MMT

As long as we labour under the delusion that financial choices are the same for a government as they are for households or firms, who don't have a bank or a money printing machine in their front room whenever they need to spend, we'll be having the wrong conversations.

— Andy Verity (@andyverity) April 25, 2023

That’s a really good thread from Verity. The BBC will probably sack him for it.

It was Margaret Thatcher who particularly popularised the myth that running a country was very similar to looking after a household budget.

Misinformation and myth creation has always served the the Tories well, and generally speaking the Labour Party has gone along with them.

An obvious recent exception was Jeremy Corbyn’s successful political campaign as leader to expose austerity as a false solution.

“Any woman who understands the problems of running a home will be nearer to understanding the problems of running a country.”
– Margaret Thatcher

.

the delusion that financial choices are the same for a government as they are for households or firms

Yup, the same with regards to firms.

https://hbr.org/1996/01/a-country-is-not-a-company

Lol and here is what the BoE think of you asking for better wages. Again we didn’t cause this mess.

But you can suck it up.

https://www.theguardian.com/business/2023/apr/25/britons-need-to-accept-theyre-poorer-says-bank-of-england-economist?CMP=Share_AndroidApp_Other

It’s time the BoE was put under direct fire from the government.

Verity is on his own with all this.

Here’s the BBC editorial line.

https://www.bbc.co.uk/news/business-50504151

What’s even stranger is the BBC only recently conducted an investigation into the way their journalists assume the regular household narratives and were encouraged instructed to look beyond it.

https://www.bbc.co.uk/mediacentre/2023/thematic-review-taxation-public-spending-govt-borrowing-debt-output

“we’re all worse off, and we all have to take our share.”

Oh why doesn’t he just regurgitate the Tory-LibDem austerity slogan “we’re all in this together”?

It’s interesting btw how in the entire article the word austerity doesn’t appear at all, even though that is exactly what is being talked about.

It’s almost as if “austerity” has become an unmentionable word. I wonder why.

Good summary from Richard Murphy on his blog.

The BBC should, in the interests of objective reporting, present a balanced view on the national debt https://www.taxresearch.org.uk/Blog/2023/04/25/the-bbc-should-in-the-interests-of-objective-reporting-present-a-balanced-view-on-the-national-debt/

Andy Verity in a good tussle with pro monetarist worm head Ex Chief Of Staff – Rupert Harrison. (under Osborne)

How many times when you were advising George Osborne did he meet all his fiscal targets? I’m trying to remember an occasion?

— Andy Verity (@andyverity) April 25, 2023

Some good info.

Lol and here is what the BoE think of you asking for better wages. Again we didn’t cause this mess.

But you can suck it up.

The BOE are just playing the hand they were dealt and telling the cold hard truth… If you want to blame someone, blame people who voted for brexit.

The BOE are just playing the hand they were dealt and telling the cold hard truth… If you want to blame someone, blame people who voted for brexit

Brexit is not the issue specifically.

And that is not a hand that has been dealt them. Wages are not driving inflation.

The BoE are adding to inflation with interest rate rises. So they’ve got a nerve taking this stand. The BoE are operating a one trick pony approach – blame people needing more money to live.

That’s a disgrace and a limit of monetarism’s a ability to solve problems. So no I don’t accept your view – raising interest rates is a choice.

This is not a Brexit issue – this is a culmination of 40 years of right-wing policy choices that causes more problems than it solves.

(I’m not disputing Brexit isn’t in there somewhere but low wages are a product of neoliberalism which features under EU membership too.)

It’s beyond ironic that it’s Harrisons policies that have been shown to be incredibly stupid and damaging. How do idiots get into such positions of power?

UK is the worst performing G7 country, and worst performing European country… there’s a common denominator here, brexit, with the side effect of enabling ‘Tory extreme: turbo edition’.

The Governor of the BoE is also a chief Brexiteer so a double whammy then according to your logic.

The Governor of the BoE is also a chief Brexiteer so a double whammy then according to your logic.

Since 2020… So a Tory stooge then?

Asked whether Brexit was contributing to the country’s underperformance, he said that “there is an effect” from leaving the EU, including a “long-run downshift” in the level of productivity.

“It’s not [an impact] we’ve been surprised by. As a public official I’m neutral on Brexit per se, but I’m not neutral in saying these are what we think are the most likely economic effects of it,” he said.

UK is the worst performing G7 country, and worst performing European country… theres a common denominator here, brexit.

The common denominator is the UK being a total **** up when it comes to making good political choices.

It wasn’t good before Brexit you know.

(GDP is also not the best metric for assessing a country’s success and well-being.)

UK is the worst performing G7 country, and worst performing European country… theres a common denominator here, brexit.

Do you honestly believe that? That the UK is the worse performing country in Europe? And do you realise 5 of the G7 countries aren’t even in the EU?

Can MMT help when people want to trade (import/export) with other economies? We still have a world with different currencies…

I think it should be called MMP
Modern Monetary Policy

It’s time the BoE was put under direct fire from the government

That had not worked out well for Turkey. Why would the UK fair better?

My argument against it (as an economic theory) is that it only works in isolation. It doesn’t seem to explain how two, (possibly competing) interests, would interact.

E.g. Foreign investment is affected by the relative attractiveness of each sovereign economy.

Do you honestly believe that? That the UK is the worse performing country in Europe? And do you realise 5 of the G7 countries aren’t even in the EU?

Note the comma.

worst performing G7 country, and worst performing European country

Although I do conceed I meant EU member, rather than European country, as if we are talking strictly geographically, the UK certainly brings the average down.

That had not worked out well for Turkey. Why would the UK fair better?

How is it working out well for us currently?

Turkey are cutting interest rates to cut inflation now as raising rates shock horror raises interest rates.

(I’m not saying interest rates caused the inflation) but there is scant evidence that raising rates actually works. But banks just keep at it.

Turkey’s inflation has fallen since they lowered interest rates as much as I can discern.

Supposed we should always qualify that inflation is different for everyone and we are often referring to CPI or PPI.

My argument against it (as an economic theory) is that it only works in isolation. It doesn’t seem to explain how two, (possibly competing) interests, would interact.

E.g. Foreign investment is affected by the relative attractiveness of each sovereign economy.

There is large chapter in the deficit myth about about trade balances.

Point is if you invest in your own economy with your own money and become productive you are likely to attract foreign interest.

It works in isolation because a sovereign currency issuer is exactly that.

Crucially the big economies all tend to be economies that MMT describes. USA, JAPAN, CANADA etc.

It’s not a model of how business affairs are conducted.

And also it’s not really an economic theory, it’s an actual description.

I know it’s labeled a Theory but it’s different to say – something like the laffer curve which is just made up. MMT is different as it is based on a set of actual trackable real procedures rather than being an idea.

Although I do conceed I meant EU member

Well Sweden is an EU member state and its economy is performing worse.

https://www.aa.com.tr/en/europe/sweden-struggles-with-poverty-as-recession-looms/2862911

And have you seen Poland’s inflation rate?

The UK’s economy isn’t doing well, without doubt, but it isn’t the worse in Europe, and most G7 countries aren’t in the EU. You might want to blame brexit for poor economic performance but there is no obvious evidence of a brexit “common denominator” from the examples that you give.

* Turkey mistake. Should read:

Turkey are cutting interest rates to cut inflation now as raising rates shock horror adds to inflation.

Sorry I put interest rates twice. Didn’t make sense.

Can MMT help when people want to trade (import/export) with other economies? We still have a world with different currencies…

Sigh. Can we please get past the lazy counterpoints to MMT where there is lots of material refuting these points.

Wiemar Germany
Zimbabwe
If it worked why isn’t everyone doing it?
It will devalue the currency.
You won’t be able to trade with other countries
etc..

Please just go and read The Deficit Myth. All these points are covered in a lot of detail. Now, does anyone have anything original to say against MMT? If so lets have it.

Yea that book looks interesting (I read chapter 5), very US-centered though. I just think there will always be competing pressures and individuals who want to do their own thing.

All eyes on the Fed this afternoon. Expected 0.25%

Could pivot? Unlikely.

Relevance is – we usually follow. Consensus is – close to pivoting but I think they will go until they break something.

Yea that book looks interesting (I read chapter 5), very US-centered though. I just think there will always be competing pressures and individuals who want to do their own thing.

It is but most of it is interchangeable with slightly different terminology and obviously the dollar being the reserve currency.

Recent Richard Murphy (as guest) stream talking clearly about MMT. FF to 12mins if you want to get past the intro as it’s Scottish centric. I’d watch it all because there’s some nice clarity at the beginning.

That video sums up my scepticism about the proponents of MMT. The video is not really about MMT, it is a series of policy assumptions that MMT is crowbarred into supporting, in this case Scottish independence.
In terms of supporting your argument through this thread, none of the people in that video have any professional credibility as economists. Murphy is a retired accountant. Van Sweeden has a degree in Anatomical Sciences. Thomson has a degree in Green Economy.

That video sums up my scepticism about the proponents of MMT. The video is not really about MMT, it is a series of policy assumptions that MMT is crowbarred into supporting, in this case Scottish independence.
In terms of supporting your argument through this thread, none of the people in that video have any professional credibility as economists. Murphy is a retired accountant. Van Sweeden has a degree in Anatomical Sciences. Thomson has a degree in Green Economy

Just stuff of interest that’s all.

Yes there is a Scottish thrust to it of course but there’s plenty of info for MMTers that stands.

I think you’re underselling Murphy there. He’s done a lot of stuff and for sure he’s been an accountant but these are the numbers people that stumble upon the reality of government spending.

If you want a the full picture then I listed plenty of comprehensive links above without the Scottish slant.

In terms of supporting your argument through this thread, none of the people in that video have any professional credibility as economists. Murphy is a retired accountant. Van Sweeden has a degree in Anatomical Sciences. Thomson has a degree in Green Economy

That’s not a fair appraisal. I’m simply posting clips of interest – the supporting material is all the way through this thread.

In this thread we have mentioned.

Professor Stephanie Kelton:
Stephanie Kelton is a professor of economics and public policy at Stony Brook University. She is a leading expert on Modern Monetary Theory and a former Chief Economist on the U.S. Senate Budget Committee (Democratic staff). She was named by POLITICO as one of the 50 people most influencing the policy debate in America.

Professor Bill Mitchell:
William Mitchell is Professor of Economics and Director of the Centre of Full Employment and Equity (CofFEE) at the University of Newcastle, NSW Australia. He is also the Docent Professor of Global Political Economy at the University of Helsinki, Finland, and JSPS International Fellow at Kyoto University, Japan.

Professor Richard Murphy – Sheffield
Professor Richard Murphy co-founded the Tax Justice Network, the Fair Tax Mark and Finance for the Future. He founded and directs Tax Research UK. He co-created the Green New Deal and remains an active member of the Green New Deal Group. He is the founder-director of the Corporate Accountability Network.

Richard created the concept of country-by-country reporting which, with the backing of the OECD, is now in use in more than 90 countries around the world to identify tax abuse by multinational corporations. Richard created the concept of sustainable cost accounting.

Steven Hail:
Steven Hail is Adjunct Associate Professor at Torrens University and Research Scholar at the Global Institute for Sustainable Prosperity, with a Ph.D. from Flinders University, and a M.Sc from the London School of Economics. He was from 2002 until December 2020 a lecturer in the School of Economics at the University of Adelaide.

Assc -Prof Pavlina R. Tcherneva
Pavlina R. Tcherneva, Ph.D., is an Associate Professor of Economics at Bard College, the Director of OSUN’s Economic Democracy Initiative, and a Research Scholar at the Levy Economics Institute, NY. She specializes in monetary and fiscal policy coordination and employment policy.

And if you want some gravity on the mechanics of how the spending works –

Here is the paper on UCLs site for “Accounting Model of the UK Exchequer/The self-financing state: An institutional analysis of government expenditure, revenue collection and debt issuance operations in the United Kingdom”
https://www.ucl.ac.uk/bartlett/public-purpose/publications/2022/may/self-financing-state-institutional-analysis

I suppose you could just believe Larry Summers?

None of the people above have tenure at a major university in an economics chair. Your position in this thread appears to be that MMT helps to understand how government income/spending works and why classical economics doesn’t necessarily explain this well. The word ‘policy’ keeps appearing in their bios supporting my point that MMT seems to be crowbarred into supporting a set of assumptions about how the world could and should be.

None of the people above have tenure at a major university in an economics chair. Your position in this thread appears to be that MMT helps to understand how government income/spending works and why classical economics doesn’t necessarily explain this well. The word ‘policy’ keeps appearing in their bios supporting my point that MMT seems to be crowbarred into supporting a set of assumptions about how the world could and should be.

They have political opinions and roles too? Stephanie Kelton was an advisor for Bernie Sanders but her book avoids too much political posturing with examples of Reps and Dems doing stuff incoherently.

Happy to discuss or look at any model you might have with the supporting evidence.

None of the people above have tenure at a major university in an economics chair.

I don’t know how to respond to that really other than to ask are they the ones currently advising UK political parties?

None of what you say puts forward an argument for MMT not being an accurate description. Just because an economist then goes to make a prescriptive case – so what?

there’s no doubt that 4 professors support MMT, but thats a really really small number. looking at them

Bill michell – not mentioned on the university of helsinki economics dept https://www.helsinki.fi/en/faculty-social-sciences/research/disciplines-and-research-units/economics or newcastle economics dept https://www.newcastle.edu.au/school/newcastle-business-school/people/people/economics

Steven hail is part time at a university thats been in existance all of 11 years

stephanie kelton isn’t mentioned on the economics department of stony brook university
https://www.stonybrook.edu/commcms/economics/people/faculty.php

there’s far more qualified people in economics (more qualified anyone on this thread) who think its nonsense

A 2019 survey of leading economists by the University of Chicago Booth’s Initiative on Global Markets showed a unanimous rejection of assertions attributed by the survey to Modern Monetary Theory: “Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt” and “Countries that borrow in their own currency can finance as much real government spending as they want by creating money”

https://www.kentclarkcenter.org/surveys/modern-monetary-theory/

there’s far more qualified people in economics (more qualified anyone on this thread) who think its nonsens

So you show me a survey and that is evidence of what? That some economists have an agenda to support monetarism?

You know I’m embarrassed for the one of them put this:

“On the second statement, Eric Maskin at Harvard observed: ‘There will come a point where the currency is so debased that further spending becomes difficult if not impossible.’ And Larry Samuelson at Yale added a further reference to history: ‘Creating money can finance a great deal of spending, but incidents of hyperinflation, collapse and other crises indicate there are limits.”

I mean did he not notice that when the USA spent/created trillions its currency got stronger?

It’s pure neoclassic twaddle. You can’t debase a currency just because MMT is a thing. And virtually all historical records of hyperinflation relate to supply shocks. There’s plenty of research.

Looks it’s up to you what you believe and who you believe but that survery tells me nothing about government spending. It tells me some economists might have an agenda. And Summers’ name is all over it. He was made to look silly by Jon Stewart recently.

Of course some economists don’t believe it! And of course MMT is heterodox. But I’m not going down a route of here is a bit of info I found on the net that someone else might be better at economics because they filled out a survey or went to a better University.

There are more MMT detractors than supporters for sure. So what?

Given that neo-classical economists have designed and supported economic policy which has resulted in the trainwreck of an economy we now see where in the US 0.1% of the population own 90% of the wealth, where the market has completely failed to deliver the supposed competition which would keep prices down and productivity up, where public services are collapsing due to lack of govt investment, and monopolies in every sector extract unjustifiable profits from working people, I’m not sure we should give them too much respect. The system all these economists have pushed on us as being the only solution has failed. If MMT was being proposed by this lot I’d run a mile.

Creating money can finance a great deal of spending, but incidents of hyperinflation, collapse and other crises indicate there are limits.”

Isn’t that what’s being said by MMTers? I don’t think anyone supporting MMT says that you can spend unlimited money, do they? I think it’s just a different model of the same thing, and the main difference seems to be simply the order in which you do things. Traditionally you’d expect to have to have a view to balancing the books before spending, whereas with MMT you can spend and then tax later. Which is the same as borrowing loads, isn’t it? The only difference is that traditionally borrowing loads is seen as bad, but in MMT it’s not, because MMT. Right?

Given that neo-classical economists have designed and supported economic policy

I thought the point about neoliberalism is that you don’t design economic policy, you just let people get on with it, which results in massive inequality but that’s the natural order of things and if it makes us really rich then that’s hardly our fault is it?

Isn’t that what’s being said by MMTers?

Yes you are correct but we keep going around in circles about this I reckon.

It’s practically the first thing MMTers say but detracters use it all the time for some crazy reason.

MMT would also say it’s never borrowing to spend – it’s issuing bonds to drain reserves. It funds nothing.

Mainstream conflates bond issuance with borrowing – which takes place right at the end of the spending cycle and doesn’t fund spending.

here’s the visual for the daily spending cycle:

Some Notes:

“The daily accounting cycle results in a net cash surplus or cash debt being
held in the National Loans Fund. Under the current policy framework, this
end-of-day position motivates reactive policy undertaken by the DMO known
as ‘cash management’ and which involves the trading of government securities
with the private sector. This activity is usually construed as a ‘borrowing’
exercise where the government has to raise funds in order to spend. As we’ve
seen, though, the government has no requirement to source cash from the
private sector in order to be able to spend because cash is made available by
the legislative processes described.”

“The cash management process is illustrated in Figure 1.5 which describes
two scenarios: that of a daily Exchequer deficit (above), and a daily Exchequer
surplus (below). In the first step illustrated, the Consolidated Fund and the
National Loans Fund start the day with a nil balance whereas the DMA has its
prescribed target balance. During the day, activity on the Consolidated Fund
and National Loans Fund (see Section 1.4.3) causes variations in their respec-
tive balances (step 2), and at the end of the day the balance on the Consolidated
Fund is swept into the National Loans Fund (step 3). The resulting balance
then represents the Net Exchequer position and it is the DMO’s task to offset
that quantity. In the case of an Exchequer deficit, the DMO achieves its objec-
tive by selling government securities which serves to increase its own balance
over the mandated target balance (step 4). The DMO then transfers its excess
balance to the National Loans Fund which has the effect of zeroing the latter
and restoring the Debt Management Account to its target level (step 5). In the
case of an Exchequer daily surplus, the process is similar except the DMO
needs to buy securities from the private sector in order to dispose of the excess
cash.”

I thought the point about neoliberalism is that you don’t design economic policy, you just let people get on with it, which results in massive inequality but that’s the natural order of things and if it makes us really rich then that’s hardly our fault is it?

That’s because they believe markets are naturally levelling, and better without goverment inteference. Trickle down etc.

But it drives money upwards.

The point being the markets have actually been enabled by governments and central banks.

whereas with MMT you can spend and then tax later

Which is what already happens.

I thought the point about neoliberalism is that you don’t design economic policy

Nope. Neo-classical economists have spent the last 40 years telling us there is only one way to run an economy, by removing the intervention of the state and the bargaining power of workers to allow capital and the market to operate unhindered. The result was supposed to be higher productivity, lower prices, the widespread availability of goods and services, and the empowerment of an asset-owning population. Not quite worked out that way has it?

Damn I missed my edit time window.

Here is Fig 1.5