Hey, at least they clearly summarised the debate, which is the most important thing for laypeople, and linked to original sources. Any commentary on the theory itself?

@WilyRickWiles I don't think you want to her my commentary on the theory. I have commented on other threads. If there were a vote on it mine would be no. The fact that AOC suggested it be discussed and other self-professed socialists and progressives agree should be warning enough.

First, keep in mind first that the US is unique in that it not only can print its own currency but that currency is the world's reserve currency. Because it is the world's reserve currency, that will always be balanced out by trade deficits. It also has one of the world's most diverse economies and is arguably the world's strongest military and diplomatic power.

After the 2008 financial crisis, there was a lot of bad debt that only an entity with a long time horizon, like the US government, could clean up. So they printed tens of trillions of dollars to do just that. To the surprise of some, not only did hyperinflation not result, but much of the world's economies threatened to go into deflation, with interest rates going negative. The US government managed to make money off the investments it's sold off, but regardless there are still more than $10 trillion on the federal reserve's balance sheet.

Subsequently, economists and people on Wall Street have searched for a theoretical framework to help explain what was happening in the economy. [nytimes.com]

Some key things to understand about the theory are:

1. Printing money without issuing bonds actually drives down interest rates because there ends up being more money in private bank accounts/reserves not yet being lent out
2. If government spending goes toward something that increases productivity, that should balance out some increased consumer demand. A good application of this would be a job guarantee. The government was once going to become the employer of last resort and it got watered down to giving the Fed a mandate to keep unemployment down.
3. When you have trade deficits government deficits are balanced by surpluses in the economy and likewise government surpluses are balanced by deficits in the economy. Case in point the 2001 recession that followed a government surplus.

@WilyRickWiles Thanks for your clear response. While I can't claim to understand economics, your info. is palatable.

The US dollar is the world's reserve currency because the US doesn't irresponsibly print money. Unless there is an increase in economic activity commensurate with the amount of money that is created, printing money would make inflation worse. This would be, as the saying goes, "too much money chasing too few goods."

While it may have worked (without the ensuing hyperinflation) in 2008, we have many more historical examples of the opposite.

I'm not too sure I like how the Dems are proposing to pay for all the services they're promising. Even Andrew Yang wants to give every American $1000.00 as UBI, without any consideration of how this will decrease the value of the American dollar, possibly create inflation, and possibly cease to be the world's reserve currency.

I mentioned the part about the diverse economy, strong military, and diplomatic power (forgot to mention stable government) because that helps maintain the integrity of our reserve currency. That is, it helps maintain confidence that we'll pay our debts through taxation. So we should be fine as long as we keep deficits within a reasonable percentage of GDP (historically it's been about 4% and it could probably be higher).

So in a nutshell, it all kind of follows from the fact that we're the world's reserve currency: reserve currency begets trade deficit, trade deficit begets economic deficits, economic deficits beget deficit spending, deficit spending begets printing money and issuing bonds only to keep interest rates from going too low, and printing money while maintaining our credibility as a tax authority begets being the world's reserve currency.

Maintaining those balances comes with some nice privileges.

Printing money played a major role in the fall of the Roman Empire.

@CRBG I'm not a Yang fan. I'm not entirely against UBI, but he seems to want to use it to replace the entire safety net, as libertarians are won't to do, and I think people need a lot more help than just a check. I wish he were on the MMT train--he might be open to it, but for now he seems set on putting in place a regressive VAT tax.

@WilyRickWiles Well, I enjoyed the chat. I think printing money might be a good temporary solution if there's a shortage in dollars circulating but as a long term thing? Sorry, I'm not on board...not yet, anyway. I think it's a risky experiment, but, perhaps I'm wrong. Cheers.

@Notestine We crossed that bridge long ago. Nevertheless, I'm wondering if it wasn't so much printing money but some other economic imbalance that was the issue with the Roman Empire. That was also before industrialization, globalization, and fully fiat currency.