retprof wrote: ↑
Mon Jan 08, 2018 8:52 pm
retprof wrote: ↑
Mon Jan 08, 2018 8:40 pm
john4546 wrote: ↑
Sat Dec 16, 2017 11:08 am
The U.S. is monetarily sovereign - meaning it is a currency issuer, and the U.S. federal government, like the Japanese government, and any other country that issues its own currency, cannot go bankrupt, ever. These countries can always pay their debts. Do a google search and learn about "Modern Monetary Theory (MMT)."
Please see these websites if you want to learn more:
Is MMT post-Hayek? Hayek used to advocate for the end of the government’s monopoly as a currency issuer. He predicted that the coexistence of several currencies would improve the government-issued currency by reducing inflation (in his view, even moderate inflation imposes huge costs on society by leading to resource missallocation and, as a result, deeper business cycles).
I’ve been recently reading about Hayek and assume all his theories have become obsolete, but have no idea what they’ve been replaced with. Is it MMT?
I see that MMT is also completely discredited by mainstream economists. So is there a modern monetary theory that can be summarized to lay people?
Although Steve Keen's book is worth a read.
Monetarism is pretty dead. Mainstream macro economics moved on to "Freshwater Schools" (Rochester, Chicago, Minnesota, Carnegie Mellon) and Real Business Cycle theory-- which doesn't pay too much attention to money, AFAIK. Recessions are caused by exogenous shocks - such as people not wanting to work as much, or technological changes ("the Sunspot Effect"). Government or Central Bank policy has only short term effects, because (Lucas Sargent Proposition) market participants rapidly adjust their expectations and behaviour to account for that policy once it becomes known.
If you look at Japan, you'd have to suspect they have a point. No monetary action or fiscal policy, no matter how rash, seems to have much ability to restore growth.
The counterforce, such as it is, is the neo Keynesians ("Saltwater Schools" like Harvard, MIT, Berkeley), and they don't worry too hard about money, either. Recessions are caused by deficiencies in aggregate demand (actually that's a Keynesian view - not sure what the neo Keynesian view is). And Hyman Minsky has come back (literally from the dead). The impact of macro stability is more risk taking, which causes larger crises. There had been a tendency to ignore finance and financial markets, as just an intermediary -- and Minsky put it back in the centre of things.
There's a school which says that old-fashioned IS-LM analysis as I was taught in undergrad is still the most useful model (Krugman in particular).