Is the current system brittle, and growing more so over time? Absolutely.
Is MM Theory the answer? I couldn't say. But part of ascertaining whether or not MM Theory can help us is taking a look at all of its wrinkles. (We should be taking a look at all of its benefits too. Again, just intellectual honesty, and necessary to the full analysis of the idea.)
The current system is growing brittle along one axis.
After World War II, there was a cycle of recession and recovery, but each cycle had a higher level of inflation... until Reagan (or, if you prefer, Volcker). Since then, we've had the same cycle of recession and recovery, but each one with a lower level of inflation. But the problem has moved to a different axis - real wages.
From [1], a list of US recessions:
"The National Bureau of Economic Research dates recessions on a monthly basis back to 1854; according to their chronology, from 1854 to 1919, there were 16 cycles. The average recession lasted 22 months, and the average expansion 27. From 1919 to 1945, there were six cycles; recessions lasted an average 18 months and expansions for 35. From 1945 to 2001, and 10 cycles, recessions lasted an average 10 months and expansions an average of 57 months. This has prompted some economists to declare that the business cycle has become less severe. Many factors that may have contributed to this moderation including the establishment of deposit insurance in the form of the Federal Deposit Insurance Corporation in 1933 and increased regulation of the banking sector. Other changes include the use of fiscal policy in the form of automatic stabilizers to alleviate cyclical volatility. The creation of the Federal Reserve System in 1913 has been disputed as a source of stability with it and its policies having mixed successes. Since the early 1980s the sources of the Great Moderation has been attributed to numerous causes including public policy, industry practices, technology, and even good luck."
[1] https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
(The way out of the mess is to stop trying to use monetary policy to manipulate market interest rates, and to instead shift to a short-term policy target that fosters stability rather than instability. Such as, e.g. the money-price of gold. Or some measure of the money supply. Or the market forecast of nominal incomes x months in the future. There are lots of plausible choices!)
I'm going to need more info before I believe someone telling me the end is neigh.
We're at 2.4% (In the US) but that's still too low and the Fed is trapped. They can't go higher, they've paused and depending on what happens over the next while, they may very well have to cut.
So I use the phrase trapped at the zero bound because once you actually touch that bound I think you get stuck there.
That old post was: https://www.zerohedge.com/news/2016-01-14/trapped-inside-zer...
> Survivorship bias or survival bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility. This can lead to false conclusions in several different ways. It is a form of selection bias.
Most prior economic systems have failed to do both of these. Either they didn't have that much capacity for growth (e.g. once you're farming all the arable land, your agrarian kingdom isn't going to be producing much more land), or necessitated violent expansion (only way to get wealthier is to raid or annex somebody else's territory).
Unless we have examples of societies experience consistent economic growth, without any substantial form of expansion of territory or use of state power, then this isn't survivorship bias. It's just a sober analysis of history.
By comparison, MMT is basically telling the government to use quantitative easing to pay for everything. When you really dig down into it, the proponents of MMT know exactly how deceptive the scheme really is. They fully understand that it's allowing the government to pay for whatever it wants by printing money and letting the populace lose their savings due to larger inflation. And it fails to address immediate shortcomings: namely the fact that people will stop accepting payment in dollars if the government starts rampantly increasing inflation.
MMT doesn't say to ignore inflation - it thinks inflation is a key measure to keep an eye on just like the current system - it just says that taxes and debt bonds should be used as independent control parameters from deficit.
In theory, yes. In practice, not at all. Recessions are exigent circumstances, and no one was under the impression that the government would continue increasing the supply of money to pay for arbitrary things. Not to mention, the bulk of this quantatitive easing took place during two years were we saw deflation - so increasing the money supply was something the government would have likely done anyway.
By comparison, if the government announced that starting in 2020 it would start paying for everything by printing more money then the first thing that will happen is that smart, wealthy, people will just move their assets into things other than dollars. Like resources futures, which are independent of inflation.
The people who actually take on the burden of taxation are people who don't have the means or know-how to manage their assets. So the result is probably that poor and middle class people are even worse off.
This is just underlining my question. If the congress were operating with an MMT view of the world, they could have injected money into beneficial social program without handwringing over deficits, avoided QE. Regular people would have more wealth in their hands, and less money would be running around the stock market inflating assets. We would have a healthier economy today.
> By comparison, if the government announced that starting in 2020 it would start paying for everything by printing more money
This isn't what MMT says to do, it keeps taxation as a control parameter, it just wouldn't be singularly obsessed about the budget deficit.
Avoiding bank runs and the collapse of financial institutions is a pretty massive social benefit, even if it does turn into "bailing out wall street" memes.
> This isn't what MMT says to do, it keeps taxation as a control parameter, it just wouldn't be singularly obsessed about the budget deficit.
The whole premise over MMT as compared to standard government revenue streams is to reduce or substantially eliminate dependency on taxation by having the government print the money it needs. As pointed out earlier, if MMT simply refers to any amount of increase in the money supply then governments already have been practicing MMT for decades.
Again, simply look at what the proponents of MMT are promising. Universal service and government provided jobs for everyone that wants one. Peel off the veneer of the whole premise of inflation vs. taxation and it's really just a means of trying to let the government spend way more money by obfuscating revenue streams.
In the immediate crash, I agree, but in the years after as QE kept being needed to stabilize the system, there were other choices. There could have been a different program to inject money directly to the people who took out mortgages, requiring lenders to take a principal write down at the same time. This would have left more wealth in peoples hands, instead of funneling more wealth and assets into bank hands. And in large part it was fear of deficits that prevented consideration of these options.
The argument isn't to "government spend way more money", it's to make a more balanced consideration of how we actually use the power of currency for beneficial purposes in the long term.
"Compared to what I see as the inevitable “dual death spirals of MMT”, letting all those banksters fry in 2008 looks a lot more palatable in retrospect. David Stockman’s Great Deformation shows how the economy would have fully recovered by 2010 or 2011 instead of being where we are now: trapped at the Zero bound and headed toward democratic socialism and MMT."