Yves here. This essay is a reminder that the supposed scarcity of spending power of America’s Federal government and other fiat currency issuers is being used as an excuse for cutting social programs as well as to justify privatization, “public/private partnerships” and other forms of looting by monied interests.
Bear in mind that Modern Monetary Theory does acknowledge, indeed, stresses the importance of real resource constraints. And tackling climate change is as thorny issue, since many supposedly “green” energy sources make use of decidedly dirty materials like rare earths. Moreover, building new facilities and equipment also has an energy cost. So radical conservation of energy use ought to be part of our future but does not appear to be happening (witness the failure to criminalize the use of Bitcoin and other cryptocurrencies for the profligate energy costs of mining them).
By J. D. Alt, author of The Architect Who Couldn’t Sing, available at Amazon.com or iBooks. Originally published at www.realprogressivesusa.com
There is a lot more riding on our understanding of modern fiat money than we typically consider or discuss. Human society is now confronted with three epoch-defining challenges and, in each case, the understanding and strategic use of modern fiat money holds out the ONLY real possibility for constructively engaging the them.
The challenges are:
- Climate change & ecological collapse
- Assault on democracy
- Mass migration
In each case, the challenges are, first, aggravated, amplified, and intertwined by our ignorant, unimaginative clinging to the old rules and norms of “commodity” money. These old rules and norms tell us, basically, that money is (a) a finite resource that people must compete to have a share of; and (b) that a sovereign democracy must collect some portion of its citizens’ “finite” money-share (as taxes) for democracy to have money to spend for its collective goals and needs.
It is precisely because sovereign democracies cannot collect enough taxes that it appears climate change and ecological collapse cannot be addressed—the “cost” is simply too high for tax-dollars to cover. Worse, we are in a Catch-22 which demands that to increase tax-dollars collected, it is necessary to expand the business development that is the root cause of the climate change and ecological collapse we seek to correct.
It is precisely because progressive democracy continuously threatens to collect MORE taxes than the citizens are willing to pay (in order, for example, to ameliorate climate change and restore ecological habitats)—it is because of this that democracy, itself, must be challenged, threatened, held in check, to protect the pocketbooks of a wealthy class that loathes and fears, above all else, the taxation of their wealth.
It is the complex interaction of failing democracies, collapsing ecosystems, and the corrupt, profiteering, manipulation of the old “commodity” money-rules and norms, that drives failed states and mass migration—which, in turn, are rapidly giving rise to national bigotries and the marginalization of hundreds of millions of men, women, and children forced to flee from unlivable conditions while being provided no place to go.
In the case of each of these challenges, a constructive confrontation can only begin with a sweeping acknowledgement that the old “commodity” money-rules and norms are no longer applicable to our modern social economy—nor have they been for over half a century. Modern fiat money, we now understand, moves in a direction opposite the old mercantilist “commodity” money: instead of moving from the citizens to the democratic state—in the form of taxes—it moves from the democratic state to the citizens (and subsequently to the “mercantiles”) in the form of sovereign spending. And it is precisely this democratic sovereign spending, well considered and strategically directed, that can indeed:
- Begin to address climate change and ecological collapse—by paying citizens to design and build new zero-carbon infrastructures, technologies and habitat restorations;
- Quell the assault on Democracy, by eliminating the perception that democracy’s spending is to be paid for with citizen’s tax-dollars—and transforming the strategic understanding of what taxes, therefore, can and should be made to accomplish;
- Ameliorate mass-migration on two fronts: (a) by repairing the failed states and rescuing the collapsing local economies that are producing the migrations; (2) integrating what necessary migrants there are into the local social economies of their adopted locales—by paying them living wages to provide useful services to their local and regional communities, wherever they may be.
We can make excuses that it is simply the greed of profit-making global corporations which holds back efforts to address global warming–(largely true!); that it is profit-making business interest and the wealthy who want Democracy in their back pockets so they can control what it taxes and spends—(definitely true!); that it is authoritarian populism (whatever that might be) which creates failed states and mass-migration (sadly, a true statement as well). But the real, underlying reason these threats are now growing large and unmanageable is because we find ourselves unwilling, or afraid, to openly discuss—in the mainstream political conversation—the simple topic of what modern fiat money is, how it works, and what it can accomplish. So long as progressive leaders are allowed to back-pedal on this topic—to try, somehow, to go forward based on the old economics of “commodity” money—little progress can ever be made to address the Big Three challenges that are growing more formidable every day.
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Just a quick question:
The buttons for sharing to Twitter, Facebook etc. have disappeared. Is this deliberate? Sharing important posts is now slightly more difficult but of course not impossible.
Keep up the good work!
I often share posts by dragging the mouse over the link in my browser ‘navigation’ field at the top, pressing control-c to copy, then opening a new tab to FB or elsewhere to post. In FB I click in the ‘post’ field and press control-v to ‘paste’.
Yes, Yves mentioned that a wordpress update that killed them.
Also so long as we let the fear mongering and demonization continue to both divide and distract us from from the current political economy including the issue of fiat money we’re are not going to succeed. I think that most of the economic and political scene, and mainstream media coverage of, is Kabuki; the ostensibly liberal and conservative players aren’t. They do not believe in any real ideology or of government service except for getting theirs. The very carefully constructed American “liberal” and “conservative” positions are neither.
We have a duel challenge of not allowing the propaganda to destroy our social cohesion and thus our ability to change the system while also convincing the majority of the relatively new reality that is fiat money.
This is going to be a real challenge. What the heck. It might be fun. Once I graduate, I have nothing else to do for the remaining thirty or forty odd years of my life. I certainly don’t have any retirement!
>The very carefully constructed American “liberal” and “conservative” positions are neither.
Wow, yes. That could be a sub-head under the “Fearless Commentary on…” at the top of this blog. And might give us something to point to when one of those visitors, most often from the Clinton side of the world it seems, comes on and immediately puts us in their “enemy” frame and fires away.
Yeah that might get on the wrong side of libertarian egotism and greed.
For MMT to work, or even be adopted for that matter, people need to think cooperatively. The problem has always been getting people to look beyond self-interest and view the potential of cooperative action. Without that, people cannot even conceive what you are talking about. The major hurdle is the fact that life is a struggle for survival and competition is the driving force. But people’s brains latch on to that simple fact and rarely take the next step, which is, cooperative action between myriad individuals can form mutually beneficial bonds in order to survive. And the elite, hold their dominant position by obfuscating that point or use various forms of violence to maintain their social position.
Tribalism, the basic form of this collective action, can always be easily turned to its most negative aspects in order to short-circuit wider collective action. Another elite tool. Individuals do make a difference in directing the actions of the whole.
For MMT to be adopted in the services of the masses, the elite would have to institute it, and that is not going to happen. So what is left, is slowly educating people to the possibilities and attempt some form of revolution. Russia and China?
In the meantime, the Freman from the Frank Herbert novel, Dune, seem like a good model to emulate. Tough, self-reliant, nomadic people, preparing for deliverance. With climate change kicking in, Herbert might have been more prescient than he knew or intended.
MMT is such a benign, rational solution to the no-longer-useful Free Market mindset… it does not interfere with constructive capitalism; it encourages it; it gives it room to evolve. We should consider climate change, ecological collapse and human overpopulation as the real deficit created by a worn out ideology and subsequent denial. We have a dangerous avoidance of seriousness. No one will state the obvious – that we are not basking in wealth and abundance due to the last century of capitalism but instead we are suffering a serious embarrassment of pollution, climate change, overpopulation and inequality.
This. Paint it on walls, print it on Tshirts, embroider it onto samplers, tell it to everyone, over and over.
+1.
@susan the other: Thank you for always the insight and conclusive mastery of your comments!
Constructive, concise post. Appreciate the reference to real resource and environmental constraints. Beginning to understand the societal structures, cognitive and psychological limitations that led to the historical collapse of other societies. Seems to me that many are attached to the status quo, preoccupied with the manifold challenges of day-to-day living, and hard-wired to avoid change as long as possible. These characteristics call for a well-educated citizenry, receptive political leaders who are not controlled by interests that benefit economically from reversion, and a defined incremental approach that recognizes the window of opportunity to implement necessary changes is finite.
At the individual level, I am particularly intrigued by recent architectural and engineering developments that are energy efficient and make use of passive energy sources. Thank you for this and past posts, JD Alt, a man of many hats including architecture.
Can someone recommend good sources for me (one of the ill-informed precariat) to learn about MMT and Fiat money, in terms I can understand?
http://neweconomicperspectives.org/2014/01/diagrams-dollars-modern-money-illustrated-part-1.html
Not the most complete, but certainly the most accessible presentation out there.
I have been watching a video by Professor Bill Mitchell who explains the development and outcomes of neoliberalism. He talks about how fiat money should be used by the government for public purposes such as health care, infrastructure, education, etc., and how money has been diverted to create wealth for the top 10% instead. The video deals with the background information about monetarism and neoliberalism.
Here is some more information on the topic. You can search for other discussions about MMT on this site.
DReay- I’m going through the same process- I found this site to be helpful. https://mythfighter.com/2018/02/14/we-all-are-doomed-again-what-will-it-take-for-us-to-understand/
I’ve pondered this same question for the last umpteen years and have realised from talking to many people that there is an issue of cognitive dissonance which can only be overcome by eliminating all trace of technical language from the discussion. I have written the following piece which I am planning to put up on YouTube in some form yet to be decided. It is written for a British audience because that is where I live, but could easily be adapted to fit the American experience.
Money is created in two ways. The first way is the government grants licenses to high street banks . That money is crested on a computer in the form of loans to customers. It literally comes into existence via a computer into your bank account as a loan which you the customer promises to repay. The second way is the government’s bank, the Bank of England credits the government’s bank accounts held with high street banks also via a computer with as much money as the government needs to run the country. In both cases the money doesn’t exist in any form and once it does it isn’t backed by anything else like gold for example.
At the end of the year both the high street banks and the Bank of England produce a set of accounts called a balance sheet showing their overall financial position, their plusses and minuses, which in order to balance must cancel each other out .To balance its balance sheet the government demands taxes from companies and individuals. If the taxes it collects do not offset its liabilities ( aka the money it needs to run the country ) completely it can create IOUs . A government IOU comes in the form of a bond ( a promise to repay ) that the government sells to the public as a form of savings. So if you buy one you are lending the government money. The government can create as many IOUs as it wants to make up the difference. These IOUs are not backed by anything other than the government’s promise to repay. But as the government creates the money in the first place it can never run out of money to repay so the public are right to trust that their money is safe.
Now at this point you might be asking yourself this question : if the government can never run out of money how is it meant to act responsibly in spending the money it creates ? The answer is it should act in the best interests of all the people in the country . Which means it should manage its expenditure so that the National Health Service for example is not in a constant state of crisis. The government can do this, but if it chooses not to because it would rather eliminate the ‘ deficit ‘ ( meaning no more IOUs ) by a policy of unnecessary ‘ austerity ‘ that is its choice. Austerity is a policy designed to under utilise resources – labour and equipment- which already exist, but the government chooses not to employ. The masquerade used by the government to fool people into believing there is insufficient money is to pretend that its debt is just like yours and mine when as described it is nothing of the sort because unlike you and I it can create all the money it needs .
This in a nutshell is how our money system actually works in the twenty first century no matter what we are told to the contrary.
Mr/Ms Templar, Looks good, would love to read/see the rest. BTW, do you need a proofreader? I volunteer! FI, “That money is crested on a computer” pretty sure could be ‘created’. Not disparaging main msg, which is brilliant, but it is a nit that the uninclined will certainly pick. On to read more …
“That money is created on a computer in the form of loans to customers. It literally comes into existence via a computer into your bank account as a loan which you the customer promises to repay.” I havd had a lovely time explaining this to my fellow Canadians, they do not understand that the bank Act of 1985 removed the banks’ necessity for reserves (ie, deposits) to make loans. They are so boggled when I explain that this is the root of our current real estate bubble. So yes, with free money ‘printing’, as, by the banks, there *is* inflation, but oit is restricted to the sectors that the banks like lendig to — eg, real estate. EG, your house is worth whatever a bank will lend you for it, whether buying or existng (aka ‘home equity’) .
That does not explain why not every country experienced the same, not to mention say in the Canadian case, capital inflows. Seems poorly underwritten and collateralize issuance proceeds events, albeit is critical in sausage making that benefits a small few.
I don’t remember John Law having a key board.
Thank you HotFlash you get it ( It’s Mr – just saying ) . Sorry about the typo – yes ‘crested ‘should have been ‘created ‘. Your point about the banks, their lending policies and the bubble thus created exemplifies the distortion that the finance sector now promotes with no countervailing power and the instability that goes with it. As a result private debt levels around the World are very close to those seen just before the GFC in 2008. Happy to have you as a proofreader – info@thepriory.net .
I have some questions re MMT.
I can understand how MMT works in developed, & fairly resource rich countries such as the US or UK. But how would it work in a resource constrained
nation ?
So by necessity such a nation would need to import resources. But, let’s imagine it runs consistent trade deficits. It simply can not acquire sufficient foreign holdings of say US dollars or Euros via trade.
So again by necessity it must purchase dollars etc on the open market. However, would not the “world” respond to a country using MMT, ie “printing” by devaluing its money ? And as it takes increasing amounts of that nation’s money to purchase Euros etc, would this not cause, at least the danger, of an inflationary spiral ?
Yes, imbalances will be corrected by exchange rate adjustments. This is considered preferable to ‘internal devaluation’ ie. wage cuts and unemployment which are the result of trying to defend an exchange rate.
Not enough resources is a tough problem but places like Cayman do pretty well out of financial services or tourism.
Ultimately, if a country (or planet) cannot sustain its population it will be reduced.
The big problem isn’t any technical issue with the monetary system. You can have socialism and hard money. You can have plutocracy and MMT.
Post-WWII, some of the broadest and most rapid improvement in general living standards in the Western countries took place when their currencies were linked to gold. Therefore, we already know that a constrained monetary system is compatible with a fairer wealth redistribution and major infrastructure development.
The key is not the money system, but the people’s politics. You can build a welfare state under a gold standard; you can have a rampant imperialist plutocracy under MMT.
I can’t help but think that some of the problems that the OP wants to solve with MMT are also problem that could be attributed to MMT. Loose money fosters the notion of unlimited consumption and contributes to resource depletion/degradation. Loose money enables warlike adventurism which causes failed states.
But the thing that bothers me the most is in this quote:
Modern fiat money, we now understand, moves in a direction opposite the old mercantilist “commodity” money: instead of moving from the citizens to the democratic state—in the form of taxes—it moves from the democratic state to the citizens (and subsequently to the “mercantiles”) in the form of sovereign spending.
It is incomprehensible that the OP would think that a system in which spending power flows from the authorities to the people could ever be democratic. Doesn’t the OP realize that he has described a system in which the mass of the people are treated as dependents of the state? That is not a nation of citizens, but a nation of clients.
MMT has always noted that it only describes a thing, how it is administered is a completely different topic e.g. gives information that can be used in policy advocacy or formation contra to the neoliberal perspective.
The people institute a state to provide them with certain things they cannot get individually. Those things cannot be magicked into existence, they must be produced collectively by the people. To acquire the required labour the state levies taxes, so creating unemployment. It is incumbent on the state to provide enough work for the people to pay those taxes and in so doing provide the things originally desired.
The citizen is no more or less a dependent of the state than a tenant is a dependent of the landlord or a worker a dependent of the capitalist.
The difference is the democratic state is accountable to the citizens. If they want civilization they have to build it somehow.
Very much agree with some of the points put here.
1. Plutocracy with MMT is already happening with all the corporate welfare that banks get when the governments borrow from them instead of the central bank directly as explained here – http://bilbo.economicoutlook.net/blog/?p=29140 .
Its about the politics which determines where the money is spent and on what.
2. “Loose money fosters the notion of unlimited consumption and contributes to resource depletion/degradation. Loose money enables warlike adventurism which causes failed states.” – Yes. If a country would decide to embark on direct central bank funding it would have to decide on how to control this problem.
3. How would the budgeting process of a government be changed if its unanimously decided by the political parties that there aren’t any limits on spending? How would they decide the amounts to spend per year if no one even decidedly knows the cause of inflation(as recently conceded by various central banks)?
Knowledge of MMT can be very useful but only if proponents also have a sound political plan and system to go with it. JD Alt and others like him should work on this so that MMT gains more and more credibility in the wider public.
MMT does not seek a political agenda, its not an ideology, it only offers a description.
Now if say those in the post Keynesian school use MMT to help explain what has or is occurring in economic terms, contra to mainstream theory, that is a completely different approach than say some political platform.
The politics should be kept separate, say social democracy forwarded by Sanders vs. the two legacy camps e.g. same MMT albeit different outcomes.
Part of the problem has been the ideological politicization of economics – Road to Serfdom by Hayek for example.
Ofcourse MMT doesnt seek a political agenda. But it will nonetheless be questioned or demonised on those grounds. That’s why I say that the proponents need such answers ready such as how they will control overspending, how will budgeting take place in parliament,what’s their theory of inflation and where’s the proof, what will be the role of the uber rich in such a society, who would and woulndt be taxed and on what grounds, which institutions will be permanently funded by direct central bank funding and which wont. You dont just need to present the engine, you need to show people the car.
“Knowledge of MMT can be very useful but only if proponents also have a sound political plan and system to go with it.”
MMT is not a political movement, as much, as some have attempted to force the issue e.g. things like engines and cars have no agency, until a human operates it. This is a distinction that should be noted, contra to the attempts by some to make it otherwise. Any political group can use it, it does not fundamentally change due to the human agency operating it, outcomes are determinate on the human agency alone. Hence the outcomes are not intrinsic to MMT.
This gets right back to the point about mainstream economics becoming ideologically driven by special interest groups through politicization. Where the answers are predetermined for optimal ideological preferences ex ante rather than reconciling outcomes with preferences good or bad.
Yea but my point is that going’s through mmt automatically raises questions that have a political element inherent to them. You can’t escape them. And afaik they haven’t been sufficiently answered.
As if that isn’t an issue ANY government spending and taxation? And we already have many items being deemed “too costly” on false premises due to the failure to understand MMT?
Sorry for the late reply.
I could condense it into something more simplistic like the ideological gap between sound finance and functional finance. One is purely premised on an ideological preference with antiquarian notions of societal function and the other the potential that knowlage can bring to bare. How this is facilitated with all things considered is problematic, societal friction due to decades of deception is a force to be reckoned with.
Case in point. Try explaining to a die hard libertarian crypto proponent that having an issue with RE or asset inflation makes their case incoherent. Especially when it has no underlining intrinsic value or income stream.
MMT only denotes the currant reality WRT creation of monies and how that reflects on taxation, the rest is social arm wrestling.
MMT does not solve all problems, it merely makes it possible to solve some of them.
Re. 3. There are limits on spending, it is just that availability of money is not one of them. It has been suggested that a technocratic body might calculate how much spending is allowed/required and a democratic body decide how to spend it.
Central banks’ problem understanding inflation is due to their false assumptions. I think MMT has a pretty good idea how inflation works.
I’ve not read it yet but Bill Mitchell’s Reclaiming the State seems to aim at offering a program.
My understanding of MMT came about after listening to the talks at the MMT/fiscal Sustainability Conference in 2010 linked here from Lambert’s Corrente: http://www.correntewire.com/mmtfiscal_sustainability_conference It took about 6 weeks of processing, self deprogramming and cognitive dissonance until I got it. I was amazed at how deep the programming was.
And for those who think that MMT is something that is adopted: it doesn’t work like that. MMT arises when there is fiat money and got adopted when Nixon took the US off the gold standard. Understanding it is another thing. Developing fiscal and monetary policy in alignment with it is another thing.
What annoys me is the number of people in government and finance who I understand it, but do not want to align government policy with it for political reasons. This is a huge problem that fiat money doesn’t solve. Many people reject helping others no matter how easy and painless it would be. The taboo against people “getting something for nothing” is heavy. “They might not act responsibly, they don’t deserve it, they didn’t earn it, zero sum thinking, there’s not enough to go around” and so on are big moral imperatives. This is where the bottleneck is.
Thank you, John. I, too, am worried about too much dissemination of MMT,. Currently the PTB have had no trouble, via Congresscritters, in bailing out the bnks to the tune of $7.62 *trillion* (or more! IIRC, that wass only the first of three instalments), and certailny there area always enough $$$ for any amount of multi
million,billion, trillion $$$ ‘defence’ projects.Are you suggesting that facts should be concealed or the unwashed ignorant.
You can’t handle the Truth!
:-)
My basic quibble with MMT is not the basic premise that a little thing like money shouldn’t stand in the way of addressing urgent social needs. It is where MMT proposes to get the needed money. There is already enough ‘hot money’ floating around in the world’s financial markets – and in the pockets of the world’s oligarchs – to more than pay for the cost of meeting those needs. MMT appears to be proposing a politically expedient solution whereby the required money will be created on government computers instead of it from people who have more of it than they could use in several lifetimes. The rich or their financial managers probably understand money at least as well as the rest of us. Keynes’s “euthanasia of the rentier” through inflation didn’t work. What makes MMTers think they will buy into a scheme that will dilute their monetary claims on the lives and wealth of future generations?
What may be obsolete is the whole concept of money, at least as a precondition for the ‘right to (a DECENT, TOLERABLE) life’. But if we want to retain it in any meaningful way, we have to recognize it IS a finite thing which has to be limited to the amount of available wealth for it to purchase. (And defining at least the ingredients of wealth is not a huge problem, at least for 99.9% of the world. See Soddy’s Wealth, Virtual Wealth and Debt, 2nd edition: “natural energy” (think fossil fuels and now renewables), “discovery” (science, technology, education) and “diligence” (for those who still have a job, paying attention to what you are doing; for computers, good programming).
“See Soddy’s Wealth, Virtual Wealth and Debt, 2nd edition”
The ‘MMT’ quote quote from chapter 7: “But, without owning the industries or even the banks or the land, the State could, if it controlled the issue of currency and every form of credit in which new money is created, go a long way to putting its house in order, and could strike effectively at monopolies in every form. It could give economic freedom to its citizens in so far as to ensure to everyone the right to earn a living.”
Great read!
http://dspace.gipe.ac.in/xmlui/handle/10973/21274
His Cartesian Economics might be a better intro though.
Unlike MMT, however, Soddy is vehemently against bank-created money.
There is no part of MMT that says you can’t tax the hell out of the rich, it just says you don’t have to. Which IMO is the only way in hell it gets past our oligarchy so we can have any chance of implementing anything large scale like single payer or free college without the billionaire class crushing it.
UserFriendly,
Thanks for the links. When I tried them yesterday they wouldn’t work. But today they do. (Go figure!) If MMT really says “you don’t have to (tax the hell out of the rich)” then I guess we will have to agree to disagree. Money is power and so long as people like the Koch brothers are allowed to hang on to theirs we will have dysfunctional political as well as economic systems. Add to this the exponential function problem of allowing wealth to accumulate over time. (Take a look at Ferdinand Lundberg’s The Rockefeller Syndrome
To quote Margaret Thatcher “TINA” (there is no alternative)
Steven
One nice thing about the concentration of wealth is there will be fewer and fewer oligarchs to eliminate when the time comes
Yes, this is precisely the issue with MMT, they leave the ability to create money and where that created money is initially spent in the hands of the very wealthy.
Thanks for all the info, everyone! Ask and ye shall receive!! It’ll take me a while to absorb and comprehend, so I’ll get started right away. I want to understand this stuff before the next presidential election!
True monetary reformers (such as IMMR, COMER, AMI, Positive Money, Dr. Joseph Huber, Dr. Michael Kumhof) understand that its not merely the lack of recognition of the true nature of fiat money that is the problem as Alt claims. Rather, it is the fact that virtually all money in circulation is determined by commercial banks. So instead of only fulfilling their valuable underwriting role, they have been granted the enormous power to actually create the money they lend and profit from. It is no wonder why money is not created for public purpose (What bank will lend to create a Medicare-for-all system?)
Contrary to the claim often heard from MMT, the government is NOT the initiator of money creation, but rather only acts in response to the money creation initiated by banks. (This takes the form of the Fed lending to banks to meet reserve requirement as well as the short-term QE asset purchase program)
I suggest you have a deeper introspection of those groups and potential ideological bias, not much focus on anything but banks – money. This is compounded by the lack of attention to the Shadow sector which is manifold. There is also a concern about returning to a free banking perspective circa the 1800s once a technocratic administration [undemocratic] of fiat is established.
MMT states that government sets the price whilst the market the quantity.
Now if some have issues with the latter they might want to look at the contracts that establish quantity – see Warren.
At the end of it all they seem quite ambivalent to market machinations or econometrics, solely fixated on money alone.
Not sure I follow – who is “they”. Of course I have an ideological bias – hope you do as well.
Monetary reformers believe that a sovereign monetary system is an enabling paradigm. There is always potential for abuse – but much less so than now. I don’t believe you are correct in your interpretation of what MMT claims. MMT, in one of its manifestations, claims the government both sets the spending AND creates the money to accommodate. This is false – government accommodates the reserve requirements of banks at best.
As far as the shadow sector is concerned, that has been fully addressed by Joseph Huber. To blithely claim it is an intractable problem is plain superficial. Of course, monetary reform does not eliminate the need for banking regulation and this includes the “shadow sector”. Credit creation with the expectation of universal acceptance, including payment of taxes (an MMT favorite point) is much less tenable under a sovereign monetary system.
“Banks” perform a valuable vetting function – but it is mainly for the benefit of the safety of their investment and future profit. We should instead expect to pay them in determining the safety of our investments.
“Not sure I follow – who is “they”. Of course I have an ideological bias – hope you do as well.’
Sorry I don’t allow my cognitive functions to be dictated by ideological bias, facts, evidence, or the currant theory of is how I arrive at a position. ‘They’ is a response to the groups or individuals you referenced above.
I think you should reference where you get the idea that MMT government both sets the spending AND creates the money to accommodate, it suffers from bias I fear. MMT states that government spends first, banks on the other hand seek reserves after the fact of transactions to meet ratios.
I see you did not respond to the free banking or non democratic administration aspect.
FYI I have well over a decade of reading and experience with the proponents you highlighted above, please don’t assume otherwise. I take exception at base axioms like private and public money, creating jargon out of whole cloth, and having a propensity to ignore every other aspect wrt to economics outside of banks. It verges on money crank territory.
Well I don’t believe a Mr. Spockian view of the world is the ideal. I am biased toward social systems that benefit people, society, animals and the environment.
” MMT states that government spends first…” how much more explicit can one be?
” I take exception at base axioms like private and public money, creating jargon out of whole cloth” So what “jargon” would you prefer?
Pulling out the old money “crank” canard isn’t very enlightening. Talk about jargon. Attempts at ridicule are not very persuasive.
What is the relevance of free banking to the discussion?
Claiming MMT is merely like a car with no “agency” is, ‘Guns don’t kill people, people kill people’ . The MMT founders are at the forefront of promoting MMT as the cure-all for our economic woes. Some deep and profound revelations – never mind that Soddy, a lowly chemist, understood fiat money almost a century ago.
Yeah I find it hard to reply to emotive special pleas, especially without any means to evaluate.
The concept of private – public money as advanced by some has more to with Murry followers than anything else.
I said it verges, distictio please, and money crank is a well defined term WRT those that would make all human ills a condition of money.
No. MMT does not make such utopian statements, only that the system has to potential to offer alternatives too neoliberal dogma w/o having to overhaul everything. MMT does suggest a JG to replace the troublesome NAIRU.
As I said before I have expansive experience with this topic and am well informed of both the material and the rhetoric its proponents engage in e.g. just recently had AMI sort tell me Adam Curtis was joyless.
(Seems my reply did not register) Do you consider Thomas Jefferson a “money crank”?
Until recently, Americans were painfully aware of the injustices due to private banks – it wasn’t some esoteric jargon-filled concept. The Populists understood the impacts of the banking industry on the well-being of the average citizen. MMT’s appreciation is tepid, at best – just pile on more regulation for an inherently flawed system.