MMT induced spending causes hyperinflation-empirics prove this causes the rise of far right nationalist leaders and destroys living standards as wages lag behind prices

(Doug, , 2-21)

That brings us to the next problem: inflation. When the printing presses run freely, it’s not only reactionaries who think that runs the risk of spiraling prices. As I was researching this piece, many people to whom I described MMT, from Democrats to Marxists, brought it up as a worry. MMTers are coy about the topic — they never say how much is too much, and they profess great confidence in their ability to control it. In a paper criticizing MMT, the left-Keynesian economist Thomas Palley says he’s heard a “leading” MMTer say inflation less than 40 percent is “costless.” That’s nearly three times the modern US record of just under 15 percent in 1980, which was widely regarded, and not just by bondholders, as a crisis. Since wages typically lag behind price changes, inflations can lead to real declines in living standards. Though it might scandalize some liberals to say so, it’s dangerous to be sanguine about inflation. People find it destabilizing and it feeds a hunger for order. The rise in inflation through the 1970s that climaxed in that 15 percent record helped grease the way for Reagan. The extreme inflation of Weimar Germany in the 1920s contributed to the rise of Hitler. As a British diplomat stationed at the embassy in Berlin wrote to his bosses at home during the hyperinflation: “The population is ripe to accept any system of firmness or for any man who appears to know what he wants and issues commands in a loud, bold voice.” The standard view of the Weimer inflation is that the German economy, severely damaged by World War I and forced to make huge reparations payments to the victors, wasn’t up to the task — it just didn’t have the productive capacity, and its citizens were both unwilling and unable to pay the necessary taxes. So instead the government just printed money and spent it, not only to pay its own bills, but to support bank lending to the private sector. (The printing presses were so overworked that they had trouble keeping up with the demand for fresh banknotes. At least keystroke money wouldn’t face this problem.) Inflation peaked at 29,500 percent in October 1923, meaning that prices doubled every four days. The value of the mark collapsed from 320 per US dollar in early 1922 to over 4 trillion per dollar in late 1923, meaning the mark lost 99.999999992 percent of its value in a year and a half. The value of the real wage, if it’s possible to measure amid such rapid inflation, fell by over 80 percent, as pay badly lagged price increases. In When Money Dies, a classic popular history of the Weimar inflation, Adam Fergusson wrote that the savaging of living standards brought “hunger, disease, destitution and sometimes death” to the mass of Germans. Hyperinflation was only stopped with a deep austerity program — government spending cuts, layoffs, wage cuts, the usual. Tax payments were linked to gold values, not the worthless notes from the printing press. Unemployment soared. But the inflation ended.