It turns out that MMT — or some version of it — has been tried in a number of emerging countries. Although most cases have taken place in Latin America, there have also been episodes in other parts of the world, including in Turkey and Israel. MMT-type policies were also attempted in France during the Mitterrand presidency. Almost every one of the Latin American experiments with major central bank–financed fiscal expansions took place under populist regimes, and all of them ended up badly, with runaway inflation, huge currency devaluations, and precipitous real wage declines. In most of these episodes — Argentina, Bolivia, Brazil, Chile, Ecuador, Nicaragua, Peru, and Venezuela — policymakers used arguments similar to those made by MMTers to justify extensive use of money creation to finance very large increases in public expenditures.
Heh, I completely expect the immediate response to be the MMT version of “True Socialism has never been tried. Thus, all your bad examples don’t count, and we’re still right.”
MMT worked for Nixon, overnight. FDR used is twice, once to reprice gold and once for WW2 price controls. With price controls one can do MMT for a few months. Hamitron used a form of it when he consolidated colonial debt into central government.
The general idea is practiced almost uniformly. If not practiced, imbalances would accumulate and cause as much problems than doing MMT.
When your currency isn’t pegged to anything particularly you have the possibilities. Comparison in the article is irrelevant.
Well, financial and political crisis do tend to mitigate around the globe over the decades and now it is time for South America to go over the barrel here. And we will have to see if any of these political protest & riots can be contained or they spin out of control with Civil Wars. Even Venezuela who yet to go full Civil War! So we really should be concerned on these issues but these nothing compared to the 1970s battles.
In terms of MMT arguments, I am not sold on historical low interest rates because:
1) This is an indication of weakness in the private sector that there is limited investment opportunities.
2) I believe China and somewhat India have crowded out Western investment opportunities much as the same way they have crowded a lot of working class positions.
3) At the heart of low interest rates and low non-medical inflation is low or following population growth. (Population slowdowns lowers AD before AS curves for Keynesian models.) Without growing populations why do you need to build more?
4) I do believe the next Western government debt will fail and lead to crisis long term. (Although I think longer than you do.)
On the other hand, the only developed Nnation to sidestep the Great Depression was Japan. They used money-financed fiscal programs and their economy expanded while Europe and the United States stayed in doldrums through the entire 1930s. Unfortunately Japan used the money-financed fiscal programs to build a military empire. It is remarkable that this chapter of the Great Depression is not taught in American macroeconomic textbooks, and is almost unknown to the West today.
The MMT trials seem to be “polluted”, politically, with other wasteful consumption rather than investment uses of the printed money.
I actually think it would be better for the USA right now to be printing money, rather than borrowing it, and pay off the national debt with US$ paper.
Liquifying it, according to the CATO article’s note about what the Latinos call it.
The idea of using money printing to pay for a Job Guarantee seems quite reasonable – fiat money, for semi-valuable work / make work / “training” work which later has little real value.
The existence of other foreign money, along with imports and exports, means the limit on printing money is influenced strongly if not determined by the exchange rates. When the currency goes down (by 5% 10% 20%???) against the USD, the printing needs to stop.
When the USD goes down 5-10% against the Euro, its printing needs to stop.
Japan’s got some 200% or more of their annual GDP as debt, mostly held by internal Japanese entities. So huge national debt doesn’t automatically lead to disaster — tho it often does. (The Wolf of Wall Street did make it home in the movie, driving).
The MMT folk need to have some theoretic limit on the amount printed, and it’s not clear they do.
The definition of MMT remains fuzzy.
However, it is interesting to note that the world’s largest bond manager, Pimco, and the world’s largest money manager, BlackRock, and the world’s largest hedge fund manager, Ray Dalio, and perhaps the world’s most experienced central banker, Stanley Fisher, have all come out in favor of money Finance fiscal programs.
Calling Car 54…and Arnold Kling!
I would echo what I think that others are hinting at: you can successfully print money as a means to transform an economy and make it more productive. This is especially the case if your economy already has a lot of unemployed factors of production and you use the money printing to pay for capital accumulation (factories, trains, roads, schools, etc.) Basically the East Asian export led development model using money presses to increase investment. So not a good idea to use in the US where most additional investment probably has a pretty low ROI and most factors of production are already employed.
What is the likelihood that my grandchildren will continue paying interest on the Texas S/L bailout? V22 will never see another day of combat with low cost attack drones flying about. Who is paying infinite interest on that development?
MMT is a mathematical certainty. It is a result of calculated imbalances in federal spending that exceed our estimate of the future. The future arrives, and we are dead and the kids and grand kids are paying interest on debt they never voted for. The Constitution has provided a remedy, the ‘Right to Coin’. Every American generation does some form of MMT to correct the imbalances.
We are simply in denial because every generation then produces the same ‘This time is different’ economists who falsely claim to have solved the imbalance problem. It is a never ending cycle, our only hope ti do do the cycle with a little less volatility.