[evilgenius]

Modern Money Theory is the idea that fiat currencies are not subject to local constraints. Governments are not domestic households that need to balance their budgets. They can deficit spend as much as they need. They will never run out of money.

The trick is whether the money supply is actually beholden entirely to government spending for its existence. I've spoken before about how borrowing from the bank creates money. Under the fractional reserve banking system the money supply both grows and shrinks in response to human activity. How does monetary policy effect that? It does so through interest rates. It imposes higher rates upon the economy by oversupplying the money supply, and using the offsetting tool of selling bonds, which causes a constraint upon the availability of money to seek those bonds. They will pay less for them, driving up rates. The increase in rates will shrink the level of borrowing. But what's to stop a government issuing money without going to the markets to sell bonds? According to Modern Money Theory, nothing. What it would do would be to induce more money supply growth. This could lead to huge inflation. It might be a possible tool when there are problems getting inflationary mechanisms going, adhering to a target rate in an economy that just won't grow that fast. But there remains a lot of danger in fields where there is a low or even a meager supply of workers. Those people could demand considerable pay for their services. You have to wonder what ratios, if any can be manipulated, would be the best approaches? Should a government stop the practice when only highly skilled positions are enjoying wage bargaining power, or ought they to allow unskilled positions to attain such power as well?

One thing to think about: If the government can create money from nothing, then why not set the opportunities of your entrepreneurs as your ultimate target? Why not make any person's opportunities possible? In other words. why not loan anyone who wants to enter a certain field what it takes to enter that field? If they want to become ride-share drivers, loan them what it takes to get a proper car and get set up. If they want to enter a certain aspect of construction, loan them what it takes to get that mini-excavator, trailer and assorted smaller tools. Why not look at opportunity the same way as we look upon student loans? Well, why not do that, and then take it to another level? Why not use the deliberate manipulation of interest rates to incentivize people to go into certain opportunities, by offering relief from the higher prices they would normally have to pay to get set up? I could say more right now, like how those who borrow should probably ought to agree to certain practices regarding employees, but that's not essential to this topic. I just wanted to bring this up and see what people think.

[Cog]

Loans are based upon the risk of being repaid. If you get a degree in gender studies for $100k, you are more at risk at defaulting than someone in a more desirable STEM degree.

Now back in 2007, banks made the decision that loaning money for sub-prime mortgages were no risk loans. Even though they knew they would default at a higher risk than conventional mortgages, the price of houses were going up monthly. You literally could not lose even with a foreclosure. But all of that risk was based on housing always going up. When it stopped going up, the risk assessment underlying those loans collapsed.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('evilgenius', 'M')odern Money Theory is the idea that fiat currencies are not subject to local constraints. Governments are not domestic households that need to balance their budgets. They can deficit spend as much as they need. They will never run out of money.

[evilgenius]

It's precisely the Latin American style of overinflating the money supply that worries me about Modern Money Theory. I think that's where getting the intent, empowering entrepreneurs, right matters. I can see temptations there which people in power have problems resisting. Not that even steep inflation is hyperinflation. Hyperinflation only comes when the people lose faith in your currency and you have to offer so much of it to them to entice them to participate that it becomes ridiculous. There is more going on than the value or circulation of money in those cases. The leadership is often divorced from reality, or is so crooked that it won't bend when challenged. That being said, it isn't necessarily the case that terrible inflation would follow spending that didn't also seek balance in the bond market. It might follow that certain sectors of the economy would experience that. I wonder if targeting talented positions of different kinds would produce different results? Can certain positions receive interest rate relief over others? How much of an economy is walled off, so to speak, that, like when gasoline prices initially rise, people just suck it up, such that when certain jobs done in the economy rise in cost the economy wouldn't also suck it up? Economists have talked for a long time about a multiplier effect, where the money in the hands of some people does more through various channels than that given to others. I think this is usually when something like defense spending rises to a level where those who receive the government's money are more likely to borrow, increasing the money supply via the banking system. More defense related employees borrow than welfare recipients, I'm fairly certain. Would the success of certain people involved in a subsidized relationship with the government that guaranteed their probable success mean that they also would tend to borrow more? Can positions like teaching in regions where teachers don't make much be effectively boosted, at least over the period of student loan repayment, so that those people have more to spend? And, then, continuing education too.

https://www.youtube.com/watch?v=odxpmyD4w0w
https://www.youtube.com/watch?v=-KRi9nF8BiA

[Newfie]

Once you start making these loans when do you stop? A guy wants to drive Uber, so you lend him the money for a nice car, but he doesn’t really work at it and can’t repay the loan. Now 10 of his buddies want the same loan, and they can’t repay it either. They demand it if the government to make things “fair.” Pretty soon it becomes a “free car” program.

Then there are so many Toyota Camrays they have no resale value so no poInt repossessing. Isn’t that sort of what happened to the housing market?

[radon1]

Currencies are not the money, they are derivatives from the money. There is always single type of money in the world as long as no totally isolated groups of people exist anywhere. Currently, the US dollar is the money. Prior to that, gold was the money.

If a central bank prints unlimited amounts of a currency, at some point this will result in hyperinflation.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('radon1', 'C')urrencies are not the money, they are derivatives from the money. There is always single type of money in the world as long as no totally isolated groups of people exist anywhere. Currently, the US dollar is the money.

[evilgenius]

$this->bbcode_second_pass_quote('Newfie', 'O')nce you start making these loans when do you stop? A guy wants to drive Uber, so you lend him the money for a nice car, but he doesn’t really work at it and can’t repay the loan. Now 10 of his buddies want the same loan, and they can’t repay it either. They demand it if the government to make things “fair.” Pretty soon it becomes a “free car” program.

Then there are so many Toyota Camrays they have no resale value so no poInt repossessing. Isn’t that sort of what happened to the housing market?

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Newfie', '
')Then there are so many Toyota Camrays they have no resale value so no poInt repossessing.

[radon1]

$this->bbcode_second_pass_quote('Outcast_Searcher', ' ')any basket of liquid currencies they want,

[Outcast_Searcher]

$this->bbcode_second_pass_quote('radon1', '')$this->bbcode_second_pass_quote('Outcast_Searcher', ' ')any basket of liquid currencies they want,

[evilgenius]

Another way to ensure compliance with the intent of any sort of entrepreneurship program would be to give people scores. If they are paying back they get a certain number of points, or lack of points. If their ratio of debt to equity or earnings is under a certain level they gain the same. There could be a whole range of ways to improve a person's score. In this way things like ride sharing opportunities could be offered to anyone possessing a certain score. If you borrowed and were just playing the system your score would probably not qualify. In case you lived in Appalachia, there could be an appeals system.

An obvious secondary point of contention would seem to be; for whom can this program work? Is it simply for individuals, or for small, or even large, corporations? Since the Supreme Court has said that corporations are people, can we leave corporations out of it? That can work in people's favor, though. Getting involved in the program would mean that corporations would be bound to certain standards in relation to contractors and employees. It isn't just that they might have to become LGBTQ friendly, but that they would have to adhere to fair employment practices. Collectively, we would have to decide what those standards were. It is important, alone, that people enjoy a common understanding that levels the playing field.

[radon1]

$this->bbcode_second_pass_quote('Outcast_Searcher', '
')
If the US disappeared tomorrow, do you imagine that the rest of the world would magically stop all economic activity?

[dissident]

radon1 and his idol, the US dollar.

Are you for real? The BS you have posted is some of the most idiotic nonsense ever on this board.

Each fiat currency out there has its own confidence level independent of the US dollar. That is why we have a currency market and currency exchange rates in the first place. If global fiat was a one-parameter function of the US dollar then such a market and exchange rates would not make any sense.

Central banks accumulate reserves independent of their prime lender role in the financial system of any country. They could accumulate palladium alone, or silver or gold, or the Chinese yuan. If you are going to argue that financial instability applies to all currencies except for the US dollar, then you are utterly clueless. For now the US has a special place where the US dollar does not react much to financial shocks. But that is because there is so much global demand for it. It has nothing to do with the role you are ascribing to the dollar. The British pound is also immune to shock devaluations. Don't even try claiming that the pound is some slaved currency that is meaningless without the dollar.

You are basically claiming that the global GDP exists only because of the US. You are clearly out of it, in a really bad way. The global GDP exists because of humans. And most humans reside outside the US.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('radon1', 'F')or example, under this theory, people have no incentive to engage into trades, since the result of a trade would be net negative for them. Also, this theory cannot explain where profits come from.
I

[onlooker]

Yes, I think inflationin the US is being reigned in by these long lasting very low interest rates which has allowed Demand to stay vibrant and of course the US being the global reserve currency helps. Which leads to the post by Dissident which I fully agree with. The economic acitivity of the world does not hinge on the US dollar nor does the value of all the many currencies. On the other hand, as Dissident pointed out the remarkable strength of the US dollar is due to the US traditionally strong Economy and its status as the global reserve currency and Petro dollar keeping demand for the Greenback always high

Now. on a more general note, MMT in my opinion has been ultimately self serving. The Banks and banking industry have made out like robber barons. The proof is that we have now have an entire planet under onerous Debt .  Leaving the Gold Standard has allowed the Federal Reserve  to constantly manipulate  interest rates, lending and the money supply.  But it has led to a country whose economics is controlled wholly by the financial sector and  where investments decisions have been ever more dubious because of all that  loose free flowing and abundant lending ie. money.  This in turn is totally distorting the interactive sound economic discipline of price discovery.  But, even more grievous is that MMT has been forced upon the world via Structural Adjustment Programs and Institutions like the World Bank , IMF and WTO. Whole economies have been sacrificed at the altar of economic growth, which is euphenism for the rich ie. rich countries exploiting the poor ones. So, to finalize, MMT to me is emblematic of the Capitalistic exploitation and profit making fervor that allows the powerful to make up rules of the game which ultimately and consistently favors them. Oh and Outcast you want citations read "The Case against the Global Economy and for a Turn toward the Local"

[radon1]

$this->bbcode_second_pass_quote('Outcast_Searcher', '')$this->bbcode_second_pass_quote('radon1', 'F')or example, under this theory, people have no incentive to engage into trades, since the result of a trade would be net negative for them. Also, this theory cannot explain where profits come from.
I

[Outcast_Searcher]

$this->bbcode_second_pass_quote('radon1', '')$this->bbcode_second_pass_quote('Outcast_Searcher', '')$this->bbcode_second_pass_quote('radon1', 'F')or example, under this theory, people have no incentive to engage into trades, since the result of a trade would be net negative for them. Also, this theory cannot explain where profits come from.
I

[radon1]

$this->bbcode_second_pass_quote('Outcast_Searcher', '
')So you're not talking about the real world?

[radon1]

$this->bbcode_second_pass_quote('dissident', ' ')

You are basically claiming that the global GDP exists only because of the US.