NO.044 Modern Monetary Theory (abbreviated as MMT) is treated as heresy, but I think it is suitable for macroeconomic theory. According to this theory, there will be no problem if Japan continues to issue government bonds in the future. If the inflation rate does not fluctuate even if government bonds are issued, it means that the economy is growing. ・・・ Theme label: MMT. Pension government bonds. Keynes policy by the Bank of Japan's direct purchase of government bonds. These suit the principles of macroeconomics. Category label:macroeconomics,


The other day the news reported about Modern Monetary Theory (abbreviated MMT).
I think that this MMT fits macroeconomic theory.

I will discuss the conclusions first.

"If the following two assumptions hold, no matter how large the government continues to issue government bonds, there will be no problem because economic growth will grow the government's tax revenues and allow the government to redeem government bonds.

The two premises are
1, that most of the issued government bonds are owned by someone in the country.
2. The inflation rate is below the known upper limit. "

As the industry grows, the scale of industrial activity grows, the scale of the economy grows, and the scale of economic activity grows, the total amount of currencies circulating through the economy also needs to grow accordingly.
As the economy grows, commodity prices shrink if the total amount of currency being supplied does not change.

And while the size of the economy does not change, if the total amount of currency increases, the price of goods will rise.

If the Bank of Japan issues new Japanese banknotes and supplies them to the Japanese economy only when the size of the Japanese economy expands, commodity prices will not rise.

If the issued government bonds are purchased by someone in Japan, it is sure that the Bank of Japan will issue a new bank note and supply it to the Japanese economy.

Nevertheless, this means that the size of the Japanese economy is growing if the fluctuations in inflation rates are properly curbed.

From now on, I will discuss using the macroeconomics I learned.

In my previous article, I said that I was told about the basics of macroeconomics at BBS, where researchers of macroeconomics gather ten years ago.
I remember that the following was said.

"The value added that is produced is supplied and becomes someone's income."

In industrial production and sales, products produced have added value that did not exist at the raw material stage.

For example, various data processing functions are added as value to the produced personal computer, right?
The data processing function of this personal computer does not exist at the stage of raw materials such as silicon and germanium, or at the stage of each element as a part?
The data processing function will exist for the first time when it is completed as a personal computer.

The production of goods in industry involves the creation of values ​​that did not exist before production.

This added value (Value added) is the price of the value added to the product that is produced by the product production activities.
Value added is the selling price of the product minus all costs such as raw materials and labor costs.

GDP (Gross Domestic Product = Gross National Income) = Total Investment + Total Consumption

The total value added value produced in that country in a year is GDP, or gross national income.

We understand that this value added production is the creation of the value of money. GDP is the sum of Value Added produced in a year in the country's economy. In other words, the total value of the created money.


In past articles, I said that pension bonds are in line with the principles of macroeconomics.
"The government issues and sells pension bonds. The Bank of Japan purchases the pension bonds for the newly issued Japanese banknotes. The government pays the pensions using the paid Japanese banknotes. The pensioner consumes using the paid pension. "

The fact that a pensioner consumes with the paid pension is to expand the total consumption, which is the growth of GDP.

Although not mentioned in past articles, GDP growth must be accompanied by industrial growth and economic growth.

From here on, I think economists in macroeconomics will not point out.
The realities of real society should not appear in macroeconomics papers.
Macroeconomics deals with statistics that statistically process the actual conditions of society. With statistical processing, all elements of actual reality are replaced with abstracted statistics.
We need to consider the realities of society from the statistics used in macroeconomics.

In each company, investments are made to grow the company. Even if a business owner borrows and invests in his own company, when the business performance grows, the company repays the debt and earns a profit.
The performance of the company is determined by "How actively are the products that the company produces and sells are purchased and paid?"

The same is true for the economy.
Personal consumption and investment by companies and governments are investments that grow the economy for the economy.

"How actively are the products that the industry produces and sells purchased? Is the price paid?" ... This is the key to economic growth.

The purpose of fiscal policy as an economic policy is not to invest in useful applications. The purpose is for the government to purchase and pay for products that the industry produces and sells.

Here is an aside, but I will point out one important thing. The part of this aside, I think that economists of macroeconomics are pointed out. ... There is no problem even if the government's spending is wasted.

As pointed out by Keynes, the founder of macroeconomics. "If there is nothing to do, the government hires workers, bury the money, and let them dig back again." That's right, it seems to be written in the general theory which is his book.

"A worker who receives a wage from the government purchases goods that the industry produces and sells, and pays for it." This makes the industry grow and the economy grows.

Personal consumption is just waste, personal consumption is not used for the purpose of improving production, such as corporate capital investment. However, private consumption will grow the economy.
"Products produced by the industry are purchased and paid for" ... this in itself makes the economy grow.

If personal waste is growing the economy, then government waste should also grow the economy.

In the deflationary spiral phase, this will provide an effective solution.

In the deflationary spiral phase, on the other hand, the products will not sell and companies will reduce the scale of production and keep a large inventory.
On the other hand, companies are fired workers for the deterioration of business performance, and then they go to bankruptcy, and a large number of unemployed people appear.

The increase in unemployed is the increase in people who can not earn income and can not consume, so the business performance of each company gets worse and more stock is held, or production Pause itself.

As a result, more workers will be fired and corporate bankruptcy will continue, further increasing the number of unemployed.
Get into this vicious circle. I understand that this is a deflationary spiral.

In the deflationary spiral phase, unemployed people can not purchase goods because they have no income even though they want to buy goods.
If an unemployed person earns income, he will purchase the goods.

So, the government should do public works, hire unemployed people, pay wages, and get them income.
Then, they will buy goods again, the business performance of the company that sold the goods will recover, and the workers will also buy goods, as they will hire workers and earn income. The business results of various companies will be further recovered.

It is also effective for the government to purchase goods directly from companies with large inventories and companies with reduced production.
Companies that have purchased goods from the government will be able to pay wages to workers again, and the workers will resume purchasing goods, and business performance will be restored one after another.

Here, it is safe to discard the goods that the government purchased for people instead.
For the economy, it is important that "the price is paid and the product is purchased."
In the case of food, for example, it is irrelevant to the economy whether the purchased food is eaten, consumed, or discarded due to the expiration date.

Now let's go back to the story.

"A product that the industry produces and sells is purchased and paid for."
This is an investment for the economy to grow.
Companies benefit from "the products they produce and sell are paid for and actively purchased."

By expanding production, companies will be able to produce and sell a larger number of products, and if greater profits can be obtained, they will invest themselves to expand production facilities. And the company hires a new worker and engages in the production and sale of goods.
In order to realize the necessary size of self-investment, it is usually necessary to raise funds by debt.
Companies invest in themselves to expand the scale of production and sales, grow total sales, and repay debts to leave profits.

The important thing here is that the company has the potential for growth.
A company has the ability to produce high value products that can make enough sales if production activities expand.

For the growth of such a company, it realizes that “the price is paid and the product to be produced and sold by the company is purchased” only for a sufficient scale.

As a fund for that, let the central bank issue a new currency to supply the economy of that country. It is the issuance of government bonds by the government of that country for this purpose.

When the government does a public service and pays a worker who works in the business, the worker purchases the goods he wants to buy, with the income earned.
For companies that can produce and sell high-value products that many people want to buy, it will be realized that "the price will be paid and the products to be produced and sold will be purchased."

The expansion of the scale of business activities of individual companies, combined across the entire industry, is the expansion of the scale of the economy.

The drivers of economic growth are not limited to the growth of existing companies. The creation of new businesses that did not exist until now will also expand the scale of the economy.
Here, the birth of a new kind of product that did not exist until now creates a new business.
Innovation is important.

Growth of industry in the country and industrial activity in the whole country requires that the central bank issue a new currency and supply the economy of the country according to the scale of growth. .
If this were done properly, inflation would not fluctuate much.

No matter how large the government continues to issue government bonds, if inflation does not change, this means that the size of the economy has grown.
With the government bonds issued, the size of the economy is expanding by the size of the currency newly supplied to the economy.

Economic growth will allow the government's tax revenues to grow and allow the government bonds to be redeemed.


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