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Unlike other economic decision-making systems, modern monetary theory recognises that there is a limit to the potential within any economy, and beyond that any attempt to create more economic activity will always result in inflation.

So, not only does modern monetary theory have a built-in inflation control mechanism,

What is that unlike doing there?

Perhaps, more to the point, since when has a promise by politicians not to spend more money been a control mechanism?

13 thoughts on “Unlike?”

  1. I wouldn’t want to gaslight anyone, to use the modern word, but there’s a nutcase called NeilW who writes this exact fairy-tale make-believe self-invented MMT-style bollocks at LemonFool investment forum. Money is free, there is no debt etc.

  2. Is there a limit to the potential within any economy? If so, what? It’s hard to see why there would be a limit to the creation of goods & services.

  3. @ bis
    Yes, but the actual limit is only relevant during War. It is the total amount that can be produced by all people living within, or commuting into, that economy working at maximum output (that is not quite working until they drop, but working until any extra output will be less than the reduction in the next day’s output due to the effect on both days of over-tiredness) when there is the optimal allocation of individuals to jobs.
    It isn’t ever going to be reached because we have bans on child labour and, except in the case of life or death hardly anyone will choose to work that hard for that long when they have no time or energy to enjoy thefruits of their labour.

  4. You can always tell when you’ve skewered spud when he won’t publish a comment. A friend of mine innocently asked a question about MMT along the lines of…

    MMT says you can control inflation by raising taxes
    Spud says the wealthy save lots
    If taxes were raised, the wealthy would carry on spending on their lifestyle and simply save less, and so have no effect on inflation
    So to be effective in controlling inflation, does MMT requires that taxes must be raised on the poor?

    Not published.

  5. Wait, “any attempt to create more economic activity will always result in inflation.” does NOT mean that therefore “ modern monetary theory has a built-in inflation control mechanism”.

    It is fucking absurd.
    It’s like saying that if I consistently over eat I will put on weight, which means I have a built in weight control mechanism.

  6. MMT says you can control inflation by raising taxes

    They never say which taxes, and how they will reduce inflation.

  7. @john77
    All of that presumes static productivity. The potential for productivity increases in any economy are infinite.

  8. @ bis
    No it is not infinite, merely unknown (as is the number of atoms in the universe). And my definition remains true for any individual economy at any point in time. My point was that trying measure or refer to this limit is pointless. What matters is whether anyone wants any more goods or services.

  9. The potato was much funnier when he was banging on about expensive handbags and banning cars better than his Berlingo. Now he’s just a joke.

  10. Depends on whether you think universes or economies are closed systems, John. Cossmology’s not without its own spudologists.

  11. @ bis
    Yeah, well there used to be a standing joke in Economics ‘O’ level about Earth’s balance of payments deficit with Mars …

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