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Originally Posted by !@#$%!
right, the idea is that deficits don’t matter
but i am not sure how long that can go on
krugman isn’t too sure either...
it did not work for third world countries in the past century because the cost of servicing the debt was too high
although that was in foreign debt not local currency
maybe the usa has achieved virtual reality. or world monopoly.
but mmt sort of presumes no currency exchanges. no? which is not the case of our reality.
but still... im not an economist, and this shit is like quantum theory or something
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Yes, this only applies to countries with sovereign currencies and doesn't apply to debts in foreign currency.
I won't taken over the whole thread, but MMT tells us a number of things.
1) The US govt creates the US dollar when it spends or credits banks. It doesn't need tax money whatsoever to undertake any project or buy anything for sale in US dollars.
2) Taxes are still important for equality and to prevent inflation via excessive spending causing resources to run short. However there is no indication that this is close to happening.
3) Fiscal surpluses or deficits are meaningless. What matters is whether the economy is being fully employed or not, and that likely involves a greater amount of government involvement in the economy.
4) As it presently sits, a New Deal-esque job guarantee and health program would improve the US economy, as long term austerity has left the economy under utilised. There is 'fiscal space' for more government spending. This is the same reason Trump's tax cuts and deficit spending have boosted the economy: there is room to grow and Trump's spending facilitated it.
5) Therefore, Bernie could pay for his plans in the same way any war is paid for... The government simply credits the accounts and creates the dollars. Then, if and only if inflation begins to rise due to the higher amount of economic activity, taxes could be raised down the line. Bernie's taxes on the rich would likely already offset any inflation risks anyway.
This diverges significantly from our mainstream understanding of economics and I understand any skepticism. Stephanie Kelton (former chief economist of the U.S. Senate Budget Committee) and Bill Mitchell (Australian economist and professor) are two people to look up if anyone is interested.
Kelton on CNBC giving a good overview
https://youtu.be/7cho7naef_k
Mitchell going into a bit more detail. Full lectures of his are available online
https://youtu.be/YnyDRwSqp2E