Home > Uncategorized > Martin Wolf says MMT is right, but …

Martin Wolf says MMT is right, but …

from Lars Syll

Modern-Monetary-Theory-1-1024x562Now we come to the core of Wolf’s objection. It is, as he admits, political. And it is that politicians might use their judgements. Heaven forbid! Wolf is very clearly of the school that created economics to impose constraint on that judgement so that full employment, rising real wages and a redistribution from capital to labour may not happen. And now he is petrified that the so-called economics that underpinned that heinous political system is shown to be wrong the constraints must still be imposed because politicians – and so, of course, those who elected them – cannot be trusted with the economy. Only bankers can have such faith placed in them, according to Wolf.

But he is wrong, of course. The 1970s are not now. And the economics of that era, including the belief that money was still a scarce resource, are even longer gone. Instead we live in an era of perpetual underuse of labour, and of politics that, if given the choice to do something would rather not do it. We have stagnation, inequality and real poverty precisely because of the maintenance of the economics that Wolf now wants to perpetuate by fear alone.

And tacitly even he admits that. He has to acknowledge the power of the state to intervene. In his conclusion he says:

“The solution, nearly all of the time, is to delegate the needed discretion to independent central banks and financial regulators. Yet proponents of MMT are right that during a period of structurally feeble private demand (as in Japan since 1990) or a deep slump, a sovereign government must and can act, on its own or in co-operation with the central bank, to offset private weakness. There is then no reason to fear the constraints. It should just go for it.”

We are back to basic errors here. We have endured structurally feeble private demand for a decade now. And we need a Green New Deal. We could deliver that GND without problem precisely because there is structurally feeble private demand without there being a shortage of resources or inflation. But when a central bank is told it may not deliver such a programme it is an impediment to progress. The result is we need to sweep away the central bank and the independence it has that is this impediment to progress. Or we, at the very least, need to change its mandate.

Richard Murphy

  1. ugu Google
    June 11, 2019 at 11:52 am

    Which Green New Deal do you mean? The only one we’ll elaborated is to my knowledge the one from DiEM25

  2. postkeynesian spain
    June 11, 2019 at 12:41 pm

    “MMT is right, but” the problem of balance of payments, exists.

    • lobdillj
      June 11, 2019 at 3:40 pm

      Why do you say that? What does balance of payments have to do with MMT vs our present system?

      • postkeynesian spain
        June 11, 2019 at 8:48 pm

        If a country have a commercial deficit, is a problem, can’t have a political expansive and down unemployment, because go to a crisis of balance of payments. Only for time limited.

        MMT say: Big expenditure public budget with down unemployment.
        I say: Deficit commercial and crisis.
        The secret is limited the imports or have exports. The experence say this.

      • postkeynesian spain
        June 11, 2019 at 8:51 pm

        Is more, never a government applicated MMT because is a error of geopolitic, not is for economic ignorance. Because deficit cause deindustrialization and technological dependence.

        USA is a big example.

      • lobdillj
        June 12, 2019 at 2:48 am

        I apologize, but I can’t understand your reply well enough to discuss it. Thank you for trying to put it in English, I wish I could speak Spanish. Maybe someone else here will help us communicate.

  3. Greg Hannsgen
    June 13, 2019 at 3:30 pm

    postkeynesian spain: So you know MMT says there must be a floating exchange rate, especially for a small, open economy, in order for the claim that there are no financial constraints on deficits to be true. Does that change your opinion? In other words MMT says the issues are different if there is an attempt to set the exchange rate, back the currency with metal, or create a currency union. Indeed there can be a balance of payments crisis in that case.

    • postkeynesian spain
      June 13, 2019 at 5:52 pm

      An exchange rate stability is needed for a prosperous economy.

      • postkeynesian spain
        June 13, 2019 at 5:58 pm

        If any country needs imports, he need exchange rate stability, he can floating but with margin, and the best importatnt, all countries needs imports today.

        Turkey and Argentina now for example. Asians in 1997 other examples, i can give more. The exchange rate limited the politics, always, and MMT don´t used because is a error, not for ignorance.

      • postkeynesian spain
        June 13, 2019 at 6:01 pm

        China is the opposite of MMT and USA is MMT.

        who winner the battle today?

    • lobdillj
      June 14, 2019 at 1:50 pm

      Where are you getting your information about MMT? Where is exchange rate claimed to be a MMT issue?

      • postkeynesian spain
        June 14, 2019 at 2:21 pm

        MMT want floating and fiscal deficit, but floating aggressive cause problems to all countries that need commerce with others. Never countries want free floating, all want have a limits in the float for the commerce (there has been no country that has not intervened in a currency crisis).

        MMT is unnestable for the external commerce because floating can sink the country when need buy imports or pay liabilities.

        For countries can not place their assets abroad a fiscal deficit with deficit trade balance is unsustainable.

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