Home > Uncategorized > MMT = Keynes 2.0

MMT = Keynes 2.0

from Lars Syll

As time goes on, and 2020 turns into 2021, the long-held idea that governments are like households and businesses that have to repay their debts, or even that government deficits must be financed by debt at all, will increasingly be exposed as a mistake.

20It will be more or less a return to Keynes, except with the twist that the Keynesian aim of balancing the budget over the course of the cycle – deficits in bad times, surpluses in good times – doesn’t matter, not that anybody has actually achieved that lately anyway.

In future 2020 will be seen as the year when Keynes 2.0 got underway – when monetary and fiscal policy merged and a more sophisticated theory of government took hold, in which spending has no limit apart from the capacity of the economy.

As debt continues to be monetised, it will become obvious that without economic bottlenecks, spending and deficits can increase with no negative inflationary and welfare impacts.

Alan Kohler / The Austral

  1. Ikonoclast
    July 25, 2020 at 10:48 am

    Ah, my old mate “Coker Kohler” as I call him. I mean no disrespect. I don’t know him at all except as a familiar face on our ABC Television commenting on finance and economics. If he has said MMT = Keynes 2.0 then I think that is a very reasonable characterization. I speak as a person who temporarily developed an inordinate admiration for MMT several years ago and then toned it down as I learned more about economics, especially about Keynesianism.

    That Alan Kohler (I’m being properly respectful now) can fit two such proper nouns (MMT and Keynes) in the one article AND get them published in that reactionary Murdoch rag “The Australian” is nothing short of amazing. This is a marker of an astonishing shift in the dominant media and public discourse away from the standard neoliberal line of the political and corporate media elites. It’s almost a sign of a tectonic shift on its own. At least I hope it is.

  2. postkeynesian spain
    July 25, 2020 at 12:07 pm

    MMT isn’t Keynes. He critiqued the MMT in the tratise and he after always wanted a equality with the external sector.

    MMT is like monetary mystics for Keynes.

    • July 25, 2020 at 2:06 pm


      • postkeynesian spain
        July 25, 2020 at 3:45 pm

        MMT = Keynes is anachronistic first hahahahah
        But secondly, in the Keynes treaty he criticized the policy that is equal to the MMT, but you must read first. I understand that it is easier to try to offend than to read and understand.

    • Calgacus
      July 26, 2020 at 1:14 am

      I disagree. But this is to misinterpret Keynes in general and his later, considered views. What in the Treatise do you refer to? Think we’ve been around this before; so doubtful I’d convince you, but hopeful about convincing others.

      As Colander notes, Keynes became a Lernerian, following Lerner’s Functional Finance, the main ideas of which Lerner of course attributed to Keynes. And Lerner’s FF is basically MMT. The Lernerian answer to external sector worries – almost always imaginary – is basically “External sector? What external sector?” (See the two external sector chapters in his Economics of Employment) For there is no magically “external” external sector – that is, it should be understood as part of the domestic economy.

      But is there a more intellectually damaging obsession than the nearly universal wild – and I mean WILD – exaggeration of the importance of external sectors and finance to national economies? In the guise of Trotsky’s irrational opposition to Stalin’s common sense “Socialism in One Country” – it rules the Left, Marxists, Socialists to this day. The idiotic logic being that Stalin was bad man, therefore what he said was bad, what Trotsky said must be good. Ancient history except that this demented obsession and anti-socialist “socialism” has real world consequences – acquiescence to the most blatant betrayals that snatched defeat out of the jaws of victory – Mitterrrand in France, Tsipras in Greece. “Left” opposition to Brexit. Brazil’s caving to a fake debt crisis under Dilma Rousseff. Venezuela maintaining an insane currency exchange system. etc etc

      When it came to practical application of theory, Keynes was in the camp of those laughing at the external sector obsession. His essay on National Self-Sufficiency. His Economic Consequences of Churchill. His apt characterization “magnificently right” of FDR’s very important, but forgotten message to the 1933 London Conference. Which torpedoed planned but destructive international cooperation that would have only helped a few financiers, at the cost of damaging all the national economies involved. To paraphrase Keynes general ideas, replacing “budget” – “take care of the employment, and the external sector will take care of itself.” Something which Lerner explicitly said and Keynes later endorsed.

      But Keynes’ assessment (see Colander) that Lerner’s irrefutable FF = MMT logic was so simple that it would fly right over the heads of the many was unfortunately quite correct too.

      • postkeynesian spain
        July 26, 2020 at 4:26 am
      • Calgacus
        July 27, 2020 at 9:11 pm

        Thanks for the link. I gave several “examples” there- particularly the USA. You accused me of lying, which i do not agree with. Really for others now to see who is backing up his statements.

        Again, obsession with exchange rates etc is something that neither FDR nor Keynes had – backed up with quotes from them. And both enormously benefited the world by weaning it off of this obsession with the outside world – things one cannot really change – that has inflicted enormous internal damage to country after country – dwarfing any damage ever seen or conceived of from just letting things float and take care of themselves.

      • postkeynesian spain
        July 28, 2020 at 2:40 am

        Zero examples, but if you really gave me a example, copy and past here and now hahahahah

        Summary: In the era of fixed exchange rates and capital controls: low unemployment. In the era of MMT with flexible exchange rates and free trade: High unemployment .

      • postkeynesian spain
        July 28, 2020 at 2:41 am

        “Again, obsession with exchange rates etc is something that neither FDR nor Keynes had”

        OMG, only bull shit…

  3. Craig
    July 25, 2020 at 4:56 pm

    MMT = Keynes IS Keynes in that it’s a mere reform. Why? Because it does not comprehend private for profit finance (PPF) as a monopolistic, parasitic and hence illegitimate business model because it adds costs POST retail sale. Retail sale is the terminal ending point of economics. Hence PPF is non/anti-economic. (Spare me the mathematical justifications.) Furthermore it neither recognizes nor analyzes on the level of the paradigm/pattern thus rendering it inevitably reductionistic, palliative and non-resolving.

    The one thing MMT has going for it is that it philosophically aligns with the new monetary paradigm one of whose aspects is abundance.

  4. Ikonoclast
    July 25, 2020 at 10:14 pm

    “MMT isn’t Keynes” “MMT = Keynes is anachonistic.”

    Erm, read the metaphorical formula. It didn’t say MMT = Keynes. It said MMT = Keynes 2.0.

    I assume we all know about version numbers? I assume we all know that a new version of something is not identical to the original?

    • postkeynesian
      July 26, 2020 at 4:28 am

      Under this criterion Samuelson, Krugman or even Friedman are 2.0 keynes.

      The reality is that Keynes criticized proposals like the MMT in the treaty.

    • July 26, 2020 at 9:34 am

      Apologies for the “anachronism”: I was too unwell to see it as arguing retrospectively. I saw Keynes as having changed his mind between the Treatise and 1936, but had neither the Treatise nor a clear enough understanding of what MMT is trying to say to see in it an argument Keynes might be criticising.

      Looking back at Lars’ original talking point, I think only Ikonoclast has seen it hoping the linking of Keynes and MMT in a notoriously neo-Con rag meant a change of mind rather than trying to smear MMT with taken-for-granted anti-Keynesianism.

  5. Craig
    July 26, 2020 at 8:48 am

    MMT = Keynes IS Keynes in that it’s a mere reform. Why? Because it does not comprehend private for profit finance (PPF) as a monopolistic, parasitic and hence illegitimate business model because it adds costs POST retail sale. Retail sale is the terminal ending point of economics. Hence PPF is non/anti-economic. (Spare me the mathematical justifications.) Furthermore it neither recognizes nor analyzes on the level of the paradigm/pattern thus
    rendering it inevitably reductionistic, palliative and non-resolving.

    The one thing MMT has going for it is that it philosophically aligns with the new monetary paradigm one of whose aspects is abundance.

  6. July 26, 2020 at 9:20 am

    Keynes is somewhat “Algorithmical”, but MMT is not, but extremely neoclassical, because the latter unilaterally understates the real effects of money as a kind of “thoughtful entity”. The continuous monetary injection will have broad, long-term and structural effects on the economy, not confined to those “data”. For example, a monetary injection prevented the economy from a crisis, which does not imply that the monetary injection will not cause inflation. If that is the case, it only indicates that the economy is too weak to inflate. To aviod a crisis is equivalent to cause an inflation. In my opinion, economists shall not be so supple or “tractable” to phenomena, but essentially grasp them, foresee them and manage them — Algorithmically.

  7. Ikonoclast
    July 26, 2020 at 11:00 pm

    The more I think about this the more worried I become, as opposed to my initial hopes.

    I think capitalists are still doing what they do best. That is making money while ignoring worker rights, human rights and “little” negative externalities like catastrophic climate change. They do this by morphing themselves and the system, seemingly at will. When a finance writer like Alan Kohler can get an article into The Australian which says “MMT = Keynes 2.0” that says something that needs unpacking. Those are two traditional cuss words, under neoliberal orthodoxy, in one algebraic sentence. Why has this been permitted in the neoliberal Australian?

    Why have Keynesian thinking and even the letters “MMT” been permitted to enter mainstream neoliberal discourse, once again for the former and almost the first time for the latter? The answer might be this. The elite capitalists and their servants in government now have reasons to legitimate the almost endless creation of fiat money. They have perfected the art, over the last couple of decades, of creating asset inflation without significant goods and services inflation. They have perfected the art of (electronically) printing lots of money but controlling which circuits the money enters. The new money enters the asset circuits but not, in the main, the goods and services circuits. Differential assets inflation means asset owners end up by owning everything and being able to buy everything (and everyone).

    Money which appears the same – it is denominated in the same dollars – is not the same. There is a real-world equivalent to this phenomenon in the ocean systems of the world. These real-world phenomena are called clines. A physical cline is a measurable gradient in the characteristic(s) of a physical component of a system across the range of a system. In the ocean there are haloclines (gradients in salinity) and thermoclines (gradients in temperature). Other gradients are possible, like gradients in oxygen content and CO2 content. In some cases, clines operate to reduce, often markedy, the ocean system mixing which otherwise would be expected.

    I suspect clines exist in the money system. Different financial instruments, all denominated in dollars, nevertheless have different characteristics. A greater preponderance of one type of instrument in one segment of the economy may indeed function to set boundaries to full system mixing and thus limit inflation, for example, from mixing evenly through the whole system. This seems a reasonable hypothesis for investigation with regard to differential inflation across the economic system (from assets to goods and services).

    The capitalists, including macro-capitalists employing “quants” and micro-investment capitalists liemploying software engineering and mathematical skills, are adepts at exploiting characteristics of the financial system via intuitive, deductive andinductive reasoning plus systems analysis and mathematical techniques. To suppose that they, collectively and by learning from each other’s moves have not “emerged”, “evolved”, developed or hitch-hiked upon, methods to exploit and even engineer differential inflation to their own ends would be to be as unimaginative as the smartest capitalists are clearly imaginative.

    Leftists may indeed be imaginative but their imagination and creativity is inoperable in the capitalist system. Their imagination and creativity does not enter the formal capitalist system at all; at least until the juncture of revolution. Initially, it enters only imaginations and consciousnesses.On the other hand the imagination of capitalist owners, quants and investors continually enters the capitalist formal and thence real systems. Only those capitalist imaginations actually evolve the formal system and by links much of the real system. Voting is the only other route to evolve the system short of revolution and we can say to date that voting has been relatively ineffective because of the control of public consciousness exerted by the capitalist media.

    In summary and referring to this topic and the “end of interest” [1], I am saying it is an intentional or quasi-intentional policy by the dominant capitalists (strong hypothesis) or an evolved result of the intentions and methods of their competitive-cooperative oligopoly behaviors (weak hypothesis).

    Note 1 – “Amid all the strange, alarming and exciting things that have happened lately, the fact that real long-term (30-year) interest rates have fallen below zero has been largely overlooked. Yet this is the end of capitalism, at least as it has traditionally been understood. Interest is the pure form of return to capital, excluding any return to monopoly power, corporate control, managerial skills or compensation for risk.

    If there is no real return to capital, then then there is no capitalism. In case it isn’t obvious, I’ll make the point in subsequent posts that there is no reason to expect the system that replaces capitalism (I’ll call it plutocracy for the moment) to be an improvement.” – Pofessor John Quiggin.

    Note 2 – As I have written on J.Q’s blog, “the end of interest” is diagnostic only, at this stage, of the eventual “end of capitalism”. At this point it is still understandable as a further intensification of capitalism which carries only the seeds of its antithesis.

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