tag:blogger.com,1999:blog-2277215496195926573.post6677204126824459074..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: MMT for beginners.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-2277215496195926573.post-15523876161604921162014-09-02T21:51:58.126-07:002014-09-02T21:51:58.126-07:00I like the joke about point 3. I realized long ago...I like the joke about point 3. I realized long ago that I'll never make it as a proof reader.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-48190617398766886662014-09-02T09:03:42.970-07:002014-09-02T09:03:42.970-07:00I'd lump in the objections to point 8 along wi...I'd lump in the objections to point 8 along with 2 and 4 to just say in general that the economic effects derive from the spending and whether debt is issued or not is a footnote.<br /><br />An important footnote though, given structural dependencies on treasuries in the financial system it would be pretty disruptive if the supply of them was abruptly shut off.<br /><br />Also, I can't believe no one has weighed in on point 3 yet.geerussellhttps://www.blogger.com/profile/10631984593634015839noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-31704506469621742642014-09-02T04:19:01.960-07:002014-09-02T04:19:01.960-07:00Hi KK,
Bill gives two reasons for thinking QE doe...Hi KK,<br /><br />Bill gives two reasons for thinking QE doesn’t have much effect at this site, which is one of the links he gives at the site you directed me to:<br /><br />http://bilbo.economicoutlook.net/blog/?p=661<br /><br />One is that QE cuts interest rates, which means more income for borrowers and less for savers. Those two effects more or less cancel out according to Bill. I suggest that borrowers or the less well-off have a higher propensity to spend a small increase in income than the better off, thus QE will actually have a finite stimulatory effect there.<br /><br />Second, he says that QE increases bank reserves, but that does not increase bank’s capacity to lend. I’ll buy that.<br /><br />But as far as I can see he has missed out what might be called the “portfolio” effect. That is, if someone has their preferred mixture of liquid and illiquid assets, and some of the less liquid assets are turned into cash, they’ll then try to restore their preferred mix buy buying various illiquid assets, including houses and other real physical assets. And that will boost demand a bit.<br /><br />However I agree with his general point that QE doesn’t have HUGE effect. I.e. there isn't a HUGE difference between funding a deficit via borrowing rather than printing money.<br /><br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-63956555738593731882014-09-02T02:08:05.830-07:002014-09-02T02:08:05.830-07:00"8. If the state funds the extra spending via..."8. If the state funds the extra spending via borrowing, the net effect per dollar spent is significantly reduced"<br /><br />This is false according to MMT (Bill Mitchell). <br />"The expansionary impact of deficit spending on aggregate demand is lower when the government matches the deficit with debt-issuance ... False.<br />See answer to question 2 in:<br />http://bilbo.economicoutlook.net/blog/?p=27461<br /><br />KongKinghttps://www.blogger.com/profile/10992633301481631373noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-43958560732188874262014-09-01T22:39:43.439-07:002014-09-01T22:39:43.439-07:00“Interest rate policy is not seen as useful for bu...“Interest rate policy is not seen as useful for business cycle stabilisation…”. I agree with that, only I’d word it a bit more strongly. I listed a whole string of problems with interest rate adjustment in section 1.19 of my MPRA paper (see top of left hand column).Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-31312899964739210082014-09-01T13:42:01.299-07:002014-09-01T13:42:01.299-07:008. If the state funds the extra spending via borro...8. If the state funds the extra spending via borrowing, the net effect per dollar spent is significantly reduced...<br /><br />This could be phrased as "borrowing reduces the fiscal multiplier". My reading of MMT does not jibe with this. Borrowing is a reserve drain, which removes reserves in order to support the yield curve away from zero (at least in regimes where there is no interest paid on reserves).<br /><br />The effect on the economy is just whatever effect non-zero interest rates have on the economy. (Wray, Mosler & Mitchell have non-standard views on the effect of interest rates on the economy, but I believe that there is no "official MMT" position on that issue.) The MMT position is that there is no need for non-zero interest rates, partly because interest rate policy is not seen as useful for business cycle stabilisation.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-86607076795610973502014-09-01T10:21:33.493-07:002014-09-01T10:21:33.493-07:00"1. Private sector spending varies with the s..."1. Private sector spending varies with the stock of what MMTers call “Private Sector Net Financial Assets” (PSNFA): that’s the stock of base money plus national debt."<br /><br />I think this is fine for beginners if the central bank buys only government securities. But is there are MBS, gold etc then this is not correct. But it is close :)Kristjanhttps://www.blogger.com/profile/09592440548093816331noreply@blogger.com