>> MMT: If the govt wants to spend money it doesn't have, and the economy is at less than full employment, why not just spend the money? Why go through this circuitous process of pretending like you "need" to issue bonds to "obtain" the money?
> Ok, so let's say this sort of thing can be done when unemployment is high - pure countercyclical spending. To get back to the 2000 employment/population ratio, we'd need to create almost 16 million new jobs. At $50,000 a year, that's almost $800 billion. Using Zandi's multipliers of 1.5-1.6 for this sort of thing, you could spend $530 billion to have that effect. By coincidence, that's $30 billion less than the Fed has bought in Treasury paper over the last year - 41% of the total increase in Treasury debt. But of course they didn't do it to fund a jobs program - it funded a rally in financial assets and hard assets.
Okay, but we're talking about two different things here. Steve was asking: "Why does (say) Larry Summers insist that fiscal policy must be financed using bonds? Why not do fiscal policy through directly monetized govt expenditure?" That's the question I was trying to answer.
You're trying to answer a different question: "Why do the powers that be prefer to stimulate using monetary policy (quantitative easing) rather than fiscal policy?" Also a good question, but a different question.
Larry Summers does support fiscal policy, which does (potentially) affect real resources. It could take the form of a jobs program, although I don't know that Summers would want to do it that way.
> Spend that much on a jobs program, though, and that means creating new kinds of jobs and not just Walmart associates, right? So you spend this $500-600 billion of Fed money - and what then? These jobs will not be replaced by any broader labor market recovery they stimulate. You'd want to keep spending on this - and then you'd have to raise taxes to fund it over the longer term. And don't we want a society with fewer third houses and second Jaguars?
I'm actually not clear on which scenario you're referring to here.
> Spending Fed money this way would be viewed as dire by moneyed capital, a threat to sacred property relations. Getting away with it would require a pretty different configuration of power than the one we're in now. You would have had to, in some sense, expropriated the bond market.
Yes. If I understand you right, this is really the answer-behind-my-answer. Doing things the MMT way would "give people ideas" in a way that would directly threaten property relations. You would probably have to expropriate the bond market. Which is part of my secret Comtean cookshop recipe, as it happens.
SA