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Isn’t this fun?

MMT thinks low inflation is good. Low interest rates must follow unless the economy is to be crushed by real transfers of wealth to those already wealthy. Low interest rates are a consequence of low inflation. We had both for more than a decade.

Inflation’s 10%, real interest rates are minus 7%. So how does that fit in with MMT?

16 thoughts on “Isn’t this fun?”

  1. Everyone thinks low inflation is good, you knob.

    Apart from those who undertake price gouging of course.

    Problem is that MMT directly causes inflation. Such theorising is the same sort of anti scientific thinking that gives us Man Made Gorbal Worming or Covid lockdowns.

  2. That blog from Spud is the latest version of his “an important journalist/MP asked me a question the other day and here is the answer I gave him*” blogs.

    Supposedly he got an email from someone with a similar writing style to his own and who references his work and asked him a few simple questions on MMT which handily enabled him to drone on about MMT for a bit. The writer of the email even gave Spud the option of replying on his blog!

    The man is truly pathetic.

    *”And the journalist/MP thanked me and told me how right I was and how lucky he was to receive my wisdom”

  3. But QE kept interest rates low. And as Spud tells us, QE just inflated the asset values of the rich and transferred wealth to the wealthy. But now high interest rates transfer wealth to the wealthy and…

    Oh how I wish I would of been a political economist and could understand things good like Richard Murphy understands things good.

  4. Dennis, Gazing Into My Crystal Ball

    Low interest rates must follow unless the economy is to be crushed by real transfers of wealth to those already wealthy.

    It’s only a matter of time before he starts substituting “wealthy Jewish bankers” for “those already wealthy”.

  5. Here’s a question I hope someone can help me with.
    Since to my mind there’s nothing else in an economy but goods & services & the purchasing power that buys them. ( I ignore assets because it takes purchasing power to buy them & therefore the purchasing power must end up with the seller.) When he talks about “the transfer of wealth to those already wealthy”, what exactly does that mean? The wealthy are unlikely to be able to consume all that wealth in goods & services. And even if they did, the purchasing power would end up with the people they bought them from. If they buy assets the seller receives the purchasing power. If it’s money banked it’s some borrowers purchasing power.
    So how much of this “wealth” is just a figment of accountancy? Does someone becoming wealthier automatically require someone else to become poorer or does his “transfer of wealth” mostly not happen? I suppose this is the opposite of the MMT argument. Purchasing power is created by the manufacture of goods & the provision of services. And destroyed by consumption. All money is, is the token of value to enter in the books. Wealth just means “on paper” some indeterminate amount of purchasing power some indeterminate time in the future. But you can’t actually move either the goods or the services through time. The important thing is not that one person gets “wealthier” on paper, but the economy grows & we all get a bit richer.

  6. I guess it depends on where their money is BiS, dunnit ?

    If it is just in Tescos bags in their wardrobes, then it is inert and not helping anyone and the mice have eaten it ( unless it is in gold or something). This is bad.

    If it is in a bank, then that financial institution is lending or investing that dosh. This is better.

    If they spend it all on coke n’ hookers then that is goods and serivces at once and circulates directly into the economy. This is best.

    Although a rich person who spends it all on c and h won’t stay rich very long.

  7. “Wealth just means “on paper” some indeterminate amount of purchasing power some indeterminate time in the future.”

    Prety much. Money is just recording debts. If £10 buys an hour of labour then £10 million buys 10 million hours of labour. Which can be embedded in any set of goods and services.

    From the other end GDP. Production equals incomes equals consumption. “Wealthy” does just means some amount of labour that can be purchased in the future. As long as asset prices hold up of course.

  8. Why I said indeterminate Tim. I don’t regard value as being real. Only price. Will anybody buy this & how much?
    I’m trying to get as far away as I can from the P³’s Scrooge McDuck view of wealth & see what it looks like. I have a very different slant on the world. My purchasing power came into being when I provided a service & was cancelled when I consumed the grub it bought. The fact that I was using recyclable tokens with the Queen’s head on to facilitate this, didn’t alter the process.

  9. But you haven’t actually answered the question. Does one person getting wealthy mean some other person gets poor? There’s a redistribution of goods & services in the present. But not to the wealthy. Their entitlement’s in the future. So in the now it must be to those who produce more than they consume. And the poor are the ones produce less than they want to consume

  10. “Does one person getting wealthy mean some other person gets poor?”
    Well it could do for some definition of wealth based on surplus of income over expenditure. That surplus could be stored in savings accounts, property, land, gold whatever you like that suits you and allows you to delay that gratification or save for the big thing you want. The big thing could be paying for your children to have a better education and private healthcare or a second home for refugees (genuine) or a Lotus.
    If the £20k earner has a surplus of 1% and the high earner a surplus of 30%, then policies such as wfa or restrictive planning that make the 20k earner/renter have a surplus of nil and the retiree, sorry high earner, a surplus of 31%, then someone’s future is poorer and another’s is richer.
    Truss and ‘grow the pie’ economics would counter that. We all get richer, just the poorest and those with least moxy by the least.

  11. Bis, this is the difference between micro and macro. If you analyse individual transactions,the profits and losses seem to balance out. Somehow, at a macro level, the economy as a whole grows or shrinks. There must be enough people making a little turn on each transaction somewhere in the system such that the whole system grows. That and compound interest

  12. “MMT thinks..”

    It doesn’t, per definition.
    I’m not sure its most vocal proponent the Ragging for here is does to begin with, other than in the extremely lenient sense possible in english, certainly not in any other decent language.

    This is one of the cases where proper use of formal english versus the vernacular is of practical use.
    Because MMT states [bollocks].
    There may be some cogitation involved in its inception by its proponents, but actual thought isn’t.

    Honestly.. if a mildly intelligent STEM nerd like me can spot the huge gaps in the logic behind this particular economic theory, it just may perhaps be of such level of incompetence one has to wonder about the qualifications, period, of its proponents.

  13. @Diogenes
    If you analyse individual transactions,the profits and losses seem to balance out.
    Of course they don’t. You actually ever run a business? You increase factor productivity you end up making more purchasing power.(money) There’s also more available to purchase, because that’s what you created. It doesn’t balance with anything. It’s created wealth.

  14. And the BIS, what did you do with your profits? A few posts ago, you declared that the transfer of wealth mostly didn’t happen. The economy does tend to grow over time but it’s a lot of people slowly getting richer and not necessarily the ones who are wealthy now, unless they get involved with activities that add value or generate profits, some of which get retained

  15. @bloke in spain – “When he talks about “the transfer of wealth to those already wealthy”, what exactly does that mean?”

    Obviously, you’d have to ask him to be sure, but I’ll take a guess. Imagine an economy which consists of only farmers. Bob and Fred own two similar farms, and one year Bob has a bad year and cannot feed himself, so buys food from Fred in exchange for 10% of his land. This leaves Fred with a bigger farm. In subsequent years, assuming conditions are randomly good of bad for each farmer, Fred is less likely to be short of food when he experiences a bad year, due to the larger farm, so over time Bob has to sell more and more of his farm to Fred. This the rich gets richer until Bob has sold everything and dies of starvation in his next bad year. Note that this relies on farm area transactions being inherently zero-sum – any piece of land bought by one person is sold by someone else. In the real world, many goods and services are not zero sum – maybe Bob sells Fred a painting he made, or does some work on Fred’s farm, tells jokes, sings songs, gives Fred a tattoo, or does any of the vast number of things which create value. Zero-sum economics is a very popular view, even though it is completely wrong.

    And what is “wealth”? Is it merely things which can be sold, or does it include things which make your life better (such as the tattoo), or even experiences which you have had (such as laughing at jokes)?

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