The problem with MMT is that it depends on responsible governments. They won't behave well, and there's no alternative when that happens. They can pull a Japan and kick the can for longer than you or I will live, but the bottom line is fertility. And although the mainstream hasn't acknowledged that link, east Asia will be long depopulated, and the rest of the modern world with it, before the system collapses.
And an MMTer would come back with socialist solutions for fertility, but then we're literally starving instead of financially drowning. Fantastic.
"The Fed had choices at every step. QE1 was a crisis response. QE2 and QE3 were unequivocally not — they came at times of near-full employment, markets functioning quite well, and long after the immediate crisis had already been resolved."
I take issue with this rather Pollyannish characterization of the economic context surrounding quantitative easing (and post-GFC economic performance more generally). Sure, when QE2 came around (c. 2011-12), economic growth was positive (although it was remarkably low) and capital markets had been restored to something resembling stability (excluding the GOP-imposed debt ceiling crisis of August 2011), but the economic crisis generated by the Great Recession was far from over. Unemployment remained high (U-3 stood at about 8.5% in December 2011, whereas full employment is generally around 4%), growth was lackluster (hence the term “jobless recovery” and calls for additional fiscal stimulus), and there was nothing to suggest that additional fiscal stimulus would be forthcoming (especially after the Republican electoral sweep in 2010). The same could be easily said for QE3 (c. September 2012): U-3 was 7.8%, growth was still lackluster, no fiscal stimulus was likely forthcoming, and unemployment didn’t return to “near-full employment” levels until at least October 2015 (when U-3 hit 5%). Under the dual mandate, the Fed had ample reason to be concerned about the weak economy, given how elevated unemployment was and fears that it would scar the economy in the long run.
This is not to suggest that I support MMT (I don’t, and Doug Henwood provides a rather devastating left-wing critique here https://jacobin.com/2019/02/modern-monetary-theory-isnt-helping). I just don’t buy the idea that QE2 and QE3 were ill-timed, let alone a policy mistake of epic proportions.
"Money is a legitimacy system built on a constraint stack. You can suppress the constraint for a while. You cannot repeal it."
Yeah, that's a good line
The problem with MMT is that it depends on responsible governments. They won't behave well, and there's no alternative when that happens. They can pull a Japan and kick the can for longer than you or I will live, but the bottom line is fertility. And although the mainstream hasn't acknowledged that link, east Asia will be long depopulated, and the rest of the modern world with it, before the system collapses.
And an MMTer would come back with socialist solutions for fertility, but then we're literally starving instead of financially drowning. Fantastic.
"The Fed had choices at every step. QE1 was a crisis response. QE2 and QE3 were unequivocally not — they came at times of near-full employment, markets functioning quite well, and long after the immediate crisis had already been resolved."
I take issue with this rather Pollyannish characterization of the economic context surrounding quantitative easing (and post-GFC economic performance more generally). Sure, when QE2 came around (c. 2011-12), economic growth was positive (although it was remarkably low) and capital markets had been restored to something resembling stability (excluding the GOP-imposed debt ceiling crisis of August 2011), but the economic crisis generated by the Great Recession was far from over. Unemployment remained high (U-3 stood at about 8.5% in December 2011, whereas full employment is generally around 4%), growth was lackluster (hence the term “jobless recovery” and calls for additional fiscal stimulus), and there was nothing to suggest that additional fiscal stimulus would be forthcoming (especially after the Republican electoral sweep in 2010). The same could be easily said for QE3 (c. September 2012): U-3 was 7.8%, growth was still lackluster, no fiscal stimulus was likely forthcoming, and unemployment didn’t return to “near-full employment” levels until at least October 2015 (when U-3 hit 5%). Under the dual mandate, the Fed had ample reason to be concerned about the weak economy, given how elevated unemployment was and fears that it would scar the economy in the long run.
This is not to suggest that I support MMT (I don’t, and Doug Henwood provides a rather devastating left-wing critique here https://jacobin.com/2019/02/modern-monetary-theory-isnt-helping). I just don’t buy the idea that QE2 and QE3 were ill-timed, let alone a policy mistake of epic proportions.