What is Modern Monetary Theory, or “MMT”?

By Dale Pierce. Cross posted from New Economic Perspectives

Modern Monetary Theory is a way of doing economics that incorporates a clear understanding of the way our present-day monetary system actually works – it emphasizes the frequently misunderstood dynamics of our so-called “fiat-money” economy. Most people are unnerved by the thought that money isn’t “backed” by anything anymore – backed by gold, for example. They’re afraid that this makes money a less reliable store of value. And, of course, it is perfectly true that a poorly managed monetary system, or one which is experiencing something like an oil-price shock, can also experience inflation. But people today simply don’t realize how much bigger a problem the opposite condition can be. Under the gold standard, and largely because of the gold standard, the capitalist world endured eight different deflationary slumps severe enough to be called “depressions.” Since the gold standard was abolished, there have been none – and, as we shall see, this is anything but coincidental.

The great virtue of modern, fiat money is that it can be managed flexibly enough to prevent *both* deflation and also any truly damaging level of inflation – that is, a situation where prices are rising faster than wages, or where both are rising so fast they distort a country’s internal or external markets. Without going into the details prematurely, there are technical reasons why a little bit of inflation is useful and normal. It discourages people from hoarding money and encourages healthy levels of consumption and investment. It promotes growth – provided that a country’s fiscal and monetary authorities manage it properly.

The trick is for the government to spend enough to ensure full employment, but not so much, or in such a way, as to cause shortages or bottlenecks in the real economy. These shortages and bottlenecks are the actual cause of most episodes of excessive inflation. If the mere existence of fiat monetary systems caused runaway inflation, the low, stable rates of consumer-price inflation we have seen over the past thirty-plus years would be pretty difficult to explain.

The essential insight of Modern Monetary Theory (or “MMT”) is that sovereign, currency-issuing countries are only constrained by real limits. They are not constrained, and cannot be constrained, by purely financial limits because, as issuers of their respective fiat-currencies, they can never “run out of money.” This doesn’t mean that governments can spend without limit, or overspend without causing inflation, or that government should spend any sum unwisely. What it emphatically does mean is that no such sovereign government can be forced to tolerate mass unemployment because of the state of its finances – no matter what that state happens to be.

Virtually all economic commentary and punditry today, whether in America, Europe or most other places, is based on ideas about the monetary system which are not merely confused – they are starkly and comprehensively counter-factual. This has led to a public discourse about things like budget deficits and Treasury debt which has become, without exaggeration, utterly detached from reality. Time and time again, these pundits declaim that hyperinflation is imminent, that interest rates are on the verge of an uncontrollable upward spike, and that the jig will be up for sure just as soon as the next T-bond auction fails. But even though, time after time, it is the pundits’ prognostications which fail, no one seems to take any notice. This must change. A reality-based economics is needed to make these things make sense again, and Modern Monetary Theory is here to put everyone on notice that a quite different jig is the one that’s really up.

The gold standard was finally and completely abolished over the course of a two-year period which started in 1971, when Richard Nixon ended the convertibility of the dollar for gold and devalued U.S. currency for the first time since the end of World War II. In 1973, the U.S. stopped trying to peg the dollar to any currency or commodity, instead allowing its value to be set on a freely-floating international currency market. The monetary system we inaugurated then is the one we still have now.

It is not the same as the one which has been adopted by most of Europe – and this very prominent source of confusion about the role of money in the world today will receive close scrutiny at the proper point. But first, we need to carefully unpack the implications of taking both gold and any sort of “peg” out of the monetary equation in the first place. In 1971, gold-linked money became fiat-money – not for the first time, of course, but for the first time in a long time. And it wasn’t just any currency. It was, by far, the world’s most important currency, economically. It was also the world’s reserve currency – the good-as-gold and backed-by-gold currency which the entire non-communist world used to settle transactions between various countries’ central banks. And yet, what everyone, and especially every American was told at the time was that it really wouldn’t make much difference.

The political emphasis, at the time, was entirely on the importance of making sure that no one panicked. The officials of the Nixon administration acted like cops who had just roped off a fresh crime scene: “Just move right along, folks,” they kept intoning. “Nuthin’ to see here. Nuthin’, to see.” All of the experts and pundits said essentially the same thing – this was just a necessary technical adjustment that was only about complicated international banking rules. It wouldn’t affect domestic-economy transactions at all, or matter to anyone’s individual economic life. And so it didn’t – at least, not right away or in any way that got linked back to the event in later years. The world moved on, and Nixon’s action was mainly just remembered as a typical, high-handed Nixonian move – one which at least carried along with it the virtue of having pissed off Charles De Gaulle.

But what had really happened was epoch-making and paradigm-shattering. It was also, for the rest of the 1970s, polymorphously destabilizing. Because no one had a plan for, or knew, what all of this was going to mean for the reserve currency status of the U.S. dollar. Certainly not Richard Nixon, who was by then embroiled in the early stages of the Watergate scandal. But no one else was in charge of this either. In the moment, other countries and their central banks followed Washington’s line. They wanted to forestall any kind of panic too. But, inevitably, as the real consequences of the new monetary regime kicked in, and as unforeseen and unintended knock-on effects began to be felt, this changed.

The world had a choice to make after the closing of the gold window, but even though it was a very important choice, with very high-stakes outcomes attached to it, there was no international mechanism for making it – it just had to emerge from the chaos. Either the U.S. dollar was going to continue to be the world’s reserve currency or it wasn’t. If it wasn’t, the related but separate question of what to use instead would come to the fore. But, as things unfolded, no other choice could be imposed on the only economic powerhouse-nation, so all the other little nations eventually just had to work out ways to adjust to the new status quo.

Even after Euro-dollar chaos, oil market chaos, inflationary chaos, a ferocious multi-national property crash and a severe, double-dip American recession, the dollar continued to be the reserve currency. And it still wasn’t going to be either backed by gold or exchangeable at any fixed rate for anything else. But while the implications of this were enormous, almost no one understood them at the time, or ever, subsequently, figured them out. For the 1970s was the period during which Keynesianism was decertified as the reigning economic philosophy of the capitalist world – replaced by something which, at least initially, purported to have internalized and improved upon it. This too was a choice that wasn’t so much made as stumbled into. The chaotic, crisis-wracked world we now live in is the one which subsequent versions of this then-new economic perspective have helped to create.

Conventional, so-called “neo-classical” economics pays little or no attention to monetary dynamics, treating money as just a “veil” over the activity of utility-maximizing individual “agents”. And, as hard as this is for non-economists to believe, the models which these ‘mainstream’ economists make do not even try to account for money, banking or debt. This is one big reason why virtually all members of the economics profession failed to see the housing bubble and were then blind-sided by both the 2008 financial collapse and the grinding, on-going Eurozone crisis which has followed in its wake. And the current group-think among ‘mainstream’ economists is yet another case where failure is no obstacle to continued funding – or continued failure. The absence of any sort of professional, intellectual or academic accountability will be a theme here.

The public policy reversal that began with Margaret Thatcher and Ronald Reagan promised that the deregulation of capitalism would lead to greater shared prosperity for everyone. Today, even though the falsehood of this claim is brutally obvious, the same economic nostrums and stupidities that were used to justify it in the first place continue to be trotted out and paid homage to by a class of financial-media personalities who equate making a lot of money with understanding money. It does not seem to occur to them that financial criminals and practitioners of bank-fraud can get rich through sociopathy alone.

What needs to be said is this: Keynesian economics worked before, and the improved version – now generally called “post-Keynesian” – will work again, to deliver what the market-fundamentalism of the past three decades has patently and persistently failed to deliver *anywhere in the world*. Namely – a prosperity which is shared by everyone. The principal purpose of Modern Monetary Theory is to explain, in detail, why this this worked in the past and how it can be made to work again.

Here’s how: start with a 100% payroll tax cut for both workers and employers – one that will only expire (if it does at all) when we have achieved full employment. This will not de-fund Social Security. And yes, we’ll come back to this point and cover it in great detail in due course. But first, stop and think back on the effect which federal revenue-sharing had on the economy in 2009 and 2010. If you’re thinking there were fewer teachers, nurses, policemen and fire-fighters getting laid off, you are correct. If you’re thinking that more roads, dams, bridges and sewer systems were getting repaired, you’re right again. But if you think that adding 800 million dollars to the deficit over two years is a guaranteed way to generate hyper-inflation, double-digit interest rates and bond-auction failures, leading ultimately to a frenzied worldwide rush to dump dollar-denominated financial assets, well, now would be a good time to ask yourself why you believe this.

One more point – one more plank in this three-point program to restore fiscal and monetary sanity: let’s give everyone who wants to work and is able to work some *work to do*. A currency-issuing government can purchase anything that is for sale in its own currency, including the labor of every last unemployed person who is still looking for a job. So, a key policy recommendation of Modern Monetary Theory is the idea of a “Job Guarantee”. The federal government should take the initiative and organize a transitional-job program for people who just can’t find work in the private sector – as it currently exists in real-world America today. Because the smug one-liner that starts and ends with: “Government can’t create jobs – only the private sector can create jobs!” is about the un-funniest joke on the planet right now.

The government creates millions of jobs already. Isn’t soldiering a job? Isn’t flying the President around in Air Force One a job? What about all the doctors and nurses down at the V.A. hospital, and the day-care workers on military bases? They certainly all appear to be employed. When you go into a convenience store to buy some – uh – local-and-organic Brussels sprouts, say, how closely does the clerk examine the bills and coins you tender? Did any clerk or cashier ever squint or turn your five-dollar bill sideways and back and ask, “Hmm.. are you sure this money came from work that was performed in the private sector?” No. They didn’t. Because the money governments pay to public employees is exactly the same money everyone else gets paid in.

A guaranteed transition-job would need to be different from the familiar examples cited above in certain ways. It would be important to make sure that such a program always hired “from the bottom”, not from the top. That’s an important way of making sure that such programs don’t create real-resource bottlenecks by competing with the private sector for highly skilled or specialized labor. Hence, a transition-program job would more closely resemble an entry-level job at a defense plant. Such a job only exists because of Pentagon orders for fighter planes or helmets or dog food for the K-9 units. There is no sort of ambiguity about where the stuff is going or how it is being paid for. And when the people who mow the lawn or sweep the parking lot get paid, they know, without having to think about it, that their wages will spend exactly the same way down at the grocery store as everyone else’s.

Defence spending is actually quite a good analog to the idea of a transitional-job program – one that would provide work to any and every person who wanted it. The only time the American economy ever achieved an extended, years-long period with zero unemployment, low, well-controlled inflation rates and with no significant financial aftershock at the end was the World War II era – broadly defined to include the Lend-Lease buildup of 1940 and 1941. This solution to the problem of mass unemployment worked in the 1940s and it would work today. In the 1940s, of course,the jobs were almost all war-related. But, economically, this makes no difference.

The connection between war and economic prosperity has been noticed before. It led some 19th Century thinkers (and also Jimmy Carter) to wonder whether there could be a “moral equivalent of war”. Well, there can be – by way of the Job Guarantee. The biggest pre-condition has been met, because one result of most wars has been that they forced the combatant countries off the gold standard. Now, all countries have left it. What matters next is whether there are enough real resources available to produce goods and services that are equal in value to the government’s job-guarantee spending. If these resources are available – if they are not already being used to produce something else – then the increased demand that results from the payment of job-guarantee wages will not be inflationary, regardless of what they go to produce.

Money is 100% fungible. Whether the job-guarantee program makes fighter planes or wind turbines makes no economic difference – the workers employed by it will spend their wages on the same things other workers buy. What matters, economically, is whether there are sufficient real resources and labor available to produce these goods and services in line with the increased demand for them. If there are, no additional government intervention is necessary in order to mobilize them. The same private-profit motivation which induces a company to produce one widget can be relied upon to induce the production of another one.

Most popular misconceptions about job-guarantee work as inefficient “make-work” ignore these private-sector dynamics. It is simply assumed that if the publicly-funded workers don’t personally contribute to making shoes or soap, their wages will result in “more money chasing the same goods” – and that this will automatically cause inflation. This is an obvious fallacy which has been empirically falsified many, many times, but most people continue to treat it as an article of economic faith. So, one of MMT’s most pressing tasks today is to make the case that we can, indeed, end mass unemployment without undermining price stability.

There are many other economic problems and challenges in the world today. Modern Monetary Theory is not a panacea for them. Even if its insights and policy recommendations become widely known, and even if they are someday fully implemented, societies will still face challenges such as inequality, regulatory capture and predatory financial behavior, including the kind of predatory mortgage lending that led to the worldwide crash in 2008. In order to understand these additional economic problems and dangers, we need to look at economics in a larger context, and correctly situate Modern Monetary Theory within this wider frame.

Modern Monetary Theory is based on earlier work which also focused on the relationship between the state and its money – ideas which come under the generic designation of “Chartalism”. MMT also remains firmly within the Keynesian tradition of macroeconomnic theorizing, and recognizes an extensive interconnectedness with other economists whose work is categorized as “post-Keynesian”. Some of MMT’s other notable academic progenitors include Hyman Minsky, Abba Lerner and, more recently, the English economist Wynne Godley, whose emphasis on achieving consistency in the analysis of economic stocks and flows presaged the emphasis which MMT-orbit economists put on it today.

The label “Modern Monetary Theory” is not particularly apt. It became attached to its advocates through the informal agency of Internet comment-threading, not because anyone considered it either very useful or very descriptive. In other words, it “just stuck”. In fact, the identity of the first person to use the “MMT” label is lost to online history. So, to be clear, MMT is only modern in the broad sense in which virtually everything that got started in the Western world in the 19th Century is called “modern”. It is not exclusively monetary either – it has quite a bit to say about fiscal policy as well. And it was not, initially, theoretical – it started as a body of quite empirical observations about the dynamics of the monetary system and the many ways they are being misunderstood these days. For MMT has a dual pedigree which is itself quite remarkable.

On the one hand, it represents the patient, decades-long academic work of a cadre of perhaps eight or ten working economists (originally there were three or four, plus their students). But MMT was independently co-discovered by a single person. A person who had no specific training or academic background in economics at all – the American businessman and auto-racing enthusiast Warren Mosler. How he came to initially suspect and, ultimately, clearly understand that the spending of sovereign governments had become operationally independent of their taxing and borrowing is recounted in his 2010 book, “The Seven Deadly Innocent Frauds of Economic Policy.” The 1996 publication of an earlier book of his, “Soft-Currency Economics,” launched MMT as a social, intellectual and online movement. And while the academic side of MMT was completely unknown to him at first, it was not long before the two camps discovered each other, and this has led to a very extensive collaboration in the years since.

Today, MMT is being discovered by a rapidly-growing worldwide Internet audience. And the public’s growing interest in MMT is evident in other ways as well. One of the movement’s leading spokespersons, Dr. Stephanie Kelton of the University of Missouri at Kansas City, has been a repeat guest on an MSNBC weekend show. She, and other MMT economists, are frequent guests on a number of popular, mostly-progressive radio programs as well – both in the U.S. and in English-speaking countries around the world. And Warren Mosler’s seminal 2010 book was recently published in Italian.

(For obvious reasons, the stressed and austerity-damaged countries of the Eurozone’s southern tier are places where people are becoming more open to fresh economic ideas. At a 3-day conference in Rimini, Italy in 2012, a panel of four MMT/post-Keynesian speakers lectured to a crowd of over 2,000 people in a packed sports arena. Many in the audience crossed multiple international borders to attend.)

MMT has been mentioned, though not yet accurately described, in several of Paul Krugman’s columns for the New York Times. And certain aspects of it have been noticed even more widely in the media – for MMT is the theoretical basis of the “trillion-dollar coin” approach to fiscal cliffs. (The idea was first proposed and debated on Warren Mosler’s website.) In short, MMT is getting harder and harder to ignore. And since it really does have answers to some of the world’s most urgent and otherwise perplexing questions, it seems likely that MMT will soon become quite impossible to ignore. What follows is written to try to hasten that day.

This will be an intentionally simplified, non-technical exposition of the principal tenets of Modern Monetary Theory. The no-algebra version, in other words. It is intended as a guide for non-economists and other lay people who may have heard the phrase or seen a video clip about MMT and who wish to learn more. It is not a substitute for more complete and, necessarily, much more technical treatments that are available elsewhere, including the MMT Primer here at NEP.

Confining myself to examples and cases so widely known that no one will wonder where they came from accounts for the absence of footnotes in this. And since I make no claim to have learned knowledge of anything, I will just say, up front, that everything I know was thought of first by someone else. But rather than interrupt the narrative or complicate the process by trying to establish who said any particular thing first, I hope it is sufficient for me to just thank the MMT community at large for any material that I have borrowed or re-purposed along the way.

I also depart, here, from MMT’s mostly-neutral stance on contested political and ideological questions. For while MMT principles apply equally, irrespective of things like the size of government or the conceptions and misconceptions of people running governments, it has a policy bias no one can really miss. I choose to emphasize rather than de-emphasize this bias – and I will sometimes even put it front-and-center. I hope no one will mistake this for any sort of rebuke toward those who choose not to do this. We have simply reached a point where practical applications need to be put on an equal footing with their theoretical underpinnings.

For somewhere – maybe somewhere in Italy – and on a day which may not be all that far off now, Modern Monetary Theory is going to start changing the world.

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465 comments

    1. Chris

      Thanks for this Yves. MMT exposes the big lie that governments which issue their own currency need to finance deficits by borrowing from the banks and pay them interest for money that they create from nothing. But the very idea is so proposterous, that society could so easily have the wool pulled over its eyes, that they are able to perpetuate the lie, even when confronted that we know what they are doing. What other subject garners so much commentary on this or any other blog?

  1. Lost Koz Bot

    I just LUV MMT!!! I do MMT everyday. A bunch of times a day really. Two, three, four times a day, I dunno, I loose count. But I know I do it a lot. It’s really great and always leaves me feeling happy and satisfied. Sometimes I get the feeling it’s going on all around me. I don’t know how I ever did without it, but then again, I guess I never really did do without it in my lifetime. hehe. Still, I look forward to tomorrow when I can do it again and again! I tell all my friends about MMT and they say they just LUV it too! Some of them even do it more than me! Then we say lets get together tomorrow and do some MMT together. Lots of it! Then we all squeal and hug and sing a MMT song. It’s more of a hum along ’cause we didn’t make up the words yet, but that really doesn’t matter and we just LUV to LUV MMT. So get with the program. You can LUV MMT too!

  2. maff

    “Under the gold standard, and largely because of the gold standard, the capitalist world endured eight different deflationary slumps severe enough to be called “depressions.” Since the gold standard was abolished, there have been none”

    The Japanese might disagree and, if we can’t pour enough petrol on the embers of whats left of our economy fast enough, so might we.

    Was the current depression caused by the lack of discipline associated with an unbacked financial system. Hmmm…

    1. digi_owl

      Said lack of discipline came about because

      1. the general ignorance of private banking money printing via credit as a ledger entry.

      2. a neoliberal doctrine of hands off the controls regarding private enterprise in all its forms, financial included.

      3. a private enterprise with blinders for anything other than pr quarter profit growth.

    2. Jim Haygood

      ‘The great virtue of modern, fiat money is that it can be managed flexibly enough to prevent *both* deflation and also any truly damaging level of inflation.’

      As they say in Japanese, ‘Baka!

      * laffs maniacally while huffing more glue *

    3. sidelarge

      “The Japanese might disagree…”

      I’m one, and I certainly don’t.

      Anyone who tries to invoke “Japan” in this kind of a debate simply has read The Economist too much to actually get a clue.

    4. Yves Smith Post author

      So tell me exactly how having a fiat currency led to Japan’s bubble and bust? I happened to have worked for the second biggest Japanese bank in the Japanese hierarchy during the bubble years, as well as consulting to same bank prior to joining it, so I have a good view of what went wrong. The onus is on you to back up your assertion, and I am warning you superficial BS won’t cut it.

    5. Massinissa

      You know, Maff, the Japanese were fine for what, almost 40 years, without gold? So how did having a fiat currency make it ‘inevitable’? Please do tell.

  3. JGordon

    “it is perfectly true that a poorly managed monetary system, or one which is experiencing something like an oil-price shock, can also experience inflation.”

    This is true.

    “But people today simply don’t realize how much bigger a problem the opposite condition can be. Under the gold standard, and largely because of the gold standard, the capitalist world endured eight different deflationary slumps severe enough to be called “depressions.”

    This is has been refuted on a number of occasions by well-credentialed people. That’s their opinion. And what’s more this is all ideological supposition anyway, i.e, your opinion, not empirical fact. So since this post is based on those premises, this is clearly a post of what your opinion is rather than something that will magically work if gosh darnit we would all would just listen to you.

    What you and the other MMTers/paper bugs fail to recognize is that it is an inherent aspect of human nature that the scum always floats to the top. I don’t disagree with the idea of fiat money in principle, however whereever a centralized fiat money regime exhists, criminal elements of society, endowed with vast intellectual hubris and paternal feelings towards their lessers who do not control the money press, will crash society in an unholy orgy of greed and corruption. Such as America is in the process of going through now.

    All the wars, greed, and corruption exploding today are a direct consequense of fiat. Yeah, things would be a lot slower without fiat, but you know what? The world would be a lot better place, and without fiat we might not be on the path to driving our species to extinction.

    1. Ben Johannson

      Well-credentialed people can’t refute by altering the definition of words. Sorry, but Austrians are intellectual light-weights.

      1. skippy

        Please don’t disuse the word – intellectual – in application to word salad armchair thunkit collaborationist’s – quasi religious cultists.

        Skippy… it only encourages them…

        1. JGordon

          You are am incredibly rude an offensive individual. And it seems like you’re taking no pains to hide that fact.

          1. They didn't leave me a choice

            Actually from what I have seen, skippy is one of the more polite people on this board. Direct, yes, but polite. If he’s a bit touchy, you just might want to consider there’s something more to his words than mere poison.

      2. JGordon

        I am sorry but we aren’t talking about real science here; these are social sciences, and the degree to which respective social science adhere to the principles of actual science is relative. And economists in particular generally find the idea of checking their ideas against reality to be absolutely abhorent, though admittedly neoclassicals are the worse of the lot–though that doesn’t mean that MMTers are much better.

        So what we have here is a situation of two ideologues arguing over how many angels can dance on the head of a pin. It’s basically a religious discussion. But what is real is human corruption and greed, and that is something I noticed all on my own, without the help of any of your Austrians.

          1. SAKMAN

            Hah, I think I read in there something along the lines of, if there are unlimited resources then everyone could be employed.

            Yeah. . . but unlimited resources is fiction. We need to manage the resources intelligently. Modern economics still hasn’t figured out how to do that, and until we can all agree that God won’t show us how to do it we are stuck in the mud. Efficiency, proven by science, that leads to effective sustainable resource management is the only way forward. Otherwise, those who can will horde resources using the logic of belief (economics or religion, it does not matter), at the cost of everyone else. . . while being idolized for their wealth.

            I’m pretty sure we can all agree that the fact that “Kourtney and Kim take Miami” is on television indicates that there will be a class of rulers that guide society forward. The current sectarian demagogues and their economists have failed. Let the INTJs give it a try. They are the system builders who don’t want the leadership roles. They are the philosopher kings that the world needs. Problem is the current overlords have guns and idiots to shoot them.

    2. from Mexico

      • JGordon says:

      What you and the other MMTers/paper bugs fail to recognize is that it is an inherent aspect of human nature that the scum always floats to the top. I don’t disagree with the idea of fiat money in principle, however whereever a centralized fiat money regime exhists, criminal elements of society, endowed with vast intellectual hubris and paternal feelings towards their lessers who do not control the money press, will crash society in an unholy orgy of greed and corruption. Such as America is in the process of going through now.

      Yours is an exceedingly dark and pessimistic outlook. It reminds me of the force of “hatred and despair” described by Martin Luther King in his Letter from the Birmingham City Jail. It is, said King

      one of bitterness and hatred, and comes perilously close to advocating violence. It is expressed in the various black nationalist groups that are springing up over the nation, the largest known being Elijah Muhammad’s Muslim movement. This movement is nourished by the contemporary frustration over the continued existence of racial discrimiation. It is made up of people who have lost faith in America, who have absolutely repudiated Christiantiy, and who have concluded that the white man is an incurable “devil.”

      Such a “consistent pessimism in regard to man’s rational capacity for justice,” notes Reinhold Niebuhr in ‘The Children of Light and the Children of Darkness’, “invariably leads to absolutistic political theories; for they prompt the conviction that only preponderant power can coerce the various vitalities of a community into a working harmony.” And history has demonstrated your exceedingly pessimistic outlook to be unwarranted. As Niebuhr goes on to explain: “Man’s capacity for justice makes democracy possible, but man’s inclination to injustice makes democracy necessary.”

      • JGordon says:

      All the wars, greed, and corruption exploding today are a direct consequense of fiat.

      I for the most part agree. This is a far more realistic description than that given by Pierce of how the “expanded policy space” created by a fiat currency, as Stephanie Kelton put it, has been used since its inception in 1971. The track record has been abominable. In fact, wasn’t fiat currency born under a bad sign? Wasn’t it given birth in order to fund the Vietnam War? And from there it’s been constantly downhill. It seems the only use of the expanded policy space has been to fund the explosive growth in the state’s instruments of violence (the police and the military) and to massively subsidize a criminal banking and finance sector.

      • JGordon says:

      Yeah, things would be a lot slower without fiat, but you know what? The world would be a lot better place, and without fiat we might not be on the path to driving our species to extinction.

      You give somebody a checkbook, and they can do bad things with the money or they can do good things. You seem to think that money itself is inherently evil, and not the choices people make with how to spend it. How would Martin Luther King have ended if he had fallen into such a mood of hatred and despair, and written America and its government off? Thankfully, he didn’t:

      Due to my involvement in the struggle for the freedom of my people, I have known very few quiet days in the last few years. I have been arrested five times and put in Alabama jails. My home has been bombed twice. A day seldom passes that my family and I are not the recipients of threats of death. I have been the victim of a near-fatal stabbing. So in a real sense I have been battered by the storms of persecution…

      As my sufferings mounted I soon realized that there were two ways that I could respond to my situation: either to react with bitterness or seek to transform the suffering into a creative force. I decided to follow the latter course. Recognizing the necessity of suffering I have tried to make it a virtue. If only to save myself from bitterness, I have attempted to see my personal ordeals as an opportunity to transform myself and heal the people involved in the tragic situation which now obtains.

      — MARTIN LUTHER KING, JR., “Suffering and Faith,” Christian Century, 27 April 1960

      1. jake chase

        Yes, let’s just mount a crusade for intelligent politicians who will spend wisely for the long term public good. I’m sure that will work.

        1. from Mexico

          jake chase says:

          Yes, let’s just mount a crusade for intelligent politicians who will spend wisely for the long term public good. I’m sure that will work.

          Where did this pernicious and profoundly antipolitical ideology come from? It teaches those without political power that it can and should be bestowed on them by elite benefactors. It is the trickle-down theory of politics.

          Where did the spirit of the American Revolution disappear to, the traditon that says that power derives from the people, and that the people are supposed to rule those who govern them?

          Where have the wise counsels of Montesquieu gone to, those that informed the establishment of the new republic, that the power of governmnet is “in proportion to the number with which it is associated,” and tyranny is therefore the most violent and least powerful form of government?

          Gone, swept from the face of the earth according to jake chase and JGordon.

          1. Doug Terpstra

            IIRC, the spirit of the American Revolution, by plantation slaveholders, was decidedly violent, as was the abolitionist movement, ending in an unavoidable civil war. Non-violence is indeed a compelling ideal, but violence may be inevitable when you have only four cheeks … two to turn and two to spread.

            RFK and JFK had thoughts about this, one optimistic, one realistic. As I recall Hugh saying recently, “this will end not in tears, but in blood.” Hope for the best but prepare for the worst?

            “A revolution is coming: a revolution which will be peaceful if we are wise enough; compassionate if we care enough; successful if we are fortunate enough. But a revolution which is coming whether we will it or not. We can affect its character; we cannot alter its inevitability.” (Robert F. Kennedy)

            Those who make peaceful revolution impossible will make violent revolution inevitable. (John F. Kennedy)

            Like MLK, both were murdered (still wondering about Chavez). And now look at the Obamination we have in the WH, IMO, the worst in US history.

          2. jake chase

            Mexico, while you have been busy copying out Montesquieu, 100 years of stooge bullshit artists from our two substantially identical political parties have grabbed total power to strangle every individual effort, all in the name of ‘helping the little man’, and making things better for everyone. Between 1932 and 1936 we had one guy who actually did one or two things that made sense. Then he gave up and propelled us into WWII, most likely because his boss John D. Rockefeller Jr. wanted to protect his Asian oil investments. Since then, one colossal f**kup after another, but you act like electoral politics is the last and best answer, just as soon as our propaganda addled electorate bones up on your Eighteenth Century philosophers and lines up behind your Twentieth Century blowhard assmen. Next, you’ll be quoting Kennedys, the only one of whom who ever amounted to anything was Joe. He at least was a successful crook. The other three were just windbag skirt chasers. I’ve read the same books you have but given just about all of them away. Hope you don’t have to burn them to keep warm. The way things are going I wouldn’t bet against that if Intrade still exists in a few months.

          3. from Mexico

            @ jake chase

            Well I’d be interested to know then, if you believe a democratic solution is futile, then just what is it that you are proposing?

        2. Lambert Strether

          Well, the New Deal had a pretty good run, for all its many imperfections. Certainly preferable to today’s cesspit of financial violence and criminality because freedom.

      2. JGordon

        I was thinking about that for a while; but rather than go into some lengthy reply I’ll just say this: throughout history the major driver of the introduction of fiat currency has always been war. Fiat is what funds wars. Without fiat, there would have been no civil war, no WWI and definitely no WWII. There would be no nuclear plants today and there would be an ilsand of plastic debri swirling around in the middle of the Pacific ocean right now.

        Fiat is the currency of death.

        1. from Mexico

          Maybe so. But is also the currency of economic expansion and innovation. And just about any sort of scientific or technological innovation can be used for evil.

          Do you really believe we’d be better off stuck back in the 17th century?

          1. jake chase

            Mexico, you asked what kind of solution I favored inasmuch as I believe a democratic solution is ‘futile’?
            IMHO, no solution is possible unless and until people wise up, take control of their own lives, stop being patzies for the Clintons and Obamas and Bushes and Reagans, who preen and prattle and blow smoke and say one thing then do the exact reverse, while a nation of creeps and toadies and connivers genuflects to their every utterance, as the noose of national security gets continually tighter and tighter, as the backdoor deals and the executive looting goes steroidal, as the war drums and the enlistment bonuses lead one gullible bumpkin after another off for a tour in the desert to serve as a human target, as humbugs like Barney Frank and his ilk parade like statesmen and historians while lining their pockets and flaunting their metropolitan lifestyles, while honest people are robbed of their savings and degraded by trivial yet exhausting employments and overwhelmed by debts it makes no sense to contract (like, for example, ‘student loans’ for tutelage at football factories where the only course of study is whoring and cheerleading and drinking to stupefaction), and mortgages on jerrybuilt shacks fifty miles from nowhere, and cars that fall apart before being half paid off, and foods devoid of nutrition but packed with carcinogens, and drugs that are insufficiently tested and are equally likely to prove worthless and homicidal, and ‘consumer products’ worth less than the packaging in which they are dumped on the shelves, and vapid, pornographic and violent and trivial entertainments, and things even more ridiculous and destructive of life which at this time escape me, and the electorate remains nevertheless convinced that the most important personal asset is an agreeable personality and a willingness to endure a lifetime of shit in exchange for a pittance, and that a job screwing your neigbor is all in a day’s work and nobody’s fault if they do it conscienciously, and a politics which increases the number of available of sinecures, at public expense, even at starvation wages, is somehow an advance on social justice, and that breeding is a God given right which our society is obligated to support in such cases where the breeders prove incapable of negotiating a solvent path through the minefield of contemporary life, and that elected politicians can be trusted, not only with the present which they have hopelessly undone, but with a future which not one person in one thousand can visualize with even a hint of clarity.

            Meanwhile, until the situation outlined above changes for the better, our only hope is a return to noblesse oblige, for which I am not holding my breath. It is for this reason and this alone that I consistently advocate an individualist approach to life in these forsaken times: sauve qui peut.

            Incidentally, if you have so much faith in American democracy, why are you holed up in Mexico?

          2. Nathanael

            Perhaps “from Mexico” has faith in Mexican democracy too. In some ways it is healthier than US democracy, but it’s not really that different.

        2. Massinissa

          Capitalism is what funds wars, no fiat. America didnt even have fiat before Lincoln started printing greenbacks to fund the war, then after Lincoln we went right back onto a hard gold standard. In that case, the civil war caused fiat, not the other way around, and as I said, it was only a temporary time. Also, most of the world had gold standard before World War One: Countries didnt start switching to fiat until during WW1 (Not before it…) in order to finance the war. Again, the war caused fiat, not the other way around…

          Britain switched to Fiat in the late 20s, before most anyone else, and America and others switched in the 30s.

          Pray tell, how does ‘fiat cause wars’, when it was not present in two of the three examples you mentioned had already actually started?

          I could almost understand someone making the case that fiat caused world war two, because AT LEAST THE WORLD USED FIAT BEFORE WORLD WAR TWO (Weimar certainly did), but anyway even if that was a contributing factor, the main problem for Germany was the massive reparations it had to pay due to the treaty of Versailles.

          Debt based Capitalism causes wars, not fiat. Fiat or hard currency, the same fucking goddamn problems exist. Youre so damn close to the answer, but you take a buffoonish answer as truth instead of going all the way.

          1. Yves Smith Post author

            I see, so Napoleon’s conquest of Europe, the Russo Japanese war, and Vietnam’s war of independence were all about fiat.

          2. Finnucane

            Capitalism is what funds wars, no[t] fiat. Well said. Not sure that I understand Ms. Smith’s reservation.

            Nice handle, btw. (So that Sophonisiba was quite the charmer, right?)

    3. RueTheDay

      “This is has been refuted on a number of occasions by well-credentialed people.”

      Really? Ignoring the blatant appeal to authority for a moment…….The Great Depression happened when the majority of the world was on a gold standard. The speed with which a particular country recovered from the Great Depression was directly correlated to how soon they exited the gold standard.

      You can (and Austrians often do) resort to the “well, what we had wasn’t a true gold standard, a true gold standard was never really tried” argument. To me, this echoes the constant whining of “true communism was never tried” that we used to hear from the hardcore Marxists.

      The problem with a gold standard or any other attempt at “fixing” the quantity of money is that the demand for money is subject to very sudden and very sharp changes. The demand for money can change a lot more quickly than the real economy can adjust through the pricing system. This then manifests itself through a sharp decline in output and employment, which can persist for long periods of time even as the economy does adjust, given that most contracts (of which debts are probably the most important type) are denominated in nominal rather than real terms.

      The gold standard is a prime example of misguided people trying to alter reality to fit their flimsy models (barter rather than monetary transactions, markets that clear instantaneously, firms that do not require financing to cover a positive cash conversion cycle, probabilistic risk vs uncertainty, etc.)

        1. RueTheDay

          LOL. In the pages of an economics textbook perhaps, certainly not in the real world.

          At one point in 2010, there was over a 12 month supply of housing inventory on the market. Even today, it’s not unusual for houses to sit unsold for months. If prices adjusted instantly this would be impossible – the price of houses would simply fall until the market cleared.

          1. Thisson

            That’s because the market is being deliberately impeded. If the houses were put to a no-reserve auction the market would clear immediately.

          2. Nathanael

            Thisson: no they wouldn’t — have you been following the issues of *clouded title* on this blog?

            Many houses would not sell because the seller doesn’t have clear title. What buyer wants to deal with that? Even among the ones who do want to deal with that, *they haven’t bought the house until they get clear title*….

        2. Nathanael

          Thisson: “prices can adjust instantly”?!?!?

          Have you ever been to a supermarket? They adjust prices faster than practically everyone else, and it still requires sending a guy around to change all the labels.

      1. JGordon

        Appeal to Authority? I don’t mean to offend, but do you have reading comprehension issues?

        I cite authority figures becasuse *everyone* has authority figures they go to when they want to back up their points. And that is exactly my point: all these economic authority figures are full of baloney because there is not one iota of empirical evidence worth a damn between any of them. You give an MMTer, a neoclassical, and an Austrian the same set of data, and they’ll all of them come to wildly different conclusions about it. In real science, that is frankly impossible. Because what these guys are doing is not science. It’s speculative fantasy, and they not to stop pretending that they’re dealing with reality. Because there’s always someone else from another school willing to contradict them on their version of reality–and there’s no way to distinguish between who is right and who is wrong. It’s unfalsifiable. That is my point.

        I didn’t bother reading beyond that, so I have no idea what else you said. Sorry.

        1. RueTheDay

          If the claim is that a gold standard prevents the boom/bust cycle, then that is certainly a falsifiable claim; in fact, it has been falsified by the fact that the Great Depression (as well as the boom that preceded it) occurred during a time when the gold standard was in effect.

          1. Finnucane

            Long time listener – first (almost) time caller … this JGordan fellow flummoxes, because he seems both a goldtard troll AND a decent person. I think he yearns for the escatological resolution – all the world in flames, only the diy non-walmart-shopping self-sufficient guy intact. His posts are not all vitriol, however, as one is accustomed to from anaonymous Rothbardians. He inverse-fetishizes fiat currency, though, to such an extent as to seem ridiculous. Personally, I’m guessing that his lifestyle and my own are close to the same, and that we both hate it.

    4. diptherio

      “All the wars, greed, and corruption exploding today are a direct consequense of fiat.”~JGordon

      I have more sympathy than most here for Austrian perspectives (what, being a Libertarian Socialist and all) but this kind of blanket statement just doesn’t cut intellectual mustard. The scum will always try to rise to the top whether there is fiat currency or not; it is the existence of social checks on individual ambition (or lack thereof) that largely determines whether or not they will succeed in doing so. The problem is with our hierarchical social and economic systems that place one person over another and the President over us all as benign/belligerent deity, not the fact that we are using a credit money system again.

      Better than commodity backed money, better than government-issued fiat, however, is bottom-up virtual money, like what the Greeks are starting to use now that Euros are becoming exceedingly hard to find.

      1. diptherio

        Like how I disparage “blanket statements” in one sentence and then use the word “always” in the very next sentence? Yeah, me too…avoiding black/white language (and thinking) is hard! [sighs]

      2. Carla

        Heavens, the dirty little secret of MMT is that there are no sovereign currency-issuing governments. Virtually every “national” central bank actually fronts for the international private banking cartel.

        All national money is issued as interest-bearing debt. And if you don’t believe me, check out currency expert Bernard Lietaer http://poptech.org/popcasts/bernard_lietaer_money_diversity

        The problem is not with “fiat.” It’s with banksters and usury. Or we could just use shorthand and say the problem is the 1%.

        In any case, it’s distressing that MMT, which purports to describe how the monetary system actually works, seems willfully blind on this issue of WHO actually creates money.

        1. Massinissa

          I actually agree with you completely here.

          I dont mind MMT much, Im not really an MMT’er either, but I kind of like it,it certainly has its uses (More than Austrian at least, not that thats saying much), but that they, like most of the mainstream (Not that MMT is mainstream, mind you), dont seem to acknowledge this little known fact and seem to parrot the popular fallacy that the treasury creates ALL the money, is rather concerning.

          Of course, I guess if ‘issuing’ a currency is different than actually creating the money, then theres no problem, but I have yet to see that clarified.

          1. joe bongiovanni

            Where money has a physical construct (coins and currency) and as with all traditional laws concerning same, money-creation and issuance are two aspects of sovereignty, the third being regulation of the money supply.
            The government creates two forms of money: paper and coins.
            The government issues the coins into circulation – the only money created and issued by the government.
            The government sells the paper currency to the banking system at cost of cents on a hundred dollars currency. At that point it has no exchange value.
            The bankers issue the currency into circulation after it is collateralized within the banking system.
            The government creates and issues coins debt-free as permanent money.
            The Banks issue the currency into circulation as a debt, being as permanent as a piece of paper can allow, but always replaced in kind.
            Yes, creation and issuance are separate monetary operations.

          2. Nathanael

            “Of course, I guess if ‘issuing’ a currency is different than actually creating the money, then theres no problem, but I have yet to see that clarified.”

            In macroeconomic terms, the important thing to measure is money *in circulation*. In a very real sense, money is created when it starts circulating and is destroyed (demonetized) when it stops circulating.

            Pay careful attention and you will be able to work out when government-issued money becomes real money — you will also be able to work out when various privately-issued “debts” and other records become real money. (My check becomes money when I write it and stops being money when it is deposited, for a simple example.)

        2. borkman

          Lietaer isn’t a “currency authority,” he’s a civil engineer who had a good spell trading currencies more than 20 years ago. And the idea that base money is interest bearing is all wet. If that’s what he’s claiming, he’s demonstrated he does not know up from down.

          1. Thisson

            Can we not agree on the basic premise that currency is issued by the Fed. Res. in exchange for Treasuries, which are indeed interest bearing? I mean, respectfully, we’re not talking about greenbacks here.

          1. MyLessThanPrimeBeef

            One can imagine a better world:

            Money is created when the people spend.

            It’s trickling up from the people to the government, instead of trickling down, from the government to the people.

            Of course, when the people are positioned properly (as in public servants vis-a-vis the people masters), one can amend that to ‘trickling down from the people to the government.’

          2. joe bongiovanni

            So, Ben.
            Does the government – the whole F’in, shebang of it – KNOW that when it (Treasury) spends it creates money?
            And therefore it can just spend and not tax to fund our prosperity – full employment, livable wage, health, education, clean environment, etc.??
            Cause if it does NOT know that, then how do you know that, how does Lambert know that, or Warren or Stephanie or anyone?
            And why don’t you just go down there to Treasury and tell them that we can end this austerity and debt debacle by a greater understanding, and, then, pray tell, what would you tell them?

          3. Ben Johannson

            joe bongiovanni,

            Because the dollars you “pay” in taxes are not and cannot be stored or transferred. They are simply debited from your account aka deleted. You do not send government anything when you pay taxes. Treasury debits the reserve account of your bank and your bank debits your checking account. The same goes for a person who pays their taxes in cash. The IRS agent will accept it and then throw it in a shredder.

            Poof, your tax dollars are destroyed, annihilated, demolished, vaporized.

            Every single penny it spends it creates by crediting accounts, aka inputting digits on a computer screen. Those funds do not come from anywhere, it is in fact impossible for them to do so. Treasury credits the reserve accounts of the banks it deals with, and those banks credit the checking accounts of the recipients.

            Taxation as a method of generating government revenues is completely obsolete.

          4. Calgacus

            Umm, no, Ben, Lambert. Money is created when the government spends, but it emphatically is debt. All money is debt [credit] and always was. That all money everywhere and always is a credit-debt relationship, and not a thing – and nothing else – is the heart of MMT. Everything else flows from this. Of course it is not interest bearing debt – the concept doesn’t even make sense. But it is debt in the primary, standard, universally understood, dictionary sense of the word “debt” – which bizarrely many MMT fans do not use for finance, even though all monetary theory and the concept of interest bearing debt depends on it.

            Calling money “not debt” is a step towards not thinking of money as a relationship, towards thinking of it as a thing, a commodity. It is a step backwards. The phrase “money is issued as interest-bearing debt” is simply gibberish, that refers to nothing real.

          5. joe bongiovanni

            In reply to Ben at 3:30PM

            Dear Mr. Lew:
            Taxation as a method of generating government revenues is completely obsolete. Please give me a call.
            Signed: Ben

            WHY can’t my tax dollars be stored and transferred, Ben?
            It is NOT Treasury that debits my bank account but the Fed as payments system master.
            It’s past time to stop claiming that cash tax payments are shredded by the IRS.
            Any proof of that – or just one of the Seven Deadly anecdotes?

            And where is the proof that my tax dollars are “destroyed, annihilated, demolished, vaporized’??

            My M1 bank account is debited and the Tsy ‘s TGA account is credited and the money remains in the TGA account until Tsy authorizes a payment and then the TGA account is debited and someone else’s M1 bank account is credited.

            Is this not how it works?
            Didn’t see anything there being vaporized or annihilated.

            I’m totally amzed how taken a group of intelligent peole are by the ‘keystroking’ argument.
            All modern payments are keystroked for all payments made. That is how money flows from one account to another.
            Yet, because we see Treasury crediting and debiting accounts, we think its somehow magic.
            It’s not magic.
            It’s electronics.

          6. Emperor Wang of Market Mongo

            MMTers seem to mix up the Treasury with the Fed now and then, and when they want to be coy, they just say US government.

            An IRS agent does not shred your tax payments (or withholding). I guarantee it.

            The Fed is in charge of “destroying money” as MMTers sometimes like to say. When they sell a bond from the Fed balance sheet, the money received by the Fed is deleted from circulation.

            Then they pride themselves in knowing how it all works. haha.

          7. Ben Johannson

            Calcagus,

            You’ve got your definitions wrong. Money spent by government is debt/credit based as a social obligation, as in “I owe you and you owe me, together we are fam-i-ly.” That’s how money began, as a method of satisfying those obligations.

            Net financial assets are most certainly not debt in the financial sense, as in they have to be paid back to someone.

          8. Ben Johannson

            joe bongiovanni,

            Your dollars can’t be stored or transferred because there’s no system in existence for sending the original bits on a hard drive down a pipe to an account on another hard drive. It’s physically impossible.

            When you download a file from a network the original file isn’t being transferred to you, you’re getting a re-creation. It’s the same with everything digital, but it was also the same in the era of ledger-books. Government erased in one ledger and created in another. There was nothing to transfer, only marks on a sheet.

            The only way your taxes can be transferred to government would be if it accepted real assets, like a car or gold coins.

          9. Calgacus

            No, Ben, you have your definitions wrong. What you and Lambert are saying is not MMT, although it is unfortunately increasingly prevalent among MMT fans. It is turning into something like Schumpeter’s watered down legal tender version of Chartalism. Government NFA, government currency, government bonds are most emphatically government debt. Money is a form of, is defined in terms of debt, not vice versa.

            Read Mitchell-Innes and the volume on him that Kelton & Wray edited. Read Geoffrey Ingham’s book, the Nature of Money. Read the Modern Money Primer & the comments – you might notice where Wray said “nice explanation, Calgacus” on this point, of just how state money should be considered debt. He sometimes gets annoyed too when people speak as you and Lambert are doing, rightfully so, IMHO. Unfortunately increasingly many people (not saying you & Lambert, who I think are usually spot on) are coming up with their half-baked versions of MMT, which usually flatly contradict what the MMT academics (and thoughtful economists through the ages) say.

            There is no “financial sense” independent of the main sense of “debt”. That’s the main point – there really is only the one sense of the word debt, and money is and always was debt, by its very nature. Government currency, government debt is continually being “paid back”. That’s what taxation and any other payment to governments are. Such transactions redeem a private financial asset, a government liability, for a private benefit.

            Government paying interest on bonds is NOT paying back a debt, because government “borrowing” is simply not borrowing, but a completely different balance sheet transaction. These points are incredibly simple, but escape most MMT fans. I used to believe something vaguely like what you and Lambert said when I first started reading MMT. But reading Lerner, Mitchell-Innes, Wray and Ingham more carefully cleared things up for me. The importance of this point cannot be overestimated. Wray called Mitchell-Innes’s papers the best ever written on money, and they are on “nothing but” this and similar points, and worth repeated rereading.

          10. joe bongiovanni

            This is to Ben at 6:38 pm.

            Ruml’s paper is useful for what it is.
            Sort of like MMT.
            It shows what CAN happen if we recognize the potential monetary freedoms that exist, if we can tap them with purposeful law and systemic reform. Thus, the Money System Common.
            To SAY that taxation can be obsolete does not MAKE taxation obsolete.
            As the editor notes: “Mr. Ruml does not say precisely how in that case the government would pay its own bills.”
            There was simply no call by Ruml for ‘printing’ the balances in place of the borrowings that were taking place.
            Ruml never stated, nor implied, that government spending creates money. Which is the ghost of a fiscal policy relied upon by MMT adherents.
            If MMT wants to propose another means for funding government, we are all ears.

            Neither MMT, nor Ruml here, have transformed what can be into what is.
            Unfortunately, Ruml used his rather profound announcement for a call to end corporate taxation.
            Most important, in discussing MMT, is the fact that Ruml exposes the Lie of 1971.
            He points out that all that is really needed is ‘internal’ economic freedom from commodity based money in order for this new truism to have ‘currency’.
            All Nixon did was extract our current account(trade) balances from fixed exchange rates.
            That’s why my Dad was a monetary reformer in the ‘60s.

            So, today, taxes for revenue are not obsolete. They are essential.

          11. joe bongiovanni

            This is to Ben at 5:56.
            WADR-
            That’s just plain friggin nuts.
            Are you saying that some certain physical-electronic reality comes into play when my bank account is debited that prevents my balance from uploading to the TGA(non-transferable), and YET that the entire premise of MMT’s computerized keystroking money into existence FROM that TGA account works in a different physical-electronic reality(transferable) so that ALL of that government keystroking creates new money in my account???
            Really???
            Here’s a clue, Ben.
            You have a lot of great ideas.
            But this should go back on the think-heap for some serious work.

    5. Me

      Human nature once again. My god, an ahistoric, unscientific claim that just doesn’t die.

      “All the wars, greed, and corruption exploding today are a direct consequense of fiat. Yeah, things would be a lot slower without fiat, but you know what? The world would be a lot better place, and without fiat we might not be on the path to driving our species to extinction.”

      Just stop. So European imperialism and colonialism, most of it under the gold standard, was because of fiat? How about the war in Vietnam, which we started in 1954 really? Seems like most of the time we were on gold. The world wars? If we are on the pathway to extinction, could it not be the things that neoclassical and Austrian economists have ignored, like the fact that the market DOESN’T include all relevant information in prices and national indices? Could it be the lack of rules for the commmons (most the commons can’t be realistically privatzied)? Could it be that markets aren’t designed to create public goods? How about the massive amount of carbon (largely capitalist) countries have put into the air since the Industrial Revolution? Things like that?

      You want people to treat you respect but you say nonsensical things. So, what should we do? Ignore you entirely?

      1. Lambert Strether

        “So European imperialism and colonialism, most of it under the gold standard, was because of fiat? How about the war in Vietnam, which we started in 1954 really? Seems like most of the time we were on gold.”

        +1000.

      2. from Mexico

        @ Me

        I don’t see your playing fast and loose with the truth as winning many converts to MMT.

        The move from money in the form of specie to a fiat money system was not direct, nor did the change occur overnight.

        There was an an intermediate step that lasted almost 300 years. It was inititated by the Bank of England in 1694, and rested on the use of banknotes backed to only a fractional part of their value by specie reserves.

        The monetary innovations of the Bank of England facilitated many wonderful things, but along with the good came greatly enhanced war finance. As the historian Carroll Quigley put it, by the late seventeenth century “the flow of bullion was not sufficient to satisfy either the demands of an expanding economic system or those of a mercantilist political system supported by a mercenary military system.” And in fact, England’s more modern monetary system played a key role in its military triumph over Napoleon, as Quigley goes on to explain:

        The Napoleonic Wars, because of the backward, specie-based, financial ideas of Napoleon were, on their fiscal side, a struggle between the older, bullionist, obsolete system favored by Napoleon and the new fractional reserve banknote system of England.

        As Pierce notes above, in the early 1970s the US made another leap forward in monetary innovation. But to argue that this didn’t also facilitate war finance, and by doing so greatly enhance the US’s ability to conduct war, is simply untrure. Or as you blasted JGordon, it is “nonsensical.” I would direct those interested in a more balanced and realistic view of events towards a paper authored by Marshall Auerback and Chris P. Dialynas titled “Renegade Economics: The Bretton Woods II Fiction.” In it the authors write:

        The U.S. has been perfectly happy to accede to the current state of affairs in spite of the immense economic damage it has inflicted on its domestic manufacturing sector (and the concomitant evisceration of its middle class) because it has provided the country with a cheap form of war finance, a particularly important consideration as it has gradually militarized its energy policy. If one includes America’s array of privately outsourced services along with a professional permanent military, the costs run around three-quarters of a trillion dollars a year…

        Since the end of the Cold War, the United States has abandoned the principles of building up a defense force for the purposes of addressing the security tasks immediately at hand, and instead has embarked on a policy of maintaining military capabilities far in excess of those of any would-be adversary or combinatin of adversaries. Von Clausewitz once said, “War is diplomacy by other menas.” Under recent U.S. administrations, however, war has become an extensions, not of diplomacy, but of energy policy.

        While the Pentagon readily acknowledges it can do little to promote trade or enhance financial stability, it increasingly asserts that it can play a key role in protecting resource supplies. Resourses are tangible assets that can be exposed to risk by political turmoil and conflict abroad — and so, it is increasingly argued, they require physical protection, which in turn is used to justify the extraordianry sums now lavished on the Pentagon….

        But America is paying little heed as to how it acquires this energy; it too embraces a form of renegade economics and is in part able to do so becuase Bretton Woods II provides nothing in the way of an external constraint of its debt-bingeing financing requirements. Quite the contrry: It subsidizes it.

        Does the “currency” of global military might make the U.S. immune to debt trap dynamics?….

        A successful military option enables the victorious country to reap the spoils of the loser. Military victories allow for the confiscation of foreign assets… The realization of the futiltiy of an internally generated solution leads to hope for and support of an externally war driven solution.

        The war solution, as seductive as it appears, has tremendous costs, which will be borne most fully by future generations, as the current Iraq war demonstrates. Beyond the tremendous human costs, the burden assoicated with a loss in war renders resolution even more problematic and severe.

        1. Me

          I really don’t get your overall point. Look up William Blum’s “Killing Hope” book for a list of US military intervention from WWII to the mid 1990’s. The foundation of the US military empire was built while it was on the gold standard. I am well aware that war has helped to fend off stagnation. Many economists on the left (Josef Steindl, Michal Kalecki, Michael Hudson to name a few) have talked about the impact the military has had on the capitalist economy. I just don’t get your overall point or why you think I was playing loose with the facts.

          As I said, the US fought most of the Vietnam War on the gold standard. It fought the Korean War on the gold standard. It greatly expanded its military empire on the gold standard. Western imperialism and colonialism was largely done on the gold standard. In fact, gold was often found in the countries being colonized. Belgium killed millions of people in the Congo on the gold standard AND was able to take lots of gold from the Congo. I guess you can say gold subsidized the slaughter.

          Look, I am not saying that war doesn’t have big role in our economy. I am not saying that finance doesn’t profit from war. It however profits from a lot more than that too. There are hundreds of trillions of dollars worth of derivatives in the world. There is nowhere near that much paper currency in the world. So what makes up the vast, vast majority of the “value” of the derivatives market? I think you are missing the much bigger picture and private credit creation has a lot to do with this. What could libertarians do about private credit creation? What, since the government won’t exist, will enforce whatever you come up with?

    6. Nathanael

      JGordon, go study some history.

      Under metallic money standards, there are (almost always) frequent periods of deflation.

      (The exception is during periods when someone has discovered a rich new gold mine, such as the Spanish when they controlled the gold mines of South America, or King Croesus whose workers discovered a new method of refining gold.)

      The deflationary periods come very frequently, every decade or so. And the deflationary periods *always suck a lot*; massive unemployment, massive waste, fields lying fallow, etc. This is a record going back not hundreds, but THOUSANDS of years.

      In contrast, if you can avoid deflationary periods entirely, you can have a pretty happy economy for a hundred years or more at a clip. Unless you’ve discovered a giant gold mine, fiat money is the way to do this. We have numerous examples of successful inflationary economies.

      1. leonard

        Yes, deflation is indeed something to be feared and avoided.

        I especially hate the deflation we’ve experienced in the tech industry over the past few decades. Prices just keep falling – how awful! That’s why NOBODY buys iPhones and iPads – only a crazy person would buy something today that they could get for cheaper tomorrow.

        Deflation – truly the scourge of humanity.

  4. jake chase

    I don’t know about the theory, but the history lesson doesn’t pass muster. First of all, there was no gold standard in 1971. Bretton Woods (1946) established a gold exchange standard, in which the dollar was pegged to gold and other currencies were pegged to the dollar, with wiggle room under specified circumstances. What saved the dollar after Nixon slammed the gold window was the pricing of oil in dollars by America’s client state, Saudi Arabia. This was no accident, since Saudi cooperation had been paid for by US tolerance of an OPEC cartel that impoverished our citizens even as it enriched our bankers and oil men.

    In the 37 years between 1971, when Nixon shut the window, and 2008, when the housing bubble collapsed, the price of a 1/4 acre lot with its Levitt built house on Long Island’s north shore (where I grew up) appreciated from $35,000 to $2,500,000. The house was 23 years old in 1971, and had sold for $20,000 in 1948.(My Dad had sold it in 1962, for $26,000, and it had the best landscaping in the neighborhood because he spent every spare minute improving it)

    Those who believe fiat money has no consequences are invited to explain this phenomenon.

    1. JGordon

      That’s because criminals control the fiat system. There is no such thing as a well-run fiat currency. Such a thing is like imagining that unicorns are real and then proposing unicorns as the solution to all our problems. It’s crazy.

      1. Ben Johannson

        By your own standard there is no such thing as a well-run gold system either. The difference being fully fiat currency hasn’t sent us into repeated depressions, unlike the disastrous system you promote which sent the U.S. into six depressions during the 19th Century.

        1. JGordon

          You have no conclusive evidence that gold backed currencies sent us into repeated depressions. For every theory you present that states that, somoene else has another theory that says exactly the opposite.

          In other words, your blowing smoke.

          Every single centrally managed system that exists Will. Be. Corrupted. with time. There are no exceptions. The most perfect fiat system that you devise that is 100% fair and equitable to everyone now will be a cesspool of corruption in a short period of time. In that sense I agree: a centrally managed gold standard would be poorly managed and prone to collapse, and in fact that is exactly what has happened in the past.

          The only solution I see is to have privately managed (non-fiat) multiple competing currencies, with no public tender laws. Whether you want to use gold, or bitcoins, or time banking doesn’t matter to me. If one is poorly managed people will jump to another. That is the solution.

          1. Ben Johannson

            Depressions while on the partially fiat gold standard began in the years 1819, 1837, 1857, 1873, 1893 and 1929.

            Depressions after moving in the 1930’s from the partially fiat gold standard to a non-convertible free-floating currency began in the years never.

          2. from Mexico

            JGordon says:

            The only solution I see is to have privately managed (non-fiat) multiple competing currencies, with no public tender laws.

            Doesn’t that pretty much describe the obscure and clandestine world of shadow banking and derivatives?

            How’s that working out?

          3. Lambert Strether

            @diptherio What the heck is TEMS?

            @mex “Doesn’t that pretty much describe the obscure and clandestine world of shadow banking and derivatives?” Well urged.

          4. J Sterling

            Lambert, it’s an abbreviation for “Topiki Enallaktiki Monada”, or “Local Alternative Unit” in Greek.

          5. Calgacus

            JGordon: The only solution I see is to have privately managed (non-fiat) multiple competing currencies, with no public tender laws. Whether you want to use gold, or bitcoins, or time banking doesn’t matter to me. If one is poorly managed people will jump to another. That is the solution.

            Except that you don’t understand that you are talking nonsense, speaking in contradictions. There is no such thing as non-fiat currency and never was. It is like saying we should use “twos” which are not numbers. All money is and always was “fiat”, credit. Legal tender laws are meaningless, and could be repealed tomorrow with no effect. Many countries do not, have never had them.

            You think there is “a solution”. And that it is “privately managed currency”. Well, if it is indeed “a solution”, a real, widely used currency, well, then by definition, the managers ARE the central managers. They have become the government by that very token. Just because you call something “private” or even everybody thinks of something as “private” doesn’t mean it is private, non-public. Informed, logical people would want the managers to be under democratic control. If you want a monetary economy, the only other alternative is oligarchical or dictatorial control. I would prefer the control to be as diffused and democratic as possible.

          6. JGordon

            Calgacus:

            Have you bothered to look up the word “fiat” in a dictionary lately? Fiat has one specific meaning and I use the word with regards to that meaning. How are you using it anyway?

            For the other: Yes, I am talking about TEMS. Or whatever other currency units you want to use. You can scale them up or down as much as you like–but once people lose faith in a particularly currency they should be free to abandon it and use somethings. For example, if the people lose faith in a private issued currency such as federal reserve notes because too many are being created, they should simply be free to conduct their transactions in something else. It’s an easy idea to get, right?

            As for the others here: I am being deliberately simplistic to have short, pithy responses to people. Yves does not like when commenters right novels and lord over the forum board. But I am perceiving a dangerous tendency towards group-thinking on these boards, and I’m doing my best to present some alternative to your groupthink sessions.

          7. Me

            “But I am perceiving a dangerous tendency towards group-thinking on these boards, and I’m doing my best to present some alternative to your groupthink sessions.”

            I’m sorry, is a LIBERTARIAN now saying others are engaging in groupthink? Are you kidding? Notice that all the libertarians here are arguing for the gold standard? This is a post about MMT, you are all talking about a failed, ill-suited 19th century idea and you want to lecture us about groupthink. I have never encountered another philosophy in which people use the same exact ideas and even phrases (I now hate the word freedom) so often. If I am talking to someone and they call themselves a “libertarian” or Austrian I have a great idea about 99% of what they believe in, who they have read (really, not a paragraph or two) , who they haven’t read, what phrases they will use, etc.

            Socialism, for example, has a very broad back. Talk to a libertarian socialist, a syndicalist, a communist, a social democrat, and you will get radically different ideas and polices ideas. Not the case with your crowd.

          8. Calgacus

            Yes, I am quite aware of that. My point is that the way most people think of fiat money has things backwards. A gold standard is not gold backing a fiat currency. A gold standard is fiat currency backing gold. As Abba Lerner said shortly after WWII, when it was obvious to all, gold was valuable because you could get dollars for it. Dollars weren’t valuable because you could get gold for them. The essence of money is fiat money. Going off a gold standard is just removing a usually harmful, pointless constraint.

            but once people lose faith in a particularly currency they should be free to abandon it and use somethings. For example, if the people lose faith in a private issued currency such as federal reserve notes because too many are being created, they should simply be free to conduct their transactions in something else. It’s an easy idea to get, right? Except for the idea that FR notes are privately issued, of course. But what on earth gives you the idea that people aren’t perfectly free to abandon dollars if they lose faith in them? You can abandon all your dollars, just tell me where. You are perfectly free to conduct your transactions in whatever you want. Legal tender laws don’t say what many people think they say, and their complete economic meaninglessness is shown by the fact that many, many countries do not and have never had them.

            Yes, I dislike groupthink myself. But my point is that you are not presenting any alternative, because you cannot, because no one can. Money is money, and fundamentally has been the same thing – forever – just like basic arithmetic. The only choice, the only choice is how the money issuer operates – dictatorially, aristocratically/oligarchically or democratically, and of course these just represent a continuum. The importance of money to everyone’s lives is such that the control of money issuance should be spread as democratically as possible imho.

        2. aj

          In my experience, it’s best not to argue with libertarians. While the rest of us continue the debate about how to best transform society for the betterment of minkind, they have long ago thrown their hands in the air and proclaimed, “Fuck it.” To quote Walter from the Big Lebowski, “I mean, say what you like about the tenets of National Socialism, Dude, at least it’s an ethos.”

          1. leonard

            Libertarians do have an eoths: it is called the Non Aggression Principle and Respect for Property Rights. Philosophical libertarians recognize that these principles must be applied universally. When you do this, you recognize that taxation is theft, that laws are opinions with guns, and the acceptance of fiat money is achieved via the use of force.

            They also believe that history has conclusively proven that central planning always fails miserably at whatever it is ostensibly attempting to achieve, and thus should be abandoned, especially when it comes to that most vital of economics, money.

            Is it so difficult to understand the argument that people should be free to choose for themselves what they will accept as payment in exchange for their goods and services?

          1. leonard

            Can we also agree that institutionalized vio1ence always breeds corruption?

            Can we also agree that fiat money, and the state in general, are based on the threat of force?

            Do you see where I’m going here?

    2. from Mexico

      jake chase says:

      What saved the dollar after Nixon slammed the gold window was the pricing of oil in dollars by America’s client state, Saudi Arabia.

      This is a phenomenon that Pierce seems to just paper over — the explosive growth of the US security state since 1971 — but neverthelss continues to nag at one’s thoughts. The question is this: What would have happened to dollar hegemony in the absense of the balooning US security state?

      Do the MMTers still operate under the classical economic delusion — that of the liberal internationalists and liberal imperialists — that economics exists in its own universe, separate and apart from geopolitics?

    3. Susan the other

      When I couldn’t take it any more, in the early 70s when the entire country was falling down in ruins because of Vietnam and other mismanagement, I stopped listening and started reading. I confess I mostly read what were considered radical viewpoints. But nevermind. Here’s the thing. I stumbled on a few books that mentioned the gold mines in Siberia. Kamchatka. Veritable gulags. And how the Soviets were running them night and day. And I began not thinking of the Cold War, but the Gold War. Fiat may have been abused, but it did win the Cold War. And it can win this war. We just need to define what this war is. Fiat is not the problem. (And remember please that gold is fiat too.) My definition would be a war on pollution and poverty.

      1. Thisson

        You are, unfortunately, incorrect. The use of fiat is compelled by the state via legal tender laws. Gold is chosen by people of their own free will. This is a fundamental difference, and if Fiat was indeed a “better” alternative to gold, the state wouldn’t need to coerce people into using it.

        1. Me

          LOL! I am a libertarian. I get weak in the knees for gold, as if expanding and contracting the money supply based on how much gold a country has makes any damn sense in the world we are in. When you expand or contract the money supply, if you are going to include external factors not currently considered, it should be about the environmental or ecological impact. Should have nothing to do with gold what so ever. It is a dated idea that doesn’t make sense in the world we are living in now, although as usualy you libertarians are just the useful idiots of rich folks. Finance would be very happy with a return to the gold standard, especially the horrible free banking era type you illogically love.

          I would like just one discussion here about MMT to not be dominated by you libertarian nitwits. Just once talk about MMT itself without referencing your pet theories. The rest of us would like to have a conversation grounded in modern reality, not have a converation about a dated idea ill suited for the world we live. It would be nice to have discussions with people whose economic ideas weren’t so ahistoric and utopian. There hasn’t been a libertarian economic system in modern times for good reason. Nothing close to it. No country, not a single one, would fit the definition of a “libertarian” or Austrian economic system now and no country has ever developed using anything close to libertarian or Austrian economics. So what the hell do you people have to add a discussion on real world economic issues? It’s coffee house economics.

          1. Ben Johannson

            I am wholeheartedly with you: it would be refreshing to have a discussion without gold-plated nitwits and obsessive-compulsives focused on non-existent international banking conspiracies making fools of themselves.

            But then I suppose that’s their goal, to prevent a discussion. The truth about these trolls is they don’t want a solution.

          2. Emperor Wang of Market Mongo

            “then why aren’t people “using” gold?”

            Because nowadays they can use rubles.

          3. jake chase

            I don’t recall making any Libertarian arguments in anything I have said about this subject. To be clear, my objection is to a system which permits unlimited expansion of money and credit, without anything to discipline lenders, and without anything to limit the growth of government. Our present crisis was created by bailing out the banks and failing to liquidate their bondholders and shareholders and our failure to punish those who engineered their looting. It is sheer foolishness to think the answer to our problems is issuing elected politicians a blank check. What is Libertarian about any of that?

          4. gepay

            “obsessive-compulsives focused on non-existent international banking conspiracies making fools of themselves.”
            It is foolish to think there are no conspiracies. While many of the people who speak of conspiracies are obsessive-compulsive and fools, “Just because you’re paranoid, doesn’t mean they aren’t out to get you.”
            There is an international banking conspiracy. I started looking into conspiracies when 911 happened. The official “conspiracy theory” was just too stupid to believe. I’ve found that the conspiracies associated with money are the biggest and they are all there in plain sight. There is a FederalReserve System owned by private banks that have given trillions (trillions created by keystrokes) to the present financial system to keep it from collapsing. There was a trillion dollar TARP bailout foisted on us by a former CEO of Goldman Sachs who just happened to be the US Treasury secretary at the time of the biggest financial crisis since the Great Depression – a coincidence I am sure. Goldman Sachs did get 10s of billions of dollars from the taxpayers via the bailout of AIG. Not to mention the money that went to JP Morgan Chase and Citibank and Deutchebank and…
            That wasn’t an international banking conspiracy? What would be in your opinion?

        2. Lambert Strether

          “Gold is chosen by people of their own free will.” [pause for hysterical laughter. Screams. Breaking glass, as of fist through computer monitor.]

          Yes, especially if people buy it from some 800-number on an Austrian site. The phrase “trolling their own book” comes to mind.

          1. MyLessThanPrimeBeef

            I don’t laugh when people of their free will choose to wear corporate logos, sorry, a thousand apologies, designer labels, on their shirts.

            It’s a free country.

    4. Me

      You do realize that there are underlying problems as far as profitability in the West, right? Robert Brenner has a great book on this, tons of facts to back it up. That helps to explain finance. You also realize that the vast, vast majority of “money” in the system has nothing to do with actual money created by central banks. The vast, vast majority of “money” is credit money. To pretend that we can talk about increasing land values and then just analyze actual money creation by central banks is nonsense and it shows how little gold bugs know about actual economics. If you want to know why land values go up you might want to read Michael Hudson. Cuts in taxes on land, credit creation, what banks lend out for, the willingness of people to go into debt, the stagnation of wages, the natural tendency of debts to grow exponentially, all of that has something to do with finance’s takeover of the capitalist system. Our problem with debt is not new and neither is the issue of fiat vs asset backed currencies. You seem to live in an intellectual bubble.

      By the way, why do you people never talk about PRIVATE debt? Private debt has exploded and, again, little of it has to do with actual money creation. Why do you not analyze that in conjunction with public debt and actual money creation? Could it be that you focus too much on this aspect and aren’t analyzing the big picture for ideological reasons?

  5. Bobbo

    The flaw in MMT (myopic monetary theory) is that it takes confidence as a given, something that can be imposed from above through taxation. I think the system is a lot more dynamic and fragile than that. Sure, for now “pundits declaim that hyperinflation is imminent, that interest rates are on the verge of an uncontrollable upward spike, and that the jig will be up for sure just as soon as the next T-bond auction fails” and until now they have been wrong. Could the reason have something to do with the trillions of dollars of risk assets moved from private to public balance sheets? Can that continue forever? Should it continue forever? What about the distortions caused by the mispricing of risk? Are there any consequences to that? MMT brushes these concerns aside and focuses on the here and now: There is no imminent threat of any T-bond auction failure. We have reached the end of monetary history. This time it’s different. It is inconceivable that a new global monetary system could ever replace the one we have right now. The dollar is here to stay as the world’s reserve currency. There is an endless supply of dollars. Confidence is unshakable. There is no risk.

    And if you look at a very narrow window of history, and if you ignore the staggering amount of unfunded future obligations, it all makes perfect sense.

    1. H. Alexander Ivey

      MMT (myopic monetary theory) – I like it. Quite appropriate too, if not for your reasons.
      MMT is only (very) partly correct. It is correct to examine the role of fiat money, but that is not the main thing by far. MMT continues to ignore the other form of money, credit. Credit is much bigger, much more fluid, and much more influencial than the fiat form of money. And with its flip side, debt, much more the cause of the business cycles we experience, especially the Great Recession that we are in now.

      1. Ben Johannson

        Creation of financial assets by banks is central to MMT. It would help if you would make an effort to understand a thing before you make such an glaringly incorrect criticism.

      2. Alex Hanin

        @H. Alexander Ivey

        “MMT continues to ignore the other form of money, credit”: I’m sorry to tell you that, but you don’t have a clue, do you? It’s like saying to an Austrian economist: “Did you know that money used to be gold-backed?”

      3. aj

        Um, no. Steve Keen (who at least works with the UMKC folks although he doesn’t really use the MMT title) has focused almost exclusively on understanding the role of banking and debt. He is even creating a computer program so that these things can accurately be modeled. You do get consolation points for creating a pretty Straw Man. You can find him at http://www.debtdeflation.com/blogs/ or read his book Debunking Economics.

    2. Alex Hanin

      @Bobbo

      MMTers don’t think you can just “create confidence out of thin air” or that a state can build a monetary system from scratch in a couple of years.

      They don’t think it’s a good think to create mountains of private debt before dumping them to the state either.

      Deliberately or not, your making a straw man argument.

      1. Bobbo

        With all due respect, Alex, you are the one making the straw arguments.

        I never said (or even implied) that you can just “create confidence out of thin air” or that a state can build a monetary system from scratch in a couple of years. Rather, my argument is that MMT takes for granted confidence in the *current* monetary system.

        Likewise, I never said or implied that MMT favors creating “mountains of private debt before dumping them to the state.” Rather, my argument is that MMT dismisses the long term effect these actions will have on confidence in the system itself.

        1. Ben Johannson

          All you’re saying is that human institutions eventually come to their end. We know that.

        2. aj

          Repeat after me folks, “I do believe in confidence fairies. I do believe in confidence fairies.”

        3. EricT

          As long as the state accepts the currency to pay taxes, fees or penalties, the currency will always have value. Unless the government shirks its responsibilities to the electorate and causes those to seek replacements.

  6. mmckinl

    Just as important as the MMT theory is the fact on the ground that any process of currency and credit creation controlled by private interests (The privately owned and operated Federal Reserve)is but a license to monopolize the profit and prerogative of money creation.

    There is also the complication of the tipping point of the worlds’ resources and ability to absorb waste. As long as money is largely created for consumer goods through loans the rapacious and suicidal rate of the consumption of the very resources that allow life on our planet goes on.

      1. Susan the other

        Thank you. That’s a good manifesto. Looking at the credits, this thinking has been around for decades. That is, it has been well-thought-out for decades. I don’t see how anybody can argue with the reasoning.

    1. Nathanael

      “Just as important as the MMT theory is the fact on the ground that any process of currency and credit creation controlled by private interests (The privately owned and operated Federal Reserve)is but a license to monopolize the profit and prerogative of money creation.”

      If you actually look back at the records of the politics and history leading to the Federal Reserve Act in IIRC 1913, you will find that it was *quite explicitly* a deal by which:
      (1) The government got control of the action of money creation / destruction;
      (2) The private bankers got the profit from money creation.

      They understood what sort of deal they’d made in 1913. Nowadays, people don’t even know that there was such a deal.

  7. from Mexico

    Dale Pierce said:

    A reality-based economics is needed…

    But if you do that, how will the lords of capital and their paid liars and bumsuckers keep duping the people?

  8. be'emet

    I would love to see some MMT’ers revisit the Social Credit movement. Major Douglas was proposing nearly 100 years ago methods to distribute a national dividend to all UK citizens. The dividend was to be metered as a function of the excess of value of the goods services available (excess capacity) compared to the amount of money in the system. Using fiat money this way seems to me a heckova good start to implementing what has become MMT.

    It seems to me that the method is politcally neutral and can be applied by left or right constituencies equally. The lefties mocked it, and let advocacy fall to fascists and anti-semites. It should be rewakened as a key step toward post-keynesianism, MMT and the rest of contemporary open source money propositions.

    1. Nathanael

      The Social Credit movement is explicitly and directly opposed by what I can only call the plutocratic movement.

      Forget “left” vs. “right”. The plutocratic movement is a very powerful enemy. There’s a reason the Social Credit movement keeps getting crushed.

  9. pigeon

    “Whether the job-guarantee program makes fighter planes or wind turbines makes no economic difference”

    Sorry Sir, but this is the real fun part of the article. I don’t understand too much about MMT but to call fighter planes of the same economic value as wind turbines seems to me quite revealing of the basic flaw in economic thinking, namely that it is so focused on money as opposed to the generation of real wealth. I can use a wind turbine to generate power for consumption. It is a real investment. I can use a fighter plane to kill people. That is the opposite of real investment.
    And herein lies the rub. MMT assumes that the government can efficiently allocate the work for the people in such a way that it does not compete with the private sector but just shaves of the surplus workforce. It would mark the first time that central planning actually works. We in the former GDR (German Democratic Republic) have learned it the hard way that it is not just work that counts but the generation of value. So we had a job guarantee and a perfectly statemanaged monetary system without any backing of whatsoever but still ended up totally bankrupt. Not because there was no money left but because the true resources of the economy were consumed.

        1. MyLessThanPrimeBeef

          It’s possible to be complete when one keeps it simple – GDP sharing.

          Whatever we have, we share.

        2. craazyman

          OK, I’m letting you know.

          MMT isn’t a theory of anything. It’s a form of evangelical politics that presupposes something called public purpose and a certain set of conditions necessary for its advancement.

          It doesn’t recognize how bank money historically advanced these sets of conditions that MMT now adopts as its own ethical imperatives — individual rights and freedoms from state malevolence. This is a centuries-long perspective, not a camouflage for today’s bankster frauds.

          MMT would assert that its tenets exist as realities independent and autonomous from considerations of statecraft and politics, the way mathematical equations exist independently of any physical reality, the way a triangle exists independently of three-cornered plot of land. This assertion is both a conceit and an error.

          MMT is incomplete because it does not acknowledge that it advances a political theory in the form of technical observations about monetary processes. Any form of monetary theory is inherently a political theory and an ethical theory, because money is nothing more or less than a form of social imagination, and that in turn is an inherently ethical-political construct. MMT is no more a theory than is the Bill of Rights.

          QED

          Now, to your question of what is a complete theory. Probably only religions achieve that, since they comprise eschatologies, but they too are works of social imagination.

          These MMT threads are always a riot. They pull out all the cranks, crazies, loonies and half-wits, including me. :() monkey man in the trees.

          1. Emperor Wang of Market Mongo

            Don’t be so hard on yourself craazy. You are held in high esteem by your Emperor and most of his subjects. (yes, they are watching)

            BTW, here is a novel about a world where they DO worship the Triangle – and the Pythagorean Theorem is the only commandment.

            =======================================
            Anathem is a speculative fiction novel by Neal Stephenson, published in 2008. Major themes include the many-worlds interpretation of quantum mechanics and the philosophical debate between Platonic realism and formalism.

            http://en.wikipedia.org/wiki/Anathem

          2. Ben Johannson

            MMT isn’t a theory of anything.

            Untrue, and pure assertion.

            It’s a form of evangelical politics that presupposes something called public purpose and a certain set of conditions necessary for its advancement.

            Ah, you’re a right-libertarian. That explains a lot.

            It doesn’t recognize how bank money historically advanced these sets of conditions that MMT now adopts as its own ethical imperatives

            Yes. All that bank money has really advanced our freedoms from the government, particularly the tens of trillions in private debt over the last three decades.

            . . . individual rights and freedoms from state malevolence. This is a centuries-long perspective, not a camouflage for today’s bankster frauds.

            So in one sentence you argue bank money is freedom, and literally in the next bankers are all “frauds”. So fraud shall set us free, huh?

            MMT would assert that its tenets exist as realities independent and autonomous from considerations of statecraft and politics, the way mathematical equations exist independently of any physical reality, the way a triangle exists independently of three-cornered plot of land. This assertion is both a conceit and an error.

            Well gee, if you say so . . .

            MMT is incomplete because it does not acknowledge that it advances a political theory in the form of technical observations about monetary processes.

            Everything is politics? Why do right-libertarians so often sound like Marxists? I suppose if I observe whether my dog has a limp I’m “advancing” a political theory about that too.

            You see, all you’ve done is reveal that you’ll alter the definition of things like “observation” and “political theory” to suit whatever foolishness you’ve got to throw at your computer screen.

            Any form of monetary theory is inherently a political theory and an ethical theory, because money is nothing more or less than a form of social imagination, and that in turn is an inherently ethical-political construct.

            No, money is the state’s unit of account. Try paying your taxes in social imagination and see where that gets you.

            Another example of how little libertarians actually know. Invariably when one makes a technical observation or argument, they respond with metaphysics.

            You guys are light-weights.

          3. Ben Johannson

            MyLessThanPrimeBeef,

            It depends on the level of what I call “monetary attachment”, meaning how integral has that currency become emotionally and intellectually to the populace. For the U.S. I doubt there would be a significant impact, at least in the beginning.

          4. Ben Johannson

            If government spends without taxation to regulate aggregate demand? It will likely result in a continual rise in prices, aka inflation.

          5. MyLessThanPrimeBeef

            So, is it wrong to say ‘No taxation without representation,’ because we need taxation to control inflation, with or without representation?

            And since the core CPI that everyone worries about concerns worker wages, is it an automatic slamdunk that every time workers are getting paid more (thus higher core CPI), we will tax them more?

          6. Nathanael

            “So, is it wrong to say ‘No taxation without representation,’ because we need taxation to control inflation, with or without representation?”

            Actually, it is wrong as a statement of fact. Countries without representation still have taxation.

            Representation is good for its own sake, because it gives the government legitimacy. “No taxation without representation” is bascially a statement of revolution, of refusal to accept the government as legitimate, even if the people who said it pretended that they weren’t revolutionaries. (They eventually started a revolution, so that just goes to show you.)

            As a statement of fact, “No government without taxation” is more accurate.

            As for whether we should raise taxes whenever inflation starts happening — well, no. Because inflation is good in moderate amounts. Deflation is horrendously bad and must be avoided at all costs. *This* is actually not disputed among empirical economists, but for some reason *they don’t talk about it much*. They should talk about it.

    1. Ben Johannson

      MMT is a macroeconomic framework for analysis and forecasting. When one says that the good produced is irrelevant, from a macroeconomic standpoint this is exactly correct.

      Spending = incomes = employment = output.

      This does not mean there are not more or less useful goods from a social standpoint. It’s akin to Keynes’ suggestion that paying people to dig holes and fill them again would generate growth. He was also correct; nevertheless there are probably better things to pay people to do.

      1. pigeon

        But that is exactly my point. Digging holes and filling them up again generates growth but no value. Growth that way is just a monetary concept but does not create supply or resources for true demand of goods. So yes, you are certainly right that MMT is an analytical framework but for a subject that is largely irrelevant when it comes to how the needs and desires of the people are best met. And believe me in GDR there were lots of ditch diggers. People working in a factory assembling things that were later disassembled in another location just to make sure everyone was “employed”. Also people were “employed” in the oversized military.

        If the government pays people it has to make sure that their work is somehow productive. But as soon as the work is productive the risk of crowding out the private sector becomes very large. That in itself would not be harmful had the government truely the same skill in deploying the workforce into productive enterprises as the private sector has but I doubt that is the case. History seems to prove the opposite. But if a crowding out occurs with a less productive end result, then all the intervention effects is a distortion of prices that will further undermine productivity and give rise to all sorts of corruption.

        1. Ben Johannson

          It depends on what one considers “value”, doesn’t it? How is providing work so people can pay their bills and provide for their families not valuable?

          1. Nathanael

            People really seem to miss the point of Keynes’s crack about burying money in holes and paying people to dig it up.

            (1) It was a crack about the gold standard. This is what the gold standard does — it declares “There’s money in those hills!” and pays people who dig it up.

            (2) His main point was that money needed to be *in circulation among the average people*. Once the money was in the hands of the average people (whether by digging it up or whatever), they would then proceed to pay farmers for food, etc., and cause *useful* economic activity to happen.

        2. Moneta

          The thing is that when things work well, the population grows to the point where growth per capita shrinks.

          We are always looking to improve out lot but equilibrium is ephemereal.

          Perfection always leads to destruction.

        3. Massinissa

          Unfortunately, thats one of the problems of capitalism. People need to work in order to survive, but unfortunately, it is pretty much impossible for the private sector to generate full employment.

          Maybe an f-15 has no real social value. I understand that and I agree completely. And I would also prefer it if the government built green infrastructure instead of military spending.

          But at the same time… At the same time, as long as people have work, they can get money and spend it on the things they need.

          Now, would it be better if we had a system, where only the people who needed to work worked? That would be far more sustainable. But we cant really have capitalism and have it work that way, thats pretty much beyond the structure of the system. Now, since youre clearly not favorable to socialism, or at least socialism as it has previously existed, I dont see how you can meet everyones needs in a capitalist society by only producing things of ‘social value’.

          If you have a solution on how to ONLY have a society produce things of value, then please, do tell.

          1. Moneta

            There are the essentials… but we are far from full employment if we limit ourselves to these.

            And the luxuries… which constantly change… for more than 50 years, it was tulips!!!

            So it is hard to really know what is of more value since we do not have crystal ball and our tastes change over time.

    2. from Mexico

      pigeon says:

      …to call fighter planes of the same economic value as wind turbines seems to me quite revealing of the basic flaw in economic thinking, namely that it is so focused on money as opposed to the generation of real wealth.

      But doesn’t a nation with an economy based on conquest and plunder produce “economic value” and “real wealth” for its denizens? And that’s essentially what we’ve seen in the US since 1971. With wholesale deindustrialization and the spectacular rise of the security state, the US economy has been transformed from one based more on industrial might to one based more on military might. If we can’t produce it, we can take it! It’s like a redux of 16th- and 17th-century Spain.

      Do you have a problem with conquest and plunder?

      As Richard Nixon happily declared back in 1970: “We’re all Keynesians now!” He then merrily procceded to usher in the era of tax-cut Keynesianism (deficits are fine if you’re giving money back to the folks that count), security state Keynesiansm (the Pentagon, the CIA and the anti-drug police perform government’s only deserving function), pork-barrel Keynesianism (more roads and projects, and then even more), and bailout Keynesianism (the sky’s the limit when it comes to rescuing large, well-connected financial firms).

      1. Malmo

        Good stuff….and just imagine how Keynesians on MMT steroids would multiply those sordid effects.

      2. Me

        What in the world does any of that have to do with Keynes? You know, every country that has developed, every one with no exception, did so with massive state involvement in the economy. Many countries developed, or started to, before Keynes was born.

        The US is often brought up as an example of a “free market” success story, but that is nonsense. The US had the highest industrial tariffs in the world for a century and a half and had high industrial tariffs thereafter during certain periods (even under “free market” leaders like Reagain). It has the most protectionist agricultural system in the world. Most of the technology we have comes out of the state dominated military system (computers, cell phones, the internet, etc). There has often been nothing close to perfect competition, going back to the founding of the country. By the late 19th century the oligopolies were openly price fixing so as to minimize “ruinous competition”. On and on. Little of this has anything to do with Keynes.

        If there is a situation in which an economy can go through a deflationary spiral and if the state can step in to increase demand, THAT might have something to do with Keynes. The realization that we have little knowledge about the future and can be overwhelmed by options available, which makes it so that people rely on experience, that has something to do with Keynes. Re-destributing some income from those with a low propensity to consume to those with a higher propensity to consume, that has something to do with Keynes. Even the socialization of finance, which many in MMT seem to support, can be linked to Keynes. The rest you listed is nonsense. Again, every state actity in the economy is not “Keynesian”. Most of the forced, mass privatizations in developing countries only happened BECAUSE of the state. Few people would chose to have their countries pilaged by financial vultures.

        1. from Mexico

          What?

          Are you saying that what Nixon and every administration after him has done in the name of Keyes is nonsense?

          Have you not noticed that the Pentagon and our mushrooming police state have become the leading Keynesian mechanisms, a point certinly not lost on the author of this article, as well as just about every other sentient human being in the United States?

          Are you saying that Nixon and the those who followed in his footsteps, who hail equally from one side of the aisle as the other, have corrupted Keynes beyond all recognition?

          Oh, what heresy! What apostasy!

          1. Me

            What?
            “Are you saying that what Nixon and every administration after him has done in the name of Keyes is nonsense?”
            For one, it was MILTON FRIEDMAN who said “we are all Keynesians now”, not Nixon. You know, the guy who is the dominant influence of the guy running the Fed now. The guy whose explanation of the Great Depression Bernanke agrees with (he said so even at a birthday party for Friedman a few years ago). Bernanke said he bought into Friedman’s explanation of the GP and that he agreed with Friedman’s cure, flooding the market with money. That is FRIEDMAN’S idea, not Keynes’. You don’t know that though because you haven’t read Keynes. You could claim otherwise, and how could I prove you haven’t, but we both know you haven’t. I say this honestly, I have yet to meet a single libertarian who knows a damn thing about non-libertarian economics. Not one.

            So giving trillions to the banks is Keynesian? Could you cite a single instance where Keynes called for this? I seem to remember his calling for the socialization of finance and the “euthanasia of the rentiers” in the General Theory. Which president attempted to euthanize the rentiers? Seems like the presidents we’ve had since Nixon, especially since Reagan, have worked on behalf of the rentiers. Maybe I am wrong though. After all, you claim he once said “We are all Keynesians now”. Which president has attempted to socialize finance (by this, Keynes said that finance should become a state function, not private banks with state backing. The euthanasia of the rentiers was going after unearned income, which is the key to financial parasitism and Keynes prioritized production over finance).

            It isn’t basterdizing Keynes, it is calling something Keynesian that isn’t. If I said I was a libertarian then I nationalized all industry would I be a libertarian? Why not, I called myself one?

            “Have you not noticed that the Pentagon and our mushrooming police state have become the leading Keynesian mechanisms, a point certinly not lost on the author of this article, as well as just about every other sentient human being in the United States?”

            Again, what does this have to do with Keynes? Cite an example where Keynes called for endless war to increase aggregate demand. Stop commenting on something you clearly don’t understand.

            “Are you saying that Nixon and the those who followed in his footsteps, who hail equally from one side of the aisle as the other, have corrupted Keynes beyond all recognition?”

            No, I am saying that libertarian nitwits should READ Keynes before telling others what Keynes said. It has nothing to do with Keynes’ ideas and, as I said before, every time the state does something in the economy is not Keynesian.
            There is a footnote to the third volume, if I remember correctly, of Capital where Engels criticizes calling the Kaiser’s policies “socialism”, which some did in his day and still do. He said that people, who know nothing about economic history, claim every time the state does something in the economy it is “socialism”, which Engels pointed out is simplistic and nonsensical. The same thing applies here. Lots of state activity (forced privatizations, forced financial liberalization, forced “labor market reforms”, etc) are done towards things Keynes and economists on the left disagree with strongly.

          2. JTFaraday

            “Again, what does this have to do with Keynes? Cite an example where Keynes called for endless war to increase aggregate demand. Stop commenting on something you clearly don’t understand.”

            This is like the “no true Marxist” rationalization. Are you actually going to try to tell us the US doesn’t practice something that actually goes by the term “military Keynesianism”?

            That is perfectly reasonably translation of Keynes’ ideas into a particular part of the economy?

            Where the rubber meets the road, it doesn’t matter what Keynes said or didn’t say. It matters what people do with his ideas.

            Here we see an example what Americans have done with them.

            This article, by one of the MMT fanboyz, itself contends that the fact that we practice something that is aptly encompassed by the term “military Keynesianism” just “doesn’t matter.”

          3. Ben Johannson

            Faraday,

            And we get another uninformed opinion from you:

            Are you actually going to try to tell us the US doesn’t practice something that actually goes by the term “military Keynesianism”?

            Try learning something for a change:

            Thus as the prime mover in the first stage of the technique of recovery I lay overwhelming emphasis on the increase of national purchasing power resulting from governmental expenditure which is financed by Loans and not by taxing present incomes. Nothing else counts in comparison with this. In a boom inflation can be caused by allowing unlimited credit to support the excited enthusiasm of business speculators. But in a slump governmental Loan expenditure is the only sure means of securing quickly a rising output at rising prices. That is why a war has always caused intense industrial activity. In the past orthodox finance has regarded a war as the only legitimate excuse for creating employment by governmental expenditure. You, Mr President, having cast off such fetters, are free to engage in the interests of peace and prosperity the technique which hitherto has only been allowed to serve the purposes of war and destruction.

            Nope, the U.S. government isn’t conducting much of anything Keynesian, particularly as Keynes didn’t create the term “military Keynesianism” or advocate for it.

            http://newdeal.feri.org/misc/keynes2.htm

          4. Me

            “This is like the “no true Marxist” rationalization. Are you actually going to try to tell us the US doesn’t practice something that actually goes by the term “military Keynesianism”?

            What does this have to do with KEYNES? I have to ask again. Lots of words can be applied to lots of things. What a person said themself shouldn’t be lessened or changed by someone else’s innacurate description. In this case the language is outright Orwellian. Could it not be that this is called Keynesianism by people like yourself? You aren’t moved by the fact that Keynes did not support anything like an economy based on war. You’ve reduced the complexity of his thought to the government in some way increasing demand somewhere in the economy for some reason. Could be to build a useless plane, could be to build nukes we don’t anticipate having to use. Could be to create computers. Whatever the case, Keynes supported countercyclical measures which increases economy activity, especially during downturns. The government increases economic activity though war. So, the government is engaing in “military Keynesianism”. Come on.

          5. gepay

            Excessive military spending is not what Keynes would have advocated for government stimulus but it is a stimulus that would have the same effect. This is why the present stimulus had very little effect on the economy. The US economy was already close to saturated with “military Keynesian” stimulus.
            The “powers that be” have been working since Reagan to control wage-price inflation. With globaliztion and outsourcing cutting the power of labor (unions in the US), “they” have solved this problem and kept the CPI sort of down. Those that work for wages have experienced inflation but not the rich.
            The PTB are not interested in having everyone that needs a job having one. Since the fall of the Soviet Union they could care less for the American or European middle class. China doesn’t even try to fool anyone that they care. Fukishima has shown that even the fairly homogenous Japanese don’t have the general welfare as their primary policy goal.
            It is a sad state of affairs when the only person in the politcal arena of the developed world that seems to care about the general welfare is Beppe Grillo.

          6. JTFaraday

            Once again, where the rubber meets the road, it doesn’t matter what Keynes, Marx, Milton Friedman, Anna Schwartz, Joe Firestone, or MMT “actually meant when they said X.”

            What matters is how what they said was used to support and advance a real world agenda.

            We practice do “military Keynesianism.” To suggest that we don’t practice military Keynesianism is a complete departure from commonly recognized reality.

            MMT’s failure to grapple effectively with that reality is a substantial part of its total intellectual, political, and moral failure.

        2. Me

          “Once again, where the rubber meets the road, it doesn’t matter what Keynes, Marx, Milton Friedman, Anna Schwartz, Joe Firestone, or MMT “actually meant when they said X.”

          [ad hominem. –ls] There is NOTHING that Keynes said that would justify the US’ military empire. Someone like yourself, who has no time for accuracy or complexity, came up with the phrase and it stuck. I am sure that many people you come across call policies “free market” that aren’t actually free market policies. The way a “free market” is defined now is radically different than during the time of classical economics. I guess we should all be intellectually lazy and not give a damn. I understand that there is something called “military Keynesianism”. I am also having a conversation with you here and I am telling you (since you obviously never read Keynes) that the term is misleading. At the very least you should acknowledge that an economy reliant on military conquest predates Keynes by thousands of years and shouldn’t be attached to his name like it is.

          “We practice do “military Keynesianism.” To suggest that we don’t practice military Keynesianism is a complete departure from commonly recognized reality.”

          Way back when a comment was made that we have put into place Keynes’ ideas over the last few decades. This military Keynesianism was supposed to be an example of this, as if an economy based on military conquest didn’t predate Keynes and as if Keynes’ name should be attached to such a thing! I am telling you that next to nothing we have done in recent decades has ANYTHING to do with Keynes. We haven’t euthanized the rentiers, we haven’t socialized finance, we aren’t doing countercyclical measures, we have cut the social programs that would transfer money to those with low marginal propensities to consume (the rich) to those with high marginal propensities to consume (the poor and middle class). The economics profession has said nothing about Keynes and the inability to accurately predict the future and to take advantage of the options available in markets because of the immense complexity (so people rely on habit). On and on. You have reduced Keynes to government spending to increase economic activity. Simplistic and willfully ignorant.

          “MMT’s failure to grapple effectively with that reality is a substantial part of its total intellectual, political, and moral failure.”

          Oh, well there you go. You just said so. You have said NOTHING in the thread that proves you understand anything about MMT, so why would I or anyone else take this comment seriously? In fact, in our conversation here you have proven one thing: you boil complex ideas you don’t understand or like down to simplistic ideas, then dismiss the inaccurate simplifications out of ignorance.

          If you really want to change peoples’ minds or at least make a convincing argument take the time to study and think about the ideas you discuss.

          1. Nathanael

            “military Keynesianism” meant funnelling all the economic stimulus packages through the bureaucracy of the military. So, instead of paying 1000 people to do something useful, we pay them to stomp around a military base in North Carolina, or whatever.

            The US isn’t really doing that any more. The military contractors are taking most of the money and it’s not being passed down to large numbers of employees, it’s being passed up to CEOs.

            China, interestingly, IS practicing “military Keynesianism”. Vast quantities of the government domestic spending in China are officially funnelled through the “People’s Army” even though they are completely non-military: housing, roads, factories producing consumer products, etc., are often part of the “military” budget in China.

      3. Nathanael

        “But doesn’t a nation with an economy based on conquest and plunder produce “economic value” and “real wealth” for its denizens?”

        Only when it’s good at it.

        The US is bad at it.

        We lost the Vietnam War, we lost the Iraq War, we lost the Afghanistan War, we lost the war in Somalia, we lost the war in Yemen,…. I could go on. Where’s the loot?

        This isn’t the East India Company, which certainly brought back wealth to Britain. We are importing junk from China which we could have made better ourselves. Where’s the wealth?

    3. Joe Firestone (LetsGetitDone)

      “Whether the job-guarantee program makes fighter planes or wind turbines makes no economic difference”

      MMT certainly does not say that. Here are some reasons why not. First, the fiscal multiplier is likely to be higher for wind turbines, especially if we compute the secondary or tertiary multipliers. Second, MMT makes a very pronounced distinction between financial assets and real economic assets. Since turbines are gifts that keep on giving; from an MMT point of view they would be much more economically valuable than fighter planes. And third, MMT keeps public purpose in the forefront. Beyond a certain point, warplanes n longer contribute to the public purpose since they would not contribute any additional defense value. Wind turbines on the other hand, contribute to energy self-sufficiency, a very important part of public purpose.

      1. Cujo359

        Since turbines are gifts that keep on giving; from an MMT point of view they would be much more economically valuable than fighter planes.

        I think this idea neglects a real world consideration – what it is we need. If we don’t have enough fighter planes to protect ourselves, but we have all the wind turbines we can possibly use, then fighters are more valuable. After all, they might deter an enemy from attacking us, and thus prevent economic losses. They might also prevent an attack from succeeding, or make it less effective.

        While I agree that we need windmills more than warplanes right now, I don’t think that’s always going to be the case, regardless of multipliers. Allocating resources wisely may not always be measured in convenient numerical ways.

      2. JTFaraday

        “MMT certainly does not say that.”

        Joe, considering you’ve gone through this thread and demanded more than once that I spend my time reading the 3 dozen MMT primers that are on the web– and also all your work– before I can open my mouth as a member of the general public, I would think that you could at least read the lead post you’re over here commenting on.

        The post very heavily implies that “it doesn’t matter” that the financially unconstrained “blank check theory” that MMT-ers volubly support is funding the US global terror and domestic police state. It is therefore not unreasonable to read this post– and “MMT” itself– as terror state and police state apologetics.

        Naturally, you don’t like the sound of that, but that is the way people read MMT’s “blank check theory.” They also quite reasonably read it as bailout apologetics, a somewhat separate but related topic. Context matters.

        It’s not my problem that you apparently can’t place your policy framework and discrete policy ideas within a larger context that takes seriously the failings of the US state at the present moment in time, and considers the likely impact those ideas if they are promoted without a big heaping dose of critical salt.

        Your consistent failure to do this has a lot to do with how people react to you, because they do look at the larger context. A majority of Americans would make spending choices. They’re not into writing “the blank check” for reasons that should be obvious to you.

        “Absolute power corrupts absolutely” may be a cliché, but it’s also not inaccurate.

        MMT also sows confusion. “MMT-ers” continually represents “MMT” in a contradictory manner as to whether it is an apolitical and amoral framework or whether it seeks to advance particular policy ideas that inevitably have political and moral implications.

        This contraction itself is a lie. MMT, and you, do advance particular policy ideas. The fact that you do advance particular policy ideas, within a particular historical political context and then tell members of the public that they can make no comment because they are not, effectively MMT acolytes—not having read the 3 dozen primers and everything you’ve ever written– is itself deeply problematic.

        That you don’t even see the fanatically undemocratic nature of your own technocratic stance says an awful lot to me about what “MMT” is and what your ilk would do, if ever given the chance to play with the big boyz in the neoliberal global terror and domestic police state.

        In addition, “MMT-ers” consistently resort to attacks on our intelligence or otherwise demand that we spend our time doing what you–as someone who attempts to communicate with the public on “MMT”– should be able to competently do yourself.

        Your bid to read the Masters implies you really believe that once we’ve done so, we’ll be converted and we’ll drop our own perspectives. You claim want people to participate, but when we don’t check our brains at the door, you technocratically dictate instead.

        Frankly, I don’t think you can get closer to a total failure than this.

        But, I really do think I’m repeating myself, because I said all of this and more early on in this thread–now found below. You don’t have to read it.

        1. Me

          Oh god, prove you know anything about MMT, or Keynes, or anything not-libertarian. Prove you’ve read the MMT economists and can understand the issues they discuss. Step out of the gold standard universe you inhabit for a moment and comment on other things with some complexity and accuracy.

          It is obvious you have read nothing from MMT economsits. Here is something on Abba Lerner and MMT, clearly your first contact with the ideas.

          http://neweconomicperspectives.org/2012/12/paying-for-lunch-mmt-style.html#more-3892

          1. Lambert Strether

            I’m not sure Faraday’s a libertarian or even a gold bug.* But I have noticed a certain paucity of citation — both of links to MMT sources, and quotations from them. At some point, one needs to address the subject matter directly, instead of making assertion after assertion after assertion after assertion, “any stick to beat a dog”-style. By the same token, MMT — like any school of thought — can almost always use a better (I would say terser) exposition of its ideas, even if detractors will instantly claim that as a sign of slipperiness, etc. Of course, there are two ways to address that problem: One is to jump in and improve the discourse, as Joe Firestone has tried to do; the other is to repeatedly claim that the problem exists, and stop there. We’ve seen examples of both methods on this thread.

            NOTE * To take issue with MMT is not to be a libertarian. I get the same thing all the time from Democrats, who think I’m a Republican because I vocally loathe Obama. In fact, I loathe both legacy parties.

      3. Nathanael

        JTFaraday: MMT is simply a fact about money as it works.

        Printing money can be used for good or for evil. However, telling people that printing money is impossible or will cause hyperinflation or other such nonsense — this is untrue, and *is part of the propaganda* used by people who wish to use the money-printing power only for evil. By spreading bullshit about money-printing being bad, they can make sure that good people don’t print money. The bad people will of course continue to print money for their evil activities, regardless of what they say about money-printing.

  10. F. Beard

    Most popular misconceptions about job-guarantee work as inefficient “make-work” ignore these private-sector dynamics. Dale Pierce [bold added]

    Those private-sector dynamics would apply even if the government simply gave away new fiat to the entire population. So why not advocate a Basic Income Guarantee instead? With sufficient income, people can create their own work to do and that work would be by definition “meaningful.”

    There is also justice to consider. The banks have stolen what should have been the population’s equity share of the country they built by driving them into debt with their own stolen purchasing power. So why make the population work for what should be restitution for theft?

    1. jrs

      Work at least in any system where work is is not *worker controlled* is slavery and obedience to masters and one’s “betters” in order to survive.

      If there is no real need for it creating more work in such a sytem creates more slavery (but this is welcome only in comparison to want). Isn’t it more desirable to spread work around and spread money around (a basic income etc.) than to just enbalm the current levels of slavery forever and ever and ever?

    2. castor

      Thanks for mentioning it. A basic income guarantee seems more straightforward to me than striving for full employment.

      1. Nathanael

        Of course it is. A basic income guarantee is a good idea.

        However, people with the Puritan mentality will bristle at the idea that people should be able to get enough food to live unless they are slaving away at work. Because they feel that this is “immoral”. They’ll probably call it “soshulisum”.

  11. Really?

    First of all, I like that this was at least a down to earth, non-academic presentation. We could use more of those. But I still struggle to see how MMT could ever actually be implemented in the real world that we live in. But I don’t want to get in a shouting match with those who are obviously emotionally invested in the subject either. So in that light, a couple things:

    – JGordon is right above. Career criminals are firmly in charge of the current fiat system, they appear to like their work, and by all accounts, they are quite good at it. How is granting the power of a wide open money printing press not gonna enhance their criminal prospects even further?

    – Do we not already effectively have MMT for the wealthy and the politically connected? Surely the TBTF banks are not feeling too spending constrained these days, are they? Nor apparently are the entire DoD, DHS, INS, ATF national security apparatus, their incessant whining notwithstanding. Yes, I suppose we could have a 50 (or 100?) carrier navy if we really set our minds to it, and possibly a fully manned, 100 foot wall with 1/2 mile kill zone on both sides from sea to shining sea on our northern and southern borders, which is exactly the kind of insanity I suspect we’d see if the pols ever embraced MMT fully and sold it to the naive, drug and television addled national electorate. Indeed, since employment programs, whatever their type are all economic enhancers, why not enhance the pay and benefits of the military and expand the force ten (100?) fold? A garrison of the best trained gestapo money can buy in every town, state, and country that needs some “economic stimulus?” What’s not to love?

    – Since welfare benefits and the like for the unemployed (who theoretically, would cease to exist) have always been politically motivated decisions, why in the world would that change, especially given the fact that MMT would be put to work making damn sure that a job – no matter how repugnant – was available for everyone? How about prisons for all the usual suspects, and minimum wage government guaranteed jobs working at them for everyone else? Oh, and since you’re having trouble getting by on your own, we’ll even let you stay at your place of work. Yeah, with the other inmates of course, but you’ll have a partition.

    – And almost finally, what’s to stop the same predatory lending and financial chicanery that got us to out our current level of misery from just resetting and kicking it up to a new, higher level of personal debt slavery? I don’t see anything changing there at all, except for mo’ money to play with. Same game, more money on the table.

    – And finally finally, the natural resource pie can’t be goosed – pie in the sky technologists be damned! – no matter the economic theory. More money, equals more growth, equals more people, equals more resource depletion, equals more and more acceleration towards industrial capitalism’s inevitable day of reckoning. Which is coming all to soon either way.

    1. TomDor

      Industrial capital does not mean industrial in the smocke stacks and waste sense. Industry is whatever is created with labor…. a painter can’t paint without first aquiring pigments and something to paint on… a brush would help – all those require industrial capital. Someone inventing a new way to produce energy at 0 pollution needs industrial capital. Someone farming in an ecologically and productive way needs industrial capital. Industrial = industrious = labor plus industrial capital like a paint brush pigments

    2. from Mexico

      Here’s the simple reality
      America’s aristocracy
      Already has MMT.

      For them, you see
      American society,
      Is pure felicity.

      It’s MMT for me,
      And austerity for thee.

      1. Wat Tyler

        Very clever and an interesting point. Perhaps another way of saying “privatize profits, socialize costs” or “socialism for the rich”.

        Someday people will understand.

        Jim

    3. Malmo

      “Do we not already effectively have MMT for the wealthy and the politically connected?”

      An emphatic, YES!

      Will those well endowed wealthy and politically connected come to their senses and advocate for their MMT induced spoils to accrue likewise for the rest of us peons by pinning for MMT across the board? Not a chance.

    4. Me

      Ok, these financial criminals were were apparently created as a result of fiat currency (which is probably true, there was never massive financial fraud during the gold standard, right?).

      So, we go onto gold tomorrow. What happens to the real economy of production and consumption. There is far less dollars being created, so obviously you libertarians and Ausrians have used the state to stop private credit creation. Cause you can’t do a damn thing about inflation if you ignore credit creation. So, inflation is lessened. So what happens to the real economy of production and consumption. It is in empirical fact that a small fraction of bank lending is for production, most if for real estate, speculation of things that already exist. So, there is no state and we give banks total freedom. So do they completely change course and start lending to increase production?

      Then there is the environmetnal and ecological angle. Most ecoystems worldwide are under stress, are collapsing or will be shortly. There are endless environmental issues we are now dealing with. Species extinction rates, ocean acidification, deforestation, soil erosion, global warming, etc. How does the gold standard create an environment in which we can realistically deal with these massive issues? Explain if you could how it makes sense to expand and contract production and consumption (and the pollution and environmental destruction that goes with that) under the gold standard.

      I don’t expect you to have to answers because they don’t exist.

    5. Doug Terpstra

      The Creature from Jekyll Island* understands MMT clearly, because that’s what it does, conjure money from nothing (for the ‘promise’ of something). But the unaccountable Fed Cartel practices a particularly ugly perversion of MMT — “MMT for me, austerity for thee”, as Mexico says. It’s a strictly top-down, supply-side abomination that intentionally funnels money away from public purpose and into its own self-serving syndicate. It is even now “printing” MMT money for organized crime, interest-free, at an unprecedented $85 billion a month. That’s $118 million an hour solely for its casino cronies to speculate on equities, commodities, mortgages, wars, derivatives, etc. This is the mother of all bubbles, the bubble to end all bubbles.

      Despite reams of evidence that Wall Street is thereby reaming Main Street, the Fed kleptocracy persistently preaches the lie that further concentration of capital and power in elite clutches is the only way to run an imperial economy. With insatiable powerlust, this kleptocracy has been systematically dismantling and ravaging America’s broad-based production capacity and commonwealth so essential for creating real value and shared prosperity, while at the same time stripping its citizens of basic human rights and freedom. Theirs is the incurable, terminal pathological mentality of the plantation slave master with a psychotic messiah complex.

      * http://www.amazon.com/The-Creature-Jekyll-Island-Federal/dp/0912986212

    6. JEHR

      When I began to understand MMT, I realized just how captured the whole financial system is. The banks are the issuers of money, not the government. The banks issue debt when the government could give debt-free money to states, for example. The banks have created a shadow banking system that apparently has trillions and trillions of dollars just waiting to be paid into the banking system (by other parts of the the banking system (hedge funds)–how incestuous is that?). The banks are the fraudulent part of the system. The banks have captured the regulators and the government. Once you know the role of banks, you can see how and where the banks have perverted the whole system!

      MMT helped me to see at least that much and I think we are f**ked because of the banks.

      1. JTFaraday

        Okay, but did you figure that out reading “MMT” or did you figure that out reading Yves Smith and Bill Black on the housing scam?

        Because when I step back from this alterna-economic universe in the blogosphere, the only thing I see “the MMT-ers” (per se) adding amounts to a justification of monetary actions on the part of the US government (Fed/Treasury) that are the same actions that enable it to cover up that scam.

        ie., MMT-ers (per se) effectively promote a “none of that (bailout money) really matters” excuse within the most critical communities on the internet while running a hope-a-dope scam that says “You too can haz bailout!” that is very reminiscent of no one less than premier bank shill and betrayer of the public, Barack Obama.

        I will grant the fanboyz that this is a view from 1000 feet, but sometimes that’s exactly the resolution that matters in the end– don’t look over there!! Look over here!

        Needless to say, the fact that the MMT-ers at UMKC have Bill Black constantly talking “deficit” instead of “crime”– which is his beat after all– in no way contradicts this impression.

        1. JTFaraday

          [ad hominem. –ls]

          Below, you’re asserted that we’re all ignorant for focusing on the political context because we recognize that the apolitical and acontextual technical knowledge MMT has on offer does nothing more than reinforce the status quo.

          [ad hominem. –ls]

          Look over there!! Not over here!! Hope-a-dope a dope.

          1. JTFaraday

            Joe, I’ve addressed your unreasonable demands relating to what I see as “MMT’s” total intellectual failure, as well as its political and moral failure, elsewhere on this thread, in more than one place.

  12. Alex Hanin

    I understand this kind of criticism, but it’s too nihilist for me.

    Basically, what you’re saying is “hey, the system is rotten, so why give one more tool to the rotten system? People are stupid, so why try to educate them?” You could oppose the same argument to any idea. Of course, the ruling elites would have to make way, which is easier said than done. The first step towards this objective would be to help people understand how the monetary system really works. Getting rid of neoclassical economics would be a huge advance. MMT has a lot to say in this respect.

    About the job guarantee and the environmental problem, I’d suggest you read Bill Mitchell. Unemployment shouldn’t be the tool used to “solve” anything, be it the inflation risk or the environmental issues.

    1. Really?

      No, what I’m really getting at is that our basic problems, even of the economic variety are all first and foremost political, and not merely theoretical. I can imagine some serious current power players reading this blog as we speak and salivating while they say to themselves, “Oh yeah, TEE IT UP! That’s JUST what we need is an unlimited supply of money and the power to direct where it’s “allocated!” I’m wrecking the economy just fine with this half-assed little stock 4WD pickup, and you guys want to throw me the keys of a 1200 hp super-charged Monster Truck! Yea!”

      And another point, a lot of people (including myself) have made a big deal about abolishing the Fed, and thus ending the debt-based aspect of our current money supply. Great as far as it goes, and it should still be pursued vigorously in my opinion (not that it’ll ever happen). BUT, the revolving door between the public and private sectors is still lubed and working just fine, so the idea that it’ll be any more intelligently (i.e.; less criminally) administered should the Treasury actually begin doing it’s job again is also misguided. Indeed, that’s why the Fed will never be abolished in the first place.

      So for me at least, I’d have to say that my problems with MMT have little or nothing to do with the basic economics, which certainly sound plausible to me as a short term fix at least (setting natural resource concerns aside for the moment), but are rather almost all political and pragmatic in nature. That’s the real fly in the ointment, and where MMT theorists should focus their efforts if they’re really serious about making any of this actually happen at anyplace other than economics blogs. And thar’s the rub! Cause the theory is the EASY PART! It’s the EXECUTION that’s hard!

      1. Ben Johannson

        You have to understand a thing before you can fix it, otherwise you’ll do more damage as you grope for a political solution. Relying on politics rather than knowledge is what’s gotten us to this point.

          1. Carla

            But by the same token, MMT, which fails to tell the dirty little secret that central “national” banks are all fronts for the international private banking cartel, unfortunately does not accurately describe reality.

          2. North

            At least in Europe most central banks are own by government. Those who run central banks are mostly neoliberalist lapdogs, but it can be changed, when ever politics want so. As long people and politics dont know how sovereign debt aint a bad thing, they cant do anything, cause they aint know anything and just does what ever banksters tells them to do or otherwise dragon will come and eat us all, which is just bullshit.

            At least in Europe we can change board members in central banks when ever we want. Its just that theres no political will, because people doesnt understand monetary policies at all and thinks its same as household economy, which it isnt.

          3. Ben Johannson

            Carla,

            I don’t think that’s a correct interpretation. The Federal Reserve was established by Congress, empowered by Congress and answers to Congress. To my way of thinking MMT is telling us there is every reason for hope, because the current order can be altered/reformed/reversed by sufficient popular political pressure brought to bear on our representatives.

            Ditto for banks. Private banking was effectively abolished with the Federal Reserve Act of 1913. Banks were all brought under the supervision of the central bank, which has the authority to fire any executive it chooses and/or take that bank into receivership. We let those banks leverage government-supplied reserves to generate their profits.

            The problem is we’ve swallowed hook, line and sinker the false notion these banks are private when they aren’t, because our elites actively work to keep us in the dark. I don’t believe for a second that things could stand as they are now if the entire electorate were suddenly blessed with the knowledge banks get to keep their profits when they are basically government-sponsored enterprises, maybe even public utilities.

          4. JTFaraday

            “To my way of thinking MMT is telling us there is every reason for hope”

            Hope a dope a dope! We don’t need “MMT” to tell us what the powers of Congress were.

          5. MyLessThanPrimeBeef

            It’s a mystery to me why people complicate simple things.

            For example, the more the government prints, check that, creates more money, the money we have.

            Do we need an accouting identity to tell us that?

            But it matters less how much money we have in the society (any level will do), but matters more how that money is distributed.

          6. Carla

            Ben Johannson: “Carla, I don’t think that’s a correct interpretation. The Federal Reserve was established by Congress, empowered by Congress and answers to Congress. To my way of thinking MMT is telling us there is every reason for hope, because the current order can be altered/reformed/reversed by sufficient popular political pressure brought to bear on our representatives.”

            Ben, with great respect, I don’t know how anyone who has been paying attention could have lived through the last five years and think that Congress is running the banks. The banks are running Congress. And the Obama adminstration, and the Supreme Court. Popular pressure? Piffle.

            “Private banking was effectively abolished with the Federal Reserve Act of 1913. Banks were all brought under the supervision of the central bank, which has the authority to fire any executive it chooses and/or take that bank into receivership.”

            Huh? Do you even read the MSM , let alone this blog?

            Maybe you work for the Fed…in which case, my sympathies.

      2. Alex Hanin

        @Really?

        I agree in part. Of course, it’s political. But it wouldn’t be so easy to impose the silly austerity that’s wrecking Europe if the theoretical (descriptive) part of MMT was more widespread. Although things seem to be changing slowly, try to explain to the lay person that public deficit = private surplus and that the state borrows the money it itself created: people just don’t get it, because they hear and read everywhere that public debt is evil and will burden their children. And most journalists sincerely believe these things, because neoclassical economics rules.

        The “power players” don’t need MMT to wreck the economy and of course MMT is not about giving more power to those guys. Your Monster Truck is driven by deregulation, not by MMT.

        Our monetary systems are based on debt with or without the central banks. I don’t see what abolishing the Fed would change in that respect.

        1. Really?

          Our monetary systems are based on debt with or without the central banks. I don’t see what abolishing the Fed would change in that respect.

          You lost me there. Are Greenbacks not issued debt free?

          And I agree with the comment on deregulation. But deregulation also goes hand in hand with MMT, unless it’s specifically curtailed. Which needs to be part and parcel of the process. And no discussion of MMT can even begin until the bigger issues of the revolving door and regulatory, legislative, and electoral capture are first addressed in my opinion. Without that, MMT which be another means to ever corrupt ends. Matter of fact, I’d be very surprised if corporate America isn’t already all over the issue, with a well thought out and developed detailed action plan just ready to spring into action. I’d expect nothing less from our “masters of the universe.”

          1. Massinissa

            Most money in the economy is not represented by a physical note printed from the Treasury. Money is ‘created’ through interest. Think about it, where does the money represented by, say, a 5% interest rate on something, does it represent something real? Not really.

            Only something like 10% of American dollars are represented by a physical ‘greenback’.

            Debt, whether public or private, grows exponentially. Marx, for instance, pointed out that a penny from the time of Jesus would today at I think 5% interest a year (I cant remember the exact amount) saved to today would be the equivalent of a gold sphere as wide as the distance between earth and jupiter.

            Debt created at interest usually accumulates much faster than the Treasury prints greenbacks. When you think about it this way, it is private banks, rather than sovereign ones, that ‘create money’, because money is essentially created through debt.

            Also, why is economic growth necessary? Everyone always assumes, correctly, that growth is necessary for capitalism, but what about capitalism makes this a necessity? If the the economy does not grow, then debts cannot be repaid, because DEBTS GROW EXPONENTIALLY. Ultimately capitalism is a sort of ponzi scheme, as it has to keep growing until it pops. So the unsustainability of capitalism, having to constantly further exploitation of both workers and the environment in order to grow economically, can in this way be traced to debt.

            Debt is a mathematical anomaly, and has a tendency of overpowering economies. Some Libertarians see the mathematical impossibility of capitalism with endless growth, but think for some reason that the problem is caused by fiat currency and not debt based capitalism itself… Whether the currency represents something physical or not, that does not effect the exponential feature of debt.

            Getting rid of the Fed will only do so much, since most of the money created is created by private banks. QE of course exacerbates the problem greatly, but getting rid of QE will not solve all of capitalisms problems.

            Sorry if I have not made this clear.

          2. Really?

            Also, why is economic growth necessary? Everyone always assumes, correctly, that growth is necessary for capitalism, but what about capitalism makes this a necessity? If the the economy does not grow, then debts cannot be repaid, because DEBTS GROW EXPONENTIALLY. Ultimately capitalism is a sort of ponzi scheme, as it has to keep growing until it pops. So the unsustainability of capitalism, having to constantly further exploitation of both workers and the environment in order to grow economically, can in this way be traced to debt.

            BINGO!

          3. Really?

            Point of clarification, by “Greenbacks,” I was referring to the past/proposed debt-free Treasury issued variety. I think that presumes that we at least reign in bank issued credit based money to some degree or another.

          4. Malmo

            “And no discussion of MMT can even begin until the bigger issues of the revolving door and regulatory, legislative, and electoral capture are first addressed in my opinion. Without that, MMT which be another means to ever corrupt ends. Matter of fact, I’d be very surprised if corporate America isn’t already all over the issue, with a well thought out and developed detailed action plan just ready to spring into action. I’d expect nothing less from our “masters of the universe.”

            Very well put, and I completely agree with your sentiments here.

            BTW, does even one prominat MMTer articulate this as a potential problem?

          5. Really?

            BTW, does even one prominat MMTer articulate this as a potential problem?

            If so, I’ve never heard it. Which goes back to my main issue. MMT seems to be good enough I guess as a theoretical concept, it’s just that it never addresses the real world political realities at hand. So once again, we had MMT in 2008 and thereafter for the banks and the rich. For the rest of us, not so much.

          6. Emperor Wang of Market Mongo

            Capitalism doesn’t necessarily self destruct, but the going can get rough at times. Like if an endogenous Napoleon or Hitler comes along.

            Also, debt grows exponentially when you borrow exponentially. Anyone who has paid off a car loan knows that it could work, y’know.

            ———————————————
            The history of Augustiner Bräu

            The history of Augustiner-Bräu, due to about 680 years of tradition Munich’s oldest brewery, has begun in 1294, when the cornerstone of the Augustinian monastery was laid at the Haberfeld next to the Neuhauser Gasse. Documentary proof exists that already in 1328 an excellent beer was brewed within the walls of the freshly completed building. A major fire raged in Munich that year as well and the monastery is known to have been spared, therefore 1328 is considered the foundation date of the Augustiner brewery, thereby being the oldest of all existing breweries resident in Munich.

            From the brewing house’s first days on until the secularisation in 1803, when Napoleon’s reforms put many Bavarian monasteries under state control, the very renowned beer had continually been brewed there. It had been sold in the internal tavern, very popular because of the reigning high spirits, as the monastery hold both brewing and selling rights. Worth mentioning is also that the Bavarian prince had not given them only both rights, but also exempted the monks from any taxes to reward them for the extraordinary quality of their beer.

            After the takeover of the monastery by the state and the departure of the brotherhood, the brewery was denationalized and eventually moved to 275, Neuhauser Straße in 1817 (in the meantime nr. 27 and in Munich’s central pedestrian precinct). The company stayed there only until 1885, when the “Stammhaus” was turned into a restaurant that has persisted until today, even though a major rearrangement, directed by the well-known architect Emanuel von Seidl, has taken place at the beginning of the 19th century.

            Since 1885 the housing of the brewery has become and remained the “Kellerareal” at the Landsberger Straße (today nr. 31 to 35), where also the “Bräustüberl” is, the internal tavern of Augustiner-Bräu. In the meantime that last relocation has proved as a very well thought-out move by the Wagner family, particularly Mr. Anton and Mrs. Therese, who bought the company back in 1829 and led it as a private brewery, just as all their successors have done up to nowadays.

            In the course of history, Augustiner-Bräu survived a privatisation, some wars and many extensions without ever forgetting its philosophy or risking about the quality of its beer. This has made Augustiner-Bräu an important element for Munich’s culture and the city’s restaurants and beer gardens – mainly the Augustiner Keller and the Hirschgarten – places still representing the cosiness and traditional social life of ancient Munich.

          7. Ben Johannson

            MMT is not a political movement. What part of that don’t you people get?

            Let me spell it out for you: politics is easy as hell. No knowledge, discipline or expertise are required to have an opinion about “fixing politics”, which is exactly why it is the purview of the vulgar.

            Understanding is difficult. It requires great knowledge, the setting aside of political ideology and a forgotten word in American Society, “wisdom”.

            Those who repetitiously harp on corruption while making no effort to actually help those of us who want understanding to become broadly distributed are a big part of the problem. You are aiding corruption by throwing out barricades to derail the work of others, work you make clear you can’t be bothered to learn about.

            It is tiresome to deal with people so proud of their ignorance, holding it up like a medal of honor. “There are corrupt people, so MMT is dumb” is about the laziest argument one could possibly make.

            Go home and do some soul-searching, because you’re on the side of the criminals and looters whether you realize it or not. Snarky comments full of opinion and devoid of knowledge, data, fact and substance are how you block productive discussion, and that can only benefit the people you claim to abhor.

          8. Malmo

            You’ve got to be kidding. Everything in the world, but especially econmoics, is political. Claiming MMT is apolitical is, to be charitable, youthful naivete.

            And likewise, having concerns about sytemic corruption perverting MMT outcomes is in no way out of bounds, in fact these concerns are essential. If A then B.

          9. Ben Johannson

            “Everything in the world is political”

            This takes the cake as latest, silliest statement.

          10. MyLessThanPrimeBeef

            For me, one way to tell whehter it’s political or not is whether people engaged in it are taking it personal or not.

            By that measuring stick, this is political.

            It may be silly, but that’s how I can tell.

          11. Malmo

            Some of these MMT world savers seem to be afflicted with the same personality disorder as those pushy, intolerant Syndicalists of my not so recent past were. That leads me to a parting shot at old Ben to clear up where I’m coming from. We war with an authoritarian system. It seeks to centralize and organize its enemies– through political parties, trade unions (not so much anymore), in any way–so as to monitor and manage them. It creates leaders and stars to simplify its control of incomplete, thus self-defeating dissent. Only a hydra-headed acephalous revolutionary current (sorry, but not MMT) is too dispersed, decentralized and unpredictable to be brought to heed. To quote Ken Knabb, the revolution will then be just where we want it: out of control.

          12. Lambert Strether

            “Everything in the world, but especially econmoics, is political.” Everything?! This generalization is surely overbroad.

            * * *

            Although not, apparently, typos. Heh.

          13. Malmo

            LS,

            Thank you for commenting. Your comment is very important to me. Please do not hesitate to comment again.

      3. jrs

        Maybe it’s more important to prioritize getting money out of politics before abolishing the Fed (yea, yea I know these systems are self-reenforcing, the Fed enriches the powers that be, they buy the politicians etc.). It just seems to me that almost nothing worthwhile can be acheived politically until we get the money out.

      4. from Mexico

        @ Really?

        Reading these comments of yours is like watching a tennis match. The ball goes back and forth from one side to the other. But here’s the rub: You’re manning both sides.

        For example, first you say: “I still struggle to see how MMT could ever actually be implemented in the real world that we live in.”

        But no sooner having said that, you turn right around and reverse yourself: “Career criminals are firmly in charge of the current fiat system…”

        But then you immediately turn around and reverse yourself again: “How is granting the power of a wide open money printing press not gonna enhance their criminal prospects even further?”

        But then, in the very next breath, you reverse yourself once more: “Do we not already effectively have MMT for the wealthy and the politically connected? Surely the TBTF banks are not feeling too spending constrained these days, are they? Nor apparently are the entire DoD, DHS, INS, ATF national security apparatus, their incessant whining notwithstanding.”

        But then you turn right around and reverse yourself again: “I’m wrecking the economy just fine with this half-assed little stock 4WD pickup, and you guys want to throw me the keys of a 1200 hp super-charged Monster Truck! Yea!”

        So what is it? Do the derelicts running our country already have the keys to the 1200 hp super-charged Monster Truck? Or do they not?

        If they’ve already got the keys, I don’t understand all the weeping and gnashing of teeth over the possibility of them getting the keys.

        And just to make my position very clear, in my way of thinking there is absolutely no doubt that they already have the keys to the 1200 hp super-charged Monster Truck. So all your fretting is much to do about nothing.

        1. Emperor Wang of Market Mongo

          I see Really?’s pain

          He hasn’t been following MMTers long enough to know whether they are talking about 1913 MMT, 1946 MMT, 1971 MMT or the yet unreleased future MMT where the treasury prints money and not the Fed and their endongenous, fractional banking buddies.

          But I don’t blame Really? for that one.

          1. Me

            Could one person in this thread and elsewhere who don’t like MMT just once prove they’ve read and understand MMT? Just once. I honestly like to read critiques of ideas, they can make you think and re-think. I have yet to hear an actual critique of MMT that has done so. I see no evidence that the anti-MMT crowd understands MMT even a bit. At least come up with new, intellectually lazy talking points. Hearing hyperinflation this, Zimbambwe that is boring and has been shot down. At least give us some new softball simplifications to destroy. These ones are worn out.

            What is it with people talking all the time about issues they haven’t taken the time to understand and study? My father denies global warming. Never read a book on the science, has read a few paragraphs here and there from oil industry front groups (the anti-MMT crowd are up to their noses in propaganda from the creditor interests they claim to hate) and he knows it doesn’t exist.

          2. Ben Johannson

            The proof one hasn’t bothered to familiarize themself with MMT is appeal to metaphysics or criticism so vague and broad as to be meaningless.

            If one of them were to write, “I don’t think the Fed can control interest rates because . . .”, that would be a legitimate attempt to engage and debate. They’d be wrong, but it would be a useful comment.

            When someone writes, “MMT is a bunch of fanboys with no lives who are too neo-liberal and ignore that bank money = freedom”, you know you’ve got a know-nothing, angry troll out to ruin other peoples’ day. They don’t specify what “fanboy” is, they don’t specify how loans make us more free, they don’t specify why MMT is too neo-liberal.

            They can’t because they don’t understand it. At all.

          3. Emperor Wang of Market Mongo

            I’ve been reading MMT, whether I wanted to or not, ever since Warren Mosler sent out his minions to spread the Word to all econ sites on the internet. That was in 2006, IIRC, and before NC was even around.

            I also leaned about how the Fed does things by reading a book back in the early ’80s. Had Keynesian economics in college, Milt econ + depression theory then too, so I wasn’t shocked to learn in the New Millennium that we aren’t on a gold standard.

            I never mention gold, Zim or Weimer because from experience I already know that a MMTer will, and then try and argue with me for being so stupid.

          4. MyLessThanPrimeBeef

            Me, (and I hope I am not talking to me, myself and I), you can start from a principle (or principles) and work down to the details, or you can start from details and work out a principle or two.

            Most people use both and you can’t really reject one over the other.

            Now, you don’t have to lose yourself with the details of MMT to critique it if you are working at the principle-level.

          5. Me

            “Now, you don’t have to lose yourself with the details of MMT to critique it if you are working at the principle-level.”

            I have an ideological bias, everyone does. We can’t escape them.

            Reality does matter though. I understand that people might have an ideological objection to MMT and that is fine. I would just like people to show they have actually read from MMT economists and have given the ideas some thought. I would also appreciate a discussion of some of the issues MMT economists discuss (and most other schools on the right don’t), like private credit creation, finance and private debt’s impact on the economy.

            I also don’t think that principle should be on equal footing with details, reality, if the anti-MMT crowd’s policies are worse. Austerity, which MMT challenges head on, should be challenged. It is also counter-productive, assuming you don’t want countries and societies to be looted and destroyed.

            It would help if libertarians would not turn every conversation into a debate on the gold standard or fiat currencies. It would be nice to know that libertarian economics had a little more to add to the discussion instead of always being stuck on the same song.

    2. jrs

      “You could oppose the same argument to any idea. Of course, the ruling elites would have to make way, which is easier said than done. The first step towards this objective would be to help people understand how the monetary system really works.”

      It might help with this but the people don’t really need to understand MMT to know they are being screwed by the system.

  13. Ruben

    As has been pointed out by others, the huge assumption behind MMT is that those controlling the fiat currency (the gov’t) are virtuous public servants, altruistic number crunchers. motivated by no other thing than providing full employment and controlling inflation. MMT is an utopian monetary theory. One has to admit though that MMT is the logical economic counterpart of the utopian representative democracy theory of politics. Both assume the wisdsom and sanctity of people granted special privileges to impose law on others.

    1. Ben Johannson

      You’re getting it wrong. MMT doesn’t “assume” anything regarding the virtue of public servants. It teaches that money creation and destruction is happening and has been happening since we went off the gold standard during the Roosevelt Administration.

      People can’t counter the policies and actions of the corrupt who control the current system until they understand how the system works. Why do you think neo-liberals continually lie about economic realities? Because they want to maintain one set of books for the powerful and a doctored set for the people so they can’t insist on real reform.

      1. Carla

        Thanks for your clarity in this comment stream, Ben Johannson. But I do wish someone would explain why MMT does not speak to the fact that 97% of money is created, NOT by governments at all, but by private banks when they issue interest-bearing loans.

        BTW, a dirty secret of the 1%: Interest is INFLATIONARY.

        1. Ben Johannson

          Financial assets created by banks are temporary. When a loan is made the money supply expands. When the loan is paid back the money supply contracts. The reason banks are responsible for so much of what mainstream economists refer to as the “money supply” is that we have been relying on monetary policies to stimulate aggregate demand for thirty-five years. The argument from neo-liberals is that monetary policies are superior to fiscal policies, which create permanent net financial assets.

          MMT and its proponents have effusively criticized those policies for forcing the private sector to take on too much debt when aggregate demand can be effectively stimulated via fiscal policy, and for failing to spend sufficiently to satisfy the private sector’s desire to save.

          That’s why bankers are so strongly against using fiscal policy to deal with our ongoing economic troubles: a massive injection of net financial assets from government would reduce private sector demand for loans from banks. Their profits would suffer.

          1. gepay

            but then you have the added interest to the money supply from every loan that is paid back. So the money supply is continually expanding except when loans aren’t paid back. Then the money goes to money heaven and the money supply contracts as happened with the latest financial crisis. So the central banks have created trillions of dollars and Euros (tens of?) etc to counteract this but it has gone to the financial system instead of the people. This has caused the velocity of money to slow down tremendously so the trillions really haven’t fixed anything in the real economy. They have kept the stock markets up.

      2. Nathanael

        Ben Johannson wrote:

        “You’re getting it wrong. MMT doesn’t “assume” anything regarding the virtue of public servants. It teaches that money creation and destruction is happening and has been happening since we went off the gold standard during the Roosevelt Administration.”

        Correct, but actually for LONGER than that. Before that, the government still controlled and regulated the paper money supply. Even before that, the government legally controlled the gold supply — for DECADES — in order to create and destroy money. Back when the standard was bimetallic, the goverment controlled the silver supply.

        You can go back further than that. Why did the government start controlling the paper money supply and the gold supply? Because before that, *private bankers were already creating and destroying money*. They were completely terrible at it and their hapless, thoughtless creation and destruction of money caused depressions every decade, or more often in some cases.

        Money WILL be created and destroyed. This is unavoidable. Understand it. Then attempt to control it.

        “People can’t counter the policies and actions of the corrupt who control the current system until they understand how the system works.”

        Exactly. People who don’t understand how it works are seduced by stupid ideas like the gold standard.

    2. Finnucane

      Jeezuz friggin Chrikes – it aint that hard: MMT stands for the simple proposition that the state sovereign in its own currency is not fiscally constrained. Meaning: the suppositions underlying the current budget-austerity-suicide debates are – wait for it – a big fucking lie. That’s why MMT is important right now – it shows, by rather simplistic arguments, that we’re being lied to, so that, as a logical corollary, we should be completely pissed off.

  14. Alex Hanin

    @Ruben

    You can go further than that. The assumption behind democracy is that the people is wise. Pretty huge too. So what?

    Nobody thinks the government is composed of “virtuous public servants, altruistic number crunchers. motivated by no other thing than providing full employment and controlling inflation”, that would be pretty silly. But they’d probably make better decisions if they didn’t believe (or couldn’t act as if they really believed) such non-sense as “ricardian equivalence” and the like.

    Checks and balances can apply to a fiat currency. Isn’t it already the case?

  15. Moneta

    According to economics, emerging markets should be gaining clout and equilibrium should push up their standard of living towards ours over time. This should lead to the US dollar losing its reserve currency status.

    However, thanks to finite resources and the current power structure, I have trouble believing that the US will let emerging market consume the oil that could be used by America.

    The US has enjoyed an overvalued currency for a while which has permitted the Americans to be net importers and avid consumers. This has configured world trade in a specific pattern… few countries are net importers and many are exporters with the ultimate goal of reching the spendthrift US consumer, which was in growth mode thanks to the boomer cohort.

    In exporting countries, exporters have the upper hand since they are the ones with the money and the power thanks to the economic structure of the last few decades. They are set up to export and they cherish the status quo. They will push their governments to devalue their currencies to keep the game going.

    The US has too much debt relative to GDP and needs to grow or devalue its debt but it has a lot to gain by keeping the reserve currency status as other exporting countries will probably end up doing the heavy lifting.

    It makes sense for most countries’ general population to kill the US dollar reserve currency and stop selling their soul to the US (just like the US did with the UK) but the exporters will fight tooth and nail to keep the status quo.

    So while I see inflation in the US, I see larger inflation in exporting countries as they all start devaluing their currencies to keep the game going.

    I believe the money structure will be set to fit to these power plays.

    Americans don’t understand how lucky their are.

  16. Moneta

    I’ve noticed a few commenters stating that there is so much work to do, yet no money to pay workers to do the work. I’ve noticed the same thing and often wondered why…

    In theory, services are unlimited. However, when you have a currency such as the one we have today, they become limited. Why? Because our monetary system is mostly based on hard assets. Most loans must be backed by some form of collateral, more often than not hard assets. That’s why most people want to own a house and build equity… that’s how the average Joe can get to play and fit into the economic system. So if you want to pay for services, you must get your hands on money that probably came into existence to fund some activity based on hard assets. Most of the 1% are linked to these hard assets or those who get the funding for them.

    In hard times, hard asset collateral becomes even more fundamental. This means that ultimately, the ones who own the hard assets will determine which services get financed.

    We could try to finance all the infinite work but it would probably lead to a bottleneck in the physical world because most of us are materialists and will use our new found money to purchase some physical assets such as a car, house, etc. And when times get hard, we focus even more on hard assets while cutting on frivolous expenses… usually services.

    If we want full employment we have got to either kill our materialism or create a second currency that would not create a bottleneck in the hard asset market. But even more, we need to create a monetary system that does not privilege the funding of hard assets.

    Frankly, as long as we are materialists, I don’t know how we will accomplish this.

  17. Stephen Gardner

    Excellent post Yves. It really made it easy to understand. I suppose it was inevitable that such an effective essay would draw the trolls out from under their bridges.

    1. JTFaraday

      Really? I had exactly the opposite reaction. As a piece of writing, I think it’s a train wreck.

      For one, who is the intended audience for this piece? I think if you re-read it with its possible audiences in mind, you will discover that it effectively informs exactly no one.

      For another, it is a mishmosh of issues of relevance in the “discssion” around MMT, but has no discernible organization that makes any sense.

      It makes a display of overcoming a few scattered objections, but it effectively overcomes none of them. It mostly rehearses them. The objections are wrong because MMT says they are!

      Finally– to take a micro, sentence level example of why a clear sense of audience matters if your aim is to inform people– there are cryptic statements like this one:

      “The essential insight of Modern Monetary Theory (or “MMT”) is that sovereign, currency-issuing countries are only constrained by real limits.”

      I suppose the author believes “real limits” refers in some way to the paragraph preceding, but it’s not clear what he or she means by this.

      I can interpret what “real limits” generally refers to in this “discussion” because I’ve been casually following it.

      Anyone who “needs to hear this”– because they’re not economically inclined and also haven’t been following the “discussion”– isn’t going to be able to interpret it.

      It’s actually statements like this that make me think the audience is “the general public” but on the the other hand, does “the general public” even know what the hey “the platinum coin” refers to?

      I suppose a plausible audience that knows what “the platinum coin” refers to could be Heidi Moore or the O-bots, but you’re not going to convince Heidi Moore–and if you don’t know who Heidi Moore is, that’s just tough!– or the O-bots by flogging them with this wet noodle.

      I could go on, but I won’t. If I were working in an editorial capacity, I wouldn’t have enough hours in the day to get this ready for publication, regardless of who the audience is supposed to be.

      But, on the other hand, I guess that’s the beauty of the internet–no editors!

      1. JTFaraday

        That said, I am not particularly a fan of MMT. I think the MMT-ers vastly over-sell the critical nature of their economic discourse, (and that overselling really irritates me).

        Scanning the comments, it would seem that there are others who generally agree with this assessment.

          1. JTFaraday

            Like I said, I scanned them.

            The ones that stick in my mind are those that refer to the primacy to the political in our political economy, with regard to which most (not all) MMT-ers are as a-contextual as any other trained economist.

            But, I have also seen people project “Austrian” ideas onto other people and shadowbox with “Austrians” where no “Austrians” were to be found.

            There seems to be an assumption that all objections to anything “MMT” are necessarily Austrian (or rightwing Tea nutter) in nature. There also seems to be an assumption that any and all references to the “gold standard” must also be ideologically “Austrian” in nature.

            These assumption are false, but yelling “Austrian” has become an acceptable way of shutting down the “discussion.”

            As your comment itself indicates, whether you yourself intended it that way or not.

          2. Malmo

            LOL. I’m no Austrian, not even close, yet I think MMT has significant shortcomings, which many here have pointed out, no matter if they’re Austrian or not.

      2. jrs

        I would assume the “real limits” or any economic theory or system are natural resources, what the planet can bare and will provide if you will. Do I win? I mean I suppose in theory a factor of production like labor could be a limit, but in a time of unemployment and a poisoned planet that’s just theory, environmental destruction the reality and the real limit.

        1. JTFaraday

          Well, that’s just it. We don’t know what the author thinks constitutes a “real limit,” according to MMT.

          On this thread, there are those who think the global hegemon (and global and domestic terror state) should be subject to moral constraints, to the limits of human decency.

          Is this a “real limit”?

          There are others who think the way to effect these moral constraints is to somehow turn off the money spigot and fount of its global power. The way to do this, is to just go with the popular opinion that says “too much government spending is bad” and pull the plug.

          There are others who think this is unnecessary reaction, that limits our choices (and it probably is), even as they suggest that furthering the global hegemon (and etc) does seem to be very much the history of fiat money since the 1970s period referred to in the article.

          The MMT-ers, in contrast, pride themselves on promoting “MMT” as an apolitical, or alternatively, an amoral framework.

          Except when it pleases them to contradict themselves and contend otherwise. This very frequently seems to have something to do with channeling human resources into the service of that same global hegemon (and etc) from which they pride themselves on being a-politically (or amorally) removed.

          Needless to say, it doesn’t work that way in the real world. The policies and policy frameworks for which one fronts arguments produce different effects in different political environments.

          There is no apolitical or amoral framework where the rubber meets the road in the real world.

          In addition, in the real world, when people are caught talking out of both sides of their mouths too much of the time, others start to regard them with suspicion.

          Here, I refer to the MMT theorists and many of their fanboyz–and they are all boys– not (necessarily) the author of this article. Frankly, I think they MMT-ers own contradictory statements sow confusion, and this article is the result.

          The same may be said for the stir that they always seem to cause, which their fanboyz have taken as a sign of their intellectual perspicacity, social and political progressivity, and moral righteousness.

          1. Ben Johannson

            You still haven’t bothered to learn about what you’re criticizing. The definition of “real limits” is ubiquitous throughout the MMT literature:

            A) the goods and services offered for sale in the nation’s currency

            B) the quantity of those goods and services government can purchase without monopolizing those resources and competing with the private sector/creating hardship.

            So as an example, government might want to do work on improving infrastructure and to do so must acquire cement from the private sector.

            If current annual demand for cement in the U.S. were 600 million tons and capacity for cement production were 900 million tons, government would limit its acquisition to 300 million tons or less. It would do this by offering market rates for cement and waiting to be approached by suppliers who cannot sell their excess productive capacity to the private sector.

          2. MyLessThanPrimeBeef

            I’d worry about vampire squid borrowing at zero percent to increase production capacity to 1.2 billion tons, forcing the government to buy another 300 millon tons.

          3. JTFaraday

            With regard to “real limits,” I am not talking about the 3 dozen MMT primers out on the interwebz, or any other article I may or may not have read.

            I am talking about this particular article, which proposes to explain something it itself sys is central to “MMT”– and fails to do so.

            In fact, if you read what I wrote above instead of shadow boxing the dark side out of your own bloated ego and unjustified sense of self righteousness–thereby illustrating some of my points about the fanboyz once again yourself– you would already know that.

            As for seeking out enlightenment from the Masters, just no. Don’t even presume to tell me how to spend my time.

          4. Lambert Strether

            Faraday: Pavlina Tcherneva and Stephanie Kelton would be surprised to hear you say that MMT theorists are “all boys.”

            Have you given consideration to the merits of a practice of familiarizing yourself with the names of the scholars — and hence, one assumes, their work — in an academic school before undertaking to invest so much time in criticizing it?

          5. JTFaraday

            I’m sure they’d also be surprised to hear that they’re “fanz” and not “theorists.”

            Although, now that you mention it, it is interesting that even with two women academics on the case, “MMT” clearly has no fangirlz.

            I’ll leave to the geniuses over “New Economic Perspectives” to determine whether that has to do with their public policy ideas–which they seem to think are great for the untermenschen!– their failure to communicate their ideas effectively with the public, or their style of communication and the way they interact with people.

            And by the way, I don’t consider pointing out the MMT fanboyz’s communicative incapacities and ad-hominem attacks themselves “ad-hominem,” those communicative incapacities and ad-hominem attacks were amply demonstrated on this thread.

            Just as I predicted yesterday morning.

          6. Lambert Strether

            @JTFaraday Ah! It’s a copy editing problem: “Here, I refer to the MMT theorists[,] and many of their fanboyz–and they are all boys– not (necessarily) the author of this article.”

            I had assumed your comma placement (or lack thereof) was accurate, given your lengthy and detailed critique of the poster’s prose style above. My bad!

          7. Nathanael

            Ben: I notice that that is an overly neoclassical definition of “real limits” — one which worships overly much at the altar of the “private sector”. I guess MMT has a ways to go.

            Suppose the cement production capacity in the US is 900 million tons. Suppose that right now, 200 million tons goes on creating elaborate sculptures for Bill Gates’s garden, an endeavor which employs three people total. 100 million tons goes to *productive* private sector uses.

            In this case, the government can and should purchase up to 800 million tons for productive uses, and can do so without disrupting other parts of the economy.

            My point is that there is quite a lot of “private sector activity” which can (and should) be squelched without meaningfully affecting the general economy or employment. Specifically, the wasteful use of materials by the idle rich.

  18. TomDor

    My only problem with the following ‘Here’s how: start with a 100% payroll tax cut for both workers and employers” is that; the consumer pays all taxes, the employers only pass thru the tax to the authority, the employer prices taxes into the product they sell.

    Also, the predatory component…the financial capital component or….as I see it…the non-labor, not wealth creating activities need to be taxed at high rates -not because of fairness but to correct the damage done to the real economy by these activities that rest outside of the real production and consumption economy. High taxes may deter this non-productive use of money but will still leave room for this activity to still occur….tax a hedge income for someone making income at 4 billion a year at 90% and it still leaves 400 million on the table.

    The great sore spot in our modern commercial life is found on the speculative side. Under present laws, which foster and encourage speculation, business life is largely a gamble, and to “get something for nothing” is too often considered the keynote to “success”. The great fortunes of today are nearly all speculative fortunes; and the ambitious young man just starting out in life thinks far less of producing or rendering service than he does of “putting it over” on the other fellow. This may seem a broad statement to some: but thirty years of business life in the heart of American commercial activity convinces me that it is absolutely true.
    If, however, the speculative incentive in modern commercial life were eliminated, and no man could become rich or successful unless he gave “value received” and rendered service for service, then indeed a profound change would have been brought in our whole commercial system, and it would be a change which no honest man would regret.- John Moody, Wall Street Publisher, and President of Moody’s Investors’ Service. Dated 1924

    In spite of the ingenious methods devised by statesmen and financiers to get more revenue from large fortunes, and regardless of whether the maximum sur tax remains at 25% or is raised or lowered, it is still true that it would be better to stop the speculative incomes at the source, rather than attempt to recover them after they have passed into the hands of profiteers.
    If a man earns his income by producing wealth nothing should be done to hamper him. For has he not given employment to labor, and has he not produced goods for our consumption? To cripple or burden such a man means that he is necessarily forced to employ fewer men, and to make less goods, which tends to decrease wages, unemployment, and increased cost of living.
    If, however, a man’s income is not made in producing wealth and employing labor, but is due to speculation, the case is altogether different. The speculator as a speculator, whether his holdings be mineral lands, forests, power sites, agricultural lands, or city lots, employs no labor and produces no wealth. He adds nothing to the riches of the country, but merely takes toll from those who do employ labor and produce wealth.
    If part of the speculator’s income – no matter how large a part – be taken in taxation, it will not decrease employment or lessen the production of wealth. Whereas, if the producer’s income be taxed it will tend to limit employment and stop the production of wealth.
    Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the source from whence they are drawn.

    Written around 1925

    Laborers knowing that science and invention have increased enormously the power of labor, cannot understand why they do not receive more of the increased product, and accuse capital of withholding it. The employer, finding it increasingly difficult to make both ends meet, accuses labor of shirking. Thus suspicion is aroused, distrust follows, and soon both are angry and struggling for mastery.
    It is not the man who gives employment to labor that does harm. The mischief comes from the man who does not give employment. Every factory, every store, every building, every bit of wealth in any shape requires labor in its creation. The more wealth created the more labor employed, the higher wages and lower prices.
    But while some men employ labor and produce wealth, others speculate in lands and resources required for production, and without employing labor or producing wealth they secure a large part of the wealth others produce. What they get without producing, labor and capital produce without getting. That is why labor and capital quarrel. But the quarrel should not be between labor and capital, but between the non-producing speculator on the one hand and labor and capital on the other.
    Co-operation between employer and employee will lead to more friendly relations and a better understanding, and will hasten the day when they will see that their interests are mutual. As long as they stand apart and permit the non-producing, non-employing exploiter to make each think the other is his enemy, the speculator will prey upon both.
    Co-operating friends, when they fully realize the source of their troubles will find at hand a simple and effective cure: The removal of taxes from industry, and the taxing of privilege and monopoly. Remove the heavy burdens of government from those who employ labor and produce wealth, and lay them upon those who enrich themselves without employing labor or producing wealth.

    1. Ben Johannson

      My only problem with the following ‘Here’s how: start with a 100% payroll tax cut for both workers and employers” is that; the consumer pays all taxes, the employers only pass thru the tax to the authority, the employer prices taxes into the product they sell.

      Why would reducing financial burdens on working people be a problem for you?

      1. TomDor

        It does not present a problem – I have no problem with cutting taxes for both – the problem is ‘All Corporations” is to broad. Also, most do not recognize that the tax burden is on the consumer and never has been on the corporation – not knowing this tax fact always leads to people making the argument that corporations are over taxed – when, in fact, it is the consumer that is over taxed. The financial services corporations have figured out how to over-finance existing equipment (not investing in new capital equipment and labor) – look at the increased labor productivity without the raise in labor rates – financial capital skims the interest income out – it is a tax on the real economy.
        Automatically, if you remove taxes from labor and (real productive) business you would lower the cost of the product enormously but, one would also create a gap that could be filled by financial services companies (extractive non-productive) finance the new profit increase by inflating the company capital assets to feed an interest stream (non-productive company)- unless you tax income from non-productive (speculative) incomes to curb that gambling.
        Two types of corporations exist – one should have taxes removed – the other (financial/speculative) should have them increased by a large amount.
        Remember Glass-Steagall Act. Separation of real banking from the gambling lot

        In spite of the ingenious methods devised by statesmen and financiers to get more revenue from large fortunes, and regardless of whether the maximum sur tax remains at 25% or is raised or lowered, it is still true that it would be better to stop the speculative incomes at the source, rather than attempt to recover them after they have passed into the hands of profiteers.
        If a man earns his income by producing wealth nothing should be done to hamper him. For has he not given employment to labor, and has he not produced goods for our consumption? To cripple or burden such a man means that he is necessarily forced to employ fewer men, and to make less goods, which tends to decrease wages, unemployment, and increased cost of living.
        If, however, a man’s income is not made in producing wealth and employing labor, but is due to speculation, the case is altogether different. The speculator as a speculator, whether his holdings be mineral lands, forests, power sites, agricultural lands, or city lots, employs no labor and produces no wealth. He adds nothing to the riches of the country, but merely takes toll from those who do employ labor and produce wealth.
        If part of the speculator’s income – no matter how large a part – be taken in taxation, it will not decrease employment or lessen the production of wealth. Whereas, if the producer’s income be taxed it will tend to limit employment and stop the production of wealth.
        Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the source from whence they are drawn.

        Written around 1925

        1. Ben Johannson

          Tax burdens being placed on the consumer occur when a business passes on the cost of the tax it owes by increasing the price of the good or service it sells. If we eliminate a tax then there’s no cost to pass on.

          1. Nathanael

            There is a solid economic literature (usually ignored for political reasons) on the following issue:

            When you tax a business, what percentage of the tax goes into higher prices (on consumers), what percentage goes into lower wages (for employees), and what percentage goes into lower profits (for the plutocratic owners)?

            This is an empirical question. The answer is different for different industries. However, the *short* answer is that in *most* industries, for the last several decades, the tax comes straight out of profits.

            Why don’t they raise prices? Prices are constrained and can’t be raised because of competition and because consumers have limited incomes. (The exception: monopolies providing essentials, such as Internet Service Providers. These need to be government-run rather than private.)

            Why don’t they cut employee wages? Well, they *do*, but employee wages are already so low that there really isn’t much left to cut. Also, competition — employees will go somewhere else if they can get better pay. Finally, the “this job isn’t worth it” factor — at some low level of pay, it becomes rational to quit, because collecting scrap metal has a better payback.

  19. Moneta

    IMO, no economic theory goes to the root of the problem which is that most money gets injected with collateral backing which is usually a physical asset.

    There is a popular movement against government but the people are shooting themselves in the foot as governement is THE entity par excellence that can inject money without physical collateral.

    Free markets are fed by private banks which usually require physical collateral, especially in hard times, when making loans. By promoting “free markets”, people are forcing an even greater economic contraction because this means the economy will be even more focused on hard assets which are finite.

    There is no reason why I should need equity to get money to get a haircut in exchange for a massage. The trade should be the basis for the money. That’s what money is for: trade. The national currency was created to make trade easier but in reality it impedes trade in services. That’s why there is underemployment.

    Furthermore, market psychology is forcing government into hard asset investments when the private market could do it iteself. Government should be promoting soft asset investment (whatever it should be called) and leaving hard assets to the private markets… unless these private assets get too concentrated and need to get redistributed… of course the 1% will hate this because it will dilute their wealth and power.

    Everybody seems to focus on how much money should be injected into the system but no one seems to differentaite the impact of money injected thourgh collateral based loans and non-collateral based loans.

    1. Moneta

      You will notice that the political affiliation typically follows the type of loan (collateral/non-collateral)that is funding the individual’s lifestyle.

    2. Massinissa

      I dont have much constructive to say at the moment, but Moneta, thank you very much for your comment.

    3. financial matters

      I think that’s a really good point. Michael Hudson addresses it from one angle in a lot of his work in that he emphasizes that most of bank loans are against collateral already in place such as real estate or stocks and bonds rather than funding entrepreneur type activity to create new jobs and an expanded manufacturing base. The former mainly tends to pump up the price of these hard assets actually putting a damper on real economic activity. (higher rents)

      It seems to me that what you’re talking about is more the ‘job guarantee’ part of MMT. Here the government could inject money into the economy for what you call ‘softer’ services which could facilitate better overall economic activity.

  20. larry

    Dan, Why did you fail to mention Bill Mitchell? After all, he is one of the founders of MMT and may have come up with the name. And he has been doing his best to communicate the theory. He and Wray are writing the first MMT based econ textbook. This really is shocking.

  21. joe bongiovanni

    MMT’s achilles heel is its failure to recognize that it is the debt-based money system of the private bankers (endogenous money) that they care to perpetuate, while claiming that the fiat money system has an inherent public purpose identity.
    Rather than start with a political-economy perspective of a national money system, they begin with a far secondary identity, that of the unit-of-account of the currency.
    From there, it is a whirlwind tour through double-entry accounting and non-money monies.
    All the while they proclaim on how a sovereign fiat money does these great things, like having the government UNKNOWINGLY create money when it spends.
    Which it doesn’t.
    But it definitely could.
    For a more proper understanding of the foundations of modern public money, have a read of the dialogue on a comparisons between MMT and the Soddy school.
    http://monetaryrealism.com/author/brett-fiebiger/

    Thanks.
    For the Money System Common.

    1. Susan the other

      This article does mention that there is a separate banking issue. But this has always bothered me too. Why take over the money supply and create jobs if the private banking system can appropriate all the gain in the manner we have directly witnessed over the last 6 years. That’s a question for policy. But it is a really big question and nobody has done much to look at it. Except talk about how to strictly regulate the banks and remake them into social utilities. I fear they are so sociopathic they will work around any half-measures in no time flat and send their ill-gotten gains half way around the world to a Chinese laundry.

      1. joe bongiovanni

        Thanks, Susan.
        At this stage, unfortunately there is no proposal by MMT to take over the money supply to create jobs. Though lip service is given to Lerner’s ideas of ‘printing money as needed’ to achieve that purpose, there are no proposals made for the legislative changes needed to do so. The claim is that no reform is needed.
        Rather, the position is taken that in a sovereign fiat system, the government not only already has the power to create the money when it spends, but that the government DOES create the money supply when it spends – it being internally unacceptable to say otherwise.

        With MMT, we have two monetary authorities. One is a private authority run by the Fed primarily as a system of commercial banks. The other is a public authority under Treasury, ostensibly with the power to run very large deficits to foster fuller employment, or whatever public policy will be used to achieve some semblance of social justice.
        The Kucinich Bill recognizes that there can be only one monetary authority, only one body charged with providing exchange media to meet our national economic goals.
        And it also recognizes that this is OUR money system, and that it is we the people who ought to gain the wealth we are producing in our economy.
        Bank profit should be a reward for risk, and not for privilege.
        Hopefully. MMT can get that someday.

        For the Money System Common.

        1. Nathanael

          Joe: one thing which MMT as an economic theory states is that money is endogenous. Period. Always and forever.

          This appears to be, in actual fact, true. There is no such thing as exogenous money.

          1. Nathanael

            I agree with you that the Kucinich Bill is a good idea.

            As long as money is being spontaneously generated, and as long as this is unavoidable, we should to the extent possible make this a communal money-printing for the benefit of the general public — rather than allowing a few billionaires to extract the seignorage profits from the money-printing.

    2. MyLessThanPrimeBeef

      The identity is correct though.

      The identity is similar to that of a slightly simpler system:

      The more money I print, the more money you will have.

      1. joe bongiovanni

        True enough.
        Until I, the holder of the interest-bearing monetary assets backing all that money, get it all back in debt-service.
        No?

        1. MyLessThanPrimeBeef

          Getting it (printed money) back is not always the objective…because you can always print more money.

          The objective (of money printing) is to avoid work, among other benefits escaping me at the moment (I have never personally experienced those, so, it’s a little difficult for me to articulate them).

        2. Calgacus

          Joe: Until I, the holder of the interest-bearing monetary assets backing all that money, get it all back in debt-service.

          Interest bearing monetary assets back money? Bonds can back money?

          Stop and THINK about what you are saying.

          Yes, bonds can sometimes tickle a wee bit more savings desire out of a state’s creditors. The founding of the Bank of England (or the start of any country’s financial system), or WWII might be times where this would be a good idea, even.

          But bonds CANNOT create a desire, a demand for savings. The idea is comical. What’s to stop anybody from doing a JGordon or JTFaraday & just deciding: – I have better things to do than accept your bonds. No matter how high the interest rate, a zillion valuelessnesses is still a valuelessness. Why not put your money in Calgobux? I sell them for one dollar each, and offer a 100%/year interest rate!

          It is so silly an idea that Lewis Carroll satirized it in Sylvie & Bruno. (I think he got the idea from work on logic by Charles Lutwidge Dodgson )

  22. Kurt Sperry

    . What follows is written to try to hasten that day.

    This will be an intentionally simplified, non-technical exposition of the principal tenets of Modern Monetary Theory. The no-algebra version, in other words. It is intended as a guide for non-economists and other lay people who may have heard the phrase or seen a video clip about MMT and who wish to learn more. It is not a substitute for more complete and, necessarily, much more technical treatments that are available elsewhere, including the MMT Primer here at NEP.

    Simple question: what happened to the promised guide?

  23. Brooklin Bridge

    The world moved on, and Nixon’s action [conversion of US dollar to fiat money starting in 1971] was mainly just remembered as a typical, high-handed Nixonian move – one which at least carried along with it the virtue of having pissed off Charles De Gaulle.

    (Just to be a pain), since De Gaulle died in November of 1970, see here, the conversion to fiat in 1971 must have really really really gotten his goat to have provoked any reaction at all (unless I’m missing something about the effects of death or unless De Gaulle heard of the possibility quite a bit before Tricky Dick put it into effect).

    Other than that trivia, this is an excellent explanation of MMS, and I’m copying it to my hard drive so I can re-read from time to time. Thanks!!!

  24. Bev

    Thanks Joe, I will need to read what you recommend.

    And, to emphasis:

    http://www.monetary.org/

    http://www.monetary.org/mmtevaluation

    AMI’s Evaluation of “Modern Monetary Theory” (MMT)

    by AMI Research, with Steven Walsh; and assistance by Stephen Zarlenga

    snip

    MMT mis-defines money as debt

    Also at:
    Read more at http://www.nakedcapitalism.com/2013/03/links-3612-2.html#WbZS2zvBEkGtWyT8.99

    …….

    The coalition for Banker’s Debt Money as per one of the most inside insiders:

    from: http://en.wikipedia.org/wiki/Kevin_Phillips_%28political_commentator%29

    Formerly a Republican Party strategist, Phillips has become disaffected with his former party over the last two decades, and is now one of its most scathing critics.

    American Theocracy (2006)

    Allen Dwight Callahan[1] states the book’s theme is that the Republican Party (GOP), religious fundamentalism, petroleum, and BORROWED MONEY are an “Unholy Alliance.”[2] The last chapter, in a nod to his first major work, is titled “The Erring Republican Majority.” American Theocracy “presents a nightmarish vision of ideological extremism, catastrophic fiscal irresponsibility, rampant greed and dangerous shortsightedness.”

    ………..

    This is not being partisan. I would want everyone across the spectrum to benefit from a Debt Free currency, so that we can create the jobs to rebuild a better future for all of our families, our communities and our nation-together.

    1. Nathanael

      All money is debt by its very nature. The history of money tells us this. The odd thing about money is that it is *tradeable* debt, whereas most debt is not transferrable.

      A good way to realize this is to think about why your money is worth something. It’s worth something because other people will accept it as payment. Why will they accept it as payment? Because it is a *claim on the labor or assets of yet other people*.

      In short, money represents someone (nonspecific) owing you something (nonspecific).

      So you’re barking up the wrong tree; money is debt and that is unavoidable. Perhaps what you’re thinking off is *interest-free* money?

  25. Paul Jurczak

    “But if you think that adding 800 million dollars to the deficit over two years is a guaranteed way to generate hyper-inflation” – it’s hard to find anyone who thinks that, but adding 800 billion may be another matter.

    1. Nathanael

      800 billion wouldn’t do it either. France multiplied the money supply by roughly 10 in… the 50s was it?…. and had no hyperinflation, just a short bout of ordinary inflation.

      Now, my proposal to give everyone a million dollars, which would inject 200 trillion into the money supply, might possibly bring hyperinflation.

  26. Ramon

    This, and “Beppe Grillo on the Money System” have been very useful.

    My favorite introduction to MMT remains “Playing Monopolis Monopoly”, on this very site. If you haven’t read it yet, you should. This is the no-algebra primer people can use to get a handle on MMT. The only thing I’d add to that primer is the role of taxation, which (amongst other things) allows government to ensure the game of Monoploly will go on indefinitely, and also allows it to balance the monetary needs of the economy.

  27. otishertz

    MMT is good at describing the current ridiculoud system. It is no justification for a compunding fiat system that draws demand forward in a way that overruns nature. All systems are a subset of the whole of nature. Nature is limited as evidenced by the spherical shape of the eEarth. Resource depletion occurs when fantasy financial systems can conjure credits on computers and hire people to make missiles or dildos, doesn’t matter. Both missiles and dildos do nothing toward improving our long term chances for survival on this finite orb of scarce resources. Any economoic theory that fails to take into account the ecosystem of which it is a subset is a farce.

    1. lambert strether

      “MMT is good at describing the current ridiculous system.” Hardly seems “farcical” to me. Diagnosis necessarily precedes cure (modulo self-healing or good luck).

  28. Me

    I came here yesterday when this post was new. There were no commments. I thought, it will be about an hour and the libertarians and their fellow travelers will arrive and ruin the conversation. We will one more post on MMT turn into a debate on the outdated gold standard and the conversation will as usual crumble from stupidity. I was right. God, I hate libertarians. Everything about them. Their dumb phrases. Their utopian economic theories. Their ahistoric pet theories. Yuk.

  29. ed burkett

    I am impressed by this MMT. Makes sense. But, I would like to read an analysis by proponents of MMT that explains 20th century’s notable inflations in South America, Zimbabwee and Weimar Republic.

    1. constant

      Category Archives: Hyperinflation

      This category contains blogs about hyperinflation

      Zimbabwe for hyperventilators 101
      Posted on Wednesday, July 29, 2009 by bill
      Zimbabwe is the new Weimar Republic. Not! Zimbabwe is the front-line evidence that shows that government deficits will generate hyper-inflation. Not! Zimbabwe is the demonstration of the folly of a fiat monetary system. Not! Zimbabwe is an African country with … Read the rest of this entry »

      http://bilbo.economicoutlook.net/blog/?p=3773

      http://bilbo.economicoutlook.net/blog/?cat=20

      Please, Check it out!

  30. JohnB

    In my view, MMT tries to stay neutral on the political issues, and that is a good thing; the initial purpose of MMT, is not to lay out a solution to the political problems, but to take the single step of showing that government use of money creation is possible without any downsides.

    Money creation can either be used for private purposes (as it is now, in the private banking system, by issuing debt-based money), or it can be used for public purposes (through government spending, as MMT advocates; with taxes being to public money creation, what debt is to private money creation), and MMT (at its current stage) is about showing use for public purpose is possible, and desirable.

    We just need to take that ONE step, and then everything changes; when that penny drops for the public, it will be a game changing situation, because it completely changes political discourse.

    Overnight, the entire conservative economic narrative, “my taxes pay for x, y, z”, “we don’t have the money!”, “we have to balance our budgets” etc., becomes totally false, and REAL progressive politics will be reignited again; it is only then that all of the wider political problems which might cause trouble for MMT, can be truly tackled, because if you try to do too much at once while promoting MMT, you will just either confuse/overwhelm people, or foster too great an opposition, when you need to stick to the one single goal of attaining that first step.

    So MMT right now is only for achieving this first step, of opening use of money creation for public purposes, and after that you can build on top of it anything else that is desired or needs reform (and the change in political narrative will make such reform far easier), whether that covers simple reform of welfare/taxation, the introduction of a money-creation-backed public bank (and corresponding elimination of fractional reserve), or going right out towards building a steady-state economy (which I think will be the next natural progression after MMT, built right on top of it).

    Just focus on getting past that first hurdle, and make that the simple goal and priority, to come before everything else (and with everything else closely following it, once that penny drops).

    1. Nell

      Well said. This was my feeling too. It is silly to expect one theory to come up with the solution to the myriad of social, political as well as economic problems that beset us. Its like saying cognitive behavioural therapy is crap because it doesn’t cure heart disease.
      Currently the bulk of the money circulating the economy is created and used for private purpose. And look where that has brought us, especially for you guys in the states. The current distribution of your national income is a disgraceful way to treat the citizens of your quite beautiful nation. Understanding how the monetary system works puts the power back into democracy.

    2. be'emet

      bravo! everything starts with legislation!

      Treasury to take over Federal Reserve.
      Government freed of tax income for expenditures.
      Bank lending only on 100% reserves, no fractions.
      (banksters to jail.)
      money created for basic infrastructure, roads, schools etc.
      taxes for redistributions and to withdraw excess liquidity.
      forgiveness of unpayable interest on consumer debt.
      viva HR 2990, Kucinich & Co!

      1. Ms G

        Good list. You left out 3 important items though:

        Ban on real estate speculation — roll back rents to where they match the true median income (not median income calculated counting .01% wealth); pull the cover off bank assets and allow all real estate prices to return to where they belong (hint: a *whole* lot lower than they are). No individual (including any entity that individual belongs to) can own more than 2 pieces of property.

        National Health Care (or Medicare for All). Effective immediately. Allow insurance companies to experience the creative destruction they find so inspiring in other contexts.

        Food — affordability issue — price controls.

  31. mac

    Given whatever line you care to adopt, MMT, Gold standard or wampum. It seems certain to me that the more folks work to make some idea work the sooner and better off we will all be.
    The Teabag folks, Ron Paul gang and many other “true believers” are not helping.

  32. MyLessThanPrimeBeef

    Ok, you can write what MMT is, but it would be more interesting, I think, when someone writes what MMT is not.

    It’s like ‘the way that can be expressed is not the eternal Way.’

    It’s also like how it’s easier to say what God is not than to define God (many would say it’s impossible).

    So, I am always interested in asking, can you tell me what it is not?

    1. Ben Johannson

      It is not a guide to a preferred political system.

      It is not a method of reorganizing a society.

      It is not an economic theory of everything, nor does it claim to be.

      It is not ideological. In fact it cannot be ideological because it is a toolset anyone can use, whether a communist or a right-libertarian.

      It is not for people who do not wish to apply themselves in understanding it. There is no such thing as “skimming the material” when it comes to MMT, because it is multi-layered and requires one to learn a great deal about central bank operations, the banking system, bond markets, debt and high finance.

      I can honestly say committed MMTers have the most detailed knowledge on these subjects of any group I have ever encountered. That’s why the reflexive dismissers should really be quiet and listen for what I suspect is the first time in their lives. Guaranteed they will learn a lot they don’t they don’t know, to paraphrase Donald Rumsfeld.

      1. Ben Johannson

        P.S.,

        It took me roughly a year of studying for a couple of hours a night (actual studying, not reading some knowledge free diatribe on a blog) before I was confident I fully understood MMT and could comment on it effectively as well as teach others.

        I had to read academic papers, learn the details of the Federal Reserves structure and how it interacted with the Treasury, learn to understand sectoral balances, go through the work of Godley, Minsky, Lerner, Wray, Mitchell, Fullwiler and Mosler. I also had to learn the history of money and monetary systems to put my knowledge into a proper context.

        It is not easy, but nothing worth doing ever is.

        1. JohnB

          To be honest, this is the problem with MMT; its proponents need to make it far more approachable, if they want it to catch on with the public in general (which is a requirement for its success politically).

          I wouldn’t say I’ve ‘studied’ MMT, but I’ve certainly read a very large amount on it in the last year as well, and have studied certain aspects of economics as they have come up in debates; that is the one positive thing about goldbugs/Austro-Libertarian-nutjobs:
          Their arguments are generally so loaded with obfuscatory nonsense, that it is inherently evident that they are (consciously or not) bullshitting, and while arguing with them can be a waste of time, it also highly motivates you to learn economics in enough detail, to most thoroughly shred their (often very sophist) arguments to itty pieces (which is kind of fun/frustrating at the same time).

          There is so much I wouldn’t now know about economics (and which I’d probably never have learned, even if I specifically set out to study it as a topic), which I’ve learned in the course of fully deconstructing/rebutting Austrian/Libertarian arguments.

          1. Ben Johannson

            It’s amazing how many zombie ideas are out there in the public. I have talked people through the very basics of MMT, had them respond that they agree with what I’m saying and then a few days later heard them repeating their original idea again as though we’d never had a discussion.

            I don’t anymore underestimate peoples’ desire to not know and to cling to thoughts which have been repeatedly staked to death.

          2. JohnB

            Heh, indeed yes; I don’t think you’ll ever truly hook anybody on first try, even if they are very receptive, because usually any concept or idea isn’t learned, until a person has heard it repeated a few times, and actually mulls it over some for themselves.

            So with that same person, they’ll fall back to what they already know, until the idea has been repeated to them enough, to properly sink in; that’s why it’s critical for MMT to be simplified as much as possible, for a general audience (which this article does well moving towards), because people won’t give it the time to sink in otherwise (took the best part of a year for me and you, which is a lot of time; too much for most, especially since economics is viewed as ‘boring’ for a lot of people).

            Conversely, this “sinking-in-through-repetition” stuff is also how Austro-Libertarians end up believing what they do: Stuff is repeated to them often enough, with a superficially appealing explanation, that it sinks in without any critical thought applied to spot the faults, so this gradual learning goes both ways (for good and bad).

            So MMT needs both a simplified narrative to hook people in (and critically, to make that penny drop, so they see money creation can be used for public purposes), and then needs to build on that and get people thinking about it for themselves on a deeper level, so they have a simple framework of basic arguments, for debunking hyperinflation scaremongers (and other common criticisms) who might shake their confidence in the theory and such.

            It’s a lot of work to refine the narrative like that, but I think this is the key to getting MMT to break out into mainstream public/political discourse; then once it reaches a certain threshold of public awareness, it will spread like wildfire.

          3. MyLessThanPrimeBeef

            Is hyperinflation always bad?

            Can we be open to the idea that hyperinflation is not bad (nor necessarily good)?

      2. MyLessThanPrimeBeef

        I am hoping we can reorganize the society and stop destroying the planet.

        And I’d be wary of a toolset anyone can use, becuase like a gun, soon or later, a bad guy will use it. That’s why we need a comprehensive ban on gun ownership – by cops, drug dealers, you and me…no unilateral disarmament.

        1. Ben Johannson

          The country is doing just fine shooting itself in the head with this knowledge restricted to the oligarchs and their government lackeys. The only way to counter it is for the vast populace these schmucks have dedicated themselves to keeping in the dark to understand what they’re up to.

          I recall Ron Paul attempting to debate Paul Krugman last year (I think it was last year). Ron came off as a boob because while he had a great many opinions on how things should be done, he had little understanding of how things are done. That is exactly what will happen every time when someone promoting a “simple and easy” way while lacking expertise goes head-to-head with someone well versed in the details and nuance. They’ll look like idiots and no-one will listen to them.

          Neo-liberals own the stage. Neo-liberals love complexity and technicality because it can be used to conceal and befuddle opponents, and because it makes them look super-smart. To compete with them we have to be even more knowledgeable than they ever were.

          1. MyLessThanPrimeBeef

            Being complicated is not always good.

            Sometimes, simple is the way to go.

            And we compete with our hearts, not our brains.

          2. Malmo

            Economics is complicated. More so now than ever. MMT doesn’t have a lock on that dynamic. And don’t hold your breath waiting for a popular grass roots movement to spring up banner waving hordes for MMT’s catalyst in instituting theMMT inspired public purpose. But take heart, it wont be the end of the world if MMT flails and shrivals away. For as Kropotkin said: “where economics begins freedom ends”.

          3. MyLessThanPrimeBeef

            Why do people refuse to consider something simple, instead of spending years poring over esoteric writings, like:

            We cooperate instead of competing.

            We share what we have, like a pack of wolves would do, after making a kill.

      3. Nathanael

        “It is not for people who do not wish to apply themselves in understanding it. There is no such thing as “skimming the material” when it comes to MMT, because it is multi-layered and requires one to learn a great deal about central bank operations, the banking system, bond markets, debt and high finance.”

        I skimmed it and have a pretty good grasp…

        …but then I understood the workings of the Federal Reserve System, private banks, and bond markets *already*, for other reasons.

    2. constant

      Fiscal austerity is bad – there are no qualifications

      Posted on Tuesday, March 12, 2013 by bill
      I know people like to dream and Latvians are apparently no exception. Their latest collective dream, or at least, those of the elites that fancy wining and dining in style in Brussels, is to join the Eurozone. The Latvian government has now formally requested the EU to undertake a “Convergence Report assessment” of the Latvian economy to facilitate membership by January 2014. The opinion polls do not necessarily support the intent of the Government. But the conservatives are out in force with supporting narratives. One such attempt at making the impossible argument was from on Anders Aslund, who is one of Peter Peterson’s stooges and has co-written a book with the Latvian Prime Minister. He wrote a Bloomberg Op Ed (January 8, 2013) – Why Austerity Works and Stimulus Doesn’t – which turned out to be a major revision of all the known facts and concepts that almost everybody else (apart from the pro-austerity spivs and their hangers-on) would by now have to share. I made a few graphs. Fiscal austerity is bad. There are no qualifications.
      Read the rest of this entry »

      http://bilbo.economicoutlook.net/blog/?p=22969

      1. Nathanael

        “Fiscal austerity is bad – there are no qualifications”

        If your GOAL is to put people out of work, make factories idle, let farms lie fallow, leave houses vacant, make people hungry and homeless and cause massive human suffering, why then fiscal austerity is highly effective.

        Suppose you hated the residents of Rubinistan with a passion. If you could convince them to apply “fiscal austerity”, you might be able to crush them without firing a single bullet.

        That’s what fiscal austerity is good for, most of the time.

        (There is an argument for austerity during massive, gigantic booms. Nobody has figured out how to implement this politically.)

  33. Joe Rebholz

    “Whether the job-guarantee program makes fighter planes or wind turbines makes no economic difference …” aside from the fact that wind turbines generate useful future value.

    But more generally, the idea that the kind of job does not matter to the purpose of giving the unemployed money to spend (although clearly the more useful the work the better) implies that paying people to go to school should/could be one of the jobs offered by the government.

    What would be more useful for the future of any country as information and knowledge become more important than goods?

    And since education is mostly a service the drain on natural resources would much less than many other types of jobs the government might provide.

    1. MyLessThanPrimeBeef

      If by education, you mean how to further exploit nature, I rather we pay people to practice zazen.

      Wisdom vs. technical knowledge – the choice is clear.

  34. Mary Bess

    Thanks for this clearly written description of MMT. Once enough people get a glimpse of what’s behind the curtain, it will be over. Things CAN change on a dime.

  35. The Dork of Cork.

    I just see at as a branch (albeit a more sustainable) branch of the debt money system.

    People must still work to pay the debt of the industrial system.

    A see no Greenback movement pursued by any elite sect.

  36. Hugh

    I suppose it is useful that the MMTers are trying to formulate their views in a clearer, more accessible, and more coherent fashion, but they still have a ways to go.

    I have for some time now advocated an approach that begins at the level of defining what kind of a society we want for ourselves and each other. I advocate one that makes sure that each of us has the building blocks for a good and meaningful life, and at that point in as far as it is possible society leaves you the privacy to live it. I call this our social purpose.

    Once we decide on what kind of a society we want we move on to an examination of the resources we have to accomplish it. Resources include physical commodities, infrastructure, but more importantly, us, our knowledge, skills, hard work, and good will.

    The key question is how to create and distribute our resources to get to our goals, and we do this through the central clearinghouse we call government. And government accomplishes this by taxing, spending, legislation, and regulation. Money, fiat money, is the medium government uses to effect the distributions we need.

    I have gone through this all before, but the point I am trying to make is that if you look at things this way, the social purpose for what we are doing and the importance of resources always remains central.

    MMT, on the other hand, by starting at the level of money, has always had difficulties working back to or even defining what its social purpose is. And it is not clear that even inherently has one.

    The result is that we need to distinguish between small bore, money only, and large bore, money plus some social purpose, versions of MMT. Pierce’s effort is at the small end of the large bore model. It’s basic MMT with a fairly minimal Jobs Guarantee. You can tell this by his description of the Jobs Guarantee as transitional, hiring from the bottom up, and avoiding competition with the private sector. There is no mention of paying workers a living wage either in the public or private sector. Almost any project worth doing would require more than just hiring from the bottom up. A wider social purpose is absent. Pierce says that it’s all the same whether these workers are producing wind turbines or tanks. But it does make a difference if we look at it from what kind of a society we want to live in. It also makes a difference with respect to the workers. Pierce has not really broken away from the neoliberal commoditization of labor. Labor isn’t just a variable. It’s real people leading real lives. People need to know that what they are doing is worthwhile. In our distorted society, this is defined in terms of how much a person earns. But it can also mean doing work that is worth doing, that contributes to the betterment of society. So no, all work is not the same. This is an especially gratuitous error because in fact, there are so very many things that need doing in our society to make it one we can feel good about and that we can sustain.

    Pierce also acknowledges that his version of MMT will not fix “inequality, regulatory capture and predatory financial behavior.” And this again demonstrates an inability to infuse MMT with a social purpose. If we started with the social purpose, as I suggest, then inequality, regulatory capture, and predatory financial behavior would be targeted from the beginning. Pierce’s punting on these issues shows an important aspect of most MMT thinking. MMT for them is a theory to be applied to the current system. But if you are like me and see the current system as a kleptocracy whose whole purpose is the looting of the many for the enrichment of the few, then MMT for the many can not work within such a frame. It will be MMT for the few, and in many ways we already see this where money is always “found” for the wars, tax cuts, and bailouts of the rich and elites but never there for the needs of the many.

    So while I give Pierce credit for trying to popularize MMT and make it more accessible, I have to give him an F overall on the content and execution.

    1. Ben Johannson

      Look, at its (exceedingly simplified) core MMT is teaching that we should decide what we want as a society and then set our level of public spending to achieve that result. In this sense its contribution is to let us know we have a lot of options, whereas the economic orthodoxy wants us to believe we have no choice at all.

    2. Lambert Strether

      If the social (not “public”?) purpose of MMT itself be defined as taking an axe to the neo-liberal zombies infesting “economics,” I for one will be satisfied.

      As for the notion of choosing, for the public, what the larger purpose should be — for example, putting criminal banksters in jail, or public banking — surely that is for the general public to decide? Is there some concrete action in sphere of public life that you would prefer MMTers take, that they are not taking?

      IOW, are you advocating that MMT become a “school of thought,” much as the neo-liberals have? (See this useful link.)

      If so, then let’s have that discussion. Because, modulo the gold bugs, this thread seems a little heavy on “MMT is teh suxx0r because it does not _____,” but rather light on “MMT would be _____ if only it would do ______,” where the doing of becoming a “school of thought” includes a great deal more academic entrepreneurialism, much more adaption in “the marketplace of ideas,” and so forth.

      1. steve from virginia

        LS:

        Just like the repetitive and inaccurate ‘money printing’ is Peak Oil denial in another form, MMT is debt repudiation in drag.

        I like it, I approve or repudiation, it bears no terror for anyone who understands how simple things work like hammers or nails. Mr. Entropy sez all debts will be repudiated as they cannot be repaid by either borrowers, lenders themselves or by the publics.

        Nevertheless, repudiation is a taboo … no matter what it’s called.

        1. MyLessThanPrimeBeef

          The real taboo is making people avoid talking about sharing the money/wealth we already have, without needing to print/issue/borrow/spend on the part of the government.

    3. Emperor Wang of Market Mongo

      Your Emperor thinks you had everthing covered on your planet long ago just using words like monetarist/central banker, keynesian, counter cyclical stimulus, social safety net, public works, progressive taxes, rule of law and regulations, moral hazard, separation of power, and checks & balances.

      It would greatly simplify things to get rid of the brand name MMT altogether and use words and concepts already in use for a few hundred years.

    4. ChrisPacific

      Good comment (I confess I scrolled down looking for your take after reading the article).

      The part in Pierce’s post where a larger social purpose comes into play is the jobs guarantee. He brushes off criticisms that we will end up with “makework” jobs as unfounded, but it can happen, especially when you have people advocating things like digging holes and filling them in again. (This was an example offered by Keynes, although more to illustrate the deficiency of the current system by comparison than as a serious suggestion. His general point was: if we can do better than the current policy simply by digging holes and filling them in, imagine how much better we could do if we set people to doing actual productive work!)

      Finding productive and useful jobs for people to do is not hard (certainly not in comparison to finding ways out of a recession while cutting spending) but it does require some thought and a common approach. As Hugh states, we need to reach some sort of agreement on the goals we are trying to achieve, identify the work needed in order to reach those goals, and go from there. The choice of these goals has broad implications for society as a whole, and should be part of any jobs guarantee discussion – at a minimum, the requirement for having them needs to be identified. It’s in the absence of any goals that we end up with makework solutions like digging and filling in holes, which end up giving the whole approach a bad name.

      Let me give one example. The government claims we have an issue with providing for people in their retirement. We also have a large number of unemployed. How about we put some of them to work in the retirement care field? They could build and/or run retirement homes, provide home care visits, offer driving services, grow food or produce goods for the elderly, and so on. We thereby put a dent in unemployment while reducing our societal cost of retirement care, all in one swoop. This wouldn’t be sufficient to employ everyone and skills might not always be a match, but it’s just one example, and we could probably come up with plenty of others given some thought.

      The existence of a large number of unemployed who are willing to work for pay represents a possible solution to a great number of problems, if society/government are willing to make use of them. To choose not to do so simply on the grounds of insufficient currency is profoundly stupid. On that point, I agree with the article.

      1. Nathanael

        The “digging holes and filling them in again” was also a crack about the gold standard, since “digging holes and filling them in again” is *literally what gold mining does*.

  37. steve from virginia

    Libertarians vs. ‘Fiat-ists’. ZeroHedge vs. Nakeds. I like it. I can sit back and watch, knowing that Mr. Entropy is going to end all the arguments soon enough … and that there is no arguing with entropy.

    – The state can always create money, it is a state, it has an army and police powers, It can imprison and take life. Its responsibility is the proper stewardship of the entire country (not just the people and certainly not just elites). Today, all states borrow from banks/lenders. Doing so puts the onus of over-issue onto the banks while not solving the problem of over-issue. The outcome is an unserviceable overhang of leverage, the onus is on the government, anyway!

    From this standpoint, the state issue of currency to retire outstanding debt is a form of repudiation. This is not an argument against either MMT or repudiation as most of the current debt is either onerous, fraudulent or ill-advised (destruction of capital).

    – Sovereign states need to issue currency in order to keep banks in check.

    – At the same time, the banks have a near-monopoly on the means of monetary (credit) circulation and transmission. Asking the banks to cut their own throats is the problem with state issue. It is safer for states to borrow until they cannot any more then it’s safer for them to beg.

    – Banks/finance make ledger loans, they expect repayment in the form of circulating money. It costs lenders nothing to make loans it costs the borrowers much more to repay them. There are always more loans than circulating money, borrowers cannot make ‘ledger repayments’, they must either earn, borrow from others or steal.

    – The state can make ledger-repayments (MMT), that is a problem for both the bank and the state, it sets one against the other.

    – MMT proposes to issue more ‘money’ (as per J.P. Morgan) in the place of taking on more debt. Management of debt flows would remain a banking matter even as MMT issue undermines the banks ability to profit.

    – It is impossible to see the current cast of politicians daring to take on the all-powerful banks, sorry. The last equivalent change was in 1934 when Congress/FDR eliminated the gold clause in contracts and took specie out of circulation (one cannot do one without doing the other).

    – Greece should have issued euros instead of begging from the Troika then being bailed out. Greek-issued euros in circulation would have put Greeks back to work and raised some tax revenues, a minuscule but notable percentage of Greece’s external debt would have been erased. It would have accomplished the same at less cost to Europe as ECB ‘bond buying’ and haircut in 2011.

    – Right now Greek MMT would not work as transmission mechanism is broken both in Greece and elsewhere in eurozone … it’s too late.

    MMT cannot repair the economy only lessen the pain and buy time to make structural reforms such as to reward conservation rather than waste. MMT cannot sell more cars or tract houses … nothing can, not even Santa Claus.

    1. Moneta

      MMT could work if capital is allocated efficiently… since it’s the same bozos making the decisions, it’s pretty clear what we’ll get.

      1. Lambert Strether

        I think that in the actual, political (operational) process needed for MMT to become orthodoxy, the usual bozos would have necessarily been purged. One could hope that would mean the an improvement in the general stock of the political class (as the New Deal was an improvement over, say, Warren G. Harding). All of these “‘Twas ever thus!” objections are based on the model of a friction-free transfer of political power in the elites. It’s hard to find a historical precdent for that.

        * * *

        I mean, c’mon. Even if all the neo-liberals are purged from the economics departments — well, maybe we could make, say, Liberty University into a theme park — wouldn’t that be a good outcome? A net good?

        1. Nathanael

          Good political summary.

          Personally, I’ve come to believe that Coolidge was worse than Harding.

          The more I studied Harding, the more I realized that when he claimed to have no idea, NO IDEA that his entire cabinet was a gang of self-dealing crooks — he was telling the truth.

          Harding was a fool.

    2. constant

      It seems that within the current straight-jacket of the euro, the stability whatever and the troika on top there are no good strategies for Greece outside the exit. Proposals for the job guarantee make sense for me.

  38. Hugh

    Being against something, the current system, for example, is not enough. There must be clear way forward. I have talked about this before. We need both a positive and negative agenda. The positive agenda is the kind of society we are striving for. The negative agenda is punishing the guilty in the current kleptocracy and delegitimizing their servant elites.

    The problem with MMT as a straight monetary theory is that it can be used equally well as a tool of looting. The problem with Pierce is that his views remain permeated with neoliberal ideas. Both Ron and Rand Paul say things from time to time with which I agree. This still doesn’t stop them from being batsh*t. The same goes for Pierce. I agree with some of his ideas about fiat money, but just because I do doesn’t mean I’m going to buy into his neoliberalism.

    We have had these discussions so many times before. The MMTers make a few adjustments here and there and then expect us all to bow down. But they never really take to heart the substance of our criticism. Ideas are usually not piecemeal. They usually have or imply structure. I got so tired of waiting around for MMTers to produce a rational frame for their ideas that I created one of my own. Mine works. It makes and keeps central precisely those things, like social purpose and resource constraints, like inequality and predatory behavior, which MMTers either don’t address or can’t tie firmly to their theory.

    So Pierce gives us yet another iteration of MMT. In its form, it is a little clearer than its predecessors, but in its substance, it contains all the errors, oversights, and neoliberalism of its forebears.

    1. Ben Johannson

      What views are permeated with neo-liberal ideas? Why can’t you be specific and contribute to the discussion?

      1. Hugh

        As I said, I have been on this merry-go-round quite a few times now. I point out the commoditization of labor, the failure to discuss a living wage, the failure to discuss meaningful work, the treatment of workers as a labor stock to be available to be “transitioned” into the private sector as needed, that is don’t make them too comfortable in public employment, the failure to discuss wealth inequality, and the belief that MMT can somehow be plugged into our current neoliberal system without sharing many of its views.

        You see I say all this, and then you give me some version of the line that MMT is just a monetary theory. I point out that a Jobs Guarantee goes beyond that. You then ignore that point and say that a Jobs Guarantee proves that MMT isn’t neoliberal and counsel me to read everything that every MMTer has ever written and to continue reading it until enlightenment comes down from on high. I usually end by saying that the reasonableness of MMTers is just a pose. They can’t defend their arguments. Most of the time they can’t even state them coherently. They can’t abide criticism of any kind and that, if they can’t even take criticism from those sympathetic to fiat money, they condemn themselves to the margins. Does that help?

        1. Ben Johannson

          Bill Mitchell has repeatedly addressed every one of your “criticisms”. I suggest you start reading through his archives.

          1. Hugh

            Well, good to see that irony is not dead. I said it was a typical approach of MMTers not to address arguments with counter-arguments and counter evidence but rather to say, “Go read, MMTer X, Y, or Z.” So you ask for specificity. I give you specificity, and you give back non-specific pap. The one thing about MMTers as I pointed out in my previous comment is their utter predictability. Again this type of response condemns MMT to marginality. Many of us have been saying this for an age, and it never sinks in, and MMT remains marginal.

          2. ChrisPacific

            Really, all of them? Even the criticism that MMTers like to answer questions by pointing you to the body of MMT literature and suggesting you read it all?

            Exactly where in the archives was that addressed? Or do we need to read all of them in order to really develop a full understanding of the answer?

          3. MyLessThanPrimeBeef

            That’s how they legislate these days too – just go read that 6,000,000 page document.

            It’s all good.

            It’s all in there.

            Trust me.

        2. Ben Johannson

          The Job Guarantee approach – relying on employment buffer stocks – is the way to defeat that trade-off. It means that the most disadvantaged workers can always access work. Surveys show that the unemployed prefer to work than being marginalised on social security systems, which have increasingly become punitive.

          Why the Job Guarantee proposal offends those who claim to be progressive is beyond me.

          Yes, it is a palliative to the “capitalist hegemony” and doesn’t advocate a violent revolution to overthrow the filthy exploiting capitalist power brokers. When the time is right to abandon the capitalist system in favour of a more functional and equitable system that safeguards human potential and our natural environment then I will be one of the first to the barricades (although I suspect my knees will have given in long before that time arrives!).

          But until that time I prefer to use my academic position (relatively well-paid and somewhat secure) to advocate policies that will make a real difference now. I prefer not to use my secure position to drink latte in cafes in an assembly of self-styled progressives and discuss how the revolution will pan out while ignoring the every day reality that people want work and do not have it and are poor and socially excluded as a consequence.

          I prefer not to condemn the unemployed to years of this sort of macroeconomic tyranny while I wax lyrical about post-modern interpretations of what Marx said and how it relates to the struggle towards revolution.

          http://bilbo.economicoutlook.net/blog/?p=22381

          1. Hugh

            What BS! No mention of what kind of work. No mention of pay. Just that offensive reference to employment buffer stocks. People I hate to tell you are something more than a buffer stock for corporations. Apparently Mitchell would rather wax lyrical about half-assed solutions than actually address what is needed, because we all know the odds of even his corporate friendly Jobs Guarantee happening under the current regime. It’s zero.

          2. Hugh

            lambert, there are several things. In a discussion of MMT, the same criticisms concerning resources and social/public purpose keep getting raised and never receive adequate answers. I put together my social purpose/resource model, as I said, to overcome these shortcomings. We have all been so indoctrinated with false ideas about money that the discussion really needs to start elsewhere and I can think of no better place than to ask people what they want for themselves, their families, and the rest of us, what kind of society do they want to live in, what quality of life, what is enough. And from there the discussion naturally flows to resources, what they are and how we use them. Whereas people have innumerable hangups about money, they have far fewer about resources. That they are themselves part of our resources includes and validates them. And a discussion of resources also includes those who stress the limits on our physical resources. From there, again as I said, the conversation goes to government as the mechanism to assure the distribution of resources happen, and from start to finish it is always about how well government action accords with a clearly stated and conceived public purpose. Only then do we move to the level of money because what people would never accept if we started with money because of their preconceived notions about it, many would at least be open to if we went this other way. They can see their part in the process, they understand their role, they are respected and included. They are not a commodity or a buffer stock. They become we.

            I say all this again because MMT does not speak to people. It does not include them. It does not show what’s in it for them. It ignores the nature of our politics. It is blind to kleptocracy and wealth inequality. It’s just more talking heads preaching at them. It’s just more noise.

            So maybe what I am asking for is a complete change in the tone of MMT, less cultishness, less defesiveness, and a complete rethink would be nice. What I would like to see at a minimum is a clear set of points that we can debate. As it is, MMT is like a game of whack-a-mole. Address one version of it and someone introduces some other version, and I’m not talking about minor points, but central ones like whether MMT is just a monetary theory or not.

            To be honest, I don’t see any of this happening because of I have had this conversation dozens of times now and nothing really changes about it.

    2. MyLessThanPrimeBeef

      The iterations/reincarnations are slippery, like squid or squids.

      Perhaps we are talking about Dracula squid here.

    3. Lambert Strether

      Given the human reality of corruption, there is no theory that will prevent looting. Christianity hasn’t, Islam hasn’t, neo-liberalism said corruption wasn’t something to worry about… And they were way more powerful than MMT.

      So one might at least go with a theory that explains money correctly, eh? And try to deal with corruption at a different level of abstraction. (That’s the sort of ambition the Framers had, and maybe two hundred years was a good run for “ambition must be made to counteract ambition..”)

        1. Hugh

          That is both simple and profound. Explanations which describe what money is but not what it is for, that is how it is to be shared, and by extension how the resources to which it gives access are to be shared, are always going to be partial, incomplete, and unsatisfying.

        2. Lambert Strether

          Part of what prevents money from being “shared” is obfuscation on how money is “created.”

          Really, what’s so hard about the idea of money being created for public purpose? Who defines public? Is “public” defined today as a democracy would define? Of course not. And if not, what then? Is the “what then” MMT’s job? Certainly not entirely.

      1. Really?

        Given the human reality of corruption, there is no theory that will prevent looting. Christianity hasn’t, Islam hasn’t, neo-liberalism said corruption wasn’t something to worry about… And they were way more powerful than MMT.

        So one might at least go with a theory that explains money correctly, eh? And try to deal with corruption at a different level of abstraction. (That’s the sort of ambition the Framers had, and maybe two hundred years was a good run for “ambition must be made to counteract ambition..”)

        OK Lambert, I’m with you so far (Really!). And in spite of your just incredibly rude brush off above (“just STFU!”), I’m gonna hang in there once again and try to explain this to you.

        Yes, looting and corruption are a given. In fact, that’s what MMT’s primary opponents on this board are trying to tell you! And given that fact, perhaps you’ll be so kind to assuage our fears that “government is never spending constrained by tax revenues alone” (did I get that exactly right for your effete sensibilities?) is not a just a further license to steal on the part of the current powers that be?

        And, are you MMT’ers really naive enough to think that the current powers that be – who are afterall smart enough to have put us into our current predicament and convinced us all (the voting public) to blame ourselves for our predicament in the first place – are not smart enough to capitalize even further on such a wide open opportunity?

        And finally, I even apologize for calling you all effete, even though I think you guys definitely beg the epithet! And I even apologize for that half-assed apology as well.

        By the way, I realize you think I’m just some dumb-assed rube commenting on your board with anonymous impunity, but I think it would behoove you all to be mindful of your f***ing audience every now and then, and realize that your critics are actually your best friends. Cause if you think I AM TOUGH…

        1. Lambert Strether

          The “Shorter” snowclone is a pithy and snarky summary of a longer text (can’t find the orginal link now, but I believe it originated in the primary wars of 2008).

          So, when I write:

          “[N]o discussion of MMT can even begin…” Shorter: STFU!

          I am saying that “STFU” is a “shorter” way of saying “[N]o discussion can even begin.

          1. Really?

            OK. And WHY pray tell, can no discussion EVEN BEGIN? Or is THAT off limits as well? Perhaps I’m just obtuse?

          2. JTFaraday

            “No discussion of MMT can even begin” until you’ve read all 3 dozen primers scattered around the interwebs, as well as everything ever written by Joe Firestone.

            I think we can conclude from this injunction, as well as the way that they react to commentary, that the “MMT-ers” don’t want any discussion.

            Not from us untermenschen and us ignorant rubes, who can exist only as objects of their policies.

            1. Lambert Strether

              I like that tactic. Framing an educational effort at several open forums around the web as an effort to shut down discussion. “Ignorance is strength” really does work, I suppose. Kudos.

              * * *

              Here’s a handy list of Joe’s efforts to shut down discussion at NEP. In fact, some of us felt so strongly about shutting down discussion that we organized a conference to do it — with a Q&A period — as a counterpoint to a Pete Peterson conference on the same day.

              * * *

              It’s unfortunate that democracy does require engagement by the citizenry, and one form of engagement is self-education on the issues of the day. I enjoy doing that, but YMMV.

          3. JTFaraday

            It is not reasonable, or even common practice, in public discourse to publish (or “publish” since this is the blogosphere) articles for broader public consumption and then turn around and respond to your interlocutors that they are required to read excessive amounts of material–rather than responding directly with concise comment or refutation.

            Preferably without calling people stupid because your article missed the mark.

            Am I right about this or not?

          4. Lambert Strether

            @JTFaraday: If you, as a citizen, do not wish to educate yourself, that is absolutely fine with me. Nobody is telling you what to do.

            * * *

            One reason, of course, for the post to have been written in the first place, was to place the ideas and issues before you, so you would not have to go elsewhere to read them.

          5. JTFaraday

            So, yes.

            By telling me that am not permitted to respond to the article “published” on Naked Capitalism because I haven’t read 30 MMT primers scattered around the web, plus everything he’s ever written, Joe Firestone is seeking to shut down public discussion.

            MMT-ers want one way propagandistic communication with the public that is the object of its policies.

          6. Lambert Strether

            @JTFaraday: Please the thread carefully. I responded to another comment that said discussion of MMT could not begin until a previous discussion had been had. You are not being told you are not “permitted” to do anything (except ad hominem attacks, trolling, and so forth, but that goes for all commenters). AFAIK, this is the only context in which “permitted” has been used. This has nothing to do with Joe Firestone.

            * * *

            Your other argument, that not reducing an entire field of study to a single source constitutes an effort to “shut down public discussion” is one of the silliest arguments I’ve heard in a long time, and I’ve heard a lot of silly arguments. It’s like claiming the American revolutionaries sought to “shut down public discussion” because they published a lot of pamphlets. Dear Lord.

          7. JTFaraday

            “One reason, of course, for the post to have been written in the first place, was to place the ideas and issues before you, so you would not have to go elsewhere to read them.”

            I know you’ve read all my comments on this thread and so you know I set out to comment on this article. Then the MMT-ers in attendance threw up their hands and essentially conceded, with their every next move, that they don’t know how talk to the public and don’t care to do so.

            I am a member of the general public. I’m not a MMT-er or MMT fan. I’m not in any possible plane of existence going to be an MMT-er or MMT fan. I don’t do cults.

            So, this is not my problem. But, as I’ve said elsewhere, I think this dynamic is fully indicative of the technocratic and anti-people mentality of the MMT-ers, who do whether they’re admitting today or not, advance a public policy agenda of intimate concern to the general public.

            This contradiction really is too much.

            1. Lambert Strether

              Well, I guess we’ll have to go to the data, then. On the one hand, JTFaraday says that “[#1: MMTers] don’t know how talk to the public and [#2] don’t care to do so.” To refute #1: MMTers fill a hall in Italy with thousands of members of the general public, as shown in the post. This argument is provably false. To refute #2: Kelton appears on Chris Hayes, also as shown in the post, regularly. Going on national TV certainly seems an odd way to show one doesn’t “care” about talking to the public! I assume the claim I quoted is the premise of most of your argumentation on this thread. It too, then, collapses.

              Since the next point you make depends on false premises, it is false. Here it is: …. “fully indicative of the technocratic and anti-people mentality of the MMT-ers.” There is nothing to indicate, since your claim is untrue.

              That said, as an argumentative tactic, the point is you make (“fully indicative”) is technically admirable, false though it is. It is parallel to the black-is-white-ism argument you make elsewhere that writing many articles and — quelle horreur — suggesting that citizens inform themselves by reading them is suppressing discourse.

              In this context, it’s clever to claim that MMT, which as a school of thought has “public purpose’ at its heart, is “anti-people.” Karl Rove (and I speak only to technique here, not to personalities) used much the same tactic, often: Turn the enemy’s strength into a negative: swiftboating John Kerry, for example. Kudos!

              Have a nice day.

          8. JTFaraday

            “This has nothing to do with Joe Firestone.”

            Well than you’ve obviously stopped reading the thread. Joe Firestone most certainly indicated more than once that we are not permitted to comment on MMT if we’ve only read this blog and haven’t read everything he’s ever written.

            I’ve already responded to him on “MMT’s” intellectual, political, and moral failure from the view obtained from reading Naked Capitalism.

            He can also take it or leave it.

          9. Lambert Strether

            [ad hominem. –ls] Ack, now I’m doing it. Hit the wrong publish button with too many tabs open.

            Adding… I just searched the thread for “permit,” and was surprised to find it does not appear in any of Firestone’s comments.

        2. Nathanael

          “And given that fact, perhaps you’ll be so kind to assuage our fears that “government is never spending constrained by tax revenues alone” (did I get that exactly right for your effete sensibilities?) is not a just a further license to steal on the part of the current powers that be?”

          Why would they need a “further” license to steal? Using their current license to steal (Reagan: magic asterisks, Bush: deficits don’t matter), they’ve stolen literally trillions.

          The elite *already* know that government is never spending constrained by tax revenues, and the Reagan-era military budgets were the most obvious example. It’s time for the *general public* to know the same thing.

  39. TS

    All I can say is that if our basis for exchange of our labor/goods/assets is so poorly rooted in some obvious reality that it can inspire such rabidly opposing opinions and feelings, then that is a problem in itself. How can a healthy society maintain itself with such ambiguity regarding something so fundamental? Do I understand the arguments?- No. Have I tried?- Yes. Do I despair?- Yes

    1. Joe Rebholz

      “… is so poorly rooted in some obvious reality that it can inspire such rabidly opposing opinions and feelings, then that is a problem in itself.”

      Yes, but maybe this is a sign that serious change is underway.

  40. Adrian H

    The thing that worries me is that MMT runs contrary to the rants over in the fever swamp at ZeroHedge – but those guys seem to be closer to the banksters who have been ripping us off for the last 30 years. Maybe the game riggers who have made huge fortunes off the game-rigging understand these systems better than me – and the professors behind MMT.

    I suspect the ZeroHedge posters are all “talking their book” in their posts, and have taken short positions up the wazoo in hopes of a crash, but if enough lunatics believe that, say, the end of QE will cause a huge crash, and behave accordingly, then the end of QE probably will cause a huge crash – and MMT will appear to have made the wrong prediction, even if it describes a theoretically possible system.

    It certainly seems to me that we have ridiculous asset bubbles building all over the place (again) right now. Does MMT predict that, too?

    1. MyLessThanPrimeBeef

      They talk about risk on/risk off times.

      Paralle to that, we als have madness on/madness off periods.

      Right now, we are not in a mad-off period.

      We are actually in the middle of a mad on.

    2. Ben Johannson

      MMT projects financial bubbles by use of the sectoral balances model. Basically if the federal government fails to spend sufficiently into the private sector it is forced to take on debt, fueling those bubbles.

      Wynned Godley was able to call the GFC using this approach, and James Galbraith used it to forecast the dot com bubble.

      1. Nathanael

        It’s important to be clear about a subtle point. The private sector takes on debt because the government hasn’t distributed enough money (to the general population). This leads to a bubble.

        Does this lead to an employment collapse? *Not necessarily* — if the debts are *cancelled and forgiven* in the right way, you can get out of the bubble bursting without too much damage.

        In the 19th century, it was standard for the legislature to pass relaxed, easy-to-qualify bankruptcy laws whenever there was a “bust”.

        In contrast, Our Idiot Elite has actually made it *harder* to qualify for bankruptcy, so the “bankruptcy solution” isn’t available for many ordinary people.

  41. The Dork of Cork.

    Just to add to the too late comments……….

    Look at the data ……..the fucking data.

    Irish national accounts.

    Construction basic prices million euro

    Y2002
    Total output : 25,978
    Intermediate consumption : 17,399
    Value added at basic prices : 8,579

    Y2006
    Total output : 47,350
    Intermediate consumption : 30,186
    Value added at basic prices : 17,164

    Y2009
    Total output : 20,598
    inter consumption : 15,474
    Value added at basic prices : 5,124

    Agriculture basic prices

    Y2002
    Total output : 5,770
    Inter consumption : 3,421
    value added at basic prices :2,349 ( not including farm subsides)

    Y2006
    Total output : 5,351
    Inter consumption : 4,015
    Value added at basic prices : 1,336

    Y2009
    Total output : 4,945
    Inter consumption : 4,185 !!
    Value added at basic prices : just 760 !!

    without subsidies Irish farming added a mere 760 million euros in Y2009 to the national economy.

    Irish farming obviously needs more labour inputs to reduce inter consumption.

    But the euro is far too hard a currency to pay labour.

    Its a shared capital token rather then state money token……………the machines will always come first.

    Money both in so called sov countries must be produced so that LOCAL labour in primary & secondary industries can bypass machine fossil fuel inputs.

    Essentially the hills need shepherd’s on foot rather then on quads and the work needs to pay (ability to buy pints) so that the village and market towns can get some life back in them.

    We need to get off the oil standard much like we got off the Gold standard 100 years ago.

    SOURCE http://www.cso.ie/en/media/csoie/releasespublications/documents/economy/2009/outputvalue2009.pdf

  42. Lorena Pardo

    Dear Mr. Dale Pierce.
    I’m just here to let you know that the realization of the first and second Summit in Rimini only happened thanks to the great preparation and great communication skills that the journalist Paolo Rossi Barnard has done on his readers, who paid all expenses out of their own pockets for the success of these 3 Summit. (also one in Sardinia).
    We conscious Italians owe him very much for bringing us to know the Mosler Economic MMT.
    If someone at this moment in Italy talks about ME-MMT it’s only thanks to this great dissident journalist,

    1. Lambert Strether

      Lorena: Got any links on Pardo? We’d be very interested in reading anything that a dissident Italian journalist has to say, especially about the current scene.

  43. Lambert Strether

    Ad hominem practitioners: The NC comments section is neither a troll pit nor (I might add) a shooting gallery with trolls for targets. I went through and cleaned as many of the ad hominems out as I could, per Yves’s new policy. This has been a public service announcement. With guitars.

    UPDATE Sheesh, I spent another ten minutes cleaning the thread. Readers will note that all sides got the treatment.

    1. skippy

      Hay… tough day at the office[?]

      Try teaching hand grenade – M-203 – Demolition proficiency to kids!

      Skippy… I still forward the precept… that for every financial transaction… one should instantly have a small amount (need citation)… of explosives injected into their C-1 spinal area.. and upon detonation of fraudulent sale… well…

        1. skippy

          I see you… as do others… your service to us all… is recognized… thank you – Sir – honorific address…

          Skippy… your stuff is meaningless to me… it is your… effort… that astounds… myself puts trust into… repetitiveness… thank you… Susan and NC’ers…

    2. Finnucane

      I hope that this isn’t ad nuthin … your edits were for JTFaraday, Ben Johannsen, and Really? exclusively. I’m guessing that JTF and BJ got into it something, and R? was just kinda freelance nasty.

      Thanks for the hard work.

  44. Bridget

    “Modern Monetary Theory is a way of doing economics that incorporates a clear understanding of the way our present-day monetary system actually works”

    Having a clear understanding of the way our present-day monetary system actually works PRESENTLY doesn’t necessarily mean that MMT has a clue about how our monetary system will work once we have created all the money we could ever want to satisfy all the wants we could ever have.

    “Most people are unnerved by the thought that money isn’t “backed” by anything anymore – backed by gold, for example”

    Any “money” of any value is ALWAYS backed by something. In the case of the US, it is backed by many things. Just because you haven’t figured out what those things are doesn’t mean they don’t exist.

  45. skippy

    ROFLMMAO@above…

    MMT is the equivalent of E=MC sq. of currant monetary actions, the question begging is whom is Gawd[?], what is Gawds decree[?], whom will live, whom will flourish (have more stuff) and whom will die and why…

    Skippy… Please Universe… myself – beseeches – either off humanity quietly or enlighten us… before we off every living thing… including our selves…

    1. Finnucane

      Pythonic as always, Skipster — I don’t think you’re rude, tho. I just wonder why all the stink over MMT, when the worst that you can say about it, unless you’re carrying water for the oligarchy, is that it oversimplifies things. Skipping over to Naked Keynesianism, I reckon that maybe MMT is a popularization, if I understand NK, but nevertheless, I can’t shake the underlying theme of MMT, which is that the state sovereign in its own currency is not fiscally constrained – that is, we can’t “go broke.”

      That’s the revolutionary implication of otherwise dull MMT: we can’t be broke. If we are broke, which most of us are, then that only raises the next question: if I am broke, and everybody that I know is broke, then who is this “we” that can’t be broke? That is, why is it that we are not seizing control of the state? And, if not us, then who?

  46. Lambert Strether

    I think I’m starting to agree with Grillo on this gold thing:

    We take gold by making a hole in South Africa, Turkey, or Amazonia… We dig and we take gold from a hole, and after taking it from a hole, we take and put it in a hole under a bank. I mean… From a hole to another hole. Holy ****, let’s build the bank over the first hole and **** off!

    It does seem simpler

    1. The Dork of Cork.

      @Lambert
      Well the BoE effectively did this up to 1914.

      England did not hold much physical above ground stuff.

      Germany ( hostile modern China ?) & France ( friendly Japan ?) held much of the Canadian & South African production.

      England said we were good for it because our empire has it in the ground…….
      It still did not work out really well.

      The parallels between trade deficit UK of 1914 and trade deficit US where treasuries preform the gold function is frightening.

      1. Nathanael

        It worked out pretty well for the UK, actually.

        World War I was disastrous for *everyone* in Europe. The UK, however, fared among the best. Russia had a revolution and a civil war! Germany… well, we know the history of interwar Germany! I could go through the other belligerents, but the UK was in *by far* the best economic position coming out of the war.

  47. Chauncey Gardiner

    Thank you for this very worthwhile post. I am far from the first observer to say this, but I view the current monetary system as gradually being rendered moot by energy resource depletion and environmental constraints anyway. Accordingly, I believe it is incumbent on our society’s leadership to consider alternative monetary and financial systems such as MMT for a number of reasons in addition to social equity, although that should certainly be one of the paramount considerations of any monetary system.

    It appears to me that the era of cheap and abundant energy is gradually drawing to a close, and with it the era of what has been labeled “perma-growth” of the U.S. economy. For the present monetary and financial system to continue in its present form, I believe a perpetually growing real economy is necessary to enable a critical mass of debtors to repay the principal amount of their debts plus interest. Absent cheap and abundant energy to fuel that economic growth, I believe it will be very difficult for both debtors to pay their debts and for members of the nation’s financial system to remain solvent going forward, although massive amounts of Cash liquidity and direct and hidden subsidies have over the past five years been directed into financial sector corporations to defer or avoid such insolvency.

    However, this approach has become increasingly problematic from a social perspective. The issue is exacerbated when the system’s largest financial intermediaries are themselves operating with very high levels of debt leverage on very modest equity capital bases, and further compounded by enormous hidden risks embedded in their off-balance sheet speculations in derivatives.

    I think that MMT accompanied by a government-guaranteed Jobs program addresses many of the shortcomings in the status quo going forward.

    1. Nathanael

      “It appears to me that the era of cheap and abundant energy is gradually drawing to a close,”

      Solar. Think solar. Certainly, it is more expensive than oil used to be. But it is cheap. And it is abundant.

      And those who learn to run everything off solar energy will become rich, while those who do not will flail around attempting to preserve their position until they collapse.

  48. The Wonderer

    368 comments and counting! My eyes started to glaze over after I read the first 100 of them.

    I’m trying to wrap my mind around this MMT theory.

    The author talks about depressions and how there haven’t been any depressions since the U.S. went off the gold standard. Business cycles happen because a capitalist economy has the unfortunate tendency to overproduce capital and this happens no matter what the monetary system is based upon.

    The term “recession” was coined after the Great Depression. I would argue that the 1982 “recession” and the current “recession” qualify as depressions based on the definition of a 10% contraction in the economy. Government generated GDP figures are not to be relied upon but instead look at the levels of employment in judging whether there is a depression or not. Is there anyone who seriously believes that the U.S. economy only contracted 5% in the latest depression? Because that’s what it is, a depression. And it happened without being under the gold standard.

    I have some questions about deficit spending. The author mentions $800 million in deficit spending. Where did this money come from? Who did it come from? Does it not have to be paid back (with interest)? Inquiring minds want to know.

    I find it very telling that as the U.S. housing bubble burst and consumer lending dried up that the government stepped in as a borrower to fill the vacuum. To the tune of over a trillion dollars a year. Correct me if I’m wrong, but this money has to be paid back. With interest. How exactly does this help the economy? It appears to me that we are on the same path as Greece and Spain and Italy and Ireland and all the rest of them. The money has to be paid back. With interest.

    1. Cujo359

      The author mentions $800 million in deficit spending. Where did this money come from? Who did it come from? Does it not have to be paid back (with interest)? Inquiring minds want to know.

      I believe the answer is that the government sold bonds to cover that spending, or more properly, it sold bonds to make up the difference between the budget and revenues collected.

      I don’t write that so much to inform you as I do to let people who actually know the answer have some idea what misinformation they may need to counter.

      What MMT seems to be saying, and what certainly seems true based on the Constitution’s grant to the government the power to coin money and determine its value, is that it could just as easily have said “Poof! There’s $800 billion”, if it weren’t for some laws Congress has passed over the years. That actually makes sense to me, despite the somewhat facetious description. If the government sends money into the accounts of the state and local governments that did the work, then they had money. The U.S. government said there was $800 billion there, so there was $800 billion.

      My attitude is that if the resources exist to do things we need to do (like people, buildings, forests, etc.) and the only reason that we (as a sovereign nation, mind you) can’t do those things is because we don’t have the money, then there’s not enough money. The solution is to make more, or go get some where it’s not doing anything useful. Take your pick.

      As someone much earlier in the comments wrote, our government and the Fed weren’t shy about making more money so the banks could stay afloat. We can do the same to do things that need doing.

      1. Nathanael

        “What MMT seems to be saying, and what certainly seems true based on the Constitution’s grant to the government the power to coin money and determine its value, is that it could just as easily have said “Poof! There’s $800 billion”, if it weren’t for some laws Congress has passed over the years. That actually makes sense to me, despite the somewhat facetious description.”

        This is absolutely correct. Good summary.

  49. Malmo

    I enjoyed Ben an JT going at it too. It’s certainly debatable if either one was overboard in their exchanges, but where I come from it was rather benign. Of course this isn’t my sandbox, so if their verbal battle isn’t kosher here then fine. I’d only add that the deleting seems slanted, but again, that is the perogative of the moderator/s.

    All that being said, I don’t harbor visceral opposition to any MMTer per se, prominant or otherwise. I do, however, appreciate many of the critcisms leveled at them. I initially was a strong advocate of MMT when I first read of it two years ago. As time has passed on I’m much less enthusatic regarding its “program” going forward, for many reasons, including some of those articulated above. Nevertheless, I don’t think the MMT policy prescrptions from its various advocates will ever come to fruition. Oh, some might, but most won’t. I won’t lose sleep either way.

    1. Lambert Strether

      @Malmo: Not to relitigate (for pity’s sake) but there are plenty of verbal battles on this thread. It’s the ad hominem stuff that got removed (per Yves’s policy). For example, it’s really not necessary to bring another commenter’s mother into it, in an insulting fashion, is it? Or to respond in kind. The exit to 4Chan is that way.

      For example, “fanboiz” is fine. As a poster, I think it’s a profoundly tendentious example of “any stick to beat a dog” (Adding, in this context.) As a moderator, I don’t think it rises to the level of ad hominem, so it stays.

      1. MyLessThanPrimeBeef

        I honestly could not read the name Johannson without thinking of Scarlett Johannsson and so it slipped out into a censorable offense.

        Perhaps subconsciously, before getting on a high horse to tell him bringing Farraday’s mother was uncalled for, I wanted to let him know that I was not perfect either, which I did state explicitly by prefacing the sermon (that was uncalled for) with a ‘no one is perfect.’

          1. MyLessThanPrimeBeef

            I thought the thread was still open for commenting…

            I think freezing it might be a good idea.

      2. Malmo

        When terms such as Austrian and libertarian are hurled as pejoratives, that also rises to the level of ad hominem abuse, and this is a common occurence here. I’d only ask, in the spirit of consitency and fairness, that that type of interaction be interdicted also.

        1. Malmo

          I understand. Ther’s a lot to monitor around here, especially on 400 post threads. Just wanted to alert you to a tactic I find objectionable if not highly inflamatory–I’m saying this a person who’s from the far far left too.

  50. JTFaraday

    “One reason, of course, for the post to have been written in the first place, was to place the ideas and issues before you, so you would not have to go elsewhere to read them.”

    I know you’ve read all my comments on this thread and so you know I set out to comment on this article. Then the MMT-ers in attendance threw up their hands and essentially conceded, with their every next move, that they don’t know how talk to the public and don’t care to do so.

    I am a member of the general public. I’m not a MMT-er or MMT fan. I’m not in any possible plane of existence going to be an MMT-er or MMT fan. I don’t do cults.

    So, this is not my problem. But, as I’ve said elsewhere, I think this dynamic is fully indicative of the technocratic and anti-people mentality of the MMT-ers, who do whether they’re admitting today or not, advance a public policy agenda of intimate concern to the general public.

    This contradiction really is too much.

  51. JTFaraday

    “This has nothing to do with Joe Firestone.”

    Well than you’ve obviously stopped reading the thread. Joe Firestone most certainly indicated more than once that we are not permitted to comment on MMT if we’ve only read this blog and haven’t read everything he’s ever written.

    I’ve already responded to him on “MMT’s” intellectual, political, and moral failure from the view obtained from reading Naked Capitalism.

    He can also take it or leave it.

  52. Huckleberry

    I have read this site off and on for a couple of years. I have tried to understand MMT, but I cannot say that I do. There seems to be an awful lot of vitriol with regards to this whenever it comes up, and that has made me wary about ever commenting here.

    I do have a question, or two. Or maybe three.

    What if there is something in this theory that is wrong, a blindspot that has been missed?

    Or, assuming that this theory is right as rain, what happens when…
    all the of the simple people who cannot understand it

    and all the smart people who do not understand it

    and all the compromised people who will not understand it

    combine to act in a manner that this theory has not accounted for? Given the current course we are being steered on, what is the most likely outcome if people behave as if MMT does not exist or is simply wrong?

    1. Emperor Wang of Market Mongo

      Huckleberry

      There is more than one MMT – and non MMTers are not sure how many there are. Many believe it is possible there is a 1:1 correspondence between number of MMTers and number of versions of MMT.

      Your Emperor, after being confronted with this phenomenon for 7 years or so, happens to believe there are multiple versions of MMT per MMTer.

      But that would explain the enigma of “it”.

  53. JTFaraday

    “But let us censor “fanboyz”. Too funny there – but woman’s libbers may take offense, maybe.”

    Yeah, because the fangirlz are just crawling out the woodwork begging for that minimum wage job at Walmart’s government extension that the 2 women MMT academic “fangirl theorists” have up on offer.

    Seriously, where are those fangirlz? They should be humbly lining up, resume in hand and ready to kiss the papal ring.

    1. Lambert Strether

      Well, to bring the thread back on topic, a Jobs Guarantee would help with the “crawling” aspect. That’s one reason I like the policies that some MMTers propose: They’re people-oriented.

      When you think about it, it’s really insane to regulate the economy as the neo-liberals do, with the DISemployment rate. More than insane, it’s evil, since decrease in health, and the increase in suicides from unemployment is well-documented.

      1. Lambert Strether

        @Wang: When all you’ve got is snark, snark is all you’ve got. (Applies to me, too, of course, I hasten to add.)

        Sadly, no response to the “pro-people” Jobs Guarantee commment. Oh well.

        1. MyLessThanPrimeBeef

          Why jobs guarantee when we could and should be asking for GDP sharing?

          It’s a bottom-line approach.

          And if this reminds you of a sexist quote, why kiss the maid when you can have the mistress, don’t go there. It will be censored.

          1. Lambert Strether

            @MLTPB Sure, that’s a public policy alternative, certainly better than neo-liberalism, like anything would be. Beyond that, I know nothing. (The JG also has the function or merit of serving as a sort of stabilizer (though I think that jargon is wrong). That’s the “buffer stock” concept that Hugh finds so dehumanizing. Since I don’t know if GDP sharing is said to perform that function, I don’t know if its apples and oranges to compare the two.

            UPDATE Adding, well, not “anything.” Careless language.

  54. JTFaraday

    “But let us censor “fanboyz”. Too funny there – but woman’s libbers may take offense, maybe.”

    Yeah, because the fangirlz are just crawling out the woodwork begging for that minimum wage job at Walmart’s government extension that the 2 women MMT academic “fangirl theorists” have up on offer.

    Seriously, where are those fangirlz? They should be humbly lining up, resume in hand and ready to kiss the papal ring.

  55. JTFaraday

    @ Lambert “Well, to bring the thread back on topic, a Jobs Guarantee would help with the “crawling” aspect. That’s one reason I like the policies that some MMTers propose: They’re people-oriented.”

    The MMT minimum wage “Job guarantee buffer stock” reserve army of labor that is their signature policy position, and the only real distinction I can see between them and those who are currently running the country into the ground, is most decidedly not people oriented.

    Nor is proposing to eliminate the traditional 6-month unemployment insurance program rather than allowing people some small window of opportunity to seek a somewhat comparable position before forcefully shoving their heads under water by monopolizing their time in a 40 hour a week minumum wage job, on which we know they can’t live any better than those who live on it now.

    It is in little petty nasty and unnecessary things like this, that the punitive and people hating nature of the “MMT agenda” reveals its proponents in their power worshipping drive for total social control.

    Not even the most conservative political representatives from the former slave states advocate the complete elimination of traditional unemployment insurance, however much they hemmed and hawed about extending it for additional months during the financial crisis.

    “Any job is not better than no job,” to correct the falsehood used to popularize this agenda on the web. The only people who would have the gall to say such a thing, are people who have never held this “any job” about which they so casually pontificate.

    The only reason to attend to this particular economic clique is that it smuggles in a deeply punitive socially conservative economic agenda and promotes it from “the left,” as some sort of new “progressive” norm for social reform.

    It moves “the progressive” Overton Window waaay to the right. Probably to the right of Newt Gingrich. You know I have a problem with the idea that there is only one right way to think. But if there is going to be only one right way to think, this is definitely not it.

    I’m not going to provide quotes–we all know I didn’t just make all that up. We also know that the MMT Masters refuse to consider altering this very same policy agenda that they also pretend to deny they have.

    I’ve tried to be as diplomatic as I can on this thread. I’m also certain you’ve seen me say this all before, so I’m going to stop now.

    1. Malmo

      One area of agreement between the vast majority of those on the left and right (this includes libertarians too) is their collective fondness of the Puritanical workerist ethos. Wage labor is the personification of social control, and you don’t have to be a student of Ellul to understand our technocracy certainly demands social control. Historically speaking it’s only been an anarchist subset of various intellectuals that have railed against this arrangement in any cogent way (sorry, but communists are workerists too). Finding a sympathetic anti workerist ear on the left, especially in academia, is no easier than finding one on the right. Still, if it’s work we must do, even JG work, then I’d be more inclined to oblige given proper compensation as a carrot, say, on the level of a tenured economics profssor. Absent that (and apologies to MMT) the job offer can be inserted where the sun don’t shine.

      1. Nathanael

        *Waves hand* Anti-Puritan here! Leisure is good.

        The French seem to realize this.

        Work is not inherently good. (Work is the curse of the drinking classes, as Churchill said?)

  56. Lambert Strether

    @JTFaraday. I’ve got stuff to do. As you yourself point out, this is repetitive (as always, kudos for the tactic, which really is key to getting ideas propagated, even or especially false ones). Have a nice day.

    NOTE Hey, if there were a Jobs Guarantee, maybe I could fix my teeth! Just a different take on the Augean “anti-people” commentary…..

  57. MyLessThanPrimeBeef

    If we simply share whatever we have, working or not working, then job counts become what body counts were in Vietnam.

  58. Lambert Strether

    MMT proponents: In general, IMNSHO, it’s not good practice to say “Go off-site to read this link.” I urge this because:

    1. Pragmatically, for NC’s sake as a site with an excellent commentariat, “go off-site” is a conversation stopper.

    2. Much better is to use a format of link + short quote, that is on point. Why? First, because the quote propagates the ideas that you wish to propagate.

    I understand and sympathize with the urge to say “You have not done your reading, so go do it,” and at some point that has to be said. However, the issue is whether that tactic advances either the discussion or the ideas you advocate.

    There have been recent posts at Eschaton and Salon and IIRC Krugman on how constant repetition is laborious but necessary. This recommendation is part of that laboriousness, alas.

  59. Lambert Strether

    At 463 commment, and with comment nesting gone pear-shaped, I’m going to accede to MLTPB’s suggestion and freeze it.

    Thanks to all.

    NOTE This SHOULD be the final comment in the thread, but since the thread has gone pear-shaped, it isn’t.

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