Search results for: “mmt”

  • MMT and the Wealth of Nations, Revisited

    I just had occasion, in replying to a correspondent, to reiterate much of the thinking in my recent MMT Conference presentation. I thought it might be a useful and apprehensible form for some readers, so I’m reproducing it here. I’ve also explained this at somewhat painful length here. Correct me if I am wrong but…

  • Where MMT Gets Its Accounting Wrong — And Right

    Modern Monetary Theory has been revolutionary in economics, and its influence is — beneficially — ever-more pervasive. It has opened the eyes of a generation to a clear-eyed, accounting-based methodology that trumps dimensionless theory, and has brought a deep, nuts-and-bolts understanding of money, debt, and financial institutions to a discipline where that understanding has been inexcusably…

  • Predicting Recessions The Easy Way: Monetarists, MMT, and the Money Stock

    I have a new post up that has implications for stock-market investment, so I decided to try posting it over at Seeking Alpha, where they’re paying me a few tens of dollars for the post (plus more based on page views — not much luck so far). The post argues that year-over-year change in Real…

  • An MMT Thought Experiment: The Arithmetic and Political Mechanics of Net Financial Assets

    Imagine that over the next week (in a closed American economy — the rest of the world has never existed) everyone sold all their financial assets, paid off all their debts, and deposited the remaining money (and any currency they have) in their checking accounts. No money-market funds, even. Just banks with reserve accounts at…

  • The Most Important Econoblog Post This Year: The Steve Keen/MMT Convergence

    Neil Wilson has done yeoman’s duty to (perhaps) achieve a convergence that has been too-long delayed. A Double Entry View on the Keen Circuit Model. Steve Keen is, to my knowledge, the only person who is actually encoding a Godley-esque, MMT-style, accounting-based, stock-flow-consistent dynamic simulation model of how economies work. But many MMTers have been…

  • Question for Market Monetarists and MMTers: What Happens if IOR Goes to Zero?

    For the non-cognoscenti: “IOR” is interest on reserves. Banks keep money in their accounts at the Fed. In October, 2008 the Fed started paying .25% interest on those accounts. The Fed’s also engaged in “quantitative easing,” a.k.a. open-market purchases on steroids, creating new money and using it to buy $1.6 trillion dollars worth of bonds…

  • Sectoral Balances: (Mis?)understanding NAFA and Net Lending/Borrowing

    I’ll start with the short version here: if you’re having trouble understanding sectoral “Net Lending/Borrowing” (the stuff of sectoral balances), try renaming it: Net net accumulation of financial assets. Net accumulation of financial assets (accumulation net of disaccumulation, broken out by types of assets)– Net incurrence of liabilities (new borrowing net of loan payoffs [and…

  • Actually, Only Banks Print Money

    I’m thinking this headline will raise some eyebrows in the MMT community. But it’s not really so radical. It’s just using the word money very carefully, as defined here. Starting with the big picture:  You can compare the magnitude of these asset-creation mechanisms here. (Hint: cap gains rule.) The key concept: “money” here just means a…

  • Wealth and the National Accounts: Response to Matthew Klein

    I’m both abashed and delighted that the truly stand-out econ writer Matthew Klein has offered wonderfully fulsome praise of one of my pieces, Why Economists Don’t Know How to Think about Wealth, and some very interesting discussion as well. Some responses here. Please excuse me if I repeat some of the points from the first article. >His…

  • “In the Beginning…Was the Unit of Account” — Twelve Myths About Money

    Jan Kregel presented a great dinner speech at the recent Modern Monetary Theory Conference, touching on some of the fundamental ways we think about money and economics. (Sorry, no recording or transcript available.) I had a brief conversation with him afterwards, and we followed up with a few emails. The quotation in the title of…

  • The Mysterious Stock of “Loanable Funds”

    This Twitter thread between Ryan Cooper and Joe Wiesenthal prompts me to do full-spectrum explanation of some thinking that I’ve been meaning to get to for a while. (Thanks for the inspiration.) This is good from @ryanlcooper on why taxes are too low. https://t.co/opACPlEX5e — Joe Weisenthal (@TheStalwart) October 25, 2017 Though I'm not sure…

  • Noahpinion: What Causes Recessions? Debt Runups or Wealth Declines?

    Noah Smith asks what seems to be an interesting question in a recent post: “what leads to big recessions: wealth or debt”? But I’d like to suggest that it’s actually a confused question. Like: is it the heat or the (relative) humidity that makes you feel so hot? Is it the voltage or the amperage…

  • Did Money Evolve? You Might (Not) Be Surprised

    You probably won’t be surprised to know that exchange, trade, reciprocity, tit for tat, and associated notions of “fairness” and “just deserts” have deep roots in humans’ evolutionary origins. We see expressions of these traits in capuchin monkeys and chimps (researchers created a “cash economy” where chimps were trained to exchange inedible tokens for food,…

  • Real Household Net Worth: Look Out Below?

    In my last post I pointed out that over the last half century, every time the year-over-year change in Real Household Net Worth went negative (real household wealth decreased), a recession had either started, or was about to.  (One bare exception: a tiny decline in Q4 2011, which looks rather like turbulence following The Big Whatever.)…

  • The New Synthesis? Market Monetarists Meet New (and Post?) Keynesians on Helicopter Drops

    A a year or so back I highlighted David Beckworth’s great post on Helicopter Drops. And the world’s best econoblogger, Steve Randy Waldman, did as well. (A “fantastic post,” he said.) I’ve been pinging ever since to see a response to that post from Market Monetarist opinion-leader Scott Sumner. (AS SRW said, what we’d gotten from him…

  • Michael Woodford and Adair Turner Agree: CBs Won’t (and Shouldn’t) Sell the Bonds Back

    Old news: April 3. But still: Following up on yesterday’s post, see here from Ambrose Evans-Pritchard in The Telegraph (emphasis mine): “All this talk of exit strategies is deeply negative,” [Woodford] told a London Business School seminar on the merits of Helicopter money, or “overt monetary financing”. He said the Bank of Japan made the mistake of…

  • The Fed is not “Printing Money.” It’s Retiring Bonds and Issuing Reserves.

    Update 5/21: See two updates to this post here. Mark Dow had a great post the other day: There is zero correlation between the Fed printing and the money supply. Deal with it. He points out (emphasis mine): From 1981 to 2006 total credit assets held by US financial institutions grew by $32.3 trillion (744%).…

  • Edward Lambert on Effective Demand, Labor Share, Capacity Utilization, and Growth

    He’s only been blogging since March. His credentials? “Independent Researcher on the equation for Effective Demand.” That may explain why, aside from a lonely Steve Randy Waldman link, I’ve seen no mention of his work out there. Just another internet econocrank? I’m wildly unqualified to pass judgment, but Lambert’s built what strikes me as a…

  • Should The Inflation Target be 4.3%?

    I’m quite tongue-in-cheek in asking that question, but nevertheless: I present for your delectation what at first blush seems like a revealing bit of chart porn (hat tip: Zero Hedge): You could flip this upside down and replace “Earning Yield” with “PE ratio.” The data displays a remarkably regular relationship. Equity investors seem to be most optimistic…

  • Identity Games: Saving ≠ Saving? Whodathunkit?

    I finally figured out a simple way to explain my confusion (and that of many others, including many economists) with the whole Saving issue. I may also have figured out a useful solution to that confusion, which I present at the bottom here for my gentle readers’ delectation and denunciation. Econ profs: I’m really curious.…

  • Should Central Banks Burn All Their Government Bonds?

    In June of 2008, Ron Paul made a radical proposal: the Fed should simply burn all the U.S. Treasuries it’s currently holding, reducing the government (U.S. Treasury) debt by $1.6 trillion, or about 10%. (Yes: bonds held by the Fed are counted as part of “Debt Held by the Public,” even though the government basically…