Saturday , August 8 2020
Home / Tag Archives: Myth Busting

Tag Archives: Myth Busting

Stop Saying MMT Describes Reality – It Doesn’t

I had a good laugh at this Tweet from Jo Michell (who is a very good economist by the way). It seems to be from a UK blog advocating for MMT: Now, I may not be an expert on sexual intercourse, but I am an expert about money creation and so that qualifies me to tell you that, based on this comment, this guy doesn’t know what sexual intercourse is. The simple fact is that MMT does not, definitively does not, describe the existing reality of the monetary system. Let me explain. First, MMT...

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Let’s Talk About Sectoral Balances

I am a big fan of looking at things through the lens of the sectoral balances. For instance, I sometimes post this chart on this website which depicts the government’s balance vs the non-government. (This is a stupid chart without a lot more context) It’s a decent (though incomplete) depiction of the private sector’s balance versus the government’s position and it’s helpful to understand because, mainly, if you believe the private sector is too heavily indebted, then the government’s...

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EVERYONE Funds Their Spending

One of the most confused (and confusing) elements of endogenous money is the idea of “funding”. Endogenous money is not a new theory, but it is not well understood even to this day. Even many supposed endogenous money theorists, like the MMT people, misunderstand it and as MMT has gained some popularity I am seeing increasing misinterpretations. So let’s dive in and see if I can’t explain this more succinctly and clearly. Endogenous money is the fact that anyone can expand their balance...

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Let’s Stop Talking About “Paying Off the National Debt”

When we talk about personal finance we often talk about paying off our debts to become financially free. But this is a fallacy of composition. While some households can pay off their debts, the economy actually relies on expanding debt (and assets) to have liquidity and growth. After all, debt isn’t necessarily bad. Yes, there are bad types of debt (like credit card debt which almost always have a negative long-term return), but there are also good types of debt (for instance, when someone...

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Stephanie Kelton — The Deficit Myth (Book)

Stephanie's new book is available for preorder. It should be a game-changer.The blurb reads, "Deficits can be used for good or evil." "Evil?" Probably few people know that German economic development post Weimar and rearmament in preparation for WWII was engineered under Adolph Hitler by Hjalmar Schacht, head of the Reichsbank (German central bank). Hitler is often associated with the Weimar Republic that destroyed the Deutsche mark (DM). Nothing could be further from the truth.  Under...

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Hard Truths for the Inflation Truthers

The main goal of this website over the years has been to search for an operationally sound and empirically supported perspective of how the monetary system works. I’ve debunked tons of myths in the process of this search, but the inflation truthers have been hard to convince for some reason. Strangely, there are still people out there who believe that the BLS lies about inflation stats and that all the data is manipulated. But I have some hard truths for the inflation truthers. Hard truth...

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Is This The Worst Thing The WSJ Has Ever Published?

Well, I thought that 2018 had to be peak stupidity for humanity, but we are not off to a good start in 2019. I opened the Wall Street Journal this morning to find this article which has a falsehood in every single paragraph. 10 for 10. Let’s review this impressive mess. First, the title, “The Fed’s Obama-Era Hangover” is just catchy politics. The Fed is an independent entity and President Obama had nothing to do with the policies enacted by the Fed, but the entire article disparages...

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Debunking Passive Investing Myths on Bloomberg TV

(The fabulous Scarlet Fu and Eric Balchunas, hosts of ETF IQ)Here’s my appearance from yesterday on ETF IQ on Bloomberg TV in case you missed it. We touched on: 1) Why is the myth of passive investing important to understand? Short answer, but the longer-than-tv answer: passive has become a misnomer as anyone can construct an index fund in an active strategy and then claim to be “passively” tracking that index via an ETF. It’s easy to fall into the trap that passive is good and active is...

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5 Questions and Answers on “Passive” Investing, Part Deux

Here’s part two of the Q&A on passive investing. If you haven’t read part 1 it will be helpful to do that first since I laid out the necessary definitions and foundation for a clear discussion. I answered Marks’ first question about passive investing in the first post, but as it was running a little long I didn’t get to the next four. So let’s bang those out: Question 2: “What are the implications of passive investing for active investing?” Marks goes on to specifically ask: “what...

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