Accepting that something can be created from nothing requires religious conviction. Money is simply a measure of productivity. Any rise in the total value of money faster than the total productive capacity of the economy can only be inflation.
Mr. Burry is a hedge fund manager and not an economist. The SEC is obligated to look into this because his pronouncements about inflation could in fact be part of a strategy to boost the value of his hedge fund. If he were making this prediction in capacity of an economist and had no significant stake in the financial markets the SEC would not be looking into this. Suggesting that this is even more of an indicator that people should be paying attention to this issue is misleading.
The United States Federal Reserve and the Bank of Canada have developped many tools to fight inflation since the 1970’s which do not rely on MMT. Comparing these institutions to the situation in Venezuala, and to the Venezualan Central bank, which is not independent from the executive branch, unlike it’s American and Canadian counterparts. There are serious economists who are warning of a spike in inflation, but no serious economist is suggesting that there will be Venezualan style hyperinflation in either country. This situation in Venezuala was caused by the gross mismangement of the country and the economy by a tyranical dictator.
Seems others beat me to the comment that comparing ourselves to Venezuela is entirely invalid. Venezuelan was (and is) in political turmoil Even if they weren't, the previous total reliance on oil, with its ups and downs, would have caused & did cause immense problems. Even here in SK, we don't have our provincial economy entirely resting on oil production. AB...well, that's a different story but even they aren't in the mess Venezuela is in.
There are no examples that I'm aware of where modern, advanced economies which issue their own currency, incur debt in their own currencies, rely on their own central banks to 'buy' their debt ever suffered hyper-inflation due to government spending as mentioned in this article.
The massive government spending by countries like the US, Canada, United Kingdom, and Australia during the Great Depression and WWII for example did not result in extreme inflation. Currently, Japan has a Debt/GDP ratio of about 266% and has been running such deficits since 2000 and has had none of the inflation mentioned in this article.
The inflation we saw in the '70s was not caused by too much government spending or borrowing. It was caused by a massive influx of 'Baby Boomers' into the workforce and an economy that was unable to respond to their demands, i.e. too much money, chasing too few goods.
Concern about inflation is good, but it needs to be based, in my view, on evidence rather than fears stoked by examples of past inflation that aren't analogous to the Canadian economy.
This strikes me as a strange criticism. Hyperinflation is just not something that happens instantly. There is generally a spike in inflation that acts as a warning. Provided that we are confident in the ability of the government to rein in spending or engage in deflationary taxation, there is no concern here.
The difficulty of the current situation comes when the government backs itself into a corner. If interest rates do rise, then the debt starts to swallow up the whole budget. The government is then forced to (a) either print more money or keep interest rates low, (b) impose austerity by cutting programs and raising taxes. The government would need to choose option b, otherwise the inflation spiral would continue upwards. But would a Canadian government ever have the will to choose option b? Because if not, then inflation is inevitable.
Now, it may be true that inflation doesn't even start in the first place due to the semi-religious faith in the stability of the currency. There is also an ingrained resistance to inflation in the population, as the dollar has been stable for so long. Finally, the real resistance to inflation is the ability to buy massive amounts of cheap goods from low-income countries. Notice that goods made in Canada tend to inflation - housing and cars, but goods from overseas stay cheap.
But if the government keeps printing money, and the asset bubbles continue to grow - then the public's confidence in the paper currency will erode. Eventually, the erosion of trust creates a tinder box, where the slightest spark sets off an inflationary spiral, as everybody starts raising prices and wages in tandem.
The higher the government debt, the less breathing room the government will have in dealing with this spiral. At the very least, we have to admit that this makes debt undesirable.
There are no examples that I'm aware of where modern, advanced economies which issue their own currency, incur debt in their own currencies, rely on their own central banks to 'buy' their debt ever suffered hyper-inflation due to government spending as mentioned in this article.
The massive government spending by countries like the US, Canada, United Kingdom, and Australia during the Great Depression and WWII for example did not result in extreme inflation. Currently, Japan has a Debt/GDP ratio of about 266% and has been running such deficits since 2000 and has had none of the inflation mentioned in this article.
The inflation we saw in the '70s was not caused by too much government spending or borrowing. It was caused by a massive influx of 'Baby Boomers' into the workforce and an economy that was unable to respond to their demands, i.e. too much money, chasing too few goods.
Concern about inflation is good, but it needs to be based, in my view, on evidence rather than fears stoked by examples of past inflation that aren't analogous to the Canadian economy.
My main worry is that governments will do the first half of MMT without the all important second half. If they want to spend a bunch, they need to ensure taxes and policies increase to remove the oversupply of cash from the economy. Probably the biggest weakness of MMT is that it relies on elected officials to help control inflation through tax policy.
I’ve been following this debate for a while on Twitter And there are excellent arguments as to where approaching deflation not inflation.
I tend to in Canada at least for see inflation coming. In the US you have to remember much of the deficit has come from tax cuts and giveaways to the 1%.
It wouldn’t be too difficult to rein in the deficit by reversing tax cuts and cutting spending on defense spending.
In Germany where I live it’s hard to say we have very very little inflation.
Accepting that something can be created from nothing requires religious conviction. Money is simply a measure of productivity. Any rise in the total value of money faster than the total productive capacity of the economy can only be inflation.
Mr. Burry is a hedge fund manager and not an economist. The SEC is obligated to look into this because his pronouncements about inflation could in fact be part of a strategy to boost the value of his hedge fund. If he were making this prediction in capacity of an economist and had no significant stake in the financial markets the SEC would not be looking into this. Suggesting that this is even more of an indicator that people should be paying attention to this issue is misleading.
The United States Federal Reserve and the Bank of Canada have developped many tools to fight inflation since the 1970’s which do not rely on MMT. Comparing these institutions to the situation in Venezuala, and to the Venezualan Central bank, which is not independent from the executive branch, unlike it’s American and Canadian counterparts. There are serious economists who are warning of a spike in inflation, but no serious economist is suggesting that there will be Venezualan style hyperinflation in either country. This situation in Venezuala was caused by the gross mismangement of the country and the economy by a tyranical dictator.
Seems others beat me to the comment that comparing ourselves to Venezuela is entirely invalid. Venezuelan was (and is) in political turmoil Even if they weren't, the previous total reliance on oil, with its ups and downs, would have caused & did cause immense problems. Even here in SK, we don't have our provincial economy entirely resting on oil production. AB...well, that's a different story but even they aren't in the mess Venezuela is in.
There are no examples that I'm aware of where modern, advanced economies which issue their own currency, incur debt in their own currencies, rely on their own central banks to 'buy' their debt ever suffered hyper-inflation due to government spending as mentioned in this article.
The massive government spending by countries like the US, Canada, United Kingdom, and Australia during the Great Depression and WWII for example did not result in extreme inflation. Currently, Japan has a Debt/GDP ratio of about 266% and has been running such deficits since 2000 and has had none of the inflation mentioned in this article.
The inflation we saw in the '70s was not caused by too much government spending or borrowing. It was caused by a massive influx of 'Baby Boomers' into the workforce and an economy that was unable to respond to their demands, i.e. too much money, chasing too few goods.
Concern about inflation is good, but it needs to be based, in my view, on evidence rather than fears stoked by examples of past inflation that aren't analogous to the Canadian economy.
This strikes me as a strange criticism. Hyperinflation is just not something that happens instantly. There is generally a spike in inflation that acts as a warning. Provided that we are confident in the ability of the government to rein in spending or engage in deflationary taxation, there is no concern here.
The difficulty of the current situation comes when the government backs itself into a corner. If interest rates do rise, then the debt starts to swallow up the whole budget. The government is then forced to (a) either print more money or keep interest rates low, (b) impose austerity by cutting programs and raising taxes. The government would need to choose option b, otherwise the inflation spiral would continue upwards. But would a Canadian government ever have the will to choose option b? Because if not, then inflation is inevitable.
Now, it may be true that inflation doesn't even start in the first place due to the semi-religious faith in the stability of the currency. There is also an ingrained resistance to inflation in the population, as the dollar has been stable for so long. Finally, the real resistance to inflation is the ability to buy massive amounts of cheap goods from low-income countries. Notice that goods made in Canada tend to inflation - housing and cars, but goods from overseas stay cheap.
But if the government keeps printing money, and the asset bubbles continue to grow - then the public's confidence in the paper currency will erode. Eventually, the erosion of trust creates a tinder box, where the slightest spark sets off an inflationary spiral, as everybody starts raising prices and wages in tandem.
The higher the government debt, the less breathing room the government will have in dealing with this spiral. At the very least, we have to admit that this makes debt undesirable.
There are no examples that I'm aware of where modern, advanced economies which issue their own currency, incur debt in their own currencies, rely on their own central banks to 'buy' their debt ever suffered hyper-inflation due to government spending as mentioned in this article.
The massive government spending by countries like the US, Canada, United Kingdom, and Australia during the Great Depression and WWII for example did not result in extreme inflation. Currently, Japan has a Debt/GDP ratio of about 266% and has been running such deficits since 2000 and has had none of the inflation mentioned in this article.
The inflation we saw in the '70s was not caused by too much government spending or borrowing. It was caused by a massive influx of 'Baby Boomers' into the workforce and an economy that was unable to respond to their demands, i.e. too much money, chasing too few goods.
Concern about inflation is good, but it needs to be based, in my view, on evidence rather than fears stoked by examples of past inflation that aren't analogous to the Canadian economy.
My main worry is that governments will do the first half of MMT without the all important second half. If they want to spend a bunch, they need to ensure taxes and policies increase to remove the oversupply of cash from the economy. Probably the biggest weakness of MMT is that it relies on elected officials to help control inflation through tax policy.
I’ve been following this debate for a while on Twitter And there are excellent arguments as to where approaching deflation not inflation.
I tend to in Canada at least for see inflation coming. In the US you have to remember much of the deficit has come from tax cuts and giveaways to the 1%.
It wouldn’t be too difficult to rein in the deficit by reversing tax cuts and cutting spending on defense spending.
In Germany where I live it’s hard to say we have very very little inflation.