Saturday, November 6, 2010
Give and Take
The U.S. dollar is backed by U.S. government debt. That isn't MMT. It is how things have been since the time of Lincoln.
The double-entry thing: The dollar is the "asset" that mirrors the "liability" of government debt. I think this is MMT, but I could have figured it out for myself.
What I take from MMT: A dollar of money cannot exist unless there is a dollar of federal debt to mirror it. (This statement is equivalent to the one above.)
What MMT must take from me: If the government prints exactly as much money as MMT says it should, and if it spends only in the best ways as approved by MMT, but if it fails to reduce the relative level of private-sector debt, the plan will fail.
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1 comment:
No argument here.
"If the government prints exactly as much money as MMT says it should, and if it spends only in the best ways as approved by MMT, but if it fails to reduce the relative level of private-sector debt, the plan will fail."
This actually completely consistent with what Bill Mitchell and Warren Mosler talk about. Their models which allowed them to predict this crisis in the early 2000s was based on the levels of private sector debt.
They still look at that and argue that the govt "debt" needs to be large enough to meet the savings needs of the private sector, which today are HUGE given the level of debt we have.
I think Bill and Warren assume that IF people had more income they would service their debt first, obviously some would some wouldnt but in aggregate they likely would. However your suggestion of fed paying mortgages (say 50% for everyone) would be a more direct way of making sure the debt was serviced.
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