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—— Ugarteche, Puyana and Madi ——
Gerson Lima / Maria Alejandra Madi
Edward Fullbrook and Jamie Morgan
————— Michael Hudson ————–
Maria Alejandra Madi / Jack Reardon
————- Edward Fullbrook ————-
—————— Steve Keen —————–
————— Richard Smith —————
————– Gustavo Marques————
– Victor Beker and Beniamino Moro –
————– Lars Pålsson Syll ————-
—————– Stuart Birks —————-
Edward Fullbrook and Jamie Morgan
———— Armando Ochangco ———-
Shimshon Bichler / Jonathan Nitzan
————— Mauro Gallegati ————–
————— Herman Daly —————-
————— Asad Zaman —————
—————– C. T. Kurien —————
————— Robert Locke —————-
Real-World Economics Review Blog 
Kudos. Very complete, with some logically incontrovertible analogies and historical facts that I haven’t seen elsewhere, and that I think will help advance acceptance of MMT.
For Lavoie’s piece – whilst his critique of MMT hasn’t changed much, if at all, I read both versions of his friendly critique at the time. His own work shows that the accounting comes out the same whether the Treasury and Central Bank are consolidated or not.
My understanding of Post Keynesian criticism of Modern Monetary Theory is the Balance of Payments and Exchange rate situations. My own study of this critique is that it depends on what the political actors do. It in no way invalidates MMT.
MMT is a public breakthrough of a coherent consistent post-keynesian (true Keynes) macroeconomics and logic explained correctly.
Wray has previously outlined MMT as including Chartalism+Credit Money+SFC(Godley)+Functional Finance+Endogenous Money+Financial Instability Hypothesis+Marx Keynes Veblen & PK & Institutional thought
If other post-keynesians have picked up on and published on loans create deposits and other MMT insights, high praise to them indeed but have they pushed it into public consciousness. Yourself and Seccareccia have attended the Modern Money Network symposia and suspect you are now aware of the MMT conference.
Also thank you for showing me what I always thought to be true that horizontalism and bank endogenous money are the same but Rochon once told me that was wrong. It is much appreciated. Thank you, Marc.
The MMT has focused its analysis on the financing of public deficits with money. His contributions have been important and his effort has been enormous. Their detractors have been abundant and will soon realize their mistakes and their poor understanding of money.
But to complete the modern money paradigm it is necessary to face the challenge of understanding what it means that money is a public good. Money is a matter of general interest. When society understands and accepts what this means, the structures of today’s banks will begin to shake. It is the forgotten proposal to create the so-called Monetary Authority that proposed the Chicago Plan.
In fact they are already shaking, we just have to look at the new ways that elites have to try to supplant money as a state monopoly. Product of this perception is the creation of BITCOIN, La libra (from facebook), the GRAM (from instagran) and other electronic currencies.
Randy greetings.
I read through the original post and appreciate the analysis and the contribution. With reference to Keynes’s momentary “Babylonian madness” I would strongly recommend that interested readers in any aspect of economics, finance, wealth, poverty and richness, gender and equality should read (apologies for being presumptuous in assuming that they have not already) The Richest Man in Babylon. It really surpasses by thousands of years the current economic wisdom on the market.
This special issue on MMT is impressive. I am gradually going through some of the articles and Tony Lawson’s got my attention for now.
I like that Lawson [again] forces us to take a step back and think about (or in terms of) the (social) ontology of economics. The distinction between ‘money is debt’ and ‘debt can be positioned as money’ is not minor. In the latter, it does not mean that money is [always] debt, and there is no ‘redeeming of currency’, no ‘puzzle’.
Despite coming from a different starting point, Lawson echoes some of the Brunhoff’s observation on the need for a monetary theory of money and not a credit theory of money.
Lawson’s starting point is his social positioning theory, which has its more recent discussion in his new book “The Nature of Social Reality: issues in social ontology” (2019), especially chapter 1 and 2. In the same book, Lawson also offers a much more detailed discussion of his positioning theory of money, where he compares the positing and credit theories of money (chapter 6). Really worth reading. https://www.taylorfrancis.com/books/9780429199035
There is a reason why the public is told that the money supply is not relevant to the condition of the economy and that they must accept austerity as the inevitable result of unaffordable social spending that must now be cut back.
What in the world is this all about? Well, it’s about balances of components that must obtain when conservative processes involving different quantities of the components occur. Chemists and physicists grasped the concept from the beginning of their development of the sciences. But amazingly, macroeconomists are still arguing about whether the concept of balances applies to economies.
An economy must be a conservative system unless there are identifiable, quantifiable sources and leakages that exactly balance each other with the passage of time. And if there are unbalanced sources and leakages, the system not conservative.
By ignoring the effect of changes in the money supply not only have we missed a conservative element in defining the system, but now we can’t explain why our model doesn’t detect the onset of booms and busts (which are caused by a shortage or excess of money). Some economists avoid this problem by denying its existence.
I know…this is illogical, but it’s true. Some macroeconomists claim that the size of the money supply is not a factor in analyzing the performance of the economy.
The purpose of this comment is to demonstrate that the money supply is an essential factor in the money balance equation and cannot be ignored without invoking magic.
The essential function of a nation’s economy is to provide the stuff that the population consumes and the wherewithal to get it. The population trades labor for income. Simply put,
Source materials + Labor = Production —> $ transactions —> GDP
This equation assumes that materials and labor are present in exactly sufficient quantity to enable the consumption of all of the production and that there are no unaccounted sources or transactions in the process.
But what if there is economic activity that produces no product to be consumed by the public? In that case a profit results from casino-like operations that produce nothing of value to the society at large. But that profit is not used by the players to grow the general economy. It remains in the casino and is used to pay interest on the new debt that fuels the next scheme to suck up all the surplus generated in the marketplace. The debt on interest grows as time passes, and the players grow more reckless as the stakes balloon.
The masters of the scheme (investment bankers on Wall Street) have gained control and have engineered the rules so that they never suffer losses when the inevitable collapses occur. The US government will use sleight of hand to create the money to bail out the masters and bill the unwitting taxpayers with unpayable exponentially escalating debt.
It is imperative that the mass of taxpayers be kept unaware as long as possible of the inescapable fact that they are falling at an accelerating rate so that the next crash is as profitable as possible for the masters. [In the aftermath of the 2008 crash the US government created roughly $26T and gave it to the masters, who promptly transferred it to themselves and bankrupted the victims.]
So it is no wonder that the masters are horrified that the truth may come out and trigger class war. This is why the public is told that the money supply is not relevant to the condition of the economy and that they must accept austerity as the inevitable result of unaffordable social spending that must now be cut back.
CORRECTION: The following paragraph is replaced: “An economy must be a conservative system unless there are identifiable, quantifiable sources and leakages that exactly balance each other with the passage of time. And if there are unbalanced sources and leakages, the system [is] not conservative.”
REPLACEMENT: Mainstream economists argue that the money supply either does not change over a reporting period, or that it’s irrelevant if it does change. This is wrong.
Dear Louis-Philippe, perhaps one reason why MMT has caught mainstream’s imagination is that the latter preaches “sound finance” in theory but does otherwise in policy action. The history of deficit spending in the US (and also elsewhere) tells us that conservatives have learned the lesson very well, and have most often outstripped progressives in this respect.
Click to access budgetinfographic.pdf
The supply side oriented Reaganomics is a case in point. It can amount, among other things, to an (illusory) attempt to overcome the psychoanalytic superego through a good binge (to the benefit of the rich, of course, as also you underscore).
This can come about because public spending can represent a maternal and protective figure whereas “TINA” perception can be linked to a punitive instance ─ for (chiefly unconscious) greedy and aggressive fantasies ─ of the austerity discipline (for the weakest groups, of course).
On that account, MMT’s contributions explain in depth the mechanisms of money creation and make clear that all this should be linked to the central objectives of full employment and price stabilisation. As noted in the previous post, such course can be fostered by a system of democratic planning coupled with a better collaboration between heterodox theories.
MMT in a nutshell: GDP is the measure of our productive economy. GDP is the sum of household, business and government spending (and likewise the income of those sectors equals that spending, because ALL spending is someone else’s income). Our economy depends on household spending (2/3 of GDP). That spending is limited by household income (which comes only from those three sectors). Business provides that income to the extent demand (business opportunity) exists, and government provides the rest (by way of bookkeeping entries to household bank accounts). All that’s important to the economy is maintaining this flow, and with a fiat currency (whose value, by definition, depends ONLY on currency-users perception), there are no limits other than that perception.
This says that a monetary sovereign can maintain a healthy economy for its populace
just by circulating tokens (so long as they don’t promote disbelief among its users
– which promotion seems to be the main contribution of economists).
about the issue of generating savings to invest, is that not a non-issue today? When the casino economy dwarfs the real economy, does that not tell us that lack of investment and lack of employment generated by investment is not due to insufficient capital formation? As Walter Bagehot wrote in 1873 any project that pays, and is known to pay, will not perish from lack of financing Lombard Street p.2 This comment refers to several lines in several articles of the special issue which seem to treat the need to generate funds to invest as a mainstream assertion that MMT and other heterodox scholars need to reply to.
Something in Richard Murphy’s “Tax and modern monetary theory” doesn’t add up. Its these two statements 1. “For example, it is argued that tax drives the value of money (Wray, 2012, p. 47). This is because it is the promise that a government makes to only accept the currency it creates in settlement of the tax liabilities that it issues that in turn creates demand for its currency.” which is saying that taxes create the demand for money.
2. “The relationship between tax and the currency does as a result afford a government considerable control over its economy in that situation. In addition, the idea implicit throughout MMT that a government need not tax before spending, but actually must first create the money required before tax payment can take place has become a central insight integral to the relevance of MMT (Bell 1998). But despite this it is suggested that the role of tax within some aspects of MMT remains underdeveloped.” Which is saying that the government must create currency before it can levy taxes.
Separately, these ideas are defensible. But together, they result in a contradiction. To get people to accept their currency, governments need to first levy taxes (1). But to levy taxes, governments first need to issue their currency. (2). So it isn’t clear why a rational actor would accept the fiat currency in the first instance. If you have no money to collect in tax payments, then the government can’t tax you per (2). So a rational actor has no reason to accept fiat currency that is not all ready accepted in exchange for goods and services. So the only way to get people to accept the fiat currency is through force or trickery.
The presumption of the direction of spending and taxation is fallacious. It ignores the notion in circuit theory that once must take into account “initial conditions” which today is the money in the economy, not the first dollar 200 or so years ago.
But monetary circuit theory teaches that banks create money endogenously, i.e. without government intervention. Modern Monetary Theory teaches that governments create money. So MMT and circuit theory are incompatible. So one cannot be invoked to explain the other. https://en.wikipedia.org/wiki/Monetary_circuit_theory
The taxing -> currency demand -> Gov spending is a motivation causality, and the important part of it is the public’s knowledge of its future legal obligation, while the Gov spending -> private circulation -> taxing is a logical and monetary causality. There is nothing weird in a government announcing a tax will be collected in the and of a period and then spending that amount into existence only to annihilate it again later through the collection of said tax.