by The US ruling class has dominated the planet since the end of World War II. Key elements of this control include its military superiority in nuclear and conventional weapons, and the stationing of over 900 military bases around the world. In addition, the US presides over the United Nations, the International Monetary Fund (IMF) and the World Bank. It upholds the US dollar as the global currency, and it controls much of the world’s resources, particularly oil. These factors provide the background to why the US can print, or create, billions and trillions of dollars, running up its national debt, now trillion, yet endure little inflation. The reason for this capacity is only tangentially explained by Modern Monetary Theory. It results from the US position as the imperial superpower,
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The US ruling class has dominated the planet since the end of World War II. Key elements of this control include its military superiority in nuclear and conventional weapons, and the stationing of over 900 military bases around the world. In addition, the US presides over the United Nations, the International Monetary Fund (IMF) and the World Bank. It upholds the US dollar as the global currency, and it controls much of the world’s resources, particularly oil.
These factors provide the background to why the US can print, or create, billions and trillions of dollars, running up its national debt, now $25 trillion, yet endure little inflation. The reason for this capacity is only tangentially explained by Modern Monetary Theory. It results from the US position as the imperial superpower, which enables it to export inflation....Worth reading but with the proviso that any simplified model of foreign exchange is somewhat simplistic.
But the idea is holds that when the US sneezes, the rest of the world catches cold (in part at least to dollar hegemony and the effect of US policy on other economies and currencies). But foreign exchange is an effect of the dynamics of the world system rather than being chiefly a cause of it. Nevertheless, the Asian financial crisis of 1997 and the global financial crisis of 2008 are reminders that global finance is key, as is the reality of who controls it.
This also presents the Fed with a conundrum since Fed officials realize that US monetary policy is really globally monetary policy as well in many ways, and that what is good for the US at any junction may not be good for the ROW, including close allies. Here, the Fed makes adjustments with currency swaps, for example.
All this is further complicated by monetary authorities' – central banks, especially – failure to properly understand the monetary system and its operations, so a number of their tools either don't work as expected by the erroneous theories, or are even opposite in effect. This includes the policy rate as a key tool for influencing borrowing rate expectations that are supposed to control investment decisions.
I would sum all this up by saying that while MMT is correct economics, there is more to the world system including the global economy that economics. The foundational factor is power, who hold it and what the power dynamics are. This applies not only to economics but also to sociology and political theory. Therefore, an integrated approach to the world system is needed.
Anyway, the post brings up many relevant issues and makes some good points, so it worth reading as a critique of certain aspects of MMT and global economics and finance, even though the scope of the issues far exceed it and some of the assertions about global finance are questionable. He does quote Michael Hudson, who has published extensively on this. The author notes that Michael Hudson identifies as an MMT economist, his views – or at least the way he expresses them – are sometimes not on all fours with the developers of MMT.
Dissident Voice
Why the US Can Keep Increasing its Debt and not Suffer Inflation (Part 2)
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Similar cautions as above apply.