BearBones wrote:
Wonder what the MMT folks would think the of the consequence of the "enormous increase in central bank balance sheets in the last 10 years or so." Does it do anything if it doesn't make it into consumer's pockets? Anyone want to comment? Moda, Stone, Gumby around?
If you print a bunch of money and bury it in your backyard, does it do anything? I think not.
If I understand the MMT folks correctly they would argue that when demand for credit is saturated the Fed can't enact monetary policy by means of bank reserves, since those are only available for interbank settlements. Mainstream economists still think that banks get the reserves first, and then loan it out and via multiplier the money supply rises throughout the economy. But empirical evidence shows banks lend money first, and then later on borrow the reserves to meet legal requirements.
I've heard some of them say the Fed should not get involved in interbank loans and just let the rate fall to 0% as it would naturally (in the interbank lending market that is, not everywhere!).
I believe they would argue the only entity that could enact effective monetary policy would be the Treasury by means of spending money on hiring the unemployed.
I'm not a Keynesian and ultimately consider myself an Austrian as well philosophically, but I think it's hard to argue that it would be preferable to put people to work instead of sending them welfare/unemployment checks.