Wednesday, June 7, 2017

Ellie Mae O'Hagan — Is there a magic money tree? Yes children, there is. But that’s the wrong question


The real question is why are we not using the money tree for public purpose rather than special interests.
Does anyone who has witnessed the pomp and circumstance of the Queen’s Jubilee, the funnelling of public money into Syrian airstrikes, or the systematic cutting of taxes for the rich really think we’re not paying nurses properly because we simply don’t have the money? Absolutely not: we don’t pay nurses properly because the government makes a choice not to.…

But the magic money tree is not a just daft expression in terms of how governments spend public money, it’s also misleading in terms of how the economy works as a whole. Since 2008, we’ve been encouraged to see the economy like a household budget: if households spend too much money, they need to cut down on living costs so they don’t get into too much debt. To that end, the magic money tree says that if we spend too much money, we can’t just simply grow more.
But actually, a country’s whole economy can grow more money if it needs to....
Growing money is possible because an economy is nothing like a household budget....
Get this coleen* a soapbox! And a megaphone.







* Gaelic cailín, diminutive of caile, girl, from Old Irish. — Free Dictionary

10 comments:

jrbarch said...

... in one small pic is your answer on how not to push the MMT bus that never fires up!

Tom Hickey said...

It's becoming pretty clear now that that "older folks" in general either cannot get it, or don't want to get it.

The future lies with the coming generations.

Andrew Anderson said...

The future lies with the coming generations. Tom Hickey

That's why I hope to outlive my generation, so help me God.

Andrew Anderson said...

Get this coleen* a soapbox! And a megaphone. Tom

Amen!

A perfect column, imo.

Neil Wilson said...

Again it would help if people talked about buying things. There is a natural limit to buying things - you run out of things to buy at a price you are prepared to pay.

That helps people see the natural limit in terms of stuff, not numbers.

Ralph Musgrave said...

O’Hagan confuses two issues, as do many commentators on this subject.

Clearly she’s right to mock politicians who spend billions on the military and then claim there’s no money for nurses: it’s obvious that money can always be switched from one government department to another. But that’s not what the magic money tree argument is about. The magic tree point is essentially the point made by Keynes in the early 1930s, namely that given excess unemployment, i.e. significant spare resources, governments can simply print money and spend it without any disastrous inflationary consequences.

Matt Franko said...

Forget millenials imo too needy but still less libertarian than previous generations boomers etc... maybe start looking at GenZ....

Matt Franko said...
This comment has been removed by the author.
Tom Hickey said...

The perfect is the enemy of the good.

She got the essentials right.

1. The government as big household analogy is wrong.

2. How and where to commit spending is a political choice.

It is also necessary to consider the scope of the article. She was given a word limit and had to make choices based on that.

She also had a broad audience to address and had to take that into consideration, too.

All it all, I think she did a good job.

Those who think she could have done better given what she was working with can contact her through the Guardian with suggestions for improvement.

Actually, it would be wise for some MMT Brits to recruit her for the MMT camp if possible.

Andrew Anderson said...

The perfect is the enemy of the good. Tom Hickey

Otoh, we've seen the outcome of pragmatic policies such as government-provided deposit insurance of privately created ("Bank loans create bank deposits") liabilities and other privileges for the banks instead of the principled solution of allowing all citizens to have accounts at the central bank and abolishing all other privileges for depository institutions.

So the issue is not perfect versus good but principled vs unprincipled; e.g. citizens should be able to use their Nation's fiat with the same ease and safety as the banks do.