Post by masterpierround on Apr 16, 2016 23:23:49 GMT -5
Well, this board seems to get very little activity, and my post in another thread touched on a topic that I think is really interesting. So without further ado, let's discuss Modern Monetary Theory (MMT):
the national debt is not as big of a problem as people say it is.
For one, a country's government must go into debt sometimes for economic reasons. There are virtually no economists who dispute this, except for the few I've seen that say the government should never NOT run a deficit. More on them later.
Another thing, only 34% of the national debt is owed to foreign countries, and less than 9%(I would estimate between 1-4%, but that is not an educated guess in the slightest) is owed to foreign nationals. This means that the vast majority of the national debt is owed to Americans, or American governments (state, local, and federal). I don't know about everybody, but most people wouldn't want to destroy their own government, and our government is unlikely to commit suicide.
Finally, our national debt is denominated in US Dollars. Guess what organization is the only legal producer of US Dollars. It's the federal government. This means that the Federal Government cannot ever go bankrupt. This also means that if you think the national debt is like a personal debt (e.g. a credit card debt or a mortgage), you are thinking about it incorrectly. You see, for you or me, we have to take in money, before we can spend it, or we must borrow in order to spend. The federal government doesn't have these limitations. It can simply create money out of thin air.
Remember those guys I mentioned earlier who think the government needs to always run a deficit? They don't think the government should borrow money at all. Instead, they argue that the deficit needs to be composed of newly printed money, not borrowed money. If you want to read more, the theory is called Modern Monetary theory. Here's a link to one of the creator's blog:
bilbo.economicoutlook.net/blog/
Here's a more general list of topics for more in-depth/exploratory reading:
modernmoney.wordpress.com/index/
Here's a page talking about the criticisms of MMT:
www.quora.com/What-are-some-mainstream-criticisms-of-Modern-Monetary-Theory
And finally, here's part 1, with the rest of the parts linked on that page, of a response to criticism by MMT people:
neweconomicperspectives.org/2013/12/mmt-101-reply-critics-part-1.html
While I don't fully understand some parts of it, and I don't fully agree with other parts of it, I think that on average, this theory does a better job of explaining the modern world than our traditional theories. In fact, traditional theories have broken down so much that a 18 year old family friend in AP Macroeconomics tells me that his teacher has to teach them theories that have virtually been disproven by recent events. Apparently she prefaces each of these lessons with a talk about data and how the recent data shows that the theory is wildly inaccurate, but the theory will still be on the test, so pretend it works for now.
I hope someone gets some knowledge out of this post and welcome all questions or arguments, although I am not an expert, and I may not have the answer you're looking for.
the national debt is not as big of a problem as people say it is.
For one, a country's government must go into debt sometimes for economic reasons. There are virtually no economists who dispute this, except for the few I've seen that say the government should never NOT run a deficit. More on them later.
Another thing, only 34% of the national debt is owed to foreign countries, and less than 9%(I would estimate between 1-4%, but that is not an educated guess in the slightest) is owed to foreign nationals. This means that the vast majority of the national debt is owed to Americans, or American governments (state, local, and federal). I don't know about everybody, but most people wouldn't want to destroy their own government, and our government is unlikely to commit suicide.
Finally, our national debt is denominated in US Dollars. Guess what organization is the only legal producer of US Dollars. It's the federal government. This means that the Federal Government cannot ever go bankrupt. This also means that if you think the national debt is like a personal debt (e.g. a credit card debt or a mortgage), you are thinking about it incorrectly. You see, for you or me, we have to take in money, before we can spend it, or we must borrow in order to spend. The federal government doesn't have these limitations. It can simply create money out of thin air.
Remember those guys I mentioned earlier who think the government needs to always run a deficit? They don't think the government should borrow money at all. Instead, they argue that the deficit needs to be composed of newly printed money, not borrowed money. If you want to read more, the theory is called Modern Monetary theory. Here's a link to one of the creator's blog:
bilbo.economicoutlook.net/blog/
Here's a more general list of topics for more in-depth/exploratory reading:
modernmoney.wordpress.com/index/
Here's a page talking about the criticisms of MMT:
www.quora.com/What-are-some-mainstream-criticisms-of-Modern-Monetary-Theory
And finally, here's part 1, with the rest of the parts linked on that page, of a response to criticism by MMT people:
neweconomicperspectives.org/2013/12/mmt-101-reply-critics-part-1.html
While I don't fully understand some parts of it, and I don't fully agree with other parts of it, I think that on average, this theory does a better job of explaining the modern world than our traditional theories. In fact, traditional theories have broken down so much that a 18 year old family friend in AP Macroeconomics tells me that his teacher has to teach them theories that have virtually been disproven by recent events. Apparently she prefaces each of these lessons with a talk about data and how the recent data shows that the theory is wildly inaccurate, but the theory will still be on the test, so pretend it works for now.
I hope someone gets some knowledge out of this post and welcome all questions or arguments, although I am not an expert, and I may not have the answer you're looking for.