Bryan Gocke says that MMT would be difficult to implement as the elite have so much power and run the financial system and corporations and would stymie a Labour party which tried to implement it, but he thinks there's a chance it could win through. I might add, after all, who would have thought the NHS could have come about with so many vested interests against it.
Bryan Gocke says the corporate media won't be much good at spreading the idea of MMT, but the it can be spread through the social media and the internet as the young and many people now mostly use that now for their news. KV
In Britain, if it wasn’t for BREXIT we would be discussing (among other things) Labour’s proposed economic policies, including an expansion of public sector spending. There would be a storm of media led disparagement about plans to stimulate the economy through borrowing and increased taxation and concerns raised about not paying down the national debt. As Theresa May said whilst campaigning for the last general election “There is no magic money tree.”
I find it particularly disheartening that many well informed, left leaning people buy this criticism, worrying whether the country can afford improved public services and whether this will make Labour unelectable. The stock response of the Left to this would normally go along the lines of:
- The Tories are in disarray and deeply split over BREXIT and thus just might be even more unelectable than a slightly radical Labour Party.
- Britain is a rich country; surely it can afford better public services than it currently has?
- Labour’s proposals are, in truth, underwhelming! They represent such a modest step in a process required to reverse a decade of austerity and cuts.
- Revenue from taxation in Britain has become wholly inadequate to the task of ensuring a fair, equitable society. Increased progressive taxation would begin to re-establish a common, shared responsibility for all citizens and fund the necessary increase in public spending.
- The current focus on ensuring a balanced national budget and paying down the National Debt is misplaced and thwarts economic regeneration and development. Britain, with its well established capital markets, has had no trouble borrowing funds to finance the public sector deficit since the financial crisis of 2008 [1] and thus could fund public sector programmes in this way in the future. At current, low, levels of interest, it would be foolish not to do so! Moreover, provided that interest and repayments are in Sterling (hence avoiding the risk of exchange rate fluctuations), borrowing essentially represents a transfer of funds from savers to the Government – the country as a whole is neither richer nor poorer. A large proportion of the national debt is money that we owe to ourselves. However, the payment of interest does represent a transfer of funds from taxpayers to savers; individuals and commercial organisations profit from the need for the Government to borrow.
- An economic stimulus focussed on improving public services could be used to re-establish secure, full time jobs and help to reverse the current trend towards precarious short term zero hours contracts[2]. The wages would almost entirely be spent by the workers (as opposed to being hoarded / used for speculation by richer people) and thus would serve to stimulate the economy further through the multiplier effect. Spending wages will stimulate other parts of the economy; you get a bigger bang for your buck as well as progress towards a better society!
It was with considerable interest therefore that I read a recent article by Jim Kavanagh on Modern Monetary Theory [3], which suggested that the Left needs to update and refine the way it promotes the credibility of a an economic stimulus approach that focusses on investing in public services.
Jim provides an excellent summary of Modern Monetary Theory (MMT) and I will attempt a rather briefer one here in order to provide the context for a discussion about the chances for implementation in Britain and its possible consequences.
The Off-Guardian
8 comments:
“Let's hope Jeremy Corbyn and his team cotton on to MMT soon.”
I’m sorry to be a pessimist, but UK politicians of all stripes maintain the lie that the UK government has “no money.”
Jeremy Corbyn (like all the rest) favors deficit reduction (i.e. gratuitous austerity). His Shadow Chancellor of the Exchequer, John McDonnell, favors a government surplus – i.e. more austerity.
Labour favors austerity via tax increases. Conservatives favor austerity via cuts in social programs that help average people. Either way, average people get burned.
The analogy I have often used is that we live in a village whose only source of water is a single well. The well is bottomless and inexhaustible, but politicians claim that the well is almost dry, so if we want any water, we must beg politicians for every drop. The public is so used to groveling and to being thirsty that if you tell them the well is bottomless and inexhaustible, they think you are crazy. They think the village has a “water debt crisis.”
And the politicians laugh at their stupidity.
Conservatives favor water conservation by giving out less water from the inexhaustible well. Labor favors water conservation by demanding that the peasants give back whatever water they have received. Either way, the peasants get burned.
“Bryan Gocke says that MMT would be difficult to implement…”
MMT doesn’t need to be implemented. Except for its “taxes drive money” dogma, MMT explains how money actually works in the real world.
“Bryan Gocke says the corporate media won't be much good at spreading the idea of MMT, but that it can be spread through the social media and the internet as the young and many people now mostly use that now for their news. “
I place my hope in younger people. Older people are too invested in false delusions fed to them by their owners. Older people are too comfortable in their suffering.
A large proportion of the national debt is money that we owe to ourselves. However, the payment of interest does represent a transfer of funds from taxpayers to savers; individuals and commercial organisations profit from the need for the Government to borrow.
The debt of a monetary sovereign, being risk-free, should yield no more than 0% MINUS administrative costs, i.e. NEGATIVELY, to avoid welfare proportional to account balance.
And shorter maturity waits should cost more with account balances at the Central Bank, a.k.a. "reserves" in the case of banks, having zero maturity weight, costing the most.
So where is the MMT proposal to convert the National Debt, over time, into a net revenue producer?
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From the article…
“It is commercial banks which digitally create the vast majority of the money supply, loosely regulated by central banks, through loans to customers and of course to the government.”
No. The US and UK governments do not borrow any of their spending money from banks, or from anyone else. Monetarily sovereign governments create their spending money by ordering banks to credit the accounts of recipients.
“Governments, if they have a sovereign currency that is not linked to precious metals etc, could create money themselves in order to pay for increased public expenditure without incurring the interest costs that borrowing would incur.”
Again, the US and UK governments do not borrow any of their spending money from banks, or from anyone else. Hence the US and UK governments incur no interest charge.
“If governments can create money then it follows that what they spend doesn’t have to be constrained by revenue from taxation.”
And indeed the US and UK governments are not revenue constrained.
“MMT correctly identifies the smoke and mirrors of modern money, not fixed to a scarce precious metal but the digital creation of private banks.”
Money is created in banks, but not all of it as loans, and not all of it by the will of banks. As noted above, monetarily sovereign governments create their spending money by instructing banks to credit the accounts of recipients.
The reason why these simple truths are obscured is that the masses have been so programmed to believe lies that the masses take the lies to be “truth,” and they desperately cling to this false “truth.”
We humans live in a consensus reality, and the consensus is a LIE.
Please please please implement full MMT in the U.K. ASAP. And do it in a way so that no one will be able to say, "That's not REAL MMT".
Let the world watch it crash and burn somewhere else.
Have to agree with Konrad ....
Humans have priests to act as brokers between them and the Divine.
Politicians are brokers between people (Stem & Artists & Workers) and their material heaven.
Human nature (inner and outer) is all about fulfillment. Hence the concepts and formulae.
"Please please please implement full MMT in the U.K. ASAP."
MMT is already "implemented." MMT describes what actually happens, not what neoliberals falsely claim happens.
Konrad, you qt and respond:
" {“Governments, if they have a sovereign currency that is not linked to precious metals etc, could create money themselves in order to pay for increased public expenditure without incurring the interest costs that borrowing would incur.”}
Again, the US and UK governments do not borrow any of their spending money from banks, or from anyone else. Hence the US and UK governments incur no interest charge. "
Under current practice, govs do pay interest to bond holders although they do not need to (and of course, they create the money for the interest payments, but it is still distorting and unneeded). We should move to ZIRP and OMF to make the functioning of the whole system clearer politically. Would be an immense help to the public to understand the system
@ Clint Ballinger: “Under current practice, govs do pay interest to bond holders although they do not need to.”
The U.S. Federal Reserve pays interest on Treasury securities, but this has no effect on the U.S. government’s ability to create its spending money out of thin air.
Monetarily sovereign governments do not borrow one penny of their spending money in their own currency from anyone.
However many governments must borrow foreign currency.
The U.S. government does not need foreign currency, since the U.S. dollar is accepted worldwide.
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