due to the country's long-running malaise, the government gross debt reached 200 percent of its GDP despite the increase of the sales tax. The IMF forecast that the tax hike in 2014 would cut Japan's economic growth from 2.5 percent in 2013 to 1.4 percent in 2014, but Kaletsky argues that this economic downturn is underestimated.So you can see how raising taxes and lowering the national debt harpooned the Japanese economy in 1997 all the way through when Abe moved to shove cash into the people's hands through low interest rates and government spending to put cash in contractors hands (who would then spend it on other economic sectors) MMT's sharpest critics almost always advocate lowering government debt to stimulate the economy. I have yet to see where that worked. You'll recall Bill Clinton lowered the debt 1997-2000. The .com crash was partially due to too much money chasing too few good ideas, but an important commonly overlooked part of it was ill Clinton's removal of money from the economy in order to pay down public debt. This may have been okay to restrain speculation1997 to 1998, but some thought perhaps should have been given to giving the economy a little gas to prevent the crash. To be fair to Clinton, his was one of the very few presidencies that has used taxes appropriately to slow growth so speculation bubbles don't occur and it almost worked. The economy stayed strong despite the tax increase of 1993. The key feature of MMT is to push money into people's hands to spend it. To get goods and services back in demand. One way is to send out checks (Trump's COVID relief, Dubya's stimulus checks), another is to buy things from private corps whose employees and investors get government money indirectly and then spend it. If too much demand causes inflation, reduce the stimulus spending. If it's not enough, raise taxes or raise interest rates. (I'd prefer to raise interest rates first since I think personal/corporate debt adds complicating factors, but I admit I do not know which is a better tactic for macroeconomic management. Perhaps a more learned economist will weigh in.) |
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Post by Handy on Oct 21, 2020 10:39:07 GMT -5
Mirrororchid
Perhaps a more learned economist will weigh in.
There is a lot in your post I never knew about, so thanks for posting it.
I had to chuckle at the "a more learned economist" in you posted. You are way ahead of me in this area. I am still in the check-book model phase, money in, minus the money out=the balance. Add an automatic loan if there is an over draft and add some interest, it begins to sort of sounds like MMT.
I suppose I am a bad financial citizen. I didn't spend my or my W's stimulus check on anything except for paying some bills and adding to my savings account. One reason is I already have too much stuff.
I didn't know what Dubya's stimulus checks refereed to but I saw something to link it to Saturday Night Live."... I don't watch much TV but I used to enjoy some of the SNL skits.
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Post by mirrororchid on Oct 21, 2020 19:57:00 GMT -5
Mirrororchid
Perhaps a more learned economist will weigh in.There is a lot in your post I never knew about, so thanks for posting it. I had to chuckle at the "a more learned economist" in you posted. You are way ahead of me in this area. I am still in the check-book model phase, money in, minus the money out=the balance. Add an automatic loan if there is an over draft and add some interest, it begins to sort of sounds like MMT. I didn't know what Dubya's stimulus checks referred to... Background: www.thebalance.com/stimulus-checks-33057502008 Stimulus Checks
The year before ARRA, the George W. Bush administration sent out stimulus checks to battle the 2008 recession....:
Individual taxpayers received up to $6009
Married couples were eligible for up to $1,200
Households with children received $300 per dependent childEveryone else's finances works like you outline. The overdraft automatic loan would be analogous to the "debt ceiling". It's pretty much automatic and accommodates spending more than you had said you had planned to, debt and income (taxes). A big difference is, you, me, cities, counties, and states don't have a mint or authority to create money, either as cash or slow-release cash with interest (T-bills) We cannot just pay as much of our loans as we please with little more than an act of will. WHY our country pretends to have routine debt is part of the big secret that mustn't be revealed to too many people, or the hyperinflation paranoia really could come true. |
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Post by Handy on Oct 21, 2020 20:33:57 GMT -5
I don't remember getting a stimulus check in 2007. Then I read this:
The self-employed and others who made estimated payments didn't get their tax cuts until April 2010. Many of these small business owners also didn't notice the tax cut. By the time they received it, the recession was over. They should have gotten a tax break sooner..............
I am sorry to say, the recession was NOT over for me and my area by 2010.
The overdraft automatic loan would be analogous to the "debt ceiling".
I used the overdraft thing for a couple of years every now and then. After the economy tanked here, I quit using it and switched to having $100 to $500 or more in my checking account as a minimum.
WHY our country pretends to have routine debt is part of the big secret that mustn't be revealed to too many people,
Are you saying the debt real or a so called illusion isn't really debt by government standards?
I have very responsible friends and they deplore the national debt. I tried to explain MMT economics and they all say it is hog-wash and is what is going to be the demise of the economic prosperity we experience. ME? I am willing to try to understand how it MIGHT work in a perfect situation.
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Post by mirrororchid on Oct 23, 2020 5:11:34 GMT -5
... By the time they received it, the recession was over. They should have gotten a tax break sooner..............I am sorry to say, the recession was NOT over for me and my area by 2010. ...Are you saying the debt real or a so called illusion isn't really debt by government standards? I have very responsible friends and they deplore the national debt. I tried to explain MMT economics and they all say it is hog-wash and is what is going to be the demise of the economic prosperity we experience. ME? I am willing to try to understand how it MIGHT work in a perfect situation. Recessions are like tornadoes. You're sure glad it's over, but there is a lot of hassle and hard work left before you're good again. All recoveries start with very sucky economies. 2010 was bad. No question. Not sure what you mean by "government standards". Responsible people should deplore all debt except national. They don't understand quantitative easing. Those that start to understand it will scream "inflation!" then dismiss any possibility that the system could work (like it has for almost 50 years) They think sovereign debt works like their household debt. It doesn't. But theey attribute similar causes and effects to both kinds. They're wrong. Just flat out wrong. |
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