Comment by lifeisstillgood | Hacker News Reader

Comment by lifeisstillgood | Hacker News Reader

Parent Full thread

lifeisstillgood

So my laypersons understanding is that

a) Governments printed money massively to handle 2008/covid (on the order of tens trillions dollars)

b) MMT says governments print money to spend it buying the services they want (ie roads, nurses, etc) then tax back the same amount thus having net no inflation and able to print the same amount again next cycle / year.

c) if people can take the system so that they don’t pay tax but instead keep the money then governments cannot print same amount of money / end up causing inflation

c) wealthiest in society are pulling away, tax rates for capital vs labour are not equal, the massive QE has ended up in hands of capital owners and as we don’t tax Wealth then each cycle of spend-tax means more is staying in private hands, it getting destroyed so more government spending must either be cut or raise inflation.

So my limited understanding says “money is just tokens, tokens should equal productive capacity (multiplied by some thing something velocity), and if governments want to spend more tokens than are being destroyed through tax, either raise tax rates n those paying tax, or tax those not paying tax (ie tax wealthy)

In the end it all comes back to rentierism- and that comes back to a land tax

The modern idea in MMT (which is a pretty old philosophy by now) that taxes create demand for the currency. Which helps with stability, since businesses/people can't just abandon trade with the currency in the event of devaluation.

It should not be seen as a mechanism primarily used to finance government spending (that's what debt is for). For a country the size of the USA, balanced budgets (tax inflows = government spending outflows) create currency issues, since there's demand for government debt as a store of wealth. What can Apple do if the government decides to stop issuing t-bills? They'd pay a dividend, but then that leave the receiver of the dividend with the same problem. Or maybe they'd purchase an existing t-bond for over market value (effectively increasing interest rates).

The government will issue as many bonds as the market has demand for as a store of wealth, but the government also decides the interest rates it is willing to pay. The idea being, the government has better control over inflation, since government spending drives inflation, but high interest rates curb it (though, I believe this is still an active area of research).

MMT largely rejects interest rates (and monetary policy in general) as a useful tool in macroeconomic policy in favour of fiscal policy. The general position is that since the marginal cost of money is basically zero, the markets in useful stuff are better able to operate if the money markets don't complicate things, and that monetary policy is not a very good tool to achieve the desired objective (weak, and potentially counterproductive at times). If a particular political objective is desired, then use more direct government tools to do that - laws and regulations, rates and duties.

And that’s the beauty of it. When has “simple is better” not ended up being true!? Whenever I read about ‘interest rates’ and other monetary policy blah blah, all I see is a group of people high on their own supply, all thinking that they’ve come up with something ‘cool’ and ‘smart’ and ‘elegant’. But, in reality, it breaks with some degree of regularity.

You make some interesting points, but not MMT. It's actually quite an easy view to fall into which I also did for a bit based on a few, but nowhere near enough, snippets of MMT along with much prior baggage.

The core point of MMT is that monetarily sovereign states should primarily consider the resources available to buy with little to no consideration of the financial side, since such states are never financially constrained. The focus of the government then is all about making sure such resources are properly managed. That means the primary role of taxation is to free resources (read people) that can be purchased. It recognises a potential cause of inflation is a lack of things the state needs being available to purchase by the state leading the state to out-compete the private sector using its greater financial power.

Conversely, if things are available to buy, then the state can use its financial might to buy up those things. This is most notable in the primary policy prescription of MMT of the Job Guarantee - acting as an employer of last resort and providing a job to anyone that wants one (and in the process, rendering the minimum wage somewhat moot). The JG is especially interesting when you realise what you're actually doing is anchoring the value of the currency to X units per hour of unskilled labour. At that point, spending is all relative to that price anchor. Things can and should float relative to it in response to supply and demand, but that fundamentally the JG wage is the financial control point.

It's kind of funny how little consideration is given in the mainstream to establishing a proper value for the currency given how much hand-wringing is performed over inflation fears.

How many hours of unskilled labor equal one hour of principal software engineer labor? Imho the answer is NaN/infinite - the unskilled person won't be able to do in years what the engineer does in minutes while picking today's lunch restaurant. Sounds very much like 9 women delivering a baby in a month.

You can make the same argument about principle software engineers. How many php front end developers does it take to write a kernel driver? Of course, the question actually being asked is what the relative pay of the different positions are, since that's how money works.

Yes. Our money works because it's not pegged to unskilled labor. Money tied to it wouldn't work.

"And you should listen to me because I'm unwilling to stand behind my opinion.". Why would it not work?

Because unskilled labor is incomparable to skilled labor, and various specializations of skilled labor are incomparable to each other.

It's an infinite money glitch - computers can do many unskilled labor tasks autonomously. I have an AWS account and am happy to sell.

When your AWS account can remove graffiti from the wall, or plant flowers, or dig a road, please do let me know. Even when that happens, I don't think a job guarantee would extend to an AWS account.

Despite your protests, people manage just fine to compare labour based on how much the provider of said labour is paid using the single measure of quantity of currency.

No, they compare the market value of labor, which is the part that makes the economy possible and this proposal would remove it.

It would not remove it, everything would float relative to that point. If you don't define the reference point, things still move about the price of labour since that's the dominant variable, just the absolute baseline can float around too. Defining a single point allows any arbitrary market position for everything else.

Since money is a social construct with a social purpose (and indeed, is the reason people are unemployed) it's perfectly reasonable that we define it's value to provide a social purpose, which has the added benefit of providing price stability.

Moreover, it provides a buffer stock of employed that can easily transfer to and from the private sector.

Reply on news.ycombinator.com