Thursday, February 7, 2019

Victoria Guida — Ocasio-Cortez boosts progressive theory that deficits aren't so scary

Fair and balanced. Stephanie Kelton speaks for the MMT view. The other side is presented, too, but I would say that the debate goes to left in this article. For Politico, overall positive, and that says something of itself. MMT is getting harder to dismiss offhandedly.

Ocasio-Cortez boosts progressive theory that deficits aren't so scary
Victoria Guida


Andrew Anderson said...

Under this theory, if the government did spend enough to stoke inflation, it would be counteracted not by the Federal Reserve hiking interest rates, as it does today, but by the president and Congress agreeing to raise taxes to pull money out of the system — assuming they would be willing to take that politically unpopular step. Interest rates would be pegged at a low level.

1) The economy runs off bank deposits, not fiat, and the banks can easily replace taxed away deposits with new deposits.

2) Moreover since Federal taxation destroys bank reserves, it improves the Supplemental Leverage Ratio of banks which INCREASES their ability to create new deposits.

3) The demand for fiat is artificially low since citizens may not use fiat in inherently risk-free account form at the Central Bank as the banks, credit unions, etc can do. Why not fix this so as to INCREASE the amount the monetary sovereign may deficit spend for a given amount of price inflation?

So it sounds like the MMT prescription for inflation is to transfer purchasing power from those who can't or won't borrow to those who can and do - along with to the banks, etc.

Noah Way said...

Maybe you should start typing in ALL CAPS. It works for Roddis.