| >>"Those are the concerns I wanted Stephanie to at least pay lip service to, but she conveniently didn't even mention them. " She, and other MMT proponents, do it in other places. Obviously this was only an introduction. If you are really interested there is now a full textbook [1]. Your questions make me think that you don't understand the basic of what MMT is saying. >>"[..]deficit gets so high that it's obvious to the people buying treasuries you can't pay the interest" All the point of MMT is that governments that use its own floating currency don't need anybody do finance them. They could just spend without selling any treasuries. The only limit to that spending is inflationary and selling treasuries don't reduce the danger of inflation. This is not a belief, it's just a description of how the system works today. For instance, now all the main governments in the world are applying stimulus at the same time. Where is the money coming from? Where is the inflation in Japan? And where the Yens from the increase in the Japanese public debt in the last 30 years come from? >>"explain away stagflation from the 70s" Frequently, problems of inflation comes from supply problems. Anyway looking to the QE programs, the current stimulus programs or Japan the last 30 years, should be obvious, by now, that monetarism is a fallacy. That doesn't mean that you can't spend too much in the economy, but there are frequently other causes. In the 70's you have oil crisis, the Vietnam war, etc.. "[..] at some point the interest burden of the debt itself requires more monetary expansion " A government with its own currency don't need to keep the fallacy of selling debt to "the markets", but if they choose to do it, and the debt is owned by the Central Bank, the money of the interest goes back to the government. [1].- http://bilbo.economicoutlook.net/blog/?page_id=33139 |
Gregory Mankiw, an economist at Harvard, voices my criticisms with the book better than I can: [1]
I think it's funny that you point to Japan as a counterexample here. The reason Japan doesn't have high inflation is because the Bank of Japan refused to print money for 20 years[2]. If it did when other countries did not, inflation would be high.
To your next point, you kind of answer it yourself. Why is there no inflation when all the main governments of the world are applying stimulus at the same time? Well, first, because they're all doing it at the same time. As soon as you remove that fact, the situation changes entirely because the economy (and currency/bond markets!) are global, not local. And second, because demand is historically low due to a pandemic. Again, when you remove that fact, everything changes.
On stagflation, I think you are misinformed about what causes/caused it. [3] is a good summary: federal interference in supply + printing money. If that sounds a lot like what MMT proposes as a magic wand, it's because it is.
Finally, I think it's important to distinguish that many critics of MMT, myself included, don't disagree with the marketing-friendly premise that debt spending can be a good thing. We disagree with the idea that it's an unlimited tool with zero repercussions. At some point there is a reckoning - either unsustainable inflation (like 1970s US) or effectively dead economic growth (like Japan) depending on how the central bank reacts. We should be concerned about these things and take steps to make sure that the time of reckoning stays far in the future.
[1] https://scholar.harvard.edu/files/mankiw/files/skeptics_guid...
[2] https://www.ceicdata.com/en/indicator/japan/m2-growth#:~:tex....
[3] https://www.thebalance.com/what-is-stagflation-3305964