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In response to
"I feel like I could use an econ refresher before I get myself in trouble trying to explain it any further."
by
znufrii
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Your old econ books would not work because the changes in the view of monetary policy has occurred because the real world didn't match up with -- (edited)
Posted by
pmb (aka pmb)
Aug 3 '21, 14:03
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economic theory. I sat through a discussion of modern monetary theory led by 2 economists. One a progressive and one a more conservative economist. They actually both agreed on the modern monetary policy ultimately because the real world has proved it out. We've been hearing about the dangers of rampant inflation from deficits for decades and yet the deficits and total national debt have grown into trillion and multi-trillion numbers, with no meaningful inflation occurring. The fed tries to pump money into the economy to "achieve" a 2% inflation rate and has basically been unable to do it for years. That is not to say that there is no limit. At some point if you pump so much money into the system that it can't keep up (so work-force and materials become scarce) you will get inflation, but we do not appear significantly near that number. So the issue becomes less about whether our debt can grow, but how we grow it. Republican approaches have been tax cuts, but that has not proven to actually meaningfully grow the economy and has led to greater wealth disparities. The Biden approach is to do the opposite and focus on spending. This should be more successful at growing the economy, but can risk overheating it at some point, especially if we keep limiting immigration in ways that restricts the size of the available workforce too much.
Note: This only works for sovereign entities with their own currencies. State and local governments can't do this. And it also matters how in demand the currency is. So not every country can get away with it (hence other country's currency collapses). But the dollar remains the most in demand currency, so the danger of collapse is extremely low.
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