{"id":1489,"date":"2011-08-24T20:22:49","date_gmt":"2011-08-24T20:22:49","guid":{"rendered":"http:\/\/www.multiplier-effect.org\/?p=1489"},"modified":"2011-08-24T20:28:53","modified_gmt":"2011-08-24T20:28:53","slug":"mmt-and-hyperinflation","status":"publish","type":"post","link":"https:\/\/blogs.bard.edu\/multiplier-effect\/mmt-and-hyperinflation\/","title":{"rendered":"MMT and Hyperinflation"},"content":{"rendered":"<p>(<em>via <a href=\"http:\/\/www.economonitor.com\/lrwray\/\">EconoMonitor<\/a><\/em>)<\/p>\n<p>In last week\u2019s post, I responded to Paul Krugman\u2019s critique of Modern Money Theory (MMT), which argues that a sovereign government that issues its own floating exchange rate currency cannot face an affordability constraint\u2014which means it cannot be forced into involuntary default on its own currency debt. His criticisms really boiled down to a misunderstanding over operational details\u2014how banks work, how the Federal Government really spends, and the role played by the Fed in making all these operations work smoothly. I won\u2019t rehash any of that here.<\/p>\n<p>But what we were left with is the argument that if a government operates along MMT lines, then we are on the path to ruinous hyperinflation. Of course Austrians have long argued that all fiat money regimes are subject to these dangers\u2014even ones that don\u2019t follow MMT\u2019s recommendations. MMTers are commonly accused of promoting policy that would recreate the experiences of Zimbabwe or Weimar Republic hyperinflations. These were supposedly caused by governments that resorted to \u201cmoney printing\u201d to finance burgeoning deficits\u2014increasing the money supply at such a rapid pace that inflation accelerated to truly monumental rates.<\/p>\n<p>It is very easy to titillate audiences with graphs such as the following, which displays rapid depreciation of the Weimar Republic\u2019s paper money in terms of gold:<\/p>\n<p><a href=\"http:\/\/blogs.bard.edu\/multiplier-effect\/files\/2011\/08\/image0012.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-1499\" title=\"image001\" src=\"http:\/\/blogs.bard.edu\/multiplier-effect\/files\/2011\/08\/image0012-286x300.jpg\" alt=\"\" width=\"286\" height=\"300\" srcset=\"https:\/\/blogs.bard.edu\/multiplier-effect\/files\/2011\/08\/image0012-286x300.jpg 286w, https:\/\/blogs.bard.edu\/multiplier-effect\/files\/2011\/08\/image0012.jpg 529w\" sizes=\"auto, (max-width: 286px) 100vw, 286px\" \/><\/a><\/p>\n<p>Or with a picture of a Zimbabwe note\u2014which shares the all-time record for number of zeroes:<\/p>\n<p><a href=\"http:\/\/blogs.bard.edu\/multiplier-effect\/files\/2011\/08\/image0021.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-1500\" title=\"image002\" src=\"http:\/\/blogs.bard.edu\/multiplier-effect\/files\/2011\/08\/image0021-300x150.jpg\" alt=\"\" width=\"300\" height=\"150\" srcset=\"https:\/\/blogs.bard.edu\/multiplier-effect\/files\/2011\/08\/image0021-300x150.jpg 300w, https:\/\/blogs.bard.edu\/multiplier-effect\/files\/2011\/08\/image0021.jpg 600w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>No one wants to defend high inflation, much less hyperinflation. In his classic 1956 paper Phillip Cagan defined hyperinflation as an inflation rate of 50% or more per month. Clearly the zeroes would add up quickly, and economic life would be significantly disrupted.\u00a0 <a href=\"http:\/\/www.economonitor.com\/lrwray\/2011\/08\/24\/zimbabwe-weimer-republic-how-modern-money-theory-replies-to-hyperinflation-hyperventilators-part-1\/\">To read the rest, click here&#8230;<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>(via EconoMonitor) In last week\u2019s post, I responded to Paul Krugman\u2019s critique of Modern Money Theory (MMT), which argues that a sovereign government that issues its own floating exchange rate currency cannot face an affordability constraint\u2014which means it cannot be forced into involuntary default on its own currency debt. His criticisms really boiled down to [&hellip;]<\/p>\n","protected":false},"author":208,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[112],"tags":[],"class_list":["post-1489","post","type-post","status-publish","format-standard","hentry","category-modern-monetary-theory"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/1489","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/users\/208"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/comments?post=1489"}],"version-history":[{"count":7,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/1489\/revisions"}],"predecessor-version":[{"id":1493,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/1489\/revisions\/1493"}],"wp:attachment":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/media?parent=1489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/categories?post=1489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/tags?post=1489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}