A Must Read: Why Does Everyone Hate MMT?

By Randy Wray. Originally published at New Economic Perspectives

The attacks on MMT continue full steam ahead. Janet Yellen (former Fed chair, but clueless on money and banking)—a centrist–has joined the fray. Jerry Epstein—on the official left–has ramped up his ridiculous claims, now associating MMT with “America First” and fascism (you knew that was coming—it has always been the refuge of critics who couldn’t come up with valid critiques).

But there are some rays of light. Bloomberg published a more balanced assessment (https://www.bloomberg.com/news/features/2019-03-21/modern-monetary-theory-beginner-s-guide). The authors of that piece actually took the time to go through our new textbook (Macroeconomics, by Mitchell, Wray and Watts—now available for purchase in the USA : And in Australia).

However, here is the best response to the critics I’ve seen:

WHY DOES EVERYONE HATE MMT? Groupthink In Economics, by James Montier, March 2019,

Not only does he take down prominent critics like Summers and Rogoff, he also provides a very useful 400 word summary of MMT. Some of you have asked for a concise statement, and this is as good as you’re likely to find.

  1. Money is a creature of the state. Money is effectively an IOU. Anyone can issue money; the trouble is getting it accepted. The ability to impose taxes (or other obligations) makes a country’s ‘money’ valuable.
  1. Understanding the monetary environment is vital. The monetary regime under which a country operates matters. Any country that issues debt only in its own currency and has a floating currency can be thought of as being monetarily sovereign. This means it cannot be forced to default on its debt (i.e. the U.S., Japan, and the UK, but not the Eurozone or most emerging markets).
  1. An operational description of the monetary system is critical. Understanding that loans create deposits (which in turn create reserves, aka endogenous deposits create loans. For example, knowing that government deficit spending creates reserves and drives down interest rates is vital to understanding Japan’s bond market.
  1. Functional finance, not sound finance. Fiscal policy is much more potent than monetary policy. Fiscal policy should be aimed at generating full employment while maintaining low inflation (rather than, say, achieving a balanced budget position). A Job Guarantee scheme is an example of a useful policy option to effect this outcome (acting like a buffer stock in a commodity market) in the eyes of MMT.
  1. Limits are real resource and ecological limits. If any sector of the economy pushes it beyond the limits of capacity, then inflation will result. If a government spends too much or taxes too little, it can create inflation, but there is nothing unique about the government sector in this regard. These are the limits that matter – people, machines, factories – not ‘financing’ constraints.
  1. Private debt matters. Even in a monetarily sovereign state, private debt matters. The private sector cannot print money to repay its debts. As such, it has the potential to create a systemic vulnerability. Think Minsky’s financial instability hypothesis: stability begets instability.
  1. Macro accounting (Godley style) keeps us honest. One sector’s debt is another’s asset. So, the government’s debt is the private sector’s asset. Understanding how one sector relates to another using a sectoral balance framework is very helpful, as is understanding the Kalecki profits equation, or the way reserves work in a financial system. Accounting isn’t glamourous and identities shouldn’t be taken as behaviours, but they can help us spot unsustainable situations.

I urge you to read the rest of his piece. It is spot-on.

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  1. PlutoniumKun

    Thanks for this – we need more primers like this one. I’m often surprised in general conversations how interested people are in ideas like MMT – mostly because I think people sense they are been taken for a ride every time they see some economist or banker on TV solemnly telling them what’s good for them – but people lack the knowledge or resources to know how to challenge it. But its very, very hard to get through the ‘but government should be run like a household…’ type idea – it seems such common sense to people its very hard to get around it.

    On the point of group-think – there is nothing unique about MMT with this. Intellectual history is full of terrible ideas that lasted decades or more because an establishment grew around that idea and could not bear to abandon it. And for anyone who thinks this is restricted to economists or the ‘soft’ sciences, then I’d suggest you read Lee Smolin on how strong theory took over physics to its detriment.

    But one plea – some of the most legitimate critiques of MMT point out that it doesn’t really get to grips with the economics of smaller, open economies, even if they are nominally monetarily sovereign. I would, for example, be very sceptical that MMT is in any way a saviour for the UK (this isn’t to say it wouldn’t improve things, but I do think an economy has to be much closer to autarky for MMT to truly transform things). I’d also love to see someone put serious thought to how the Eurozone could be transformed using MMT ideas. Most MMTers simply seem to want to see the Euro collapse – but this ignores the reality of internal trade within the EU which makes floating sovereign currencies very difficult to maintain.

    1. Geo

      “That millions of people share the same forms of mental pathology does not make these people sane.”
      – Erich Fromm, The Sane Society

    2. Samuel Conner

      I think that there has been serious thought about Eurozone transformation in light of MMT principles; it would require a fiscal union with the ECB funding a Eurozone-wide public sector deficit. I believe that Yanis Varoufakis has proposed something less dramatic but still useful in the form of (IIRC) ECB-funded infrastructure investment.

      I believe that these are, at the moment, politically infeasible due to German opposition to central bank funding of deficits and to more general popular opposition to greater political integration. Unfortunately (or perhaps not), it appears to me that developments in recent years make such integration less and less likely. Fragmentation into once-again monetarily sovereign states may be the only realistic way for MMT principles to be introduced into the governance of the nations of Europe.

      1. Peter

        The Euro will be the death of a system that does not adress the inequalities in its member states and their being able to deal with those inequalites by exchange rate fluctuations or a mechanism of transfer of funds between the members, as it is done i.e. in Canada between provinces of severe inequality like once Newfoundland and i.e Ontario.

        Establishing integration by a supernational Economics/Finance ministry being able to develop common policies taking into account those differences and moving away from the strict fiscal policies pushed by Germany can this be solved – the only other solution is dissolving the EURO zone and reverting back to a common trading bloc.


        But for a single currency to work over a region with enormous economic and political diversity is not easy. A single currency entails a fixed exchange rate among the countries, and a single interest rate. Even if these are set to reflect the circumstances in the majority of member countries, given the economic diversity, there needs to be an array of institutions that can help those nations for which the policies are not well suited. Europe failed to create these institutions.

        1. Susan the other`

          Merkel has acknowledged this weakness. Going so far as to implore the EU members to “give up more sovereignty to the EU” which translates as giving up their fixed rate national debt authority for a monetary union that is sovereign and has broad fiscal authority across all countries in the EU and can redistribute money to maintain stability. Whereas, Macron, recently, has just been pandering to French social unrest by doing big deals with China and Africa under the justification that France needs more sovereignty… That’s almost a non sequitur. He’s equating sovereignty with capitalist expansion, not fiscal stabilization. He’s saying France has to bring in some money because the EU imposes balanced budgets before it money can be spent on fiscal solutions (the opposite of MMT fiscal finance). France is reverting to imperialism with a veneer of democracy.

    3. Ignacio

      I think that the EU migth just get rid of the self impossed straigthjackets (and it really does somehow) and admit those are not sensible politics. Also, the UE should give state organs more authority in order to rein on private debt when it is growing like crazy as it occured during the housing boom. This would mean to put brakes on foreign financial transfers when needed. I think this applies also to the UK. Reduce the financial openness when necessary.

    4. eg

      “the economics of smaller, open economies, even if they are nominally monetarily sovereign.”

      William Mitchell and others in the MMT community have been examining the challenges of such nations for some time now. As I understand it the real problem for those countries are their own elites who favour FDI in foreign currencies for their own purposes (including piling up a stash in places like London and NYC) and at the expense of their fellow citizens.

      To my mind, among the developed nations the most important contribution of MMT is the elimination of the farcical “but how are you going to pay for it?” dodge that gold-standard era economic thinking continues to enable among those who are pleased to see policy decisions “depoliticized” — that is, taken out of the hands of elected officials. Because policy decisions properly DO belong in the political arena where accountability to the electorate resides.

      1. bronco

        not farcical , everything ultimately needs to be paid for , with treasure or sweat or lives. Theories and hand waving are not legal tender .

        1. Anarcissie

          Yes, but an actually sovereign power — the monopoly of force inherent in an actually independent modern state — can see to that, because it has the power to tax and expropriate and can make its money be worth whatever its rulers decide upon, up to the totality of its resources. Conceded, there is a question of applicability: many supposedly independent states are really satellites or colonies, not sovereigns.

          1. eg

            Precisely — and that power is granted the sovereign only as long as it remains legitimate in the eyes of its citizenry.

      2. PlutoniumKun

        The core problem for small open economies is that they have to buy lots of things in other currencies. They also suffer far more ‘leakage’ so fiscal stimulators are always less effective. They really work very differently from those larger economies that are closer to autarky.

      1. Susan the other`

        Yes and thanks for that joyride. I think I’ll read some of those delightfully incomprehensible books.

    5. Susan the other`

      I wonder about small countries too. They seem powerless on a global scale – no big trading clout to demand fair trade for their own goods. But I do not understand why this can’t be solved. Why can’t smaller “open” countries achieve enough autarky to make their sovereignty meaningful? It seems like they could set certain monetary goals to design their fiscal spending to scale. Why is a country with 80 million people less fiscally sovereign than a federation with 500 million?

      1. eg

        No less fiscally sovereign, but with tighter material and labor constraints. The biggest danger is when a nation lacks the basic resources necessary to sustain its citizens — in which case it really isn’t viable anyway.

        The next layer of vulnerability is when nations borrow in a currency that is not their own — they should NEVER do this! If they have already done so, they should do whatever they possibly can to eliminate that debt as fast as possible by any means necessary.

        The most insidious layer of vulnerability are elements within its own elites who seek to enrich themselves and squirrel away assets in foreign bolt-holes — they are economic traitors, for lack of a better term. The best way to choke them off is again to refuse to borrow in foreign currency and impose capital controls.

        1. animalogic

          “The next layer of vulnerability is when nations borrow in a currency that is not their own — they should NEVER do this! ”
          Amen to that.
          Another area of vulnerability (I believe) is the need to acquire foreign currency to facilitate imports. Often this means obtaining US dollars, as oil & other products are traded in US dollars.
          Should FX markets or the US government turn against a particular currency they can cause significant economic pain. If I understand it correctly, a primary part of US policy against Venezuela involved a multi-leveled strategy to deprive Venezuela of access to US dollars. Given that Venezuela has a huge reliance on imports, this has caused very high inflation.
          But what has this to do with MMT?
          Logically, nothing. But in practice malicious actors (governments, market players etc) could use a nation’s MMT practices as the basis of a sustained fear campaign. (they’re just printing money ! spending like drunken sailors, don’t forget Germany’s hyper-inflation of the 1920’s etc etc)

          1. John Zelnicker

            March 28, 2019 at 11:48 pm

            You are correct that Venezuela depends on critical imports of food and other necessities.

            However, the bigger issue, IMO, is that Venezuela depends on the sale of its oil to bring in the foreign exchange (mostly dollars) that it needs to purchase the things that it can’t produce.

            More than anything else, US sanctions blocking the sale of Venezuelan oil is what has crippled the country economically.

            A related issue is that the oil from Venezuela is what’s called “bitter crude”. It is very viscous and difficult to refine. Most of the refineries that can handle this oil are on the US Gulf Coast (mainly owned by Koch brothers companies).

            Whatever the MSM says about the situation in Venezuela, everyone needs to keep in mind the fact that US neo-cons, e.g., John Bolton, are pushing as hard as they can for “regime change”.

            Like Trump said about Iraq; “..we should have taken their oil…”.

            That’s the end game in Venezuela, and all options, including a military invasion are on the table.

        2. Jason

          Not only must the government be wary of borrowing in an external currency, but it must be wary of the domestic private sector borrowing in an external currency. That’s the story of Thailand 1997. Sectoral balances in an open economy is much more complicated than sectoral balances in an autarky.

  2. Sound of the Suburbs

    Let’s face it; no one in the mainstream has got a clue about the monetary system.

    Milton Freidman thought bank lending was controlled by central bank reserves; this is why monetarism didn’t work. (Fractional reserve theory)

    Ben Bernanke thought banks were financial intermediaries; this is why he couldn’t understand debt deflation in his work in the Great Depression. (Financial intermediation theory)

    Our knowledge of privately created money has been going backwards since 1856.

    Credit creation theory -> fractional reserve theory -> financial intermediation theory


    The central banks have now set the record straight (credit creation theory) and shown Milton Freidman and Ben Bernanke didn’t understand the monetary system.


    The US wants to balance the Government budget and run a big trade deficit.

    This is the US (46.30 mins.)

    They wouldn’t if they knew what they were doing, but they don’t.

    2008 – “How did that happen?”
    It was a black swan.


    Bankers were inflating asset prices with the money they create from loans leading to Minsky Moments in 1929 and 2008.

    Money is power and if you know how the system works and others don’t you can make lots of money.

    “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

    “Let me issue and control a nation’s money and I care not who writes the laws.”

    A lot of time and effort has gone into ensuring people don’t understand the monetary system, MMT could ruin everything.

    If they find money comes out of nothing, they won’t need to bow and scrape to those with capital to invest. The banks can create the money out of nothing to invest in business and industry.

    1. Sound of the Suburbs

      “The banks can create the money out of nothing to invest in business and industry.”

      Michael Hudson tells us this is how they saw things developing in the 19th century.

      This is actually how the Asian Tiger economies used to work before they discovered financial liberalization.

      Milton Freidman was on the right track with monetarism, but didn’t know about credit/window guidance to regulate bank credit and the money supply.

      The Asian Tiger economies used to use credit/window guidance to ensure bank credit was directed into business and industry to grow GDP with the debt. The bank credit was producing new products and services in the economy adding to GDP.

      This also ensured the money supply grew steadily and in line with the new goods and services in the economy. When the economy produces more goods and services it needs more money to purchase those new goods and services.

      Richard Werner goes into the details in his work.

  3. Ignacio

    Very good summary. This makes me think of one of the top reasons given by the TINA crowd against Health Care for All or the GND: there is no money for that. This reasoning could be the main line of attack from Sanders and he could use not just the whole MMT theory but take the bits that fit. On the health care issue it is so easy to dismantle the idea that there is no money. For instance you can ask why on earth a country that is less wealthy (for instance Spain) can afford Health care for all and the US not. The fact is that public healthcare is way more affordable than private insurance amongst other reasons, because the state has no financial constraints (other than inflationary spending) while private debt in the insurance scheme makes healthcare quite vulnerable.

    Regarding the insurance bussiness, while I was commenting recently with my wife about the crapification of auto insurance in Spain and we were comparing with the past it assaulted my mind the idea that current monetary policies focused on low rates migth be responsible for much of the crapification observed. Given that in this environment insurers can barely make money with the quotes they collect, they are increasingly passing expenses to the insured in ways that make insurance nearly useless.

    1. amfortas the hippie

      1- insurance is still my least favorite “industry”. i hate them more even than banks.
      2- “we have no money!”…. has always been silly. just look at the funny building in arlington, virginia. the one w the 5 sided hole in it where trillions of thin air derived dollars have gone.
      that imagery is a much easier sell in the feedstore that burning dollar bills and raving about how they obtain value.
      to effectively do the latter presentation (“$ is the holy cracker in the temple of moloch and only has value bc a sufficient number of humans believe it does”)… one needs beer and a campfire. a nice hogleg joint helps,too.
      ordinary folks resist this truth viscerally

    1. NotTimothyGeithner

      This. Outside of the usual cruelty of conservatives, the “great men” of our times have really lousy legacies. It’s no different than Obama griping about the cost of a Green New Deal. He could have been Roosevelt but settled for Bush III (poor Jeb?). If updated forms of old Ideas (MMT) work again, there goes the legacies.

  4. Watt4Bob

    MMT is the way our system works, but that reality is virtually occult.

    The reason that is so, is that as you might imagine, the ability to spend on anything you wish can be quite profitable if you are among those making the choices about how, and what to spend for.

    The folks who have been making those choices for our nation are a relatively small group, and have been very jealously guarding the ‘secret’ that has been making them rich and powerful for these many years.

    It’s surprising how easily they’ve covered up the nature of our nations money creation system, and more importantly how much damage they’ve done by using their control of that system to pursue their narrow interest in personal wealth and power.

    Our collective understanding of the system and who controls it, for what purpose, has been hidden behind a mythology created for that purpose, and we have been convinced as a people to take great pride in ‘understanding, and agreeing‘ with that mythology.

    The folks who ‘hate‘ MMT have been either been members of the group creating and maintaining that mythology, or the very much larger group that prides itself in believing it.

    The scoundrels who invented the mythology can afford an an army of enthusiastic adherents, politicians, academics, and MSM talking heads to defend their myth, and if that doesn’t work they have a long history of employing brutish paramilitary ‘security‘ firms to enforce their wills wherever the people seek to organize for the purpose of challenging their control of the money system.

    In the end, the most evil thing those men do to protect their monopoly on making spending choices that do nothing more than make themselves wealthier and more powerful, is to stoke the fire of civil war.

    Our job then is to understand that our money system could just as well create a decent life for all of us, and very importantly, to refuse to kill each other in the interest of people like Donald Trump, who insist we cannot afford to spend in the interest of our collective well being.

    1. animalogic

      “Government, possessing the power to create and issue currency and credit as money and enjoying the right to withdraw both currency and credit from circulation by taxation and otherwise, need not and should not borrow capital at interest as a means of financing government work and public enterprise. The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power ofconsumers.”
      President Lincoln, Senate Speech 1865

  5. rob

    whats not to like?
    oh wait, how about #7

    government debts are private sector assets…… well YEAH!….
    That is the problem with MMT,
    Rather than make any attempt of stopping the insanity that was enshrined by the federal reserve act, that has the monetary creation of this nation “outsourced” by the private banking cartel called “the federal reserve”, and all the other private banks that get to make money when they make loans.
    The UNITED STATES has a debt of 22 trillion dollars. It doesn’t HAVE to.
    The rest of the financial world would do just fine if the us government created our money, with NO associated debt. And as a citizen, my country would not have to make 300-400 BILLION dollar PER YEAR ,interest payments to the holders of that debt.
    It is all unnecessary.
    So we have the government gets the debt, and for that the government gets money it could have made on its own(were we to change the LAW) FRA out/ NEED act in.The constitution already gave the power to the gov’t. the FRA gave the power to the fed.

    And for this “some private sector” somewhere… well lets give it a think…. HMM…
    that sounds like the wall street banking and financial services sector who is the scourge of this nation on the “private” side of the equation…. The people who subvert politics and policies with their money(that could have been ours), the people who invest in destroying the planet and environment for profit, daily. The people who put out of work entire industries, so they can make a profit. The people who get the benefit of our military presence around the globe ,when negotiating their multi national agendas…

    So what is the “upside” to this relationship.
    We could have money without the debt.and ya know, we might be able to save capitalism from the capitalists ,too.
    But MMT doesn’t have any reform associated. It implies by this lack of reform minded mantra, that the relationships should not be changed.Sometimes not saying something, says A LOT.

    1. JEHR

      MMT describes how money works and is not a theory for change. Just knowing how money works is the first step in trying to make it work for everyone, not just the capitalists.

      By the way, concerning “government debts are private sector assets…… well YEAH!…” remember that individual families who save money for their retirements are part of the private sector as are the big corporations who try not to pay any taxes if they can manage it.

      1. nothing but the truth

        There are two main ideas in MMT articles:

        1. How the system “actually” works (down to some really painful technicalities). This is the domain of finance, not so much (political) economy. But it is good that economists are understanding that we are no longer on the gold standard.

        2. That somehow (with some very labored explanations), MMT will solve all the problems. The problems of economics have been always about real variables. Ratio of their costs/distributions, monopolies, technologies and so on.

        It is this insistence that just being sovereign in currency will solve all problems, that invites ridicule. Unfortunately, that ridicule is answered with more arcane technicalities about the accounting system.

        If the arguments were about the distribution of purchasing power, it would make some sense, But that is not a finance technicality, it is a political economy issue.

        For some reason MMT folks like to dial up the snark.

      2. rob

        problem is though. MMT is only a half truth. When they say a little knowledge is a dangerous thing… that is what is wrong with half truths.

        MMT may be better than the pathetic mainstream orthodox economists,who claim the loanable funds ; or the money multiplier myths….
        but just like any good con, they seed you with the truth, then they lead you astray…..right through the back door of the same jive “private banking system created money” , we have now.
        The entities served by those pathetic orthodox economists, are the same ones served by the MMT version of what being progressive means.The reason being, they are saying the same thing. The system AS IT IS NOW, is as good as it gets… and we should keep the same LAW that creates our fiat currency now,with the same actors, and the same beneficiaries … and just make some more debt….. hoorah.. It is like winning a bet that you can pull out your own tooth…. you win the dollar… and the taste of victory is yours…

        So , the assertion that MMT is just descriptive, doesn’t really mean that much. People in the know, have known for generations how the money system works. at every turn… only the public has been misled.
        The way out of our debt trap was first laid out in the thirties, and now with all changes in the world still has modern proposals that are still the way to go.
        And those small fries , who also “earn” a nickel off the debt obligations… are a small slice of the pie…. and the income they enjoy, probably doesn’t add up to all the value lost in every other sense of the word, that was siphoned out of a productive society by the banking elite. The world would not be the same, and we will never know what could have been, had we not been hood winked for a century… but to pretend that it is still a good idea to go down this worn path, and expect a different outcome,is what MMT espouses.
        If there weren’t better alternatives, i wouldn’t mind entertaining useless ideas, but when there are better alternatives, playing pointless games is actually subversive.

  6. a different chris

    Wow I didn’t think I would be the first to quote this:

    First they ignore you, then they laugh at you, then they fight you, then you win

    We – including me – always worry about the “just print money” aspect of MMT. But we’ve unilaterally disarmed. The MIC “just prints money” anytime it wants. Now we get to skip right by that and talk about real resources, and thus quote that bleeding heart liberal Eisenhower:

    Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.

    1. ChrisAtRUTT


      … and yes, #MMT has already won. The numpties shouting from the peanut gallery are on their way out. If any of them cared about their “legacies”, they’d call time on their disingenuous diatribes and admit to being wrong. But that’s not the way the hubris, narcissism and elitism work. We’re going to have to usher them out, perp-walk style, to the full ridicule of everyone who sees them for the false prophets and hacks they all are.

      1. animalogic

        The “numpties” are wrong, but it will take more than ridicule & ushering to get rid of them. MMT is in essence revolutionary.
        To practice MMT is to open the door to greater equality & justice as governments will not be able to refuse such “luxuries” as universal health care with the old standby of “we can’t afford it”. It would probably also change the nature of private banking.
        Expect a fight…a very nasty fight.

        1. rob

          why would MMT change the nature of private banking? or the status quo..

          right now, the federal reserve(a consortium of private banks) and all the other commercial banks, “create money” when they make loans. the federal reserve “creates money”, and “trades” that money with the treasury, who in turn create the debt instruments the banks need to satisfy their “asset” requirements…. The banks are the ones who right now, enjoy a free lunch.

          MMT is not revising anything. It is really just lipstick on the pig. Private banking creating money,IS the status quo. and has been for 100 years.
          The federal reserve act…. made it so.
          And people can throw in the changes in ’33 and 71’… which may have altered the medium, but not the fact. GOLD has no intrinsic value. It was just public faith then. it is public faith now….. all ruled by a LAW.
          MMT, doesn’t really change anything. If more people BELIEVE in MMT….. that just means more people BELIEVE the private banking system should control our money.

          1. bronco

            Not exactly true , if you fled your country with its gold coins , they would still have value elsewhere . It may have been faith but it was universal

            1. rob

              yeah, but what value?
              the value of a gold coin goes up and down wildly. Pick the wrong time, or place, and you could lose half or two thirds of your “value”…. and if you are in a pinch, like when people need things, the “buyer” determines what that coin is worth… depending on how desperate you are.
              the idea gold has value, is just a long held myth… that is still held by many… so if you have some gold , someone may want to buy it from you….but it has no intrinsic value. It is a good conductor.it doesn’t tarnish. but the reason gold has had value for centuries is because the laws/rules/decrees of the kings… said so…
              Now money has value because the LAW says it does.

              1. Wukchumni

                It costs around 20 Cents to print a $100 FRN

                It costs around a Dime to mint a Nickel

                It costs around 2 Cents to mint a Cent

                Nothing really makes sense, but its an agreed upon thing that nobody inquires as to where the added $99.80 of value comes from, in the curious case of the Benjamin?


                Most of your assertions of Au are absurd.

                1. rob

                  well, the dime and the nickel are stamped by the treasury. That cost is borne by the us gov’t.

                  the seigniorage that comes from a FRN is what the federal reserve gets to make… and account for.
                  The money the us treasury makes in coins, is created once, and has no debt associated.
                  The money made by the federal reserve, costs the full price of the notes to the treasury, plus the cost of the debt. that is what is owed…. hence the 22 trillion in debt…(although most of that debt is owed because the private banks create money when they make loans, not cash being made by FRB)

                  But really, What am I saying about gold that is absurd?
                  Have you ever had gold coins to sell? Have you ever used one for buying anything?

                  And did you buy your coins “graded”, or were they loose. did it cost you to have them graded before they were sold? did that come out of your “profit” Do you buy gold bullion? stamped and graded…. and is that why you think gold is a standard value?
                  The real question is when did you buy, and when did you sell…
                  The last gold coin I sold when the market was high, and I have family who can grade and buy for free.. so it is good for me…. but I bought it for $350 and sold it for $1350.. ok but if I did that at the wrong time, I might have only gotten 500-600 for it…a couple of years later… If I had timed it right, it may have been worth $1700…
                  That is an investment…. not a thing of intrinsic value.
                  And if I were in some dire straight, I might have had to take the $200-$300 some person or pawn shop would have offered…. never mind if I was in another country…

                  So, tell me.. what is absurd?

                  1. Wukchumni

                    I was in the business for over 25 years, constantly buying & selling.

                    When dealing with reputable dealers (it sounds as if you’re fond of pawn shops-a no go as they tend to be jacks of all trades and master of none) the retail spread on a 1 oz coin is around $25 between the buy & sell prices. It’s closer to $15 difference on a wholesale basis.

                    You have a very limited idea of what you’re trying to explain, using one example as the way things happen, and nobody cares about grades on modern bullion coins either.

                    1. rob

                      by “1 oz coin”, you’re saying bullion coin… so you mention the same thing twice as two examples…. and there is no grade on a piece of bullion… that is used for anything .I never said there was.
                      So being in the business for over 25 years buying and selling constantly…. and you never heard of the bootleg minting operations from back in the day, where local mines made their own coins..you never heard of the papers printing various values of variously minted coins, from all over the world that ran in large papers a couple hundred years ago… ..
                      If your spread is only 15-25 dollars on a coin…. you must limit yourself to coins for weight…. you can’t be a real coin dealer…. just a buyer and seller of what others already verified.
                      yes, I have never sold a coin at a pawn shop because they are there to rip you off. I also never sold a coin in an auction, because I didn’t want to pay the percentage. I also never sold a coin to a low level dealer because those people don’t really have the ability to grade a coin, that is accepted by the trade, And I didn’t buy nicely pre packed and graded coins….which are the only ones that you can turn over at a standard rate.
                      You are the one who is talking about simplicity. And doesn’t seem to know very much about coins, just about investment buying of commodity.

          2. animalogic

            “why would MMT change the nature of private banking? or the status quo..”
            Why – ? You basically answer your own question:
            “The banks are the ones who right now, enjoy a free lunch.”
            If MMT reaches the point of becoming active Policy (similar to neoliberalism in the late 70’s/early 80’s ) why would Government want to maintain the status quo? Why private banks at all? Laws can be changed, just as peoples’ beliefs.
            MMT is far more than mere “lipstick on a pig”. It’s potential is revolutionary.

  7. bronco

    I think because its just about more technocrats being given control and thats a disaster. Different theories , same old grift

  8. Marc

    I have had enough exposure to MMT to believe, as Montier states, that it “thrashes neoclassical economics”. But having said that, if you read some of the accounts on monetary operations, there is quite a bit of counter-intuitive stuff in there and it requires a real investment (which I have yet to make despite having the text book etc) to digest. At the same time, when you go from the theory to the policy prescriptions of most MMT’ers which are decidedly to the left, is it that surprising that economists who have supported the neo-liberal order are aligning against it (in this regard, I would be curious to hear what Stiglitz has to say about MMT)? If one were to just take MMT as the correct description, however, it is not a given that these are necessarily the policies to pursue. A healthy dose of skepticism around a government’s capability to spend wisely or to even pursue rational policies is one issue. Also, you still have to deal with policy targets. For example, at current unemployment rates and the pace of wage increases, is it not fair to argue that we are near the inflation boundary/full capacity that MMT’ers would warn about? What is the natural rate of unemployment rate, which has been a moving target, we should be targetting? Different views on this would still lead to very different policy actions etc.

    Btw, Montier has written a lot of good stuff on related topics over the years with a lot of greats stats and Jeremy Granham (the G in GMO) has spoken and written very intelligently on his industry (and climate change). It is a testament, however, to the nature of financial markets, particularly in recent years, that among the smartest minds operating in it have been challenged to perform well.

    1. Left in Wisconsin

      A healthy dose of skepticism around a government’s capability to spend wisely or to even pursue rational policies is one issue

      Absolutely. But the solution to that must be good governance. Governments can be competent – Wisconsin state government is still mostly competent despite recent efforts to destroy that competence, and it used to be a lot more competent. City government here is Madison is unbelievably competent compared the the machine that ran Albany NY when I was growing up. The notion that government is by default or trends to incompetence is another canard that needs to go – though constant vigilance, high levels of citizen participation, etc. are all necessary to achieve it.

      1. Watt4Bob



        We might also ask who those skeptics why they loudly question our ability to afford tangible material benefits for the masses but remain so quiet when $Trillions are spent killing people, and bombing the ME into rubble?

        Those of us skeptical of the wisdom of endless war and the overly generous subsidies for escalating fossil-fuel extraction are routinely excluded from the ‘rational debate supposedly occurring around those issues.

        Those who own our government allow only their skeptics to be heard.

        That’s the essence of our argument, our venal government spends reflexively on the interests of the rich and turns a deaf ear to the rest of us.

        1. bronco

          If its true that the owners of our government are the real issue then switching to mmt without removing those owners will probably make things worse.

          Those owners will make the choice to line their own pockets regardless of the system in place. The trillions apparently were always available , a conscious decision to buy missiles and bullets was made and will be made again.

          1. amfortas the hippie

            “…without removing those owners….”
            at the last, remember that theyre edible.
            rich folks: the other white meat.
            im on my phone, so cant link/ cut/paste, but jfk—pp-” those who prevent peaceful change invite violent change” should be spray painted on every corner office window

          2. nothing but the truth


            once the argument that “we can’t pay for it” is shown to be false, we are looking at hyperinflation.

            the main anchor is “inflation expectations”, which is basically another way of invoking the confidence fairy in paper money.

    2. eg

      Mostly in agreement here, though you might be surprised by the amount of unused capacity in the US economy. The NAIRU is a bad joke, but the labor participation rate isn’t a bad proxy:


      If you look at the 10 year view (different tabs at the bottom of the graph) there’s a fair bit of headroom at the current 63ish% — and that doesn’t factor in the underemployment of those in part-time employment who would prefer full-time, nor the pernicious “gig economy” effects of increasing monopsony among the large employers.

      I’ve heard numbers between 4% (probably low) and as much as 10% (probably high) of GDP. In a country as big as the USA, that’s a lot of macaroni!

  9. Susan the other`

    This is the first time I have noticed that MMT includes, specifically,Ecological Limits as one of the destabilizers causing inflation. I have probably been too lazy to actually find the language until now. But thank you for posting this summary of MMT thinking. If the economy sails off beyond the limits of capacity inflation follows. I’m thinking now that the environmental limits we have ignored (replaced with financial expansion) have translated into a realm of dark finance where the externalities of environmental damage represent such an overuse of the environment that we will be restricted by a form of inflation we will have to respect much more than our current Senators are willing to admit. I see this political denial of the urgency of the GND as a threat to everything we should be doing to fix the planet. A very dangerous one. No one in politics is up to the task of facing fiscal finance and responsibility. No one. Well, maybe Bernie.

  10. Personal User

    Looks to me like the US is pretty much on the way there, and will go down that path.

    In that, the national debt will never be paid and only continues to grow.

    I don’t know where we’re going, or propose that I know where the US should go.

    However, the reality is that there will never be the political will to live within a realistic budget, or ever pay back the debt.

    So, like it or not, something has to change.

    1. rob

      a change is what we need.
      “The change ” has been around for 80 years so far.
      The original “chicago plan” from the thirties…
      Look at the “NEED act”
      HR 2990 112th congress
      How to end debt creation for money creation.
      paying off the debt as it comes due, while creating no more national debt, without disrupting financial markets
      The green party has a plank called
      “greening the dollar”, this is exactly what the US needs now. This is the real way to the “green new deal”, . the route we need to go for universal healthcare,education,political reform,…

      MMT leaves so much to be desired.. so much left unsaid. All hat, no cattle.

  11. Oregoncharles

    #3 is unclear; in fact I think the syntax is scrambled. And what does “endogenous” mean? I doubt my own ability to unscramble it; should come from an actual theorist.

    It may seem clear if you’re very familiar with the theory, but trust me, it isn’t.

    1. Oregoncharles

      #4) “Functional finance, not sound finance.” Jargon; meaningless to laymen. Should be left off, or footnoted – at length, I suspect. It adds nothing to the rest, which makes sense.

      1. BillC

        Both terms are defined in footnote 1 of the PDF version of the paper at the GMO site. Once understood, it does add value — check out Abba Lerner’s “Functional Finance” concepts in Wikipedia or, better yet, in his original paper of that title.

  12. Oregoncharles

    “The private sector cannot print money to repay its debts.” Neither can state or local governments. For a while, I think it was a “Great Society” program, the federal government had “revenue sharing” (misnomer), in which it sent money to state governments to subsidize the direct services they’re responsible for. This is another logical MMT policy.

    7) Again: accounting identities are not impressive to non-accountants. They make a very weak argument, or none at all. They need a translation into real terms to be useful. The end of para 7 approaches understanding this point, which I see as a persistent weakness in presentations of MMT. (My father was trained as an accountant and sometimes talked like one – and it sounded like mumbo-jumbo then.)

  13. Oregoncharles

    “Why Does Everyone Hate MMT?”
    It’s the policies, of course; but there are other reasons. (Caveat: I don’t doubt the theory and I approve of the policies. The problem I see is with public presentation.)

    First, it illuminates just how arbitrary and even shaky our monetary system is. It really is a confidence game. Casting light into that sort of dark corner is never going to be popular with the denizens. And it’s unfamiliar: we went off the gold standard within living memory (1972, IIRC), and that’s when the US dollar became a full-blown fiat currency. I remember having no idea what a Big F’ing Deal it really was. I was actually taught about fiat currency in the 60’s, well before that, so it’s only partially new; but the adjustment is still going on.

    Second, politically it’s an unintended attack on the power to tax. “In order to give money its value” is not a purpose that is going to impress most people. They’ll respond with “so my money has no value?” And with “if you don’t really need it, why should I pay it?” We can’t have an income tax without the cooperation of the citizenry, like in the next 3 weeks, so this is important.

    3rd: We’ve already passed those “ecological” limits, so why don’t we have massive inflation? Or do we, and the numbers are fudged?

    4th: Dollars are used as a “reserve” – that is, extra-secure – currency by millions of people in other countries who do NOT have to pay US taxes. Those dollars never actually come home; they appear to be supported by nothing except mutual agreement. How does that work?

    1. amfortas the hippie

      i reckon the ecological limits were breached circa 1975. the repercussions have been buried since then in abundant paper and digital wealth, as well as a whole lot of mindf@ckery.
      mother nature will be paid, though.

  14. tiebie66

    I’m not so sure about #2: any government that pays back its loans in devalued currency is de facto though not de jure defaulting on its debt. What will happen if it does so repeatedly? It might get away the first time doing so, but doing so repeatedly will certainly affect #1. Despite levying taxes, there will be trouble getting the currency accepted.

    The accounting I find incomplete. Whenever money flows in one direction, goods and services flow in the opposite direction. Money is fungible, but goods and services not. This can have very serious distorting consequences on the economy in ways that sectoral balances might not reveal. Accounting needs to account for this to arrive at a holistic view of the economy.

    To its credit, MMT acknowledges the constraints of resources and environment. But, MMTers do themselves a great disservice if they state something like: “Sure it can be paid for – the government can just print the necessary money.” Statements should always include the conditionalities.

  15. Tim

    Good summary. Shows theoretically how MMT is workable.

    I’m not a government hater, but I don’t think our government in its current functional state is capable of implementing MMT correctly.

    So my question for everybody here, which doesn’t really have an answer given it’s so generic is: which is worse, MMT implemented improperly, or the status quo?

  16. Kevin Nell

    What the MMT group fails to recognize is that money created first and foremost ends up on the hands of the rich initially. We have been in an extended period of MMT economics over the last decade with a debt ballooning up to $21 trillion and the main result is an inflated equity market and increased inequality.

    The GND renewable component would be no different either. People like to think about renewables as rooftop solar, but to achieve the shift in energy production required, trillions of dollars would have to flow to large, multinational energy companies that current dominate energy markets. I am sure they will share profits with the working class.

    1. WobblyTelomeres

      I think it depends how the money is sent into the economy that matters most.

      If the money went to the workers, through a JG (WPA/CCC) program, it gets to the people that need it most. When it goes to the bankers and financiers, through QE, it gets to the people that need it least. Huge difference. Obama and his rightwing cohorts (D and R) preferred the latter.

    2. Tip Parker

      Point #7 referred to Godle’s work, which was illuminating, but it was just two dimensional. This comment shows that Godle’s work should be expanded to a third dimension that would show how the concentrations of income, wealth, and power have grown within the private and foreign sectors. Many of the comments to this article are implicitly saying the same thing.

  17. California Bob

    ‘Jerry Epstein—on the official left–has ramped up his ridiculous claims, now associating MMT with “America First” and fascism (you knew that was coming—it has always been the refuge of critics who couldn’t come up with valid critiques).’

    Aka “Godwin’s Law:”


  18. Democrita

    For me, the significance is this: right now, only a small number of people know about MMT, and they already use it to enrich themselves.

    When enough ordinary voters understand MMT, they may feel more empowered politically to demand what they want/need.

    It takes away the TINA sense.

  19. djrichard

    The existing priest/king is defending his sacred tree from being claimed by the new priest/king.

    per https://www.epsilontheory.com/magical-thinking/

    the priest-kings are challenged by a rogue priest in their midst (rare) or an alt-priest coming out of nowhere (common). By “nowhere” I mean that the alt-priest is an Other, whether that’s a foreign religion or a foreign geography or a foreign (i.e., non-priestly) caste. The alt-priest isn’t about tweaking the spell or casting it louder. He’s about doing an entirely different spell, and he’s about accusing the incumbent priests of incompetence or worse. The alt-priest is always a populist, and populism comes easy when the incumbent spells have been failing … and failing … and failing.

  20. Jason

    From the article: “In fact, when a government spends it simply tells the central bank to credit the government’s account with funds (created by keystrokes).”

    Where’s the documentary proof for this statement?

    1. Yves Smith Post author

      Lordie. Go read the NYT story on QE, for starters. The reporters sat at the NY Fed and watched how it worked. The Bank of England has a primer that says the same thing. And yes, that is exactly how it works. This is old news.

    2. skippy

      The congress sets a budget with an eye to what consensus in the political sphere wants to achieve, then flow of funds occurs, too the private sector, hence its more a political [ideological state of affairs] than one of monetary concerns.

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