By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Jointly published with New Economic Perspectives
First Article in a Series
The massive, coordinated assault on Modern Monetary Theory (MMT) scholars by the most elite forces of orthodoxy represents a watershed moment in economics, but we must not lose sight that the real attack is actually on progressives, particularly the newly elected progressive members of Congress plus Elizabeth Warren, and Bernie Sanders. Even that statement is incomplete, for it is the combination of the rise of these progressive elected officials, the 2020 presidential election (and nomination battle), and the exceptional embrace of progressive policies by the general public and Democratic Party candidates for the presidential nomination that prompted the coordinated and personalized assault of overwhelmingly neoliberal economists on MMT scholars. This first column in a series provides an overview of why the progressives’ embrace of MMT spurred the terrified assault on MMT by orthodox economists. That desperate assault reveals how much orthodox economists fear the voters’ increasing embrace of the progressive core policy issues on the environment, health care, and restoring the rule of law to the markets. Later articles in this series will flesh out that overview.
The polls showing enormous public support for the key progressive initiatives terrify the neoliberals. Sanders’ 2016 policy initiatives have transformed the Democratic Party candidates’ policy proposals for 2020. Imitation is the sincerest form of flattery. Warren’s policy proposals are having a similar effect. Polls show broad support for the Green New Deal, Medicare for All, a jobs guaranty program, a tax system that would reverse the current race to plutocracy, a campaign to reduce gun slaughter and massacres, the restoration of the rule of law (including antitrust laws) to business (particularly banking and Silicon Valley), and a meaningful minimum wage.
The emerging progressive policy core enjoys far stronger public support than do the neoliberal policies of the self-described Democratic Party ‘moderates.’ That professed ‘moderation,’ has become code for extreme opposition to the policies that the public overwhelmingly supports. The progressive policy core is centrist in terms of the electorate’s preferences. The progressive policy core is not “socialist,” “extreme,” or “left.”
The Democratic Party “moderates,” on two key economic issues, their embrace of austerity and willingness to cut the safety net, are to the right of Republican conservatives. Republicans only pretend to embrace austerity when there is a Democratic president. The New Democrats, Blue Dogs, and “Problem Solver” Democrats actually believe in inflicting self-destructive austerity and cuts to the safety net regardless of the President’s party. Neoliberal Democrats’ big club to bash progressive policies is the typically mythical catastrophic effects of federal budget deficits. MMT scholarship disarms neoliberals, removing the legitimacy of their deficit hysteria ‘club’ in the vast bulk of circumstances where federal deficits do not cause significant shortages of real resources.
Fox News, President Trump, and neoliberal economists mounted a desperate attack on the progressive policy core precisely because the public overwhelmingly supports it. Their attack makes three claims. First, the policy core represents bad economics. Second, the policy core represents ‘socialism.’ Third, even if the policies are desirable, the world cannot afford to adopt them. These three points form the all-encompassing neoliberal meme that the government cannot and should not act to protect the public. They think the government should serve and fund the plutocrats, kleptocrats, and the “chicken hawks’” massive military expenditures and wars. Neoliberals try desperately to convince the public to adopt their ideology that democratic government is fundamentally illegitimate while the reality of a rigged kleptocracy represents the fiction of ‘capitalism.’
This is the place where MMT scholars became involved. MMT is not inherently ideological, but a number of prominent MMT scholars are progressives. To no one’s surprise, the coordinated orthodox assault on MMT scholars focuses on progressive MMT scholars. The orthodox economists’ aimed the schwerpunkt of their assault at Stephanie Kelton, the world’s top female MMT scholar. The lead orthodox assault corps was exclusively male. (They will soon move to cure that obvious ‘tell.’)
There are five primary reasons why increasing numbers of progressive elected officials have embraced MMT scholarship. First, progressive MMT scholars are among the economists who have demonstrated that the progressive core policies are good economics and the opposing neoliberal policies are bad economics. For example, it is insane to keep adding to global climate change. It is insane economics to claim that we can afford to cripple our planet’s climate but cannot afford to prevent the catastrophe.
Second, MMT scholars have blown up the effort to smear the progressive core’s policies as ‘socialism.’ Laissez faire economics is terrible economics. It is literally suicidal with regard to global climate change. Similarly, neoliberal policies have eviscerated the rule of law, producing the “criminogenic environments” that produce the epidemics of elite fraud and predation that drove the Great Financial Crisis (GFC).
Absent an effective rule of law, it is easy for elite fraud and predation to create a “Gresham’s” dynamic in which bad ethics drives good ethics from the markets, professions, and sports. Effective government is essential to effective markets. MMT scholars come not to destroy honest markets, but to make them possible. Sound regulation constitutes a large part of the “rule of law.” Effective regulation is essential to allow honest business people to prosper. MMT scholars documented how and why elite fraudsters and predators “rig the system” and the horrific harm that “control fraud and predation” cause.
We did not design this branch of our work, which began in 1984, to help any candidate. It is remarkable that Warren has not yet used this strand of MMT research to bolster her central policy positions. Our multi-disciplinary scholarship draws on the best of white-collar criminology, economics, law, accounting, and psychology. Our proposed regulatory policies are immensely popular among voters, including many Trump voters, but progressive support is near universal. Our scholarship demonstrates in detail why Warren is correct – our most elite predators have systematically rigged huge areas of the economy. We also explain why “control fraud and predation” cause such devastating harm to the public, our overall economy, and honest business people. Our research and theories also explain why this predators target people of color, women, the elderly, children, and the elderly (and the ‘intersection’ of these characteristics). For any economists wondering what this branch of our scholarly work has to do with macroeconomics, the answer is that it provides part of MMT’s devastating critique of the ‘microfoundations’ of “modern macro.”
If neoliberals want to define as “socialism” an effective government that produces markets in which honest people prosper and we imprison or at least drive from the markets the elite cheaters, then we are all socialists. An economic system without an effective rule of law and with massive negative externalities such as global climate change is a suicidal kleptocracy. If neoliberals want to define that as “capitalism,” they should get used to the public rejecting it as an ideology that is as economically illiterate as it is inhumane and unethical. Kleptocracy and plutocracy invariably corrupt and ruin democracy. The truth is that honest markets and governments are complements and that the most effective economies are ‘mixed-economies.’ Using ‘socialism’ or ‘capitalism’ as swear words is a pointless waste.
Third, MMT has been of particular use to progressives in countering the bizarre claim that while we can afford to destroy our planet’s ability to support life we cannot afford to prevent that catastrophe. A significant strand of MMT scholarship focuses on understanding the true fiscal capacity of nations with fully sovereign currencies. The most effective means neoliberal opponents of vital public programs have found to dissuade Democrats from adopting such programs is the deliberate creation of the myth that the U.S. cannot afford to fund progressive programs. The express goal of the economists creating and spreading this myth was to deceive the public in order to prevent it from voting for social programs the voters viewed as highly desirable.
The most famous admission of this myth is by Paul Samuelson, one of the two Nobel Laureates in Economics who were Larry Summers’ uncles. Randy Wray made this point in his April 30, 2010 New Economic Perspective (NEP) blog (“Paul Samuelson on Deficit Myths”). [Randy Wray referred to] “an interview Nobel winner Paul Samuelson gave to Mark Blaug (in his film on Keynes, “John Maynard Keynes: Life/Ideas/Legacy 1995”). There Samuelson said:
I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say “uh, oh what you have done” and James Buchanan argues in those terms. I have to say that I see merit in that view.
Notice the key logical error in Samuelson’s endorsement of economists deceiving the people by spreading a myth. MMT scholars stress that “there must be discipline in the allocation of resources.” MMT urges us to focus on the use of scarce real resources. MMT explains that dollars are never scarce for the U.S. government given our fully sovereign currency, but real resources can be scarce and that their scarcity can lead to inflation and significant “opportunity costs.” If we fail to adopt government policies that stop global climate change, we will not show “discipline,” but irrational idiocy.
Samuelson made this statement 24 years ago, but Ed Crooks, a top Financial Times editor, just praised the same myth. Note that he expressly adopts the statement that MMT is “obviously true” – and they must keep that truth from the public. He retweated with his highest praise this tweated text:
Modern Monetary Theory is reverse Santa Clause. It is something that is obviously true & and believing in it will cause lots of bad behavior.
Crooks then tweeted this text.
An underrated aspect of political economy, I think, is the extent to which obvious falsehoods – e.g., “the government’s budget is just like a household budget” – are worth maintaining because in the long run they lead to better outcomes than the truth would.
Orthodox economists and elite members of the financial press admit, in blunt terms:
- MMT is “obviously true”
- Instead, of explaining the reality of nations with fully sovereign currencies, orthodox economists and financial journalists have consciously propounded what they describe as “obvious falsehoods,” “superstition,” and quasi-religious “myths” for the purpose of deceiving the public about the fiscal capacity of those nations,
- This is done for the express purpose of keeping a majority of the voters from adopting social programs they consider desirable,
- Orthodox economists and financial journalists spread their “obvious falsehoods” because they think it is essential to subvert democratic choices, which they view as certain to create ruin. Decisions on public programs must be left to orthodox economists, who are far more likely to oppose public programs based on their lust for laissez faire, and,
- Orthodox economists and financial journalists are proud of their lies, proud of their paternalistic elitism, proud of their efforts to suborn the democratic will of the voters, and proud that they – and only they – will decide policy on issues such as global climate change.
The fourth and fifth reasons why progressive elected officials find MMT scholarship so useful should apply to all elected officials. The fourth reason is that MMT scholars have a superb record of predictive success. Orthodox economists routinely claim that predictive success is the standard by which the soundness of theory is determined. MMT scholarship is one of the strands of modern economic research that reveals that twin orthodox lies about that assertion. One, orthodox economists routinely employ theories and models that routinely fail hypothesis testing. Two, orthodox economists routinely refuse to adopt theories with far superior predictive success and instead continue to embrace theories that fit their ideological priors.
Fifth, MMT scholars have a superb record in designing policies that prove effective when implemented. Orthodox macro and ‘microfoundation’ scholars have terrible records on policy. Orthodox policy on a broad range of fronts does not simply fail to cure severe problems; it is a primary cause of severe problems. Orthodox economic policy prescriptions are frequently so criminogenic that they cause “control fraud and predation” to become epidemic. The successful policies that MMT scholars have helped formulate such as restoring the effective rule of law to Wall Street counter that criminogenic environment. Such policies should attract overwhelming support from elected officials and economists of all stripes.
Is anyone surprised that progressives are horrified when they learn that orthodox economists and journalists know that MMT is “obviously true” and respond to that truth with lies designed to prevent the adoption of progressive core policies? MMT scholarship has exposed the campaign of lies and demonstrated that the progressive core policies are excellent economics and that the U.S. can implement them. MMT scholars are the initial target of the orthodox counterrevolution against the ascendancy of progressive core policies among the electorate. The ultimate orthodox target is blocking those policies.
The second article in this series provides an overview of MMT scholars’ superb predictive and policy successes. Orthodox economists teach that such successes are the standard for judging the soundness of economic theory and theorists. It is revealing that the orthodox assault on MMT scholars has ignored the standard orthodox standard for testing the strength of economic theory.
media is all owned.
if they didn’t want the people at large to know about MMT, we wouldn’t. i take this blog as the primary enlightener on my personal journey to understanding economic reality, but 8-10 years ago i was just a “crazy cat lady” ranting about how the government could obviously afford to “pay for it”. and it could have always remained so. if they let the Holders of Truth in front of the cameras, as they are doing every day now, it is because they want them to be there.
so, this war is between elites and it allows some of them to get the public’s buy-in. if they didn’t want us peons to know about it, we would not. they would just let the truth go die quietly in the corner. what has actually changed, to let “the truth” come in through the (as portrayed) back window?
was it the social status of the economists? they have been saying it for years and getting nowhere.
was it the New Media, which allows direct conversations between people with ideas, and people with fresh ideas? what? because i smell something about this whole “setting stuff up to be knocked down, in public, and then the Knockers are hoisted by their own petard” which is just as theatre as any series of Senate hearings on baseball player dope consumption.
what is up?
overly ominous? point taken it is good to remain vigilant, but systems do change, inevitably, and cannot forces for the good impact their development? Big Tech is appalling but Bernie has harnessed it to his own ends, bypassing the MSM.
the lure of determinism is great, no need to suffer the pain of hope once again crushed
Great, great question… Sites like NC have been laying a groundwork among a small vanguard, but now these verboten ideas are coming out in the mainstream.
My best guess is that it’s all a long term operation, ongoing over many decades, to bring society into a new phase. Part of that involves propaganda and public opinion, of course, but propaganda is not always (or even usually) false. If the truth works, pragmatically speaking, to achieve certain ends, the truth will be used.
But anony, you’re probably looking at it from a deeper level than “they” expect most people will.
Somebody is pushing AOC and MMT onto the political stage now that QE and NIRP are failing and you have to wonder what could be next after QE and NIRP BUT MMT or something similar………considering that you can bet that those pushing AOC to wall to wall 24 hr a day media coverage and trial ballooning MMT are central and investment banking interests
Great descriptions of the differences of the Democratic Party and how MMT is a mirror and not a panacea for the economy.
Thank you for Bill Black’s excellent post. I have not been surprised by the oppo to MMT by some elite economists. After all, the ascendancy of MMT threatens their credibility, rice bowls and policy influence. I have been somewhat more surprised and disappointed by the opposition of the current Fed chairman in response to a congressional question, and that of Larry Fink, chairman of BlackRock. But perhaps the background of both men in debt leveraged private equity firms plays a role in their view.
In any event, I hope the latest federal budget proposed by the current administration to cut federal spending on social programs by 5 percent is immediately dismissed as deeply flawed and socially damaging economics.
Larry forgets to mention that regarding military spending the US goverment readily applies MMT principles and that is why the US can afford such a huge military budget. This, I think is the sole important omission in this excellent article.
He does describe requirement of effective regulation/govt in controlling resource waste. Don’t think that exists in the military industrial complex. Perhaps Bill will address this in his upcoming articles.
Three cheers for J.D.Alt’s real-resource budget in New Economic Perspectives.
On March 11, PBS NewsHour Larry Kudlow, White House Chief Economic Advisor, was on at about the 11:45 mark of the video which has closed captioning but no transcript that I could find. Judy Woodruff, the host, actually asked some good questions (though not enough) and it was fun watching Kudlow try to justify the new budget.
Dont be fooled, you can bet central and investment bankers are pushing AOC and MMT onto the stage
That may seem counter intuitive but after QE and NIRP what else do they have left to go to but MMT or something similar?
We are in the end game of this 100 year fiat ponzinomics control fraud scheme
Yeah, I’m not so sure about that. I’m not taking anything on face value and want to see how the actions actually play out, but AOC is a Democratic Socialist and is preaching a much different ideology. And MMT is not a scheme to print endless amounts of money. It’s just pointing out that public and private spending has to balance and US solvency is not an issue. What MMT’rs are really questioning is who gets to decide how the resources are directed and what is being invested in. No one is saying print unlimited amounts of money. Instead they are pointing out the hypocrisy of saying we cannot afford public spending in the face of 17 trillion in worldwide QE.
I do think the fatal flaw in what AOC is representing is the notion of economic growth in the face of climate change, but I haven’t made the leap that this is due to being backed by a secret central banker conspiracy. It’s far more likely it is what it is, someone slipped through the cracks, in the right place at the right time and now she is giving them fits. She can make speeches at SWSX every hour of every day and that is not going to change the US Government. So right now, she is just an inconvenience.
Listen when AOC first started getting this wall to wall coverage I assumed that TPTB were pushing her onto the world stage for some purpose and that purpose would have something to do with the central and investment banking cartels failing fiat ponzinomics scheme………and then she comes out with the GND and MMT
I have never seen a Congress person get so much coverage in 60 years, not even once…….not in the old days…..not in the internet era……not ever
Lots of the worlds greediest and most rapacious crony capitalists and financiers have been pitching various “socialist” concepts post 2008………High taxes for the rich……Universal Basic Income etc…..have you noticed this? And all of those schemes fit into the idea of a self serving crony capitalist fiat regime that is at its end point…….and so does MMT…..they know financial collapse is next and they have no other place to go
AOC could be totally oblivious as to is who exactly is pushing her out on stage but you will find highest level crony capitalists are behind her inexplicable rise
Remember the people I am talking about who seem like the last that would support an AOC and her 70% tax rate have no reason not to……people just think they do…..and the reason for that is they themselves will never pay a single penny of any tax she comes up with because all of their money is in Foundations, trusts and tax shelters………everyone else will pay
10 bucks says Rockefeller Foundation, Soros Foundation and the like money is ultimately backing her
Now the trick will be for them to use the MMT debate to come up with an alternate mainstream economist sock puppet officially approved counter theory to MMT………that is almost exactly the same as MMT and implement that instead……..and then AOC’s job is done
Consider this, if AOC’s GDN and MMT plans were ever to be implemented I will predict that more fake hedge fund straw man trader, Wall Street and banker billionaires will be created practically overnight than even QE aka “free money for financiers” managed to create over the last 9 years and that is really saying something…..imagine multiples of the glom QE created…….1000’s of fake billionaires instead of hundreds all thanks to Good Socialist Democrat AOC
A vast, shadowy conspiracy that’s impossible to either verify or falsify can, paradoxically, be very comforting, if you’re in that frame of mind. Which I’m not.
It is not all that vast and it has never been particularly shadowy and not all that hard to discern and verify
You just have to study who is operating behind the scenes in government, 100 years ago or today, it has always been the same people from central and investment banking and in many cases even the names are exactly the same as they were 100 years ago
My Twitter feed gets daily more interesting, in part because of all the MMT brouhaha’s.
My shorthand, simplified sense is that neoliberals with sinecures — and revenue generated by ‘ownership’ (stocks, bonds, forms of rent) — are flipping out at the attention that some Dems are receiving as they describe a new economics that brings some sense of reciprocity and moral sensibility into the conversation.
In the face of what amounts to hysterical screeds from the neoliberals, it appears that the Dems (Warren, Sanders, Inslee, Sherrod Brown, AOC) are *not* backing down. The MMT dam has broken, and although the flood is only beginning, there’s no going back. MMT is not yet dominant, but it will be.
“it appears that the Dems (Warren, Sanders, Inslee, Sherrod Brown, AOC) are *not* backing down.” I’m intrigued that you include Sherrod Brown in that list — can you cite any evidence of Brown admitting to an understanding of MMT? (As ranking member of the Senate Banking Committee, I’m sure he knows about it–the man is hardly stupid–but admitting to it is something else entirely.)
Inslee is my governor, what has he said about MMT?
……..and you think this is a good thing?
MMT is just the logical next step in the central bankers ponzi scheme……after QE and NIRP fail what else can they do except MMT?……..or some other outright money printing scheme
On the evidence of your comment, you haven’t the slightest acquaintance with MMT.
Perhaps read this:
Why bother reading sophist arguments?
Why would I need to read an academic explanation for something I intuitively and logically know must be false?
I will give you an example…….ZIRP
ZIRP has never existed in human economic history yet post 2008 when the central banks decided they NEEDED it to exist they created the sophist financial arguments to legitimize its existence,,,,,,,now it exists as a monetary policy concept…completely legitimized practically overnight…..viola!…do I need to read all the PHD level sophist financial obfuscations manufactured since 2008 to know that it should not exist and exists only as another economic fraud that banking, economists, government, media are committing against the public?
Try deconstructing ZIRP as an economic concept first then tell me about MMT
Try and find one single mention of ZIRP as even a wild ass scheme in 5000 years of human economic history that predates 2008…….and the single example of Swiss banks and de facto negative rates in the 1970’s they trotted out to justify ZIRP is not ZIRP
Bank fees that exceed the interest rate of return being charged to money launderers and tax dodgers is not the same as ZIRP
So excluding that try and find any mention of ZIRP even as a madman’s wild ass scheme in all of economic history
Do you see what I am getting at?
Hi Bill ….
What a show mate – !!!!! – who would have imagined exhuming Summers or the thrown together tag team that orthodox has deployed – inconceivable …. reminiscent of late stage desperation [some WWII doco].
As you note every time one pops up there is a cornucopia of respondents to hold them to their past statements, which contradict the recent, not to mention the complete memory loss of economic history. Gezz I even saw Noah having some kinda episode of un-banning and banning people again, get a dig in and then slam the door.
On the other hand you have some switching sides internationally like a come to Jesus moment, I can see the light – !!!!!!
So after the last couple of decades of wrangling with orthodox and a ragtag band of ideologue pawns, spewing sophist verbiage or pejorative authoritarian [self awarded] rhetoric, its awful fancy to see the whole Milgrams white coat self immolate.
Yet its not over ….
MMT makes perfect sense to this former field engineer turned economist. In engineering any system has constraints, in economics we call it scarcity. Same diff. The hard part to making MMT work will be keeping within the constraints as there are going to be a heck of a lot of moving parts in there. This could be fun. [I love econometrics.]
That’s an interesting background combination, relevant to the present discussion (engineering and monetary system), in particular, to an analogy that comes to mind, namely, driving a car on the road (together, a system), and money.
When we say money can be created limited only the resources, that is like the case of drving on a rural autobahn in Germany, where,
When resources become scarce, monetary inflation can happen potentially. That is like the car engine overheating, when you step on the pedal, injecting too much electrical or gas energy.
And while we can drive as fast as the engine allows, we don’t always drive anywhere near that, because, sometimes, for example, when we approach a curve, we have to adjust. To turn left, we have to slow down. It can be likened to slowing down money creation when approaching a large military spending block. You would want to slow down and turn away.
So, money creation and driving are similar in many ways. As you can journey to different places, so too can you running the money supply in various different directions. You reverse going in one direction (limiting money creation that ends up in places you don’t like), and start in another direction (directing new money to places you want it to go).
In both cases, way before inflation limits on resources are triggered, or the engine overheats, we are running the systems at a lower speed.
It only makes sense in that now that every other sophist financial scheme the central bankers have created out of thin air are failing…..QE, ZIRP, NIRP…..MMT or some other outright money printing scheme is the logical next step……..in that way MMT surely makes sense but it does not mean MMT is legitimate more like a last ditch money grab before the ultimate collapse, just one final prop and skim
If QE created 100’s of hedge fund straw man trader billionaires, MMT will create 1000’s
If they can legitimize ZIRP which has never even existed as a concept in human financial and economic history……..and NO that 1970[s Swiss bank defacto negative interest rate scenario was not NIRP……..NIRP proved they can legitimize any economic scheme no matter how sophist it is, so why not MMT which is exactly as sophist as NIRP…….and who has the most to gain with MMT?……..where will the money be going with MMT?
They were able to pull NIRP out of their butts with little to no pushback from economic academia when it was necessary to support their ponzi scheme so now maybe they are doing the same with MMT
Well I am afraid that Bill Black and I must part company in his criticisms of neoliberal economics. We must look at all the success that this theory of economics has had over the past forty odd years. I mean look at all the countries whose economies have benefited from these policies like, uhh, well, umm…..let me think a minute. I know – Portugal! Look at all the success that… no wait – they went opposite our advice. Well forget that then. Look, I’ll get back to you on that one. Look too at all the people that have done so well financially out of it. Well, maybe just those on salary – mostly. Sucks if you are on wages in a neoliberal economy but those people don’t count anyway because they’re not rich, amiright? Sure these economic theories have pushed the planet into climate change and probable catastrophe but that is because people forget that we live on a planet with infinite resources. That is what our theories are premised on after all. And if we don’t keep up these policies, we will never know who the world’s first trillionaire is going to be in world history and that’s got to count for something, hasn’t it?
Incredible to think Bill Black would support a sophist financial scheme like MMT that so well fits as an ultimate last gasp end game effort for the banking elites fiat ponzinomics
MMT must be the very last scheme the central bankers can come up with after QE and negative interest rates to give their asset stripping scam one last final push
If anyone is pushing AOC and MMT onto the political stage it is the central and investment banking elite……..now all they have to do is make it a conservative vs liberal issue, already done, and half the population will be on board, have some mainstream economists suddenly “reexamine or rethink MMT” and conclude MMT is a viable alternative and we will be well on our way to the ultimate very last central and investment banking rip off
Imagine how many new billionaires, hundred billionaires and maybe even trillionaires AOC’s hair brained schemes and MMT will create out of very thin air……..QE created 100’s of them, MMT will create 1000’s…….heck under MMT maybe we can all be billionaires, because after all we are just borrowing it from ourselves to give to ourselves
“Is anyone surprised…” the first sentence in the penultimate paragraph correct or is it a slip?
Randy Wray has a response to DeLong which came out today in NEP entitled MMT Responds to Brad DeLong’s Challenge. It is better than his response to Henwood. And contains a number of quite useful references.
Thanks for sharing. Wray’s primer on MMT on NEP is what got me hooked in the first place and eventually led me to NC.
MMT will be the very last gasp in this central banking “control fraud”……and here I thought it was going to be NIRP, something that has never even existed as a concept in finance or economics history for the obvious reasons that the central bankers pulled out of their butts after the last collapse and somehow miraculously legitimized as some sort of new monetary policy.
Every one of Bill Black’s posts resembles the movie scene where the hero opens a secret room full of all the necessary weapons with which to vanquish the enemy.
It’s sort of ironic…
I agree with the folks who want military spending front and center in the discussion, there is no better example that illustrates our ability to spend on our priorities.
And that the political argument is about priorities.
I vote for this as a motto for 2020 — “The political argument is about priorities!”
But it is hard to imagine the MIC coming that clean. Since WW2 we have made it a priority to promote military power… at first we rationalized it by saying we wanted to promote free trade and prosperity and defeat colonialism/imperialism… then we morphed into imperialism ourselves because we began to think long term about short civilization… we made resources a priority. That’s interesting to think about because “It’s the resources, stupid” seems to have been a given in their actions. And it’s no surprise to hear that orthodox economists were in on the myth of balancing the budget which fit nicely with appropriating control the world’s resources. If people think gold is the be all and end of wealth and economics (or a “strong dollar” myth to replace it) then you don’t have to explain the real world to them. They are Pavlov’s dog once removed from reality. And this “cold war” was diametrically opposed to freedom, democracy and capitalism itself. I wonder if this serves as a real-world model for social research on how to promote human reactions that accept pure irony as reality.
We found out the beauties of imperialism only after 1945? I’m this is gonna be a long post because the extent and length of American imperialism must be noted.
Mexico, Nicaragua, Honduras, Kindom of Hawaii, Columbia, Venezuela, Costa Rica, El Salvador, Panama, Haiti, the Spanish colonies of Cuba, Philippines, and Puerto Rico, all before 1945 and sometimes more than once. The prewar list is not complete but only comes from my immediate memory. I am not going to even try to do the Cold War. Just note that it is more extensive and bloody.
Almost all the military conflicts before the Mexican-American War and Pearl Harbor provoked extreme controversy, even serious attempts to have the United States give up some of the conquests especially Hawaii and the Philippines; quite a few Americans did not like the growing imperialism especially its growth after that of Spanish-American War. The real differences after the 1945 was the continued existence of an extensive military, especially the rebirth of army during the Korean War, and the end of American Isolationism, which was mostly dominant until the Cold War.
Aside from possibly the Revolution and the War of 1812, then the Civil War, the First and Second World Wars, the Korea War and Vietnamese War every other of the many, many, many wars, “police actions,” and gunboats visitations, were about the money. Sometimes at the direct request of business owners. There was usually some drivel about protecting some American citizens from harm, or that the eeeevillll Communists were taking over, but that mostly was just PR bull pucky.
This is not a direct attack on capitalism even though I am a socialist. The various European states and empires, Japan, and later the Soviet Union all practice some form of imperialism in that they imposed, often violently, an economic system in which the central state forced the periphery to mainly supply the raw materials while most of the manufacturing, especially the heavy industries, were located in the core country.
You are right. I was thinking that we had managed to establish an American Myth about equality and prosperity – which we did do – but that after 1945 we disregarded it in favor of global control. And it could not be supported in the end. I didn’t mean to imply that we were ever angels. We have been imperialists and racists of the worst order. But that doesn’t mean we cannot change. It’s a little humiliating to confess that we only change when the utility of oppression no longer serves us. But I’m afraid that is also true.
The major problem with Military Imperialism is cost. Even in the pre-WWI era, it was expensive and time consuming to send men and material half way around the world. Today, that’s still true. What’s even worse, relying on foreign countries for manufacturing -in addition- to raw materials is a fools game. This won’t end well.
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Neoliberals seem to be saying that they base their economics on a lie because it achieves the political outcomes they desire. That view supports neoliberlism’s critics, who have long maintained that neoliberalism is a religion designed to serve its priests and their patrons. Everyone else can eat cake.
If neoliberalism’s elite predators were confronted with MMT-following economies and democratic polities across the globe, depriving them of their Chiles and their Brexits, where would they go for their predation?
Thanks, Bill Black, for this post and this series.
This is consistent with Nancy MacLean’s research in Democracy in Chains.
James Buchanan’s inverted definition of corruption was political leaders using the power and resources of the government to take care of their constituents in a base desire to win votes.
She writes that he conceived of his plan (among other things) to change the teaching of economics to fight his version of corruption and thus preserve the proper order of things.
It also betrays their inherent distrust of democratic principles and organizations. They think the will of the people cannot handle itself, and so they need to be scared into handing over the reins of the economy to the high priests of neoliberal economics.
One major quibble.
There is no “Gun Slaughter” violent crime has been declining for decades according to the FBI statistics..
Or is BB referring to the slaughter perpetrated by the US and other governments?
There’s been plenty of that.
Tom, it’s correct that violent crime has declined, but that doesn’t contradict what Black said. I’m pretty sure it has not declined to zero, or anywhere near it.
Re. Professor Black’s references to climate change, I’m not quite sure where he’s comming from. He posits that MMT policies are needed to ‘stop’ changes in the climate, when it is actually mitigation & adaptation that is what’s needed for societies to remain at least somewhat stable state. I see so many experts, pundants, and much of the public repeating this fallacy, dialing the fear-factor beyond 11, just to make a point ! The distinction, I feel, is of import, so as to limit the chances of wasting time, money, and resources in misguided strategies. This is NOT to deny Climate change, whether by natural, antropogenic .. or some combination thereof. But to think we came just tweek thing and keep the planet’s climate in some static, arrested state is delusional.
I otherwise thought his post to be spot on.
We printed 7 trillion dollars to fight our endless wars in the Middle East. Money that either shouldn’t have been spent, or better yet, used to help us adjust to a future with less available energy (fossil fuels). In 1929 it took one barrel of oil to produce 100 barrels. Today the shale oil industry uses one barrel of oil to produce 5 barrels of oil. We can print money, but we can’t print coal, oil, ores, minerals, etc. Switching over to “green energy” to run this global economy just as it exists is a pipe dream. We need to immediately start powering down, conserve, preserve, make do or do without. A decent government for and of the people could help us make the transition to our energy and resource depleted future by marshaling and rationing what resources are left in an equitable manner. The first place to start reducing the damage of climate change is agriculture. In the last ten years or so there has been a lot of research about the huge potential of carbon sequestration through holistic ranching and crop production. Instead of printing money to subsidize huge wind and solar farms that have dubious EROI (energy returned on energy invested) we should be printing money to help farmers and ranchers transition to agricultural methods that could potentially mitigate, to a significant degree, the ravages of uncontrolled production of green house gases.
The main argument from neoliberals is that moving towards a carbon-neutral/negative economy is too expensive. “How are you going to pay for that?” is the ‘centrist’ motto.
Bill Black is back–better than ever!
I thought so too. This is Bill Black at his best. It is important now that the discussion does not evolve into an argument about capitalism v. socialism. Those words don’t matter, in fact don’t have any meaning anymore. They haven’t for some time now.
One of the key problems with the current credit and monetary system is the corruption.
1. The central banks of the world had not problem creating $USD trillions to fund perpetual and unnecessary wars and bank bailouts while hammering everyday people.
2. The country unnecessarily pays $700+ billion per year in unnecessary interest.
3. The healthcare scam. Medicare and medicaid spending near 8% of GDP–the rate at which other countries provide universal care. So lack of enforcing the law and creating sound regulations leads to greater than $1.5 trillion per year in the cost of corruption not including premature deaths and lost productivity.
Eliminating interest payments alone nearly balances the federal budget. Productive investments in infrastructure, health care and educational attainment leads to lower total factor cost and productivity gains making the country healthier, wealthier and more secure.
Apparently the sociopaths who are so rapacious can’t even see that their own survival may depend on the system succeeding.
Scary AP article in my local newspaper today with big bold headline:
“Trump proposes record spending, trillion-dollar deficit in new budget”
Why would this be scary to any MMT proponent?
Because it will be used by neolib’s, particularly those afflicted with Trump Derangement Syndrome, to push future austerity measures that will punish the average citizen (but not, of course, the FIRE or MIC sectors).
How does mmt handle bottlenecks? Say a foreign power controls a particular resource that determines the temperature of the economy? Or the possible adaptive rate?
MMT correctly points out that we are constrained by real resources, not financial resources. Regular old supply and demand theory still applies to real resources. A foreign power limiting supply of oil, for example, still causes price increases if demand stays the same. All MMT says is that if its being sold in dollars, the government can buy as much as it wants. I’m not sure what you mean by temperature or adaptive rate.
The question is if you control a resource and try to increase quickly the total capacity of the economy – the temperature – or try to increase so quickly that the means of production need to be changed – the rate of adaptation – what happens to exchange rates and the ability to import these bottleneck goods.
The common mmt explanation that is easy for those of us outside the field to understand is an essentially close to steady state description.
But what about overly dynamic situations? Does the logic of real world resources still hold or do we end up in currency fluctuations, capital flight or some other feedback problem I can’t predict that is primarily a financial problem before we reach our resource limits?
Two points should be hammered:
1. Inflation is, and always has, come from shortages of real goods, traditionally food or labor but, more recently, oil.
2. Currency continuously disappears from most economies through hoarding (saving), but this is particularly true for a country with a trade deficit as foreigners hoard (save) our dollars. It is critically necessary for gov to continually deficit spend sufficient to replace the lost cash, just as in the game monopoly the bank continuously injects cash to the players as they pass go (this has the effect of prolonging the game… if the objective was to ‘keep players in the game’ it would be necessary to increase payments to players sufficient to replace cash lost to those players hoarding the cash, I.e. the successful monopolists.
As noted by others, gov does not have to borrow to spend, and therefore has no need to pay interest. However, the interest injection does help to replace cash lost to domestic and foreign savers. Of course, much of cash injections that go to bond holders (the rich) is saved, and therefore does not efficiently replace lost cash… much better to inject cash to those that will spend most of it, such as workers hired to build and repair our crappy infra.
Economists should be looking at the question of how much is lost? What is the right deficit? Does last years inflation rate affect This? Population growth? Should deficit spending be skewed (block grants?) towards regions in recession? What is the effect on growth of a dollar spent on infra, military, or tax cuts for the rich?
” To no one’s surprise, the coordinated orthodox assault on MMT scholars focuses on progressive MMT scholars.”
It would be useful to name some not-progressive MMT scholars. I think this is possible – as someone else pointed out, MMT is already accepted when it comes to military spending. In a sense, the real debate isn’t over fiat money, but over how to spend it. That is an extremely familiar political issue, not economics.
I think it’s worth saying that the REALITY of MMT is quite new: the US dropped the gold standard (Nixon!) in 1972, thus going to full-blown sovereign currency. That may seem like a long time ago, but I remember it clearly. To paraphrase the famous saying, “Economics advances one death at a time.” Maybe there just haven’t been enough generations until now.
That said, MMT doesn’t look that different to me from the Keynesian economics I learned in college in the 60’s. It’s basically a return to an old orthodoxy, with new possibilities that Nixon (!) created.
And a caveat: new means that we haven’t seen all the pitfalls yet. The one I worry about is that we’re actually resource-limited, meaning natural resources, most of which are declining dramatically. There may be empty factories and unemployed people, but there may not be the materials to run through them.
Hats off to Prof. Black. I try to read all the attacks on MMT, the latest – we can’t print enough currency to fund the deficits, huh? The attackers really cannot find anything wrong with MMT. I personally believe we should drop the “theory” part , since it describes the monetary systems workings which we have operating right now.
Forty years ago, we had a strong middle class, but the capitalists were threatened by this new force who dared enter the political arena and press their demands for civil, labor, health rights, food safety and environmental protections and ending an illegal war during the 60’s decade.
They thought they had conditioned everyone to think of public sector investment as “socialism”. No, it’s actually what government is supposed to do and did prior to the 80’s. The truly “garbage” agenda (junk economics, gotta love Michael Hudson!) to reduce the world to poverty has been exposed and is on its way out.
“In recent days MMT has captured the attention of anyone who can fog a mirror—even those long thought dead. The critics are out in full force—from the crazy right to the insular left. A short list includes Doug Henwood, Jerry Epstein, Josh Mason, Paul Krugman, Larry Summers, Ken “Mr Spreadsheet” Rogoff, Bill Gates, Larry Fink, George Selgin, Noah Smith, and Fed Chairman Powell. After laboring for a quarter century in the wilderness, the developers of MMT are pilloried for unleashing a theory that is “crazy”, “disastrous”, “hyperinflationary”, “nonsense”, “garbage” and just plain “wrong”.
What all the critics have in common is that they have not bothered to read the MMT literature. Oh, it is just too much effort for the lazy critics! So they imagine what it must say, conjuring up the most ridiculous thing they can imagine, and then tear apart ideas so stupid that no one could possibly hold them.”
MMT Responds to Brad DeLong’s Challenge
By L. Randall Wray
Kudos to Bill Black. Emulating Cato he should conclude every article he writes, every interview he gives, with the words he has here – “progressive core policy issues (are) on the environment, health care, and restoring the rule of law to the markets.”
It seems obvious that a sovereign government can make its money worth anything it wants up to the point of total (re)allocation of the state’s resources, because it can use force to tax, expropriate, draft, or enslave to obtain the value for which the money it issues is a marker. However, political difficulties are likely to arise when the resources are reallocated from those who presently have or control them to someone or something else, especially among those who are distant from the elses. For instance, Trump or his friends have been talking about how the Green New Deal is going to take your pickup truck away and make you buy an electric Snowflake model — if you can afford one, which many pickup owners will be unable to do, going by present prices and incomes. In an alleged democracy, public disquiet, especially among the better-off, can be a potent political force. Fundamentally, money is a license to access and consume a certain portion of the (finite) aggregate social product, regardless of what mumbo-jumbo may attend its birth, adventures, and death. Is this not so? And thus some are likely to rise while others fall. That would be the problem proponents of MMT + GND would have to deal with, not the orthodoxy of conservative economists.
When Nixon took us off the gold standard “accountability” began to slip away. It was lost across the entire globe. Politicians and their elite handlers became unconstrained in their selfish spending and power grabs. We have since suffered four or five market crashes? Job losses, housing losses, losses of life’s saving’s, and middle class destruction. Hasn’t it been the consensus of this community on NC that the continued printing of money continues to enable the same politicians and elites?
MMT is printing on steroids, to infinity and beyond. And the same politicians and elites will then broker even more of the power over our markets, economies and lives. If we let this genie out of the bottle it will be truly Orwellian. MMT doesn’t address the concentration of power, it enables it.
I think a lot of folks are coming to this trough because they think it is a means to fund their priorities. We don’t feel like we are actually represented in our government and if the lid comes off the budget we can all get what we want. It’s a poison apple. We will get bread and circuses while even more power concentrates.
What is the answer then? Do we ride our elected officials harder? Do we have more protests? Insist on the rule of law? Can we ever hope for a more representative government? Or are we all hamsters on the wheel running as fast as we can because we know it can’t last forever?
“MMT is printing on steroids, to infinity and beyond.”
No it isn’t. Why are we allowing such straw men to be presented here?
MMT describes fiat monetary operations — it is a descriptive tool, not a prescriptive one.
All Orthodox economics are ‘bad’ economics is the only realistic reply to mainstream economists opposing MMT.
And that problem is not merely about its ‘macro economics’, but begins with the nonsense of ill-defined preference/utility theory at the heart of the so-called theory of the consumer, and which creates a theory of the firm separate from the reality that to consume is to use to obtain a direct or indirect benefit from that use.