A few billion here and a few billion there, throw in some foreign aid and 70 years of wars without profit and it adds up.
Inflation of common items since 2021
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Well in their defense there are some assumptions. The primary one being that the country has a closed economy. The US could function as a closed economy.
Fed Reserve doesn't actually create money. Not directly anyway. They do about every thing else though, just don't actually run the presses. I realize not much of a distinction.
https://www.federalreserve.gov/faqs/about_12594.htm
Anyway my two pence:
You guys remember some clumsy poster saying jacking rates is at BEST a crude tool for taming inflation? How it creates some forms and adds to other forms of inflation? What is that poster's name????
Clue: He was ridiculed here and on financial forums.
None of this actually made him any money according to my sources.
That assumption won' work either. If you have a closed system that's already operating efficiently and you double the money supply, inflation will simply double over time. Unless you have a huge unused capacity or resources that can be set free with the money printing.
But since our system is not closed its moot anyway.
Right, lots of people do not understand our system. The TREASURY determines how much and which types of treasuries are sold on the open market, NOT THE FED. How does the Treasury decide how much to sell? Easy, they are charged with keeping the federal government running. There's a budget, there's how much has been spent, there's how much has been taken in with taxes, and the difference is the amount the Treasury MUST sell to keep the lights on. The Fed simply decides how much and which types of treasuries it wants to buy to carry out its mandate of price stability and maximal sustainable employment and that process of buying treasuries turns it into public debt. The Fed can also control the money supply by buying treasuries (adding to the money supply) or it can sell treasuries (decreasing the money supply). If the Fed does not buy these treasuries with our money, other people, organizations, and countries buy them. CONGRESS and to a lesser degree the Executive spends the money and they are responsible for the deficit that the Treasury then MUST close by selling Treasuries.
Our problem is we spend too much relative to how much we collect, we collect too little relative to how much we spend, and we have turned most of this mismatch into public debt. We are too focused on the turning into public debt part, which would be unnecessary if we could get spending and taxation right, and IMO all three of these need to be attacked, aggressively, and both sides of the aisle have been failing us for decades. I'm not hopeful looking forward, regardless of who wins which election.
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I don't think you understand how MMT is supposed to function. Under MMT taxation is used to reduce the money supply rather than via The Fed. Under MMT there would be no longer be Treasury bonds. There would no longer be a Federal Reserve as we know it today. MMT is very similar to how the financial system has operated since the end of WW2 and more recently since countries went full floating exchange rates after Nixon closed the gold window in the early 1970's.
Warren Mossler, the "father" of MMT as it is known today, has some interesting videos about this. Now that doesn't mean that offshoots from Mossler don't have their own ideas of how it's supposed to function.
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On top of that it's not even currency. It's a money substitute or "credit money" which is payable in currency. IIRC the amount of credit money in the system exceeds the amount of physical currency by a factor of 100.
$2.3T in US currency in circulation worldwide.
$34T US govt debt.
$235T in USD dominated debt globally.
Pop press: https://finance.yahoo.com/news/us-c...-with-high-rates-morning-brief-100047960.html
That's like a 180°??
That's like a 180°??
And those resources are labor and housing. It takes labor to make more housing, too. We have a demographic problem (lots of old people), the same as other developed nations, and they have inflation problems too. Nothing will improve until Boomers let go of a little.
Read a theory that it was to... drumroll... reduce inflation by returning most of the money to the Treasury that they spent in the first place.
We could raise taxes to meet what the government needs to spend money on but that riles people up. Inflate instead and you're taxing people sitting on money not doing anything with it. So you can tax workers or those born with silver spoons, or a combo of the two.
We spend too much..Like paying off student loans...
I think that is actually incorrect by their theory - but I will admit I am no expert. The idea is so stupid I didn't spend much time.
I think In their "theory" the treasury simply controls the money supply instead of the fed. So to shrink the money supply they tax instead of raise rates, which shrinks the money supply according to them. They seem to ignore the whole idea of fractional reserve at this point, but that can slide for now. So the tax brings the money supply down
But where does that money go to? To the Treasury. And who controls what the treasury does with those taxes - the politicians.
So instead of business and individuals spending the money, its the politicians that can spend as they wish. In theory they could use the taxes to pay down the debt - but given they can but don't do that now, they wouldn't do it then.
So the only real difference between MMT and the Fed, from a structural standpoint, is that instead of the fed controlling the money supply the treasury does it, and all limits are removed, so they can spend whatever they want.
Just like Argentina and Venezuela and Turkey do today.
Just bought a large 21cuft Top freezer fridge; it cost less than the Whirlpool We bought in 1997 and it's made in Alabama!
$695.00 !
$695.00 !
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Very true, but both have one foot on the gas pedal while someone else is telling them to slow down to avoid overheating the “ brakes “.How could that be?! I thought the problem was uniquely Murican because of who is in....?
Applies to back seat drivers criticizing the person doing the driving once they get behind the wheel.
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Unfortunately the distribution of the "too much money" has gone completely out of control since the C word.
The other aspect of this is nearly all central banks have made the same moves as far as interest rate hikes.
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Because people complain life ( post C inflation ) is far more expensive now ( chickens came home to roost ) , so they give them more $ ( deficit ) which repeats the cycle ( plus the other reason we know why ).
The challenge function broke down during C and any economist that dared warn that inflation would be entrenched versus transitory was too scared to say anything or was not taken seriously.
Now we have serious problems.
Trying to stay away from stuff we are not allowed to talk about but that’s the problem.
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Very true.
In Canada, they just announced they have to be careful to keep our rates close to what the central bank does in the u.s before lowering as part of their rate strategy.
Fractional reserve banking really doesn't exist. Bank lending is constrained by capital not reserves. IIRC banks in the UK and Australia don't have reserve requirements. Just a thought.
The money goes back to the treasury and vanishes. It's an accounting entry after all.
As I understand it per Mossler, there would be no US debt because treasuries would no longer exist. There's no need for them.
There really are no limits now. There's only the perception of limits.
Argentina, Venezuela, Turkey rely heavily on imports so that changes things. Some MMT theorists have written on how the system could work in an open economy with debt sales but it has been years since I looked at it.
You should really look up some Mossler interviews on MMT. https://en.wikipedia.org/wiki/Warren_Mosler
Ultimately from a practical standpoint MMT will never work because of current constitutional/regulatory hurdles not to mention the perfect information problem.
The Fed has the difficult job of not only conveying what is happening but also not pushing the economy in a bad direction simply by making a statement that becomes self-fulfilling. As for the economists, I was taking an economics course post C thing and we spoke a lot about inflation and he was honest and said he did not know if it would be transitory vs entrenched. The other thing we talked about was while the past can give guidance, we are truly in a unique time for many many reasons, and sometimes you just have to wait and see. His candor was refreshing.
