As we know Modern Monetary Theory is the latest great new plan from the left. Governments aren’t constrained by not having any money to do good things with, they can just make it and spend it, Yippeee!
And then we’ve this cautionary little tale about how the end game plays out. There’re more than just the one of those cautionary tales of course, Zimbabwe and Venezuela come to mind. Or perhaps Argentina:
Nestor Kirchner’s appetite for cash gifts — but not in Argentine currency — is now legendary. “He would kick anyone who brought him bags full of pesos rather than dollars or euros,” said Pablo Werning, an economist.
Yes of course this is some corrupt Latin American caudillo, not an upstanding Anglo politician who would never, ever, dream of doing such a thing. Hillary didn’t, as we know, sell State Department access for donations to the Clinton Foundation, Tony Blair hasn’t ever flogged off his position as ex-PM to dodgy foreigners on consultancy contracts. We are blessed by having a politics in which such things simply do not happen.
Thus MMT will work for us, right?
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I recommend learning what modern monetary theory is all about before writing about it. https://theconversation.com/explainer-what-is-modern-monetary-theory-72095
I agree with Steve. This writer puts up a crazy chart but his discussion is weak to support his premise and nearly non-existent. It’s quite easy to mock something with no basis for your non analysis.
I agree with Steve. MMTers have always made it clear that inflation poses a limit to how much stimulus can be implemented. However, as I've been pointing out for YEARS, some MMTers, e.g. Stephanie Kelton, are a bit irresponsible in that they write stuff advocating big increases in the deficit without mentioning that there are limits to how large deficits can be.
Possibly that sort of propaganda put out by Stephanie is justified as a counter to the large number of economics commentators who are under the illusion that government is like a household, and that it's budge must balance in the long term. It's hard to know how to strike the right balance.
"there are limits to how large deficits can be."
There is no physical limit on how large a deficit can be. Its just the difference between tax and spend.
If you could imagine an economy just starting from scratch, where the government imposes a tax, to requires the population to work for the fiat currency, then.... at this point in time, the deficit to GDP would be ∞ - An infinite deficit!!! OMG!
What MMT'ers say is that the size of the deficit has no meaning without other economic indicators to be taken into account . Is the inflation rate too high? maybe the deficit needs to be cut. Is there lots of poverty and unemployment? then maybe there is room to increase the deficit.
Bottom line... the size of the deficit is not meaningful on its own. To say there that the deficit can be too large - well, how long is a piece of string?.
Trying to guide the amount of government spending that should be done by looking at the tax revenue is getting it wrong.
The English should know this. When you are facing WWII do you look at the tax revenue to see how much you can spend?
NNOOO!!!!! That is stupid. You instead look at resources you have that you can fight the war with. You use the currency to optimise the use of those resources.
Wars are inflationary because governments tend to spend beyond the real resources to push things to the limit.
This is all MMTers are saying. Look at the real resources and focus on using them for the public benefit.
- If people are hungry and you are producing food that is not getting to them, fix that problem. Spending in ways that help the hungry be able to purchase food is the general idea.
- If people are wanting to earn money but can't find employment, this is an opportunity. The government can work to find work in communities that would enrich everyone that match to the people looking for work. The work gives them money and experience. They can more easily switch to better pay in the private sector which then ends the government money creation.
- If we are having an existential threat from climate change, the government is failing in its duties if it does not use the country's resources to solve it.
Looking at tax revenue to decide how to spend is like driving a car looking out the back window. Sure you can keep going straight, but you will not properly react to the required turns. You will fall off the cliff of climate change to your own ignorant death.
Just another article laying down cover fire for the austerity peddling neoliberals. MMT is not complex, but it does at least require a passing knowledge to criticize it, like anything else.
MMT is not a "plan." It is simply one of the few accurate descriptions of how the economy actually functions to be found in "Economics".
Of course, an accurate description sometimes highlights where a system can be made to work better, see https://clintballinger.wordpress.com/2018/11/14/mmt-the-fourth-spark-plug-descriptive-vs-prescriptive-revisited/