6.Jones wrote:The usual argument is that it'd be inflationary [and a majority of economists would say so] but in an economy where all the excess money was spent on lost production, rather than sloshing around in the system to buy things, would it be?
We might need a big gust of inflationary pressure.
Jobs, profits, stocks heading earthward, oil dipping below zero, double-digit unemployment: means there's a worry about DEflation ...
6.Jones wrote:What if the swivel eyed loons are right? If ever there was a time to find out if MME is right, this is our chance. Of course you can't just magic up that amount of quantitative easing whenever you want, but these are unusual circumstances.
Did Silver put out out a primer on this MME business for the bored that you could executively summarise?
(A lot of threads on here I just never bothered opening, after a while...)
I sat at the feet of Silver. I can write a primer.
Simplistically, MME says central bank money behaves fundamentally differently to regular money, as long as it stays in the control of the central bank. Most importantly, it can't have an inflationary effect. Thus, if the central bank creates money in the form of central bank credit, which the government then spends directly on goods and services, that's alright. But if the central bank pushes that money into the real economy as credit [for example by selling bonds to pay back the loan it made to itself, or worse, borrowed to fund] then that can be inflationary, because that new money competes for goods and services with the money already in the system, so each bit of money's worth less.
Like an island with five coconuts, and five women to spend them on. Adding a new coconut doesn't create a new woman, so each coconut is worth less. As long as the government doesn't spend its coconut on women, but roads, there's no inflationary effect.
It's the logical extension of the idea that money is credit, and everyone magicks it up, which is true. Silver got a lot of flack for that, but on that narrow point he was right. Retail banks magic up money all the time in the form of commercial bank credit, with the aim of making it disappear when it's repaid. There's a concept called the money multiplier intended to control this but it never worked, because most banks simply use credit as collateral, which means old credit can be used to make new credit, like making Kombucha in your bath.
That means there's much too much money in the world, but that's another story. Personally, I think the cause of all our financial problems is the vast excess of money in comparison with all the goods and services in the world, and the emergence of a newly wealthy group of developing nations forcing it into circulation because of their wealth. Or to put it another way, no more simply stealing their shit.
But if the MME mavens are right, we can solve our debt problem with a pen. Surely it's worth trying, once?
What can go wrong? Apart from Venezuela style hyperinflation?