The NYT on MMT

Someone must have told the New York Times that Market Monetarist Theory was hot!

HT:  Marcus Nunes

Update:  As usual, the NYT had impeccable timing.  They do this story on the day when the “liquidity trap” clearly ended.

 


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11 Responses to “The NYT on MMT”

  1. Gravatar of Mark A. Sadowski Mark A. Sadowski
    5. July 2013 at 10:52

    “Someone must have told the New York Times that Market Monetarist Theory was hot!”

    Well, evidently that not Mark Thoma:

    “”They deny the fact that the government use of real resources can drive the real interest rate up,” said Mark Thoma, an economics professor and widely followed blogger who teaches at the University of Oregon. After delving into the technical details of modern monetary theory for a few minutes, he paused, then added, “I think it’s just nuts.””

    Incidentally, Thoma posted this article in the Economist’s View links today and, based on the comment section, his regular MMT commenters are still trying to figure out the true meaning of his statement.

  2. Gravatar of Mark A. Sadowski Mark A. Sadowski
    5. July 2013 at 10:54

    I just noticed you changed the MM in MMT. So obviously that joke went over my head. No matter.

  3. Gravatar of ssumner ssumner
    5. July 2013 at 11:09

    Mark, Don’t worry, jokes go over my head every day. But glad to see that Mark Thoma doesn’t fall for the MMT stuff.

  4. Gravatar of Ognian Davchev Ognian Davchev
    5. July 2013 at 12:48

    Prof. Sumner,

    This is slightly off-topic but since now Market Monetarism is almost mainstream, can you do a post on NGDP targeting for small economies?

    I am from such a country, Bulgaria and I am very interested in hearing your reservations regarding NGDPLT for small economies in details. In the past you have mentioned that your intuition is that NGDPLT is not optimal for such economies.

    A stable NGDP path should be just as good for small countries as it is for the big developed economies.

    The only difficulties that I can think of would be maybe in reliably measuring NGDP or in some differences in the W/NGDP ratio in small economies.
    Anyway I hope that you can find time and let us know your opinion on that matter.

  5. Gravatar of youko shi youko shi
    5. July 2013 at 15:28

    Apparently 52 out of 99 economists disagree with the statement “Monetary forces were the primary cause of the Great Depression” Only 14 agree, and 33 agree with provisos.

    25 out of 100 disagree with the idea that the Fed could have stopped the deflation and banking collapse. Only 34 agree.

    What happened to Milton Friedman’s Legacy? Did too many people read Kehoe and Prescott’s take on Great Depressions?

    Questions 34 and 36, page 6 of the PDF:
    http://employees.csbsju.edu/JOLSON/ECON315/Whaples2123771.pdf

  6. Gravatar of ssumner ssumner
    5. July 2013 at 15:47

    Ognian, I think it would do pretty well for someplace like Bulgaria. It’s places like Kuwait where it won’t work–as oil shocks would throw things off.

    Small countries might consider targeting aggregate wages and salaries, indeed big countries too. But I usually focus on NGDP for big countries because it’s easier to explain than aggregate wages and salaries.

    Youko, That’s from 1995. No, the problem is not Prescott, they don’t blame the New Deal either.

    The worst is the answer to “money demand”.

  7. Gravatar of flow5 flow5
    6. July 2013 at 06:37

    Any recovery in the economy will present a “catch 22″ situation. An upturn in the economy will add increased private demand for loan funds to the insatiable demands of the federal government. The consequent rise in interest rates will effectively abort any recover.

    The “high National Debt-to-GDP ratio” is a contrived metric (the volume of nominal GDP is not independent of the size of the deficit). To appraise the effect of the federal budget deficit on interest rates, it is necessary to compare the deficit, not to GDP, but to the volume of gross current savings (+ international investment, & debt monetization), made available to the credit markets.

    The limitation on quantitative easing is a function of inflation expectations. And inflation will soon decelerate based on the 24 month rate-of-change in MVt (& bond proxy). Unless there’s some data collection, calculation, or reporting error, interest rates should already be falling.

    Yields on 3 month T-Bills peaked as the roc in MVt (the proxy for real-output), peaked back in Feb @ .13% (now @ .05%).

    Interest rates’s seasonal peak is due on July 10th. So 10 year constant maturities could have just peaked on 7/5 @ 2.74%. 30 year fixed mortgage rates should have just peaked on 6/27 @ 4.46%. 30 year Daily Treasury Yield Curve Rates should have just peaked 7/5 @ 3.68%

  8. Gravatar of ssumner ssumner
    6. July 2013 at 16:13

    Flow5, Probably a “data error.”

  9. Gravatar of flow5 flow5
    7. July 2013 at 10:52

    A rapid increase in required reserves (means-of-payment money) almost always propels the transactions velocity permanently higher in the following 2-3 months. Since the G.6 release was discontinued changes in Vt are hard to predict.

    There are no large percent changes in AD for the rest of this year (where MVt = aggregate monetary demand), except for Oct.

  10. Gravatar of flow5 flow5
    9. July 2013 at 04:46

    MMMFs have been recent recipients of new deposit inflows. Fund growth bottomed right before the surge in rates @ $624.5 billion on 5/6/2013. Balances now stand @ $651.9 billion.

    Higher interest rates both reflect (& generate) higher money velocity.

  11. Gravatar of flow5 flow5
    9. July 2013 at 07:23

    Any recovery in the economy will present a “catch 22″ situation. An upturn in the economy will add increased private demand for loan funds to the insatiable demands of the federal government. The consequent rise in interest rates will effectively abort any recover

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