| I started reading the book you linked shortly after it came out and gave up because of how shallow all the reasoning was. I think you and most MMT proponents don't understand that the concerns are long-term and deal with knock-on effects, not limited to what is happening right now, and that having your own fiat currency is not a magic wand that you can use to wave away problems with no repercussions. 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 |
About the stagflation I recognize that I have not looking enough into it (yet) to be able to have a meaningful debate.
About Japan, your comment: "the BOJ refused to print money for 20 years" puzzles me. The public debt of Japan is, currently, around 240% of GDP, and around half of it is owned by the BOJ. If that's not your interpretation of "printing money", what is it?
I don't understand neither your comment "[..] no inflation when all the governments of the world [..] at the same time". Are you making a reference to the external sector aspects of inflation?
You say: "[..] debt spending [..] We disagree with the idea that it's an unlimited tool with zero repercussions."
Please, note that MMT doesn't say that. MMT says that excessive deficits can be inflationary in a problematic way, what MMT disagree is that public debt (the accumulate of past deficits) is problematic.
Finally, thanks for engaging in this discussion. It seems to me that it's reasonable that people disagree in policies, because policies come from values and those can be very different. What we should be able to agree is in how the financial system currently works. MMT have some policy proposals but that's not the important thing, the important thing is that the description of how the system works is different and, should be falsifiable. Sometimes, in this kind of exchange, I despair because it seems the other person and I are talking past each other.
I think I found your webpage, would you be willing to continue this exchange by mail? I have some problems understanding what is what the MMT critics don't understand. In the worst case scenario we will finish with a better understanding of the other position.
[1] - http://bilbo.economicoutlook.net/blog/?p=43900 - http://bilbo.economicoutlook.net/blog/?p=43961 - http://bilbo.economicoutlook.net/blog/?p=43997