Mirabile Dictu: Lead Story at Bloomberg Gives a Thumbs Up to MMT

As reader Sam C points out, the prominent Bloomberg story, Ignored for Years, a Radical Economic Theory Is Gaining Converts, gives a positive and accurate, if superficial, treatment of Modern Monetary Theory (MMT). Interestingly, it attributes the increased receptivity to MMT as the result of investor frustration and concern with central banks resorting to desperate and destructive-looking measures like negative interest rates, and the accompanying recognition that the only way to pull stagnant and worse, deflating economies out of the ditch is through sustained fiscal stimulus, aka deficits. That’s anathema under the current neoliberal orthodoxy, but it’s becoming more obvious with every passing day that conventional thinking failed to anticipate the criss and has done a mediocre-at-best job at dealing with the aftermath.

Key extracts from the Bloomberg account:

“There’s an acknowledgment, even in the investor community, that monetary policy is kind of running out of ammo,” said Thomas Costerg, economist at Standard Chartered Bank in New York. “The focus is now shifting to fiscal policy.”

That’s where it should have been all along, according to Modern Money Theory. The 20-something-year-old doctrine, on the fringes of economic thought, is getting a hearing with an unconventional take on government spending in nations with their own currency.

Such countries, the MMTers argue, face no risk of fiscal crisis. They may owe debts in, say, dollars or yen — but they’re also the monopoly creators of dollars or yen, so can always meet their obligations. For the same reason, they don’t need to finance spending by collecting taxes, or even selling bonds.

The long-run implication of that approach has many economists worried.

“I have no problem with deficit spending,” said Aneta Markowska, chief U.S. economist at Societe Generale in New York. “But this idea of the government printing money — unlimited amounts of money — and running unlimited, infinite deficits, that could become unhinged pretty quickly.”

To which MMT replies: No one’s saying there are no limits. Real resources can be a constraint — how much labor is available to build that road? Taxes are an essential tool, to ensure demand for the currency and cool the economy if it overheats. But the MMTers argue there’s plenty of room to spend without triggering inflation.

Given that heterodox ideas are typically shut out of the mainstream media, and when they are mentioned, seldom get a positive treatment, this article represents an encouraging departure. I suggest you read it in full. It’s a welcome sign that failed theories are finally leading ones with more promise to get a hearing.

Print Friendly, PDF & Email


  1. RabidGandhi

    If you had asked me 15 years ago what might break the educated classes obsession with inflation, I would have thought certainly bringing interest rates to zero and beyond and having multiple central banks flood banks with liquidity would certainly dispel the myth. Yet I still find it utterly mind boggling: after ZIRP, NIRP and repeated QEs did in fact bring this to fruition, the first thing that always gets mentioned when presenting MMT is: Zimbabwe and Venezuela (although the Bloomberg article for some reason forgets to mention Weimar Germany). After years of expanding the monetary base and lowering interest rates Europe is in a deflationary spiral, and they still trot out the inflation bogeyman (looking at you Janet Yellen).

    This marvelous ability to hang on to a discredited theory in the face of all evidence is a blaring testament to the effectiveness of the education/propaganda system.

    1. YankeeFrank

      As Jesse over at his Cafe Americain continues to point out, its the credibility trap they are caught in that makes them refuse to see reality: if monetary stimulus doesn’t work, then what have they been doing for the past 8 years? And if fiscal stimulus is the only way to generate demand in a massively over-indebted private sector, then all the talking up of the economy for the past 7 of those 8 years has been a lot of distortions and lies.

      The green shoots must’ve amounted to something by now or they were wrong all along and are not just incompetent, but lying thieves who saved their friends in finance while letting the 99% slowly and painfully die… and now, lucky us, we get fascism.

      1. Benedict@Large

        … then what have they been doing for the past 8 years?

        Actually, that would be 40 years. Monetarism didn’t suddenly just stop working. It never even started.

        1. jsn

          Well, that depends on what you think it was meant to do: it justified dismantling the New Deal and managed to turn the middle class against both its own economic interests and the environment.

          From the Devil’s perspective it’s been a stunning success, hell it even made a politician out of Trump!

          1. steelhead23

            Sure would like a like button here. JSN is spot on. Also, isn’t the UST market a bit of a gravy-train for its primary dealers? Forcing deficit spending into the UST market places the primary dealers in a power position. Perhaps when defending MMT, its purveyors could make comparisons to the current system – and institutions. I believe that along with Nobel prize winning economists defending their stupid models, the globe’s financial giants are against MMT because it would reduce their wealth and power.

  2. Big River Bandido

    I had to laugh at the Bloomberg headline’s characterization of Keynesian economics as “radical economic theory”. I didn’t think it was possible for ostensibly intelligent people to be *so* out of touch.

    Then again, I wasn’t familiar with the MMT acronym. My first thought was…”Magical Mystery Tour?”

    1. washunate

      Yeah, MMT is part of mainstream economic thought. It will be portrayed by the mainstream media as radical, though, to sell a kinder, gentler, more progressive deficit spending in the name of warmongering and bank bailouts and corporate welfare and tax cuts for the rich.

      Even Professor Wray speaks about MMT in the context of mainstream economic thinking, for example:

      However. And here’s the Big However. We do agree with the mainstream that you need a price anchor, or otherwise pursuit of true, full employment probably would, at least much of the time, cause inflation. So, we, too, want a price anchor.


      We could choose to dissent from the mainstream and propose giving national currency units directly to people in need. But that would indeed be radical :)

      1. Jim Haygood

        Randy Wray agreeing with the need for a price anchor is like Bill Clinton praising the virtues of chastity.

        Actually, there IS a price anchor: la relique barbare, as it’s called in the elite salons of Kansas City.

        If we go “full MMT” — which is not so improbable, as NIRP crashes and burns — you’re gonna need it.

        1. washunate

          That’s one of the ironies I love about MMT. They agree with you on the central role played by a price anchor. Their dispute is that JG/ELR/FE/whatever is superior to gold/silver/copper/whatever.

          What they interestingly alternate between lampooning and ignoring is an entirely different line of economic thinking, namely, one that suggests that buffer stock monetary policy itself is irrelevant, that mainstream economics is too obsessed with the quantity of money. In a society of sufficient aggregate wealth domestically and freely floating exchange rates abroad, what matters is the distribution. The quantity of money doesn’t matter; what matters is how that money is used to direct labor.

          1. Jim Haygood

            Demographics also seems to play a role. Peak population within a currency area looks to be deflationary, at least as a first-order tendency.

            Planet Japan’s shrinking “glow in the dark” population is a test case, as its govt debt-to-GDP soars to 230% and beyond. In financial terms, Japan is Voyager I, having escaped the solar system and moved into the zen emptiness of interstellar space.

            Without NIRP and ZIRP, Spaceship Japan runs out of oxygen in a hurry.

            1. jsn

              Just look at where all that Japanese money resides. That it’s not in circulation, just like in the West now, is the reason it’s deflationary.

              Distribute some of it, or better yet create some more and give it to people who have pent up needs that can’t be expressed with money because they don’t have any, and you find all kinds of things that need doing.

              And if you do enough of it, maybe a little inflationary pressure.

            2. jsn

              Also, I suspect you have the causality reversed: if you hoard enough of the money stock long enough, people will discover how hard it is to live in an industrial society where access to money is, ipso facto, access to survival and they’ll opt out of bringing little ones into that trap. Tight money, at some point, kills: ask Trump voters.

          2. Steven Tucker

            There is more to it than the direction of labor. The promoting of innovative capabilities (through education, etc), the allotment of limited or distant resources, and (currently the prime focus of banking industry) the monopolization of decision making, are three examples of systems that are affected by wealth distribution.

            If you reply that decision making is part of the direction of labor, you are right objectively – but I will then say that you must never have met a sociopath. Hoards of them infest our government and banking systems. They just like to control people, they don’t care where the labor goes.

            1. washunate

              I was talking about budgeting; all federal spending ultimately directs labor activity, either directly when the government hires someone, or indirectly, when the government subcontracts services or procures goods. A lot of nonspending federal activity directs labor activity, as well, from the I-9/e-verify system to drug scheduling to IP law to NCLB and RttT.

              As far as psychopathy, we very much agree. That is one of the main problems with MMT. Both JG and deficit spending assume good management when management failure is precisely the problem.

              I’m not sure what you mean about control freaks not caring where labor goes? They absolutely care; that’s the problem. If they didn’t care, then there would be no political obstacle to shifting labor from unproductive activities to productive ones. The control freaks are the only reason we have so many people employed in the national security state. The control freaks are the only reason we have the largest prison system on the planet. The control freaks are the only reason we have the most expensive healthcare system on the planet. These aren’t naturally occurring circumstances; they exist due to people in power who care very much how labor is directed in the economy.

        2. kenick

          I don’t think employing people at minimum wage would cause that much inflation. The multiplier would increase jobs in the private sector. And there might be less spending on prisons, etc.

          Gold doesn’t anchor much of anything. You can certainly buy gold, or bitcoins, or designer handbags. When the dollar was convertible there were still big swings in prices.

          1. washunate

            I don’t think employing people at minimum wage would cause that much inflation.

            Exactly, that’s the critique. Mosler, Wray, and others prevent too much inflation from happening by setting the wage paid for JG jobs (the minimum wage) notably lower than the wages paid to higher income public employees. That’s why they create a distinction between JG and non-JG public sector employment in the first place; systemic inequality is their buffer stock. They require a constant supply of workers making low wages in order to keep prices down.

            It’s why they won’t (can’t?) come to consensus on advocating a specific wage level for the JG. They have positioned MMT rhetorically as a solution to inequality when it doesn’t actually do so, so now they’re intellectually and practically stuck between the two options of either 1) rejecting the mainstream view of buffer stock policy, or 2) advocating JG in principle without offering concrete plans.

            1. jsn

              Good critique. But I don’t think Wray or Mosler intend to “eliminate” inequality. It would be an appropriate question of public purpose what level of inequality society would choose and the act of the choosing would define a lot about who we are and who we want to be. At present, bankers and the Fed make all these decisions for us and are happy to see both Buffets and bums. Neither extreme strikes me as fair.

              1. washunate

                That’s where MMT is stuck. The more strongly it emphasizes its price stability roots, the more irrelevant it is as far as actually doing anything meaningful about our nation’s social problems. But the more strongly MMT ideas are sold in the language of advocating change, such as addressing poverty, the more the rhetoric conflicts with the price anchor. This is the inherent tension that exists when operating within the buffer stock framework of establishment economics. It leads to absurd statements, like this interview with Wray from a couple years ago:

                We showed that if you just give a job to anyone who wants to work you will eliminate two thirds of all poverty, even if you pay only the minimum wage.


                Paying minimum wages is exactly what the banksters, feds, and everybody else running our political system want.

                  1. washunate

                    Ha, nice.

                    The easy way out of the impasse would be for MMTers to present a specific plan with concrete information so we can analyze what they have in mind in relation to both how HR philosophy works currently and other potential policy choices.

                    Until then, we’re left with this nebulous situation where skepticism is resisted rather than embraced and problems with the theory are ignored rather than addressed.

                    1. slm

                      The JG is not an essential component of MMT, it is only a policy option that comes out of MMT. MMT itself is a description of how the system actually works. The critique of the job guarantee needs to be separated from the explanation of the workings of modern money. If, for some reason a JG is not effective or well-run, it does not mean that MMT is not still a description of how the system works. A price anchor is not necessary for the description of modern money to “work”, only that there is sufficient demand for the currency, which is the tax system. There is currently no ‘anchor’ on profit rates and speculation-driven demand for financial assets. Also, offering a job-guarantee that can be directed to transitioning the economy toward sustainability could provide a “double-dividend” of sorts, depending on whether our society decides we can be more creative than “burying and digging us old bottles with banknotes.”

                    2. washunate

                      If I have convinced MMT supporters that 1) JG is not an essential component, and 2) a price anchor is not necessary, then I will consider my multi-year critique to have been quite successful.

                      slm, the issue is I’m not sure how many other MMT proponents would agree with you?

                1. Plenue

                  How about you quote the whole paragraph, jackass?

                  “Well it’s very easy to reduce the inequality that results from low income, from poverty, from low wages; all you have to do is offer jobs. Minsky did a calculation [in] 1974 and Professor Kelton and I did one around 2000. We showed that if you just give a job to anyone who wants to work you will eliminate two thirds of all poverty, even if you pay only the minimum wage. We would like to see the job pay more than that, but even at a minimum wage you eliminate two-thirds of all poverty. So most poverty is due to joblessness. People who cannot get jobs or maybe they get jobs that last a few months and then they are unemployed again. We need permanent jobs that pay a decent wage and you’ll eliminate most poverty. You’ll still need some kinds of anti-poverty programs but the jobs are the best anti-poverty programs there are, then you need something else to fill the gaps.”


                  “We would like to see the job pay more than that, but even at a minimum wage you eliminate two-thirds of all poverty.”

                  You also forgot to trot out the customary ‘well the jobs will suck’ nonsense. Not only is it not true, even if it was, so what? If the choice is between getting paid to dig and fill in holes or to not do a meaningless job and simply starve to death, the only viable option is clear. Or we could just give people money simply for being alive, Basic income Guarantee, which is also entirely possible if a government creates its own money from scratch, which is the entire core point of MMT.

                  1. washunate

                    I would encourage you to read this after a deep breath. This pretty much sums up MMT’s communication challenge in a nutshell.

                    1) Name calling on the internet is hilarious.

                    2) Making extreme claims and then getting defensive when someone challenges the claim gives off the appearance of either carelessness in making the claim or lack of desire in actually testing and exploring claims to identify falsifiability and address potential errors and so forth. It gives the appearance of insecurity, of a need to prevent people from examining the matter too closely.

                    3) Resorting to generalities rather than providing specifics in a hope no one notices only works if no one notices.

                    4) Mischaracterizing MMT’s work requirement is a red flag to me. “The entire core point of MMT” is that people need to be put to work, that we need more time spent in formal employment. The entire core point of UBI (BIG) is that work requirements should not be attached to the basic necessities of life. Either you don’t understand that, or you are purposefully engaging in deception.

                    5) It’s particularly hilarious you mention UBI to me. I don’t support UBI. I support social insurance as the safety net delivery mechanism, specifically universal health insurance and universal unemployment insurance. I openly present those as personal preferences where others may disagree. MMT has been quite hostile to UBI over the years. For example, here’s Wray again in his own words (and you’re welcome to say I’m quoting out of context again, but here’s the thing, there’s only so much room for comments before they turn into posts themselves).

                    I’m not going to say more about these final two arguments against full employment as I’m convinced both are fallacious, and because neither of these critiques offers a price-stabilizing anchor for the currency in place of the JG/ELR.

                    Please tell me how calling UBI advocates fallacious is a positive way to engage that advocacy? And note this further demonstrates that MMT falls firmly in the establishment camp. Wray won’t even engage debate unless one accepts the very premise being debated, namely, the need for a specific price anchor embedded in monetary policy.



                    “Most poverty is due to joblessness” is a disputable opinion, not some kind of objective scientific observation. Presenting it as the latter rather than the former calls into question the rigor and relevance of the entire intellectual construct.

                    “We would like to see the job pay more than that” How much more? Who makes that decision; is it a universal figure in the statute, or do people in power get to determine compensation levels for each worker individually? Specifics are notably absent.

                    1. Plenue

                      And I would encourage you to stop quote mining people to make them say things they haven’t actually said. You even end up conceding right at the end of your comment that he didn’t actually say everyone should be on minimum wage, and then you complain that he didn’t give you enough specifics about what the wages ideally would be.

                      And yes, MMTs entire core idea is that governments that control their own currency can’t run out of that currency. What they choose to do with that power is a separate issue. Most MMT advocates may not believe in a BIG, but that doesn’t mean it becomes an invalid option.

                    2. washunate

                      You are incorrect, and I can’t tell if you understand that or if you genuinely believe what you just wrote.

                      The issue is not what the wage level “should” be to alleviate poverty: MMT has refused to date to provide such a level. Rather, the issue is that Wray claimed that a minimum wage level would solve 2/3 of poverty. That you need to reword the claim to make it more palatable to you doesn’t change what Wray said.

                      As far as your willingness to separate JG from chartalism, that runs directly counter to Wray’s point. It’s you who are saying things people haven’t actually said. I’m being authentic to the way Wray and Mosler have developed what we now call Modern Monetary Theory.

                      That you don’t like what they actually write is your intellectual conundrum with which to grapple, not mine. I’ll leave you with one more quote from that article, again, verbatim, Wray describing Mosler explaining the MMT Insight.

                      Here is Warren Mosler’s response, in what is almost a Haiku in its simplicity:
                      It comes down to this:
                      With ‘state currency’
                      There necessarily is,
                      Always has been,
                      Always will be,
                      A buffer stock policy.
                      Call that the MMT insight if you wish.
                      So it comes down to ‘pick one’

                      Note the word necessarily in that statement. Or maybe you would prefer this conclusion, from a different article posted right here at NC.

                      So, can you separate the modern theory of the disease cause of Polio from the cure? Yes.

                      Can you separate the MMT explanation of the cause of unemployment from the policy to cure it? Yes.

                      Should you? Of course not.


                      If you are separating JG from MMT, I’ll consider my work done. This has been my long-running critique that JG is a solution in search of a problem. That’s exactly my position that we don’t need a buffer stock at all. We can simply give currency units directly to people in need because a sovereign government can’t run out of said currency units.

        3. Plenue

          I will give you credit for being a true believer. No amount of historical or anthropological evidence will sway you from your devotion to the shiny rock.

    2. Steven Tucker

      Try reading the obtuse and science fictional theories of language origins being published at MIT the last 40 or 50 years. It is extra funny because the people doing it are using nonsense language to explain language – it’s a huge recursive instance of nonsense that only has meaning to the few who write the nonsense.

      Just like economists, their jobs, income, and prestige are tied to their propagation of nonsense and on convincing others to accept that nonsense = truth.

  3. trinity river

    Now, thanks to the blogosphere, he says there are thousands around the world, especially in struggling euro-area countries like Italy and Spain…

    One problem I found in the Bloomberg article was that it did not go on to name the person in the blogosphere who is most responsible for educating us on MMT. Can we hear it for Yves Smith?

    1. Yves Smith Post author

      Thanks for the kind words, but it is the UMKC site, New Economic Perspectives, that has been doing the heavy lifting for years. We have just amplified and once in a while elaborated on their work.

  4. washunate

    That’s anathema under the current neoliberal orthodoxy…

    I’m curious what is meant by this tidbit? Deficit spending is what we’ve been doing for decades.

    1. beene

      trinity river, there are several articles here by Randy Wray.

      Put Randall Wray in search and start with article dated 2010.

      1. trinity river

        beene, I’m not trying to say that Yves did it all by herself, but more people have come to this site and learned about Randy Wray and many, many others than the other way around.

        I learned about Stephanie Kelton, indirectly or otherwise, from this blog. And her Angry Birds lecture recently is excellent. in explaining the deficit issue.

        1. trinity river

          This may be a bit late, but I meant to include this video for Stephanie Kelton’s most recent Angry Birds video.

    2. RKelly

      It goes something like this…

      The great majority of money creation should be done by banks through lending. The neoliberal elites are able to control the world’s assets if those assets are collateralizing all/most new money creation. Default is a nifty way to transfer over assets to the lenders.

      We can’t just have the government create new money. That would make the 99% too complacent. They need to have fear and uncertainty to keep them honest and hard working. Nothing like a mortgage and a car payment and a student loan to keep you hungry and willing to put your nose to the grindstone.

    3. susan the other

      our deficit spending has been borrowed money from our and foreign banking systems, which makes it a problem and restricts using that money for social spending, because TINA, etc.

    4. Steven Tucker

      Try thinking of “neoliberal” as a view that a nation or world where all are equal under the law and have equal access to opportunity (the old liberal point of view) can only be achieved by the control and manipulation of the laws and wealth by people, like me (it’s always me, you see…) who are super superior to everyone else. The old liberals (I am old school) want equal opportunity that is optimal and maximized for all. The neoliberals don’t think the rabble can handle that much opportunity – it might lead them to think they can make decisions and such. Neoliberals and neo conservatives are basically Ayn Randians who differ on what should be supported most and controlled most. Neolibs want to control the money, control the decision making, and seek to do it globally (think of free trade stuff, like NAFTA, Al Gore with his cap-and-trade con game, and of course the investment bankers and vulture capitalists. They love education, so long as the populace is educated to think like they do.). The Neocons want to control resources and industry, control citizen behavior, and kill everyone else to take their resources (think of privatized military systems, the war on drugs, War for oil, Vietnam, Nicaragua, etc….They love private property and sovereign rights, so long as your property or nation doesn’t have resources they want) .

      That’s why Neos of both kinds get along so well – they are all sociopaths. Old school Libs and Cons got along and were good neighbors, and knew how to compromise ideals to get things done that needed to be done. The Neos both want to be in charge so badly and are so fixated on the perfection and divinity of their own thoughts that they cannot compromise, will throw tantrums unless they get their way 100%, and would rather watch America burn in hell than to admit that their grand ideas turned out to be imperfect. They are the intellectual and moral elites who are too wise to ever learn anything, and too godlike to ever really believe in equality under the law, the upholding of the Constitution, or any God that is not in their own image.

      1. John

        I think it’s simpler than that. Both sides want to spread classical liberalism (especially neoclassical economics) throughout the world, they just disagree on the means to that end. Neoliberals are optimists who believe in cooperation and want to use supranational institutions (and free trade) to achieve these goals. They believe that the free market will work its magic and lead to growth and prosperity that will convert people, and ultimately governments, into secular, pro-globalization liberals. Neoconservatives are a bit more pessimistic and believe that there is too much evil in the world for this change in ideology to happen magically. They believe the only way to spread liberalism is by force, eg by destroying Islamic societies and rebuilding them as liberal ones from the bottom up.

      2. washunate

        I don’t buy the distinction between neocon/libs. As we use the terms colloquially, they are the same thing. To use them more formally, everyone in DC is a neocon.

        At anyrate, what does that have to do with saying that our current power structure opposes deficit spending? I’m making an empirical point, an observation that we have net deficit spent trillions of dollars in the Reagan-Obama era. Not only do they know deficit spending is possible theoretically, not only do they like the idea in general, they have actually done it in practice at scale over an extended period of time.

        1. John

          They’re in the same family but they certainly are different. Clinton and Bush had different styles, different methods of spreading American values throughout the world. Bush had no qualms about dragging us into to costly, protracted wars while Clinton preferred to simply sign trade agreements and let local elites do the work for him. Clinton thought the invisible hand would best do the trick while Bush preferred stealth bombers. Clinton’s strategy was ultimately much more powerful because there’s no better way to dominate than to make it appear entirely consensual. Bush only made the Washington Consensus and America’s image in general much less popular abroad.

          1. washunate

            I’m not sure I follow? You seem to be saying that the Bush years were worse than the Clinton ones (no argument here), not that they differed in fundamental principles. And you don’t address the most recent Obama years at all. That is the biggest tell: if the neolibs honestly disagreed with the neocons, they would have enthusiastically contested policy when they ran Congress and radically changed policy once Bush was out of office. Instead, it is tough to tell today whether a policy idea was a Bush one or an Obama one; there is that much continuity in the substantive actions (as opposed to the meaningless rhetoric) over the past couple decades. It was Joe Biden, not Dick Cheney, who chaired the Senate Foreign Relations committee in the run-up to the 2003 invasion of Iraq, and it was Nancy Pelosi, not Donald Rumsfeld, that said impeachment was off the table even though obvious war crimes had been committed.


            Where you get this idea that the Clinton years were built on consensus really baffles me. I don’t want to insult your intelligence if you’re familiar with our nation’s contemporary history, but here’s a summary in case you’re not. Have you honestly not heard about sanctions and no fly zones enforced against Iraq in the 1990s? Or the isolation of Cuba? Or the domestic police state, with its massive incarceration at home and open war on drugs abroad, from supporting the Taliban to Plan Columbia? Did you miss the 1990s when the NSA specifically and the surveillance capabilities generally of the computing era spilled over into the public consciousness (side note, if you want a fun action flick, Will Smith in Enemy of the State is outstanding)? Or when the groundwork for future problems was laid with media consolidation and DMCA and financial deregulation? Or the war in Kosovo? Or NATO expansion further and further toward encircling Russia? The Clinton Administration loved stealth aircraft. They even got one shot down over Serbia. We even, uh, accidentally bombed the Chinese embassy there. The B-2 Stealth Bomber was an icon of US power projection in the 1990s, the last great symbol of peak dominance of the unipolar world. The culture was so rife with naked militarism and American exceptionalism that Hollywood was desperate to find legitimate enemies against which to pit our savior military tech (another great Will Smith movie, Independence Day…). We sent cruise missiles after places like Sudan and Afghanistan and the evils of international terrorism, proliferation, and WMDs were all making the rounds, conveniently available for full fearmongering deployment in the early 2000s. The CATO institute was a voice of reason(!). The 1990s were a crazy time of trashing Constitutional rights at home while projecting force abroad, not some consensus where everybody welcomed the meddling of the USFG.

            Perhaps most pointedly, Clinton didn’t cut national security spending after the collapse of the USSR. He expanded it, the completely opposite approach of the demobilization the US did in the early 20th century following the Great War. It was widely understood that an aggressive foreign policy was being implemented to project American power abroad, not defend the US.

            Clinton kicked off the era of NATO being the world’s policeman. NATO had never acted unilaterally before, outside the UN Security Council process, until we went after the Serbs (who in a complete coincidence, were cultural and economic friends with the Russians).

            This is not to pass value judgment here on whether the use of force is a legitimate tool of public policy, nor is it to say the 1990s were uniquely bad; I’m simply pointing out this artificial distinction between Republican warmongers and Democratic consensus builders is not based in actual events. It’s a fiction invented by the authoritarians in the Democratic party to help defend kabuki theater and lesser of two evilism, especially amongst more educated liberals who would otherwise be appalled that their own party is overrun by neoconservative philosophy.

            1. John

              First of all, some of your examples are entirely irrelevant. Of course Clinton repealed Glass-Steagall, that’s exactly what a neoliberal would do.

              They didn’t differ in principals, they differed in methods.

              While Clinton certainly beefed up our military and the NSA and was willing to support certain sides of certain conflicts abroad, he did not get us entangled in any long and costly wars, nor did he nation build. Those are neoconservative methods. Not only did Bush invade two nations, he disbanded their civil society so would have to rebuild them from the bottom up.

              I’m not trying to argue that the Democrats are “lesser than two evils,” that’s a strawman that you’re building. I’m simply pointing out that they differed in regards to foreign policy. Bush and the neocons are much more blatant than the neoliberals. The neocons want to continue and invade nearly every nation in the Middle East until they have remade it along the lines of their fantasy. Neoliberals want to spread free markets, and perhaps even send a few bombers, but they have entirely different ideas on how to shape the Middle East (they would like any changes to be “consensual”). And yes, as you pointed out, most Democrats voted for the war in Iraq, but that’s because they’re spineless politicians who simply follow public opinion. All of America was hooked on the War on Terror at the time, and they wanted to get re-elected. But the fact remains that the Gulf War II ran entirely contrary to neoliberal ideals, and most neoliberals outside of the US did not support it. They aren’t quite as hawkish as the neocons, and few neoliberals are calling for a ground invasion of Iran.

              1. washunate

                Opinions can differ of course, but that sounds like a stretch to me, a distinction without a difference. You say encouraging financial fraud and looting is a neoliberal thing. Then why did the neoconservatives do even more of that? I point out multiple instances of aggressive foreign policy in the 1990s, from defense budgeting to cruise missiles to stealth bombers, and you then switch to saying that’s not enough.

                You completely ignore NATO expansion, as if that’s some kind of peaceful, consensus building project rather than an enormous middle finger of international relations to Russia specifically and the world more generally.

                You say that the Democrats are spineless politicians and that they were merely following public opinion. Why deny them the agency of their actions? That comes off as nothing more than trying to cover for them.

                You ignore the fact that the central figure in shaping public opinion was Joe Biden, Democratic Senator who actively prevented anti-war positions from being heard. This notion that public opinion drove politicians to war rather than the other way around is so divorced from what actually happened that I don’t think I understand your argument. And Biden was big on terrorism and certainly had his own plans for the middle east, like when he openly suggested ripping Iraq apart into three sections based upon ethnic cleansing.

                You ignore the drug war completely, one of the cleanest distinctions both intellectually and practically between neoconservatives and neoliberals. Even Milton Friedman opposed the drug war(!). No one in power in the US is an actual neoliberal.

                You say that neoconservatives invade middle eastern nations. Exactly. The US has a military presence in most nations on the planet. From what percentage of those nations have the Democrats removed US military activity? Heck, George Bush worked with Libya. The Democrats were more war mongering than the Bush Administration. And then there’s Syria, another country that has become a main focus of American imperialism since Bush left office. And then there’s the Ukraine, where we may never know exactly what happened, but we do know the Democrats are completely, totally, 100% responsible for having Victoria Nuland on the job.

                The above is far from exhaustive, but basically, it appears you are reverse-engineering a distinction in the post-Cold War era between neoliberal and neoconservative actions based upon party ID rather than material policy differences.

  5. paul

    Did Richard Cheney not say “Reagan proved that deficits don’t matter” to Paul O Neil?
    Did his big pal ‘The real Donald’ Rumsfeld sponsor Warren Mosler’s research?

    Maybe it’s just moving from the occult to the mainstream.

    1. trinity river

      Yes, the Bush administration learned of MMT from Warren Mosler. His book, “The 7 Deadly Innocent Frauds of Economic Policy” tells how this happened. Knowledge of MMT does not guarantee that it will be used to solve the inequality problem. Tools can be used for good or ill.

      1. washunate

        So, if MMT is a tool that can be used for good or ill, what relevance does it have to solving inequality?

        1. two beers

          By your logic, since a hammer can be misused to hit someone over the head, it’s excluded from its proper function to hammer nails.

          1. washunate

            So if someone hammers a nail into your head, is that a proper function? Who determines what is proper?

          2. TomD

            A better metaphor. Taxes can be used to oppress the poor and increase inequality, so what relevance do they have to solving inequality?

            1. washunate

              Yes, good question. My answer is none. The flip side of saying deficits don’t matter. Nondeficits don’t matter, either.


              I critique monetarism in both its orthodox and MMT variants. I would argue the fixation on quantity of money is at the heart of what blinds mainstream economics to the issue of our day. Our economic problem is no longer primarily aggregate production. Instead, our economic problem is inequality. (This is a good thing, by the way, that we have become so wealthy in aggregate; it just means that we need a paradigm shift away from disputes anchored in a mindset of scarcity of the basic necessities of life.) The amount of money spent on housing, for example, is plenty to provide decent housing to every single American. The issue is that some people have ‘a lot’ of housing while others have ‘little’ or ‘none’.

              The level of taxation spending is just as irrelevant as the level of deficit spending (taxes + deficits = total spending). What matters is the distribution: who pays the taxes and who receives the spending. Whether the level of spending is greater than, equal to, or less than tax revenue within an arbitrarily short time period simply doesn’t matter in the scheme of things unless/until we approach extremes beyond the bounds of anything anyone actually proposes (ie, near 0% or 100% tax rates would be problematic).

              Keynes supported cyclical spending, not infinite deficits, and he proposed that we would be working less, not needing to find ways to have yet more employment in the formal economy.

              For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich to-day, only too glad to have small duties and tasks and routines. But beyond this, we shall endeavour to spread the bread thin on the butter – to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us!


          3. trinity river

            GW reasoned that since “deficits don’t matter” then giving tax cuts to the wealthy won’t hurt the economy. Now we know better but this is my interpretation of what he did. Read the book for yourself to see if you agree with me. Also, Bush didn’t know, or perhaps didn’t care who the real job creators were, he just knew he could increase his own and his friends bank accounts.

            1. washunate

              Now we know better…

              I’m curious about the timeline you lay out here. I would counter that we knew quite well that tax cuts for the rich are a bad idea. Progressive income taxation is one of the core policy tools we have used for a long time.

              The MMT desire to de-emphasize the role of taxation in public policy runs directly counter to this historical record that progressive taxation has been both effective and popular.

  6. Hacker

    The obvious problem with MMT is that the finance industry will have to go back to doing real work to earn money. Can’t possibly have that.

    Seriously, figure out how to do MMT and still give the rentier’s a good cut off the top and it would be passed tomorrow.

    1. washunate

      The financial industry seems to have done quite well in an environment of deficit spending, tax cuts, and so forth over the past three plus decades. That’s even where Warren Mosler got his money (he founded a hedge fund in the early 1980s).

      1. TomD

        I think it’s clear fiscal policy and regulation the last 3 decades are not about the wealthy making money, but about making sure an increasing share goes to them, and their power increases. Policies to fight poverty and boost lower and middle incomes put plenty of money in the pockets on the rich, since those people are buying things made by companies owned by the rich. That doesn’t matter to them because it means the lower and middle classes gain increased power.

    2. susan the other

      without deficit funded capitalism and irrational growth, as in life support mainlined funding, justified by the determination to make capitalism the one way forward forever, MMT doesn’t run much risk. We will never see that kind of growth again. Mostly because it has been proven to be an utter failure. MMT is deficit funded (debt by ourselves to ourselves) sovereign social progress. Capitalism will only benefit indirectly by a healthier wealthier society to leach off of. They’ll do better as real capitalists than they have ever done before. Without inflation growth.

      1. Robert Coutinho

        No! It is not! It is the statement that WE DON’T NEED TO BORROW OUR OWN MONEY!!! Deficits are paid for by increasing the money supply. That is why taxes need to be linked to inflation–not (directly) to government spending!

    3. Adam1

      It’s not about giving the financial elite their rents, its about giving them power (and money). As Kaleki says, a sovereign government can sustain full employment, but with sustained full employment comes a shift in power from the elite few to the large masses of workers. Now we can’t have that can we. Last time we started to get there (late 60s early 1970s) the elite revolted and we’ve been loosing since (and they’ve been winning).

  7. Adam Eran

    There are two answers to the inflationistas:

    1. In theory, government, with its unlimited dollar resources, could get into a bidding war with the private sector and cause inflation. But bidding has to actually occur for this to happen. If it issued trillion-dollar coins to pay off “debt,” no bidding occurs. Spending happens at the initiation of any debt; paying it off is, in effect, “un-spending.”

    So, if government offered a job guarantee, employing the unemployed, who else is bidding? By definition no one. A job guarantee would therefore not cause labor inflation, and would be a lot more effective than hand wringing about social safety nets.

    One side note here: I just heard that before the “end of welfare as we know it” in the Clinton administration, 76% of eligible people received benefits (AFDC, food stamps, etc.). After welfare was transformed into block grants (TANF, SNAP, etc.) that figure became 26%…. Newman!…I mean Clinton!

    2. In historical practice, according to the Cato Institute study of 56 hyperinflationary episodes, government “over-printing” is never the culprit for such inflation. It’s always a shortage of goods, and/or a trade imbalance. So the Rhodesian farmers left Zimbabwe, and a country that had previously fed itself had to import food. And the French took over one of the most productive areas of Germany’s industry (the Ruhr).

  8. Andrew Anderson

    I’m a firm believer in PERPETUAL deficits, be they ever so small should price inflation becomes a problem, by the monetary sovereign. IOW the monetary sovereign should NEVER, intentionally, even have a balanced budget much less run a surplus.

    But MMT me this, MMT fans? What’s to stop the government-privileged usury cartel from blowing another bubble when the economy starts to significantly recover?

    IOW, wouldn’t it be great idea to de-privilege the cartel in addition to increasing the deficit?

    1. RabidGandhi

      Let me see if I understand what you’re saying: fear of deficits is what prevents currency issuing governments from blowing bubbles, therefore, don’t preach MMT because once the fake budgetary constraint is gone, central banks will flood asset markets with liquidity, leading to bubbles to the benefit of the cartel.

      To which I ask: has the deficits myth been any constraint over the last 8 years of QE, ZIRP, NIRP?

      Which leads to the answer: policy must be determined based on the common good, not on myths.

      1. Andrew Anderson

        The biggest privilege the usury cartel enjoys is government-provided deposit insurance instead of the allowance of inherently risk-free accounts for all at the central bank.

        Without that privilege then attempts to blow another bubble would be short-circuited by reserve drains to those inherently risk-free individual, business, state and local government, etc. accounts at the central bank.

        So how about we allow those accounts for all at the central bank and abolish government-provided deposit insurance?

      2. Andrew Anderson

        therefore, don’t preach MMT

        Not what I said or mean.

        What we need is MMT but also to deprivilege the usury cartel.

    2. Robert Coutinho

      Okay: here is the process by which MMT can be used (semi-) safely:

      1. Congress decides how much the government needs to spend for goods and services (it could include a job guarantee, but does not have to, btw)

      2. Congress decides the distribution of collection of taxes and fees. In other words, if we need x then thus and thus comes from people making y. If we need 1.5 times x then thus and thus (for that extra 0.5) comes from people making y and z.

      3. Congress does NOT get to decide how much the government collects in taxes and fees–that is decided by an agency who is tasked with making sure that inflation does not go past a certain level (with an obvious caveat that they will not be able to get it exactly right year to year, but will have to make up for it over time).

      4. Congress gets to decide how much inflation we can/will tolerate.

      THAT is an MMT type plan. It will work automatically–because there is no need for the US Government (or any other government that issues its own currency) to borrow its own money. If there is a deficit, but the inflation remains tolerable–great. If there is a surplus (of revenue from taxes and fees) but the inflation rate remains tolerable–so be it.

  9. Robert Frances

    Even though humans create value and wealth through the interaction of labor, land and capital, it’s always the money system that takes center stage, often as the source of severe traumas to the “real” economic system.

    Regular readers of NC know better than most that if the world economy is in a no- or low-growth cycle, and if the allocation of wealth and income is skewed to a relatively small segment of the population, central banks can blow as hard as they want on the string – or release as much cash into the system as they want – but the result is the same: stagnant growth and extreme skewing of wealth and income to relatively small segments of the population.

    Never let a crisis go to waste. Middle- and lower-income working families have never had a better time to attack some of the sources of extreme inequality: 1) relatively high regressive taxes on working people and relatively low taxes for landlords and capital owners, and 2) high rents/house prices paid by working families and increased wealth received by landlords and banks financing the mortgages.

    Until the tax and housing systems are fixed it’s difficult to see any solutions to the economic quandary. Any money given to working people (ie, helicopter money) will be vacuumed up by landlords in the form of higher rents. Likely higher prices for goods and services will eventually happen too, making working people worse off, as they always are when economies inflate.

    1. Andrew Anderson

      Any money given to working people (ie, helicopter money) will be vacuumed up by landlords in the form of higher rents.

      Aren’t you assuming no spare capacity in housing?

        1. MyLessThanPrimeBeef

          They are both correct.

          Giving money to the government will likely lead to more drones and surveillance. So, the choice is to give that extra money to the people, and not the government.

          And the government can do the non-fiscal governing (exercising legislative sovereignty) to lessen housing inflation.

    2. jsn

      Anti trust enforcement, strongly progressive tax and financial regulation all worked before and would work again if tired. In the digital money world, the Fed/Treasury has much more effective tools for enforcement if it chose to use them.

      That, of course, raises the question of “who owns our data” and who has what rights to it. All of this will need to be tackled holistically, which happens periodically.

      Sometimes it’s a “Glorious Revolution”, sometimes a bloody one and most commonly a war that precipitates elites re-negotiating their privileges to make meaningful structural adjustments, but it does keep happening or industrial civilization would never have come into being.

  10. Helmholtz Watson

    MMT is a fascinating theory but strikes me as suffering from a serious slippery slope problem. Yet, given the mess the current system has created it needs to be considered. On the other hand the current type of monetary systems work reasonably well if “anchored” properly. The problem, of course, is that once the gold was stripped from the system money and credit creation become unlimited and we went down a slippery slope and now live in world swamped with unfathomable levels of debt. The gig is up on the current system. How and when it ends are unknowable but end it will.

    1. jsn

      Though in modesty it calls itself a “theory” in fact MMT is simply a description of how all monetary operations actually and verifiably happen. It’s proponents choose to call it a “theory” to solicit evidence of where their logic, history and/or documentation are wrong. Mostly they’ve been vindicated.

      The problem, as alluded to in one of the exchanges above, is that like all tools the monetary system is subject to all kinds of abuses. That doesn’t make it wrong, a moral judgement inapplicable to tools, it makes the schmucks who misuse it wrong.

      But if no one understands clearly how it actually works, no one can tell who the schmucks are. To date MMTs signal contribution has been in outing schmucks, not that any prosecutor is acting on its findings, but public opinion is turning.

      Schmucks are attracted to the power of money. Those of us who are more indifferent to it have been abused by them for the last 40 years without knowing it because mainstream economics has abandoned paying attention to banking and the monetary system except to worry about the interest rate.

      Almost all of what MMT has documented had been clearly understood by the English speaking monetary authorities during WW2, and by Keynes who tried to create a soft currency trade mechanism to prevent mercantilism after the war. Interestingly he was over ridden by the US representative Dexter White who it turned out was actually a communist.

      Despite White, Functional Finance, the then current name for MMT, was the financial basis of the New Deal and responsible for creating the American and European middle classes and those of our allies in Asia. It could be used the same today, the goal of its proponents, but Hjalmar Schacht, Hitler’s Minister of Treasury used the identical tools to create the wehrmacht, so who’s in charge does matter.

      1. helmholtz watson

        My issue with MMT is that it seems to be ideal for “all kinds of abuses” which you rightfully acknowledge as the eternal and universal problem with all monetary systems. I think I know what their answer is to this problem. They will monitor employment and inflation to maintain the right level of money creation by the government but that simply isn’t realistic. No humans can be trusted with the power to print money so the question is how do you design a system that limits human discretion. Gold forces some rules on the system and Keynes ideas of Bancor or the current SDR regime can solve the problem if everyone signs up.

        I have thought about this issue endlessly these last few years and there is no perfect answer. I am all for a new system but MMT has failed to convince me that it is the answer. Yes it limits the role of banks in the system and makes money more democratic but it seems a little to idealistic and fails to address the eternal problems associated with monetary regimes. Namely, what are the rules governing its creation an who gets to decide.

        Can anyone shed a little more light on why MMT would work better?

      2. Carla

        “Schmucks are attracted to the power of money. Those of us who are more indifferent to it have been abused by them for the last 40 years”

        Add at least two zeros to 40, and you’ve got it about right.

        1. jsn

          The last 400 years has not had a record of unbroken failure. People live longer better lives in a strictly quantitative measure. Maybe that’s breaking down now, I think it is. But I picked the 40 year time frame because for the 40 years before that the US government was actively making things better for most Americans, starting with economic rights, with which success lead to the Civil Rights legislation that created the backlash against good government and the disaster that the last 40 years have been.

          With regards to HW comment above, government is as good as we make it. It’s worked for most of us in the past and it can again. We can’t have industrial society without it, and we can’t make industrial society go away without being taken over by another society still committed to it. So we’re going to have a monetary system and its going to work like they always have. So we’d best understand it and set up checks and balances to see to it its used for the benefit of the many rather than the few.

          MMT is just a description of reality, if you choose to work from some other basis your outcomes are likely to surprise. Central bank experiments with ZIRP and QE have been double blind experiments treating civilization as a guinea pig. NARIU and DSGE don’t work, they failed to have useful predictive power, the same with ZIRP and QE. These policies and tools all ignore the realities MMT documents. Only tools designed to address reality will have predictable results.

      3. Steven Tucker

        Glad I read down first, I was gonna say the exact same thing as your first 2 paragraphs. Tip of the hat to you, sir.

        I would add, or clarify, that the other reason it is referred to as a “theory” rather than a fairly objective “description” of the underlying nature of money and financing in a civilization, is because a description informs people, and leads them to understand the world around them. A theory can not only be wrong or flawed, it can be made to seem to be without value unless there is some “application” that promises a new, perfect world – thus removing the need for understanding reality, and guaranteeing the continued existence of the true source of power of the bankers: Widespread ignorance concerning the nature of money and the reality of our power/banking system, and a lack of awareness that such knowledge, if had by the bulk of the population, would be the great equalizer and the great liberator.

        BTW has anyone ever contemplated all of the time we spent in school, all the inane things we learned, and wondered why we all, in publicly funded schools, did not really learn about anything a citizen should know? Like how our justice system really works in detail, how the financial system works, how oil and food is produced and distributed, how land is developed and why it happened the way it did, etc etc. At 18, after 12 years of school, the smart ones are just well informed enough to immediately take a government loan that they cannot go bankrupt on to pay for a continuing inadequate education that has little connection to jobs and offers little wisdom.

  11. LincolnGreenbacks

    A wealth tax on any net worth north of $10M would be a good start.
    1950s progressive income tax rates would help too.
    Cap all interest rates at 14%.
    Job guarantee, massive housing subsidies.
    Bases in our own country instead of 100+ others as well.

    Print whatever currency you want. If the sociopathic 1% jackals are in control of the means of production, distribution, banking, and media, while also controlling the currency, it’s irrelevant.

    Meyer Rothschild, Give me control of a nation’s currency and I care not who writes its laws, etc etc etc

  12. casino implosion

    MMT for the Elites, Austrian Economics for the Rest Of Us has been the status quo. I guess the cat is out of the bag.

    1. craazyboy

      If the money velocity of transactions was driven up by persons of no consequence, we’d get “inflation”. Could be a lot too. Elites would rather have it all to buy real assets, or their fake counterparts – corporate stock, commodity futures and junk bonds. Or buying politicians has good ROI.

      Be best to just “steal” it from them via taxes and send it to us in the mail so we’ll spend some. Been trying to find an economist with a model for that. Maybe they can figure out how much we need to get “inflation” to go to the magical 2% that economists claim our economy desperately needs. Then figure out how to get “inflation” of stuff we actually do buy to get down to, say, a 2% price growth over 30 years. Looking at you, health, education, defense, housing, food and energy.

    2. helmholtz watson

      dude, there is no Austrian economics for the rest of us, at least not on the monetary side. We would be far better off it there was.

Comments are closed.