MODERN MONETARY THEORY - can anyone explain major differences between MMT and current monetary system?
INTRODUCTION
For the past several months, my personal interest with business and economy (both in micro and macro scale) have been growing rapidly. There isn't a day that goes by that I would not learn something new - it is a fascinating and complex world, full of unknown relationship and constantly evolving.
And every now and then I encounter topics, which are often initially to difficult to understand - I've spent hours trying to figure out what QE (quantitative easing) or REPO markets are about. And while I've been researching those two terms, I bumped into a new one: MMT (modern monetary theory).
And I must admit, that more I learn about it, the more confused and unsure I was about how this model could potentially work and what consequences we should all expect if MMT would ever gain more popularity. And it seem that it's popularity is only growing.
So today, I would actually like to ask you, dear readers, to share with me your knowledge and view on that particular topic.
MODERN MONETARY THEORY - a few questions
Most of all, I found it important to understand what problems MMT does try to solve and what challenges it will face ahead. How is it different from the current monetary system and how could it affect businesses and life or regular people.
I would also like to know, what are the threats to the "current state of things" if MMT would ever be introduced? Are there any real advantages and disadvantages of this solution? What risks and benefits would we be all facing?
I cannot stop but wonder if MMT will impact stock markets, inflation, property markets and ... crypto. And if it does - what kind of impact should we expect?
Those are some of questions I've been asking myself. Hopefully some of you, dear readers, have the necessary knowledge and willingness to share it with me and others.
SHARE YOUR THOUGHTS AND EARN SOLID UPVOTE
I really love to hear your opinion on that particular topic. And I'm planning to reward all most valuable comments with a solid upvote (150k SP) from @project.hope to show my appreciation.
Please resteem. And note that all rewards (50%) from this post will be transferred to @ph-fund - to support @project.hope. So be generous with upvotes :)
Yours, Piotr
@crypto.piotr
Money lies at the core of most of the problems in this world and I have also found it to be one of the most interesting topics to discuss. To write a comment on it myself would most likely be the start of a book. I'll keep it simple and just refer to the people on the forefront with their different theories.
First there is the gold standard advocates which include people like Mike Maloney and G Edward Griffin:
There are many more in agreement with the above to name a few:
On the other side we have the money policy advocates. A group of people who believe that the wrong policies are what brings about abundant and dire times. I have not seen a lot of them making videos on the subject but I have come across a few who have tried to explain it in simple terms. Bill Still explain his position in The Money Masters. In my view the petro dollar will fit into this system but it gets complicated.
These two ideas are fairly different from each other and attract a lot of debate but one obvious similarity is the fact that at the head of this beast there is a puppet master pulling the strings.
For me it is not a matter of consensus among the slave population to correctly define words or the workings of systems but the understanding that there is a slave master driving you into the ground and stealing your wealth.
Thank you for your amazing comment @dpl
Indeed, money lies at the core of most of the problems. However without money there would be most likely even more problems we all would have to dealt with - just different ones :)
Good one :) Can I sign up for your book already :)
ps. didn't you consider powering up?
Yours, Piotr
@crypto.piotr
It is debatable as the current system is most corrupt. It's like saying we need government because who will build the roads...
Just tried something with my steem. That's why it was not in power up mode :-)
It's me again @dpl
I've just realized that I never actually thanked you for your comment. Big thx.
ps.
I would need to ask you for little favour. Recently I've decided to join small contest called "Community of the week" and I desribed our project.hope hive/community. Would you mind helping me out and RESTEEM this post - just to get some extra exposure? Your valuable comment would be also appreciated.
Link to my post: on steemit or on steempeak
Thanks :)
Yours, Piotr
I did read up on MMT some time back. The key difference between the current system we have is that it believes that countries with a fiat currency system can and should print as much money as they need to spend since they will never go broke.
In contrast, the current system believes that governments spending should be funded through taxations and issuance of bonds.
Under the MMT, the central bank will no longer need to manage interest rates as it will always be kept a fixed level (e.g. 0%). Overall greater responsibilities will be on the government.
Will be happy to have an open discussion on this topic
Hi @culgin
Thanks buddy for always being so responsive and helpful with your comments.
That part I already managed to understand. However Im not sure how does MMT plan to combat extreme inflations caused by constant drop of value of printent FIAT currency.
Yours, Piotr
The fact is nobody can be certain that the system can prevent high/hyper inflation. The most compelling argument I read so far is that the government will be able to regulate the inflation level through efficient allocation of money and taxations
MMT really relies on an efficient government, which so far I haven't really seen one. The government here in Singapore is probably among the most efficient, but I am not confident MMT will work even under the Singaporean government
If government is involved-- or if there's a political "theory" propping it up-- it's wrong. http://blog.kentforliberty.com/2009/11/requires-no-government.html
Hi again @dullhawk
Can I ask you for little favour? I joined contest called "Community of the week" with project I manage and I would be grateful if you could RESTEEM it and help me get some exposure and drop some encouraging comment :)
Link to my post: on steemit or on steempeak
Thanks :)
Yours, Piotr
Hi my friend,
This is indeed a very interesting topic and I believe that people who believe in MMT simply never went through a period without relative money stability.
It is funny that this theory comes from people living mainly in developed countries. This theories only works as long as there are no foreign depts...
MMT doesn't produce inflation, it produces bubbles that pop
Of course it is possible to always create more money supply by printing it directly through the central banks or through dept creation by normal commercial banks. The more money available in a system the more you devaluate it. This means that for an even amount of goods the amount of money available increases which should lean to a devaluation of the money.
MMT believes that a country can always print new money but it is simply blind. The more money that is printed, the more we assist to a bad allocation of assets. Meaning the money will always go where the ROI is highest. It will go into share markets or real estate or bonds, accordingly...
This means that we don't see a continuous depreciation of the money, it fills a bubble and the depreciation will only occur when this buble pops.
MMT and foreign dept = potential for major crises
Imagine a country that prints and prints more of its currency to pay back its depts. Of course it can print always more but currencies are interlocked between each other. You are a foreigner and you see that the money supply of this country is growing and growing. You expect inflation and you will sell assets of this country. This means that there will be a sale pressure on this currency and a loss of price compared to other currencies. This means that if this country has depts in foreign currencies then this dept will increase in value drastically. It will be impossible to print always more currency because the more that is printed, the less it will be worth and the foreign dept will increase. Just some examples of that: Venezuela, Argentina, Turkey...
A currency that is printed according to MMT will be worth nothing in the long run
So I would keep my hands away from any currency that is created according to MMT. I would advise to invest in BTC that has a very limited supply or in Swiss Francs, probably the most stable Fiat currency and a governement behind it that by law is compelled to keep dept under control.
Best regards,
Achim
Our current banking system, in which money is created out of thin air each time a loan is granted, is essentially printing money. I guess the difference between fractional reserve lending and MMT is that with fractional reserve only the banks really benefit. With MMT more of us may benefit.
Interesting point. But remember, "more of us may benefit" owing to money that is printed out of thin air. Those benefits might feel good, but they're all based on nothing more than thin air.
In other words, MMT can have certain short-term benefits, but at what cost. MMT and QE and money-printing are by their very nature unsustainable.
Regardless of any benefits, I'm expecting the worst.
Trouble is that fractional reserve lending does the same thing--creates money out of thin air. The difference is that a loan is supposed to be based on some value-add that will allow the borrower to repay the principle and interest. It is worth watching Money as Debt on YouTube for how this works as well as reading the critiques and director's responses
Exactly. I find it strange when those who rely on / support fractional reserve banking turn around and excoriate those who promote MMT.
Thanks for the link to "Money as Debt." I'll give it a look soon.
Dear @majes.tytyty
In long run I would also expect the worst.
Yep. Hang on tight!!
Thank you for dropping by @toddrjohnson and sharing your thoughts.
ps. did you give up on posting on steemit ?
Yours, Piotr
Thank you for your amazing comment @achim03
Very informative. And you shocked me when you mentioned that MMT doesnt produce inflation. I always thought that increased supply (over demand) will lower value of FIAT currency. And as such - it would create inflation.
If money would end up in property market, then it will increase cost of rent. And that will impact prices of everything. Wouldn't it be ... inflation?
You nailed it! Again big thx for your feedback.
Cheers, Piotr
In a way we are already living in a world of MMT with QE and as a result I always wondered why there was not more inflation. I believe it is because the inflation is kind of hidden within bubbles but when these bubbles explode we will have the same results as if we would have with an increased inflation. I saw this in Turkey. A simple tweet from D. Trump about taxing steel was enough to produce a devaluation of the currency of 20% within a couple of days.
Instead of coming little by little the inflation manifests in bursts and is therefore much more dangerous and imprevisible.
Best regards,
Achim
Some economists wish to make the governments all mighty. They think governments have all the solutions of the problems related to economies. These economists are the proponents of Modern Monetary Theory. It is not different from the current monetary system. In fact, these are very similar. There is only a difference of the name.
Dear @akdx
Thank you for always being so responsive
ps.
I seriously wonder how MMT would deal with inflation (losing fiat currency value). After all inflation is nothing but 'hidden tax', that can destroy economy and businesses. Just like tsunami would.
Also Im curious how countries following MMT monetary system would deal financially with those who stick to traditional/current ways. Something would surely have to change.
Yours
Piotr
You don’t have to be bewildered with it, @crypto.piotr. It’s just another terminology manipulation, as it is usually done in the Centralized Hierarchical Political Matrix (CHPM). Orwell called it doublespeak. or newspeak You see, CHPM uses terminology to cover up repeating robbery. For example, at the beginning of the 20th Century, if you came to the bank to raise your money, and the bank could’t return your full amount and interest, that was called a Bankruptcy, or Default. Today it is called Negative Interest Rate Policy (NIRP)! In the 20th Century, excessive emission of the fiat money was called Inflation. Today it is called Quantitative Easing or REPO. MMT is just another name for a blind robbery created through the globalist economic system.
I would suggest to follow this man:
He is explaining it clearly and logically. You can start with these important lectures:
https://steemit.com/informationwar/@lighteye/richard-wolff-explains-how-politics-work-in-the-us-of-a
https://steemit.com/informationwar/@lighteye/the-roots-of-fear-of-a-humane-idea-in-the-united-states-of-america
https://steemit.com/informationwar/@lighteye/instability-of-capitalism
Good luck!
I very much agree with your explanation. I truly believe the decentralized monetary system is already establishing and it is up to us here to support its functionality. As I'm more with technology understanding than economical cannot give more profound clarification of the main topic.
It is an interesting discussion although.
Thank you, @trayan
Thank you for dropping by @trayan and your comment.
Thank you for your amazing comment @lighteye
I will take your advice and I won't be "bewildered with it" :)
Thank you for sharing those links with me.
ps.
I would also like to take this opportunity to share with you one of my recent posts
, where I'm describing project.hope economy (I run it with few guys from steem). I would love, if you could invest few minutes and get familiar with our efforts and perhaps share your feedback (this is what I always care the most).
Yours, Piotr
Thanks for the invitation.
I haven't heard anything about the subject. But if this "idea" fell out of the minds of today's economists and politicians, it is time to quickly run away towards the crypt
Essentially, MMT is a misguided attempt to deal with insufficient government income / funds.
Typically, governments make money by collecting taxes or by selling bonds. MMT holds that needy governments do not have to collect more taxes or sell more bonds. There is a third way, and that's MMT.
MMT may be cloaked and disguised as a clever new policy, but for all intents and purposes, it's basically money-printing.
Certain overly clever central bankers such as Greenspan and Bernanke explicitly condoned MMT. In certain ways, they even resorted to it. They essentially said that they US had access to an unlimited supply of money, cuz it could simply print more and more.
But any fiat money, printed out of thin air onto valueless bits of paper or clicked into being by using a computer mouse, will eventually revert to its actual value – which is zero.
On the way, the money produced according to MMT will create bubbles and eventually hyperinflation. As well as lots of pain and misery for those who are impoverished by it.
Anybody who thinks that MMT is a viable alternative has her/his head stuck in the sand ... or else somewhere else dark and smelly. MMT is Magic Money Thoughtlessness.
Thank you for your amazing comment @majes.tytyty
Somehow I don't see goverments being able to dismantle their own taxing system. That would also means massive amount of people, which would lose their jobs in administration sector. People noone else would like to hire.
ps.
I would also like to take this opportunity to share with you one of my recent posts
, where I'm describing project.hope economy (I run it with few guys from steem). I would love, if you could invest few minutes and get familiar with our efforts and perhaps share your feedback (this is what I always care the most).
I've read your recent memo and I'm aware of your lacking time. Take it easy buddy :) You may join our curation trail whenever you're ready.
Yours, Piotr
Good point. I believe that MMT does not advise govts to STOP collecting taxes or to STOP selling bonds. But if and when tax revenue plummets and when nobody buys the govt's bonds, then the MMT alternative (last resort) is to just print tons of money.
I'll open your link and read that post soon. And I'll also get to that curation trail ... sooner or later. :-)
Money is everything in the modern world. So, there are economists who thinks that the governments are free to print as much money as they wish and to counter inflation and state of unemployment governments should increase taxes and issue bonds to drain excess money from the economy. It all seems to me a bullshit as printing excessive money can be fatal to any economy as it increases inflation and also creates conditions of economic failure.
Hi again @erica005
Can I ask you for little favour? I joined contest called "Community of the week" with project I manage and I would be grateful if you could RESTEEM it and help me get some exposure and drop some encouraging comment :)
Link to my post: on steemit or on steempeak
Thanks :)
Yours, Piotr
Resteemed.