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By how much should the Bank of England increase interest rates in a traditional monetarist economy

Are you the Thread Police? It's the thread where the two posts I refer to are found. Take it up with @PaulMB and @Jim Audiomisc
Just re read my post. My final paragraph was not a dig at you. Apologies if it appeared otherwise. As far as I am aware you are not one of those who have been hostile to MMT. I would happy to answer any questions about MMT, but perhaps not here.
 
I have limited understanding but it seems that in time of stagnation/recession MMT is, regardless of anything, the humane approach. Blame Covid, Brexit, Russia and any combination but it seems very clear that monetarist policy will damage the lives of many and all the poor.
 
Your response here to a question about your opinion on Monetarism, is exactly the same as your response when asked a question about your opinion of MMT. You are clearly incapable of forming an opinion one way or another
On the contrary, I'm forming an opinion at this moment.
If opinion of MMT is "one way or another" are there only two allowed? Are they for or against?
 
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I have limited understanding but it seems that in time of stagnation/recession MMT is, regardless of anything, the humane approach. Blame Covid, Brexit, Russia and any combination but it seems very clear that monetarist policy will damage the lives of many and all the poor.
I think therein lies the rub, people are attracted to the theory as they prefer the predicted outcomes, but that doesn't mean it's right or it works. The stagflation of the 70s, and the monetarist reaction, are seen as a similar failure of the heroic adoption of Keynesian policy, although I suspect that view is subject to revisionist interpretation by some modern economic thinkers, possibly including those who subscribe to MMT
 
I think therein lies the rub, people are attracted to the theory as they prefer the predicted outcomes, but that doesn't mean it's right or it works. The stagflation of the 70s, and the monetarist reaction, are seen as a similar failure of the heroic adoption of Keynesian policy, although I suspect that view is subject to revisionist interpretation by some modern economic thinkers, possibly including those who subscribe to MMT

Yes, that is my impression, too. What some on these many MMT threads seem to think is that MMT is a magic formula for making the world a better place. But from what I've read it is not a "formula" but a "theory," a way of looking at economics different from the traditional way. It is not in itself a magic bullet. You can make massive new investments and increase the national debt, take from the rich and give to the poor, on the basis of traditional economics. This has been done and has worked in the past, using traditional economics prompted by a political and social vision.

And, once again from what little I know, the idea that a currency's value is not determined by the market, by good old supply-and-demand, but by government decisions, and that international dynamics (e.g. exchange rates, viability of state bonds) need not be taken into consideration, or that taxes do not fund state spending, to me sounds like utter nonsense.
 
I think therein lies the rub, people are attracted to the theory as they prefer the predicted outcomes, but that doesn't mean it's right or it works. The stagflation of the 70s, and the monetarist reaction, are seen as a similar failure of the heroic adoption of Keynesian policy, although I suspect that view is subject to revisionist interpretation by some modern economic thinkers, possibly including those who subscribe to MMT
I agree with Fadhel Kaboub where he says that MMT is not a theory, (but that is very controversial among MMT supporters) MMT is at heart an observation that tax does not fund government spending. A lot comes after that which constitutes a coherent theory, but the central observation about money flow in the real world does not require an understanding of theory
People are attracted to that MMT observation because it allows for spending where it is so desperately needed as opposed to monetarism which is an ideology that sees government spending as the root of all evil and needs to be cut as much as possible. Despite being an ideology that is supposed to control inflation, monetarism has actually produced inflation time and time again.

Monetarism ascribes the stagflation of the 70’s to Keynesianism, but we are now heading for stagflation under Monetarism, so by the same measure, monetarism has failed on it’s own terms.

I don’t want to say more about 70’s stagflation because that would take us into MMT, but I offer this excellent article for those who might be interested

http://bilbo.economicoutlook.net/blog/?p=33419
 
On the question of recession it is important to recognise that recession (and inflation) is something which happens in the private sector, but which must be addressed by the government sector. It's so commonly thought of as a government problem first (though some of it is) and confused with ideas about money supply excess etc. which is the first stop of all commentators.

In supply shock like this, the 'too much money chasing too few goods' inflation slogan should be seen turned on its head as: 'too few goods to supply existing demand'. When that exists you up production, you don't merely depress demand. That's retarded. You need more bread and have the money to pay for it, but the supermarket doesn't have enough bread? The answer isn't to just destroy or paralyse your purchasing power, but to bake more fecking bread!

In a situation where the economy is artificially held down with refusal to use all labour resources effectively (refusal by government, unwillingness/inability by private sector) it can't be achieved.

Again as we all know here it is a job guarantee we need to stabilise prices by anchoring it to that employment buffer stock, setting wage price. Which also produces output (which they can choose, it's not 'make work' nonsense) which is supply, which is what we need!

It should be noted that the 2008 crash occurred during monetarist assumptions about the economy

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It should be noted that economic collapse did in fact control inflation. Monetarist policies will control inflation but austerity, wage deflation and unemployment are the consequences

It should also be noted that the monetarist response to 2008 has also failed to produce the required outcomes.
 
In supply shock like this, the 'too much money chasing too few goods' inflation slogan should be seen turned on its head as: 'too few goods to supply existing demand'. When that exists you up production, you don't merely depress demand. That's retarded. You need more bread and have the money to pay for it, but the supermarket doesn't have enough bread? The answer isn't to just destroy or paralyse your purchasing power, but to bake more fecking bread!

Upping production is disastrous from an environmental perspective. We need to consume less of pretty much everything, not more!
 
Upping production is disastrous from an environmental perspective. We need to consume less of pretty much everything, not more!
Depends on what you produce? Producing tat for popular consumption yes, but producing for need, for example, more cycle ways and more coherent transport solutions, to get more cars off the roads, not so much.
 
Why am I a conscientious objector? For a start there have been many life changing injuries, and at least one loss, as a direct result of MMT just on this forum.
Are you going to explain this remark, or just post irrelevant comments in reply? Only this is a big f-off bomb to drop into a thread and just walk away from.
 
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What can we do to shift discussion away from the current orthodoxy? "Philosophers have hitherto only interpreted the world in various ways; the point is to change it"

Get more people to read Galbraith! :) His key advantage is that his writing is sharp and exposes the failings of the established religion called "Conventional Wisdom" in economics. Whereas, alas, I fear modern critics like Steve Keen tend to be more opaque and lack the barbed wit Galbraith peppered his work with. Makes them readable.

Even if the result means someone doesn't agree with him about everything, they can see the failings of the present system neatly kippered and some of the alternative approaches. That then makes it easier to see the point of more modern work like Keen's.

The problem is, indeed, that Established economics is like Established religion. It becomes a meal-ticket, a club, a way for some to gain power, influence, and wealth by using it to exploit and control the rest of us using a dogma. TINA Rulz.

I also predict that many will smile at times as they read Galbraith... although those in the above 'club' will hate it. :)
 
I think the answer as to why no-one is defending monetarism, passionately or otherwise, is quite simply that few of us, self definitely included, have the intellectual ability, specifically with regards to mathematics and statistics, to mount a defence of it. .

Sorry, can't resist saying here: Galbraith is pretty much an "equation free zone". He tends to discuss in terms of human behaviour and what happens in the real world.

Beware economists or politicians who try to blind you with 'maths'. Sign that they have nae clue.

Somewhere I have a copy of a cartoon showing two people coming out of a lecture. One saying to the other: "He must be very clever, I didn't understand a word he said."

Avoid assuming such signs prove someone is "clever" because it may simply mean the *speaker* had no clue, either, what he was saying. :)

(As someone who was in the "Ed Biz" for decades I routinely came across things in textbooks that I was puzzled by and didn't understand. However - more often than you'd expect for standard texts in *physics* - looking into it I realised that the book was simply wrong.

Take no-one's word for it.
 
It should be noted that economic collapse did in fact control inflation. Monetarist policies will control inflation but austerity, wage deflation and unemployment are the consequences

It should also be noted that the monetarist response to 2008 has also failed to produce the required outcomes.

And, yes, shooting everyone also solves all economic problems. 8-]
 
Depends on what you produce? Producing tat for popular consumption yes, but producing for need, for example, more cycle ways and more coherent transport solutions, to get more cars off the roads, not so much.

Hard to disagree, in theory. But who decides what is "tat for popular consumption" and what is "need"? And what do you do when 90% of the shops have to close because they sell "tat"? Or when car factories have to lay off workers?
The obvious answer is that the shopkeepers and factory workers would be turned to making solar panels and cycle paths and bamboo bicycles. But how long would it take, hypothetically, to transform the whole world?
And people would still desire "tat," in the form of a new car, a new stereo, new clothes, a new kitchen, new pots-and-pans, a new and ever larger TV set?
Because people will spend their money on what they desire, which is 90% "tat". And by drastically cutting back production and retailing of consumer goods, people will become poorer, factory hands jobless, shopkeepers' families starving. One solution might be forcing all men to have one very expensive handmade suit every three years, instead of three new rubbish rags a year. Or a new car, built to last, every 20 years. But is this realistic.
Unfortunately the world lives in a culture of massive consumption of cheap, throwaway rubbish. Could you isolate the UK and create a Utopia? Given all thr threads here about computers, 58-inch TVs, tablets, Iphones, streamers, trainers, hats, multiple expensive cars, expensive holidays, etc., which are evidently all indicators of how not "in need" one is, I doubt it would be easy.
 
Hard to disagree, in theory. But who decides what is "tat for popular consumption" and what is "need"? And what do you do when 90% of the shops have to close because they sell "tat"? Or when car factories have to lay off workers?
The obvious answer is that the shopkeepers and factory workers would be turned to making solar panels and cycle paths and bamboo bicycles. But how long would it take, hypothetically, to transform the whole world?
And people would still desire "tat," in the form of a new car, a new stereo, new clothes, a new kitchen, new pots-and-pans, a new and ever larger TV set?
Because people will spend their money on what they desire, which is 90% "tat". And by drastically cutting back production and retailing of consumer goods, people will become poorer, factory hands jobless, shopkeepers' families starving. One solution might be forcing all men to have one very expensive handmade suit every three years, instead of three new rubbish rags a year. Or a new car, built to last, every 20 years. But is this realistic.
Unfortunately the world lives in a culture of massive consumption of cheap, throwaway rubbish. Could you isolate the UK and create a Utopia? Given all thr threads here about computers, 58-inch TVs, tablets, Iphones, streamers, trainers, hats, multiple expensive cars, expensive holidays, etc., which are evidently all indicators of how not "in need" one is, I doubt it would be easy.
I’m not going to talk at length here, because this is a thread about Monetarism, and the OP doesn’t want discussion of it’s alternatives.

You said upthread the “taxes do fund spending”, but I have yet to see evidence to support that claim other than it’s what a lot of people believe.

The alternatives to monetarism have nothing to do with creating utopias, they are about arming our selves with real world tools for addressing real world problems, and one of the most pressing problems is the need for a planet able to sustain us. While I could take a personal stand and not go on holiday*, or drive a car, of own a HiFi, in the real world any effective challenge to climate catastrophe has to come from government. Perhaps saving the planet should be *the* role of government. Monetarism denies us the means to tackle real world problems and also creates those very problems, recessions, inflation, low wages and unemployment, that it is designed to solve.

Utopia doesn’t exist, but economic lies that underpin the reality of misery for many and a looming climate crisis are around us day in, day out.

Just today we have a monetarist Tory leadship contender promising to cut Green initiative to pay for tax cuts that will primarily benefit the rich.

*
 
Yes, a lot of people believe that taxes fund spending. Could it be because they do?
Or are these lots of people the victims of a worldwide hoax that has been perpetrated for the past few thousand years, while an enlightened few have seen the light?
I'm sorry but I don't feel like continuing this debate.
 
I've long given up on the question of what the BoE should do with interest rates, so as it's getting interesting and I don't want to break up a party, please feel free to discuss MMT here now.

I should throw in that I'm just starting to get my head around the idea from what Le Baron, Klassik etc have been saying but I need to read their posts more carefully.

I think fundamentally it is that the government can spend what it wants (injection) through money creation as long as it taxes (withdrawal) at the right amount required to stop inflation resulting from the increase in money supply, or deflation from a decrease. So expenditure is the net of public and private spending minus taxation, and this total needs setting at the right level to prevent inflation. Rather than controlling inflation through interest rates it is done through taxation. Although the main policy objective is full employment (through spending) rather than inflation.

I have a few questions that I might be able to answer by reading the posts, but doing that could also raise further questions.

1. How do we know what level of taxation is required at any given time to prevent inflation? That's a fundamental theoreticial point, but I also have an operational point:

2. can the tax system be used to micromanage demand in real time as economic shocks come quickly and I understand changes to tax in the budget are often delayed by months or years as HMRC cannot change their systems quickly enough to apply them? Also, while salaried employees may see the changes quickly in their net incomes, the self employed and those who pay further tax through their annual return may not change their spending behaviour for some time.

If you think about how frequently the MPC meets and how their policy changes are applied immediately, we need a similarly agile policy here.

3. Do interest rates still have a role, what is that role if any, and who sets them? Also gilt issuance?

4. I understand that when employment is not full then there is excess labour that can be used but government spending (eg new hospitals) requires other finite resources. The govt will be competing with the private sector for these, so there will be an increase in prices and a commensurate fall in private sector output. If these price rises are to be limited by taxation then essentially the private sector demand for resources is to be shrunk through making production more expensive (if corporation tax) or demand for their output lower (through income tax). This will raise unemployment in the private sector which will need to be increased by the public sector to maintain full employment. This will lead to an ever increasing share of the economy by the public sector. I'm not sure this is what people want, because of a. the sort of stuff the public sector supply and b. the relative inefficiency and lack of innovation in the public sector.

5. There is an equilibrium level of unemployment in the private sector whatever people say. This can result from "search" unemployment where people are changing jobs and looking for new ones, and structural changes in the economy. When industries are no longer viable (which can be through changes in demand or international competition for example) people are laid off and need to find new jobs or retrain. If companies are not allowed to make redundancies then the economy will become ever more inefficient as it falls behind in technology and changes in consumer behaviour. So assume the govt will have to employ then to keep full employment. (Also that the govt can't make redundancies as that will create unemployment) Then you have a ratchet effect where those laid off always go straight to the public sector, adding to the issue above that it gets ever bigger.

6. This is all assuming a closed economy so far. What will the impact be on trade and exchange rates if MMT implied policies are implemented? I'm leaving this open for discussion rather than giving a view, but will note that if a currency weakens (eg if global markets have concerns about the efficacy of such policies) then imported goods get more expensive (and foreign demand for UK produced goods rises as they are cheaper for them) and inflation rises, requiring higher taxation, but I note that this will only be as effective as current interest rate policy fighting imported energy price inflation - and people are saying this is not effective. So maybe MMT (ie taxation as a policy tool) has the same, or its own set of, weaknesses as interest rates now.

A dream world where all countries implement these policies at the same time will annul any risks but I think it's safe to say that's not going to happen.

7. How would the transition to such a policy happen, and how quick would it be. What would happen to the economy, inflation and unemployment during this transition? The example I gave above about the tax system not being nimble is one example but I can see a lot of change required which is always a slower and bumpier journey than expected.

I think I'll leave it there for now as I'm rather busy today but I think it's enough to get on with!
 
Trekonomics is something to aspire to - "we’ve overcome hunger and greed, and we’re no longer interested in the accumulation of things, fiat currencies and money” says Jean-Luc.

Star Trek teaches us many important lessons. Swear Trek too.

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Are you going to explain this remark, or just post irrelevant comments in reply? Only this is a big f-off bomb to drop into a thread and just walk away from.
You should give conscientious objecting a try.
But now I'm falling into the same trap as team MMT - making a positional sales pitch - it really is that easy!
 


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