You don't need to be an 'investor' to invest in Singletrack: 6 days left: 95% of target - Find out more
I'd say that probably the majority of those on here who have engaged in the threads touching on economics are hostile to the idea of MMT, and have been personally hostile to those posters who have dared to suggest that MMT could be helpful. I would strongly recommend that they read 'The Deficit Myth' by Stephanie Kelton, but it's a long book and can be hard going. But the reason for this post is that Richard Murphy has just published a somewhat shorter explanation of MMT at
- it's well worth a read, and I'd be really interested to hear where and how the doubters disagree with the logic of Murphy's argument.
For me its not so much I do not believe it but that the enthusiasts for it on here have it as the answer to everything without any limits which is clear nonsense as you are diluting the value of the currency and thus at some point it will cause inflation and / or devaluation of the currency
I see it as one tool in the box not the panacea to all woes
I will join in.
I don't want to complicate things but just be aware that Murphy is not an MMTer - he refutes some parts of it - but he's definitely on the right side of the battle.
I can answer question too about the process not that I'm a professor or anything buyt I do know a few of the big hitters on the MMT side of things - and have entry level qualification in MMT / Macro.
Kelton's book is relatively accessible to be honest but the best stuff comes from the MMT podcast - lots of great information about MMT and Q/E etc.
Warren Mosler is the real father of MMT but very technical and he was a banker - he discovered it like this.
I would also recommend for detail maniacs: An Accounting Model of the UK Exchequer - a white paper created by freedom of information acts on the UK Exchequer.
https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/
I'm working with some of the gimms people to produce a documentary about the subject. But I have to do this alongside my normal prodcution work so it's taking a lot of time.
I have no idea if MMT will work or not. At this stage though, I'm not sure there's any way to avoid it regardless.
which is clear nonsense as you are diluting the value of the currency
I don't want to start a tangential argument, but the value of a fiat currency is only loosely related to its scarcity, if at all. Does the value of the pound go up when the government increases taxes to remove money from the economy? I'd still be
really interested to hear where and how the doubters disagree with the logic of Murphy’s argument.
For me its not so much I do not believe it but that the enthusiasts for it on here have it as the answer to everything without any limits which is clear nonsense as you are diluting the value of the currency and thus at some point it will cause inflation and / or devaluation of the currency
I see it as one tool in the box not the panacea to all woes
No one on the MMT side says this stuff. We get responses like this all the time.
It doesn't devalue currency - that's decided on markets, for example USA spent trillions recently and because the economy has done well - money has moved into the dollar because of the economy's strength. Currency goes up and down for all sorts of complex market reasons. (Dollar strength has regressed somewhat but that's what happens when people move money in and out of assets.)
GBP and $$ are not pegged so there's no automatic devaluation. A common misunderstanding.
That's not what's being said.
You can spend without budgetary limit but you would want to target the spending and keep an eye on inflation that might occur.
It is a tool - but lack of money is also the number one reason politicians give for not funding things. How much damage do you think that gives to society?
It's not a solution to all woes.
I don’t want to start a tangential argument, but the value of a fiat currency is only loosely related to its scarcity, if at all. Does the value of the pound go up when the government increases taxes to remove money from the economy? I’d still be
Currency is largely irrelevent to MMT.
People get all hissy about it - but in reality things jump about. It's not an automatic feature of MMT.
See my USA example.
Also MMT is a description - we don't choose to do it. It's an accurate model of government spending in fiat systems - with central banks.
The prescriptive side comes with political will - should we build new roads? - are the resources available etc.
the enthusiasts for it on here have it as the answer to everything without any limits
Sigh! No one has ever said that. The difference (to repeat again) is that the limit is not the amount money the government posesses or can create, but the labour and raw materials available in the economy. I really don't understand what's so difficult to understand about this simple point.
MMT has two sides to it. First a recognition of the reality of how goverment finances work in a country with a sovereign fiat currency, second how to manage those finances to provide stable prices, full employment, public services, national infrastructure etc. We already have MMT to a certain extent, but the mechanisms by which it is operated are ridiculously over-complicated and opaque which enables the financial sector to profit from being the middlemen. It could be managed much more simply, more fairly, and be more accountably. You don't have to think too hard to see the reasons why it isn't.
Basically the magic money tree does absolutely exist, but only a tiny few people have access to it and benefit disproportionately from it. Dodgy PPE during covid was a classic example. If we were honest about how it all works and transparent and accountable about how it is operated, the PPE scam would never have happened.
We're in the process of seeing the negative affects of MMT
Quantitate easing post 2008 and the pandemic, plus high employment rates following Brexit and people retiring early.
Both have contributed to the current high levels of inflation we're currently seeing.
High inflation hurts everybody, especially those at the bottom, so it needs to be brought under control.
Pumping more money into the economy is just adding fuel to the inflation fire.
The exchange rates between the £ & $ are closely linked the the interest rates in both areas, so there has been a flow of funds to the US where the return on Bonds are higher. Also Brexit hasnt helped as we're no longer the obvious choice of international companies to set up an EU base, which has made the £ less desirable.
We’re in the process of seeing the negative affects of MMT
No we're in the process of seeing the negative effects of an economy being managed in the interest of a tiny few rich people.
High inflation hurts everybody, especially those at the bottom, so it needs to be brought under control.
Pumping more money into the economy is just adding fuel to the inflation fire.
And if you read the stuff about MMT you'll see that it is in agreement with this. The difference is in how inflation is controlled, by leveraging more tax on the economy and targeting it the most inflationary sectors such as asset owners. Currently asset owners are protected, and producers (ie workers) are punished. As a good example we have the perverse situation of pensioners getting an 11% rise while workers get much less.
The difference is in how inflation is controlled, by leveraging more tax on the economy and targeting it the most inflationary sectors such as asset owners. Currently asset owners are protected, and producers (ie workers) are punished.
Which comes back to Fiscal vs Monetary policy.
Either way you're looking at reducing the amount of money in circulation, its just which mechanism you're using to achieve it.
Rone - you are the worst offender for it! You constantly say its the solution without limit to every problem
but lack of money is also the number one reason politicians give for not funding things.
100% this. There is no shortage of money and there never will be, there will just be different ways to control its distribution (public and private) and its worth (inflation). MMT isn't a untried method of how money is created, Its mostly how governments fund things already, the lies told to the public about "household budgets" and "balancing the books" are ways in which politicians protect the wealth and asset holding classes to the detriment of the wider population.
There is an investment adage that “the four most dangerous words in investment is “this time it’s different””. And MMT is a macroeconomists version of it. It’s a wrong ‘un.
Either way you’re looking at reducing the amount of money in circulation, its just which mechanism you’re using to achieve it.
Yes, and if done via taxation it's fairer and more transparent. No one is arguing that inflation doesn't need to be controlled, it's one of the central pillars of MMT. It's not MMT that has caused inflation, it's the unwillingness of the govt to limit energy price rises and tax asset owners. The idea that there is too much money in the economy is ridiculous. At least there are some people who seem to get this..
https://twitter.com/whitecarz/status/1648094845271941121?s=20
We’re in the process of seeing the negative affects of MMT
No we’re in the process of seeing the negative effects of an economy being managed in the interest of a tiny few rich people.
MMT can be used to benefit the "tiny few rich people"... arguably that's exactly what happened in the UK at the height of the pandemic under the schemes Sunak designed that had the government funnelling more money to the rich, especially their VIP contacts. Same again with energy prices... plenty of new money from the government going into Shell developing new oil and gas fields, and taken in profits. Sunak uses MMT, just tailored to fossil fuel production and huge back handers to Conservative backers.
it's always the ill-informed.
Quantitate easing post 2008 and the pandemic, plus high employment rates following Brexit and people retiring early.
Both have contributed to the current high levels of inflation we’re currently seein
Q/E is not MMT for a start.
MMT can be used to benefit the “tiny few rich people”… arguably that’s exactly what happened in the UK at the height of the pandemic under the schemes Sunak designed that had the government funnelling more money to the rich, especially their VIP contacts. Same again with energy prices… plenty of new money from the governemnt going into Shell developing new oil and gas fields, and taken in profits. Sunak uses MMT, just tailored to fossil fuel production and huge back handers to Conservative backers.
A slight distortion of what happened.
Government decisions are responsible here - not MMT itself. You don't blame the road for speeders - you blame the drivers.
MMT happens irrespective of political choice.
Rone – you are the worst offender for it! You constantly say its the solution without limit to every problem
I'm not an offender.
I've just detailed what I think above.
Once again (for the hundredth time) - the is no budgetary reason why a government (with a central bank) can't spend as much as it needs on whatever is available in its own currency.
The actual limitations are inflation and real resources.
Governments spend money into existence so you can can fulfil your tax obligations. That's what gives demand to the money.
The idea that sterling is finite is the issue.
I'm not doing this one again TJ in this context with you flipping out about it. I get that some of this is a shock to people who were told by the establishment - this - is - how - it is.
I was just this morning looking into the process of BoE spending for government to help summarise it.
There is an account at the BoE for the UK government called the Consolidated Fund. (which sits along side 3 other accounts in the process (HMRC account etc)
This starts the day at 0. Spending takes place every day with a zero account. Tax revenue never reaches the spending account, it only deletes off from the C.F at the end of the day. And when what is left rolls out to the National Loand Fund for borrowing - after all the spending has been made.
The first tranche of pension payments go out at 09:30 when the accounts are zero.
It's technically impossibel to start the day with a positive balance on the C.F. You know why - because the BoE create the money for purchasing everyday.
Anyway, if we didn't have MMT the alternative would be even worse austerity and stagnation. Having to tax first before you can spend is a stupid way to run an economy and would lead to deflation and depression. We flirted with that in 2008 and during covid. The solution was to create money and use government policy to distribute it where it needed to go. It had some negative effects in that it filled the pockets of people who shouldn't have received it and pumped up the stock market and property prices, but without it we'd have been looking at double digit unemployment and mass bankruptcies. What we need to do now is make sure we get that money back by taxing the wealthy and spending the money on public services and infrastructure.
If the UK Government was to do something constructive with our money. Like investment in infrastructure, skills and productivity there could be significant long-term benefits. However, all that QE resulted in corporations using cheap money to fund share buy-backs (rather than investment) the nett effect being to improve EPS, thus improving exec bonuses and their remuneration giving them an excuse to pay themselves even more money. Not helped by this venal government who see it as their mission in life to transfer the wealth of the nation to their coterie of chums and donors to the detriment of everything else.
Having to tax first before you can spend is a stupid way to run an economy and would lead to deflation and depression.
No government works that way. The spending always happens first. Taxation follows on. No budget would announce that the tax burden would rise the following year... but then spending increases are held back to the following year. They say what they plan to do in the coming year, and then revenue is collected back after the event, often in subsequent years.
The solution was to create money and use government policy to distribute it where it needed to go.
Absolutely. And it happens all the time, but the pandemic was just relatively contained time wise so a good example to explain it to people. Watch where all the new money goes though... and who later gets hit by the taxation (and wage restraint/devaluation).
[ EDIT: to be clear, I agree with your post 100% Dazh ]
Just to be clear - Q/E is not MMT.
it's basically a round the house approach to make it look like government funding was 'borrowed'.
Q/E on its own injects no more funds into the system. Q/E just buys up exisiting bonds and gives cash back to the purchaser. No net increase in funds.
Monetarism is the opposite of MMT - these guys believe everything starts with the private sector. And of course there is a commercial banking sector but it is underpinned by the BoE. They make loans not 'net money'. It has to be paid back.
So money that is used to buy bonds is just government spending that has already happened - and the national debt is a record or score keeping of that process. It's not an actual debt that needs to be paid back.
So the ideal would be simply to 'use' MMT to fill the holes currently in the state system.
NHS - Wages - go into the real economy - big boost.
Green infrastructure / energy
Schools
All the stuff we want - but this is a big debate. What do you want?
Why Tories / Labour are against the first part I will never know - if you want to grow the economy you have to grow the state, and spend into it.
Monetarism ruins everything. Blame Milton Friedman - he's so wrong on inflation as most of us would agree.
Why Tories / Labour are against the first part I will never know
Because politicians generally don't understand how the economy works, so they ask the 'experts' like Andrew Bailey and the CEOs of the big banks. Those experts tell them monetarism is the only way because it gives them power and riches. The politicians who do understand are either dismissed as dangerous radicals or being bought off to keep quiet about it. Keir Starmer is a classic example of a politician who doesn't understand and the likes of Rachel Reeves are the ones who know but don't speak out.
No government works that way. The spending always happens first. Taxation follows on.
Can I just jump in and modify, and say local government is funded by taxation - they're currency users.
That's why local government takes the hit on local services.
They're constrained.
That’s why local government takes the hit on local services. They’re constrained.
Government decisions are responsible here
Because politicians generally don’t understand how the economy works, so they ask the ‘experts’ like Andrew Bailey and the CEOs of the big banks. Those experts tell them monetarism is the only way because it gives them power and riches. The politicians who do understand are either dismissed as dangerous radicals or being bought off to keep quiet about it. Keir Starmer is a classic example of a politician who doesn’t understand and the likes of Rachel Reeves are the ones who know but don’t speak out.
I agree - I meant more that they want and expect private sector growth so why be against state spending?
Sunak wants to lower the national debt and create growth. The two don't simply operate like that.
The idea that sterling is finite is the issue.
This is just nonsense
Anything which is infinite has no value.
Also I'm totally against the charade of BoE independence. (They're not independent in a literal sense of the word) - The BoE is currently making all the wrong decisions for many peoplpe - and wilfully harming by pushing unemployment as a back-stop to inflation (that these same people didn't cause) but neither Rachael Reeves or Hunt will make any sort of a stand with them.
How is that democratic or reasonable?
This has nothing do to with MMT as such.
This is just nonsense
Anything which is infinite has no value.
It's categorically not nonsense.
We're not on the gold standard any longer (if you haven't noticed) so it is not backed by anything.
It's created when it's needed for spending.
It's domestic value is determined by taxation - so there's not a infinite supply out there - just an infinite mechanism (marking up accounts digitally) for spending. Taxation destroys money in the same way it's created.
Inflation arising out of too much spending is your marker that there may be too much money chasing too few goods. (Current inflation doesn't arise out of this as we've discussed.)
I meant more that they want and expect private sector growth so why be against state spending?
TBH I think Sunak actually thinks the private sector 'creates money'. Being an ex-investment banker doesn't really qualify him to manage an economy. He no doubt thinks that as long as the rich are in control, they will generate wealth and hence growth. Starmer on the other hand is just terrified of speaking the truth and going against the entrenched small state paradigm. I hope and pray it's just and election strategy, but the more I listen to him and Reeves the more I think they actually believe this nonsense. It's depressing.
Sterling is not infinite. It is finite... but that limit can be changed at any time to any amount by the state (however that is split up between government and central bank). So it's variable, yet controlled. The limit is arbitrary and can be changed. And we all know that it is, don't we? No one is claiming it never increases in supply, are they?
. I hope and pray it’s just and election strategy, but the more I listen to him and Reeves the more I think they actually believe this nonsense. It’s depressing.
I'm happy to be wrong about him if that did occur. But can't see it. He's establishment through and through.
Sterling is not infinite. It is finite…
It's infinite in terms of the state to keep creating it. It isn't going to run out.
Whereas on Gold-standard or Bretton Woods it wasn't.
TBH I think Sunak actually thinks the private sector ‘creates money’.
He said as much - smack bang in the middle of the pandemic.
'The government has no money of its own.'
What a fool.
Anything which is infinite has no value.
Money has no intrinsic value. It's just a promise, and promises can be broken. It only has value because it is very convenient for us all to continue to pretend that it has.
‘The government has no money of its own.’
Isn't that a Thatcherism? Ah yes, her exact words were:
Let us never forget this fundamental truth: the state has no source of money other than the money people earn themselves.
Utter bollocks then, utter bollocks 40 years later.
Money has no intrinsic value. It’s just a promise, and promises can be broken. It only has value because it is very convenient for us all to continue to pretend that it has.
This is mostly true but ...
You need money to pay your taxes that's why you need to obtain it. The government demands taxes paid in its currency.
You could start a currency tomorrow but there would be no demand for it if you can't force people to pay taxes in it.
Money has no intrinsic value. It’s just a promise, and promises can be broken. It only has value because it is very convenient for us all to continue to pretend that it has.
You can do much worse than watch this if anyone wants to understand the nature of money. And it's another opportunity to post a Graeber video 🙂
I will add to the above and urge you to listen to this too.
#157 Key Insights, Leading Thinkers, Vital Economics - with Prue Plumridge, Claire Jackson-Prior, Neil Wilson and Phil Armstrong
You need money to pay your taxes that’s why you need to obtain it. The government demands taxes paid in its currency.
You could start a currency tomorrow but there would be no demand for it if you can’t force people to pay taxes in it.
Sure, as explained in Murphy's paper that I linked in the OP.
Speaking of the original post, I notice that we are on page 2 and no one has yet responded to my original request. The very few who are hostile to MMT have restricted their reasoning to "it's wrong", which I have to admit I find intellectually unconvincing. Would anyone like to address the argument?
You need money to pay your taxes that’s why you need to obtain it. The government demands taxes paid in its currency.
If money is infinite then why do you have to pay tax in the first place?
The Government dont need it, they can just keep printing it.....
The very few who are hostile to MMT have restricted their reasoning to “it’s wrong”, which I have to admit I find intellectually unconvincing. Would anyone like to address the argument?
Like most things theres a time and a place.
All economic theories assume everyone is rational, and humans are very far away from being that.
If money is infinite then why do you have to pay tax in the first place?
The Government dont need it, they can just keep printing it…..
Answered in the paper I linked originally. Please read it, and then maybe you can debate it properly.
If money is infinite then why do you have to pay tax in the first place?
The Government dont need it, they can just keep printing it…..
Methinks you're being deliberately obtuse here. It's clear you don't really understand what MMT is, so I will give you my usual advice to go away and do some reading with an open mind.
All economic theories assume everyone is rational, and humans are very far away from being that.
MMT isn't really an economic theory. It's a description of how modern government finances work and why the ubiquitous metaphor of household finances and the limitations that comes with it are wrong.
Can we not respond to all queries with "go and do some reading"...? Please try and summarise in a form that works in a forum reply. And if that isn't possible... ponder how hard it would be to explain it to the wider public.
A physicist, a chemist and an economist were shipwrecked on an island and the only item of food they had left was a tin of beans. They had no means of opening it so each tried to come up with an answer as to how to gain access to the contents. The physicist suggested smashing a stone on the can to create a crack, the chemist suggested immersing it in sea water to promote corrosion of the seams. After an exaggerated pause the economist said “let us assume we have a can opener”….
MMT is the product of a minority set of a “profession” which spends a disproportionate amount of its time theorising in unreal worlds. Unlimited spending only works if every government does it; in isolation the devaluation is catastrophic. (A form of it works in Japan because the government debt market is very substantially held by Japanese entities not overseas investors).
<span style="font-size: 0.8rem;">Can we not respond to all queries with “go and do some reading</span>
Normally I'd agree with you. However, when the original post said 'go and do some reading and then come back and discuss it', I think it's understandable that I might get a bit short with people who haven't done the reading but then proceed to gainsay stuff that is addressed in the thing they were asked to read.
Unlimited spending
MMT=/= unlimited spending.
It's just a way about being honest about how the government of the day manages access to and who benefits from, a useful resource.
Unlimited spending only works if every government does it; in isolation the devaluation is catastrophic.
Please show us where MMT recommends unlimited spending?
As others have already pointed out, MMT is a description of reality. What governments decide to do with that description is something else entirely.
Please try and summarise in a form that works in a forum reply.
We have. Many times. How many time have you hear myself and rone (and others) repeat the same things in very simple language? And yet people still respond with the tired old tropes about Weimar Germany or Zimbabwe even though they've been shown to be irrelevant.
So once again, to address the 'money isn't infinite' argument. The potential amount of money in an economy is not finite, because the government can - and does - create as much of it as it wants. What is finite however is labour and raw materials, so the govt will only create as much money as it thinks it needs to do the stuff that the available labour and resources can do, otherwise we get inflation. It may sound like a pedantic point buts it's an important distinction, because our politicians often tell us we can't have the things we want/need because there isn't enough money.
The reason people go on about it so much is because once you look at the economy and govt policy through the lens of MMT, most of the justifications for not doing stuff like having a well paid well functioning health service, cheap public transport, efficient local services, high quality schools, free universities etc evaporate. We can have all these things, and we can afford them. All we have to do is manage the economy in a slightly different way to the way we currently do it, and be honest with each other about how it works.
We can have all these things
Ah, but the capitalists (who are in charge, and look to be in charge for the foreseeable) don't want those things to be affordable and available, they want them to be scarce and expensive, so they can make a profit from them...
From the article:
It can be summarised by saying that MMT suggests that a government spends the currency that it wants to be used to make settlement of the taxes owing to it into the economy with the active assistance and support of its central bank when undertaking its routine spending, for the purposes of which expenditure the central bank provides all the money required by way of loans meaning that neither tax revenues or third party government borrowing are required to fund that spending
Ah, but the capitalists (who are in charge, and look to be in charge for the foreseeable) don’t want those things to be affordable and available
Of course, but that can be changed. Actually one of the thing I like about MMT is that unlike Marxism or other political/economic ideologies, it doesn't really require wholesale change (revolution if you like), but instead is saying that we already have the solution, we just need to change its focus. I see no reason why you couldn't have capitalism, markets, companies, profit, entrepreneurs, stock markets etc in an MMT world because that's what we already have. What we wouldn't have though is runaway unsustainable wealth accumulation and an assumption of infinite growth at the cost of the planet and most of the people who live on it.
It's ironic in the extreme that the critics of MMT go on about how money isn't infinite when they support a system which assumes infinite and exponential economic growth. It's not MMT advocates who are in denial about the finite nature of our economy.
If money is infinite then why do you have to pay tax in the first place?
The Government dont need it, they can just keep printing it…..
Taxes peform several important roles.
1) Control inflation by deleting existing money
2) Shape policy for example (tax on booze & cigs etc) to make something more or less appealing/expensive
3) Redistribution - so some wealthy people have too much 'stuff' money/resources - you can remove their purchasing power by limiting how much they can gain by taxing them heavily - which means more 'stuff' for the rest of us.
Unlimited spending only works if every government does it; in isolation the devaluation is catastrophic. (A form of it works in Japan because the government debt market is very substantially held by Japanese entities not overseas investors).
Again it's not unlimited spending that we're shooting for.
It's unlimited access to issuing money to purchase the things we need. There is no technical limit on the money that can be issued.
There is a huge difference.
Well Japan, New Zealand, USA, UK, Canada all do it. And like I said several times the USA economy has been very strong and it has issued trillions.
There is no absolute correlation beetween issuing money and devaluation - it's old fashioned gold standard thinking.
Just ask yourself next time you see an administration spend money on an Air Craft carrier or the military - budget is never of concern. Ever. It just zips straight through Congress or Parliament.
Speaking of the original post, I notice that we are on page 2 and no one has yet responded to my original request. The very few who are hostile to MMT have restricted their reasoning to “it’s wrong”, which I have to admit I find intellectually unconvincing. Would anyone like to address the argument?
This is a sad reality.
If you've been told for 40 years that taxes fund spending you're going to be angry when you find out they don't.
MMT is fairly logical in its approach but the machinations can be complex - the BoE definitely obfuscates the situation by actively denying it finances directly. There is also the problems of legacy - bonds/gilts are a roll-over from gold-stand and there are many examples like this.
How deep do you want to go?
Just take a step back and understand the government owns and controls the Bank of England and ask yourself in that case why do we need private money to fund public spending? It makes no sense at all to accept that we do, and when you unravel the process and look at the Covid spending package for example it's quickly very clear the private sector is not responsible.
My favourite Kelton quote during Covid.
https://twitter.com/StephanieKelton/status/1364059199123165185?s=20
we already have the solution, we just need to change its focus
Well put.
@rone - I hear your statements presented as fact.
I do kindly differ - but would struggle to explain why.
I don't accept all that you say is fact, it is a viewpoint, of which there are many.
I do kindly differ – but would struggle to explain why.
I don’t accept all that you say is fact, it is a viewpoint, of which there are many
Can you not offer something up? Monetarists themselves simply don't accept MMT - despite the masses of information. Don't forget I'm not the expert - Warren Mosler, Prof Bill Mitchell, Prof Randell Wray, Prof Stephanie Kelton and Prof Steven Hail are! I've just spent a lot of time with there material.
White Paper: Modern Monetary Theory (MMT)
https://docs.google.com/document/d/1gvDcMU_ko1h5TeVjQL8UMJW9gmKY1x0zcqKIRTZQDAQ/edit
Macro-economics is open to interpretation and there is debate within MMT about certain things of course. But MMT is an accurate description of government spending.
Kelton's story is interesting - she went to study (classically) about public finances expecting it to lead her down the path of private funding - but she kept getting knocked back with evidence the more she dug up that Central Banks fund the public purse.
I've put this up before but it was succinct - and relevant at the time for the pandemic.
another small one that I like.
So simple question and hopefully a simple answer. If MMT is great, why is everyone not doing it? Why is the G7 not saying, lads (its mainly lads) lets just do this. Its a vote winner, we will fix our infrastructure/health/energy issues, be the savour of our countries, they will build statues of us.
I do kindly differ – but would struggle to explain why.
"I know you're wrong but don't know why" 🙄
It took me a while to find it but look at this. It explains in one graph what MMT is (mostly) about. Notice how the amount of money in the economy (the green line) is a mirror image of the amount of the government debt (the red line).
Without govt 'debt' (ie money creation) we would have no private business. It's not opinion, it's a simple fact. The government creates the money, spends it into the economy, the private sector uses that money to do stuff, then gives it back in the form of tax. It's really that simple.
So simple question and hopefully a simple answer. If MMT is great, why is everyone not doing it? Why is the G7 not saying, lads (its mainly lads) lets just do this. Its a vote winner, we will fix our infrastructure/health/energy issues, be the savour of our countries, they will build statues of us
They are already doing MMT - or operating in an MMT system - they're just not taking advantage of it.
But it's a good question generally. Some politicians don't understand - some don't believe it works as MMT describes. Maybe they're scared that we would demand too much? There is also a great need to protect the establishment view. Look at how we've regressed with Brexit.
Think of it like this - the Government hasn't got a good track-record of necessarily acting in the interests of its population - so why should this be any different?
I recently gave my copy of the The Deficit Myth to our potential Labour MP - and I said that if Labour don't grasp this we will always be held back.
(Technically France, Germany and Italy don't operate MMT - have to go to the ECB and are not monetarily sovereign - but it's changed recently in the EU - and they did get access to their own funds. But it's a good reason to not adopt the Euro.)
So simple question and hopefully a simple answer. If MMT is great, why is everyone not doing it? Why is the G7 not saying, lads (its mainly lads) lets just do this.
Ask yourself some simple questions. Who benefits from monetarism and austerity? Who holds most of the private money in our economy? Who derives power from that wealth? The answer to your question is pretty obvious.
. If MMT is great, why is everyone not doing it?
If I said that the fact that we have a bigger national debt than 200 years ago would you think that's a good thing or a bad thing? And bear in mind what life was like for the average Joe 200 years ago when you do.
Now, if I suggest that debt (in this instance) means the money we owe ourselves does that change your mind about it?
Does the idea that govts have to run their finances like you do make it easy to understand govt finance? Do you think it's true?
I genuinely think that some politicians think that the "household" model is true, and I also think that some have realised if they tried to tell the public the truth, there'd be riots. I think politicians have dug a hole for themselves. In the 1930's when the first politician compared the way then that govt have to behave (because they were tied to the gold standard) like the average housewife it was generally true. But it also became an easy way to explain away why you can't do something (like give nurses a pay rise) that it was just too neat for them not to use when it was no longer true.
I think this is a key point:
What is finite however is labour and raw materials, so the govt will only create as much money as it thinks it needs to do the stuff that the available labour and resources can do, otherwise we get inflation.
In other words, MMT only works if the government can make money work as it should, i.e. as a means of exchange, a proxy for the available labour & resources that means we don't have to barter for everything. Ideally there is enough money created to slightly exceed the labour & resources around such that we get ~2% inflation.
When the government says "there is not enough money to do X" what they are really saying is a combination of "there are not enough labour/resources to do X" and "we are not prepared to redistribute the rights to existing labour & resources to do X". MMT is irrelevant to this - this is essentially all about wealth redistribution and the political will to enact it. MMT is just a way to make it a bit easier to sell the needed redistribution of wealth.
this is essentially all about wealth redistribution and the political will to enact it
Can just keep pasting this:
Government decisions are responsible here
But also Kelvin - most politicians do go around asking how are we going to pay for it.
That is the main narrative.
When did we last hear a politician asking - how are we going to resource it?
So MMT helps remove that restriction of money. It's a vital discussion.
So MMT helps remove that restriction of money.
Does it? It better explains the limitations and consequences, and the timing and options as regards interventions. Claiming that MMT removes restrictions on spending is what makes people with a broader understanding of economics bristle. MMT can help explain why certain intuitive models of the finances of state are wrong… but language about “no restrictions” and “no limits” around spending isn’t helpful.
https://twitter.com/StephanieKelton/status/1647342652570968064?t=fm-oUDWlynHdMSuxi_eLHg&s=19
The USA are worse with their mystical debt ceiling.
Claiming that MMT removes restrictions on spending is what makes people with a broader understanding of economics bristle. MMT can help explain why certain intuitive models of the finances of state are wrong… but language about “no restrictions” and “no limits” around spending isn’t helpful.
MMT is the description of the way the state spends.
And it does help remove restrictions on spending - that is not the same as no limits or no restrictions. It is a total fact that lack of money is the number one reason given for a government not spending.
Why evade the truth? In fact you are doing more here to possibly muddy the water unnecessarily.
It's the opposite rationale you should be pushing back against - lack of affordability - not doing word play against what is or isn't a restriction.
the description
Ah, economists. MMT adds important understanding, for sure. Don’t go all year zero on us.
And it does help remove many of the claimed restrictions on spending – that is not the same as no limits or no restrictions.
Agreed. With that little added clarification.
Ah, economists. MMT adds important understanding, for sure. Don’t go all year zero on us
What other model do you know that is accurate?
Case in point.
https://twitter.com/ITVNewsPolitics/status/1646128162743492609?t=Q_HKi9V4p8yclzWQbpeL9w&s=19
May I mention a couple of things that have not been mentioned yet (I think). Firstly, creation of what some regard as money by (commercial) bank lending, the fractional reserve and so on. And secondly debt owed by a government in overseas currencies, failure to pay whereof appears to be a signal for economic woe.
Where do these fit into MMT?
https://twitter.com/Allan1cas/status/1648417022768828416?t=BfmQFPLIRJVvTdaHqGa3fA&s=19
We end up with total horse-shit like this if we don't challenge the narrative of government finance.
If we reduce taxes it leaves more money in private hands. Not more money for the exchequer.