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Phenomenal Post on Why Hyperinflationists are Wrong


bmichaud
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http://pragcap.com/inflation-predictions-and-broken-models#comments

 

Mr. Roche over at pragcap does a tremendous job summing up the MMT viewpoint and denouncing Austrian economics in this post.

 

The problem is his argument against classical Macro.

 

1. Monetary Policy: He stretches some of the classical points to some absurd levels. This is a balance sheet recession so monetary policy will NEVER work at ANY level.  Really? The problem is the size of what has been done and the lack of political will to do the levels needed.

2. Definition of Money:  to include different financial instruments is not different from classical macro, (different Ms: M1, M2, M3, .... ) Macro 101

3. Emphasis on Aggregate Balances: It is almost as if he had not heard from the classical identity Sg+Sc+Sx=0. Macro 101

4. Advantages of borrowing in own currency: Ok, this advanced Macro. But I did assessment of balance sheet risks in my second Macro course in the MBA program. If an MBA can understand it, it is not so difficult (stickiness of foreign investments, central bank reserves, sudden stops, banking system fragility, balance of payment crisis...)

 

I just don't get what is different or insightful.

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