Mastodawn

Patricia Aas Jul 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.

Patricia Aas Jul 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

Patricia Aas Jul 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”

Patricia Aas Jul 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.

Patricia Aas Jul 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.

Patricia Aas Jul 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)

Patricia Aas Jul 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.

Patricia Aas Jul 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.

Patricia Aas Jul 2, 2024

10/ I am trying to understand chapter 2 again, it is called “Think of inflation”. She is speaking very much from a US perspective, and so my attempt to map to Norway in my head is not always working. But I think Norway fits the criteria:
1. Has its own currency: NOK Norwegian kroner
2. The currency is not tied to a foreign currency (as opposed to Denmark who has now tied its currency DKK to the Euro)
3. Does not have debt in a foreign currency. (I don’t think we do, we have a massive sovereign wealth fund instead, which is only (mostly?) invested abroad)

Patricia Aas Jul 2, 2024

11/ I am wondering how much these “models” are suited for a global economy. The US might be able to control its inflation inside its own country, by dramatically reducing importation. But if a country is a massive importer, I don’t see how you can control inflation… or it depends on What Inflation Is. Which is… what I’m struggling with. I think their simplistic models are crashing with the Real World here.

Patricia Aas Jul 2, 2024

12/ People have told me before that inflation is what happens when the “economy is overheated” (too much spending/consumption) so increasing interest rates are a way to “cool down the economy”. But that makes zero sense for Norway right now.

Patricia Aas Jul 2, 2024

13/ I don’t see any sign of the Norwegian economy being “overheated”. What I see is the opposite tbh. People seem to be struggling financially much more than I’ve seen in decades.

Patricia Aas Jul 2, 2024

14/ What is a problem is that the NOK to USD/Euro exchange rate weak. So imports are more expensive. But to “fix” that the central bank has raised the interest rate. Which means people who were already struggling with higher prices now also get hit with higher interest rates.

Patricia Aas Jul 2, 2024

15/ And young people and families are being hit the hardest because they are either renters (and rents are increasing because of the interest rates and the cooling of construction because of the higher import costs and higher intrest rates) or early homeowners with big mortgages.

Patricia Aas Jul 2, 2024

16/ Meanwhile the politicians are on TV saying “Well Actually The Economy Is Going Great”. But the only sectors that seem to be doing great are those who are exporting (being paid in foreign currency) and that’s because they are raking in on the NOK being weak, and that’s not “the economy” that’s just gambling.

Alper Çuğun-Gscheidel Jul 2, 2024

@Patricia MMT—I think—would say that inflation is because there’s too much money in the economy and you should tax it out (the state’s way of taking money out of the economy).

Patricia Aas Jul 2, 2024

@alper like I say in the thread, that doesn’t make sense for Norway

Alper Çuğun-Gscheidel

@Patricia Whatever theory is true it will in the end probably be overshadowed by vibes anyway.

Patricia Aas Jul 2, 2024

@alper I actually think it IS vibes
https://social.vivaldi.net/@Patricia/112718513111814471

Patricia Aas (@[email protected])

18/ In my opinion the most logical thing is that the NOK is down for the same reason gold is way up: people are scared. Russia invaded Ukraine, Israel is pushing for a regional war in the Middle East and… let’s be honest here: the US might elect a fascist dictator in a few months. Basically NOBODY will make the decision to buy NOK no matter what the interest rate is. They are putting their money where they think it’s safe and that isn’t a tiny economy by the polar circle.

Vivaldi Social

Patricia Aas Jul 2, 2024

@alper global vibes. People feeling that the future is uncertain and wanting to make safer choices.