I think that you don’t have to be an economist or have done a PhD involving econometrics (economic statistics) to see that the claim “doubling the monetary supply decreases the dollar’s exchange rate by 50%” does not hold at all. While monetary supply goes up almost all of the time, the exchange rate swung back and forth. There does not seem to be any causal relationship at all. This is not a surprise: almost all scholars of economics point out that the trade-weighted exchange rate is influenced by interest rates and expectations of interest rates. Textbooks of international economics contain discussions of (uncovered) interest parity and other issues, but there is no textbook that I know of that claims that monetary supply drives “the” exchange rate.
Given the empirical picture above it is quite reasonable.
The other “arguments” against MMT belong firmly into the territory of “monetary cranks”, so that I will stop here.…
Also, MMT does not promise anything. It is that when people understand the way the monetary system works – and THAT is what MMT is about – then certain problems seem to have rather simple solutions.
econoblog 101
Re: “MMT Sounds Great In Theory…But”Dirk Ehnts | Lecturer at Bard College Berlin
Well said by Dirk Ehnts:
ReplyDelete"MMT does not promise anything. It is that when people understand the way the monetary system works – and THAT is what MMT is about"
That's how I see and use MMT. It's not a panacea. It does provide a better language for understanding the economy, money and banking than can be found elsewhere in conventional wisdom or academia. My current favorite description of these topics is in the textbook by Eric Tymoigne: http://neweconomicperspectives.org/money-banking
The economic anthropologists such as David Graeber also had some valuable insights from an historical perspective.
Good to see all the talk of MMT these days.