Stephanie commented:
keltons
2/19/2012 1:58 PM MST
It was very nice to see Dylan Matthews, who is a young journalist and not an economist, recognize the growing influence of MMT. The piece does get a number of things wrong (perhaps inevitably, given the sheer volume of work we have produced over the last 10-15 years). We'll be working to clear things up on our various websites (including:
www.neweconomicperspectives.org and via our Twitter feed @deficitowl).
We hope readers will not jump to erroneous conclusions about MMT. We have gotten a great deal right over the years (the S&P downgrade, the Eurozone debt crisis, QE, US interest rates, inflation, etc.). While Austrians screamed, "Zimbabwe", we explained that QE is nothing but an asset swap and that idle reserves -- whatever their magnitude -- will not "chase" any goods. And while "Keynesians" worried about the impact that large deficits would have on US interest rates, we calmly explained the flaws in the loanable funds framework and insisted that rates would remain low as long as the Fed was committed to low rates (as the Bank of Japan has shown for decades). And while Nobel laureates, like Robert Mundell, were espousing the virtues of a common currency in Europe, we warned that the new design would put bond markets in charge of government policies. At some point, being right should actually count for something.
3 comments:
Curious if any one has contacted Dylan Matthews directly...
Actually, a lot of people warned about the flaws in the Emu: Krugman, Feldstein, Dornbush, Thirlwall, Eichengreen, Tobin, Roubini and many others. Why don't you recognize that?
Are we to believe that you're the only one who got it right?
Only a very small group of economists got the Euro exactly right. Many argued that the Stability and Growth Pact (SGP) was too binding, that it would restrict deficits to 3% and therefore not permit governments to actively stabilize their economies in times of crisis. Only a small handful of us (MMTer) argued that it would be financial markets, NOT the SGP, that would tie the hands of government. Only we explained that default risk would come to replace exchange rate risk and inflation risk in a serious and pernicious way. Everyone else either: (1) hailed the common currency or (2) weakly cautioned that there might not be sufficient fiscal space in times of crises. Godley was the first (and best) on this point. His 1992 article laid out the problems with uncanny clarity. We worked alongside Godley. He was a friend, colleague and of mentor to many of us. Goodhart was also hugely influential. His "Two Theories of Money" reaffirmed our concerns about the abandonment of state money. Krugman NEVER saw what Godley or Goodhart saw. He never argued what the developers of MMT argued. So, yes, you are supposed to believe that we are the ones who got it right.
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