It is Wednesday so very little blog writing today. One question I often get asked is what would happen if the bond market investors in a nation stopped bidding for the debt instruments being offered in the regular auctions. Interestingly, overnight I was sent some news from a Deutsche Bank information service written by their New York-based Chief International Economist, who signs himself off as “Torsten Sløk, Ph.D”. It related to these issues. The problem is that Dr Sløk seemed to want to take a snide shot at Modern Monetary Theory (MMT) and just made a fool of himself. It goes on. This is what the point is....
Bill Mitchell – billy blog
Bid-to-cover ratios and MMTBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
"In a modern monetary system with flexible exchange rates it is clear the government does not have to finance its spending so the the institutional machinery is voluntary and reflects the..."
ReplyDeleteDepends on the desired rate of inflation. As we've seen in recent years the labor market doesn't primarily drive inflation and hence a JG isn't an adequate buffer stock in a modern economy like ours with essentially free trade and open capital markets. The external sector primarily drives the price and demand for labor while the government can do little but influence the composition of the activities labor performs. MMTs big flaw is that it doesn't adequately explain the external sector and how it is influenced and interacts with fiscal policy, labor, inflation and currency value.
“the labor market doesn't primarily drive inflation and hence a JG isn't an adequate buffer stock”
ReplyDeleteThat is only true when wages are suppressed and do not follow profits as it’s been like for decades.
BTW your argument is really strange since the JG is the opposite of the unemployment buffer stock which we have today.
ReplyDelete