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View Diary: Why deficits don't matter - the reality of government finance (116 comments)

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  •  I'm not a fan of this theory (0+ / 0-)

    But hey, I'm not an economist.

    I think that it's important in times like this to think about how government finance really works.
    What you're espousing is a theory. I'd stay away from stating it as fact. When people state theories as facts they lose credibility (at least to me).
    •  What isn't? (2+ / 0-)
      Recommended by:
      psyched, Roger Fox

      Would you say that to someone who was worried about the National Debt, because we're passing on an unsustainable burden to our children?  Or, someone who claimed that we need to reduce budget deficits, for any reason at all?  Such ideas are based on particular theories of what money is and how it works in the economy, and are no more fact than this.

      All attempts at explaining money are theory, because nobody really understands what it is or how it works.  Classical economics either ignores the problem, or posits a theory of money that is obviously counterfactual.

      `Under my command, every mission is a suicide mission.`

      by Zwackus on Sat Nov 10, 2012 at 06:56:30 AM PST

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    •  It's not a theory that we are no longer (3+ / 0-)
      Recommended by:
      psyched, jellyyork, Roger Fox

      on the gold standard.  It's a fact.

      It's not a theory that every dollar is both a public liability and a private asset.

      It's not a theory that 2 plus 2 equals four, and that if you reduce the public liability by 2 dollars, you reduce private assets by 2 dollars.  It's simple accounting.

      It's not a theory that if you had a money making machine in your kitchen, you could never go broke.  Just a fact.  Likewise, the US can never go broke.

      It's not a theory that there's no internal, logical reason, for a monetary sovereign of a fiat currency to sell bonds, borrow in any way nor tax to fund it's spending.  It's just facts.


    •  In that case, you should understand that (1+ / 0-)
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      our current dominant economic process is a theory, and it does not work very well at all. I would rate it as a failure. The folks who took pragmatic steps to deal with the problems of the Great Depression enabled us to find a way to hold things together this time, otherwise we would be another Great Depression again.

      Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

      by hestal on Sat Nov 10, 2012 at 08:28:48 AM PST

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    •  IF you want to know what's (2+ / 0-)
      Recommended by:
      katiec, psyched

      really happening, follow the money.  That's exactly what MMT does.  It cannot be disproved because it is mathematically correct in its understanding of how money works.  Money works the way it works no matter what any expert may attempt to claim to the contrary.  Just as the facts about the polls in the last election were right no matter what the so-called experts claimed, MMT in its mathematical form is impossible to refute.  In fact, it can only be shelved idealistically.  So let's agree that the math is right and then spend our time figuring out how to politically manage what it means.

      •  We can't go too far (3+ / 0-)
        Recommended by:
        katiec, psyched, jellyyork

        The sectoral financial balances model is an accounting identity. Accounting identites are tautologies. They are empty of empirical content.

        But its interpretation in terms of real measures and statistics is contingent and makes the model an empirical theory that can be refuted. It hasn't been however, and it's at the very foundation of MMT.

        •  Understood. (0+ / 0-)

          It seems to me that to be effectively refuted, the interpretive contingents going into the theory would have to be proven wrong or reformed, which would actually just create another identity.  So you're right, the parameters (real measures and statistics) of the identity can be empirically explored relative to whether or not they prove to be the relevant inputs and mathematically relate to the identity.  But as long as everyone accepts the real measures and statistics comprising the identity, and therefor the theory, its foundation will remain solid?

          Thanks for your counsel.  


    •  But nearly all of the underlying foundation (1+ / 0-)
      Recommended by:

      is a nice bullet list of facts.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Sat Nov 10, 2012 at 02:48:21 PM PST

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