Given the confusion and chaos in the markets I was curious about Warren Moslers perspective on our 'inflation' situation. The popular narrative has been to blame this 'inflation' on the MMT crowd so I wanted to see his defense being that he is probably one of the leading figureheads of this particular economic school of thought. Once again, he impresses with clarity.
Everyone else I listen to doesn't make as much sense as he does. One thing in particular that I find surprising is that his comments on oil have been largely absent from all political and media dialogue on the subject...or at least very poorly explained and laid out for the public. It's astounding to me that the fundamental pricing structures of the worlds most important commodity is not understood at all by the vast majority of people including, it seems, to our leaders
Here's the interview:
https://youtu.be/pP0875cGbew
Mosler on current inflation...the MMT response
Re: Mosler on current inflation...the MMT response
Could you summarize the key points, doodle? Particularly, what are the comments on oil?
My understanding was that MMR describes the current fiat-currency system as it is, and MMT agrees with that description but goes further and says the government should just keep spending and spending, and will be constrained by inflation.
He doesn't agree that we're at that point?
My understanding was that MMR describes the current fiat-currency system as it is, and MMT agrees with that description but goes further and says the government should just keep spending and spending, and will be constrained by inflation.
He doesn't agree that we're at that point?
Re: Mosler on current inflation...the MMT response
He has other videos where he addresses inflation more specifically but I was looking for his most recent video to gauge his reaction to present economic turmoil.
From what I can gather( and I watched video while eating breakfast and getting ready for work... so I would have to rewatch to get more specifics) the present 'inflation' is not a monetary phenomenon that stemmed from printing money (he would argue it wasn't really printing money I think but creating bank reserves...an important distinction?) but rather a supply shock brought in by immigration and labor issues related to COVID combined with monopolistic price gouging all of which is now exacerbated by rate hikes...(yes, he claims rate hikes have the opposite intended effect and increase inflation by acting as a net credit to private sector. ..although I wonder about this in the context of a system where debt and borrowing seem to underly most consumption. For example he claims Volkers rate hikes exacerbated inflation and that the true bullet that killed the 70s inflation is due to Jimmy Carter's deregulating natural gas industry and allowing gas to become a viable alternative to oil for power production.)
He mentioned over and over how our leaders and nation in general doesnt have a very clear agenda....inflation is bad but we hit canadian lumber imports with high tariffs and initiated a trade war with China...driving material prices higher. From an energy standpoint we fail to recognize that the price of oil is set at the margins and that producers like Russia and Saudi Arabia, although only accounting for a fraction of world oil production, can control the price of this commodity by restricting supply....which they do. Related to energy it's also seemingly non sensical that the democrats are simultaneously for reducing consumption and burning or fossil fuels for environmental reasons but also trying to lower prices which would lead to increased consumption. In addition he argued that the feds reaction to this of raising rates again a'la Volker will exacerbate inflation until the point where it simply begins to break markets.
Mosler doesn't seem to be an idiot yet he says things that run counter to the conventional dialogue. Somehow though the things he says give me more clarity than what I hear out of most talking heads....worth a listen I think.
From what I can gather( and I watched video while eating breakfast and getting ready for work... so I would have to rewatch to get more specifics) the present 'inflation' is not a monetary phenomenon that stemmed from printing money (he would argue it wasn't really printing money I think but creating bank reserves...an important distinction?) but rather a supply shock brought in by immigration and labor issues related to COVID combined with monopolistic price gouging all of which is now exacerbated by rate hikes...(yes, he claims rate hikes have the opposite intended effect and increase inflation by acting as a net credit to private sector. ..although I wonder about this in the context of a system where debt and borrowing seem to underly most consumption. For example he claims Volkers rate hikes exacerbated inflation and that the true bullet that killed the 70s inflation is due to Jimmy Carter's deregulating natural gas industry and allowing gas to become a viable alternative to oil for power production.)
He mentioned over and over how our leaders and nation in general doesnt have a very clear agenda....inflation is bad but we hit canadian lumber imports with high tariffs and initiated a trade war with China...driving material prices higher. From an energy standpoint we fail to recognize that the price of oil is set at the margins and that producers like Russia and Saudi Arabia, although only accounting for a fraction of world oil production, can control the price of this commodity by restricting supply....which they do. Related to energy it's also seemingly non sensical that the democrats are simultaneously for reducing consumption and burning or fossil fuels for environmental reasons but also trying to lower prices which would lead to increased consumption. In addition he argued that the feds reaction to this of raising rates again a'la Volker will exacerbate inflation until the point where it simply begins to break markets.
Mosler doesn't seem to be an idiot yet he says things that run counter to the conventional dialogue. Somehow though the things he says give me more clarity than what I hear out of most talking heads....worth a listen I think.
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Re: Mosler on current inflation...the MMT response
I think it's quite clear that a lot of the inflation we see today is caused by shortages in labor and materials. Practically every business is complaining about this. But all the money printing during the pandemic definitely goosed demand. Tons of evidence for that as well. The war in Ukraine has also spiked prices of food and fossil fuels in the global markets for obvious reasons.
Things that I expect to help would be:
- The war in Ukraine ends
- OPEC stops taking advantage of the war and high fossil fuel prices by deliberately restricting production to keep the prices high
- China ends its "zero COVID" policy and resumes its full manufacturing output
- Less dependence on price-volatile fuels for energy needs in a general sense
- Tariffs and embargoes are generally reduced
- More immigration
- More non-China and domestic manufacturing
- Wages generally rise so that more people are enticed back to work
- Some of the free money that went to people and businesses that didn't need it gets clawed back
- Higher taxes, especially on those who won biggest during COVID: large businesses, high earners and high net worth people, owners of financial instruments (AKA people like us) etc.
- The culture surrounding home ownership changes to view homes first and foremost as functional and often-maintenance-intensive dwellings rather than investments that must rise in value
- Incentives, subsidies, and zoning changes to encourage building more multi-family housing, and single-family homes that are substantially smaller than average
- Somehow make the health care and higher education markets not be totally dysfunctional
None of these have anything to do with the Fed, of course. And most are either international in scale, not easily affected at all, are politically risky to attempt domestically, or have substantial negative side effects attached to them.
Hence, persistent inflation.
A lot of these things will get better on their own, though. Which party/administration is in power when that happens is essentially random, but you can bet they'll take credit for it anyway.
That's the bargain we make with our leaders: they get to take the credit when random good things happen, but we also blame them when bad things happen that are largely out of their control.
Things that I expect to help would be:
- The war in Ukraine ends
- OPEC stops taking advantage of the war and high fossil fuel prices by deliberately restricting production to keep the prices high
- China ends its "zero COVID" policy and resumes its full manufacturing output
- Less dependence on price-volatile fuels for energy needs in a general sense
- Tariffs and embargoes are generally reduced
- More immigration
- More non-China and domestic manufacturing
- Wages generally rise so that more people are enticed back to work
- Some of the free money that went to people and businesses that didn't need it gets clawed back
- Higher taxes, especially on those who won biggest during COVID: large businesses, high earners and high net worth people, owners of financial instruments (AKA people like us) etc.
- The culture surrounding home ownership changes to view homes first and foremost as functional and often-maintenance-intensive dwellings rather than investments that must rise in value
- Incentives, subsidies, and zoning changes to encourage building more multi-family housing, and single-family homes that are substantially smaller than average
- Somehow make the health care and higher education markets not be totally dysfunctional
None of these have anything to do with the Fed, of course. And most are either international in scale, not easily affected at all, are politically risky to attempt domestically, or have substantial negative side effects attached to them.
Hence, persistent inflation.
A lot of these things will get better on their own, though. Which party/administration is in power when that happens is essentially random, but you can bet they'll take credit for it anyway.
That's the bargain we make with our leaders: they get to take the credit when random good things happen, but we also blame them when bad things happen that are largely out of their control.Re: Mosler on current inflation...the MMT response
+1 to everything PS wrote.
Monetary policy has an effect, but it is nowhere near as strong as reality. And, we have a lot of "reality bites" things going on. My take is we are going to see inflation begin to taper off a bit. Some fundamentals (particularly housing) have nosed over and are heading south. So I don't see 8-9% annualized persisting. However, IDK if that means we are simply heading to 4-6% inflation or moving toward the preferred 2% range.
Monetary policy has an effect, but it is nowhere near as strong as reality. And, we have a lot of "reality bites" things going on. My take is we are going to see inflation begin to taper off a bit. Some fundamentals (particularly housing) have nosed over and are heading south. So I don't see 8-9% annualized persisting. However, IDK if that means we are simply heading to 4-6% inflation or moving toward the preferred 2% range.
Re: Mosler on current inflation...the MMT response
Only watched the beginning of the Mosler video doodle posted so can't comment on most of it. Anyway, Mosler seems to start off every piece he does with a premise that, at least for me, just doesn't jive with reality. Specifically he has this idea that the government more or less arbitrarily imposes taxes on its citizens which then forces the citizens to go out and work just to pay their taxes... that we'd essentially have no need for dollars if the government wasn't taxing us. This seems like BS to me unless we all want to go back to a barter economy, be responsible for building our own roads, electrical grid, etc.
Not saying that many aspects of MMT are not an accurate description of what we see in the world. For example, I don't think the US government seriously believes that it's ever going to pull back 30 trillion dollars in federal debt from US tax payers. There will be taxation for sure but, to the extent that the money needs to be paid back (to us for our I-bonds and US Treasuries, for example), much of that that can and will be "created" more or less out of thin air.
Not saying that many aspects of MMT are not an accurate description of what we see in the world. For example, I don't think the US government seriously believes that it's ever going to pull back 30 trillion dollars in federal debt from US tax payers. There will be taxation for sure but, to the extent that the money needs to be paid back (to us for our I-bonds and US Treasuries, for example), much of that that can and will be "created" more or less out of thin air.
Re: Mosler on current inflation...the MMT response
I'm really no expert on Mosler's claims, but I believe taxation is his explanation of why we need US Dollars specifically, not why we need some form of currency/money.barrett wrote: ↑Tue Oct 25, 2022 6:03 am Only watched the beginning of the Mosler video doodle posted so can't comment on most of it. Anyway, Mosler seems to start off every piece he does with a premise that, at least for me, just doesn't jive with reality. Specifically he has this idea that the government more or less arbitrarily imposes taxes on its citizens which then forces the citizens to go out and work just to pay their taxes... that we'd essentially have no need for dollars if the government wasn't taxing us. This seems like BS to me unless we all want to go back to a barter economy, be responsible for building our own roads, electrical grid, etc.
Not saying that many aspects of MMT are not an accurate description of what we see in the world. For example, I don't think the US government seriously believes that it's ever going to pull back 30 trillion dollars in federal debt from US tax payers. There will be taxation for sure but, to the extent that the money needs to be paid back (to us for our I-bonds and US Treasuries, for example), much of that that can and will be "created" more or less out of thin air.