A Memo From MMT’s Legal Department

By Devin Smith, an economist at the US Army Corps of Engineers. Originally published at New Economic Perspectives.

Orthodox economists are often inclined to think of law as an external force that ‘intervenes’ to regulate otherwise naturally occurring economic phenomena. In contrast, Modern Monetary Theory and its antecedent intellectual traditions have long recognized that law in fact constitutes and shapes modern economies and the monetary regimes that underpin them. For example, Knapp argued explicitly that money was a “creature of law.” Similarly, Keynes, in A Treatise on Money, stated:

“The State…comes in first of all as the authority of law which enforces the payment of the thing which corresponds to the name or description in the contracts. But it comes in doubly when, in addition, it claims the right to determine and declare what thing corresponds to the name, and to vary its declaration from time to time-when, that is to say, it claims the right to re-edit the dictionary. This right is claimed by all modern states and has been so claimed for some four thousand years at least.”

Today, many of the core propositions of MMT can be understood as essentially legal arguments. Here are a few examples:

  • MMT’s determination that that a Job Guarantee is necessary because the state creates unemployment by imposing a non-reciprocal liability (i.e. a tax) that can only be satisfied by obtaining its tokens (i.e. tax credits), and thus owes individuals the ability to work for those tokens, is an argument about legal systems design. That is to say, the Job Guarantee is a legal remedy to the problem of legally-created unemployment. This framing echoes the legal arguments made by the British peasantry in response to the 18th century enclosure movement. When the state privatized farming and hunting lands previously considered part of the commons, peasants demanded compensation. Although the enclosure story focuses on the coercive creation of private property rights and the Job Guarantee story focuses on taxation , the underlying legal reasoning is the same: when the state prevents its subjects from subsisting independently from the state-controlled, monetarily driven, social provisioning process, it cannot exclude them from equitable participation in that process.
  • MMT’s observation that the state has a “monopoly” over money can be understood in relation to the longstanding legal prohibition against counterfeiting–not only of currency, but also of private monetary instruments issued under state sanction. For example, laws against securities and wire fraud, as well as regulations prohibiting non-banking institutions from issuing demand deposits, are all examples of the state’s power to delineate the scope of legitimate monetary transactions. From this perspective, the notion that money is a public monopoly supports, rather than contradicts, Minsky’s famous dictum that “anyone can create money, the challenge is to get it accepted.” After all, the question of acceptance is, ultimately, one of legal legitimacy. Indeed, we see this quite clearly in current regulatory debates over financial technologies. For example, while the U.S. Treasury has classified bitcoin as a “currency,” the Commodity Futures Trading Commission continues to treat it as a “commodity,” and the Internal Revenue Service taxes it as “property.” Together, these legal classifications determine bitcoin’s ‘moneyness’ by establishing the boundaries of its legitimate commercial use.
  • MMT’s recognition that certain operational constraints on macroeconomic policymaking are merely “self-imposed,” rather than intrinsic to the monetary system, reflects a sophisticated legal understanding of the varying malleability of constitutional versus statutory provisions, as well as administrative rules, regulatory guidances, and mere informal conventions. For example, while the minutiae of the Federal Reserve Act may be highly restrictive to the day-to-day activities of a bureaucrat operating in the bowels of the St. Louis Federal Reserve, they don’t present any ‘deep’ constitutional barrier to a member of Congress contemplating reform of the Federal Reserve System itself. With these distinctions in mind, MMT’s tendency to analyze Treasury-Central Bank operations from both a “consolidated” as well as a “deconsolidated” approach is not a technical weakness but a visionary strength. MMT economists are not ignoring institutional granularity, they are appropriately acknowledging the plasticity of law and the power we have to change it.
  • Finally, MMT’s embrace of Minsky’s balance sheet view of the monetary economy and its commitment to stock-flow consistent models implies recognition that finance is governed by man-made accounting laws, rather than natural laws. These accounting laws are ultimately subject to the same legislative, administrative, and judicial input as any other laws. They are also subject to constant manipulation: a notion intrinsic to the concept of control fraud. . Whereas it is mathematically impossible to make 2+2=5 in the real world, such an outcome is easily achievable in the nominal realm of legal accounting and thus throughout the financial system and the monetary economy overall.

At the same time, the dialogue between MMT and the law is a two-way street. Indeed, modern money theorists have historically found mainstream lawyers far more eager to grasp and grapple with the radical political implications of their insights than mainstream economists. For example, Innes, who, according to Randy Wray, wrote “two of the best pieces written in the 20th Century on the nature of money,” chose to publish his ideas in the Banking Law Journal. Similarly, Beardsley Ruml, President of the New York Federal Reserve and author of the excellent proto-MMT Taxes for Revenue are Obsolete, first presented his argument to the American Bar Association.

In 2012, in recognition of this natural pairing between MMT and certain kinds of legal thinking, several of us formed the Modern Money Network (MMN), a non-profit, educational organization dedicated to promoting public understanding of money and finance. From our initial beginnings as a student group at Columbia Law School in New York City, we have grown into an international organization with affiliates and supporters in Europe, Australia, and elsewhere.

In recent years, many progressive and radical lawyers and legal academics have embraced MMT’s core ideas and arguments. For some, this is a result of direct engagement with MMN and/or the broader MMT community. Others have arrived here on their own, using independent thinking to reach similar technical and normative conclusions. For example, as University of Maryland Law Professor Frank Pasquale observed in 2014:

“[A] renewed emphasis on a key legal insight (the government cannot default on debt it issues in its own currency) can lead to an adjustment to economic theory (MMT), which in turn informs a new legal proposal to get past the current, futile […] debate. It’s a movement from legal insight to economic insight back to legal insight, or L – E – L. … The legal foundations of MMT make it both scientifically, and normatively, a better theory of our economic system than the dominant paradigms of monetary policy.”

Similarly, University at Buffalo Law Professor Martha McCluskey noted in 2016:

“Modern money theory explains that political and legal systems for creating, regulating, and distributing money are fundamental to economic prosperity and stability, necessarily shaping (not “distorting”) and facilitating private exchanges of goods and services. … the economic costs and benefits of public money creation depend on the contingent, complex value-laden questions of how that money is spent and invested and how effectively taxes and other forms of regulation help steer economic and political activity toward the productivity, stability, and legitimacy that will help maintain currency value.”

Developments like these have been both validating and deeply encouraging. At the same time, MMN continues to relentlessly promote MMT in the legal world, through organizing widely attended educational events, and bringing economists and lawyers together with the explicit purpose of building a truly transdisciplinary theoretical and policy framework for achieving social and economic justice. Some MMN highlights during this period include:

  • A seminar on bridging legal and economic perspectives on money, ft. David Bholat from the Advanced Analytics Division of the Bank of England and MMTer Pavlina Tcherneva;
  • A seminar on the federal budget at Harvard Law School, ft. Amar Reganti, former Deputy Director of the Office of Debt Management at U.S. Treasury, and MMTer Stephanie Kelton;
  • A seminar on money markets, ft. New York Federal Reserve Bank Legal Counsel Joseph Sommer, former U.S. Treasury Department Senior Advisor Zoltan Pozsar, and MMTer Marshall Auerback;
  • A seminar on central banking as part of a series on the “law-money nexus,” ft. former U.K. Financial Services Authority Chairman Adair Turner, former Central Bank of Argentina Economic Research Director Matias Vernengo, former Assistant U.S. Treasury Secretary Richard Clarida, and MMT fellow traveler James K. Galbraith;
  • A symposium on the future of Greece and the Eurozone, ft. the now-Prime Minister of Greece, Alexis Tsipras, Greek Alternate Minister for Combatting Unemployment, Rania Antonopoulos, Rutgers Law Professor and author of Rep. John Conyers H.R. 1000 full employment bill, Philip Harvey, and MMTer Mathew Forstater;
  • Panels on public banking, the legal architecture of economic institutions, and the role of economic models in public policymaking, at the student-organized Rethinking Economics New York conference at Columbia and New York University Law Schools and the Economics Department of the New School;
  • Panels on public money and financing the criminal legal system at the annual Rebellious Lawyering Conference at Yale Law School, the nation’s largest student-run public interest law conference;
  • A 1-credit, student-driven course on law, money, and finance at Columbia Law School;
  • Three chapters in an upcoming law school casebook, authored by the Association for the Promotion of Political Economy and Law (APPEAL), exploring the legal architecture of public and private money, the legal foundations of the job guarantee, and the law of derivatives regulation;

And these are just the tip of the iceberg. For anyone, regardless of experience or background, who is interested in learning more about MMN’s forays in the legal world, please join us and the rest of the MMT community at the historic 1st International MMT Congress at the University of Missouri-Kansas City in September. To borrow a phrase, we believe that anyone can create law, the only challenge is to get it accepted. We look forward to rising to that challenge with you all, together.

See you there!

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

61 comments

  1. reason

    I just don’t like this whole line of argument.

    First it is too narrow. MMT is a theory. A job guarantee is a policy. A job guarantee is not an intrinsic part of MMT, it is just that some MMT theorists have decided to embrace it. I don’t like it as a policy for quite a number of reasons which I have outlined elsewhere (much preferring a national dividend which is an alternative to a job guarantee but also a potential solution for other problems).

    1. skippy

      Is a national dividend just another form of UBI w/ all the attendant issues its neoclassical [original proponents in modernity] discuss i.e. diminished rights lest people just vote themselves more money – let alone relinquishing any rights to production – end-user.

      I would also state that the introduction of a JG in MMT has more to fundamentally do with ending the use of NAIRU, in the monetarist [quasi or otherwise] fixation about exploding inflation. QTM is looking a bit dog eared for some years, must be path dependency or some thing less savory.

      The additional thing is there is actually a lot of – work – to be done fixing up things from decades of neoliberalism. Don’t see how any UBI or Dividend [questionable numerology goal seeking attributes] does anything to deal with that observation.

      Lest we forget dominate economic doctrine did not even have a “Theory” of the monetary or financial system, purely grounded in deductive based thinking about “Money”.

      disheveled…. that’s not even getting into IR – Natural or – ?????? quagmire….

      1. vlade

        *sigh* JG as well as UBI VERY MUCH (well, ENTIRELY) depend on implementation. There are good, bad, and horrendous ways to implement each. Most of the bad ones (for both) have already been tried (in fact, a version of JG was tried on a much much larger scale than any UBI – in the Soviet block countries, with a test population of a few hundred million humans, and was very successfully used as an instrument of state oppression), and the opponents of each use it to discredit the other.

        So, can we please stop praising to heaven one or the other, recognise that they are both POLICIES, implemented by HUMANS, and if we want to have a discussion, we can look at detailed implementation plans and judge those, not the policies per se?

        You know, I can see even single-payer (or an equivalent) to be worse than the current US health system. All it takes is political will to do so. A policy w/o a detailed implementation plan is just a soundbite.

        1. skippy

          I thought you of all people vlade would be aware that the MMT – PK variant would be administered byy regional social democratic means and not some totalitarian bureaucracy. Hence the Soviet example seems miss placed.

          Although I completely agree that implementation and humans is a complex problem with no guarantees, especially considering the conditioning of consumers ™, cementing of elite bargaining power, and nascent networking effects – even as the proverbial wheels fall off.

          Still that does not redress the thrust of my comment or the points I bring up wrt the response I’ve offered reasons comment.

          disheveled…. I hold the long NC view that change is possible, even if unlikely, yet at the end of the day it’s more a case of reporting it – than anything else. It was said.

          1. JTFaraday

            Yeah, but the reason thugs like Paul Ryan always want to devolve things to the states is that the US is a former slave state and half the country is worse than Stalin. So, you don’t get off the hook that easy.

    2. Steven J

      True but the argument is surely basically sound. The state demands from its citizens payment of taxes in its currency and therefore has an obligation to provide those citizens with a means to earn currency. If the state chooses to simply give the currency to its citizens without demanding work, then surely the currency would have no value?
      Given that the peasants had work ( they had to feed themselves ) before the closure of the commons, then they should expect to work and to have work.

      1. washunate

        Given that the peasants had work…

        So, then, are you accepting the claim of the existing power structure that there must be peasants and aristocrats, that this is the natural order rather than an artificial creation of public policy? That’s what a JG does, after all. It further entrenches inequality. Wray and others have been quite explicit for many years now that JG jobs are not supposed to pay as well as other public jobs, like prosecutors, econ profs, and DEA special agents. The great progress over the past century in terms of work is that we do less of it (weekends, 8 hour work days, ban on child labor, etc.) and get more for it (productivity, innovation, technological growth, whatever word you want to use). Why can’t we just shorten the work week more, increase the minimum wage, and make social insurance payments directly to people in need?

        Also, are you suggesting that industrialized societies today are not enormously more wealthy than they were a couple hundred years ago? The vast majority of ‘work’ in the formal economy today is predation for benefit of the few, not productive creation of wealth for society at large.

        1. Eclair

          “So, then, are you accepting the claim of the existing power structure that there must be peasants and aristocrats ….”
          Nice point, washunate. We might as well term the divisions ‘predator’ and ‘prey.’ Or ‘con artist’ and ‘mark.’ Or ‘the violent’ and ‘the meek,’ (who will inherit the earth, so don’t make waves).

          1. washunate

            Thanks! This is something that has fascinated me for several years in MMT discussion. The distributional implications of both wage inequality (on the emission of national currency units end) and tax cuts for the rich (destruction of currency units) are almost never considered in these posts. Thus, I’m left to conclude that MMT proponents either actively like the inequality of our current system or at minimum aren’t bothered by it enough to propose a remedy.

        2. Left in Wisconsin

          The vast majority of ‘work’ in the formal economy today is predation for benefit of the few, not productive creation of wealth for society at large.

          Another binary. Regardless, we are so far away from a JG, BI, or shortening of the workweek that all are purely speculative at this point. Given that, let me suggest a different avenue:

          Different aspects of “the economy” run on different logics. Markets for internationally traded goods are fundamentally different than “markets” for government services, education, care work, etc. So it seems futile to try to shoehorn them all into one logic.

          It is true that firms that are successful in internationally competitive markets net cash from all over the planet, which tends to bring wealth to the societies in which they are embedded. Many of these firms still are based in the U.S. and I firmly believe that it is not impossible to bring much of the manufacturing of those products back to the U.S. On the other hand, global labor arbitrage is not going away, and to a large degree, this is simply talking about who has the “privilege” of doing this work, which is in short supply globally. So if it’s done here, it’s not done somewhere else.

          OTOH, other kinds of work: caring, education, government, local retail (some have taken to calling this “the foundational economy”) needs to be done everywhere and is everywhere more important, socially, than goods manufacturing. But we are hamstrung in being able to think about the future by three myths:
          1. All money transactions, and thus all markets, conform to the same logic. (They don’t.)
          2. Service jobs are by definition low productivity. (The problem here is that the measures always come down to money, not actual effort or even social value. According to current measures, finance jobs are highly productive.)
          3. Social progress requires economic growth which requires high productivity growth.

          Since we are talking about a speculative future, why don’t we start with the jobs that we think are the most valuable and figure out how to fill those, then work downward. Instead of a half-assed MMT JG of terrible, low paid jobs, why don’t we use MMT to pay for good, socially useful jobs?

          1. washunate

            Lots of things are binary. The quantum world may work differently, but macroscopically, we are constricted by finite, mutually exclusive decisions. This is the essence of public policy. Directing labor in one direction, by definition, means that labor is not working in another direction. I don’t understand at all what you’re saying. There is lots of waste in the formal economy today. You’re not seriously denying that, are you?

            The finiteness of people’s time is one of the fundamental limitations of the universe which MMT refuses to address. The opportunity cost of spending excessive time in formal employment is all the other things people could do with that time instead.

            As far as not being close, can you elaborate what you mean? We have a specific legislative framework for social insurance policies (the Social Security Act and related legislation) and work time regulations (the Fair Labor Standards Act and related legislation). The policy options of making social insurance programs more universal, and reducing hours spent in formal employment (making the work week shorter, raising the minimum wage, mandating paid leave, etc.) are relatively easy to implement and relatively popular across a governable majority of Americans. For goodness sakes, we implemented Medicare in about a year. Before we even had computers or cell phones!

            If you are making an argument that it is politically difficult to implement policy that helps average Americans, I completely agree. But this is a post about policy preferences, not political expediency. I would point out that MMT advocacy has refused to address the nature of the USFG that representative democracy has been replaced by authoritarian fascism. I would also point out that if political constraints are one’s major hurdle, then building upon existing frameworks that already work and enjoy public support is a better approach than trying to craft an entirely new program from scratch and expecting our existing system to manage it well.

          2. washunate

            …why don’t we use MMT to pay for good, socially useful jobs?

            I wanted to address this as a separate comment thread just in case we get good discussion on this. This is the basic exchange on the policy proposal side of MMT that doesn’t happen. Yves and Lambert have been allowing MMT authors to post at NC for years, and yet there is a notable absence of interest from the authors in advocating concrete programs that can be analyzed and critiqued.

            So I would offer three basic issues here.

            1) It’s a misdiagnosis of the problem to focus on creating good jobs. Public policy creates huge amounts of concentration of wealth and power. The first priority is stopping those sources of oppression and injustice. MMT’s unwillingness to address what has gone wrong with government power is a huge red flag for me.

            2) A lot of MMT proponents over the years have focused their attention on deficit spending. So when you say use MMT, what, precisely, does that mean? I would point out that if MMT = deficit spending, then we are already using MMT. Without a concrete policy proposal, then using MMT just means continuing to do what we’ve been doing. Indeed, one of the many simple things we could do is increase taxes on the rich. But that’s Evil Austerity in MMT lingo.

            3) MMT’s JG has been specifically designed to not be a good job. Good jobs are permanent, professional jobs, where people are treated with dignity and good pay. JG, on the other hand, is specifically designed to be crap jobs. The pay is specifically designed to be less than other jobs and the jobs themselves are specifically designed to be temp work rather than professional careers. It’s the Teach for America model, the Americorps model, the gig model. So again, if you mean something different from the general MMT advocacy of the past couple decades, that’s great. But it means you agree with me that how MMT has promoted JG to this point is flawed.

            1. Left in Wisconsin

              I meant to come back here yesterday but car problems ….
              1. I don’t accept the binary you posed at the beginning of your first post, either as a (0,1) binary or even as ideal types. There are lots of lots of jobs that are neither predation nor “productive creation of wealth for society at large,” unless you mean something different by “productive” and “wealth” than I think you do. No, I am not denying that there is lots of waste in the modern economy, though I’m not sure how that relates to the first point.
              2. Yes, my point is that any potential solution is a political solution and we are far, far away from a politics that would yield a JG, BI or even decent federal minimum wage. I don’t accept that there is such a thing as a non-political policy solution. The policy has to get passed, implemented and administered in good faith to have any chance of working. Otherwise, we are just daydreaming. (Not that I’m opposed to that but it’s good to be clear.) TBH, I’m not sure what the point of the initial post was.
              3. As MMT becomes more a part of the conversation, it will become more important for MMT symps like me to qualify what we mean. For me, the key points are that the federal budget constraint is much looser than most recognize (though I agree no one can really say how loose) and that there are no obvious budget or debt constraints to a full employment policy.
              4. I am not a fan of using care work for an MMT-style low-wage JG. And I am quite sure any receiver of care work feels the same way. Care work is not much different than education as far as the benefit to society and should be treated as such – what you rightly call a “good job.” (There are lots of other jobs that I would have no problem being part of an MMT JG – eradicating buckthorn and other invasive species, beautification, etc.)
              5. It’s a misdiagnosis of the problem to focus on creating good jobs. I’m not sure what problem we are talking about.

              1. JTFaraday

                Yeah, this doesn’t work for me either. Your true last chance laborer is the felon. Right now we don’t hire former felons to work with dependent people and I think that’s probably the way to go.

              2. washunate

                TBH, I’m not sure what the point of the initial post was.

                Indeed, I think that was reason’s initial point, and my curiosity more generally across the MMT posts of the past few years. I’ll get back on the substance because I think that’s where there is opportunity for good discussion, but just wanted to let you know I saw your comment and do want to continue our discussions.

              3. washunate

                1. I’m talking broadly about work that doesn’t produce value. I’m not offering any hairsplitting parsing of words. Predation, theft, looting, stealing, kleptocracy, oligarchy, plutocracy, whatever. We have so many descriptions, I would argue, because it is such a huge potential problem in organized society. The primary role of government is either to prevent waste or protect it, depending upon one’s perspective. I’m not shying away from the binary nature of that system. At a macro level, one person’s trash is another person’s treasure. It’s a zero sum system because power operates in relative terms, not absolute ones. Authoritarian power seeks to control others, and thus, it requires dominion over others. Do you have an example of a job that doesn’t create value but also isn’t wasteful? I’m having a hard time with your in-between stasis, as if an hour of work can be both useful and not useful simultaneously.

                2. Agreed. This is one of the reasons I’ve been increasingly skeptical of the MMT advocacy at NC and elsewhere. MMT authors present themselves as experts ready to save our system yet refuse to explain how their special “insights” offer any relevant guidance on reclaiming representative democracy (or any other form of government that is more responsive to the general public).

                3. I appreciate the saying what you mean part. That’s another difficulty with MMT advocacy. Authors frequently fail to define key terms or offer any concrete proposals that can be evaluated. What I would point out is that there’s nothing particularly useful about noting federal budget constraints are loose. Everybody knows that. We’ve had loose budgeting for decades. Moreover, the main MMT proponents actually pooh-pooh alternatives precisely because they think they’re too loose(!). MMT is an establishment economic philosophy. It believes that economics requires a price anchor established through a monetary system rather than one focused on the productive output of labor.

                4. This is where I think there is room for discussion that MMT shoves aside. Let’s actually talk about what work we want more of in our society. What I notice from MMT is an unwillingness to address the huge of amount of time spent working that isn’t good. And of course, there’s the equity problem, which is that MMT authors create their price anchor (see point 3) by entrenching inequality on the backs of low-paid JG workers.

                5. MMT says the fundamental problem in our economy is unemployment. I disagree. But moreover, MMT authors refuse to explain or defend why they think this is so. They simply assert it as true.

          3. JTFaraday

            “Instead of a half-assed MMT JG of terrible, low paid jobs, why don’t we use MMT to pay for good, socially useful jobs?”

            Yes, this is puzzling. People have suggested that if MMTeers want public sector jobs, then just create more public sector jobs. Don’t disrupt actually existing public sector jobs by creating a sub-category of exploited “last chance” public sector laborers who may have the same skills as those in better, actually existing public sector jobs. But for some reason, when an MMTeer promotes Uber for government we’re suddenly supposed to kneel down and suck hog.

    3. Brian

      I agree completely. The author points out the similarity of calls for a JG to the calls for compensation by the peasantry when public lands were privatized. If you are smart enough to recognize that both money and private property are creations of law and authority, which they are, why would you advocate for a JG instead of a policy that money and private property were distributed equitably among the people. If they are creatures of law, shouldn’t they be administered equitably as all law should be?

  2. reason

    Secondly, I think the US based MMT people need to revise their rather neglectful view of foreign trade. I think it might be worth their while to adopt the position of a small open economy sometimes to see if they are not trapped in a special case (the US with a global reserve currency) in their thinking.

    1. Odysseus

      Could you give specific examples of what you think that path to failure looks like?

      The National Savings Identity (https://en.wikipedia.org/wiki/Savings_identity) and MMT interact in specific ways. The role of the current account balance in savings is important, and any MMT implementation would have to pay attention to that.

  3. Sue

    “when the state prevents its subjects from subsisting independently from the state-controlled, monetarily driven, social provisioning process, it cannot exclude them from equitable participation in that process.”
    Modern State social provisioning did develop- and is- a necessary and always insufficient patching up of capitalism. The Capitalist State main function is to protect, maintain, tweak and feed the power of irrational capital and, particularly, as we stand, financial capital. Anyone who has followed the Fed (its lack of transparency and democratic controls,the particular ways it expanded its balance sheet during the crisis, the true purpose of all QE phases,etc) must comprehend this . Against and with MMT, we must insist that what should be faced goes far beyond and above MMT’s fiscal and sovereign money intertwining case.

  4. dcrane

    Perhaps my uninformed question belongs in another thread devoted to MMT itself, but I became hung up on this:

    “the government cannot default on debt it issues in its own currency”

    What is the meaning of “cannot” here? The GOP was threatening exactly this not very long ago, albeit perhaps as an empty threat. But if the government refuses to repay a loan by its due date – if it refuses to mint new money to accomplish the repayment – has it not defaulted? Perhaps the writer means to say that the government is never forced into default as a final option.

    1. Will

      It’s common for people to say “cannot” or “must not” even though they don’t really mean something is impossible. Usually there’s a subtle moral or authoritarian judgement involved. In the case you mention, the writers meant the government couldn’t default on a debt payment unless it chooses to – it can’t involuntarily miss a payment, because it can manufacture enough money to pay any time it wants.

      Another example of this obscuring language: “when the state prevents its subjects from subsisting independently from the state-controlled, monetarily driven, social provisioning process, it cannot exclude them from equitable participation in that process” Clearly the state CAN exclude subjects from participation while preventing them from subsisting independently of state-controlled processes; this is the way many governments operate. Forcing people to seek money and not giving them a guaranteed way of doing it gives much power to any institutions (corporations) offering jobs, so the leaders of those corporations are generally against any sort of job guarantee.

      I recently was climbing a tree while waiting for a train. A train employee came outside the station and yelled at me, “You can’t climb trees sir! Get down right now.” My first inclination was to respond, “What do you mean? Clearly I CAN climb trees since I just climbed this tree. Do you mean you’d prefer me not to climb trees because it violates policies you’ve agreed to uphold and you fear your employer’s response if I fall and get hurt?”

      Instead I just said ok and climbed down. Sometimes non-violent communication doesn’t seem worth it :(

    2. PKMKII

      It means the government cannot default due to a lack of funds. That which creates the fiat currency cannot run out of it, they just “print” more. The GOP default threat was a default of politics, which MMT recognizes as a limit, along with inflation (although MMTers are a lot less paranoid about that than your neoclassical or Austrian economists).

    3. Nell

      The US government is the only entity that has the legal powers to create new money. Hence it is the originator of all the dollars spent in the economy. Perhaps this short clip (24s) from Alan Greenspan the Head of the Fed Reserve will help. He was the head for many many years – so one assumes he has an in depth understanding of the US monetary system (for good or ill) and he states quite clearly that the US government can always pay its debts as it can always issue US dollars to pay that debt.
      https://www.youtube.com/watch?v=q6vi528gseA
      Central bankers know this, as do politicians high up in the Treasury. They just don’t want it generally understood on the grounds that if people knew they would demand politicians spend like crazy and we’d all implode under sky high inflation. They are wrong. And the GOP and the democrats are incoherent when discussion the monetary system. As are most politicians.

    4. Mel

      You’re right. A sovereign government definitely has the power to decide to default on a debt and stiff a creditor. People are usually thinking of the question in terms of the old days when the treasury could run out of gold/silver, so that the government truly could not pay. That’s what “cannot” means here.

    1. skippy

      You might want to vet people that are fellows at The New America Foundation, same camp that pushes Common Core, as well, as it funding base.

      “Academically his most famous work is the book Post Keynesian Economics: Debt, Distribution, and the Macro Economy. In this book Palley tries to develop Post-Keynesian macroeconomic models that combine the insights of various ‘brands’ of Post-Keynesian economics including the following: Yale Keynesianism (James Tobin), Cambridge–UK Keynesianism (Nicholas Kaldor), and American Post-Keynesianism (Paul Davidson, Hyman Minsky).

      A critique of that book was written by Basil Moore, also a Post Keynesian economist. Moore argues that Palley succeeds in demonstrating the coherence of Post-Keynesian macroeconomics. This is done via the concepts of effective demand, price-setting, quantity-taking fix-price supply behavior and the ineffectiveness of nominal wage and price adjustments as a means of remedying aggregate demand deficiencies. But Moore raises the criticism that by using neoclassical tools and methodology Palley has failed to take both time and uncertainty (key Post-Keynesian concerns) in a sufficiently serious fashion.[3]”

      The last sentence gives pause for concern.

      Disheveled…. I did not get the same dismembered feeling from one graph, in one time and space point. I find it so Devo…. why does the left hand not know what the right hand is doing…. eh…

  5. craazyboy

    We have a ton of Mesquite Trees around here and I would like to see them utilized productively and just let everyone make them into Tally Sticks.

    Then we would get the gunmint outta the money printing biz, finally. Good Riddance, I say.

    Then who da f*ck needs a job if we all got lots of Tally Sticks? Hmm?

    MMT Theorists are always quite hung up on destroying money, to make it valuable. If they say so, it must be true. So the good part about Mesquite Tally sticks is everyone can have a BBQ and destroy their own money!

    Good Eatin’, fer sure!

    Besides, we don’t have jobs anymore, now that robots do all the crappy work?!

    1. craazyman

      That’s what Mexicans are for. To take our tally sticks and work their sweaty butts off for them while we lay around getting tatoos, smoking dope, drinking and busting heads.

      That would be a good job. A tally stick maker! It would be like being a banker but you wouldn’t have to sit at a desk all day surfing the internet. The garden would do all the work.

      I wonder if Professor Kelton would be a tally stick maker or if she’d take a real job — like driving a Dunkin Donuts delivery truck. I can’t believe Dunkin Donuts would not be a totally booming business if we had real MMT. There might even be lines at the counter.

      Poor man wanna be rich
      Rich man wanna be king
      And a King ain’t satisfied
      Till he rules everything

      Well I believe in the sticks
      That you gave me
      I believe in the truck
      That can save me
      I believe in the faith
      And I pray that MMT
      Will raise me
      Above these Badlands . . .
      -Bruuuuce!!! (With yuge apologies)

      1. craazyboy

        Mexicans make Tally Pesos! When you chop the Mesquite sticks up smaller, they devalue and Peso GDP goes up! (PGDP)

        They pay themselves, so the cut in pay is not inflationary. And no-one can hoard Pesos past Saturday Barbecue. They use the excess sticks for Piñata Bats. And baseball.

        Perf Kelton wants to make Mesquite pennies for the US. That could help?

        1. skippy

          Yet which or what compels engagement resulting in activity that creates value through trade or exchange and how does – form – effect – these “relationships”.

          disheveled… what does this inform wrt reality both shared and individualistic.

          1. craazyboy

            They export excess Mexican Pesos via Forex, which adds to PGDP greatly, and then they have hard foreign currency to buy baseballs and napkins!

            Except when the Peso falls too much, then all the foreigners hoard Pesos, rather than have backyard BBQs. Plus it’s seasonal, so Mexico is in negotiations with Brazil for a trade agreement, but first they must agree to hoard each others barbeque brickets, and an exchange rate. That has always been the sticking point, altho both countries always seem to have a BBQ Crisis every 10 years.

            The only problem for Mexico with this scheme is foreign multinationals own all the means of hoarding money. (everyone can go out and cut down a Mesquite Tree – they grow like weeds) So, they reap the value of selling in a strong currency, but costs are controlled via payments in the weak money brickets. But exporting Trump Piñatas solves that problem! Brazil is a weak Bricket, too!

            However, rumor has it that Trump is responding with Economic Hit Men. They looks like robots (probably are) and are very similar to the dreaded Dalics. They scream, “Exterminate!…EXTERMINAAAAAAATE!!!!!!”, over and over again, like psycho ‘bots. This is worrisome to the Mexican Government, and usually why they always cave in quickly to any US demands.

            Also, Mexican banks fail regularly because they must hoard their brickets in bags, and also provide customers with Peso Rolls. These monetary supplies are expensive, and can only be purchased thru The Coffee Cartel, which sources the materials from Canada, Australia, and New Zealand.

            So, it’s complicated, but not that bad.

            1. skippy

              I thought it was more simple, historically.

              Bancor was to put a floor under it, but better minds, thought the space ship had landed in Chicago instead of Home Town ME and weaponized it to defeat the anti thingies.

              Like Volcker’s meds and the golden rule – don’t do your own supply – they got hooked, made more complicated by pit thinkers, wild men from the outback, and TV evangelistic like fringe loon pond i.e. taxes are theft, all gov – inevitably – goes commie [steals the wealtfh] and the movie where Dreyfus keeps that fifty up his you know where [family blog] whilst at the track.

              So were right back to the question, does the human intrinsically act out or does the model inform the human when sufficient dominance is achieved and carried foreword over significant time.

              disheveled…. always makes me curious if some understand the meaning of “Demand” pull….

              1. craazyboy

                “Demand” pull….is when you “pull” the baseball to your batting weak side and way far over the fence, sometimes even outta da ballpark and into the parking lot, sometimes knocking over BBQ Grills and injuring drunken partyers.

                But that has nothing to do with Forex, Bancor, or even trading stocks on the floor of the stock exchange!

                Maybe a Chicago football, baseball, or hockey game.

                1. skippy

                  Demand pull is a lot like growing up in a cult, but most can play those past times….

    2. blennylips

      So the good part about Mesquite Tally sticks is everyone can have a BBQ and destroy their own money!

      Seems the Italians are way ahead of you with “scriptural euros” instead of tally sticks:

      Bank Of Italy Warns Citizens Against “Creating Your Own Currency …
      http://www.zerohedge.com/…/bank-italy-warns-citizens-against-creating-your-own-currenc...
      8 hours ago – Scriptural Euros are Euros issued by citizens under a “theory of the autonomous creation of scriptural currency” based on the idea of collective …

      Maybe upgrade to Messianic Tally Sticks (modern MTS theory)?

  6. /lasse

    The main change should be to leave “money” and financialisation as main focus and focus on what matter, the economy. The economy is about real resources, our ingenuity and ability to work. The economy have been neglected for to long, it has put coming pensioners an future generations at risk.
    There is always economic constrains, MMT “only” has the ability to remove the man made artificial ones, not the real ones.
    If MMT was the system there would probably be lot of ingenious arguments that they’re cause won’t cause to much demand and inflation. Paul Samuelson’s fears on spending out of control if politicians realized that money wasn’t a constrain is probably not totally unwarranted.
    There is a long way back from neoliberal anti-intellectual lunacy.

    1. Nell

      The evidence suggests that most governments are very good at controlling their spending (not particularly good at spending it in the interests of all sectors of society admittedly). Recessions and depressions are usually preceded by some kind of financial sector crisis particularly in modern times. If you want to see out of control spending, look to the financial sector, not governments. You will also note that politicians usually get voted out when they mismanage the economy. So governments are controlled by the populace. Bankers, on the other hand, are supposed to be controlled by the market. We know now that is not the case. The Great Financial Crisis is evidence that market controls do not work.
      I realize the the US is a dysfunctional democracy so if you live there it is hard to believe that it is possible to have a government that you can trust to do the right thing in terms of present and future prosperity, but citizens, even in a dysfunctional democracies have more power than citizens who leave their fate in the hands of unaccountable bankers and the market.

  7. Eclair

    “MMT’s determination that that a Job Guarantee is necessary because the state creates unemployment by imposing a non-reciprocal liability (i.e. a tax) that can only be satisfied by obtaining its tokens (i.e. tax credits), and thus owes individuals the ability to work for those tokens, is an argument about legal systems design. That is to say, the Job Guarantee is a legal remedy to the problem of legally-created unemployment. This framing echoes the legal arguments made by the British peasantry in response to the 18th century enclosure movement. When the state privatized farming and hunting lands previously considered part of the commons, peasants demanded compensation.”

    Thanks, Lambert, for posting this, as well as for last week’s post on the MMT version of financing the criminal justice system. MMT is finally beginning to make sense. In a weird way.

    “Legally-created unemployment.” It makes sense in light of what the european occupiers of the Americas did to the indigenous population. The native Americans had no concept of ‘unemployment.’ Everyone ‘worked,’ from small children who worked at mimicking their elders, to ancient grannies, who whiled away the long winter nights by passing on the teaching stories of the tribe.

    But what we might regard as ‘work,’ they looked upon as each person’s contribution to the common good, to the survival of the tribe.

    But the occupiers, fresh from their victories of enclosing the commons, or a victim of those policies, immediately began the process of enclosing the continental ‘commons.’ They privatized the land, and having deprived the native populations of their land and thereby of their means of subsistence, sent them to concentration camps (those they did not massacre outright), and began the long campaign of demonization of a shiftless bunch of redskins who did not ‘work.’ Totally brilliant!

    And now, we are in the endgame. Everything has been privatized, from land to roads to schools to health care to water. And those without are regarded as human trash. It’s only 7:30 AM in the Rockies, but I’m going to get a drink.

  8. edr

    MMT Theory isn’t going to convince the majority of the country that unlimited spending on Social security and Medicaid for all is possible, because the theory isn’t easily presentable in everyday terms, anymore than Keynesian Theory is.

    “the government cannot default on debt it issues in its own currency) can lead to an adjustment to economic theory (MMT),”

    When a government continues to print (or the bank lending leverages 18×1 on the deposits they hold: Lend 1.8million when they only ever received $100k in deposits) causes the value of products to go up (INFLATION) so you pay the extra currency in the market in expenses, while hoping that the large expenses like Housing and Insurance go up much slower. Your Currency becomes devalued reference other currencies so you exports to the world appear cheaper and imports more expensive. Runaway INFLATION has destroyed economies, which is what happened in Hyeks country of birth when he was a child and made him so anti-money printing.

    In Argentina, runaway INFLATION meant that your rent went up every month, the system of everything changed to charge for the extra printing of money in the economy.

    And then we are back to POLICY, as a commenter indicated. Keynsian economics actually does work. Print extra WHEN there is a depression and EMPLOY people, and stop printing when the economy starts improving. But instead the government (1) subsidizes agribusinesses, (2) Student loans where the government pays for the defaults(the risk) and the banks make the profit, and causes CollegePrices to go up because de-coupled from ability to pay – since the banks don’t care if the loans are repaid because they no longer hold the risk (3) and gives MegaBanks the discount window with loans at a negative interest rate, so the minute they take out the money, without any work, they’ve made a profit,(4) buys the MegaBanks BadLoans for Mortgages they gave without checking incomes and causing housing prices to skyrocket de-coupled from the the income of the general popluation. (5) The Public-Private partnerships where the government gives the money and the private Corporate sector spends it indiscriminately, while taking a huge cut for doing the same thing the govt could do without paying million in CEO salaries (6) Spends it on Wars and the military industrial complex, spending more than the next 8 countries combined. ………….

    The Politicians do everything their donors are requesting with the MoneyGovtPrinted except spend it like FDR on infrastructure projects that employ people, grow the economy, and create the infrastructure for further future growth.

    I think the point appoint Monetary Theory and Policy on Govt.Spending is very clarifying.

  9. steven

    MMT provides some very plausible explanations for the historical origins of money. But if you just fast-forward a little, some of its basic premises just don’t hold water if you try to apply them to life in the Main Street economy.

    1- money is first and foremost a ‘medium of exchange’. You need it / use it to buy things you need to live NOT to pay taxes.

    2- the state may possess a de jure monopoly on the creation of money. But in reality almost all the West’s money is created by privately owned banks and financial institutions.

    The bottom line here is that what’s at issue is WEALTH creation, not money creation. Lawyers seem to have a propensity to get hung up on words and cheap legal tricks when it comes to discussing money. Just adding a few digits to some entity’s financial ledger does not really expunge the debt created when the ownership real wealth changes hands. In this respect MMT appears to be little more than a smokescreen for Michael Hudson’s “Super Imperialism” or what he now calls “financial warfare”:

    Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership.

    Why the U.S. has Launched a New Financial World War — And How the the Rest of the World Will Fight Back Elsewhere Hudson notes this financial warfare has come home to roost as class warfare employed by the West’s oligarchies against people with the borders of countries they already control.

    … a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science.”
    Frederick Soddy, WEALTH, VIRTUAL WEALTH AND DEBT,
    2nd edition, p. 102

    1. steven

      Using the state’s de jure power to create money to fund genuine wealth creation – e.g. renewable energy, mass transit, education, health care, etc – is a no-brainer. After all, it’s only money. But conditioning that use on the ability of the wealth so produced to provide economic rent which can be used to pyramid more finance capital creation for people like Trump (for whom the only real use of more money is to “keep score”) is another matter. As is using it to pay people whose labor contributes little or nothing to the efficient production of genuine, needed social wealth.

  10. Spencer

    Complete tripe. MMT is simply “concealed greenbacking” reconstituted. That’s why folks subscribed to Dr. Franz Picks’ “Pick’s Currency Report”, a monthly newsletter, and “Pick’s Currency Yearbook” (90 currencies each year).

    You see, MMTers don’t know a debit from a credit. There are economic leakages in MMT’s flawed sectorial accounting. It is axiomatic, that MMT’s thesis will result in stalled real-output and currency default.

    – Michel de Nostredame

  11. Carla

    Am I the only person who finds it intriguing that Devin Smith, the author of this piece, is employed by the U.S. Army Corps of Engineers?

    Mr. Smith, I found your piece enlightening and suggest that with your influence in MMN, you might consider putting forward the re-branding of MMT — Modern Money Theory — to MMR — Modern Money Reality– because although some folks may not like it, that is what it actually is.

  12. jsba

    Orthodox economists are often inclined to think of law as an external force that ‘intervenes’ to regulate otherwise naturally occurring economic phenomena. In contrast, Modern Monetary Theory and its antecedent intellectual traditions have long recognized that law in fact constitutes and shapes modern economies

    I’ve been thinking recently that this is also an insight that MMT shares with neoliberalism. At least in its earliest outlines, what distinguished neoliberals from classical liberals was that the latter presupposed a (quasi-)natural realm of “the market”/”the economy” in which the state could (but largely ought not) intervene, while the latter understood markets as products of state institutions and policy (which ought to be oriented to extending an idealized market logic into more and more spheres).

    Neoliberal implementation, of course, had deleterious effects on citizenship. It obliterated the very terms central to any notion of a social contract; it wholly privatized solidarity. And it did so at the very moment when a (roughly social democratic) notion of the welfare state was becoming common sense throughout the North Atlantic world. People like Polanyi, TH Marshall, etc. understood the institutions of the welfare state not only in economic terms but in civic terms. Marshall optimistically announced an era of “social citizenship” in which these institutions worked to expand equality and further erode class distinctions by, e.g. (in the UK context), making sure that the richest and the poorest all had the same National Health Service card in their pockets.

    Now, the neoliberal program always emphasized the promotion and expansion into ever more domains of “competition” (even in the paradoxical justifications for monopoly offered by some of its American proponents, whether in good or bad faith). This is the source of neoliberalism’s corrosive effects on what I’m calling citizenship or solidarity.

    This competition-fetish is largely absent from MMT. But I do wonder if MMT’s legal realism leads to a similar blind spot: how will atomization be prevented? How will a sense of collectivity be promoted?

  13. Susan the other

    Thank you for this post Lambert. Nice to read about MMN and not surprised lotsa people from Columbia are in on it. Good social policy is a 2-way street, as the author says. But here’s a question for the upcoming International MMT Conference at UMKC: About public v private money in a capitalist system – I keep remembering Stiglitz’s comment a while back on the problem of unemployment and efficiency/prouctivity that capitalism is too successful as a business model. I read my own thoughts into this comment and surmise that capitalism competes to the death. At some point for the sake of winning private capital competes against the public good and considers it to be its legal right to do so. So just thinking of the integrity of public money because at some point public money, public spending, is undermined by private money and if and when the two finally come to cooperate for the sake of a good society we will have a much different form of capitalism. And will it be so tame as to fail to compete? Instead of a 2-way street maybe we need more one-way streets because we could wind up with the worst of both worlds… and there is the spectre of growth only for the sake of money hovering over us with global warming. Etc.

  14. Bam_Man

    MMT = “Magic Money Tree”.
    Newsflash! – The US trade deficit is close to three-quarters of a TRILLION dollars, each and every year.
    Not all our global “partners” would be thrilled to receive leaves from the “Magic Money Tree” in return for their goods and natural resources.
    I think we have an inkling already as to which “global partners” those might be.
    Hint: “You’re gonna need a bigger military”.

    1. witters

      ‘Not all our global “partners” would be thrilled to receive leaves from the “Magic Money Tree” in return for their goods and natural resources.’

      Um, they already do! (there are none so blind…)

  15. Lebow

    MMT opened my eyes to the notion that money doesn’t need to be artificially constrained. That’s pretty much the main takeaway. The fact is, however, that money is very much constrained by statute and that currently, taxes effectively DO fund government spending. This has been a semantic issue with MMT from the beginning – making the the distinction between what is possible versus what is. Just because a monetary system can be configured so that taxes do not fund spending does not lead to the conclusion that taxes should NOT fund spending. A good argument can and has been made that taxes should be an integral part of the spending cycle.

    I agree with Reason above, the JG program is an add-on to MMT. The need for a buffer stock may be more of a symptom of capitalism than the monetary system. The philosophical arguments don’t really make the case that this is the only way to achieve economic justice. With open, transparent and democratic monetary policy, the economy may very well function so well that the concept of a holding tank may look like a silly idea.

    1. Odysseus

      “Just because a monetary system can be configured so that taxes do not fund spending does not lead to the conclusion that taxes should NOT fund spending.”

      It’s not just “can be configured”. It’s a real correspondence.

      Government prints money and hires a researcher. Researcher creates a vaccine. You now have a good which is being traded in the market, and zero taxes have ever been involved. That’s a hard refutation of “taxes fund spending”.

      MV=PQ. When you have situations where changing M can change Q without changing P, then MMT produces real value.

      Food stamps are another example. When you have people who have no resources to buy food, and you create money, give it to them and they buy food, there is no reason to assume that P goes up. (inflation). Inflation is driven by scarcity, M is not welded to P.

      Taxes destroy money, and destroying money is valuable because it controls inflation. Fear of inflation should not stop real economic activity.

      1. Lebow

        By statute the gov’t can’t spend more than it borrows plus tax. You can always change the law.

        What you are describing does not exist under current system but it would under the NEED Act HR2990.

  16. John k

    I see several problems with Jg.
    1. Bureaucracy… maybe not necessarily as bad as Soviet Union, but typically killing incentive.
    2. A blunt tool… not necessary in areas with labor shortage.
    3. Not likely to receive sufficient political support, better to focus on other approaches, such as

    A. Block grants to states with high unemployment for infrastructure. Why not get things we need doing done rather than make work? Plus the private sector is good at assembling labor and resources, what is missing is the funding.
    B. Higher min wage.

    MMT provides understanding that
    1 fiscal spending is not inflationary when resources are plentiful,
    2 that gov has no need to borrow to spend,
    3. Money is anyway draining from our economy through world wide personal and institutional saving preferences, meaning there is a need for continuous deficit spending to replace the sequestration plus new money is necessary to accommodate a growing population, and
    4. While a net increase in bank loans does inject credit and spending into the private sector, it is eventually destabilizing when that growth exceeds GDP growth, and restricting debt growth to GDP growth is, for this economy, insufficient to compensate for the savings drain. (Granted loans should not in any event be allowed to fund equity and some other speculation, which is destabilizing.)

    Once these points are understood much of the resistance to using sovereign money for the public evaporates, so I think the push should be education, infra, and higher min wage as a better and more practical approach.

    I would add that current gov data undercounts unemployment, critical to include those that have given up plus proper accounting for part timers, e.g. If somebody works ten hours/wk, they are 0.25 employed… note that fed is looking for any excuse to raise rates, and they hate to see real wage gains, no matter there is much catching up to do at the bottom.

  17. Sue

    1. “Plus the private sector is good at assembling labor and resources, what is missing is the funding”

    The funding is not missing. The funding is channeled or diverted-see for example corporate stock buybacks and Fed actions.

    2.From another post above “Money doesn’t need to be artificially constrained”

    We could say “money does not need artificially and infinitely be outpoured either”. The problem is that the word artificial is not the right word in both cases. As I pointed out earlier, the Capitalist State main function is to protect, maintain, tweak and feed the power of irrational capital from a societal perspective and the rational self-interest from capital main holders’ vintage point -all this particularly, as we stand, in regards to financial capital.

  18. washunate

    Another post about the legal system without actually addressing fraud specifically or theft more generally? The ability of MMT advocates to refuse to address life outside the bubble certainly does win points for persistence.

    As far as promoting public understanding of money, the problem isn’t the public. The problem is the arrogance and condescension of our affluent intellectual class. MMT proponents have been asserting that the public is the problem for a long time now, without any evidence or even making an argument for why they believe that to be the case. The public knows the financial sector are criminals. Printing money to give to criminals was pushed by the leadership of this country and rubber stamped by the intellectual class. Running a global empire isn’t something demanded by the public. Printing money to do so is pushed by the leadership of this country and rubber stamped by the intellectual class. Social Security (i.e., cash payments to people in need and universal healthcare) are extremely popular amongst the public. So of course MMT pooh-poohs this in favor of a complicated JG controlled through technocrats and connected insiders.

    On and on, this notion that the problem is public ignorance rather than the behavior of the power structure is a fundamental misdiagnosis of the problem.

    It doesn’t require moar currency units to improve public policy. In fact, a lot of good would come by reducing wasteful spending and raising taxes on the rich. Oops, sorry, we can’t do that. That’s austerity in MMT jargon. It’s every good progressive American’s duty to support tax cuts for the rich, after all!

    1. Eclair

      So, if revenue resulting from taxation is unnecessary to fund the activities of a sovereign government, with the necessary condition that the society produces enough goods and services (and the land provides enough extractive opportunities), so that the supply of money does not exceed the supply of goods, then what is the reason for taxation? Other than to provide jobs for tax collectors, tax auditors and professors of taxation.

      Taxation on the federal level needs to exist for the sole purpose of ncome redistribution. To take money from the well-off and gift it to those whom nature or fortune has rendered incapable of providing a livelihood for themselves.

      So, the ideology that insists on lower (or no) taxes, is really an ideology, not of fiscal frugality, but of greed; pure, unadulterated avarice. Rapacity. I have mine and I’m not sharing any of it with you. In fact, scr*w you and all your underfed trailer trash offspring.

      Read one of today’s links: My Mother Wasn’t Trash. This is what happens when the people made enormously wealthy by exploiting this country’s natural resources and its citizens (as well as its non-citizens), refuse to share. What has been done to Joshua Wilkey’s ‘sweet little mama,’ and tens of thousands other Americans, is nothing short of violence. Sometimes when good people caution those who protest against against our society’s many injustices, to eschew ‘violence,’ that a ‘safe’ society is better than one experiencing the turmoil of civil war, I think of Wilkey’s mom, of the homeless people on the streets of Denver, of the Lakota babies born with fetal alcohol syndrome who will never have a chance to excel in school, of the black boys shot by police, of the girls who flee from foster care straight into the tender mercies of a pimp and forced sex, of the inmates in prisons who spend decades in a tiny windowless room, slowly losing their minds, and I think, “Violence? Thousands of people are experiencing soul-numbing and body-destroying violence on a daily basis. You have made the decision that other people can suck off all the ills of our society so that you can pretend we live in a safe world.”

      1. Lebow

        I believe the reason that there is such an emphasis on the canard that taxes are not needed is to make it more attractive to the rich. Has a catchy ring to it. Taxes are not just redistributive, in an asset-based monetary system where money is created by the government in a democratic process, taxes would be used to recirculate money out of the private sector and back for spending in the public sector. See the NEED Act HR2990 of 2011.

        1. washunate

          For how much MMT proponents obsess about money, I find it intriguing that in posts like this they almost never define the term or explain what’s so bad about taxing the rich.

          But I’m not sure I’d say the reason is so much to make MMT more attractive to the rich as that MMT advocacy comes from the rich. MMT is the funding mechanism used by the power structure to create the extreme concentration of wealth and power we see today. It’s why MMT authors’ hands are tied. They cannot promote wage equality, taxation of the wealthy, or a reduction of the authoritarianism of the state because that would defeat the whole point of concentrating wealth and power in the first place.

  19. kevbot9000

    2+2 can totally equal 5, for sufficiently large values of 2. (This is my favorite math joke)

  20. Lebow

    People need to stop wining. Either one believes a non-corrupt democracy is possible or one doesn’t. If you do, then let the government create money as an asset for public purpose. If you don’t, then continue allowing banks to create all of the purchasing power as they do today and let the invisible hand of the free market rule.

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