Thread by @AlexValchyshen

@INETeconomics By a chance, the article saying #MMT "theorists ignore how their policies could hurt developing countries" places #Ukraine currency #hryvnia (notes of 20 hryvnia's) as its cover picture.

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@INETeconomics Btw, another time when #MMT-related literature opted by a mere chance to associate itself with #Ukraine's currency was the book 'Can "It" Happen Again?' written by Hyman Minsky (2nd ed published in 2016).

This time there is a jar of coins 5 kopecks each (5 #копійок).

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@INETeconomics I am #Ukrainian, having a 22-year experience in the Ukraine's financial sector (1995-2017) and working full-day jobs first as bank officer doing debts/credits and then as research economist. I worked in the banking sector as well as in the non-banking financial sector.

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@INETeconomics I did climb the career ladder from entry level bank officer at Prominvestbank, then one of the largest bank in the country, to the position of head of research at ING Bank (#Ukraine), effectively being part of @ING_Economics during 2005-08, and then at @ICU_UA.

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@INETeconomics @ING_Economics @ICU_UA I did see numerous financial and economic #crises that regularly engulfed Ukraine since early 90s.

Moreover, crisis was near permanent in #Ukraine during 1980s, when it was part of #USSR that later collapsed unexpectedly for so many.

They were slow and very fast ones. 5/n

@INETeconomics While on the position of research analyst/economist (2000-17), I was puzzled how #Ukraine's economy was following the same path over and over again from currency crisis to some stabilization followed by a recovery or even a boom and then again collapsing famously w FX crisis. 6/n

@INETeconomics Since very beginning of my career as research analyst in early 2000s I was acquanted with econ literature on the nature of LatAm crises especially in Argentina, which advocated strongly to avoid FX debt accumulation on the balance sheets of dom econ units.

@ptcherneva @stf18 7/n

@INETeconomics @ptcherneva @stf18 With that in mind what I observed in my country #Ukraine since early 2000s in the recovery was that domestic businesses had two debt waves: (1) local currency debt issuance, (2) foreign ccy debt issuance. The 1st one was strong, but the 2nd one much stronger.

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@INETeconomics @ptcherneva @stf18 This development was a part of econ boom of 2005-07 that ended up with a Sep 2008 collapse, forcing #UAH FX rate devaluation and 15% decline of GDP in real terms. Then, that partten of private debt repeated itself (albeit at slower pace) in the 2010-12 recovery.

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@INETeconomics @ptcherneva @stf18 It ended up in 2014 with crisis again as economy once again contracted by more than 15% in real terms over 2014-15. (True, #Russia's millitary aggression triggered techtonic shift in "liquidity" preference, #UAH's devalued again, and massive wave of #defaults.)

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@INETeconomics @ptcherneva @stf18 Back in late 1990s, #Ukraine attempted IMF-advised dom ccy convertibility w the gov't borrowing short-term at super high % rates. Foriegn buying of the local ccy debt helped to sustain fictious "stability" in terms of UAH's nominal FX rate. Later, it ended up badly w crisis. 11/n

@INETeconomics @ptcherneva @stf18 All in all, the never-ending puzzle of recurring crises in Ukraine forced me to notice Randall Wray's book Modern Money Theory (1st ed).

While reading it, being on the 2nd chapter, my 1st thought was 'this is it!'. This just does explain a lot of Ukraine's econ misfortune. 12/n

@INETeconomics @ptcherneva @stf18 All in all, #MMT does provide distinctive and coherent approach that allows developing countries like Ukraine to eventually escape the ever-recurring circle of crisis-stabilization-growth-deeper crisis. 13/n

@INETeconomics @ptcherneva @stf18 That’s why, in my opinion #MMT is a breakthrough.

While orthodox/mainstream econ framework is a receipt for stagnation.

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@INETeconomics @ptcherneva @stf18 Too, that is why Randall Wray two books 'Modern Money Theory' (2nd ed) and 'Why Minsky Matter' were translated into #Ukrainian and published respectively in Dec-17 and Sep-18.

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@INETeconomics @ptcherneva @stf18 Back in 2015, the idea of getting them--those two books--published in #Ukrainian language was born.

https://twitter.com/AlexValchyshen/status/677543230322434049

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@INETeconomics @ptcherneva @stf18 Re policy prescriptions to the so-called "developing" countries from the #MMT camp, I would start with this one which relevant and sensible indeed. Wray's own words: "...any country with its own currency should prohibit its gov't from issuing debt in a foreign currency..."17/n

@INETeconomics @ptcherneva @stf18 ...it is borrowed from this post neweconomicperspectives.org/2019/02/respon…

In general, point "f" entirely is like a reality check for a developing country.

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@INETeconomics @ptcherneva @stf18 Second policy prescription to EM economies enspired by the #MMT way of thinking is to eliminate any constrains, devised ironically to fight #inflation (#IT regime) for the sake of macro & fin stability, that put central gov't effectively into a #Minsky's #Ponzi position.

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@INETeconomics @ptcherneva @stf18 2day it’s a settlement day for the #Ukraine’s govt $350m “tap” of the outstanding sovereign Eurobond due in 2028. This bond pays semi annual coupon rate of 9.75%.

The “tap” was organized by @jpmorgan and as reported by @wsj the issue price was 98.88 cents on the $.

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@INETeconomics @ptcherneva @stf18 @jpmorgan @WSJ In effect, yield to maturity at the sell price was 10.83%.

This shows (1) desperate needs for FX monetary reserves, (2) that are required for tight govt FX debt re-payments, (3) #Ponzi like position of the govt that borrows to payback %+principal of past FX debt.

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@INETeconomics @ptcherneva @stf18 Back in 1980s, while at high school, I recall what #Ukraine's economy looked like under USSR regime. It was effectively a membership in a monetary union centered in Moscow and #ruble being a single currency for then 15 soviet republics.

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@INETeconomics @ptcherneva @stf18 Then, Soviet state-run TV channel at prime time news shows call 'Vremya' (or 'Time') used 2regularly agigate among the general public the slogan 'Ekonomika dolzhna byt' ekonomnoy' (or 'Economy should b thrifty'). In Ukraine, grocery shops visibly had a shortage of cons goods 23/n

@INETeconomics @ptcherneva @stf18 Shortage of goods at #Ukraine's stores was so profound that I re-call my parents used to travel to nearby republic #Moldova (town of Soroky, now Soroca) to buy ordinary kid clothes to wear them in school. Visibly, in Moldova consumer goods stores were a bit better. 24/n

@INETeconomics @ptcherneva @stf18 Shortage of cons goods was so profound that word #deficit (in the meaning that nearly majority of goods were in deficit or shortage) was a household word. I recall I knew what #deficit means before I started learning algebra and geometrics at school.

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@INETeconomics @ptcherneva @stf18 Meanwhile, there were talks that #Ukraine's plants were working quite well and producing cons goods (in my area there were food processing goods) that we had never seen them in the stores. With general wages being fixed and personal savings low, now I realized that... 26/n

@INETeconomics @ptcherneva @stf18 ...back in 1980s, econ policy in USSR was #austerity. Particularly, in Ukraine it was not only austerity entire republic was very much likely running a trade surplus. Hence, judging from the #MMT's sectoral balances approach, back then there was a fertile soil for discontent 27/n

@INETeconomics @ptcherneva @stf18 Again back in 1980s, there were kitchen talks that shockingly USSR was borrowing valuta (#FX ccy's) to buy grains because there was a shortage of domestically produced grain. It was visible that entire USSR was desperate to capture FX monetary reserves... 28/n

@INETeconomics @ptcherneva @stf18 ...as USSR started producing consumer goods for exports.Example, it was like a shock among my school mates as one guy, whose parents worked in Iraq at USSR run power station, was wearing jeans with label 'Made in USSR'.Meanwhile,in dom stores there were no such things at all.29/n

@INETeconomics @ptcherneva @stf18 Eventually, it was a time that felt like #austerity and net exports position of Ukraine being heavily felt like a cost. This explanation is available in the Wray's #MMT book.

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@INETeconomics @ptcherneva @stf18 With all econ discontent, the general public supported Ukraine's #exit, as many other ex soviet republics did, from the #monetary #union based on ruble.

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