Thursday, May 2, 2019

Ray Dalio — It’s Time to Look More Carefully at “Monetary Policy 3 (MP3)” and “Modern Monetary Theory (MMT)”

This is the breakthrough point for MMT. When Ray Dalio says something is going to happen, it is. So you probably want to read this in full.

It’s Time to Look More Carefully at “Monetary Policy 3 (MP3)” and “Modern Monetary Theory (MMT)”
Ray Dalio | Co-Chief Investment Officer and Co-Chairman, Bridgewater

See also
Capitalism is no longer working for most Americans, according to one hedge-fund billionaire, who says the expanding wealth gap dividing the haves and have-nots is creating a volatile environment with disturbing parallels to the economic and social upheaval of the 1930s. 
Ray Dalio, founder of Bridgewater Associates LP, the world’s biggest hedge fund, says capitalism has developed into a system that is promoting an ever-wider wealth gap that puts the very existence of the United States at risk. In a two-part series published on LinkedIn, the noted investor argues that capitalism is now in need of reform — and offered ways to accomplish it:
Hedge-fund billionaire Ray Dalio says capitalism needs urgent reform
Ciara Linnane | Corporate News Editor


Ray Dalio, the hedge fund manager decrying wealth inequality, made $2 billion last year
Fred Imbert


Ralph Musgrave said...

Dalio is right to draw attention to a weakness in MMT when he says in relation to creating more base money and spending it: “The big risk of this approach arises from the risks of putting the power to create and allocate money, credit, and spending in the hands of politically elected policy makers.”

Luckily others have worked out the solution to that problem. The solution is to have some sort of independent committee of economists decide how much money to create and spend each year, as explained by Positive Money and co-authors on their p.10 about ten years ago here:

The committee could be some existing central bank committee.

Ben Bernanke gave an approving nod to that sort of arrangement. See his para starting “A possible arrangement….” here:

André said...

If that power is not put in the hands of politically elected policy makers, then in whose hands should we put it? In Goldman's Sachs? Because that is all that "independence" is about: all power in the independent hands of Wall Street, and as far as possible from democratically elected policy makers.

Ray Dalio is as neoliberal as any other banker. He doesn't like MMT. He is just making some concessions because he is one of the few that understands how failed the neoliberal theory is...

Joe said...

Tagging on Andre here:
"In my opinion, for these MP3 policies to work well, the system would have to be engineered in a way that decision making would be in the hands of wise, not politically motivated, and highly skilled people."

So he's calling for technocracy. We've seen how technocratic government in the EU has worked. New ideas are needed. Although, the idea of tying taxes to economic performance to function as an automatic stabilizer is worth exploring.

Kudos to him for saying "staying employed is generally important for people’s psychology/emotional health as well as producing good outcomes (like keeping our cities clean and helping each other). " - I rarely see recognition of this fact in UBI discussions. A lot of people, maybe most, in fact like to earn their keep and contribute. Even little children feel proud for "helping" their parents do something. A huge part of the opioid epidemic has to do with people losing their jobs and then losing their self-esteem, then they develop chronic pain problems.

"Some MMTers blame inflation primarily on businesses’ excessive pricing power. While that might influence inflation, the bigger deal is that when you have a shortage of something (labor, commodities, etc.) and excessive demand for it, the price of that thing goes up."
- except most MMTer's I've read agree with the latter, unless I've missed it, I haven't seen anyone that advocates the former.