See ’0 is the natural rate of interest’ on this website thanks

So the prices for housing went up to way over $100 psf. Now that the government has stopped buying (and price setting) huge marginal amounts of building materials, the housing prices have come down. This part of it had nothing to do with MBS, perhaps it could even be looked at as the government implemented a huge price increase in housing that then turned into a speculative frenzy, but the government started it imo. You had one part of the government (DoD) competing and bidding up with another part of the government (Banks) for the same fixed amount of building materials. WW2 was not run this way.

I wasn’t really trying to say that MBS directly caused the rise in house prices, although I would expect it to have some effect. I was trying to highlight the fact that any ‘asset-class’ can be used in a similar way as gold was used during the fixed exchange era, but without the regulatory restrictions. So an unregulated ‘asset’ class can be used in such a way to inflate the ‘money supply’(or whatever MMT term is supposed to be used).

The government morons do not understand what fiscal authority is or how to properly use it.

Their criminals, war criminals. Regardless, the game needs to be setup in a way that prevents morons and criminals from getting into power.

The fact that MMT has taxation and govt spending as one of its founding principles shows the unbreakable link between politics and economics. How can MMT ever be a ‘complete’ body of knowledge if it does not also deal with the political component? This where schools of thought such as Game Theory and Cryptography need to be applied so that distributed feedback systems can be created( popular voting systems).

If we can get people in there who have a clue, a lot of this goes away. And if we can get a broader understanding of the true fiscal authority of govt out to the masses thru education, it never comes back….

The masses aren’t going to care about something that they can’t interact with. I don’t agree with the line of thought against dramatic change. If it were a true line of thought, democracy would have never occurred in most countries.

Even if someone like Warren gets in and we have 40 years of prosperity, then what? By then there will be a new generation that has not experienced what we have. It is exactly the same as us, in the sense we have not experienced WW2. The same issues will occur, the good work implemented by some will be repealed and the problems will reappear. This is especially true given that there is no school of thought that does not deal with the political component of political economy.

If I had to choose a ‘team’ I would choose MMT, but I still think that if there is one word I could use to describe MMT it would be inadequate. This is still certainly better than irrelevant, which is how I would describe every other school of economic thought.

Best Regards :)

So the prices for housing went up to way over $100 psf. Now that the government has stopped buying (and price setting) huge marginal amounts of building materials, the housing prices have come down. This part of it had nothing to do with MBS, perhaps it could even be looked at as the government implemented a huge price increase in housing that then turned into a speculative frenzy, but the government started it imo. You had one part of the government (DoD) competing and bidding up with another part of the government (Banks) for the same fixed amount of building materials. WW2 was not run this way.

The government morons do not understand what fiscal authority is or how to properly use it. All of this chaos we have experienced over the last few years can be laid exclusively at the feet of the government which caused the price run up and then when balance sheets maxed out, did not engage with fiscal to maintain the levels of AD that they were responsible for stimulating in the first place.

If we can get people in there who have a clue, a lot of this goes away. And if we can get a broader understanding of the true fiscal authority of govt out to the masses thru education, it never comes back…. Resp,

True enough thought its not quite at zero because of the 0.25% IOR payment. Would you lock that in or drop IOR to 0?

Interest rate uncertainty needlessly raises the risk premium for investment. Since there is roughly a zero floor on interest rates, I think ZIRP will prove to have the lowest interest rate volatility.

There is another virtue, which is that we’re already there.

Good question, I would like to know too.

My impression is that MMTers consider interest rate policy ineffective and with ambiguous and indirect effects. See page 16-17 in this paper by Wray, for example: A Post-Keynesian View of Central Bank Independence, Policy Targets, and the Rules-versus-Discretion Debate

Fiscal policy is the preferred tool.

But does all this ultimately amount to a ZIRP (zero interest rate policy) proposal? I don’t know.

However, generally speaking the conventional MMT stance is that a zero interest rate combined with a strong regulatory framework, ensuring that loans are only ever approved for the public purpose is actually the optimal way to run our economy.

The idea is that loans should be used to increase the capacity of our economy. Accordingly, as long as loans adhere to this principle then the overall effect is non-inflationary, and if anything possibly deflationary. The possibility of deflation arises from the fact that the growth in productive capacity may actually exceed the total amount of circulating financial assets( money-like objects).

So who gains and benefits? The likely losers of such a situation are the current controllers of productive capacity. The beneficiaries are those that have the talent to identify productive deficiencies within our economy, and are able to fulfill such a demand by purchasing the necessary means of production using a zero-interest loan from the FED.

Now the neo-MMT position is; as long as people don’t think to hard and realize that MBS were used as a way to exploit the current arrangement, then they are non the wiser, or the fact that zero-interest rate could be repealed in the future and we repeat the same mistakes, then MMT will appear to be a nice ‘complete’ solution.

Just don’t think too hard, and this zero-interest rate idea actually sounds amazing.

from a MMT perspective is a zero interest rate better than a positive rate? which are the pros and cons? who has to gain and who has to lose from a zero interest rate?