The NYT article on MMT is bad
noahpinion.substack.com
noahpinion.substack.com
What we call "money" is, at bottom, simply a set of widely-distributed tokens that we use in lieu of centralized bookkeeping. When you accept any kind of money, including gold, in return for goods given or services rendered, you're trusting that you can in turn use the money in the future to acquire goods or services yourself, in a quantity you find acceptable. As long as price increases remain "reasonable" (EDIT: for whatever value of reasonable is politically feasible), it really doesn't matter how much money is in the system.
The central thesis of MMT, as I understand it, is something like this:
1) The economy will often have greater capacity to produce goods and services than it is currently doing (i.e., additional supply could exist).
2) Society will often have people willing to buy additional goods and services if produced and they had the money (i.e., additional demand could exist).
3) When both additional supply and additional demand could exist, it makes sense for the government to "print money" and put it in the hands of the people who would spend it if they had it; that way, those people can buy additionally-produced goods and services and so keep more workers and assets productively employed.
4) Ideally, this will also increase our productive capacity still further, in a virtuous cycle.
Chapter 3 of The Deficit Myth is online at https://www.milkenreview.org/articles/the-deficit-myth — excerpt: "When I arrived in Washington in 2015, I was the only staffer on the U.S. Senate Budget Committee who looked at the world through the lens of a currency issuer. I knew the federal government wasn’t like a household or a private business. I knew Uncle Sam could never run out of money. I knew that inflation, rather than insolvency, was the relevant punishment for overspending. I also knew I was alone in this thinking." (Emphasis added.)
Kelton also has a piece at https://stephaniekelton.substack.com/p/its-oooooooooooooo-bi...
MMT's only unique proposition was that the upper bound of money creation was much higher than previously thought. MMT kind of promised an infinite money glitch hack of the economy, and the reality has been closer to a bit of loose change.
Also, Kelton et al have severely underrated how much people hate inflation. So it's well enough to say we can pay for a ton of government programs with a bit of inflation, but people are going to hate, hate, hate it.
And right-wing media had nothing to do with that, of course.
Agreed (and that's not what I said).
In this case, they really don't have anything to do with that. The average person has a much better BS detector than economists give them credit for.
Most people are quick to see inflation for what what it is: Theft from the average person for the benefit of government and banks.
Money printing is great when you're the money printer or close to the money printer. It's crap when you're money doesn't go as far.
https://www.nytimes.com/2021/04/07/opinion/biden-infrastruct...
It is necessary. MMT an immoral economic theory used to justify a very specific set of policies that would not otherwise be feasible. You'd have a very difficult time selling an enormous expansion of the state if individual citizens had to directly foot the bill through taxes, so instead you convince them that you can just print the money at no cost to anyone, the ultimate free lunch. MMT is by its very nature political since it involves transferring a large amount of wealth from individuals to the state (and bankers) via inflation, which is an inherently political decision.
Some of the related ideas, like the "job guarantee" as what amounts to a supply-side intervention, show a similar "twist" on labor economics: it's hard to tell whether they're interesting or new, but if they're interesting they're not new (you can achieve the same effect with an EITC-like wage subsidy), and if they're new they're not interesting.
Last month, she was arguing that price controls are now necessary.
This is clearly a movement that is bailing out water, so the NYT piece is especially baffling.
Was QE not MMT in action? I’d appreciate enlightenment from someone who understands better.
Proponents of MMT are often arguing for conventional government stimulus. The basic idea is that the shape of the globalised economy is such that we have more deflationary pressures than were observed in the 20th century when standard monetary theory was conceived. Typically proponents argue that the government can assume a larger role in the consumer economy without adding inflationary pressure.
He explained recently how he feels QE 2008-16 (which led to asset price inflation) is different to QE in covid times.
https://www.taxresearch.org.uk/Blog/2022/02/06/reversing-qe-...
In fact, they specifically says that you have to manage inflation with fiscal policy, by “taxing money out of the economy” or cut spending.
Neither of which are even close to occurring in the United States.
Politicians are going to politician. Just look at the “dynamic scoring” models republicans apply to tax cuts. It isn’t the job of economic theory to ideologically reign in politicians, it’s job is to model to world accurately. I haven’t read enough into MMT to actually assess that for myself, but it’s ridiculous to assert that it’s flat out wrong because politicians run deficits (which they have done for decades before MMT even came into existence)
In fact, as long as we are at full employment deficits should be stabilized or cut.
In the end, it’s advocating utilizing the economic resources you ah e at your disposal, rather than letting them languish.
Also, note that the us is hovering at around 120% debt/gdp, a number that has declined since Q2 of 2020.
This is actually an accurate description of the whole of economics, irrespective of MMT.
At the end of the day they seem very much rooted in the question of wether there are productive economic assets that can be utilized. Yes => the government should spend money to use them, don’t worry about deficits, No => either spend less (create less demand for resources) or tax more (remove demand from somewhere else). In the end, there’s no reason assets should be left to no productive use, by their estimation.
“MMT is not a theory of how the economy works, but rather a set of political memes to push for more deficit spending.”
Put another way, MMT is the fallback defense for why a “modern government” like the USA can make the money printer go brrrrr.
This differs from traditional theory wherein the banking sector, specifically central banks, play the primary role in managing the money supply.
Proponents of MMT also advocate spending to maintain full employment, to the point when inflation occurs, at which point it becomes necessary to cut deficits.
Note that this policy prescription is only the case when a country actually controls their own currency.
Also, anyone who says things like “it means money printer go brrr” likely has spent close to zero time actually attempting to understand even basic facts about MMT, and likely gained anything they know about MMT from memes or shallow criticism.
So do Keynesians, relying on the Phillips Curve, which has to be one of the most embarrassing, historically invalidated concepts of all time.
> Also, anyone who says things like “it means money printer go brrr” likely has spent close to zero time actually attempting to understand even basic facts about MMT, and likely gained anything they know about MMT from memes or shallow criticism.
Waves macro finance degree here. MMT, magic monetary theory, is very much "money printer go brrrr" in practice. They rely on a qualitative understanding of inflation like the Austrians as opposed to a CPI quantitative understanding. Where Austrians see nominal credit expansion as money creation, MMT proponents see credit expansion as being able to be cancelled out via taxation at the aggregate level. It's argumentation via definition.
MMT also is of the "heads I win tails you lose" style of argumentation, because it pretends that state extraction of resources via taxes nets out the impact of state extraction of resources via inflation. Implicit in the (false) argument of no net impact on inflation is that those taxes will be transferred to deserving members of society via fiscal transfer payments, and therefore CPI-style inflation is mitigated. It's monetary communism and a philosophy promoted by charlatans.
Perhaps I’ve missed this, but what the hell is a “qualitative” understanding of inflation, and where have MMTer argued this?
Edit: after doing some basic searching, it seems that MMT’s primary critique is that CPI is a poor measure of overall inflation, and that it shouldn’t be a primary target of fed policy, because monetary policy mechanisms don’t have a very direct impact on moving the index.
That’s the best I can gather at the moment.
In their theory, what does fractional reserve banking do?
Unfortunately I haven’t gotten all that deep into the theory, so I can’t go much further on how they view fractional reserve banking.
This is basically the same conclusion as Keynesianism or even Fiscal Theory. The difference is these other theories actually care about when inflation will occur. Meanwhile MMT kind of handwaves it away with "we'll know when we get there". And it only took about 5 feet out the driveway to find it.
> Also, anyone who says things like “it means money printer go brrr” likely has spent close to zero time actually attempting to understand even basic facts about MMT, and likely gained anything they know about MMT from memes or shallow criticism.
It doesn't help that most vocal proponents of MMT to tend to treat it like an infinite money glitch hack of the economy. And to be fair, the only insight MMT provides over more mainstream economic models is that deficit spending could be much higher than it is.
Also, Bretton Woods was very much covered in my high school history classes.