empty vessel
Member
Similarly, I don't think government debt is bad, in fact I'd say it's essential to a lot of our economy. It's a matter of how much.
I don't know if it's essential. I agree that some debt might be good as a service: specifically, the government's debt provides a risk-free financial asset to the private sector. But it's important to understand, in my opinion, that all debt issuance of a monetarily sovereign government is voluntary. The amount it issues can always be chosen without regard to its spending decisions. In other words, debt does not have to equal the amount of money the government spends in excess of tax receipts.
Lastly, whether on a fiat system or not, the money supply is controlled. I don't think abandoning or extremely loosening that control is a good idea.
The money supply--by which I include the money that banks temporarily create and not just the government's base money--is not controllable at all under current structures. It is demand determined. The Federal Reserve gave up on trying to control the money supply a long time ago, because it cannot control both the money supply and the short term interest rate. It controls the latter.
And no, I don't know what the right levels for these controls should be. My initial post was simply to the comment that "debts aren't a problem" which I think is overly simplistic.
It certainly can be over-simplistic, in the sense that debt is just another component of spending and spending cannot exceed the productive capacity of the economy without devaluing money. But it's far more accurate to say that than to simply say that debt is a problem (which I know you are not saying).
I think the important insight that MMT brings to this issue is not that debt never matters but that it is unnecessary to finance spending. That it is unnecessary to finance spending means that the amount of debt a government issues can be disconnected from its spending decisions. Both questions--how much money should the government spend this year and how much debt should the government issue this year--can be decided independently. That is a hugely important insight, because right now our laws arbitrarily and needlessly tie them together.