Modern Monetary Theory

Moderators: Elvis, DrVolin, Jeff

Re: Modern Monetary Theory

Postby Elvis » Thu May 02, 2019 2:37 am

Another hit piece on MMT, this time from Jacobin. Did something happen to Jacobin, when its economics writer Doug Henwood says this?:

Absent from Kelton’s paper, Wray’s book, and much of the subsequent MMT literature, is any sense of what money means in the private economy, where workers labor and capitalists profit from their toil and compete with each other to maximize that profit, a complex network of social relations mediated by money.

That's a "leftist perspective" on MMT? :blankstare

Despite reading some MMT literature and talking to Warren Mosler, Henwood just plain gets the premise wrong. He takes a couple of paragraphs to let us know what nasty people many MMT economists are (he must have got his butt hurt during research or something). He gripes that MMT offers little in prescriptives—not realizing that's not their job. (When they do offer policy suggestions, they're branded "commie socialists!") He misses the entire point.

In an article offering a strategy for funding a Green New Deal — just spend the money, don’t worry about where it’s going to come from — Stephanie Kelton, Andres Bernal, and Greg Carlock claim that “the government’s bank — the Federal Reserve — clears the payments by crediting the seller’s bank account with digital dollars. In other words, Congress can pass any budget it chooses, and our government already pays for everything by creating new money.” But the government doesn’t do that. It spends only money gotten from tax revenues or bond sales. (If you don’t believe me, look at a Daily Treasury Statement, a daily accounting of the federal government’s income and outgo. It looks a lot like any normal financial statement, only with a lot more zeroes.)

But that Treasury Report is just bookkeeping; in no way does a set of books apposing taxes and outlays disprove the fact that the federal government creates new money when it spends. The books ignore and cover up the reality of money creation but do not disqualify the reality. Henning has no imagination—which is not required here but he can't see past his training. He calls MMT a "keystroke fantasy, [...] a phantasm, a late-imperial fever dream."

To quote a wiser man:

The process by which money is created is so simple that the mind is repelled.

John Kenneth Galbraith, Money: Whence It Came, Where It Went (1975)



Some friends and acquaintences whom I've bombarded with MMT lectures, send me articles about MMT, almost all hit pieces; "what about this??" Every one is crap, easily refuted. I'd spend more time on this one but it pisses me off. :mad2 :lol:
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” ― Joan Robinson
User avatar
Elvis
 
Posts: 7413
Joined: Fri Apr 11, 2008 7:24 pm
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby JackRiddler » Thu May 02, 2019 6:35 am

.

Henwood runs a great interview show with academics talking about their books and I very highly recommend it.

On social media Henwood cultivates grudges and engages sophistry like a champ.

His MMT article was both lame & despicable. Jacobin is flexible and interesting in so many ways but followed an orthodox Marxist reflex on this question in giving it to Henwood.

As soon as he chooses the German economy of 1923 as an exemplary case (a societal collapse understood simplistically as "the hyperinflation," which removes the context), it's game over. It's sophistry. It's pretty much the least fucking relevant example one could choose, but it's the go-too for idiots. Which Henwood, again, usually, is not. (He's a friend on the FB and I enjoy many of his posts.)

One could always choose the U.S. in the FIFTY YEARS since 1971, which is what MMT is basically about, but never mind. The way he covers early Weimar is both massively wrong history and glosses on the already simpleminded right-wing saws about it.

Jacobin, way mixed bag but grateful it exists most of the time. I like Current Affairs better, but that's a much smaller show.

.
Last edited by JackRiddler on Thu May 02, 2019 1:03 pm, edited 1 time in total.
We meet at the borders of our being, we dream something of each others reality. - Harvey of R.I.

To Justice my maker from on high did incline:
I am by virtue of its might divine,
The highest Wisdom and the first Love.

TopSecret WallSt. Iraq & more
User avatar
JackRiddler
 
Posts: 15983
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby Elvis » Thu May 02, 2019 7:07 am

Thanks for the report on Henwood. I feel better. Not much, though, because writers like Henwood need to understand and get behind MMT, not beat it with a shovel.
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” ― Joan Robinson
User avatar
Elvis
 
Posts: 7413
Joined: Fri Apr 11, 2008 7:24 pm
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby Grizzly » Fri May 03, 2019 11:33 am



Eat the rich! And then eat the Super rich.

In 2008 "synthetic CDOs" destroyed the global economy, and now they're back
https://boingboing.net/2019/05/03/this-time-its-different.html
“The more we do to you, the less you seem to believe we are doing it.”

― Joseph mengele
User avatar
Grizzly
 
Posts: 4722
Joined: Wed Oct 26, 2011 4:15 pm
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby Belligerent Savant » Fri May 03, 2019 12:08 pm

.

A posting/article I came across on LinkedIn.

It's quite long, so will only share a snippet here.

https://www.linkedin.com/pulse/its-time ... ray-dalio/

It’s Time to Look More Carefully at “Monetary Policy 3 (MP3)” and “Modern Monetary Theory (MMT)”

Image

Ray Dalio
Co-Chief Investment Officer & Co-Chairman of Bridgewater Associates, L.P.


This article is for folks who are interested in economics, especially about how monetary and fiscal policy will work differently in the future. It will focus on Monetary Policy 3 (the new type that we will see more of around the world) and Modern Monetary Theory (a recently proposed new approach that has received a fair amount of attention). It comes in two parts. The first part is important for folks who care about such stuff but it’s a bit wonky and the second which shows historical cases is very wonky so feel free to wade into this in whatever depth suits your interest.

Part 1: Understanding MP3 and MMT

When I look at economies and markets I look at them in a mechanical way much like an engineer would look at cause-effect relationships of a machine. To me the economic machine has a limited number of basic cause-effect relationships (see “How the Economic Machine Works”) that can be put together in numerous ways that can lead to an infinite number of combinations, just like the 26 letters of the alphabet can be combined to make up an infinite number of words. More specifically there are two basic building blocks of economic policy, which are monetary and fiscal policy, and under these there are a few ways (taxing and spending for fiscal policy, and interest rates and quantitative easing and tightening for monetary policy) and under each of these there are various ways they can be configured. At the big picture level, monetary policy determines the total amount of money and credit (i.e., spending power) in the system, and fiscal policy determines the government’s influence on where it’s taken from (i.e., taxes) and where it goes (i.e., spending).

To me the most important engineering puzzle policy makers around the world have to solve for the years ahead is how to get the economic machine to produce economic well-being for most people when monetary policy does not work. I don’t mean that monetary policy won’t work at all; I mean that it won’t work hardly at all in stimulating economic prosperity in the ways that we are used to having it stimulate economic activity, which are through interest rate cuts (what I call Monetary Policy 1) and through quantitative easing (what I call Monetary Policy 2). That is because it won’t be effective in producing money and credit growth (i.e., spending power) and it won’t be effective in getting it in the hands of most people to increase their productivity and prosperity. Hence I believe we will have to go to Monetary Policy 3, which is fiscal and monetary policy coordination that is of a form that we haven’t seen before in our lifetimes but has existed in various forms in others’ lifetimes or faraway places. It is inevitable that this shift will happen because it is inevitable that central bankers will want to ease when interest rates are pinned at 0% and when quantitative easing will be ineffective in achieving the goal. I recently refreshed my prior exploration of past cases and future possibilities of such coordination, which I will share below.

Modern Monetary Theory is one of those infinite number of configurations that is in my opinion inevitable and shouldn’t be looked at in a precise way. For those of you who don’t know what Modern Monetary Theory is, it’s described here (link). It’s described differently by different folks so it has slightly different configurations. For example, some might change fiscal policy so that there is a wealth tax that is used to eliminate student loans, and others might change taxes and spending in other ways, and there are an infinite number of ways these changes can be configured that we shouldn’t delve into at this stage because that will drive us into the weeds and the particulars that will stand in the way of seeing the big important things. Also, people who are focusing on MMT as a package will limit their thinking to the specifics of that package rather than thinking about the wider range of MP3 policies to find the best one.

MMT’s most important configuration is the fixing of interest rates at 0% and there is the strict controlling of inflation via the changing of fiscal policy surpluses and deficits, which will produce debt that central banks will monetize. In other words, whereas during the times we have become used to, interest rates moved around flexibly and fiscal deficits (often) and surpluses (rarely) were very sticky so interest rates were more important in producing buying power and the cycles, in the future interest rates will be very sticky at 0% and fiscal policies will be much more fluid and important and the debts produced by the deficits will be monetized. In case you didn’t notice, that is by and large what has been happening and will increasingly need to happen. In other words, interest rates are now pinned near 0% in two of the three major reserve currencies (the euro and the yen) and there is a good chance that they will be pinned there in the third and most important reserve currency (the dollar) in the next economic downturn. As a result, fiscal policy deficits that are monetized is the contemporary stimulation configuration of choice. That existed long before there was a concept called “Modern Monetary Theory,” though MMT embraces it. Putting labels aside, it is certainly the case that the configuration of having 1) an interest rate fixed at around 0%, 2) more flexible fiscal policies with debt monetization to fund the resulting deficits with 3) rigorous inflation targeting exists and is increasingly likely, necessary, and possible in reserve currency countries. An added benefit of this approach is that the money and credit created can be better targeted to fund the desired uses than the process of having the central bank buy financial assets from those who have financial assets and use the money they get from the central bank to buy the financial assets they want to buy. There are many historical cases of this happening (see the 1930s-1940s prewar and war periods which, as you know, I think are analogous), which offer worthwhile lessons about how this was and could be engineered.

The big risk of this approach arises from the risks of putting the power to create and allocate money, credit, and spending in the hands of politically elected policy makers. In my opinion, for these MP3 policies to work well, the system would have to be engineered in a way that decision making would be in the hands of wise, not politically motivated, and highly skilled people. It’s difficult to imagine how the system will be built to achieve that. At the same time it is inevitable that we are headed in this direction.

[cont'd]



The comments to the article are wide-ranging, to say the least.

Comments:
Gerry Wootton
Automation Science Consultant

It's safe to say that managing the economy (if that's even possible) is extremely complicated. One must laugh when politicians attempt to popularize their economic plans by equating fiscal policy to personal finances EXCEPT that some of these dudes actually believe they're making sense. Even this article tends to simplify in the assumption that the scope of an economy is / can be confined to national borders. In general there is a basic tension between a desire to have consistency / stability in the economy and the belief that growth is essential (while at the same time there is the notion of excessive growth as a thing, usually a bad thing). There are no magic bullets though politicians frequently claim to have them. From control theory we know that equilibrium is a tenuous condition and that means of riding out disturbance is generally beneficial. The problem with politicians is that they frequently latch on to single examples or even imaginary examples; consequently, regulation of the economy frequently consists of what one calls 'bang-bang' control exacerbated by the protracted latency of policy making, legislation and regulation. An additional problem is the squeeky wheel problem where only one aspect of a complex system comes into focus at a given time: one current example is where Canadian government attempted to deal with price escalation in hot real estate markets, put new constraints on the purchasing power of buyers, quickly leading to real estate agents complaining about lack of sales revenue, followed by TBD (we'll soon see). A corollary problem is that when politicians find the usual tools are marginally effective, they fan out into other areas; for example, weakening health and safety regulations (typical code being 'eliminating red tape'). In other instances they choose to interfere in the financial system and/or competition by underwriting risk, bailing out floundering businesses, making below market loans, etc.; some disparage this as picking 'winners and losers' (which certainly disrupts market competition) but more often consists of assisting losers. Given the economics of political life, governments tend to favor corporate interest over public interest: perhaps a basic question should be 'who is the economy meant to serve?'.
The dangerous assumption in this article is that politics can be a reliable economic tool. The use of selected examples is always sketchy: perhaps politicians were sufficiently prescient in some cases or perhaps they merely screwed up in reverse. It should be clear that a cabal of used car salesmen, real estate developers, lawyers and PoliSci majors are not best suited to dealing with such great complexity.

Steven Mockbee
Steven Mockbee Self Employed at Steve & Co

The first thing i think of is that This Modern Theory takes power away from the FED to control things - by raising and lowering interest rates and money supply, and directly gives control to the government - who will raise and lower taxes to promote economic activity.
Or in one scenario described above....give the FED the power to control tax rates. Does that seem wise? Let a For Profit business control US taxes, instead of the government which is there to protect the citizens?
And, for stimulus of job creation, it simply seems to be a copy of what I see here in China, incentivize businesses to hire people, and the government will pay the companies, who in turn willpay the employees. Thats a brief incomplete description, but generally accurate. The welfare system is handled thru businesses(State owned Enterprises).
MM1 and MM2 were FED controlled. MM3 looks like is putting control into governments hands.


Mike Agne
CTA Investment Manager and dedicated futurist contributing to the intellectual & logical growth of humanity

No way Ray wrote this, too long and he wouldn't waste his time. Anyway he speaks as if the Govt or Central Banks are impartial and fair, which is the farthest thing from the truth, fact is the markets are controlled and monetary policy is there for one reason and one reason only, to bail out the large levered players. QE, zero interest rates don't help the real economy, what would help is if the perpetrators of wrong doing were put in jail and their businesses were allowed to fail. Nobody benefits from bailing out banks like we did in 2008, the only beneficiaries are the same guys that started the fire, period. You take risk and you get burned, that's your fault. so long see yah...not hey I am AIG I am too big to fail...so the reality is capitalism works, but it only works if the system is not rigged and zero rates and QE is rigging the system. Give me 7% mortgages and 7% 1yr CD's now that is real capitalism, and if you levered your future betting on interest rate spreads and QE and low long term rates...well so long...mankind needs to realize there are two economies, those that will always have and those that will not. (edited)
·

Anton F. Balint
Research and Communications Associate at AIMA - The Alternative Investment Management Association

I think the core message of the essay is to be open to alternatives given that we are all running out of options


User avatar
Belligerent Savant
 
Posts: 5215
Joined: Mon Oct 05, 2009 11:58 pm
Location: North Atlantic.
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby thrulookingglass » Fri May 03, 2019 2:40 pm

Fuck this noise!

In general there is a basic tension between a desire to have consistency / stability in the economy and the belief that growth is essential


It's safe to say that managing the economy (if that's even possible) is extremely complicated.


Is everyone so blind as to see money isn't real? Its value is created by expressly clandestined forces who's careful measure of the valuation of goods and services ensures a working poor. The pyramid scheme cannot be created without a massive base of dejected, purposely unschooled riffraff to nurse the moneyed elites sores. The whole scheme is to keep you working at menial, pointless and vapid endeavors so the premeditatively oppressed never realize that that is exactly what they are. Money destroys the value of life! End of the story. If all you value in life is money, I hope you drown in it! How many gurus, shaman, prophets, messiahs does it take to convince you that money isn't wealth. What natural resource will be left unexploited if all we value the tree for is its apples and lumber it might yield? I support an equal and living wage for all, zero! Fucking nada, zilch, zippo. Let your work be your reward and may your work be rewarding. What we value in life is intrinsically important to its quality. When all we value is money, we depreciate each other and all earth's bounties. This world is a common treasury for all. Don't be so callow as to not see the whole of the sun because the moon stands before it. We don't have to spend all our days laboring for money's imagined value, in fact, we don't have to spend our days working at all. The whole idea of keeping the lower classes laboring at ignominious tasks is so they cannot find the strength in their discouraged exasperated souls to rise up against tyranny. Someday I'll make it to manager. Which one of us, you is worth more than the next? Who wants to place a price tag on a human life, especially if its yours being evaluated? Shit, its in Fight Club!

Narrator:
A new car built by my company leaves somewhere traveling at 60 mph. The rear differential locks up. The car crashes and burns with everyone trapped inside. Now, should we initiate a recall? Take the number of vehicles in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one.

Business woman on plane:
Are there a lot of these kinds of accidents?

Narrator:
You wouldn't believe.

Business woman on plane:
Which car company do you work for?

Narrator:
A major one.


Doesn't mean shit to you unless its someone you care about. This thread REEKS of Ayn Rand's ferocious malevolence! Money isn't the root of all evil by the way, people who appraise its offerings over sacramental human dignity convey that.
User avatar
thrulookingglass
 
Posts: 877
Joined: Thu May 19, 2005 2:46 pm
Location: down the rabbit hole USA
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby Elvis » Fri May 03, 2019 4:31 pm

Belligerent Savant wrote:A posting/article I came across on LinkedIn.

It's quite long, so will only share a snippet here.

https://www.linkedin.com/pulse/its-time ... ray-dalio/


Wow, I'll have to set aside time to get through this. I remember reading the 2011 New Yorker profile of Dalio, cited in the Wikipedia page on Dalio, which also cites his recent "60 Minutes" appearance:

On April 7, 2019, Dalio said on 60 Minutes that income inequality in the United States was a national emergency requiring reform.[25][26]
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” ― Joan Robinson
User avatar
Elvis
 
Posts: 7413
Joined: Fri Apr 11, 2008 7:24 pm
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby stickdog99 » Fri May 03, 2019 4:38 pm

Elvis » 02 May 2019 06:37 wrote:Another hit piece on MMT, this time from Jacobin. Did something happen to Jacobin, when its economics writer Doug Henwood says this?:

Absent from Kelton’s paper, Wray’s book, and much of the subsequent MMT literature, is any sense of what money means in the private economy, where workers labor and capitalists profit from their toil and compete with each other to maximize that profit, a complex network of social relations mediated by money.

That's a "leftist perspective" on MMT? :blankstare

Despite reading some MMT literature and talking to Warren Mosler, Henwood just plain gets the premise wrong. He takes a couple of paragraphs to let us know what nasty people many MMT economists are (he must have got his butt hurt during research or something). He gripes that MMT offers little in prescriptives—not realizing that's not their job. (When they do offer policy suggestions, they're branded "commie socialists!") He misses the entire point.

In an article offering a strategy for funding a Green New Deal — just spend the money, don’t worry about where it’s going to come from — Stephanie Kelton, Andres Bernal, and Greg Carlock claim that “the government’s bank — the Federal Reserve — clears the payments by crediting the seller’s bank account with digital dollars. In other words, Congress can pass any budget it chooses, and our government already pays for everything by creating new money.” But the government doesn’t do that. It spends only money gotten from tax revenues or bond sales. (If you don’t believe me, look at a Daily Treasury Statement, a daily accounting of the federal government’s income and outgo. It looks a lot like any normal financial statement, only with a lot more zeroes.)

But that Treasury Report is just bookkeeping; in no way does a set of books apposing taxes and outlays disprove the fact that the federal government creates new money when it spends. The books ignore and cover up the reality of money creation but do not disqualify the reality. Henning has no imagination—which is not required here but he can't see past his training. He calls MMT a "keystroke fantasy, [...] a phantasm, a late-imperial fever dream."

To quote a wiser man:

The process by which money is created is so simple that the mind is repelled.

John Kenneth Galbraith, Money: Whence It Came, Where It Went (1975)



Some friends and acquaintences whom I've bombarded with MMT lectures, send me articles about MMT, almost all hit pieces; "what about this??" Every one is crap, easily refuted. I'd spend more time on this one but it pisses me off. :mad2 :lol:


It's purely confirmation bias, and it reminds me of what happens when you propose the idea of undirected panspermia to scientists who were once taught and thus have spent their whole lives assuming that Earthly life originated on Earth.

First, they come up with every recently disproven reason to deny any possibility of undirected panspermia.

"You don't understand how vast space is."

But impact collisions constantly move matter from solar system bodies to other solar system bodies other solar system bodies, and over billions of years we would expect trillions of intra-solar system rock sharing and at least millions of impacts from other solar systems.

"Nothing can live in space."

Microbes can and do.

"Nothing can live that long."

Microbe spores are effectively immortal.

"All microbes would die upon impact."

No, this has been tested many times, and some microbes always survive.

"Earth is uniquely suited to originate life."

In the entire galaxy? By what exact mechanism? Isn't this just another Pre-Copernican bias?

"Well, the real problem is how life got started, and panspermia just pushes the real problem back and thus answers nothing!"

So how Earthly life actually originated is suddenly not even a legitimate scientific question?
stickdog99
 
Posts: 6303
Joined: Tue Jul 12, 2005 5:42 am
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby alloneword » Fri May 03, 2019 7:19 pm

I'll admit I've not read much of Doug Henwood's output for a while, but I remember thinking once or twice that his own understanding of what money is and where it comes from was somewhat 'Marxist' - in that it hadn't ever occurred to him to give it too much thought.

I went over this same point with a Marxist tag team right here on RI about 12 years ago (God, I feel old)... It was a fun discussion (well, until it got a bit weird and creepy).

Henwood was on twitter only today reinforcing that point with reference to his article on Jacobin:

henwood.png


I'm grateful, really, as he led me to this rebuttle:

Modern Monetary Theory (MMT)—A Response to Henwood
Posted May 02, 2019 by Nathan Tankus, Rohan Grey, Scott Ferguson, and Raúl Carrillo

The essay is little more than a inchoate mix of old MMT criticisms that have been responded to ad infinitum, plus some unique historical cherry-picking. Because unraveling every “Henwoodism” would require a book, we are not going to reply to each specific point.

Instead, we will focus on what matters—the politics of full employment in the Green New Deal era. We think it’s important and instructive for the left to see just how badly Henwood gets it wrong. For us, there are three critical problems:

First, Henwood is ignorant as to the deeper connections between central banking operations and class struggle.
Second, this leads Henwood to miss the structural role of government debt within capitalism.
Finally, and most importantly, Henwood is dead wrong on the contemporary politics of public finance and taxation.

Early in his screed, Henwood asserts that “[r]eserve accounting is important if you’re a financial economist or a central banker, but it’s of limited relevance to anyone concerned with big-picture economic questions.” MMT advocates, of course, think otherwise. In fact, it would be surprising if central banking had little to do with the “big picture economic questions.” Henwood’s contention that focusing on central banking means ignoring class struggle is circular; he simply ignores MMT analysis demonstrating that such understanding strengthens the cause. [levyinstitute.org].

The shallowness of Henwood’s critique is especially clear when he painfully misinterprets Kalecki’s “Political Aspects of Full Employment” [equitablegrowth.org]. In full concert with MMT, the essay literally begins with Kalecki describing how the government pays for the services by crediting bank accounts, but also drains reserves by selling bonds. Furthermore, Kalecki argues that the central bank can control key interest rates, no matter the amount of deficit spending. Now, contrast Kalecki’s analysis with Henwood...

<snip>

(my emph... you get the idea)
You do not have the required permissions to view the files attached to this post.
User avatar
alloneword
 
Posts: 902
Joined: Mon Jan 22, 2007 9:19 am
Location: UK
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby JackRiddler » Sat May 04, 2019 8:05 am

.

That discussion from many years ago was on a high level and worth linking.

Mosler, like some of the scholars employed by central banks, is an example of someone who studies money creation empirically, but one has no obligation or inclination to agree with him politically. MMT is about that empirical study, not a necessary support for capitalism. The MMT political movement, on the other hand, is represented by the guys who wrote the Henwood rebuttal, two of whom I've met.

I see no necessary clash between MMT and Marxist notions. This is a mistake of Marxists who think MMT is incompatible with class struggle, or who have dogmatic notions about things Marx did not even write; and, on the other side, of economists who might explore MMT or just be pragmatic about the realities of money creation but remain tied to the capitalist ideology and say stupid things like the Mosler sentence that Henwood quotes. False dichotomy all around.

People have been getting money wrong or been confused by it for forever. That's a feature not a bug, and I have been among them. So I'm not holding confusion about money against anyone if they're willing to consider things with an open mind and do not engage in sophistry. Marx made a hero of Lincoln, albeit not for overseeing the issuance of the greenback. In the later chapters of Capital III, he has sophisticated explication of contemporary financial mechanics and talks with fascination about the derivatives and futures used in Britain. He sees these as forms of notional or potential money-claims, and understands interest more generally as a tool of power, as a way capitalists lay claim to all future wealth by virtue of investments in the present. The complications and confusion about money are not absent. Note in the MCM formula the "M" is actually the "money-commodity," so he understood that money is not simple means of exchange but also store of value (also as evident in the 1844 passage quoted by chlamor and erosoplier at the link), as well as something made up and aspirational, a convention.

.
We meet at the borders of our being, we dream something of each others reality. - Harvey of R.I.

To Justice my maker from on high did incline:
I am by virtue of its might divine,
The highest Wisdom and the first Love.

TopSecret WallSt. Iraq & more
User avatar
JackRiddler
 
Posts: 15983
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby alloneword » Sat May 04, 2019 10:11 am

JackRiddler » Sat May 04, 2019 1:05 pm wrote:False dichotomy all around.

People have been getting money wrong or been confused by it for forever. That's a feature not a bug, and I have been among them. So I'm not holding confusion about money against anyone if they're willing to consider things with an open mind and do not engage in sophistry.


True, true.

Extending the computer analogy a little, I once heard it described as roughly this:

Most minds see money as a 'software program', a mere 'app', while greater minds see it as the 'operating system'... yet to get any real understanding, you need to realise it's more like the BIOS... practically invisible, yet governs all that can take place.

To stretch it further, we're long overdue an upgrade to UEFI, which perhaps MMT is part of.

[Incidentally, there was an essay I linked to on that old thread which seems to have now disappeared (D. Hawkes - Faust Among the Witches), but can still be found on archive.org - reposted here purely because you might enjoy it (it's a good troll)].
User avatar
alloneword
 
Posts: 902
Joined: Mon Jan 22, 2007 9:19 am
Location: UK
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby Elvis » Sun May 05, 2019 6:19 pm

alloneword wrote:I went over this same point with a Marxist tag team right here on RI about 12 years ago


Great post, thanks. In that old thread, you wrote,

Since every dollar/pound that exists is 'created' by debt that bears interest, there can logically never be enough 'money' to repay the debt, since only the principal sum was ever created - the 'money' to repay the principal plus interest does not exist.


However, a key tenet of MMT informs us that those dollars can be created without debt. That's critical to any response to critics who compare government 'deficit' spending to "credit card" spending ("eventually somebody has to pay that bill!!"... BZZZT wrong.)

I used to repeat that same quoted sentence, and it's a fascinating way to look at money, but it turns out to be another excuse to constrain federal spending on the public good.


Anyway, thanks for posting this rebuttal from the MMT crowd — I'm sending it to the person who first sent me Henwood's piece as evidence that MMT is a lot of hooey that will send us spiraling into hyperinflation yada yada....

alloneword wrote:I'm grateful, really, as he led me to this rebuttle:

Modern Monetary Theory (MMT)—A Response to Henwood
Posted May 02, 2019 by Nathan Tankus, Rohan Grey, Scott Ferguson, and Raúl Carrillo

The essay is little more than a inchoate mix of old MMT criticisms that have been responded to ad infinitum, plus some unique historical cherry-picking. Because unraveling every “Henwoodism” would require a book, we are not going to reply to each specific point.

Instead, we will focus on what matters—the politics of full employment in the Green New Deal era. We think it’s important and instructive for the left to see just how badly Henwood gets it wrong. For us, there are three critical problems:

First, Henwood is ignorant as to the deeper connections between central banking operations and class struggle.
Second, this leads Henwood to miss the structural role of government debt within capitalism.
Finally, and most importantly, Henwood is dead wrong on the contemporary politics of public finance and taxation.

Early in his screed, Henwood asserts that “[r]eserve accounting is important if you’re a financial economist or a central banker, but it’s of limited relevance to anyone concerned with big-picture economic questions.” MMT advocates, of course, think otherwise. In fact, it would be surprising if central banking had little to do with the “big picture economic questions.” Henwood’s contention that focusing on central banking means ignoring class struggle is circular; he simply ignores MMT analysis demonstrating that such understanding strengthens the cause. [levyinstitute.org].

The shallowness of Henwood’s critique is especially clear when he painfully misinterprets Kalecki’s “Political Aspects of Full Employment” [equitablegrowth.org]. In full concert with MMT, the essay literally begins with Kalecki describing how the government pays for the services by crediting bank accounts, but also drains reserves by selling bonds. Furthermore, Kalecki argues that the central bank can control key interest rates, no matter the amount of deficit spending. Now, contrast Kalecki’s analysis with Henwood...


<snip>

Some favorite snips:

In addition to missing the mark on central banking in general, he betrays ignorance of the many fundamental functions of safe government securities within capitalism—another analytical mistake that undermines his political conclusions. U.S. Treasury bonds will be issued regardless of their putative role in public finance.



Selling treasury securities is not tantamount to placing the U.S. State in the thrall of the investor class. Persistent deficit spending is not a “few steps down the road to Weimar”, as Henwood contends. If we truly want to end the wealthy’s free lunch, the answer is not austerity or—shudder—“sound finance.” It’s euthanizing the rentiers. It’s lowering Treasury Bond interest rates and pursuing a permanent zero interest rate policy [neweconomicperspectives.org]. One would expect a Marxist to understand how this policy prescription threatens the status quo.



For Henwood, the left’s role is merely to argue extra hard for corporations and the wealthy to pay their “fair share” of taxes. This amounts to a more boisterous version of Hillary Clinton’s politics.



It is no coincidence that Thatcher went to great lengths to manufacture a conventional wisdom that “there is no such thing as public money, only taxpayer money”. Weaponizing taxpayer identity has been fundamental to the rise of neoliberalism, generally, and it played a big part in getting Trump elected, specifically [thenation.com].

For over 40 years, Republicans have controlled the conventional wisdom around budgets, successfully using the “taxpayer money” myth and to force Democrats to cut social spending.



MMT demonstrates that the rich are a troublesome barrier to a better world, but we need not rely on their money [stitcher.com]. Of course, exposing neoliberal lies about the constitution of public finance is obviously not sufficient for achieving leftist aims, but it is necessary.



The threat that MMT—and especially leftist deployment of MMT—poses to the status quo is becoming more apparent everyday.



Deconstructing monetary and fiscal policy isn’t skirting the administrative and political challenges of implementing the Job Guarantee or the Green New Deal; it’s denying the foundational neoliberal myth that justifies why those programs shouldn’t be seriously considered in the first place. Henwood argues that showing the “system can’t pay” is politically useful. We argue that showing the system can obviously pay, but won’t pay, is infinitely more powerful in demonstrating why the status quo must go.



Professor Kelton remains an economic advisor to Senator Bernie Sanders.
:yay


to pass and administer the policies we all desire deeply, we think the left must embrace MMT. In doing so, we’ll finally bury “sound finance” (including ‘socialist’ sound finance) and, with it, the rest of the neoliberal order.
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” ― Joan Robinson
User avatar
Elvis
 
Posts: 7413
Joined: Fri Apr 11, 2008 7:24 pm
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby Grizzly » Sun May 05, 2019 10:47 pm

Thought the following might interest somebunall

ImageImage
“The more we do to you, the less you seem to believe we are doing it.”

― Joseph mengele
User avatar
Grizzly
 
Posts: 4722
Joined: Wed Oct 26, 2011 4:15 pm
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby alloneword » Mon May 06, 2019 10:45 am

Elvis » Sun May 05, 2019 11:19 pm wrote:In that old thread, you wrote...

Heh... yeah. We were all young(er), once. :)

I saw this on ZeroHedge (yeah, I know):

“In the next recession, US rates will fall 100bps quickly. Then go to zero. And after that, we’ll just have to see what direction we go,” he said, “But that’s probably to MMT.”

Splitting Atoms:

“MMT is entirely valid and has been embraced by Japan, even if they don’t call it by name,” said the CIO. Japan’s debt to GDP ratio stands at nearly 250%, but the central bank owns half of it and continues buying. Overnight interest rates are -0.10%, 10yr bond yields are -0.06%, the currency is stable and there’s barely any inflation. “Lots of people scoff at MMT because they think it’s the equivalent of opening Pandora’s box. But that’s like denying the existence of nuclear physics because you think humans can’t be trusted with atomic weapons.”

“In Japan, they chose to suppress inflation to protect older people,” continued the CIO. “The older Japanese own the property and assets. So they’ve made the younger people have to work harder to buy these things from them.” That’s what the rentier class in every society has always done and will always do. “Japan could have made different policy choices as they deployed MMT. But the economic structure they chose has protected the status quo, while getting the most work out of young people. That’s how the world generally works.”

“We are quite obviously headed to MMT in the US, Europe and China,” said the CIO. “But it is still not clear how it’ll be deployed.” In Warren Mosler’s construct, MMT is best used to run an economy efficiently, supporting full employment and investment in expanding a nation’s productivity and productive capacity. “History tells us that the rentier class coopts policy to enhance their position. So while MMT is a framework suited to get people out of poverty, by the time we’re finished, it’ll probably be used to further expand inequality.”


:ohno:
User avatar
alloneword
 
Posts: 902
Joined: Mon Jan 22, 2007 9:19 am
Location: UK
Blog: View Blog (0)

Re: Modern Monetary Theory

Postby JackRiddler » Mon May 06, 2019 12:13 pm

.

Yeah, that's the point, for the hudredth time. The T in MMT is just a more accurate and honest description of how sovereign money in large functioning economies actually works. How the knowledge is used, for good or for bad, or with competence or disastrous effects, is an open matter. Effectively, in the US, the same Republicans who now want to pass a Senate condemnation of MMT (no kidding) are the ones who discovered it first, and have applied it relentlessly as the deficit kings since the 1980s. But the actual explication of it is coming in the wake of its biggest application since 2008, and the explicators, unlike Mosler, are mostly on the left and urging its use for GND and JG, not protection of assets as with QE or Japan. The main problem will indeed be what Mason points out. Although he can really be an analytical lightweight, he certainly has a sense of power dynamics. The use of MMT insights for good WILL be attacked by the concentrated corporate power - to an extreme. It will be no less relentless than with Greece in 2015. So people who are serious about using it for good had best be prepared to acknowledge that, to fight, and not to play the Obama-Democrats lay down for more abuse "compromise" game until we get the second and far more fascist version Trump (or will it be the fifth Nixon? I lose track.)

.
We meet at the borders of our being, we dream something of each others reality. - Harvey of R.I.

To Justice my maker from on high did incline:
I am by virtue of its might divine,
The highest Wisdom and the first Love.

TopSecret WallSt. Iraq & more
User avatar
JackRiddler
 
Posts: 15983
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

PreviousNext

Return to General Discussion

Who is online

Users browsing this forum: No registered users and 45 guests