Patricia AasJul 1, 2024

2/ Only barely through the introduction and the start of chapter 1, but it got interesting so I wanted to start the thread. (I’ll get back to Harvey when the polls are done)

So, the premise here seems to be that you (a country) have your own national currency. The thing she is going to get to, as far as I can understand these things right now, is that “deficits are a myth”.

And I think this is related to the Piketty (I can’t believe this is useful now) stories about how states erased their debts through inflation: Germany and France were the examples. And Germany are today apparently very skeptical of this approach.

Show threadPatricia AasJul 1, 2024
3/ The reason that I had to post is that she started talking about this question I had earlier. Basically: it seems risky to me to take out loans in a currency you don’t control since you can no longer use inflation to erase it.
https://social.vivaldi.net/@Patricia/112707420539468262
Patricia Aas (@[email protected])

24/ ok, I give up on this part and tbh I’m not sure it’s important. He has drifted into one of the features of FIAT/normal money being an instrument by which a state can eliminate its debt in that currency by tanking the value of its currency. Given this, why would anyone lend a state money in its own currency? Sweden wants to borrow money, why wouldn’t you lend them euros? It seems a bit risky to use their currency. Though I believe these “loans” are actually in the form of government bonds, so in that case the borrower has taken control of the currency in which it is expressed. I bet the developing nations debt is not expressed in their own currency, just to make sure we can erase our debt, but they sure as hell can’t erase theirs.

Vivaldi Social
Show threadPatricia AasJul 1, 2024
4/ She literally says: “and they need to refrain from borrowing, that is taking on debt, in a currency that isn’t their own”
Show threadPatricia AasJul 1, 2024

5/ So maybe we’ll get a glimpse into this mechanism.

Unfortunately, we have seen examples of countries that didn’t have this option, like Haiti and I guess also Greece (because they were using the Euro). Feel free to chime in here.

I’m also interested in how she deals with what made Germany so intent on not going through that again. I wish Piketty had spent more time on that.

Show threadPatricia AasJul 1, 2024

6/ Ok, this is fun. Basically it’s a different way to look at a national currency: for a government that can literally “print money” money only has “value” if you can do something with it. And taxes are such a thing. So taxes aren’t a way to make people pay for stuff, it is a way to create a need for your currency.

Right now the value of the Norwegian kroner (NOK) is a hot topic here in Norway. And I’ve tried to understand it but I just haven’t been able to. Maybe this will help. One of the things that I’ve learned is that the Norwegian government requires that the oil industry pays its taxes in NOK and this is actually one of the major “buyers” of NOK.

Show threadPatricia AasJul 1, 2024
7/ I really enjoy that a central part of her narrative is basically that “everyone knew this, except economists because they didn’t talk to anyone else” which tbh I think is one of the foundational problems with the “field” (read pseudoscience)
Show threadPatricia AasJul 1, 2024

8/ This first chapter was super interesting. I have to think about it for a bit, but I really recommend reading this chapter. Especially a story about chores in the beginning made sense to me.

Moving on to the next chapter which is on inflation, which I am really curious about because Norway has increased interest rates lately, but it seems to me that instead of being tied to our own economy the variables seem to be the exchange rate of NOK (which seems to be affected by a general sense of fear and not our economy) and for some reason our central bank is obsessed by numbers about the US economy. And that doesn’t make sense to me.

Show threadPatricia AasJul 1, 2024
9/ I think my sleep deprived brain won’t be able to grok inflation today. I’ve restarted the chapter probably 5 times by now. I’ll try again tomorrow.
Show threadPeter Toft Jølving

@Patricia be careful you don't set your expectations too high. No one groks inflation, not even those whose entire job is managing it: https://www.ft.com/content/a5438cce-a933-11e7-ab55-27219df83c97

Well, Kelton and compatriots are probably those with the best understanding: https://www.ft.com/content/539618f8-b88c-3125-8031-cf46ca197c64

Fed has no reliable theory of inflation, says Tarullo

Former Fed governor calls for more attention to actual data

Jul 1, 2024 at 6:54pmWeb
Show threadPatricia AasJul 1, 2024
@joelving that’s so funny because people talk about it like it’s trivial to understand
Show threadPeter Toft JølvingJul 1, 2024
@Patricia it's tricky, because conceptually it's very simple - prices go up - but determining causality is of course a whole other ballgame.
Show threadArne BrasseurJul 1, 2024
@Patricia @joelving my (very layman) take is that it's trivial to observe when it happens, and it seems to correlate with a number of things, but it's impossible to prove what the actual causes are in any given instance
Show threadAsbjørn UlsbergJul 2, 2024

@plexus @Patricia @joelving As with all complex systems, Cynefin tells us that we cannot confidently predict outcomes. We can't even formulate hypothesis; we need to perform experiments and measure the outcome.

I think too many domain experts, such as economists (but also experts in other similarly young fields of science, such as IT/CS and psychology), commonly mistake their domain for being complicated when it is in fact complex, often bordering chaotic.

1/3

Show threadAsbjørn UlsbergJul 2, 2024

@plexus @joelving As Cynefin's creator says about the boundary between complicated and complex systems:

"Experts can be trusted within the bounds of their expertise if the situation is complicated, but in a complex domain they can only create hypotheses.

The danger is a lot of hypotheses are wrong. There's nothing wrong with that – it's the nature of the system. The trouble is if we believe a complex system is complicated, and the expert gets it wrong, we lose trust in expertise.

So the boundary between complicated and complex is important, because on one side of the boundary somebody with the right training and the right qualification can be trusted. On the other side of the boundary – they can’t.”​

I think this mistrust is evident from @Patricia's great book reading threads of late, and one that is difficult to remedy.

2/3

Show threadAsbjørn UlsbergJul 2, 2024

@plexus @Patricia But I agree with @joelving in that MMT is the economic framework that best explains inflation in particular, as well as macroeconomics in general. And not only that; MMT also provides the best tools to deal with it: Swift, targeted (and usually temporary) taxation to counterbalance the market.

The problem is of course that we have a political system that don't want to understand how macroeconomics actually work in the 21st century, and even if they did, don't want to use the power they have at their hand; they would much rather leave that up to the inept central banks and market forces, and come in as heroic saviours when it all eventually crashes every 10 or so years.

3/3

#MMT