The government could, as a consequence, try and spend that money into the economy. But – and this is an enormous but – it won’t if it’s wise if there is nothing for it to spend that money on. In other words, if there is already full employment, or we are already at our physical limits with regard to the capacity of the economy and the environment to expand without causing harm, like climate change.
So, of course, there are limits on what the government can do, however much money it can create and MMT – modern monetary theory – recognizes that fact and says the government can spend until it reaches the limits of full employment, and I would add, the limits of environmental change, or rather the limits that environmental change impose upon us.
But the recent inflation was not caused by the government printing a few hundred billion and spending it. Therefore nothing need be done to stop the inflation which wasn’t caused by what MMT says will cause inflation.
Got it?
There is a germ of a point here, although not one that Spud has picked up on.
There are people, stereotypically the rich elderly who have seen all of the world that they want to, happy to babysit the grandchildren, visit the Legion or allotment society for company, but who have no more investment plans. Don’t want to improve their house, or get a better car.
You could literally give them lots of extra money and they wouldn’t know what to do with it.
Some companies too – give them lots of extra money and all they can think of is share buy backs. Which transfers the ‘how do i spend’ problem to the sellers of the shares in the buy back.
But government can’t think of a way to spend? Gimme a break.
“There are people, stereotypically the rich elderly…who have no more investment plans. Don’t want to improve their house, or get a better car.”
Really? This grandpa would happily buy a third house or an even better Audi (or three) or another fine oil painting or upgrade bathroom No 4…if the funds were available. #greedygrandpa
MMT is fantasy economics for deluded socialists.
What’s this limit of full employment? If you have full employment and want more goods or services, you pay more and stimulate the replacement of people with machines causing greater productivity. It’s not a limit.
It not full employment (that’s just Spud) it’s full employment of resources. Then you pay more – indeed, which is inflation. Which is the limit of how far monetary – and indeed fiscal – stimulus can take you ahead of technological change. Reaplacing people with machines is, of course, technological change.