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19-03-2021, 07:29   #16
Wanderer78
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^^^exceptional explanation, thank you. Stephanie kelton was on David McWilliams latest podcast explaining all of this, well worth a listen
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19-03-2021, 11:02   #17
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^^^exceptional explanation, thank you. Stephanie kelton was on David McWilliams latest podcast explaining all of this, well worth a listen
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Additionally, because interest rates are a very blunt/inconsistent tool for managing inflation, taxes should be used instead: Overheating sectors should be targeted with high taxes to depress them, moving workers either into the Job Guarantee or into other sectors which are not overheating. Instead of depressing the whole private sector (both below-capacity and over-capacity sectors), with higher interest rates.
A. Yes, I listened to that yesterday and it inspired me to ask those questions as it was very interesting. Either in that interview or in McWilliam's monologue afterwards that issue of using taxation as a control of inflation came up. If you use taxation to control inflation what then happens with the rate of interest? Does it get held constant (at say 2%) or does a Central Bank still use it as a lever to control things in a more long-term manner?

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You can increase output even more when at Full Employment, by shifting workers into sectors that are more productive/competitive etc. - but that's more about the structure of the economy, and less about Full Output.
B. Yes, this was kind of what I was getting at. For example, a lot of middle eastern autocracies are known for placating their people by handing out public sector jobs where they don't do any real work. A scenario like that would show lower unemployment but clearly there is a lot of slack in that system.

Is it a case that unemployment is still a good measure here since it would take more money to entice those people to leave their jobs to take productive jobs and that would lead to inflation?

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This is pretty unjust, and a better way to manage inflation is the Job Guarantee policy - where fiscal policy is also used to push workers out of the private sector, but into the Job Guarantee program instead
C. Ok so this is the Federal Job's guarantee that I've heard AOC talk about in the USA context? What exactly would those workers be doing?

That kind of thing has an unfortunate historical context in this country with Famine Relief programs building roads to nowhere. What kind of work is there that people can easily slot into and out of without requiring much training or prior knowledge?

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Ultimately, the main limit is Full Output, not money. Unless there are exceptional circumstances, like e.g. foreign sanctions in one form or another etc. - then a country with its own currency can normally always afford to immediately return to Full Output - money is never the limit, resources and workers are the limit.
D. Let's do a thought experiment. What would happen if you got a country such as the Democratic Republic of Congo (DRC) and cancelled all of their debt that was in foreign currencies. This is an extremely poor country that is extremely rich in natural resources (it has gold, diamonds, oil, rare earth minerals, timber and lots more). The DRC has their own currency, the Congolese Franc. They have a population of 86 million where over 70% live on less than $2 a day.

What would be the roadblock to the DRC using MMT to pump money into their economy, either directly to people or to their primary extraction industries?


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Sorry if a bunch of this is quite verbose - the change in perspective in how macroeconomics works, compared to what people traditionally think and are taught, is quite large and subtly far reaching - so even for questions which are pretty simple, a bunch of different things have to be touched on at once.
Not at all. It's fascinating and mind-blowing stuff. I'm from an Engineering & Scientific background so have not studied Economics at any level since a module in Transition Year (a long time ago). I first got wind of this new way of thinking about Economics when McWilliams had Kelton on his show last year. I bought her book off the back of that - read half of it and it was blowing my mind but I had loads of questions that I wanted to ask someone so I paused (for way too long). I want to go back now and read the whole thing with a fuller comprehension of it all.
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20-03-2021, 03:51   #18
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A. Yes, I listened to that yesterday and it inspired me to ask those questions as it was very interesting. Either in that interview or in McWilliam's monologue afterwards that issue of using taxation as a control of inflation came up. If you use taxation to control inflation what then happens with the rate of interest? Does it get held constant (at say 2%) or does a Central Bank still use it as a lever to control things in a more long-term manner?
Ya that was a good interview, and the followup afterwards in particular (almost skipped that) - "most economists don't understand money":
https://podcasts.apple.com/ie/podcas...=1000513498995

The experience of the other guy on the interview, of mind-bending cognitive dissonance trying to understand it at first, unfortunately seems to be a universal experience (myself included ~10 years ago) - but once you grok it and it 'clicks', it makes so much sense (but you'll practically never stop learning new angles to it, in debate).

MMT supporters tend to argue that parking the interest rate at 0% and using just taxation to manage inflation, is best.

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B. Yes, this was kind of what I was getting at. For example, a lot of middle eastern autocracies are known for placating their people by handing out public sector jobs where they don't do any real work. A scenario like that would show lower unemployment but clearly there is a lot of slack in that system.

Is it a case that unemployment is still a good measure here since it would take more money to entice those people to leave their jobs to take productive jobs and that would lead to inflation?
The thing about that example of public sector jobs in autocracies, is that if those people would remain unemployed otherwise, then that's still a benefit to the economy by keeping it closer to Full Output - and by those workers spending their money in the private economy, helping to boost it back up. In this case, inflation would still be determined by monetary/fiscal policy, and wouldn't be related to such jobs.

If we replace this with the Job Guarantee though, then your question touches on an additional benefit of the Job Guarantee the JG is inherently an inflation management mechanism (so that would not be a problem), but what you touch on is that it also bolsters workers bargaining power with businesses/employers.

No more shit pay for jobs that nobody likes, because workers can just go on the JG instead - nursing home workers having to clean up after pensioners etc. would probably have to be paid multiples of what they get now (and rightly so) - people wouldn't be pushed into sex work due to financial circumstances etc..

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C. Ok so this is the Federal Job's guarantee that I've heard AOC talk about in the USA context? What exactly would those workers be doing?

That kind of thing has an unfortunate historical context in this country with Famine Relief programs building roads to nowhere. What kind of work is there that people can easily slot into and out of without requiring much training or prior knowledge?
I'm not sure exactly what AOC has advocated, but yes I believe AOC and Sanders advocated the same thing - though perhaps a lighter form of it.

The problem with discussing what the workers can do, is that the sheer breadth of work that can be and needs to be done is so large, and the different skills and limitations in the potential workers is of such a large variety, that no matter how good or thorough the examples presented, they are really easy to attack rhetorically by trying to play-up potential mismatches between work and skills.
The JG would offer training as well as work, and the breadth of work available would be so wide that there will almost always be a matching role - but that won't matter to someone engaging in a rhetorical attack.

Straight away though, there are things which we need to immediately be working on in massive numbers, like retrofitting economies to eliminate climate changing emissions, R&D in this area as well, rapidly expanding accommodation and public transport infrastructure - there is decades of urgently needed work in these alone - and that is not even scratching the surface of the scope of potential work that a JG can offer.

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D. Let's do a thought experiment. What would happen if you got a country such as the Democratic Republic of Congo (DRC) and cancelled all of their debt that was in foreign currencies. This is an extremely poor country that is extremely rich in natural resources (it has gold, diamonds, oil, rare earth minerals, timber and lots more). The DRC has their own currency, the Congolese Franc. They have a population of 86 million where over 70% live on less than $2 a day.

What would be the roadblock to the DRC using MMT to pump money into their economy, either directly to people or to their primary extraction industries?
The problem is you can't separate politics and economics - Congo's main problem is that it's basically being pillaged through neo-colonialism, lead by multinationals and intelligence agencies, who'll prop up into power, whoever will assist.

It's a very unstable country, so if they undertook MMT policies and e.g. rebels got control of key areas of the economy - causing a large drop in GDP - or if there were, for example, economic sanctions against the country - then that's the perfect recipe for hyperinflation (some of the true causes of hyperinflation: economic collapse and/or sanctions) - which would be likely in that circumstance, even without creating money.

So, their problems are political and a problem of international foreign policy against Congo - MMT can't fix that.

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Not at all. It's fascinating and mind-blowing stuff. I'm from an Engineering & Scientific background so have not studied Economics at any level since a module in Transition Year (a long time ago). I first got wind of this new way of thinking about Economics when McWilliams had Kelton on his show last year. I bought her book off the back of that - read half of it and it was blowing my mind but I had loads of questions that I wanted to ask someone so I paused (for way too long). I want to go back now and read the whole thing with a fuller comprehension of it all.
Ya people from a scientific background have a waaay better chance at groking this accurately and not going down a false path, than the average economist, heh

Steve Keen is another good guy to read (he is Post-Keynesian, the same general economic school that MMT is a part of) - but his 'debunking economics' book is perhaps too dense - he has a good Patreon (you might find his Minsky macroeconomic modelling software very interesting, from a science/engineering viewpoint).

One of the best resources I know of (where I indirectly found most of the people and economics resources I learned from), is Naked Capitalism - which is more a journalism resource, and does some of the best political/economic news collation/analysis I've seen anywhere (some of the earliest/best writing on scandals in the aftermath the economic crisis, one of the earliest prominent MMT supporters, the best writing/political-economic-analysis on all of: the Greek Debt crisis in 2015, Brexit all the way up to today, and the coronavirus).
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20-03-2021, 07:58   #19
Wanderer78
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Steve Keen is another good guy to read (he is Post-Keynesian, the same general economic school that MMT is a part of) - but his 'debunking economics' book is perhaps too dense - he has a good
His podcast, also called debunking economics, is very good, but you have to pay for it, in order to listen to it in full, but he does give short teasers for free. I downloaded minsky a long time ago, still haven't managed to use it though, keens YouTube channel is very good, which includes minsky tutorials. Ann pettifor is also very good at explaining money
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