Randy Wray: Modern Monetary Theory – How I Came to MMT and What I Include in MMT

By L. Randall Wray, Professor of Economics at Bard College. Originally published at New Economic Perspectives

I was asked to give a short presentation at the MMT conference. What follows is the text version of my remarks, some of which I had to skip over in the interests of time. Many readers might want to skip to the bullet points near the end, which summarize what I include in MMT.

I’d also like to quickly respond to some comments that were made at the very last session of the conference—having to do with “approachability” of the “original” creators of MMT. Like Bill Mitchell, I am uncomfortable with any discussion of “rockstars” or “heroes”. I find this quite embarrassing. As Bill said, we’re just doing our job. We are happy (or, more accurately pleasantly surprised) that so many people have found our work interesting and useful. I’m happy (even if uncomfortable) to sign books and to answer questions at such events. I don’t mind emailed questions, however please understand that I receive hundreds of emails every day, and the vast majority of the questions I get have been answered hundreds, thousands, even tens of thousands of times by the developers of MMT. A quick reading of my Primer or search of NEP (and Bill’s blog and Warren’s blogs) will reveal answers to most questions. So please do some homework first. I receive a lot of “questions” that are really just a thinly disguised pretense to argue with MMT—I don’t have much patience with those. Almost every day I also receive a 2000+ word email laying out the writer’s original thesis on how the economy works and asking me to defend MMT against that alternative vision. I am not going to engage in a debate via email. If you have an alternative, gather together a small group and work for 25 years to produce scholarly articles, popular blogs, and media attention—as we have done for MMT—and then I’ll pay attention. That said, here you go: wrayr@umkc.edu.


As an undergraduate I studied psychology and social sciences—but no economics, which probably gave me an advantage when I finally did come to economics.  I began my economics career in my late 20’s studying mostly Institutionalist and Marxist approaches while working for the local government in Sacramento. However, I did carefully read Keynes’s General Theoryat Sacramento State and one of my professors—John Henry—pushed me to go to St. Louis to study with Hyman Minsky, the greatest Post Keynesian economist.

I wrote my dissertation in Bologna under Minsky’s direction, focusing on private banking and the rise of what we called “nonbank banks” and “off-balance sheet operations” (now called shadow banking). While in Bologna, I met Otto Steiger—who had an alternative to the barter story of money that was based on his theory of property. I found it intriguing because it was consistent with some of Keynes’s Treatise on Moneythat I was reading at the time. Also, I had found Knapp’s State Theory of Money—cited in both Steiger and Keynes–so I speculated on money’s origins (in spite of Minsky’s warning that he didn’t want me to write Genesis) and the role of the state in my dissertation that became a book in 1990—Money and Credit in Capitalist Economies— that helped to develop the Post Keynesian endogenous money approach.

What was lacking in that literature was an adequate treatment of the role of the state–which played a passive role—supplying reserves as demanded by private bankers—that is the Post Keynesian accommodationist or Horzontalist approach. There was no discussion of the relation of money to fiscal policy at that time. As I continued to read about the history of money, I became more convinced that we need to put the state at the center. Fortunately I ran into two people that helped me to see how to do it.

First there was Warren Mosler, who I met online in the PKT discussion group; he insisted on viewing money as a tax-driven government monopoly. Second, I met Michael Hudson at a seminar at the Levy Institute, who provided the key to help unlock what Keynes had called his “Babylonian Madness” period—when he was driven crazy trying to understand early money. Hudson argued that money was an invention of the authorities used for accounting purposes. So over the next decade I worked with a handful of people to put the state into monetary theory.

As we all know, the mainstream wants a small government, with a central bank that follows a rule (initially, a money growth rate but now some version of inflation targeting). The fiscal branch of government is treated like a household that faces a budget constraint. But this conflicts with Institutionalist theory as well as Keynes’s own theory. As the great Institutionalist Fagg Foster—who preceded me at the University of Denver–put it: whatever is technically feasible is financially feasible. How can we square that with the belief that sovereign government is financially constrained? And if private banks can create money endogenously—without limit—why is government constrained?

My second book, in 1998, provided a different view of sovereign spending. I also revisited the origins of money. By this time I had discovered the two best articles ever written on the nature of money—by Mitchell Innes. Like Warren, Innes insisted that the dollar’s value is derived from the tax that drives it. And he argued this has always been the case. This was also consistent with what Keynes claimed in the Treatise, where he said that money has been a state money for the past four thousand years, at least. I called this “modern money” with intentional irony—and titled my 1998 book Understanding Modern Moneyas an inside joke. It only applies to the past 4000 years.

Surprisingly, this work was more controversial than the earlier endogenous money research. In my view it was a natural extension—or more correctly, it was the prerequisite to a study of privately created money. You need the state’s money before you can have private money. Eventually our work found acceptance outside economics—especially in law schools, among historians, and with anthropologists.

For the most part, our fellow economists, including the heterodox ones, attacked us as crazy.

I benefited greatly by participating in law school seminars (in Tel Aviv, Cambridge, and Harvard) on the legal history of money—that is where I met Chris Desan and later Farley Grubb, and eventually Rohan Grey. Those who knew the legal history of money had no problem in adopting MMT view—unlike economists.

I remember one of the Harvard seminars when a prominent Post Keynesian monetary theorist tried to argue against the taxes drive money view. He said he never thinks about taxes when he accepts money—he accepts currency because he believes he can fob it off on Buffy Sue. The audience full of legal historians broke out in an explosion of laughter—yelling “it’s the taxes, stupid”. All he could do in response was to mumble that he might have to think more about it.

Another prominent Post Keynesian claimed we had two things wrong. First, government debt isn’t special—debt is debt. Second, he argued we don’t need double entry book-keeping—his model has only single entry book-keeping. Years later he agreed that private debt is more dangerous than sovereign debt, and he’s finally learned double-entry accounting. But of course whenever you are accounting for money you have to use quadruple entry book-keeping. Maybe in another dozen years he’ll figure that out.

As a student I had read a lot of anthropology—as most Institutionalists do. So I knew that money could not have come out of tribal economies based on barter exchange. As you all know, David Graeber’s book insisted that anthropologists have never found any evidence of barter-based markets. Money preceded market exchange.

Studying history also confirmed our story, but you have to carefully read between the lines. Most historians adopt monetarism because the only economics they know is Friedman–who claims that money causes inflation. Almost all of them also adopt a commodity money view—gold was good money and fiat paper money causes inflation. If you ignore those biases, you can learn a lot about the nature of money from historians.

Farley Grubb—the foremost authority on Colonial currency—proved that the American colonists understood perfectly well that taxes drive money. Every Act that authorized the issue of paper money imposed a Redemption Tax. The colonies burned all their tax revenue. Again, history shows that this has always been true. All money must be redeemed—that is, accepted by its issuer in payment. As Innes said, that is the fundamental nature of credit. It is written right there in the early acts by the American colonies. Even a gold coin is the issuer’s IOU, redeemed in payment of taxes. Once you understand that, you understand the nature of money.

So we were winning the academic debates, across a variety of disciplines. But we had a hard time making progress in economics or in policy circles. Bill, Warren, Mat Forstater and I used to meet up every year or so to count the number of economists who understood what we were talking about. It took over decade before we got up to a dozen. I can remember telling Pavlina Tcherneva back around 2005 that I was about ready to give it up.

But in 2007, Warren, Bill and I met to discuss writing an MMT textbook. Bill and I knew the odds were against us—it would be for a small market, consisting mostly of our former students. Still, we decided to go for it. Here we are—another dozen years later—and the textbook is going to be published. MMT is everywhere. It was even featured in a New Yorkercrossword puzzle in August. You cannot get more mainstream than that.

We originally titled our textbook Modern Money Theory, but recently decided to just call it Macroeconomics. There’s no need to modify that with a subtitle. What we do is Macroeconomics. There is no coherent alternative to MMT.

A couple of years ago Charles Goodhart told me: “You won. Declare victory but be magnanimous about it.” After so many years of fighting, both of those are hard to do. We won. Be nice.

Let me finish with 10 bullet points of what I include in MMT:

1. What is money: An IOU denominated in a socially sanctioned money of account. In almost all known cases, it is the authority—the state—that chooses the money of account. This comes from Knapp, Innes, Keynes, Geoff Ingham, and Minsky.

2. Taxes or other obligations (fees, fines, tribute, tithes) drive the currency. The ability to impose such obligations is an important aspect of sovereignty; today states alone monopolize this power. This comes from Knapp, Innes, Minsky, and Mosler.

3. Anyone can issue money; the problem is to get it accepted. Anyone can write an IOU denominated in the recognized money of account; but acceptance can be hard to get unless you have the state backing you up. This is Minsky.

4. The word “redemption” is used in two ways—accepting your own IOUs in payment and promising to convert your IOUs to something else (such as gold, foreign currency, or the state’s IOUs).

The first is fundamental and true of all IOUs. All our gold bugs mistakenly focus on the second meaning—which does not apply to the currencies issued by most modern nations, and indeed does not apply to most of the currencies issued throughout history. This comes from Innes and Knapp, and is reinforced by Hudson’s and Grubb’s work, as well as by  Margaret Atwood’s great book: Payback: Debt and the shadow side of wealth.

5. Sovereign debt is different. There is no chance of involuntary default so long as the state only promises to accept its currency in payment. It could voluntarily repudiate its debt, but this is rare and has not been done by any modern sovereign nation.

6. Functional Finance: finance should be “functional” (to achieve the public purpose), not “sound” (to achieve some arbitrary “balance” between spending and revenues). Most importantly, monetary and fiscal policy should be formulated to achieve full employment with price stability. This is credited to Abba Lerner, who was introduced into MMT by Mat Forstater.

In its original formulation it is too simplistic, summarized as two principles: increase government spending (or reduce taxes) and increase the money supply if there is unemployment (do the reverse if there is inflation). The first of these is fiscal policy and the second is monetary policy. A steering wheel metaphor is often invoked, using policy to keep the economy on course. A modern economy is far too complex to steer as if you were driving a car. If unemployment exists it is not enough to say that you can just reduce the interest rate, raise government spending, or reduce taxes. The first might even increase unemployment. The second two could cause unacceptable inflation, increase inequality, or induce financial instability long before they solved the unemployment problem. I agree that government can always afford to spend more. But the spending has to be carefully targeted to achieve the desired result. I’d credit all my Institutionalist influences for that, including Minsky.

7. For that reason, the JG is a critical component of MMT. It anchors the currency and ensures that achieving full employment will enhance both price and financial stability. This comes from Minsky’s earliest work on the ELR, from Bill Mitchell’s work on bufferstocks and Warren Mosler’s work on monopoly price setting.

8. And also for that reason, we need Minsky’s analysis of financial instability. Here I don’t really mean the financial instability hypothesis. I mean his whole body of work and especially the research line that began with his dissertation written under Schumpeter up through his work on Money Manager Capitalism at the Levy Institute before he died.

9. The government’s debt is our financial asset. This follows from the sectoral balances approach of Wynne Godley. We have to get our macro accounting correct. Minsky always used to tell students: go home and do the balances sheets because what you are saying is nonsense. Fortunately, I had learned T-accounts from John Ranlett in Sacramento (who also taught Stephanie Kelton from his own, great, money and banking textbook—it is all there, including the impact of budget deficits on bank reserves). Godley taught us about stock-flow consistency and he insisted that all mainstream macroeconomics is incoherent.

10. Rejection of the typical view of the central bank as independent and potent. Monetary policy is weak and its impact is at best uncertain—it might even be mistaking the brake pedal for the gas pedal. The central bank is the government’s bank so can never be independent. Its main independence is limited to setting the overnight rate target, and it is probably a mistake to let it do even that. Permanent Zirp (zero interest rate policy) is probably a better policy since it reduces the compounding of debt and the tendency for the rentier class to take over more of the economy. I credit Keynes, Minsky, Hudson, Mosler, Eric Tymoigne, and Scott Fullwiler for much of the work on this.

That is my short list of what MMT ought to include. Some of these traditions have a very long history in economics. Some were long lost until we brought them back into discussion. We’ve integrated them into a coherent approach to Macro. In my view, none of these can be dropped if you want a macroeconomics that is applicable to the modern economy. There are many other issues that can be (often are) included, most importantly environmental concerns and inequality, gender and race/ethnicity. I have no problem with that.

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  1. Hilary Barnes

    Out of my depth: “7. For that reason, the JG is a critical component of MMT.” The JG?

    1. BillC

      Job guarantee (especially as distinguished from a basic income guarantee). See here for fairly recent coverage by Lambert.

        1. skippy

          A JG is to discontinue NAIRU or structural under-unemployment with attendant monetarist/quasi inflation views. Something MMT has be at pains to point out wrt fighting a nonexistent occurrence due to extended deflationary period.

    2. dcrane

      The paragraph on “double entry book-keeping” is also a bit too inside-baseball. Otherwise I enjoyed the essay.

      1. PlutoniumKun

        Yup, he lost me on quadruple entry book-keeping, thats the first time I ever heard of that concept.

        1. Quanka

          Its double entry accounting counting both sides of the equation. Fed deposits money into bank requires 4 entries, a double entry for the Fed and for the bank. Typical double entry accounting only looks at the books of 1 entity at a time. Quadruple Entry accounting makes the connection between the government monetary policy and private business accounting. I’m not an accountant, I may have butchered that.

        2. horostam

          think about banks and reserves, your money is on the bank’s liability side (and your asset), while the reserves are on the bank’s asset side (and gov’t or fed’s liability.)

          i think its the reserves that quadruple it, reserves are confusing because when you move $5 from a bank account to buy ice cream its not just one copy of the $5 that moves between checking accounts, there is another $5 that moves “under the hood” so to speak in reserve world

      2. HotFlash

        Very briefly, double entry bookkeeping keeps track of how money comes in/out, and where it came from/went. Cash is the determining item (although there may be a few removes). Hence, say I buy a $20 dollar manicure from you. I record my purchase as “Debit (increase) expense: manicure $20, credit (decrease) cash, $20”. Bonus! If my bookkeeping is correct, my debits and credits are equal and if I add them up (credits are minus and debits are plus) the total is zero – my books “balance”. So, double-entry bookkeeping is also a hash-total check on my accounting accuracy. But I digress.

        On your books, the entry would be “Debit (increase) cash $20, credit (decrease) sales, $20”.

        So, your double-entry book plus my double-entry books would be quadruple-entry accounting.

    3. JCC

      #7 was my immediate stopper, too. It drives me nuts when people introduce 2-3-4 letter acronyms with no explanation (I work for the DoD and I’m surrounded by these “code words”. I rarely know what people are talking about and when I ask, the people talking rarely know what these TLAs – Three Letter Acronyms – stand for either!).

      Next question regarding #7: What is ELR?

      Other than #7, I really appreciate this article. NC teaches and/or clarifies on a daily basis.

        1. JCC

          Guilty as charged :-)

          For non-US readers, DoD is Department of Defense, the undisputed-by-many home of TLAs.

      1. Roberto

        In Chrome you can highlight the unknown abbreviation then right click. Then one of the menu selections is to do a google look up of the highlighted term. Helpfully a new tab is opened with the goog hits listed.

  2. Bill C

    Thank you for this post!

    This quick, entertaining read is IMHO nothing less than a “Rosetta Stone” that can bring non-specialists to understand MMT: not just how, but why it differs from now-conventional neoliberal economics. I hope it finds a wide readership and that its many references to MMT’s antecedents inspire serious study by the unconvinced (and I hope they don’t take Wray’s invitation to skip the 10 bullet points).

    This piece is a fine demonstration of why I’ve missed Wray as he seemed to withdraw from public discourse for the last few years.

    1. HotFlash

      No no! He said “Many readers might want to skip to the bullet points near the end, which summarize what I include in MMT.”

  3. el_tel

    Thank you! The (broad) analogies with my own experience are there. I had a decidedly “mainstream” macro education at Cambridge (UK); though many of the “old school” professors/college Fellows who, although not MMT people as we’d currently understand (or weren’t at *that* stage – Godley lectured a module I took but this was in the early 1990s) were still around, in hindsight the “university syllabus” (i.e. what you needed to regurgitate to pass exams) had already steered towards neoliberalism. I never really understood why I never “got” macro and it was consistently my weakest subject.

    It was later, having worked in the City of London, learned accountancy in my actuarial training, and then most crucially starting reading blogs from people who went on to become MMT leading lights, that I realised the problem wasn’t ME, it was the subject matter. So I had to painfully unlearn much of what I was taught and begin the difficult process of getting my head around a profoundly different paradigm. I still hesitate to argue the MMT case to friends, since I don’t usually have to hand the “quick snappy one liners” that would torpedo their old discredited understanding.

    I’m still profoundly grateful for the “old school” Cambridge College Fellows who were obviously being sidelined by the University and who taught me stuff like the Marxist/Lerner critiques, British economic history, political economy of the system etc. Indeed whilst I had “official” tutorials with a finance guy who practically came whenever Black-Scholes etc was being discussed, an old schooler was simultaneously predicting that it would blow the world economy up at some point (and of course he was in the main , correct). I still had to fill in some gaps in my knowledge (anthropology was not a module, though Marxist economics was), with hindsight I appreciate so much more of what the “old schoolers” said on the sly during quiet points in tutorials – Godley being one, although he wasn’t ready at that time to release the work he subsequently published and was so revolutionary. Having peers educated elsewhere during my Masters and PhD who knew nothing of the subjects that – whilst certainly not the “key guide” to “proper macro” described in the article – began to horrify me later in my career.

  4. skippy

    Thanks for your efforts Mr Wray, your provide a rich resource to familiarize most and in some cases refute doctrinaire attitudes. Kudos.

    BTW completely agree with the perspective against PR marketing of the topic or individuals wrt MMT or PK.

  5. Lambert Strether

    This is really great. Thanks a ton, as Yves would say.

    I know I have used to “rock star” metaphor on occasion, so let me explain that to me what is important in excellent (i.e., live) rock and roll is improvisational interplay among the group members — the dozen or so who understood MMT in the beginning, in this case — who know the tune, know each other, and yet manage to make the song a little different each time. It’s really spectacular to see in action. Nothing to do with spotlights, or celebrity worship, or fandom!

  6. DavidEG

    I’m no MMT expert, but I think this article does a good job of juxtaposing MMT with classic (non-advanced) macroeconomics. I quote:

    In the language of Tinbergen (1952), the debate between MMT and mainstream macro can be thought of as a debate over which instrument should be assigned to which target. The consensus assignment is that the interest rate, under the control of an independent central bank, should be assigned to the output gap target, while the fiscal position, under control of the elected budget authorities, should be assigned to the debt sustainability target. […] The functional finance assignment is the reverse—the fiscal balance under the budget authorities is assigned to the output target, while any concerns about debt sustainability are the responsibility of the monetary authority.

    What about interest rate fixing? The central bank would remain in charge of that, but in an MMT context this instrument would lose most of its relevance:

    [W]hile a simple swapping of instruments and targets is one way to think about functional finance, this does not describe the usual MMT view of how the policy interest rate should be set. What is generally called for, rather, is that the interest rate be permanently kept at a very low level, perhaps zero. In an orthodox policy framework, of course, this would create the risk of runaway inflation; but keep in mind that in the functional framework, the fiscal balance is set to whatever level is consistent with price stability.

    It may be a partial reconstruction of MMT, but to me this seems to be a neat way to present MMT to most people. Saying that taxes are there just to remove money from the economy or to provide incentives is a rather extreme statement that is bound to elicit some fierce opposition.

    Having said that, I’ve never seen anyone address what I think are two issues to MMT: how to make sure that the power to create money is not exploited by a political body in order to achieve consensus, and how to assure that the idea of unlimited monetary resources do not lead to misallocation and inefficiencies (the bloated, awash-with-money US military industry would probably be a good example).

    1. larry

      The best comparison of MMT with neoliberal neoclassical economics, in my view, is Bill Mitchell’s blog post, “How to Discuss Modern Monetary Theory” (http://bilbo.economicoutlook.net/blog/?p=25961). I especially recommend the table near the end as a terrific summary of the differences between the mainstream narrative and MMT.

      1. el_tel

        Thanks! I have enormous respect for Mitchell, given the quantity and quality of his blogging. However, my only nitpick is that a lot of his blog entries are quite long and “not easily digestible”. I have long thought that one of those clever people who can do those 3 minute rapid animation vids we see on youtube is needed to “do a Lakoff” and change the metaphors/language. But this post of Mitchell (which I missed, since I don’t read all his stuff) is, IMHO, his best at “re-orienting us”.

        1. el_tel

          FWIW I mucked around with the link in Firefox (although I typically use Opera, which gave me that same error) and could read it.

    2. Epistrophy

      Saying that taxes are there just to remove money from the economy or to provide incentives is a rather extreme statement that is bound to elicit some fierce opposition.

      Yes this is a frightening statement. The power to tax is the power to destroy. If this is a foundation point of the proposal then …

      Having said that, I’ve never seen anyone address what I think are two issues to MMT: how to make sure that the power to create money is not exploited by a political body in order to achieve consensus, and how to assure that the idea of unlimited monetary resources do not lead to misallocation and inefficiencies (the bloated, awash-with-money US military industry would probably be a good example).

      Bingo. My thoughts exactly. Too much power in the hands of the few. Easy to slide into Orwell’s Animal Farm – where some people are more equal than others.

      MMT is based upon very good intentions but, in my view, there is a moral rot at the root of the US of A’s problems, not sure this can be solved by monetary policy and more centralized control.

      And the JG? Once the government starts to permanently guarantee jobs …

      1. skippy

        I suggest you delve into what is proposed by the MMT – PK camp wrt a JG because its not centralized in the manner you suggest. It would be more regional and hopefully administrated via social democratic means e.g. the totalitarian aspect is moot.

        I think its incumbent on commenters to do at least a cursory examination before heading off on some deductive rationalizations, which might have undertones of some book they read e.g. environmental bias.

        1. Epistrophy

          Skippy, I read the article, plus the links, including those links of the comments. I will admit that I am a little more right of center in my views than many on the website.

          The idea is interesting, but the administration of such a system would require rewriting the US Constitution, or an Amendment to it if one thinks the process through, would it not? I think of the Amendment required to create the Federal Reserve System when I say this.

          1. Clive

            One thing I really don’t like at all — and I’ve crossed swords with many over this — is that we do tend to take (not just in the US, this is prevalent in far too many places) things like the constitution, or cultural norms, or traditions or other variants of “that’s the way we’ve always done this” and elevate them to a level of sacrosanctity.

            Not for one moment am I suggesting that we should ever rush into tweaking such devices lightly nor without a great deal of analysis and introspective consultations.

            Constitutions get amended all the time. The Republic of Ireland changed its to renounce a territorial claim on Northern Ireland. The U.K. created a right for Scotland to secede from the Union. There’s even a country in Europe voting whether to formally change its name right now. Britain “gave up” its empire territories (not, I would add speedily, without a lot of prodding, but still, we got there in the end). All of which were, at one time or another, “unthinkable”. Even the US, perhaps the most inherently resistant to change country when it thinks it’s being “forced” to do so, begrudgingly acknowledged Cuba.

            If something is necessary, it should be done.

            1. vlade

              Human laws (any and all, for simplicity I include culture, customs etc.. here) are not laws of nature.

              They change over time to survive. The easy way, or the hard way.

              Or they don’t survive at all, that’s an option too.

              1. witters

                “Human laws (any and all, for simplicity I include culture, customs etc.. here) are not laws of nature.”

                Wave Function Collapse?

          2. voteforno6

            Why would a jobs guarantee require a constitutional amendment? The federal government creates jobs all the time, with certain defined benefits. This would merely expand upon that, to potentially include anyone who wants a job.

            1. Epistrophy

              I was thinking of implementing the whole concept of MMT, of which the JG is but one part, with this statement. Perhaps I did not make that clear.

              1. voteforno6

                There are a couple different aspects of this that people are getting mixed together, I think. The core of MMT is not a proposal for government to implement. Rather, it is simply a description of how sovereign currencies actually operate, as opposed by mainstream economics, which has failed in this regard. In other words, we don’t need any new laws to implement MMT – we need a paradigm shift.

                The Jobs Guarantee is a policy proposal that flows from this different paradigm.

                1. skippy

                  It has been stated many times that it is to inform policy wrt to potential and not some booming voice from above dictating from some ridged ideology.

                  Persoanly as a capitalist I can’t phantom why anyone would want structural under – unemployment. Seems like driving around with the hand brake on and then wondering why performance is restricted or parts wear out early.

                  1. todde


                    I want 12 people lined up at the door to take your job, and then you will know where the power lies…

          3. todde

            the Amendment required to create the Federal Reserve System

            What Amendment was that?

            And since the Constitution gives Congress the power to coin money I am unaware of any reason an amendment would be necessary.

            1. Epistrophy

              Thinking of the Federal Reserve Act being enabled by the Federal Income Tax of the 16th Amendment.

              Using Federal taxes to fund the JG; I do not think that this aspect of it (and others) would survive a Constitutional challenge. Therefore ultimately an Amendment might be needed.

              Then again I may be wrong. Technically Obamacare should have been implemented by an Amendment were strict Constitutional law applied.

              Rights to health care and jobs are not enumerated in either the Constitution or Bill of Rights, as far as I am aware.

              1. todde

                16th Amendment had nothing to do with the Federal Reserve.

                And I think you are confusing ‘you must buy health insurance or face a tax”, with “You have a right to have healthcare”.

                If the government forced you to work, you may have a case.

                There are 3 things the feds can spend federal funds on, pay debt, provide for the common defense, and the general welfare clause.

                The General Welfare clause has been interpreted very widely in regards to Government spending.

                New Deal, Social Security, Medicare/aid all survived court challenges, or if they lost, they lost on regulatory issues, and not ‘spending’ issues

                1. Epistrophy

                  You raise an interesting point. I had always assumed that taxes had to be paid in Federal Reserve Notes so the 16th Amendment, the Federal Income Tax Act and the Federal Reserve Act were effectively interconnected. But there were still Greenbacks and Gold Coins in circulation in 1914.

                  Considering that the initial tax rates of 1913 kicked in at incomes that in today’s money represented something like $500K and national banks were required to join the Federal Reserve System and place reserves there (I believe much consisted of gold) then one would assume that taxes would have been paid with Federal Reserve Notes – thus creating demand.

                  So would a Federal Reserve Note exist without the 16th Amendment?

                  1. Wukchumni

                    The different types of USA banknotes in circulation in 1914 would have been:

                    Legal Tender Banknotes
                    United States Banknotes
                    National Banknotes
                    Federal Reserve Banknotes
                    Silver Certificate Banknotes
                    Gold Certificate Banknotes

                    The top 4 being completely fiat, not backed by precious metals.

              2. Grebo

                The Humphrey-Hawkins Act has not been struck down so far as I know. Neither has it been implemented, probably because it was nobbled with a balanced budget clause.

                Federal taxes would not be used to fund the JG. They are not used to fund anything.

        2. ChristopherJ

          Still have a brother in Canberra, Skip, pretty high up. He scoffs at my ‘MMT conspiracies’ and then I back off when I realise I can’t convince him. Intelligent man too, but it is exactly the same reaction to when I try to talk to people about what I think happened on 9/11. I mean, shit, as conspiracies go, there not the same thing, but not evidence, I know…

          I get the impression that like ‘fight club’, no one is allowed to talk about it. Has to be that, lot of smarter people than me in Canberra.

          I’ve tried many times to unboggle this and all I can think of is that the public servants don’t trust politicians (duh) but, particularly a government that has a budget which is unlimited. Well spent sovereign money could buy you power indefinitely, no?

          Cue the $400m gifted to the Government’s mates in the Great Barrier Reef Foundation – or the millions gifted to the Clintons during the last presidential election (and earlier I think).

          Can anyone else think of another reason why this ‘theory’ of the truth (about money, banking and taxes) has been so hard to gain traction, particularly with economists and politicians?

      2. Epistrophy

        Not opposed to some of the principles of MMT, just don’t understand, in this modern age where effectively all currency is electronic digits in a banking computer system, the issue of a currency must be tied to taxes. In years past, where currency was printed and in one’s pocket, or stuffed under a mattress, or couriered by stagecoach, then yes – taxes would be needed. But today can we not just print (electronically) the cash needed for government operations each year based upon a fixed percentage of private sector GDP? Why therefore do we need government debt? Why do we need an income tax?

        1. skippy

          A. GDP is non distributional.

          B. Had taxation not been promoted as theft in some camps Volcker would have not had to jack IR to such a upper bound during the Vietnam war.

          C. Government Debt allocated to socially productive activities is a long term asset with distributional income vectors.

          D. Ask the Greeks.

          1. Epistrophy

            Skippy, I have lived and worked in countries without income tax (but instead indirect tax) and where government operating revenue was based upon a percentage of projected national revenue. I have been involved in the administration of such budgets.

            I am in favor of government spending, or perhaps more accurately termed investing, public money on long-term, economically beneficial projects. But this is not happening. The reality is that government priorities can easily be hijacked by political interests, as we currently witness.

            1. larry

              While I agree that political highjacking is possible and must be dealt with, this is not strictly speaking part of an economic theory, which is what MMT is. While MMT authors may take political positions, the theory itself is politically neutral.

              Income taxes, tithes, or any other kind of driver is what drives the monetary circuit. Consider it from first principles. You have just set up a new government with a new currency where this government is the monopoly issuer. No one else has any money yet. So, the government must be the first spender. However, how is this nascent government going to motivate anyone to use this new currency? Via taxation, or like means, that can only be met by using the national currency, whatever form that currency may take, marks on a stick, paper, an entry in a ledger, or the like.

              1. Epistrophy

                Thank you for this explanation. I understand that, for example, this is why the Federal Reserve Act of 1913, I believe, created the Federal Reserve and Federal Income Tax at the same time.

                But the US economy functioned adequately, survived a civil war, numerous banking crises, experienced industrialization, national railways, etc without a central bank or federal income tax from the 1790’s to 1913.

                To me, the US’s state of perpetual war is enabled by Federal Income Tax. Without it the MIC would collapse, I am certain.

                1. John k

                  Functioned adequately…
                  During the 150 yr hard money period we had recessions/depressions that we’re both far more frequent (every three years) and on avg far deeper than what we have had since fdr copied the brits and took us off the gold standard. Great deprecession was neither the longest or deepest.
                  Two reasons
                  Banks used to fail frequently, a run on one bank typically leading to runs on other banks, spreading across regions like prairie fires… if your bank failed you lost all your money. Consequences were serious.
                  During GR so many banks failed in the Midwest, leading to farm foreclosures, the region was near armed insurrection in 1932. Fiat meant that the fed can supply unlimited liquidity. Since then banks have failed but immediately taken over by another. Critically, no depositor has lost a penny, even those with far more exposed than the deposit insurance limit. No runs on us banks since 1933.
                  Second, we now have auto stabilizers, spending continues during downturns because gov has no spending limit. Note previously in an emergency gov borrowed. 10 mil from J.P. Morgan.

                  1. Brian

                    But at what cost? no depositor loses money, yet huge amounts are required to be printed, thus devaluing the “currency”. So is the answer inflation that must by necessity become hyperinflation?
                    I don’t understand why it is important to protect a bank vs. making it perform its function without risking collapse. This is magical thinking as we have found very few banks in this world not ready and willing to pillage their clients, be it nations or just the little folk.
                    Why would anyone trust a government to do the right thing by its population? When has that ever worked out in favor of the people?
                    I can not understand the trust being demanded by this concept. It wants trust for the users, but in no way can it expect trust or virtue from the issuer of the “currency”

                    also, I can’t help but think MMT is for growth at all costs. Hasn’t the growth shown that it is pernicious in itself? Destroy the planet for the purpose of stabilizing “currency”.

                    Our federal reserve gave banks trillions of dollars, and then demanded they keep much of it with the Fed and are paid interest not to use it. It inflated the “currency” in circulation yet again and now it is becoming clear a great percentage of people in our country can no longer eat, no longer purchase medications, a home, a business……

                    If being on a hard money system as we were causes recessions and depressions, would we find that it was a natural function to cut off the speculators at their knees?

                    How does MMT promote and retain value for the actual working and producing people that have no recourse with their government? I would like to read about what is left out of this monumental equation.

                    1. todde

                      we used to protect the banks depositors and the government put the the bank in receivership.

                      That went away in the 21st century for some reason.

                      Now we protect the bank and put the Government in receivership (Greece).

                2. todde

                  Some points:

                  US had a federal income tax during the civil war and for a decade or so after.

                  I have always assumed that mass conscription and the Dreadnought arms race led to the implementation of the modern taxing/monetary system. (gov’t needed both warfare and welfare)

                  Taxes, just as debt, create an artificial demand for currency as one must pay back their taxes in {currency}, and one must pay back debt in {currency}. It doesn’t have to be an income tax, and I think a sales tax would be a better driver of demand than an income tax.

                  The US had land sales that helped fund government expenditures in the 1800s.

                3. HotFlash

                  Not all taxes are income taxes. Back in the day (20’s/30’s/40’s),my grandfather could pay off the (county) property taxes on his farm by plowing snow for the county in the winter — and he was damned careful to make sure that the county commissioners’ driveways were plowed out as early as possible after a storm.

                  In the 30’s/40’s the property tax laws were changed to be payable only in dollars.

                  So Grandpa had to make cash crops. Things changed and money became necessary.

            2. skippy

              I think your grievance here has more to do with the information the currant political operatives function on-under than what is actually available, due to decades of neoliberal grooming e.g. most of the polity is just plain ignorant or complicit because it advances bio-political or structural class distinctions within the survival of the fittest paradigm.

              That’s not to say I don’t understand the CA aspects in this hyper reporting market driven reality, but, at some point something will give. That is something I hope to avoid considering all the consequences in this new emerging environmental event horizon. I mean unless some narcissistic wankers want to leverage it for a big pay day thingy…. sigh….

        2. Benjamin Wolf

          But today can we not just print (electronically) the cash needed for government operations each year based upon a fixed percentage of private sector GDP?

          The élites could, but it would be totally undemocratic and the economics profession’s track record of forecasting growth is no better than letting a cat choose a number written on an index card.

          Why therefore do we need government debt?

          There is no government debt. It’s just a record of interest payments Congress has agreed to make because the wealthy wanted another welfare program.

          Why do we need an income tax?

          The only logically consistent purpose is because people have too much income.

        3. voteforno6

          I think the point they’re driving at, is that by requiring the payment of taxes in a particular currency, a government creates demand for that currency. There are other uses for federal taxes, not the least of which is to keep inflation in check.

          Government debt is not needed, at least not at the federal level. My understanding of it is that it’s a relic from the days of the gold standard. It’s also very useful to some rather large financial institutions, so eliminating it would be politically difficult.

          1. WobblyTelomeres

            Wray has said in interviews that the debt (and associated treasury bonds), while not strictly necessary in a fiat currency, is of use in that it provides a safe base for investment, for pensioners and retirees, etc.

            Sure, it could be eliminated by (a) trillion dollar platinum coins deposited at the Federal Reserve followed by (b) slowly paying off the existing debt when the bonds mature or (c) simply decreeing that the Fed must go to a terminal and type in 21500000000000 as the US Gov account balance (hope I got the number of zeroes correct!).

            It could be argued that the US doesn’t strictly need taxes to drive currency demand as long as our status as the world reserve currency is maintained (see oft-discussed petrodollar, Libya, etc). If that status is imperiled, say by an push by a coalition of nations to establish a different currency as the “world reserve currency”) taxes would be needed to drive currency demand.

            I think most of this is covered in one way or another here:


            1. HotFlash

              Government debt is not actually a ‘real thing’. It is a residue of double-entry bookkeeping, as is net income (income minus expenses, that’s a credit in the double-entry system). It could as well be called ‘retained earnings (also a ‘book’ credit in the double-entry system). If everybody had to take bookkeeping in high school there would be far few knickers in knots!

                1. Grebo

                  There are two kinds of government ‘debt’: the accumulated deficit which is the money in circulation not a real debt, and outstanding bonds which is real in the sense that it must be repaid with interest.

                  However, the government can choose the interest rate and pay it (or buy back the bonds at any time) with newly minted money at no cost to itself, cf. QE.

                  Neither kind warrant bunched panties.

            2. Procopius

              As I understand it, the so-called “public debt” is the sum of all treasury bonds and notes outstanding. These documents have uses, particularly as collateral for institutional loans (between banks and financial institutions[shadow banks]) because they represent a guarantee by the government. We could simply rename the account as something else less scary, but there has to be some mechanism to replace those bonds. Similar to the way you simply cannot do without currency, as India demonstrated last year. There was a time when Kings and Parliaments had to have coins in hand to pay for things, so they had to borrow the money from rich people and pay it back with interest. The rich people wanted it paid back because there were no written IOUs they could trade with other rich people. The genius of issuing bonds (gilts, as they were called at the time because of the gold edges on the documents) is they never have to be repaid, or you can repay them by issuing new ones in their place. Late seventeenth century, England. I’ll bet the Babylonians had an equivalent on clay tablets but then it was forgotten for a couple millennia.

        4. Jared

          But today can we not just print (electronically) the cash needed for government operations each year based upon a fixed percentage of private sector GDP?

          The government already does just print (issue) the currency that it spends.

          Why therefore do we need government debt?

          We don’t, and technically the government doesn’t have any debt. It’s illusory.

          Why do we need an income tax?

          The government doesn’t need income tax per se, and doesn’t necessarily need any tax. It needs to acquire real resources, and it uses its currency to do it. Therefore, it needs a way to influence individuals to give it real resources (goods or services, including labor) it can then use for public purposes. To be sure, it could use force, but that’s slavery, and in the modern era that’s not really kosher. So, influence. Enter currency, and the need for people to want to use it. Enter taxes, which requires that people acquire the currency if they want “income,” which most people do. So the government says it will put people in cages if they don’t pay taxes in its currency on their income.

          Taxes are, in fact, theft, if theft means the taking of real things via coercive means. But c’est la vie. If you want a society (and the immense benefits that comes with a society), then there must be contributions to the public good. And if humans are obtuse assholes who think they are islands and don’t understand the immense benefits of society (and they by and large are exactly this), then the government has to use some (indirect) coercion to get those contributions. So threats of prison lead to payment of taxes leads to demand for currency leads to government acquiring goods and services for public purpose.

          In short: humans are assholes.

          1. skippy

            Fallacy of composition e.g. if FRN are issued as a tax …where is the theft considering property rights and all thingy….

      3. horostam

        seems to me that the guaranteed jobs would be stigmatized, and make it harder for people to get private sector jobs. “once youre in the JG industry, its hard to get out” etc.

        how much of a guarantee is the job guarantee supposed to be? ie. at what point can you get fired from a guaranteed job?

        1. Epistrophy

          Yes, my mind wandered into the same territory. While I agree that something needs to be done, it also has the potential to strike at the heart of a lean, merit-based system by introducing another layer of bureaucracy. In principle, I am not against the idea, but as they say, “God (or the Devil – take your pick) is in the details …”.

          1. The Rev Kev

            Is there any point in working for a jobs guarantee when the only sort of jobs that would probably be guaranteed would be MacJobs and Amazon workers?

            1. Newton Finn

              If you haven’t already read it, “Reclaiming the State” by Mitchell and Fazi (Pluto Press 2017) provides a detailed and cogent analysis of how neoliberalism came into ascendency, and how the principles of MMT can be used to pave the way to a more humane and sustainable economic system. A new political agenda for the left, drawing in a different way upon the nationalism that has energized the right, is laid out for those progressives who understand the necessity of broadening their appeal. And the jobs guarantee that MMT proposes has NOTHING to do with MacJobs and Amazon workers. It has to do with meeting essential human and environmental needs which are not profitable to meet in today’s private sector.

            2. HotFlash

              Job guarantee, or govt as employer of last resort — now there is a social challenge/opportunity if there ever was one.

              Well managed, it would guarantee a living wage to anyone who wants to work, thereby setting a floor on minimum wages and benefits that private employers would have to meet or exceed. These minima would also redound to the benefit of self-employed persons by setting standards re income and care (health, vacations, days off, etc) *and* putting money in the pockets of potential customers.

              Poorly managed it could create the ‘digging holes, filling them in’ programs of the Irish Potato Famine ore worse (hard to imagine, but still…). It has often been remarked that the potato blight was endemic across Europe, it was only a famine in Ireland — through policy choices.

              So, MMT aside (as being descriptive, rather than prescriptive), we are down to who controls policy. And that is *really* scary.

        2. eg

          To your first point, I haven’t seen any serious JG proposals where the jobs would make one more unemployable than actually being unemployed.

          To your second point, the Job Guarantee is for those who want to work, not those who don’t want to work.

        3. skippy

          Actually a JG is more in line with upward mobility than say a UBI, which would create a permanent underclass, especially when its roots are grounded in the Milton’s camp of thinking [investors] and its penchant for the removal of targeted social programs or social goods because Hayek et al said we need rational price discovery or EMH has a sad.

          Then again I could be all wrong when some can’t sleep at night because of totalitarianism… so they cuddle the TINA bear… the authority of that keeps the monsters under the bed…. eh….

      4. Mel

        In terms of power, the government has the power to shoot your house to splinters, or blow it up, with or without you in it. We say they’re not supposed to, but they have the ability, and it has been done.
        The question of how to hold your government to the things it’s supposed to do applies to issues beyond money. We’d best deal with government power as an issue in itself. I should buckle down and get Mitchell’s next-to-newest book Reclaiming the State.

    3. Grebo

      Bill Mitchell was not too impressed with the INET paper: Part 1.
      There’s three parts! Mitchell rarely has the time to be brief.

  7. Tinky

    I don’t claim to fully understand MMT yet, but I find Wray’s use of the derogatory term “gold bugs” to be both disappointing and revealing. To lump those, some of whom are quite sophisticated, who believe that currencies should be backed by something of tangible value (and no, “the military” misses the point), or those who hold physical gold as an insurance policy against political incompetence, and the inexorable degradation of fiat currencies, in with those who promote or hold gold in the hopes of hitting some type of lottery, is disingenuous at best.

    1. Wukchumni

      OMT seemingly has no reason to exist being old school, but for what it’s worth, the almighty dollar has lost over 95% of it’s value when measured against something that matters, since the divorce in 1971.

      I found this passage funny, as in flipping the dates around to 1791, is when George Washington set an exchange rate of 1000-1 for old debauched Continental Currency, in exchange for newly issued specie. (there was no Federal currency issued until 1861)

      So yeah, they burned all of their tax revenue, because the money wasn’t worth jack.

      Farley Grubb—the foremost authority on Colonial currency—proved that the American colonists understood perfectly well that taxes drive money. Every Act that authorized the issue of paper money imposed a Redemption Tax. The colonies burned all their tax revenue.

    2. skippy

      Gold bug is akin to money crank e.g. money = morals. That’s not to mention all the evidence to date does not support the monetarist view nor how one gets the value into the inanimate object or how one can make it moral.

    3. Benjamin Wolf

      Gold doesn’t historically perform as a hedge but as a speculative trade. Those who think it can protect them from political events typically don’t realize that a gold standard means public control of the gold industry, thereby cutting any separation from the political process off at the knees.

      When a government declares that $20 is equal in value to one ounce of gold, it also declares an ounce of gold is equal to $20 dollars. It is therefore fixing, through a political decision subject to political changes, the price of the commodity.

      1. Tinky

        Nonsense. When fiat currencies invariably degrade, and especially at a fast rate, gold has proven to be a relative store of value for millennia. All one need do is to look at Venezuela, Argentina, Turkey, etc., to see that ancient dynamic in action today.

        You, and others who have replied to my comment, are using the classical gold standard as a straw man, as well. Neither I, nor many other gold “bugs” propose such a simple solution to the obviously failed current economy, which is increasingly based on mountains of debt that can never be repaid.

        1. WobblyTelomeres

          gold has proven to be a relative store of value for millennia.

          As long as one is mindful that gold is just another commodity, subject to the same speculative distortions as any other commodity (see Hunt brothers and silver).

          1. Tinky

            But that is obviously false, given that no other commodity has remotely performed with such stability over such a long period of time.

            It is true that over short periods distortions can appear, and the *true* value of gold has been suppressed in recent years through the use of fraudulent paper derivatives. But again, I’m not arguing for the return of a classical gold standard.

            1. Wukchumni

              The only way the gold standard returns, is if it’s forced on the world on account of massive fraud in terms of fiat money, but that’ll never happen.

            2. WobblyTelomeres


              I’m curious as to what you consider the “*true* value of gold”. Could you elaborate?

              I’m dense/obtuse and thus not an economist!

              1. Tinky

                Don’t worry, I’m likely to be at least equally dense!

                I didn’t mean to suggest that there is some formula from which a *true* value of precious metals might be derived. I simply meant that gold has clearly been the object of price suppression in recent years through the use of paper derivatives (i.e. future contracts). The reason for such suppression, aside from short-term profits to be made, is that gold has historically acted as a barometer relating to political and economic stability, and those in power have a particular interest in suppressing such warning signals when the system becomes unstable.

                So, while the Central Banks created previously unimaginable mountains of debt, it was important not to alarm the commoners.

                The suppression schemes have become less effective of late, and will ultimately fail when the impending crisis unfolds in earnest.

          2. Wukchumni

            As long as one is mindful that gold is just another commodity, subject to the same speculative distortions as any other commodity

            It sounds good in theory, but history says otherwise.

            The value remained more or less the same for well over 500 years as far as an English Pound was concerned, the weight and value of a Sovereign hardly varied, and the exact weight and fineness of one struck today or any time since 1817, is the same, no variance whatsoever.

            Thus there was no speculative distortions in terms of value, the only variance being the value of the Pound (= 1 Sovereign) itself.


        2. Benjamin Wolf

          When fiat currencies invariably degrade, and especially at a fast rate, gold has proven to be a relative store of value for millennia.

          Currencies do not degrade. Political systems degrade.

        3. TheScream

          90% of the gold we have today has been mined since 1849. And 90% of all gold ever mined is still around. The world economy is definitely 9 times larger today than it was in 1849, at least in nominal terms which is what matters for this particular discussion.

          According to one website I found, average inflation from 1200 to 2017 is 0.9% (don’t ask me, I don’t know but feels right). So if we extrapolate 0.9% back another thousand or so years, we end up with gold being next to worthless. This doesn’t pass the smell test to me.

          If gold were really a store of value over the millenia and represented “real” money, it should be worth tens of thousands an ounce, non? If not more!

        4. TheScream

          Do you know why gold was chosen as “The Money”? Why not platinum or palladium? both were equally rare.

          1. Wukchumni

            Platinum (little silver in Spanish) was only utilized in making counterfeit gold coins say pre 1900, as it had a similar specific gravity, and once the fakes were cast or struck, they were then gold-plated, and passed in public.

            It (and Palladium) had no function whatsoever @ the time in terms of usage, so nobody cared.

            Platinum used to be worth about 3x that of Palladium only in the past decades, but now is worth less than Palladium, so the market is listening to your plea.

            1. TheScream

              Palladium was discovered in 1803. Platinum was discovered much earlier. The key to gold vs. platinum is melting points. Platinum melts at 1768 dec C which meant it could not be turned into coins until recently (1782 was the first melting of platinum).

              Of course it was not sought or mined in Europe though it was known to Egyptians in alloys.

              Gold is “Gold” because it has certain characteristics (malleability, ductility, non-tarnishing, etc.) and could be melted in just about anyone’s hearth. So gold was useful, shiny, durable, and could be used.

              1. Wukchumni

                Really only the western world embraced coin money, but somehow more or less most of the world over time all figured out that gold was the most common rare item, and thus desirable.

    4. Bridget

      “ who believe that currencies should be backed by something of tangible value”

      As I understand it, MMT also requires that currency be backed by something of tangible value: a well managed and productive economy. It doesn’t matter in the least if your debt is denominated in your own currency if you have the economy of Zimbabwe.

      1. Tinky

        Sounds reasonable in theory, but that was supposed to be the case with the current economic system, as well, and we can all see where that has led.

        I’m not arguing that there isn’t a theoretically better way to create and use “modern” money, but rather doubt that those empowered to create it out of thin air will ever do so without abusing such power.

        1. Bridget

          Oh, I agree with you. In no universe that I am aware of would the temptation to create money beyond the productive capacity of the economy to back it up be resisted. I think Zimbabwe is a pretty good example of where the theory goes in practice.

          1. TroyMcClure

            That’s exactly wrong. Zimbabwe had a production collapse. Same amount of money to buy a much smaller amount of goods. The gov responded not by increasing goods, but increasing money supply.

            1. Bridget

              Maybe because the economy did not have the productive capacity to increase goods? It takes more than a magic wand and wishful thinking.

            2. skippy

              sigh…. the issuance was to service internal debt as a function of accounting in lieu of trade post facto.

    5. voteforno6

      Mark Blyth has a good discussion of the gold standard in his book Austerity: The History of a Dangerous Idea. He makes the point that, in imposing the adjustments necessary to keep the balance of payments flowing, the measures imposed by a government would be so politically toxic, that no elected official in his or her right mind would implement them, and expect to remain in office. In short, you can have either democracy, or a gold standard, but you can’t have both.

      Also, MMT does recognize that there are real world constraints on a currency, and that is represented by employment, not some artificially-imposed commodity such as gold (or bitcoin, or seashells, etc). The Jobs Guarantee flows out of this.

      1. Tinky

        As mentioned above, you, among others who have replied to my original comment, are using the classical gold standard as a straw manl. Neither I, nor many other gold “bugs”, propose such a simple solution for the failed current economic system, which is increasingly based on mountains of debt that can never be repaid.

        1. WobblyTelomeres

          increasingly based on mountains of debt that can never be repaid.

          Huh? I listed two ways they could be repaid above. In the US, the national debt is denominated in dollars, of which we have an infinite supply (fiat). In addition, the Federal Reserve could buy all the existing debt by [defer to quad-entry accounting stuff from Wray’s primer] and then figuratively burn it. Sure, the rest of the world would be pissed and inflation *may* run amok, but “can never” is just flat out wrong.

          1. Tinky

            Of course it can be extinguished through hyperinflation. I didn’t think that it would be necessary to point that out. No “may” about it, though, as if the U.S. prints tens of trillions of dollars to extinguish the debt, hyperinflation will be assured.

            1. todde

              not if it would be done over time, as the debt comes due.

              We could also tax the excess dollars from the system with a large capital gains tax rate.

              1. todde

                so I don’t believe there will be a hyper-inflation of goods, but in asset prices. That is why I would raise the capital gains rate.

                The failure of MMT is when the hyper-inflation occurs in goods and services.

                Taxing a middle class person while his cost of living is rising will be a tough political act to do.

            2. WobblyTelomeres

              I didn’t think that it would be necessary to point that out.

              Sorry, but I’m an old programmer; logic rules the roost. When one’s software is expected to execute billions of times a day without fail for years (and this post is very likely routed through a device running an instance of something I’ve written). Always means every time, no exceptions; never means not ever, no matter what.

              You said never.

              1. Tinky

                Yes I did. I was simply being lazy, as I typically do add “except via hyperflation”, when discussing debts that can only be repaid in that manner.

                That “solution” is obviously no solution at all, as it would lead to chaos.

                Interpret it any way that you wish.

            3. hoonose

              And so goes the Trillion Dollar Platinum Coin gambit. It could subtract a Trillion from our national debt number. No reason for inflation that I can see. But suspicion, confusion and mayhem may ensue. Or we just move along, having learned a bit more about our modern money.

          1. Tinky

            I’m sure that there is no one solution proposed, though an alternative to the current system which seems plausible would be a currency backed by a basket of commodities, including gold.

            1. todde

              and when commodity prices fluctuate you will still have government printing and eliminating money to maintain the price.

              I would say, if that was the argument, stick to gold as it is one of the more stable commodities.

        2. HotFlash

          Hi Tinky, much late but still. Gold will have value as long as people believe it has value. But what will they trade it for? The bottom line is your life.

          I don’t have any gold, too expensive, and it really has no use. But I remember Dimitri Orlov’s advice: I am long in needles, pins, thread, nails and screws, drill bits, saws, files, knives, seeds, manual tools of many sorts, mechanical skills and beer recipes. Plus I can sing.

          1. Tinky

            The vast majority of people who hold physical gold are well aware of the value of having skills and supplies, etc., in case of a serious meltdown. But it’s not a zero-sum game, as you suggest. Gold will inexorably rise sharply in value when today’s fraudulent markets crash, and there will be plenty of opportunities for those who own it to trade it for other assets.

            Furthermore, as previously mentioned, gold’s utility is already on full display, to those who are paying attention, and not looking myopically through a USD lens.

            1. Wukchumni

              Why not the GOILD standard?, one mineral moves everything, while the other just sits around gathering dust, after being extracted.

        3. David Swan

          “Mountains of debt that can never be repaid” is a propaganda statement with no reference to any economic fact. Why do you feel that this “debt” needs to be “repaid”? It is simply an accounting artifact. The “debt” is all of the dollars that have been spent *into* the economy without having been taxed back *out*. The word “debt” activates your feels, but has no intrinsic meaning in this context. Please step back from your indoctrinated emotional reaction and understand that the so-called national “debt” is nothing more than money that has been created via public spending, and “repaying” it would be an act of destruction.

          1. WobblyTelomeres


            I keep telling (boring, annoying, infuriating) people that, in the simplest terms, the national debt is the money supply and they won’t grasp that simple declaration. When I said it to my Freedom Caucus congress critter (we were seated next to each other on an exit aisle) his head started spinning, reminding me of Linda Blair in The Exorcist.

          2. Tinky

            The debt may not have to be repaid, but the interest does have to be serviced. Good luck with that in the long run.

            1. WobblyTelomeres

              As I said to my congress critter, if the debt bother’s y’all so much, why not just pay it off, dust off your hands, and be done with it?

              Personally, if I were President for a day, I’d have the mint stamp out 40 or so trillion dollar platinum coins just to fill the top right drawer of the Resolute desk. Would give me warm fuzzy feelings all day long.

              p.s. I also told him that the man with nothing cares not about inflation. He didn’t like that either.

            2. eg

              The public debt represents private assets.

              The public debt will never be repaid. I expect that it will continue to grow.

              The public debt is serviced in the currency over which the sovereign exercises a monopoly, so luck will not be required, regardless of the length of run.

              1. Tinky

                lol! The luck that they require is holding the value of the currency, not printing money to service (or extinguish) the debt.

                Why not give a billion dollars to every U.S. citizen, as well?

    6. MisterMr

      “those, some of whom are quite sophisticated, who believe that currencies should be backed by something of tangible value (and no, “the military” misses the point), or those who hold physical gold as an insurance policy against political incompetence, and the inexorable degradation of fiat currencies”

      I suspect that Wray exactly means that these people are the goldbugs, not the ones who speculate on gold.

      The whole point that currencies should be backed by something of tangible value IMO is wrong, and I think the MMTers agree with me on this.

      1. Tinky

        If so, then he should clarify his position, as again, lumping the billions – literally – of people who consider gold to be economically important, together as one, is disingenuous.

        1. skippy

          I think people that consider gold to be a risk hedge understand its anthro, per se an early example of its use was a fleck of golds equal weight to a few grains of wheat e.g. the gold did not store value, but was a marker – token of the wheat’s value – labour inputs and utility. Not to mention its early use wrt religious iconography or vis-à-vis the former as a status symbol. Hence many of the proponents of a gold standard are really arguing for immutable labour tokens, problem here is scalability wrt high worth individuals and resulting distribution distortions, unless one forwards trickle down sorts of theory’s.

          Not to mention in times of nascent socioeconomic storms many that forward the idea of gold safety are the ones selling it. I think as such the entire thing is more a social psychology question than one of factual natural history e.g. the need to feel safe i.e. like commercials about “peace of mind”. I think a reasonably stable society would provide more “peace of mind” than some notion that an inanimate object could lend too – in an atomistic individualistic paradigm.

          1. WobblyTelomeres

            I once had an co-worker that was a devout Christian. When he realized I wasn’t religious, he asked me, incredulously, how I was able to get out of bed in the morning. Meaning, he couldn’t face a world without meaning.

            I think a lot of people feel that same way about money. They fight over it, lie for it, steal it, kill for it, go to war over it, and most importantly, slave for it. Therefore, it must have intrinsic value. I think gold bugs are in this camp.

            1. skippy

              Having experienced a side of that during my youth, only to walk away from it completely, I can understand the predicament.

              As reader Skippy noted,

              The WBC is a prime example of how hard it is to engage in any reasonable discussion with BELIEVERS of any stripe, mental heroin methinks.

              I wonder how many realize the fight is just starting, warming up, and unprepared for the acts that may be used against them.


              This is compounded by special interest groups that have no qualms about disingenuous argumentation or playing fast with the facts. Early on in the NC days I watched a video of Mosler and David Friedman. Was quite interested in a moment in the video debate where Mosler seeks to admonish David for just such actions e.g. taking stuff out of context to forward a bastardize tale of events to underpin an objective.

              Later on I had personal experiences with David and a companion AnCap on FB econ sites back in the wild west days. All I can say is WOW all the sophist rubbish and blatant twisting of everything under the sun including science to fit the narrative they were selling.

              This again gets back to early NC days and discussions about crafting narratives or ideological propaganda. 90%+ is just an attempt to suspend disbelief [critical thinking] and once that is accomplished the renaming is just establishing the critical mental anchor points which then can be manipulated to the narrators desire e.g. per se “natural or real” is uttered [quantified] and then extenuated to meet the desired cultural behavioral proscription*.

              This is why I support Wray’s thoughts on individualist stardom or pedestal worship to forward MMT or PK. That’s the game the neoliberals like to play or would like to force others into playing in the first steps of being absorbed by the blob or borg. MMT or PK can stand on its merits alone with out any Milton, Greenspan, or other charlatan to get the unwashed to comply.

            2. Wukchumni

              Let’s use our neighbor next door (not you Canada!) as an example, a warning, a shot across the bow if you will.

              We’ll use a mythical Mexican couple, Juan & Rosa, who have 250,000 pesos in the bank in savings in 1980, they are well off, as this is equal to $20,000 U.S.

              Juan is a bit of a maverick when it comes to manna, and he realizes that Mexico’s wealth is based largely on oil, and prices per barrel are plummeting, and decides against Rosa’s pleading, to put all of their savings into gold bullion, and idiot Juan buys at the top of the market @ $800 per ounce-when the Hunt bros tried to corner the market on silver, and all he has is 25 troy ounces when it’s all said and done, but then the Peso goes from a rock solid 12.5 Pesos to the Dollar, eventually to 3,300 Pesos to the Dollar, when finally in 1993, 3 zeroes are hacked off of old Pesos, with the new Peso being worth 3.3 to the Dollar.

              All gold did in that period was go down in Dollar spot price terms, it was a regular Rip Van Winkle and not in a good way if you were an American, but when Juan cashed out his 25 ounces in 1993, he received a little under $10,000 on his investment, whereas if he’d kept that 250,000 pesos in the bank all that time, he’d have a princely $100 or so to show for it.


              1. skippy


                All investments should be weighed across a wide set of asset classes, gold isolated and put in a narrow time span is not really an indicator of anything e.g. same thing can be said about bitcoin, but that really does not substantiate an argument for commodity money.

                1. Wukchumni

                  I could give you oh so many examples it would make your head spin. Let’s say you are from Ghana and worried about the hyperinflation there and the eroding value of the Cedi, that no westerners know about, because the only hyperinflation they know of is the 1923 Weimar example.

                2. skippy


                  I sure you could give me plenty of anecdotal examples, but that’s not what were talking about here. 5000 years of debt has already been noted, as well, many other non ideological or biased sources.

                  This is coming from a perspective of knowlage mate, beyond personal trading observations. Not to mention my family owns a few 100 thousand acres of geology rights in AZ with copper, gold, and turquoise in perpetuity. Was going into old mines and new shafts as a kid and then running it through the ball mill and wash plant. Knew old timers that were doing it in the early 1900s until they died.

                  That does not even begin to factor in that it is a narrow market and all that comes with it or the vast quantity’s that are held due to traditional factors. As noted above thread the quality of law and contracts proceed moeny forms, see GD under a gold standard.

                  I leave you with the thought that prominent prepper gave wrt gold e.g. anyone coming to the encampment gate looking for shelter or goods and then asked what they had to offer in exchange replied gold…. they would be shot post haste. Seems the whole not willing to work or supply knowledge based exchange, that might assist in everyone’s survival, would be deemed a concept that could destabilize the group.

                  1. Wukchumni

                    How would a prepper have fared in Peking in 1949, or Saigon in 1975, or Tehran in 1978?

                    One thing most misunderstood about ne plus ultra among Americans, is it’s not for hanging around, it’s for getting the hell outta dodge…

                    The alternative for those w/o, being subjected to horrible communist governments with the first 2, and an overbearing theocracy with the latter.

                    It didn’t matter which awful regime you stuck it out with if you decided to stay, you were guaranteed a generational shit sandwich in all 3 scenarios.

                    1. skippy

                      Which gets right back to my point that gold might, in some cases, provide a price point hedge against some currencies, but, in a server down turn go poof compared to other assets due to utility.

                      That still does not deal with the pre monetary dramas that proceed the currency effects.

                      This is well researched sociologically and Yves has pointed out many times imo.

                      Gold is a commodity or asset that some people trade where we’re talking about monetary realities and how administration effects outcomes for investors, businesses, and citizens.

                    2. Wukchumni

                      Which gets right back to my point that gold might, in some cases, provide a price point hedge against some currencies, but, in a server down turn go poof compared to other assets due to utility.

                      What does this mean, exactly?

                      That it would only benefit by the computer world crashing?

                    3. skippy

                      Severe – my bad – dyslexia problem.

                      I would also add that you might be interested in the Central – South American cultural experience wrt moving from a jade fetish to a gold fetish.

                      Here’s the thing, when examining such topics wrt the human state one needs to be aware of the observer problem and insure a non biased baseline – that is inclusive of all the data. Hence why Mr Hudson sought out anthropologists vs mythologists or metaphysics.

          2. Tinky

            I’m surprised at how many times I need to point out that gold’s long-standing utility as a store of value is on display at this various moment, and in a number of countries around the world.

            Now, if you believe that it will behave differently than it has for thousands of years when the next crisis unfolds in earnest, I’d be interested to hear why.

            1. todde

              because that is the drawback to the gold standard.

              It will function as a store of value when it needs to be a medium of exchange(hoarding during deflationary period).

              if you want some sort of gold standard to guard against inflation how about you just buy gold and then the poor people won’t have to butcher each other every time a Pullman cuts wages in half.

        2. MisterMr

          I can’t speak for Wray, because I’m not an MMTer.

          I think Wray’s opinion is that deficits/surpluses are to be used in function of having full employment and low inflation, and that high inflation would not result if deficits are not excessive and full employment is not reached.

          For what is worth, I disagree with the MMT because I think that the main problem that causes low demand is a savings glut, ie many people want to accumulate wealth but don’t want to consume, so these savings must be recycled into demand through debts, but this causes bubbles in case of private debts or increasing government debt to gdp in case of government deficits.

          Government and private debts are thus, literally, the other side of the coin of private savings, that therefore cannot really be backed by “real value”.

          Therefore the problem of gold is exactly that we can’t inflate it away, and that we can’t stick it to savers.

          Mind, I don’t hate savers and I don’t want to punish them, but the continuous accumulation of wealth is THE problem of capitalism.

          I think that Wray would disagree with me though.

    7. eg

      I imagine Wray shares Keynes’ view of “the barbarous relic”

      It’s a commodity, not a currency.

      Sure fiats decay — because all human institutions and civilizations decay.

      But the gold without people is no more use than the fiats without people.

      1. Fried

        Thanks. It seems to be blocking my IP address, no idea why. Not sure why I have to be human to look at a website.

          1. Fried

            Hm, I can’t find anything that would explain it. Maybe the website just generally blocks Austrians. ;-)

          2. el_tel

            That’s a good suggestion. Unfortunately, as I sometimes find, you can pass ALL the major test-sites but something (a minor, less-used site using out-of-date info?) can give you grief. NC site managers once (kindly) took the time to explain to me why I might have problems that they had no ability to address at their end. I had to muck around with a link given earlier to Bill Mitchell’s blog before my browser would load it.
            I think there can be quirks that are beyond our control (unfortunately) – for instance I think a whole block of IP addresses (including mine) used by my ISP have been flagged *somewhere* – no doubt due to another customer doing stuff that the checker(s) don’t like. (The issue I mentioned above was more likely due to a strict security protocol in my browser, however.)

  8. larry

    Monetary policy in terms of interest rates is not just weak, it also tends to treat all targets the same. Fiscal policy can be targetted to where it is felt it can do the most good.

  9. William Beyer

    Christine Desan’s book, “Making Money,” exhaustively documents the history of money as a creature of the state. Recall as well that creating money and regulating its value are among the enumerated POWERS granted to our government by we, the people. Money, indeed, is power.

  10. Grumpy Engineer

    Hmmm… Randy Wray states that “permanent Zirp (zero interest rate policy) is probably a better policy since it reduces the compounding of debt and the tendency for the rentier class to take over more of the economy.

    But just last week, Yves stated that “that one of the consequences of the protracted super-low interest rate regime of the post crisis era was to create a world of hurt for savers, particularly long-term savers like pension funds, life insurers and retirees.” [https://www.nakedcapitalism.com/2018/09/crisis-caused-pension-train-wreck.html]

    So are interest rates today too high, or too low? We’re getting mixed messages here.

    IMO, interest rates are too low. Beyond the harmful effect to savers, it also drives income inequality. How? When interest rates are less than inflation, it is trivial to borrow money, buy some assets, wait for the assets to appreciate, sell the assets, repay the debt, and still have profit left over even after paying interest. Well, it’s trivial if you’re already rich and have a line of credit that is both large and low-interest. If you’re poor with a bad FICO score, you don’t get to play the asset appreciation game at all.

    I can’t think of another reason inequality skyrocketed so badly during the Obama years: https://www.newsweek.com/2013/12/13/two-numbers-rich-are-getting-richer-faster-244922.html. Other than interest rates, his policies weren’t all that different from Clinton or Bush.

    1. Tinky

      Not to mention that interest rates are designed to reflect risk. Artificially suppressed rates mask risk, and inevitably lead to gross malinvestment.

      1. todde

        The rates between riskier and less risky borrowers will still be reflected in the different rates given to each.

        The low rates encourage greater risk taking to increase the reward(a higher rate of return). This is what leads to the gross malinvestment.

        Case in point: the low rates led to more investments into the stock market, where the returns are unlimited. This is what led to the income inequality of Obama’s term, as mentioned above.

        1. todde

          if government creates money to lend to borrowers it should be at a zero interest rate.

          The loans would be based on public policy decisions, and not business decisions.

    2. HotFlash

      I cannot speak for Yves, nor or Randy, but IMO, interest rates are too low for people who depend on interest for their living — as an old person, I have seen my expected income drop to about zilch when I had expected 7 to 10% on my savings. Haha! So yeah, too low for us who saved for ‘retirement’.

      Too high for people financing on credit, since a decent mortgage on a modestly-priced house will cost you almost the same as the house. And that doesn’t even begin to look at unsecured consumer credit (ie, credit card debt), which is used in the US and other barbaric countries for medical expenses, not to mention student debt. The banks can create the principal with their keystrokes, but they don’t create the interest. Where do you suppose that comes from? Hint: nowhere, as in foreclosures and bankruptcies.

    3. Adam1

      Wray’s statement reflects his preferences from an operational policy perspective. Sovereign government debt cares no risk and therefore should not pay interest. The income earned from that interest is basically a subsidy and all income when spent caries a risk of inflation induced excess demand. Therefore who unnecessarily add the risk to the economy and potential risk needing to reduce other policy objectives to accommodate unnecessary interest income subsidies to mostly rich people?

      Yves comment reflects the reality of prior decades of economic history. Even if Wray’s policy perspective is optimal, there are decades of people with pensions and retirement savings designed around the assumption of income from risk-free government debt. It’s this legacy that Yves is commenting on and is a real problem that current policy makers are just ignoring.

      As for your comments on how low cost credit can be abused, I believe you’ll find most MMT practitioners would recommend far more regulation on the extension of credit for non-productive purposes.

  11. michael hudson

    I just wrote a note to Randy:
    The origin of money is not merely for accounting, but specifically for accounting for DEBT — debt owed to the palatial economy and temples.
    I make that clear in my Springer dictionary of money that will come out later this year: Origins of Money and Interest: Palatial Credit, not Barter

    1. skippy

      Look forward to reading it Mr Hudson, albeit could you inform if it includes say south and central American experiences.


  12. gramsci

    Can somebody help me out here? It seems to me that the US macroeconomic policy has been operating under MMT at least since FDR (see for example Beardsley Ruml from 1945).

    Since then, insofar as I understand MMT, fiat has been printed and distributed to flow primarily through the MIC and certain other periodically favored sectors (e.g. the Interstate Highway System). Then, rather than destroying this fiat through taxation, the sectoral balances have been kept deliberately out of balance: Taxes on unearned income have been almost eliminated with an eye to not destroying fiat, but to sequestering as much as possible in the private hands of the 1%. This accumulating fiat cannot be productively invested because that would cause overproduction, inflation, and reduce the debt burden by which the 1% retains power over the 99%. So the new royalists, as FDR would have styled them, keep their hoard as a war chest against “socialists”.

    I get all this, more or less, and I appreciate that it is well and good and important that MMTers insistently point out that the emperor has no clothes. This is a necessary first step in educating the 99%.

    But I don’t see MMT types discussing the fact that US (and NATO) macroeconomic policy already has a Job Guarantee: if you don’t want to work alongside undocumented immigrants on a roof or in a slaughterhouse or suffer the humiliation of US welfare, such as it is, you can always get a job with the army, or the TSA, or the police, or as a prison guard, or if you have some education, with a health unsurance company or pushing drone buttons. You only have to be willing to follow orders to kill–or at least help to kill–strangers.

    (Okay, perhaps I overstate. If you’re a medical doctor or an “educator” with university debt you don’t have to actively kill. You can decline scant Medicaid payments and open a concierge practice, or you can teach to the test in order that nobody learns anything moral.)

    It is difficult to get a man to understand something, when his salary depends on his not understanding it. Wouldn’t it be clarified matters if MMTers acknowledged that we already have a JG?

    1. Wukchumni

      We have been operating on MMT since the end of WW2, with 2 exceptions in 1968 when Silver Certificate banknotes no longer were redeemable for silver, and in 1971 when foreign central banks (not individuals!) weren’t allowed to exchange FRN’s for gold @ $35 an ounce anymore.

      It’s been full on fiat accompli since then and to an outsider looks absurd in that money is entirely a faith-based agenda, but it’s worked for the majority of all of lives, so nobody squawks.

      It’s an economic “the emperor has no clothes” gig.

    2. HotFlash

      It seems to me that the US macroeconomic policy has been operating under MMT at least since FDR (see for example Beardsley Ruml from 1945).

      Yup, you are correct, IMO. And about the jobs guarantee, too. The point of MMT is not that we have to adopt, believe in, or implement it, but that *this is how things work* and we need to get a %&*^* handle on it *STAT* or they will ride it and us to the graveyard. The conservatives and neo-cons are already on to this, long-time.

      I believe the chant is:

      We can have anything we want that is available in our (sovereign) currency and for which there are resources

      What we get depends on what we want and how well we convince/coerce our ‘leaders’ to make it so.

    3. David Swan

      JG is geared toward community involvement to create an open-ended collection of potential work assignments, not top-down provision of a limited number of job slots determined by bureaucrats on a 1% leash.

        1. Grebo

          Community Job Guarantee?
          Grassroots Job Guarantee?
          Local Jobs for Local People?
          Parish Polishing Program?

          Want to polish your parish? Get with the program!

  13. Wukchumni

    About every 80 years, there has been a great turning in terms of money in these United States…

    Might as well start with 1793 and the first Federal coins, followed in 1861 by the first Federal paper money, and then the abandonment of the gold standard (a misnomer, as it was one of many money standards @ era, most of them fiat) in 1933.

    We’re a little past our use-by date for the next incarnation of manna, or is it already here in the guise of the great giveaway orchestrated since 2008 to a selected few?

  14. Adam1

    After learning MMT I’ve occasionally thought I should get a refund for the two economics degree’s I originally received. One of the primary mainstream teachings that I now readily see as false is the concept of money being a vale over a barter economy. It’s lazy, self-serving analysis. It doesn’t even pass a basic logical analysis let alone archeological history. Even in a very primitive economy it would be virtually impossible for barter to be the main form of transaction. The strawberry farmer can’t barter with the apple farmer. His strawberries will be rotten before the apples are ripe. He could give the apple farmer strawberries in June on the promise of receiving apples in October, but that’s not barter that’s credit. The apple farmer could default of his own free will or by happenstance (he dies, his apple harvest is destroyed by an act of god, etc…). How does the iron miner get his horse shoed if the blacksmith needs iron before he can make the horse show? Credit has to have always been a key component of any economy and therefore barter could never have been the original core.

    1. HotFlash

      After learning MMT I’ve occasionally thought I should get a refund for the two economics degree’s I originally received.

      Agreed. Richard Wolff notes that in most Impressive Universities there are two schools, one for Economics (theory) and another for Business (practice). Heh. I say, go for the refund, you was robbed.

  15. Wukchumni

    Take Indians for instance…

    All the Rupee* has done over time is go down in value against other currencies, and up in the spot price measured in Rupees even as gold is trending down now, and that whole stupid demonetization of bank notes gig, anybody on the outside of the fiat curtain looking in, had to be laughing, and ownership there is no laughing matter, as it’s almost a state financial religion, never seen anything like it.

    * A silver coin larger than a U.S. half dollar pre-post WW2, now worth a princely 1.4 cents U.S.

  16. Chauncey Gardiner

    Not an economist, but I appreciate both the applicability of MMT and the fierce, but often subtle resistance its proponents have encountered academically, institutionally and politically. However, I have questioned to what extent MMT is uniquely applicable to a nation with either a current account surplus or that controls access to a global reserve currency.

    How does a nation that is sovereign in its own currency, say Argentina for example (there are many such examples), lose 60 percent of its value in global foreign exchange markets in a very short time period?

    Is this due primarily to private sector debts denominated in a foreign currency (and if so, what sectors of the Argentine economy undertook those debts, for what purposes, and to whom are they owed?), foreign exchange market manipulation by external third parties, the effective imposition of sanctions by those who control the global reserve currency and international payments system, or some combination of those or other factors?

  17. PKMKII

    MMT makes more sense than orthodox neoliberal accounts of currency and sovereign spending to me, as it does a better job of acknowledging reality. MMT recognizes that currency is an artifice and that imagined limitations on it are just that, and real resources are the things which are limited. Neoliberal economics acts as if all sorts of byzantine factors mean currency must be limited, but we can think of resources, and the growth machine they feed, as being infinite.

  18. Rodger Malcolm Mitchell

    “Taxes or other obligations (fees, fines, tribute, tithes) drive the currency.”

    Specifically, what does “drive” mean? Does it mean:
    1. When taxes are reduced, the value of money falls?
    2. If taxes were zero, the value of money would be zero?
    3. Cryptocurrencies, which are not supported by taxes, have no value?

    “JG is a critical component of MMT. It anchors the currency and ensures that achieving full employment will enhance both price and financial stability.”

    Specifically, what do “anchors” and “critical component” mean? Do they mean:
    1. Since JG does not exist, the U.S. dollar is unanchored and MMT does not exist?
    2. Providing college graduates with ditch-digging jobs enhances price and financial stability?
    3. Forcing people to work is both morally and economically superior to giving them money and benefits?

    1. Grebo

      “Drive” means “creates initial demand for”:
      1. No, not for an established currency.
      2. See 1.
      3. Crypto is worth what you can buy with it.

      “Anchors” means it acts against inflation and deflation. “Critical component” means the economy works better if it has it.
      1. Yes and no.
      2. Yes, if no-one else will hire them.
      3. No element of force is implied.

  19. José

    Randall Wray mentions that

    (The State) could voluntarily repudiate its debt, but this is rare and has not been done by any modern sovereign nation

    However, Russia did default on its ruble-denominated debt in August, 1998.

    What was the reason behind this decision? A policy intention: to expropriate the debt holders? Pure ignorance – the government could have simply ordered its central bank to expand its balance sheet and buy back the debt, but was not aware of this because of the pervasive “we’re out of money” mentality?

    It would be interesting to further study this relatively recent case of a major economy repudiating its own domestic currency denominated public debt.

    1. Grebo

      The Russians tried to peg the ruble, they allowed capital flight, they borrowed foreign money, their production tanked, they were fighting a war, their exports lost value.
      Not having a clue, they took advice (and money) from the IMF and the World Bank. When that didn’t work they panicked.

  20. Tom Bradford

    I would challenge point 3: Anyone can issue money; the problem is to get it accepted.

    Bitcoin would appear to be the exception that disproves the rule. Yes, it’s not generally accepted – yet. But it is becoming more widely useable as more people and institutions master the underlying technology – especially as an international exchange medium in this era of globalisation.

    I’d suggest that all that is necessary for a money to be accepted is that it has a fair to middling chance of appreciating in value – surely it was this which underlay gold as an acceptable currency. Bitcoin being limited inevitably grows in value as demand for it spreads, making it an acceptable currency which leads to demand for it spreading, growth in value and so on.

    1. todde

      but as money grows in value, it’s use declines as people hoard it.

      and then you have deflationary problems…

  21. tokyo rose

    MMT = Modern Marxist Theory. Judge for yourself.

    Manifesto of the Communist Party
    by Karl Marx and Frederick Engels February 1848

    – 18 –
    What will be the course of this revolution?

    Democracy would be wholly valueless to the proletariat if it were not immediately used as a means for putting through measures directed against private property and ensuring the livelihood of the proletariat. The main measures, emerging as the necessary result of existing relations, are the following:

    1. Abolition of property in land and application of all rents of land to public purposes.
    2. A heavy progressive or graduated income tax.
    3. Abolition of all rights of inheritance.
    4. Confiscation of the property of all emigrants and rebels.
    5. Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.
    6. Centralisation of the means of communication and transport in the hands of the State.
    7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
    8. Equal liability of all to work. Establishment of industrial armies, especially for agriculture.
    9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.
    10. Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production, &c, &c.


  22. Scott1

    Great comments, & I read about half of them along with the essay/story by Randall Wray. I like watching him on youtube & look forward to the Textbook.
    “90% of MMT (Macroeconomics) is just how it is. I believe the other 10% to be about how to wisely employ what we have learned. That is my own issue far as my model that brought me to MMT & the teachers of it.
    I have a reading list. Last was “7 Deadly Innocent Frauds of Economic Policy”, by Warren Mosler. That he is running for Governor of the USVIs is a big deal. He thereby enters the arena of the Financial Engineer and the Economist. The US Virgin Islands are in about as much trouble financially as you want to ever get.
    I do believe that Mr. Mosler said that the Russians defaulted on bonds they had issued in roubles, “I don’t know why they did that.” he said.
    In my tweets towards Michael McFaul former US Ambassador to Russia during the Obama Administration, I say that Medvedev’s ignorance of MMT contributed to the general failure of Democracy in Russia.


  23. TheScream

    While I understand that MMT reposes on the concept of taxes create money, the author entirely dismisses non-governmental money in all forms with a wave of the hand and quick “Don’t look behind any curtains. I checked them ALL. Nothing there. Move along.”
    What about salt? What about Chinese bronze statues? Cowrie shells? Blue feathers or anything else blue, for that matter? Banker’s drafts? Gold dust? Gold nuggets? clipped coins? All of these things existed as money and none of them were backed by governments or “redeemable” in any official sense. If the author wishes to argue that blue feathers are a form of barter, then I simply throw my hands up in the air and say, “Well, let me make up my own definitions and I will write a paper explaining how the moon is actually orbiting inside the earth.”

    1. todde

      True – and it might be relevant for a discussion of money with Bitcoin and other cyber-currencies becoming popular, but I think not.

      It seems to me that cyber-currencies function more as an investment than a currency. And I don’t see them becoming a ‘currency’ either, but I could be wrong.

      1. TheScream

        They are certainly objects of speculation but they are also used as money. But why cast aside cyber currencies as tainted as being investment or speculation vehicles. The currency market is massive and the subject of both investment and speculation.

        Perhaps I need a definition of “currency” since I may be mistaken. Not being snarky, but no point disagreeing if we really agree.

        1. todde

          because it is too widely speculated on and price is too volatile to be considered a currency.

          what interest rate would you loan bitcoin at? You can’t because it doesn’t have a nominal value.

          With dollars I can say – do this job for me in 6 months and I will pay you $5,000. I can’t do that with bitcoin because we have no idea what it will be worth in 6 months.

          1. TheScream

            There are plenty of transactions in Bitcoin. I don’t know if there are Bitcoin loans but why would it be hard to apply an interest rate?
            But you are saying that any currency which is volatile is no longer a currency. What is the maximum vol to lose this status? Or is it just a feeling? Like Argentinian pesos or something? You just don’t feel like they are real currency? You would if you lived in Argentina! Would you accept yen for payment in 6 months? Do you know where dollar-yen is for that delivery?
            Are there Bticoin forward markets? I don’t even know (I should check).

            1. todde

              it’s not a feeling but an observation.

              I don’t observe Bitcoin being used as an unit of account, one of the three primary functions of a currency.

              Therefore I will say it isn’t a currency until I observe something different.

              When I observe the Argentine Peso not being used as a store of value, then it will become a failed currency.

            2. todde

              But you are saying that any currency which is volatile is no longer a currency. What is the maximum vol to lose this status? Or is it just a feeling?

              its an observation, not a feeling. I don’t have feelings

              I observe Bitcoin prices going up and down.
              I observe Bitcoin not being used on mortgage loans.
              I observe Bitcoin not being used on corporate bonds(Japan corp did issue a bond in bitcoin.)
              I observe bitcoin not being used on invoices.
              I observe bitcoin not being used on financial statements.
              I observe Bitcoin not being used for tax payments.

              This doesn’t mean in the future I wont observe these things, and then change my mind.

              I do know some states are considering accepting tax payments in bitcoin, and I believe some countries do.

              Like I said, my assertions change as my observations do.

  24. Norm

    Is the underlying thesis that “barter” and “money” evolved with some coincidence in time, but that there is no cause and effect from one to the other ?

  25. JohnB

    It was a mistake to name the book Macroeconomics. There must at least be hundreds of other books with the same title.

    This was a very basic mistake.

    I’m a full-on MMT supporter, but MMT’s main academic proponents, make a lot of basic mistakes like this, which hinder pushing the narrative a lot.

    I mean come on, if you want to capitalize on MMT’s mainstream success, naming the book Macroeconomics was the perfect way to make it fly under the radar and not take advantage of this success.

    1. skippy

      “but MMT’s main academic proponents, make a lot of basic mistakes like this, which hinder pushing the narrative a lot.”

      MMT is not pushing a narrative nor is it a product that is attempting to be sold to consumers. This is why Wray clearly stated his perspective about not treating it like a PR marketing agenda because its an academic and intellectual topic. Once you start turning it into a product all the rigor goes right out the window and the next thing you know the neoliberal blob absorbs it.

      MMT and most PK people have a distinction against say AET or neoclassical operatives. Just look at this blogs host, after a brief attempt at utilizing main stream media et al she has gone cold turkey, and besides some twitter stuff never sullied herself with Fborg. MMT and PK can stand their ground without resorting Bernays types of social grooming – lest it gets sucked into the proverbial SNL skit of lore…. Jane you ignorant slut – !!!!!

      1. JohnB

        Improving the narrative doesn’t mean selling out – it means not making basic mistakes that hinder peoples understanding – it means polishing the narrative so that people can learn the topic faster, which helps academically, too.

        It took me years to grok MMT fully, as a layman – and it’s almost impossible to impart knowledge about it to others, because there are a lot of parts of the narrative that need polishing – and especially, which need to be reforumulated for describing Euro economies, rather than the main focus on the US.

        Economics is Politics. Economics needs to be accessible to the public, not just academics. It is critically important that the public be able to understand economics, because it is essential to the entire political process – democracy suffers when the public is fooled into thinking economic theory is divorced from politics, and can be ‘left to the experts’. Economists have a duty to refine their narrative and make it accessible to the public, so that the public can be informed and can participate in the debate – without being turned away by the learning curve.

        1. skippy

          I think you should consider the deeper aspects of the term narrative in the context your suggesting e.g. communal identity et al.

          Again MMT is A political and has zero ideological groundings, how it is used and administrated is political or ideological, but this is not what core MMT academics advance e.g. MMT describes the tool, although how that tool is used is political and is prone to the human tool user problem.

          PK on the other hand takes MMT and advances economic policy to promote social stability and cohesion without ridged ideological tones.

          You might not be aware of years ago on this blog and elsewhere when detractors attempted to pigeonhole MMT into some ideological square in order to set up strawmen to attack. Your opinion might be well meaning, but one has to consider the reality which actually occurs.

          Again I side with Wray on this matter.

  26. todde

    because it is too widely speculated on and price is too volatile to be considered a currency.

    what interest rate would you loan bitcoin at? You can’t because it doesn’t have a nominal value.

    With dollars I can say – do this job for me in 6 months and I will pay you $5,000. I can’t do that with bitcoin because we have no idea what it will be worth in 6 months.

    Could you read a financial statement in Bitcoin with any reliability?

    So it fails on the unit of account, passes on store of value and the jury is still out on medium of exchange – if we use the 3 classical functions of money

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