• About
  • Contact
  • Give
Newsletter
NOQ Report - Conservative Christian News, Opinions, and Quotes
Sunday, June 26, 2022
  • Home
    • About
    • Give
  • News
  • Opinions
  • Quotes
  • Around the Web
  • Videos
  • Podcasts
No Result
View All Result
  • Home
    • About
    • Give
  • News
  • Opinions
  • Quotes
  • Around the Web
  • Videos
  • Podcasts
No Result
View All Result
NOQ Report - Conservative Christian News, Opinions, and Quotes
No Result
View All Result

Putin’s Inflation? Homegrown Modern Monetary Theory Is to Blame

by Vibhu Vikramaditya
April 4, 2022
in Podcasts
Putin’s Inflation? Homegrown Modern Monetary Theory Is to Blame

Editor’s Commentary: Today’s episode of JD Rucker LIVE at 2pm Eastern on Red State Talk Radio as well as The Midnight Sentinel podcast focused on the article below by Vibhu Vikramaditya from Mises.

Prices of goods and services in the economy seem to be going through the roof, and both consumers and producers suffer from the falling value of their money. Unfortunately, the public turns to politicians in Washington and economists around the world for answers.

While president Joe Biden and his administration call it Putin’s price hike, the US Bureau of Labor Statistics reports that over the last twelve months, the all items index increased 7.9 percent before seasonal adjustment. The reported twelve-month increase has been steadily rising and is now the largest since the period ending January 1982. The all items less food and energy index rose 6.4 percent, the largest twelve-month change since the period ending August 1982. The energy index rose 25.6 percent over the last year, and the food index increased 7.9 percent, the largest twelve-month increase since the period ending July 1981.

Meanwhile, the government’s debt has exploded to $30 trillion, up from about $10 trillion at the start of the 2008 downturn and $5 trillion in the mid-1990s. While such startling evidence is directly in contradiction with the official narrative of the White House, political elites either ignore the problem altogether or blame the wrong people. Part of the root of this calamity is found in the foundation of economic beliefs of the Biden administration.

Even though Treasury secretary Janet Yellen has distanced herself from modern monetary theory (MMT), as a student of James Tobin, she continues to remain an inflationist who believes that government should play a more active role in the economy. For example, she supported the $1.9 trillion stimulus plan signed in March 2020 even though the money was created from thin air. While she does not officially endorse MMT, nonetheless her views of economics do not stray far from MMT orthodoxy.

Stephanie Kelton, author of The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, also began doing regular interviews on the topic, becoming the de facto face of the MMT movement. She served as an economic adviser to Sen. Bernie Sanders during his presidential campaign and has since advised the Biden administration as well, going as far as to declare that Biden has adopted her principles.

What Is Modern Monetary Theory?

Modern monetary theory begins with the government budget constraint under a system of fiat money. According to William Mitchell, L. Randall Wray, and Martin Watts in Macroeconomics, the standard MMT approach, which relates the present value of tax revenue to the present value of government spending and the government debt, is misleading. Further,

the most important conclusion reached by MMT is that the issuer of a currency faces no financial constraints. Put simply, a country that issues its own currency can never run out and can never become insolvent in its currency. It can make all payments as they come due. (p. 13)

As a result, “For most governments, there is no default risk on government debt” (p. 15).

The most important implication of such a radical theory is that government enjoys potentially limitless power as an arbitrator in the economy. Based on this theory, Congress supposedly can use the printing press effectively via accumulation of debt, raising aggregate demand to the level of full employment. Inflation, according to MMT theorists, is a phenomenon borne out of the class conflicts between workers and capitalists as they jostle for higher shares of the national income (Macroeconomics, p. 255). According to them, moreover, virtually “all spending (private or public) is inflationary if it drives nominal aggregate demand above the real capacity of the economy to absorb it” (Macroeconomics, p. 127).

As is the case with most “crank” theories, the world that this theory describes can never come to life. Full employment is not a criterion that real prices wait for to increase as buyers and sellers compete for scarce resources in the market economy. The view that inflation is a purely monetary phenomenon and that inflation takes place that is beyond the economy’s absorbing capacity are both true to an extent, but both miss the vital picture of the interconnectedness of the market economy.

Inflation in the Structure of Production

The general increase in the price level, as the mainstream and MMT theorists want to believe, does not come directly from an increase in money supply or full employment (the “overheated” economy) but from an increase in the scarcity of goods and services whose ability to impact the prices of other goods and services is relatively higher and whose production takes substantial time. The full employment criterion of MMT is therefore not needed for prices to start increasing, as economists like Murray N. Rothbard have demonstrated when they refer to “stagflation,” the simultaneous increase of inflation and unemployment.

The structure of production in the economy starts with goods produced at the primary stages and ends with the final goods used by consumers. Goods used in the primary stages of the structure of production are created through agriculture, forestry, fishing, mining, oil extraction, and other natural resources. These inputs form the base of almost every other product or service provided to consumers. Due to their vital role as the base products of the economy, these products’ price changes due to changes in demand are the most inflationary to all other goods.

GoldCo 1

The second most effective influencers of prices of other goods are the semifinished goods and services used as inputs by producers during the middle stages to create final goods and services. Given their nongeneral nature, these goods, such as steel and plastic, are used by multiple producers for various next-stage goods. As demand for semifinished goods increases due to increased competition among producers of final goods, it exerts inflationary pressures directly on final-goods prices.

When additional money is introduced into the economy as a result of increased government spending, it leads consumers to increase their consumption of final goods due to their increased money balances. As demand for final goods increases, producers of final goods look to purchase more primary order goods and various other intermediate goods, whose scarcity then increases due to increased competition among producers, which leads to an increase in these goods’ prices.

This reorients prices of the entire structure of production, and the shift is then observed as a general increase in prices through various indexes. The severity of increases in prices depends upon the ability to meet the increased demand for base goods and intermediate goods.

We can understand that inflation is a phenomenon that takes place due to changes in scarcity as a result of increased competition between producers each pursuing their independent ends. While increases in prices are a part of the adaptive market process that guides production and consumption, soaring inflation levels or sudden general increases in prices require an additional generation of money in the economy that is more than the money created through consumer and producer credit in the natural course of the economy. Had the changes in money supply been internal to the economy, the adaptive market process would have worked to allocate goods efficiently.

When governments create artificial demand and try to increase their spending in an unchecked manner, they effectively create inflationary pressures in the structure of production. At the same time, they also destroy the allocating price mechanism of the markets, which gets worse the more they spend. While printing and digitally transferring money might take seconds, production and distribution takes much longer.

The Proper Role of Prices in the Market Process

As Congress armed with MMT attempts to dictate the course of the economy based on their political leanings, it leads to distortions of prices in the structure of production, but the rise in prices is not the problem per se. The rise in prices in a well-functioning market has a specific role; when an object of use becomes scarce in the market, it is a signal to consumers to economize on it. At the same time, price increases point in the direction of a more profitable employment of resources—production of the expensive good—until supernormal profits are exhausted. When prices rise artificially, however, this destroys the efficient allocation mechanism of markets and is a tax levied on consumers that reduces the purchasing power of their money, as well as their saved-up wealth.

Inflation-driven price increases act as signals that misdirect the employment of resources, leading producers to make inefficient choices and allocate factors erroneously. They undermine the trust in the price mechanism from all sides. Prices in this situation are like traffic signals that always misdirect traffic.

Conclusion

The only thing modern about MMT is the unprecedented amount of confidence in both its advocacy and application. The US economy already has experienced the Keynesian spending spree of the sixties, which ended in the stagflation of the seventies. When the government’s economic policies are based on the belief that the government can print unlimited amounts of money with little or no repercussions, we should not be surprised to find ourselves living under the most inflationary period in forty years.

About the Author

An economics and a libertarian scholar with research interests in capital theory, monetary theory, and business cycles, I write about events in the economy from a legal and economic standpoint with a proliberty outlook and believe that safeguarding the liberty and rights of each individual is the most important act toward peace, prosperity and growth. My other works can be found at the Austrian Economics Center, the Libertarian Institute, and beinglibetarian.com. I can be reached at [email protected] and on Twitter (@vibhu3333).

TOP Prepare Now



They’re Trying to Shut Us Down

Over the last several months, I’ve lost count of how many times the powers-that-be have tried to shut us down. They’ve sent hackers at us, forcing us to take extreme measures on web security. They sent attorneys after us, but thankfully we’re not easily intimidated by baseless accusations or threats. They’ve even gone so far as to make physical threats. Those can actually be a bit worrisome but Remington has me covered.

For us to continue to deliver the truth that Americans need to read and hear, we ask you, our amazing audience, for financial assistance. We just launched a GiveSendGo page to help us pay the bills. It’s brand new so don’t be discouraged by the lack of donations there. It’s a funny reality that the fewer the donations that have been made, the less likely people are willing to donate to it. One would think this is counterintuitive, but sometimes people are skeptical because they think that perhaps there’s a reason others haven’t been donating. In our situation, we’re just getting started so please don’t be shy if you have the means to help.

Thank you and God bless!

JD Rucker

Tags: EconomyElon MuskJoe BidenLedeMisesMMTModern Monetary TheoryPodcastThe Midnight SentinelTop Story
  • Anglia says:
    April 4, 2022 at 6:03 pm

    Work on-line from home and earn over $15,000 simply by doing a straightforward job. Jsl235 Last month I attained and received $20,000 from this job doing an easy half time job. In fact, this job is really easy to try and do and regular financial gain is far higher than different traditional workplace jobs wherever you’ve got to wear down your boss…….. http://joinpay24.tk

  • Sharon says:
    April 4, 2022 at 8:41 pm

    Start Earning $250 Per Day By Using A Work From Home System That Has Helped Thousands Of People Just Like You! Learn open this ↓↓↓↓↓↓↓↓ site and just visit home and other….. more here………. https://joinushere1.blogspot.com/

  • Jade Joyce says:
    April 4, 2022 at 8:50 pm

    As much as I saw the bank draft which had said $4075, I be certain …That…My father in regulation ought to realia receiving money of their spare time from their computer.. There moms pleasant friend began doing this four much less than 20 months and as of now paid for the mortgage on there domestic and bout a appropriate Acura. you could test here

    For more detail …… https://hugeincomstar.blogspot.com/

  • Bypass Big Tech Censors



    My Shows

    The JD Rucker Show (Apple)
    The JD Rucker Podcast (Apple)
    Red State Talk Radio (M-F 2pm ET)
    America Out Loud (M-F 7pm ET)
    America First Report (Substack)
    The Late Prepper (Substack)
    End Medical Tyranny (Substack)

    Our Sponsors

     
    MyPillow Promo Code NOQ

    MyPatriotSupply

    Z-Stack Life

    Our Gold Guy
     
    Valley Food
     

    Shows

    Post-Roe America

    BlackRock Runs the Country

    Gaslighting on Kids' Deaths

    Prepare for Economic Collapse

    Dr. Carrie Madej

    Clay Clark

    Bypass Big Tech Censors

    RSS The Federalist

    • J6 Committee Ignores Witness’s Ties To Zuckerberg-Funded Group That Manipulated 2020 Election
    • Bill Barr: If You’re Appalled About Unequal Justice, Get Joe Biden Out Of Office
    • If You’re Frightened Of Post-Roe America, Consider How Liberating Dobbs Is
    • Why Democrats Oppose Emancipation For The Unborn
    • America Has Donald Trump To Thank For Roe v. Wade Finally Being Overturned

    RSS The Blaze

    • 'I ended her life:' Brian Laundrie reportedly confessed to murdering Gabby Petito in newly released diary
    • Bill Maher says we live in 'two different countries' after Roe v. Wade reversal, warns woke progressives could cause Democrats to lose abortion debate
    • President Biden previously said abortion is 'always a tragedy' and not a 'right' in resurfaced clip
    • Video: Pro-abortion protesters try to storm Arizona state Capitol, lawmakers 'held hostage.' Kari Lake calls the event a 'real insurrection.'
    • 'Night of rage' protests erupt into violence across the country: Fox News HQ targeted, fireworks shot at police, pro-life woman attacked, journalists assaulted

    RSS PJ Media

    • From Airbnb to Zillow, You Subsidize Abortion When You Patronize These Companies
    • Abortion Emergency! Black Women Demand Biden Declare 'National Public Health Emergency'
    • GOP Rep. Misspeaks and the World Explodes
    • [WATCH] One American Gun Manufacturer Is Fighting Back Against the Left's Wrath
    • Meckler: In the Wake of Dobbs, Radical Federalism Is the Only Way Back to Civility

    RSS National File

    • Michael Guest Ally Encouraged Democrats to Vote in GOP Primary, Cassidy Campaign Reveals
    • MTG Calls Out Pro-Abortion, Anti-Family Corporations in Wake of Roe Ruling
    • VIRGINIA: Jefferson Davis Statue Destroyed by BLM Rioters Now Displayed as Left-Wing Art
    • Verified Twitter Users Openly Call for Violent Uprising in Response to Roe Decision
    • The Arizona Capitol Was Evacuated After Far-Left Protesters Stormed Building

    RSS Townhall

    • God, Guns, Babies, Trump!
    • Parents Face Even More Than the Destruction of Their Daughters’ Sports As Title IX Turns 50
    • Terror Follows Slander: How to Decipher the Timing and Intensity of Tehran’s Psychological Warfare
    • A Quick, Compelling Bible Study Vol. 119: Miracles in the Hebrew Bible
    • Donald Trump’s Supreme Court Legacy

    RSS RedState

    • Antifa Terrorist Attack Against Pregnancy Center Thwarted, Another Wasn't So Fortunate
    • Kamala Is So 'Unburdened' From Sense on Abortion, Even Marianne Williamson Has Questions
    • Democrats Swat Down a Measure to Ban Critical Race Theory in the Military
    • Davis: The Left Has Only Themselves to Blame for RBG Failing to Retire
    • Miss France Welcomes Biological Male Contestant, 'a Candidate Like the Others'
    • About
    • Contact
    • Give

    © 2021 NOQ Report

    No Result
    View All Result
    • Home
      • About
      • Give
    • News
    • Opinions
    • Quotes
    • Around the Web
    • Videos
    • Podcasts

    © 2021 NOQ Report

    Session expired

    Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.

    >