Michael Hudson: 2,181 Italians Pack a Sports Arena to Learn Modern Monetary Theory – The Economy Doesn’t Need to Suffer Neoliberal Austerity

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

I have just returned from Rimini, Italy, where I experienced one of the most amazing spectacles of my academic life. Four of us associated with the University of Missouri at Kansas City (UMKC) were invited to lecture for three days on Modern Monetary Theory (MMT) and explain why Europe is in such monetary trouble today – and to show that there is an alternative, that the enforced austerity for the 99% and vast wealth grab by the 1% is not a force of nature.

Stephanie Kelton (incoming UMKC Economics Dept. chair and editor of its economic blog, New Economic Perspectives), criminologist and law professor Bill Black, investment banker Marshall Auerback and me (along with a French economist, Alain Parquez) stepped into the basketball auditorium on Friday night. We walked down, and down, and further down the central aisle, past a packed audience reported as over 2,100. It was like entering the Oscars as People called out our first names. Some told us they had read all of our economics blogs. Stephanie joked that now she knew how The Beatles felt. There was prolonged applause – all for an intellectual rather than a physical sporting event.

With one difference, of course: Our adversaries were not there. There was much press, but the prevailing Euro-technocrats (the bank lobbyists who determine European economic policy) hoped that the less discussion of possible alternatives to austerity, the easier it would be to force their brutal financial grab through.

All the audience members had contributed to raise the funds to fly us over from the United States (and from France for Alain), and treat us to Federico Fellini’s Grand Hotel on the Rimini beach. The conference was organized by reporter Paolo Barnard, who had studied MMT with Randall Wray and realized that there was plenty of demand in Italian mass culture for a discussion of what actually was determining the living conditions of Europe – and the emerging financial elite that hopes to use this crisis as an opportunity to become the new financial lords carving out fiefdoms by privatizing the public domain being sold off by governments that have no central bank to finance their deficits, and are tragically beholden to bondholders and to Eurocrats drawn from the neoliberal camp.

Paolo and his enormous support staff of translators and interns provided an opportunity to hear an approach to monetary and tax theory and policy that until recently was almost unheard of in the United States. Just one week earlier the Washington Post published a review of MMT, followed by a long discussion in the Financial Times. But the theory remains grounded primarily at the UMKC’s economics department and the Levy Institute at Bard College, with which most of us are associated.

The basic thrust of our argument is that just as commercial banks create credit electronically on their computer keyboards (creating a bank account credit for borrowers in exchange for their signing an IOU at interest), governments can create money. There is no need to borrow from banks, as computer keyboards provide nearly free credit creation to finance spending.

The difference, of course, is that governments spend money (at least in principle) to promote long-term growth and employment, to invest in public infrastructure, research and development, provide health care and other basic economic functions. Banks have a more short-term time frame. They lend credit against collateral in place. Some 80% of bank loans are mortgages against real estate. Other loans are made to finance leveraged buyouts and corporate takeovers. But most new fixed capital investment by corporations is financed out of retained earnings.

Unfortunately, the flow of earnings is now being diverted increasingly to the financial sector – not only to pay interest and penalties to banks, but for stock buybacks intended to support stock prices and hence the value of stock options that managers of today’s financialized companies give themselves. As for the stock market – which textbook diagrams still depict as raising money for new capital investment – it has been turned into a vehicle to buy out companies on credit (e.g., with high interest junk bonds) and replace equity with debt. Inasmuch as interest payments are tax-deductible, as if they were a necessary cost of doing business, corporate income-tax payments lowered. And what the tax collector relinquishes is available to be paid out to the bankers and bondholders who get rich by loading the economy down with debt.

Welcome to the post-industrial economy, financialized style. Industrial capitalism has passed into a series of stages of finance capitalism, from the Bubble Economy to the Negative Equity stage, foreclosure time, debt deflation, austerity – and what looks like debt peonage in Europe, above all for the PIIGS: Portugal, Ireland, Italy, Greece and Spain. (The Baltic countries of Latvia, Estonia and Lithuania already have been plunged so deeply into debt that their populations are emigrating to find work and flee debt-burdened real estate. The same has plagued Iceland since its bank rip-offs collapsed in 2008.)

Why aren’t economists describing this phenomenon? The answer is a combination of political ideology and analytic blinders. As soon as the Rimini conference ended on Sunday evening, for instance, Paul Krugman’s Monday, February 27 New York Times column, “What Ails Europe?” blamed the euro’s problems simply on the inability of countries to devalue their currencies. He rightly criticized the Republican party line that blames European welfare spending for the Eurozone’s problems, and also criticizing putting the blame on budget deficits.

But he left out of account the straitjacket of the European Central Bank (ECB) unable to monetize the deficits, as a result of junk economics written into the EU constitution.

If the peripheral nations still had their own currencies, they could and would use devaluation to quickly restore competitiveness. But they don’t, which means that they are in for a long period of mass unemployment and slow, grinding deflation. Their debt crises are mainly a byproduct of this sad prospect, because depressed economies lead to budget deficits and deflation magnifies the burden of debt.

Depreciation would lower the price of labor while raising the price of imports. The burden of debts denominated in foreign currencies would increase in keeping with the devaluation, thereby creating problems unless the government passed a law re-denominating all debts in domestic currency. This would satisfy the Prime Directive of international financing: always denominated debts in your own currency, as the United States does.

In 1933, Franklin Roosevelt nullified the Gold Clause in U.S. loan contracts, enabling banks and other creditors to be paid in the equivalent gold value. But in his usual neoclassical fashion, Mr. Krugman ignores the debt issue:

The afflicted nations, in particular, have nothing but bad choices: either they suffer the pains of deflation or they take the drastic step of leaving the euro, which won’t be politically feasible until or unless all else fails (a point Greece seems to be approaching). Germany could help by reversing its own austerity policies and accepting higher inflation, but it won’t.

But leaving the euro is not sufficient to avert austerity, foreclosure and debt deflation if the nation that withdraws retains the neoliberal policy that plagues the euro. Suppose the post-euro economy has a central bank that still refuses to finance public budget deficits, forcing the government to borrow from commercial banks and bondholders? Suppose the government believes that it should balance the budget rather than provide the economy with spending power to increase its growth?

Suppose the government slashes public welfare spending, or bails out banks for their losses, or takes losing bank gambles onto the public balance sheet, as Ireland has done? Or for that matter, what if the governments do not write down real estate mortgages and other debts to the debtors’ ability to pay, as Iceland has failed to do? The result will still be debt deflation, forfeiture of property, unemployment – and a rising tide of emigration as the domestic economy and employment opportunities shrink.

So what then is the key? It is to have a central bank that does what central banks were founded to do: monetize government budget deficits so as to spend money into the economy, in a way best intended to promote economic growth and full employment.

This was the MMT message that the five of us were invited to explain to the audience in Rimini. Some attendees came up and explained that they had come all the way from Spain, others from France and cities across Italy. And although we did many press, radio and TV interviews, we were told that the major media were directed to ignore us as not politically correct.

Such is the censorial spirit of neoliberal monetary austerity. Its motto is TINA: There Is No Alternative, and it wants to keep matters this way. As long as it can suppress discussion of how many better alternatives there are, the hope is that the public will remain acquiescent as their living standards shrink and wealth is sucked up to the top of the economic pyramid to the 1%.

The audience requested above all more theory from Stephanie Kelton, who gave the clearest lecture on economics I had ever heard – a Euclidean presentation of MMT logic. For a visual of the magnitude, see http://www.youtube.com/watch?v=XP60tpwu5cs. At the end, we felt like concert performers.

The size of the audience filling the sports stadium to hear our economic explanation of how a real central bank should operate to avoid austerity and promote rather than discourage employment showed that the government’s attempt to brainwash the population was not working. It was not working any better than Harvard’s Economics 101 class, from which students walked out in protest against the unrealistic parallel universe thinking whose only appeal is to Aspergers Syndrome sufferers who are selected as useful idiots to train to draw pictures of the economy that exclude analysis of the debt overhead, rentier free lunches and financial parasitism.

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  1. John Regan

    It’s wonderful that you’re getting a hearing, Dr. Hudson, and although I think this is a rule of law problem and not an economics problem, I very much appreciate your efforts and those of Steve Keen to bring alternative approaches to the table.

    I prefer a legal jubilee, not an economists’ jubilee, but any kind of jubilee is better than none which is what is in store for us if TPTB have their way:



    1. William Neil

      It would be wonderful to have a PBS aired debate between this travelling MMT crew and selected teams from the economic departments of Harvard and Princeton.

      I regret to say, however, living just outside the Beltway near DC, and very familiar with the “think tanks” downtown, it’s hard to imagine seeing any such debtate being put together there.

      I think the closest the US has ever gotten to a serious economic exchange was when John Kenneth Galbraith’s BBC documentary series “The Age of Uncertainty,” ran in the late 1970’s. It ran 1st in Great Britain in 1976, and Galbraith’s biographer, Richard Parker, describes the reaction to it this way: “Before it could be aired in the United State, “The Age of Uncertainty” started drawing aggresive,bitter denunciation from American conservatives, who’d been alerted by news of Milton Friedman’s dramatic flight across the Atlantic to denounce the show’s patent heresies and inaccuracies.” (Alleged ones, of course.)

      The show did run in the US, but each airing had a conservative rebuttal tacked on afterwards.

      I regret to say that “mainstream” Democratic economic thinking still is living and worshipping in the “Age” of Bill Clinton’s late 1990’s economy, no matter its now proven illusory “foundations.”

      Oh well, the public will just have to content itself with “Pawn Stars” and the “Antiques Road Show.”

      1. Murky

        Galbraith’s The Age of Uncertainty is available on Youtube.com. Written and presented by Galbraith himself. I just viewed the 1st of 13 episodes. Wow! Here is just one quote:

        “People of privilege almost always prefer to risk destruction, total destruction, rather than surrender any part of their privileges.”

        Now viewing episode 2; I’m hooked!

    2. Carla

      NC readers may want to know about the first Public Banking in America conference that will be held in Philadelphia April 27-28, 2012. The list of speakers includes Ellen Brown, Gar Alperovitz, Samuel Giles, Thomas Greco and Michael Sauvante.

      Dr. Hudson has been invited, but not confirmed.

      More at http://www.publicbankinginstitute.org

  2. LeonovaBalletRusse

    This is great news, Dr. Hudson. The Italians put their money down for what they know is valid information that can lead to their self-empowerment and freedom from propaganda/bondage that serves the .01% uber alles. They are leaders of the people awake. Imagine this happening in the U.S.A.! Well done.

    1. cathy

      Printed Fiat money = Digital Fiat money and subject to collapse. The fact that we have to pay interest, no doubt, makes the exercise worse. But to suggest that we do this on a global basis, as if the EURO was successful, is a fool’s errand.

      I’m left with the full knowledge now, like when I too attended UMKC, that the professors there are stupid and have only gotten stupider.

      1. YankeeFrank

        No, its just you cathy with a “c”. Michael Hudson and Bill Black are far from dumb. In fact, its pretty safe to say they are leaders in the attempt to revive fields that have been almost completely destroyed by phony neoclassical claptrap “economists” and “legal” “experts” who have no integrity nor honesty, and to whom justice is a laughable enterprise.

        To people of your ilk, money is always available to bail out plutocratic thieves and their “investments” but never available for the health and functioning of society as a whole. We can “print” trillions for banksters but somehow we are broke when the people need healthcare, jobs and education.

        If we continue to follow the “technocratic” wisdom of the neoliberal hitmen you apparently admire, the middle classes of the western world — the first appearance in the entirety of human history where the vast majority have had education and enough to eat — will be gone, and a new dark age of debt peonage and slavery will emerge, like a putrid phoenix, from the ashes of a history humanity should never have to live again.

        Money is not magical, and inflation is not a phantom to threaten people with to scare them into debt-slavery. Unfortunately you are either too dumb or too dogmatic to have actually learned anything from your professors… its a shame such insight was wasted on you.

        1. Bev

          With the help of Michael Hudson, Dennis Kucinich and John Conyers (and, please more politicians now support Dennis Kucinich’s NEED Act HR 2990) we could turn this economy around fast and should through a gentle accounting change.



          Historic Endorsement: Chicago Teachers Support Kucinich’s N.E.E.D. Act


          Washington D.C. (January 27, 2012) – Congressman Dennis Kucinich (D-OH) today thanked the 29,000 members of the Chicago Teacher’s Union for their historic endorsement of H.R. 2990, The National Employment Emergency Defense (NEED) Act.

          “I thank the Chicago teachers for the hard work they do every single day to educate the next generation of Americans. People like the teachers of Chicago have given so much to make America great and it is time to make sure that America works for everyone again,” said Kucinich.

          The Executive Board of the Chicago Teacher’s Union voted to endorse the NEED Act. Their endorsement follows:

          Be it resolved that the Chicago Teachers Union goes on record to support The National Employment Emergency Defense (NEED) Act, H.R. 2990, because: The NEED Act puts back the money creation powers under public checks and balances through their Congressional representatives; The NEED Act puts any necessary functions of the Federal Reserve under public administration to be in alignment with the U.S. Constitution; The NEED Act uses the money creation powers to give millions of people at all government levels work to improve the infrastructure of the country; The NEED Act allows state and local government to determine where one-fourth of the federal monies created shall be used; The NEED Act allows full funding for teaching positions, pension obligations and the building of schools.

          Congressman Dennis Kucinich authored The NEED Act and introduced it with Congressman John Conyers (D-MI) on October 21, 2011.




          (I assume the following is allowed. Thank you.)

          Primary Elections soon:


          1. Bev

            John Conyers also introduced Kucinich HR 2990 The NEED Act to help everyone…everyone no matter what ideology or politics. His site is http://conyers.house.gov/

            I do not know if Conyers has a challenger in his primary like Kucinich where redistricting put Kucinich up against another district’s current Representative who is now a challenger. She has not supported Kucinich’s HR 2990 so she is not helping us, but rather the bankers debt money.

            Support politicians who support us with debt free and interest free public money to turn this economy around fast.

          2. Bev

            In case the following is to be used as a method of “Shock Doctrine” a disaster capitalism about which Naomi Klein warns us ( see: http://www.naomiklein.org/shock-doctrine ), it would be important to continue to work for the best solutions for our economic recovery as per Michael Hudsons, Dennis Kucinich, and John Conyers ( see: http://www.monetary.org/ ) before, during and after any credit crisis:


            ISDA Determinations Committee Accepts Question Related to a Potential Hellenic Republic Credit Event

            Posted by Jim Sinclair on February 28, 2012 @ 4:24 pm in General Editorial

            Dear CIGAs,

            The implications if this event comes to pass are huge!

            ISDA Determinations Committee Accepts Question Related to a Potential Hellenic Republic Credit Event

            LONDON, February 28, 2012 – The International Swaps and Derivatives Association, Inc. (ISDA), as secretary to the Determinations Committees (the DCs), today announced that a question relating to a potential credit event with respect to the Hellenic Republic has been submitted to, and subsequently accepted for consideration by, the EMEA Determinations Committee.

            In accordance with the Determinations Committee Rules, a meeting will be held at 11AM GMT on Thursday, March 1 to determine whether a credit event has occurred.

            Further information regarding the question is available at http://www.isda.org/credit [1].


      2. j.grmwd

        “You’re stupid!”
        “I know you are but what are we.”

        The classic cut and thrust of schoolyard repartee. It never gets old.

      3. F. Beard

        Printed Fiat money = Digital Fiat money and subject to collapse. cathy

        Tally Sticks lasted over 800 years. Were they not fiat? And they did not collapse. In fact, Tally Sticks were used to buy BoE stock when it was founded.

        And your alternative is what?

      4. moorefire

        This should read:

        “I’m left with the full knowledge now, like when I too attended UMKC, that the professors there WERE stupid and have only gotten MORE STUPID.”

        If you don’t want to look like an idiot…

      5. Tony Wonder

        You’ve got it exactly right, Cathy. Don’t listen to these bozos. Yves is good at, and has spent her entire life, “playing the game”, that’s why her blog is sometimes so insightful. She understands the system, and that is precisely why she endorses MMT. It’s like the hopey-changey liberal version of the horrendous corruption that permeates every aspect of our economy and society. It’s like the people who thought that communism just needed to be “fixed”.


        The solutions are out there for those who are able to think outside our current paradigm. That excludes most of the scum in the FIRE (bureaucratic) / Government sector, which is a grotesquely large and historically unprecedented portion of our population.

        1. F. Beard

          The solutions are out there for those who are able to think outside our current paradigm. Tony Wonder

          Let’s hear them, then.

          1. redleg

            Tony troll – in case you hadn’t noticed the cartel of global banks that controld the debt supply also control the gold. An asset backed currency is still fiat, subject to devaluation at any time.

      6. Yves Smith Post author

        Your comment strongly suggests that you slept through class at UMKC.

        The Euro crisis has bupkis to do with MMT.

  3. temp

    “Depreciation would lower the price of labor while raising the price of imports. The burden of debts denominated in foreign currencies would increase in keeping with the devaluation, thereby creating problems, unless the government passed a law re-denominating all debts in domestic currency.”

    Hungarians took mortgages denominated in Euros. After depreciation of the national currency against the $ and E, the govt.passed a law to re-denominate the debt (in national currency). The IMF, the WB, the banks (mostly Austrian) saw this move as an hostile one, they refuse now to lend to Hungary. Consequently, the boyz from rating agencies trashed Hungarian bonds.

    Romanians also have debt denominated in Euros. Their National Bank didn’t want to have any major depreciation taking place of the national currency against the Euro or to re-denominate the loans. The IMF is very happy that Romania has sold its water, electricity, telecommunications, gas, oil, and soon the railroads to foreign companies, and still would like to grab even more. The right-wing government always considers the praise from the IMF as their greatest success. Meanwhile, the social living standards are abysmal, with over 44% of the population under the threshold of powerty.

    1. LeonovaBalletRusse

      temp, the IMF is the Global Fuerher of International Lebensraum “without firing a shot” — Why is it that their troops keep their invasions going without a single objection from anyone in *finance* or *government*? These surely are *crimes against humanity* and *aggressive war* by any other name.

      Will someone please NAME NAMES of the private profiteers *invested* in these *War Crimes*?

    2. Gerald Muller

      Actually, most Hungarians took loans in Swiss Francs, not euros and this is why the real estate market in Hungary is completely depressed at the moment. As a matter of fact, you can buy a nice flat in central Budapest, a nice city, with over 4m (12.5 feet) ceiling height for less than $1000/square meter (approx. $100/sqft).

  4. Marley

    Thank you. I happened to click on the “Upcoming Appearances” tab on NEP today and saw the graphic for the flyer promoting this event. I wondered what word of it would come and when. This post was quite timely!

  5. Foppe

    Unfortunately, the flow of earnings is now being diverted increasingly to the financial sector – not only to pay interest and penalties to banks, but for stock buybacks intended to support stock prices and hence the value of stock options that managers of today’s financialized companies give themselves. As for the stock market – which textbook diagrams still depict as raising money for new capital investment – it has been turned into a vehicle to buy out companies on credit (e.g., with high interest junk bonds) and replace equity with debt. Inasmuch as interest payments are tax-deductible, as if they were a necessary cost of doing business, corporate income-tax payments lowered. And what the tax collector relinquishes is available to be paid out to the bankers and bondholders who get rich by loading the economy down with debt.

    Welcome to the post-industrial economy, financialized style.

    I like. It is a curious thing how the system is currently eating itself in search of ‘growth’..

    1. Elisabeth Marshall

      Is there a version of the Kelton video with good audio in English. I tried to listen, but the Italian translation was too loud to hear the original English delivery.

    2. Joe Rebholz

      “…the system is currently eating itself…”

      Very nicely said. And it will destroy itself if we don’t change it soon. Think of all the ways: The housing bubbles, more empty foreclosed homes and more homeless, trashing the law (MERS, chain of title fraud, non prosecution of finance criminals), high unemployment wasting human resources, diminishing personal lives by promoting feelings of uselessness, helplessness, increasing uncertainty about the future leading to inaction and short-termism, increasing the costs of education and huge student debt which must discourage seeking education, deteriorating physical and social infrastructure, huge prison populations, decreasing individual freedoms, increasing police and surveilance states, huge numbers of people effectively non productive (the unemployed, most poor, uneducated, imprisoned).

    3. LeonovaBalletRusse

      Foppe, it’s Extraction Capitalism through compound derivates *Pie in the Sky*. The *perverse incentives* and *criminogenic environment* (Bill Black) of Extraction Capitalism–via Lebensraum, or via *Pie in the Sky* complex squeezes and tiers of robotic arbitrage–rule finance. It has nothing at all to do with *real life*, except that insofar as it CONSUMES all available resources and spins them into Extractor (presumably HFT). This entire *Pie in the Sky* INDUSTRY should be sequestered, and kept apart in the la-la-land of the extractor *investors*. This INDUSTRY is terminally entangled with a DEAD monetary system.

      We the People should create our own SEPARATE monetary system, designed with a strict separation of powers and *entanglement with none* of the above.

  6. Swedish Lex

    Is there a full video?
    If not, could you four rock stars please get together (via Skype?) and do a complete video version?
    Would not be the same, of course, but such a video could broaden the impact significantly.

        1. F. Beard

          The solution is both government and private money supplies to keep each other in check. This solution is hinted at in Matthew 22:16-22, btw.

    1. F. Beard

      An addendum I would add to MMT is that government money (after a general and equal bailout of the entire population including non-debtors till ALL credit debt is paid off) should be de jure and de facto legal tender for government debts only. That precaution would give government itself the highest incentive to spend wisely since only it and its payees would suffer price inflation if it did not.

      1. OTAY

        F, you make allot of sense but, “That precaution would give government itself the highest incentive to spend wisely”.

        Unfortunately that is not a reasonable assumption. The history of banking in the US since colonial times makes me surmise that’s a six sigma wish at best. But is it still a good system if we can vastly improve things and say only loose 50% of spending to corruption?

        1. LeonovaBalletRusse

          OTAY, good point. As every bar owner knows, there is a threshold set for permissible stealing by bartenders; and the owner of this *cash* business knows that there is a limit to *skimming* the owner can get away with.

          A new system requires: Standard Accounting, Separation of Powers, Limits.

  7. readerOfTeaLeaves

    There is no need to borrow from banks, as computer keyboards provide nearly free credit creation to finance spending.

    It’s easy to see why this simple recognition of a non-Asperger’s reality might be viewed by the financial sector as a form of apostasy.
    More, please.

    1. j.grmwd

      There would be a lot of hungry bankers if the financial sector had to survive just on what value they add through financial intermediation.

      1. Foppe

        nah, that’s the great thing about capitalism.. they would be frictionlessly reassigned to some other sector of the economy.. For instance, some of them could become office cleaners for a mining company.

      2. LeonovaBalletRusse

        j.g. – Tech bites back! “Banker manufacturing is not coming back.” There is really no more *need* for bankers and their quaint functions. So last century.

  8. Max424

    My only concern with this MMT “Italian Job;” we shouldn’t be sending all this talent over on one plane.

    Do you know what I’m saying?

    There are only about 12 MMT experts on the planet. We can’t afford to lose any them, let alone four on one flight.

    Separate planes next time, please.

  9. michael hudson

    Thanks for your supportive comments. We had a Pacifica reporter there, Bonnie Faulkner, who will be editing the sound tapes and providing a set of follow-up interviews.
    Also, I believe that Stephanie Kelton will be repeating her wonderful presentation on her site. All that is needed is to verbalize her power point presentation.

    And by the way, we DID take separate planes!

    1. LeonovaBalletRusse

      mh, they can’t outsmart you. The KC team: We the People’s Heroes.

      Michael Hudson: Secretary of the Treasury

      Rebels Unite! We have nothing to lose but our shame.

    2. William Neil


      About how many years do you think it will take to get an invitation to appear at the Center for American Progress, downtown in good old DC?

      I counted months and months, years even, go by before they ever tip-toed up to the heart of the financial crisis from 2007-2009.

    3. Bev

      Thank you for your brave work, like Rep. Dennis Kucinich’s work on HR 2990 the NEED Act.

      I am guessing that you support Kucinich’s work.

      However, there must be variations of MMT as I admire the work of NC commentor Joe Bongiovanni and his site:



      The three legs the Kucinich Bill: HR 6550 the National
      Emergency Employment Defense Act:

      1) End the private creation and destruction of money through fractional reserve banking, and replace it with full-reserve banking.

      2) Replace money supply with debt-free US dollars issued by the treasury, in an amount specified by an independent monetary commission.

      3) Incorporate the Federal Reserve into the US Treasury for supervisory and regulatory expertise. Fed is no longer privately owned.


      Could You and Joe come to some similar agreement so that I know you two are on the same page?



      joebhed says:
      February 21, 2012 at 8:32 am

      Yamaguchi’s model correctly identifies today’s system as one based on debt, rather than merely the multiplier function of a regulatory base.

      His solution correctly displaces the link between debt and money in such a way that the issuance of a national circulating media(money) is NOT tied to the issuance of a debt by the banking system.

      The endogenous money cover is a red-herring in the discussion of a scientifically-based monetary system.
      MMT postulates a debt-basis for money in Innes’ failed rationale that because debt is based on money accounting, that its corollary is also true – that money is and must be based on debt.

      Whether money is debt is a function of its issuance and management.

      That it becomes a debt when it is loaned, and that it is a debit in a bank’s balance sheet when it is deposited, has nothing to do with Yamaguchi’s work modeling the American Monetary Institute’s proposal, contained in H.R. 2990 by Congressman Kucinich.


      MMT is a halfway measure that fails by its inability to meet the NEED for ending a debt-based money system, colloquially cloaked in the misnomer of fractional-reserve banking.

  10. DiSc

    Oh, wow, I did not know Barnard would be able to pull off something like that. He is a very marginal intellectual, sometimes masochistically so, always against everything and everybody. His site about MMT – in Italian – is almost raving at times. Glad he organized something to take MMT out of the weird-hippieland it is now.

  11. fresno dan

    The think I find interesting about MMT theory is:
    Assume government officals use the money they create for good.
    We are “paying” for Iraq and Afghanistan “off book”
    Maybe, just maybe, more “created” money would give us Iran to fight as well, since we would not even be able to use the arguement about financing the war. Of course, I accept whether we can pay for a war or not has never stopped us before…

    1. TK421

      That’s certainly a valid concern. However, only a tiny minoriity of governments with modern economies are currently stupid enough to spend their resources blowing up other countries while their own country decays from within.

    2. MyLessThanPrimeBeef

      Fresno Dan, it doesn’t have to be outward aggression.

      MMT is a dictator’s best friend.

      ‘Sir, a street vendor just set himself on fire to protest the lack of jobs.’

      Benito the Chief: ‘Print more money! Take it over to the secret police. Have them double their size! Tell the boss there I want to see jobs, jobs, jobs! Our glorious fascist nation should never run out of money!’


      Benito: ‘Don’t make me look bad. Uncle Joseph just tripled the size of NKVD thanks to MMT!’

      I mean, how do you tell dictators not to use MMT?

      1. TK421

        Well, that wouldn’t be a very MMT thing to do, since building a secret police isn’t a productive investment that will grow the economy in the long term.

    3. Anonymous Jones

      Where in MMT do you find this assumption?

      I’ve searched high and low and don’t see it anywhere…

      At root, the theory is investigating the *financing* of expenditures, not the decision of what expenditures to make.

      Who but an idiot would say that all government expenditures are good just because they are made by the government? Only idiots would say that. Surely, many MMT proponents are not idiots. So draw your own conclusions from that. Maybe assuming that the parts you don’t understand are idiotic is your first mistake. You seem to be the one with the grossly mistaken assumption, not the MMT proponents (unless you’ve found something else that you’ve not yet decided to share with us).

      On my own behalf, I do happen to believe that many shared expenditures should be undertaken by communities. I am not eager to return to the days of private fire departments or private police departments. I would like to have at my disposal a safety net that is provided by the most secure counterparty around (and that is, in almost all cases, the monetary sovereign). This is far different from a claim that all government spending or intervention is good.

      Reality dictates that we must have dispute resolution mechanisms in a community (disputes are always resolved, one way or another). This is “government”. We do live as neighbors, whether near or far, and we can try to pretend that our actions don’t have consequences for others and we can try to pretend that we can live a life “free” from the actions of others, but this is no different than the world of your dreams (it does not exist…).

      MMT is about the realities of the monetary system we now have (set up to serve the banking interests) and the alternates that most assuredly do exist. Don’t let the ones who benefit from the current system confuse you by bringing up the size of the government or the numerous hindsight examples of poor expenditure decisions.

      1. MyLessThanPrimeBeef

        Financing expenditures not what expenditures.

        That’s like biological weapons.

        We want to ban weapons of mass destruction because humans don’t trust humans.

        1. MyLessThanPrimeBeef

          Like nuclear power, a thing may be innocuous in and of itself.

          It’s the people using it.

          1. citizendave

            Yes. And if the people tend to be war-heads, they will spend money on war, whether the financing is costly or cheap, and regardless of impediments or constraints.

  12. bluffraise

    Best way to end a conversatiom is to talk about monetary theory. So, the fact that people paid for it is a watershed moment in history. Explaining the modern day slaughter to the masses in a sports venue. No easy task indeed. No doubt it was built on the grounds of an old colliseum.

  13. 2laneIA

    Is there a transcript of Stephanie Kelton’s talk? The video features loud translation over her remarks.

  14. Tom

    Is there an “MMT Theory for Dummies” somewhere? I think I’m getting close to understanding what it’s talking about but then I keep going back to: “If the government prints all the money it wants, why will anyone take that currency seriously? I understand the US is a bit different than, say, Zimbabwe, but if a government announces a “print on demand” policy, why accept their money?

    1. Tony Wonder

      “Is there an “MMT Theory for Dummies” somewhere?”

      Yes, it is called any conversation about MMT that has ever taken place.

      “I think I’m getting close to understanding what it’s talking about but then I keep going back to: “If the government prints all the money it wants, why will anyone take that currency seriously? I understand the US is a bit different than, say, Zimbabwe, but if a government announces a “print on demand” policy, why accept their money?”

      Why does anyone take the currency seriously now, when the US dollar has lost something like 85% of it’s value since officially untethering to anything tangible in 1971? I’ll tell you why; if you do not, they will SHOOT YOU IN THE FUCKING HEAD.

      That’s why MMT pisses me off so much; it is ideological sophistry that tinkers around the edges of a completely broken system, endorsed by people who ought to know better (like Black and Smith).

      Stop clinging to your cherished system, status quoers. It does not become you. It’s a simple problem to solve; the people with the guns are forcing everyone else to use their garbage to run the world economy. Most people in the US are forced to accept this trash for payment, and then they ignorantly shuffle it into their 401k because that’s what everyone else is doing, so the bankers can pile it up in huge stacks and roll around in it, then use it to create the boom/bust cycle which benefits them tremendously.

      If you keep following the herd and not UNDERSTANDING WHY things have value, you will keep falling off the cliff. That most of the global population has done this (with some welcome exceptions in places like India and China) is the source of our problems, and nothing short of repudiation of this garbage paper fiat nonsense is the only thing that will set things aright. The good news is that even though our best and brightest are being snookered ONCE AGAIN, the change that must come, will come. I just hope it is in my lifetime.

      This is how these idiot economists actually think: hey, a bunch of people came to see us, so our hairbrained economic theories MUST be right! Plus, its MODERN!

      By that retarded logic, Ron Paul’s theories on the government and economy must be TWICE as right as the MMT bozos, since he drew a crowd of 4,000 students last night in Michigan, and received a 40-second standing ovation upon entrance!


      Don’t fall for it, Tom. They’re all idiots who are looking out for their self-interest, NOT yours. They just rationalize it by convincing themselves that YOU will be better off under THEIR system. They may be correct insofar that it would be a slightly better system than what we have now, but that is setting the bar so low that not even Hermes Conrad could limbo underneath it.

      1. F. Beard

        Yes, it is called any conversation about MMT that has ever taken place. Leave a Reply to

        Well at least the MMT folks don’t worship a shiny metal. But I readily concede that primitives should be allowed to use shiny metals for private debts SO LONG AS OTHER MONEY FORMS ARE ALLOWED ON EQUAL FOOTING TOO.

        1. LeonovaBalletRusse

          F. Beard, but as L. Frank Baum recognized, Americans want the right to bring our own silver and gold to the Mint to turn it into fungible coin. It is the Reich’s Monopoly on MInting coin that is at the Heart of Darkness.

          Who will address this issue?

          1. F. Beard

            Inexpensive fiat is the ONLY ethical money form for government debts. However PMs and EVERYTHING ELSE should be allowed for private debts.

            Want gold or silver coins? Mint them yourself but don’t expect them to be accepted by government.

            The solution to government counterfeiting of private money is NOT private counterfeiting of government money.

          2. MyLessThanPrimeBeef

            The private sector is capable of counterfeiting private money.

            They are probably already busy at it.

      2. LeonovaBalletRusse

        TW, yeah: “You got a problem with that?”

        “Confessions of An Economic Hitman” by Perkins.

      3. j.grmwd

        The only people for whom dollars have lost 85% of their value are those that buried them in their backyard in 1971. I earn and spend my dollars in the here and now and find that they buy plenty of nice stuff. The other point to make is that productivity has grown about 80% since the early 70’s so dollars earnt back then and buried in the backyard absolutely SHOULD be worth 80% less than dollars I earn today.

        1. F. Beard

          Ideally, money should neither gain nor lose purchasing power but if one has to choose then a money supply that encourages investment is preferable to one that encourages risk-free hoarding. (cf: “The Parable of the Talents” – Matthew 25:14-30)

  15. Kay Fabe

    It’s in this environment that the clearly deluded UK Chancellor, George Osborne, has this week stated publicly “The UK has run out of money”.

    1. TK421

      How the UK can run out of something that it, and only it, produces, and produces at will, is a question that people are not supposed to ask.

    2. MyLessThanPrimeBeef

      That’s a good question.

      I am sure what the answer to that is.

      Maybe it’s like an entity (a person, a corporation of a government) able to issue, or create, its own promises.

      In theory, you don’t run out of promises.

      But then, if you keep issuing promises, it might work for some, but not all.

      I guess, as far as the argument that if an entity can create something on its own, at will, it can then keep doing that is not always valid, beyond the technically correct interpretation that it can do it without the world paying any attention to it doing.

  16. Kay Fabe

    … and in answer to the commenter above, you can’t simply create money ad infinitum and do nothing with it, you’ll devalue it. Say in the one hand you have the wealth of the nation, and in the other you have a pile of money representing that wealth. If you increase the money, you have to proportionately increase the wealth of the nation also. You’d need the money to go to building houses, hospitals, parks maybe. Fund business that build things we want. Stuff like that. Print it and give it to everyone to go to the pub with and then you’ve got a problem, but not if it’s used productively and proportionately to create wealth.

    1. TK421

      Well, if a government “owes” itself a certain amount of its own currency, the devaluing problem isn’t so severe, is it? (I’m new to MMT, myself)

      It’s not a question of “if” America creates more money–we already have, and we wasted it by bailing out the financial sector. The question is, if the lease useful area of the economy can get free money, why not others?

    2. MyLessThanPrimeBeef

      If the government can issue fiat jobs (forget the fiat car jokes) and fiat money – and why not? we are sovereign of our employment – between the two, it should try issuing fiat jobs first.

      Fiat jobs make the recipients feel more useful.

      No, the government needs no fiat money to issue fiat jobs.

    3. kjr

      That’s why you need an analysis between “good” and “bad” taxes. i.e. Adam Smith postulated in “Wealth of Nations” four principles of taxation which any source of revenue should meet:

      1. Light on the production of wealth, and does not impede or reduce production;

      2. Cheap to collect, requiring few collectors, and easy to understand;

      3. Certain; can’t be avoided, little opportunity for corruption, and provides adequate revenue;

      4. Equitable and fair, payment for benefits received, impartial, and just.

  17. Schofield

    It doesn’t take much reasoning to figure the resistance of Neo-Liberalism to MMT ideas is driven by free-riders in the shape of Banksters who don’t want to lose their power of looting by creating money to inflate asset bubbles. They certainly don’t want governments, or accountable trusts, creating money in competition with or instead of them.

    To retain their ability to free-ride it is obvious they have engaged in corruptly capturing government. In this way they can, amongst other things, ensure that any economic model (software program) that threatens to restrict, regulate or review their powers, like Godley’s Three Balances Model, is not implemented. Until the Banksters and Neo-Liberals are removed from control economies will continue to remain more unstable and dysfunctional than they need to be.

    1. MyLessThanPrimeBeef

      Does the executive branch just print money or does it need the legislative branch’s OK?

      Can the legislative branch print its own money?

      If you are facing impeachment like Nixon, can you just print money so we can have a big party to forget about the whole thing?

      How does it really work?

      1. craazyman

        you are correct Beef. The mystery of money is the mystery of who has the power to turn nature or imagination into property. It’s a question of how a culture controls its Id-energy imagination. Some sort of social structure evolves to do this, and it may fail and be reformed or overthrown.

        But for it to be succesful it needs endogenous restraint mechanisms. For all its errors and pradation, our financial system of investor-funded banks theoretically had those through regulation and prospect of failure that injures equity and debt holders. These restrain mechanisms failed due to operator error.

        What are the equivalent restraint mechanisms with MMT? The democratic process probably. But that takes us back 2500 years to the political theory debates in ancient Athens. They are never old and always informative.

      2. j.grmwd

        It works exactly as it works now. There can be no money if someone doesn’t “print” liabilities. Backed by nothing but trust. Anything else is barter. If you believe that neither the government nor the private sector can be trusted to “print” liabilities, then you’re asking for a non-monetary barter economy.

  18. craazyman

    youze guys need better costumes for the next gig. Something like this plus a smoke machine:


    And Ms. Kelton looks like she could be pretty hot! Is she the Fergie of MMT? It was hard to see from the movie. How somebody who’s naturally hot can be an economist is beyond me, but the world is full of surprise. And I don’t know why the cinematographer bored us with shots of beaches and car drives. The long approach sequence — so European. It seems the Europeans just can’t movies move the way they do in Hollywood. Maybe Ken Burns can make a MMT movie. What kind of background music would he use? That’s not easy.

    Somebody like Beef up the thread might call MMT a smoke machine, but I’m less critical. It could be a smoke machine depending on who decides what and when. Now we have an ice machine, though. the world ends in fire or in ice, as they say.

      1. craazyman

        she always says she’s not an economist, and when I tried to hit on her once she gave me an icy smackdown, so I’m careful now. ;)

    1. MyLessThanPrimeBeef

      Craazyman, I am doubtful it will work.

      Let’s assume it works, for the sake of argument, then it will ruin us all.

      Imagine Benito the Chief with MMT.

      1. F. Beard

        I am doubtful it will work. MyLessThanPrimeBeef

        No. I’d bet you are afraid it will work

        Let’s assume it works, for the sake of argument, then it will ruin us all. MyLessThanPrimeBeef

        Who’s “us”? Those who don’t want to end this depression? Those who wish to protect the status quo?

        Who do you work for? Rather, whose bidding do you do? You play the fool when it comes to vegetables but get very serious when the current money system is threatened.

  19. Pearl


    You guys didn’t realize that you are rock stars?

    You are totally rock stars.

    When you have housewives from places like Roswell, Georgia and rural New Hampshire alerting each other of your latest blog posts–you’ve definitely crossed over to some sort of stardom….

  20. joebhed

    The closest I’ve seen of the MMT v. Straight-economics debate happens at the annual Minsky conference.
    While I guess it is to be expected, many comments here border on the childish, and offer little information to the discussion.
    Put away the slogans, the wedge-phrases and all the hyperbole and say what is wrong with MMT, and why it might not work and what needs to be improved or included.
    If you watched the Morning Joe chat this morning,(NOT to be confused with Coffee With Joe) it was all about EVERYONE knows something is wrong, and everyone NEEDS to see a solution they can believe in.
    It is time to reform the national and global monetary systems.
    That’s the ONLY thing that will work.
    If not through MMT, then what?
    For the Money System Common.

    1. MyLessThanPrimeBeef

      That’s the ONLY thing that will work?

      How do we know?

      I know Marx said his stuff was scientific. The Bolsheviks were so sure it would work that they just slammed it on the ex-boyars and their former enablers.

      Or was that unfortunate episode just their attempt at experimental verification of Marx’s scientific theory.

      In our own case, are we being asked to volunteer for the coming Great MMT experiment?

      Is MMT as scientific as Marxism?

      1. j.grmwd

        Scientific enough. It’s based on the system at work right now. It makes testable predictions contradictory to mainstream dogma. Predictions which turn out to be correct time after time.

        1. joebhed

          Please have a read of the most science based book ever written about the subject – Frderick Soddy’s – The Role of Money.
          He explains clearly why the struggles between capital and labor are misguided, with no lasting benefits to the workers, and why and how to change that.
          It’s available free online.

      2. joebhed

        What we almost know is that it is the MONETARY systems themselves that are broken, broke and insolvent.
        Trying to move the economic peg or repair financial markets is a lost cause, as they cannot touuch the money system.

        Please think about this: the problem of the national circulating medium is that it is not circulating.

        If anyone has some other solution that will get the national circulating medium BACK into circulation – like having enough money to employ all the employables – then put it on the table.
        Otherwise, it’s the MONEY system that needs reform.
        Not banking.
        Not economics.
        Not finance.
        It’s the money system.
        It is our common medium.

  21. JustAnObserver

    Perhaps the 2,181 is an unexpected, indirect, effect of #Occupy_XXX acting in combination with the – now perceived as – insane consequences of the hairshirt policies being imposed on the EuroZone.

    When I say “hairshirt” I really have this image of those medieval processions of flagellants beating themselves senseless with whips and chains all the while thinking that with enough blood & pain their sins would be forgiven and that God would then relent and take away the scourge of the Black Death.

    MMT = Never needing to use a whip ?

  22. Hugh

    MMT is useful because it describes money in a post-gold standard world. But it really doesn’t address the three great issues of our times: kleptocracy, wealth inequality, and class war. And it only addresses the first two of the six problems which make up the European crisis:

    1) lack of a strong ECB
    2) lack of a democratic and comprehensive fiscal and debt union
    3) an insolvent banking sector
    4) mercantilist trade patterns
    5) a thoroughly corrupt political class
    6) rich kleptocratic elites

    1. Carla

      Hugh, I would say the correct adjective for the banking sector is “criminal.”

      And is MMT a theory at all? It seems to be how the international monetary “system” actually works. Should it not be called Modern Monetary Reality?

        1. Someone

          C’mon. The public always loves New Coke. Oh, wait, no they don’t.
          This ship has sailed. It’s MMT. Too bad for the New Cokers.

        1. Carla

          Thank you, TK421, for the reference. I was under the misapprehension that a “theory” referred to the second definition given:

          2. a proposed explanation whose status is still conjectural and subject to experimentation, in contrast to well-established propositions that are regarded as reporting matters of actual fact. Synonyms: idea, notion hypothesis, postulate. Antonyms: practice, verification, corroboration, substantiation.

          I am grateful that you directed me to the clarification. And I still think “Modern Monetary Reality” would strike a chord with more people, once they knew about it, Lambert’s loyalty to branding notwithstanding. As in, “This is the way the world works–you wanna know about it honey, or not?”

  23. MyLessThanPrimeBeef

    Professor Hudson, you seem like a nice guy.

    But you’re creating your own Frankenstein.

    I think a lot of crypto-fascists like your idea.

    Why do I intuit that they are crypto-fascists? Well, I don’t really know, to be honese, though it might have to do with the fact that they never seem to say ‘I don’t know.’

    1. j.grmwd

      I realize that a certain cynicism and distrust of the whole apparatus of modern society is well-justified. But MMT is just a description of the current fiat currency system with an emphasis on shifting the balance of power in control of the monetary system away from private credit-creating banks and back to democratically elected governments. If you don’t think that’s necessary, desirable or possible, I.m

  24. nobody

    Good grief, what an ugly, stupid, prejudicial ending to an otherwise compelling contribution to this blog.

    (“…whose only appeal is to Aspergers Syndrome sufferers who are selected as useful idiots to train…”)

    A good rule of thumb to those tempted to use such formulations – try running that sentence in your head with a crucial substitution and see how it sounds (“…Sexual Orientation Disturbance sufferers who are selected as useful idiots to…”)

    1. JTFaraday

      Actually, MMT is an Aspie’s dream, all those little convoluted arrows from vault at the US Treasury (sorry, keyboard at the UST) to the Fed to Goldman Sachs and JPM to the offshore accounts of Lord Blankfein and the Dimon Duke in the Cayman Islands and the Swiss Alps is enough to make an idiot “Normal’s” poor little head ache!

      See, most MMT-ers still seem to be under the delusion that what they are faced with is a knowledge problem, when the truth is that they are faced with a political problem. Which social condition, as uber-brilliant Aspies, largely escapes them.

      This is probably why Hudson got to go an the Aspie-bus to Italy to discuss MMT in the first place. He is the only MMT-associated economist I know of who even comes close to addressing the real problems Hugh cites at 3:04pm.

      After all, how can a brilliant Aspie be expected to worry about little things like who printed (sorry, keyboarded) their way into control of the government, when they’re busy building this:


      So, I’m inclined to forgive Hudson this Freudian slip. (But just this once!)

      Chalk it up to jet lag.

      1. Carla

        And isn’t every political problem a knowledge problem of some kind? I don’t get where you’re coming from, JTFaraday.

  25. Frank Ashe

    Great news! Maybe Bill Mitchell here in Australia could fill a football stadium to do the same thing.

  26. Tim

    I appreciate MMT for attempting to level the playing field of the elites, by saying okay it’s fine to print money, just spend it on the 99% not the bailouts, at which point the elite are forced to answer as to what their real concern is: savin the status quo. They really don’t care how they get there.

    At the same time, I agree with some of the naysayers that point out that MMT argues money printing would work if the central bank just implemented it correctly. Sure theoretically. So would a gold standard currency, and a government that refused to deficit spend and appropriated all fund on a maximum economic efficiency basis.

    At the end of the day, until someone alters humanity that drives those in power to stay in power by lying cheating and stealing, we are all just shooting the breeze by discussing economic/government/financial infrastructure solutions.

    1. TK421

      You are right, of course: without better representation, nothing will work. But MMT shows how good representation could fix things right now (by which I mean, within a few years) instead of waiting a decade or too for the business cycle to wrap itself up.

      1. Carla

        TK421, despite your providing the dictionary defense for calling the current monetary system “Modern Monetary Theory” or MMT, I don’t think regular people worldwide are going to go to the mat over makind a “theory” work to their (our) benefit. Hope I’m wrong.

    2. j.grmwd

      How could a government refuse to deficit spend? How could the economy grow with a constant stock of money? (Unless you wanted constant deflation, something which doesn’t exactly lead to a vibrant economy.) This is the kind of knowledge deficit that MMT tries to address. Like it or not, in a growing monetary economy someone has to be in deficit at all times.

  27. William Black

    Let’s take the substantive issues in segments without the ad hominem aspects. Stephanie Kelton and Marshall Auerback were the experts on MMT at the Summit in Rimini, Italy. It is no disrespect to Michael Hudson or me that our specialties lie in related fields or that Alain Parquez comes from a different (but supportive) economic tradition. (FYI: only Kelton and I were on the same plane.) I’ll begin by addressing today the dominant concern critics have expressed here — the government might act badly with the funds. This is, of course, a real concern. But it is some ways a very odd concern and not a logical objection to MMT. The extreme variant of this critique argues that MMT is “fascist.”

    The good news from the standpoint of MMT is that this critique agrees that MMT is accurate and makes available policy choices that are effective in increasing income and employment — and claims that MMT’ effectiveness is the problem because the government leaders might use the increased income and wealth for evil purposes.

    If that is a valid criticism of an economic theory (it works — it increases income, wealth, and employment) then virtually any accurate economic theory that improves the economy is “fascist” because the government might be ruled by a fascist and the ruler might use the increased wealth and income to do evil. No one (economist or otherwise) can ever guarantee that a government ruler will not be evil and use the increased national wealth to do evil. Under this logic all effective economic theories are fascist and we should try to make the world as poor as possible so that fascistic governmental leaders have fewer resources with which to do evil.

    It is also an odd criticism because it suggests that we should try to hide knowledge about MMT from governments because they might use the knowledge to improve their economies. Trying to hide knowledge about how a monetary system works is a fruitless task. There are tens of thousands of people who understand much of the mechanics of fiat currency systems. Even if we could wipe out the knowledge people would relearn it because their jobs required them to understand monetary operations.

    Consider the statements by the UK leadership that the UK has “run out of money.” Does anyone think that the UK financial leaders believe that statement? If Germany declared war on the UK tomorrow would the UK surrender because it had “run out of money” and could not “afford” to increase expenditures to defend the nation? The point is that nations, when faced with the need to make enormous, emergency expenditures, rediscover through necessity the knowledge of how monetary operations actually work even if they previously were captured by economic dogmas that asserted the opposit. That means that a national leader who is determined to be a fascist, imperialist will discover in the course of creating a dramatic growth in its military that it can fund the growth if it has a sovereign, floating currency and if the nation’s debt is denominated in its own currency. (MMT explains that real resources can be scarce, and that can limit the military build up.) So, even if every academic conversant with MMT traveled on the same plane and died in a crash fascist government leaders engaged in an arms race in preparation of invading their neighbors would discover that resources, not funds, were the real restraint on the military growth if they had fully sovereign currencies.

    The “fascism” critique expressed on this page does not address two other important points. There are staggering costs to refusing to use MMT to respond to a severe recession. Unemplotyment, poverty, and inequality all rise sharply. Very few democratic governments warrant the term “fascist.” We cannot stop fascist governments from increasing their national wealth by using MMT principles. We should encourage powerful, democratic governments to use MMT principles to recover from severe recessions, which will help them avoid the social disintegration most likely to lead to the rise of fascist leaders. It is theoclassical dogma that is producing the economic crises throughout the periphery that have led to the rise of anti-democratic leaders and policies in much of Europe. Fundamentally, the commenters who raise the “fascist” criticism of MMT do not trust democracy. We would urge against hopelessness. Governments typically use budget expenditures in severe recessions for generally desirable purposes. Instead of embracing over 20% unemployment (roughly 50% for young adults — this is what austerity is doing to the European periphery) as a means to starve potential fascist leaders of the funds to do evil we urge that people work to defeat fascist candidates.

    The Italians who joined us for the MMT Summit in Rimini were strong opponents of the fascists. They were regular Italians and their response was overwhelming. Paolo Barnard, the Italian journalist who orgainized the Summit and we, the non-Italian panelists, are all strong opponents of fascism.

    The same was true in Ireland, Iceland, and France when we discussed MMT in those nations. The response is so positive because we show that “TINA” is a lie — there are alternatives. We hope Naked Capitalism readers will work with us to implement programs that provide jobs and fund the investments in people, technology, government, and infrastructure that will make possible growth and reduced harm to the environment.

    As citizens in a (yes, flawed) democracy, we are not helpless. Our job as citizens is to make our government more democratic and effective and a bulwark against fascism.

    1. F. Beard

      Well said!

      I would add that the current system is fascist if one’s definition of fascism is “government for the benefit of the rich”.

  28. Skippy

    The complete and total history of the USA post WWII (keeping it simple here) makes me say no, unequivocally no to MMT.

    Skippy… my trust has been lost, so until that can be repaired, its no mas.

    1. skippy

      I find it curious that most of the discussion is on whether or not MMT is a true reflection of the present mechanics, viable tool going forward and not whom will use it and to what ends.

      Its like voting for obama all over, again?

      Skippy… If the present actors that brought us to this place, you know the derivative crowd et al, are given a force even more powerful tool than that… Well call me silly but, more blow and hookers on Yachts and in Penthouses is going to fix everything?

      1. F. Beard

        Its like voting for obama all over, again? Skippy

        Yet even criminals are given medical treatment and who knows what they will do with their restored health?

        But if you are afraid of the consequences of a free spending government then you should be for a universal bailout instead. Most private citizens don’t use their funds to kill brown people in foreign lands, for example. They use them for such things as food, clothing and shelter for themselves and their children.

  29. Scott Baker

    Michael Hudson is always clear and succinct, and always a gust of fresh air in an otherwise TINA pundit circle.
    However, I have a problem with MMT which I’ve expressed directly to the founders (Warren Mosler and Randall Wray), but have not gotten a satisfactory answer to.
    It can be summed up by a recent joke: How many MMTers does it take to screw in a light bulb? Ans: none, because to anMMTer, the light bulb is already screwed in.
    Basically, MMT says we have no debt because we can always make more money. They don’t ignore inflation, but (like me) say it is desirable sometimes.
    But the question I, and Lincoln and Henry George etc. ask is why have a debt at all on a sovereign currency? That is, a truly sovereign government can simply create its own currency, as Lincoln did with the first U.S. Notes (1862) to pay the northern troops, as existed in the MAJORITY of the currency just 20 years later – and perhaps urged Henry George to proclaim “Of course I am a Greenbacker. BUt I am not a fool!” – meaning he believed government should produce the national currency (Greenbacks in those days, because Lincoln’s first Legal Tender had a green back), but not overproduce it, leading to inflation.
    Now, as any honest economist will admit, we have asset inflation from over-production of money to the speculating 1%, and deflation of wages and assets for most of the 99%.
    Congress, acting under Art. 1, Sec. of the constitution, can reverse this inequity at any time, by producing debt-free money, aimed at the sectors of society that need it – infrastructure, maybe Social Security (to end the regressive payroll tax), etc.
    MMT seeks to create a middle ground – running up the debt, but paying it with fiat money. Why not just apply the fiat money to where it is needed? Haven’t we given the 1% enough already?

    1. F. Beard

      The MMT gang can’t seem to cut themselves free from government support for banking and support for the national debt.

      Sometimes, I think they want just enough reform to keep the system going till they make THEIR billion or so.

      And their Guaranteed Job program (instead of cash restitution) reeks of elitism (Sorry Lambert).

      And Cullen Roche is a fan of Alexander Hamilton who cheated at his duel but lost anyway.

      But that said their insight that the debt of a monetarily sovereign nation is ITSELF a form of money is a game changer.

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