An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
. “Looks like the days of just mocking MMT are about over. Now critics have to be careful of looking foolish.” ~ Tom
What's the old saying? Something like: First they ignore you, then they mock you, then they attack you, and finally they claim to have agreed with you all along.
MMT is indeed prone to “misuse,” since MMT exposes the lie that there is “no money” for social programs that help average people.
“We would be wise to reject politicians’ and activists’ more extreme applications of MMT — particularly the notion of funding major social programs by printing money.”
Right. “Extreme applications” must only occur with things like ever-increasing spending on wars and weapons makers.
Notice how…
Today’s attacks on MMT concede that MMT is correct, but we must reject MMT because…Zimbabwe.
Or that MMT is correct, but we must reject MMT because it is incorrect, as seen in the article above. (“The bottom line is that, at the margin, taxes do pay for government spending.”)
Or that MMT is correct, but we must reject MMT because elitists like Paul Krugman say we should.
Or that MMT is correct, but we must reject MMT because it is “socialist” or “communist” or whatever-ist. (It’s a manifestation of “white privilege” and “toxic masculinity.)
Or that MMT is correct, but we must reject MMT because “Whatever sounds too good to be true, is.”
The author is an MBA candidate at the Wharton School who attacks MMT in order to advance his future career prospects.
+++++++++++++++++++++++++++++++++
PERSONAL NOTE 1: If you are reading this blog, and you are not one of its frequent trolls, and you suspect that most people around you are morons, YOU ARE CORRECT.
PERSONAL NOTE 2: The National Review's days are numbered. Today you can't call yourself a conservative while loudly and constantly attacking Trump. No one on any side will listen to you.
Glenn Beck, the Weekly Standard, and others have learned this the hard way. Ben Shapiro is also learning it.
Looks like the days of just mocking MMT are about over. Tom Hickey
Except that Federal taxation can only temporarily reduce the money supply since banks are not reserved constrained anyway and can simply replace taxed-away deposits with even more* new ones.
*Since the reserve drain from the Federal taxation improves the Supplemental Leverage Ratio.
Scott Fullwiler said on Twitter a few hours ago that that National Review article wasn’t too bad, and I agree. But that will all be a mile above Bob Roddis’s head.
MMTers main failing is that while they advocate overt money creation, they don’t explain how that money creation should be controlled. In contrast, Positive Money also advocate OMC, but they specify how it’s to be controlled. Plus Ben Bernanke and Adair Turner (former head of the UK’s Financial Services Authority) have given an approving nod in the direction of OMC, so there’s nothing much wrong with OMC.
Critics of MMT (e.g. Tim Worstall) have jumped on that omission by MMTers.
“MMTers main failing is that while they advocate overt money creation, they don’t explain how that money creation should be controlled.” ~ Sanjay Mittal
This is like claiming that the theory of aerodynamics explains how an airplane gets off the ground and maintains flight, but “fails” to explain how that same airplane stays in the air.
The basics of MMT do not explain how money should function, but how money actually does function. The US federal government creates money via the process of congressional appropriations. This remains true whether or not we choose to acknowledge the facts of MMT.
Regarding “Positive Money,” those clowns think that all money is currently created by banks as loans. They want monetarily sovereign governments to be able to create their own money, which of course they already do right now.
Regarding Tim Worstall, he is to be pitied, not debated.
"Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity". Bob Roddis
Any money or money form used by government is fiat and is backed by the God-given authority of government to tax and by the God-given authority of government to PUNISH:
Every person is to be in subjection to the governing authorities. For there is no authority except from God, and those which exist are established by God. Therefore whoever resists authority has opposed the ordinance of God; and they who have opposed will receive condemnation upon themselves. For rulers are not a cause of fear for good behavior, but for evil. Do you want to have no fear of authority? Do what is good and you will have praise from the same; for it is a minister of God to you for good. But if you do what is evil, be afraid; for it does not bear the sword for nothing; for it is a minister of God, an avenger who brings wrath on the one who practices evil. Therefore it is necessary to be in subjection, not only because of wrath, but also for conscience’ sake. For because of this you also pay taxes, for rulers are servants of God, devoting themselves to this very thing.Romans 13:1-6 New American Standard Bible (NASB) [bold added]
So fiat has the strongest possible backing - the God-given authority and power of government to: 1) Exist. 2) Tax. 3) Punish tax evasion.
Moreover, that the State may create money BY FIAT (“Then render to Caesar the things that are Caesar’s; ...") and require that taxes be paid in it is evident in Matthew 22:15-22.
So fiat has the strongest possible backing - the God-given authority and power of government to: 1) Exist. 2) Tax. 3) Punish tax evasion.
Moreover, that the State may create money BY FIAT (“Then render to Caesar the things that are Caesar’s; ...") and require that taxes be paid in it is evident in Matthew 22:15-22.
Bob Roddis, how did Robert Murphy "crush MMT" back in 2011 when this garbage is in his supposed crushing:
Robert Murphy: "As a free-market economist, I don't need to run from this tautology. I can use it to underscore the familiar "crowding out" critique of government deficit spending. Specifically, if government spending (G) goes up while tax revenue (T) remains the same, then the left-hand side of the equation gets bigger as the government budget deficit grows. So the accounting tells us that the right-hand side must get bigger too. It may happen partially because people cut down on consumption and save more (due to higher interest rates and their expectation of higher tax burdens in the future), but it may also happen because private-sector investment goes down. In other words, as the government borrows and spends more, the equation tells us we might see lower private consumption, rising interest rates, and real resources being siphoned out of private investment into pork-barrel spending projects. I can tell my "story" of the dangers of government deficit spending with that equation just fine."
(1) "It may happen partially because people cut down on consumption and save more (due to higher interest rates..."
The Loanable Funds Model of investment is wrong, which is something MMTers continually emphasize. U.S. government deficit spending actually pushes interest rates down, not up, since absent Federal Reserve intervention to stabilize the Federal Funds Rate, the injection of reserves will drive down the FFR to zero.
(2) "It may happen partially because people cut down on consumption and save more (due to... their expectation of higher tax burdens in the future)"
Ricardian Equivalence is nonsense. Not only do people not behave that way, as MMT explains the National Debt doesn't ever get paid down cause it's not 'debt' as in how a household or business takes on debt. It's National Debt = Non-Government Net Financial Assets; in other words, taxes never have to go up to pay it back.
(3) "but it may also happen because private-sector investment goes down."
More Loanable Funds Model nonsense. U.S. government 'borrowing' does not compete with a finite pool of loanable funds, and therefore cannot crowd out private investment. If you want to argue that U.S. government deficit spending competes for real resources, driving up their cost, that's an empirical question which is time and place and resource specific. Let's see it demonstrated. But we all know that if it does happen to some extent, that can actually crowd-IN private investment in order to supply more of that resource. For example when the price of energy goes up, this incentivized the fracking boom.
........
It's funny how Bob Roddis constantly accuses MMTers of not understanding Austrian economics and then simultaneously champions a misrepresentation of MMT positions as supposedly crushing MMT.
“As MMT explains, the National Debt doesn't ever get paid down cause it's not 'debt' as in how a household or business takes on debt. It's National Debt = Non-Government Net Financial Assets; in other words, taxes never have to go up to pay it back.” ~ SDB
The “national debt” is paid off continually. Not just paid down; paid off.
When you buy a Treasury security, money is debited from your checking account, and is credited to a Fed savings account in your name. The money you deposit in a Fed savings account is lent to the Fed, and it stays with the Fed as non-spendable reserves. Hence the “Federal Reserve System.” This has nothing to do with the U.S. government’s spending decisions.
When your Treasury security matures (in a few days to 30 years depending on what kind of T-security you buy) the Fed debits your Fed savings account, and credits your regular bank checking account with the money you had deposited with the Fed, plus interest. In this way the Fed pays off its debt to you. The Fed creates the interest money out of thin air, just as the U.S. government creates its spending money out of thin air.
Q. If the Fed is continually paying off the “national debt,” then why does the “national debt” keep growing?
A. Because the amount of money deposited in Fed savings accounts keeps growing. The minimum amount you could deposit used to be $1,000. Now it is $100.
No disrespect, but we don't actually need to go into that level of detail to get the point across. If someone wants to go there, thats fine, getting into the details further explains the MMT position. But the birdseye view is sufficient for most public discussions.
Interestingly, we don't even need MMT to see that the national debt never gets paid down. Just look at the data. Seriously, look up the last 150 years of deficit spending. It goes up and up and up over time, except for rare and short lived surpluses. What MMT offers is a explanation for why it never gets paid down.
Bob Roddis, what "money" system(s) do you propose and why? (I imagine there are links to Austrian sites but a nice couple of paragraphs of plain English would be perhaps interesting)
Knorad: So, the federal debt can "easily" be paid off with more money dilution since an unlimited amount of dollars can always be conjured out of nothing and used to pay it off.
Conjuring money out of thin air to pay off the debt just increases the debt, so it could never be paid off. If it was paid off the economy would be collapsed to to a shortage of currency, as the historical result of government surpluses shows.
I'm picturing an endless stream of clowns in Roddis costumes piling out of (and back into) the same VW Beetle.
More Loanable Funds Model nonsense. U.S. government 'borrowing' does not compete with a finite pool of loanable funds, and therefore cannot crowd out private investment.
1. Austrian analysis understands that most funds lent by U.S. banks are not anyone's savings and are created out of nothing.
2. Nevertheless, if someone's actual savings are used to buy treasury bonds, those savings cannot be in two places at the same time, investing in a private company.
If you want to argue that U.S. government deficit spending competes for real resources, driving up their cost, that's an empirical question which is time and place and resource specific. Let's see it demonstrated.
You know it's true. Assuming a scenario where the government spends money into existence A) The resources were sold to the government for a higher price than any private person offered or the sale would not have happened; and B) The resources can't be in two places at the same time.
36 comments:
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“Looks like the days of just mocking MMT are about over. Now critics have to be careful of looking foolish.” ~ Tom
What's the old saying? Something like: First they ignore you, then they mock you, then they attack you, and finally they claim to have agreed with you all along.
MMT is indeed prone to “misuse,” since MMT exposes the lie that there is “no money” for social programs that help average people.
“We would be wise to reject politicians’ and activists’ more extreme applications of MMT — particularly the notion of funding major social programs by printing money.”
Right. “Extreme applications” must only occur with things like ever-increasing spending on wars and weapons makers.
Notice how…
Today’s attacks on MMT concede that MMT is correct, but we must reject MMT because…Zimbabwe.
Or that MMT is correct, but we must reject MMT because it is incorrect, as seen in the article above. (“The bottom line is that, at the margin, taxes do pay for government spending.”)
Or that MMT is correct, but we must reject MMT because elitists like Paul Krugman say we should.
Or that MMT is correct, but we must reject MMT because it is “socialist” or “communist” or whatever-ist. (It’s a manifestation of “white privilege” and “toxic masculinity.)
Or that MMT is correct, but we must reject MMT because “Whatever sounds too good to be true, is.”
The author is an MBA candidate at the Wharton School who attacks MMT in order to advance his future career prospects.
+++++++++++++++++++++++++++++++++
PERSONAL NOTE 1: If you are reading this blog, and you are not one of its frequent trolls, and you suspect that most people around you are morons, YOU ARE CORRECT.
PERSONAL NOTE 2: The National Review's days are numbered. Today you can't call yourself a conservative while loudly and constantly attacking Trump. No one on any side will listen to you.
Glenn Beck, the Weekly Standard, and others have learned this the hard way. Ben Shapiro is also learning it.
There are two aspects of MMT.
1. The part that describes the pure mechanics of where the fiat funny money comes from and where it goes etc...
2. The announced "economics" of MMT and fiat funny money is pure Keynesian hogwash.
1 and 2 are two completely different things. You guys know it too or else you wouldn't always be obfuscating the differences.
Please Bob, explain what funny money is again.
Bob ”Pinochet” Roddis holding his lecture again.
Wow, that was easy. Konrad, Noah Way and S400 are unable to concoct even a single debating point. Just as we all assumed.
Looks like the days of just mocking MMT are about over. Tom Hickey
Except that Federal taxation can only temporarily reduce the money supply since banks are not reserved constrained anyway and can simply replace taxed-away deposits with even more* new ones.
*Since the reserve drain from the Federal taxation improves the Supplemental Leverage Ratio.
Debate with Roddis is just waste of time.
Scott Fullwiler said on Twitter a few hours ago that that National Review article wasn’t too bad, and I agree. But that will all be a mile above Bob Roddis’s head.
MMTers main failing is that while they advocate overt money creation, they don’t explain how that money creation should be controlled. In contrast, Positive Money also advocate OMC, but they specify how it’s to be controlled. Plus Ben Bernanke and Adair Turner (former head of the UK’s Financial Services Authority) have given an approving nod in the direction of OMC, so there’s nothing much wrong with OMC.
Critics of MMT (e.g. Tim Worstall) have jumped on that omission by MMTers.
Sanjay Mittal: I understand all of it. You guys do not understand the Austrian School critique of MMT and/or Keynesianism at all.
Bankruptcy Bob does not understand the MMT critique of the Austrian school or Keynesianism at all.
There is no "MMT critique of the Austrian school". Which would be funny if it were not so pathetic.
Yeah Austrian religious school denies it.
Robert P. Murphy crushed MMT back in 2011. The only response from the MMTers was crickets.
https://tinyurl.com/y9fy8e7b
“MMTers main failing is that while they advocate overt money creation, they don’t explain how that money creation should be controlled.” ~ Sanjay Mittal
This is like claiming that the theory of aerodynamics explains how an airplane gets off the ground and maintains flight, but “fails” to explain how that same airplane stays in the air.
The basics of MMT do not explain how money should function, but how money actually does function. The US federal government creates money via the process of congressional appropriations. This remains true whether or not we choose to acknowledge the facts of MMT.
Regarding “Positive Money,” those clowns think that all money is currently created by banks as loans. They want monetarily sovereign governments to be able to create their own money, which of course they already do right now.
Regarding Tim Worstall, he is to be pitied, not debated.
MMT is - by it's very existence - a blistering critique of all other bullshit economic theories, er ... ideologies.
Robert P. Murphy Was it the clown who debated with Warren Mosler? If so your as nuts as Egmont.
Robert P. Murphy is a creationist. This disqualifies him from any position requiring logic.
"This disqualifies him plus anyone who supports him from any position requiring logic."
Apparently, no one here has heard of the concept of argumentum ad hominem. Why am I'm not surprised?
Still, you guys always manage to amaze me.
“Looks like the days of just mocking MMT are about over. Now critics have to be careful of looking foolish.” ~ Tom Hickey
Roddis has no concern about looking foolish.
When I asked Bob to explain 'fiat funny money' he said we were "unable to concoct even a single debating point".
Now he accuses us of ad hominem? LOL
Just Googled Murphy and it is the clown who debated Mosler. He had nothing against Mosler. Zero.
"Fiat funny money" is another name for "fiat money". You didn't know that? And do you not know what fiat money is?
"Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity".
Was this a mystery before?
"Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity". Bob Roddis
Any money or money form used by government is fiat and is backed by the God-given authority of government to tax and by the God-given authority of government to PUNISH:
Every person is to be in subjection to the governing authorities. For there is no authority except from God, and those which exist are established by God. Therefore whoever resists authority has opposed the ordinance of God; and they who have opposed will receive condemnation upon themselves. For rulers are not a cause of fear for good behavior, but for evil. Do you want to have no fear of authority? Do what is good and you will have praise from the same; for it is a minister of God to you for good. But if you do what is evil, be afraid; for it does not bear the sword for nothing; for it is a minister of God, an avenger who brings wrath on the one who practices evil. Therefore it is necessary to be in subjection, not only because of wrath, but also for conscience’ sake. For because of this you also pay taxes, for rulers are servants of God, devoting themselves to this very thing. Romans 13:1-6 New American Standard Bible (NASB) [bold added]
So fiat has the strongest possible backing - the God-given authority and power of government to:
1) Exist.
2) Tax.
3) Punish tax evasion.
Moreover, that the State may create money BY FIAT (“Then render to Caesar the things that are Caesar’s; ...") and require that taxes be paid in it is evident in Matthew 22:15-22.
So fiat has the strongest possible backing - the God-given authority and power of government to:
1) Exist.
2) Tax.
3) Punish tax evasion.
Moreover, that the State may create money BY FIAT (“Then render to Caesar the things that are Caesar’s; ...") and require that taxes be paid in it is evident in Matthew 22:15-22.
I love it. Truly, I do.
LOOK - Roddis learned how to use Google!
Now if only he could learn how to type something other than, "fiat funny money."
Bob Roddis, how did Robert Murphy "crush MMT" back in 2011 when this garbage is in his supposed crushing:
Robert Murphy: "As a free-market economist, I don't need to run from this tautology. I can use it to underscore the familiar "crowding out" critique of government deficit spending. Specifically, if government spending (G) goes up while tax revenue (T) remains the same, then the left-hand side of the equation gets bigger as the government budget deficit grows. So the accounting tells us that the right-hand side must get bigger too. It may happen partially because people cut down on consumption and save more (due to higher interest rates and their expectation of higher tax burdens in the future), but it may also happen because private-sector investment goes down. In other words, as the government borrows and spends more, the equation tells us we might see lower private consumption, rising interest rates, and real resources being siphoned out of private investment into pork-barrel spending projects. I can tell my "story" of the dangers of government deficit spending with that equation just fine."
(1) "It may happen partially because people cut down on consumption and save more (due to higher interest rates..."
The Loanable Funds Model of investment is wrong, which is something MMTers continually emphasize. U.S. government deficit spending actually pushes interest rates down, not up, since absent Federal Reserve intervention to stabilize the Federal Funds Rate, the injection of reserves will drive down the FFR to zero.
(2) "It may happen partially because people cut down on consumption and save more (due to... their expectation of higher tax burdens in the future)"
Ricardian Equivalence is nonsense. Not only do people not behave that way, as MMT explains the National Debt doesn't ever get paid down cause it's not 'debt' as in how a household or business takes on debt. It's National Debt = Non-Government Net Financial Assets; in other words, taxes never have to go up to pay it back.
(3) "but it may also happen because private-sector investment goes down."
More Loanable Funds Model nonsense. U.S. government 'borrowing' does not compete with a finite pool of loanable funds, and therefore cannot crowd out private investment. If you want to argue that U.S. government deficit spending competes for real resources, driving up their cost, that's an empirical question which is time and place and resource specific. Let's see it demonstrated. But we all know that if it does happen to some extent, that can actually crowd-IN private investment in order to supply more of that resource. For example when the price of energy goes up, this incentivized the fracking boom.
........
It's funny how Bob Roddis constantly accuses MMTers of not understanding Austrian economics and then simultaneously champions a misrepresentation of MMT positions as supposedly crushing MMT.
“As MMT explains, the National Debt doesn't ever get paid down cause it's not 'debt' as in how a household or business takes on debt. It's National Debt = Non-Government Net Financial Assets; in other words, taxes never have to go up to pay it back.” ~ SDB
The “national debt” is paid off continually. Not just paid down; paid off.
When you buy a Treasury security, money is debited from your checking account, and is credited to a Fed savings account in your name. The money you deposit in a Fed savings account is lent to the Fed, and it stays with the Fed as non-spendable reserves. Hence the “Federal Reserve System.” This has nothing to do with the U.S. government’s spending decisions.
When your Treasury security matures (in a few days to 30 years depending on what kind of T-security you buy) the Fed debits your Fed savings account, and credits your regular bank checking account with the money you had deposited with the Fed, plus interest. In this way the Fed pays off its debt to you. The Fed creates the interest money out of thin air, just as the U.S. government creates its spending money out of thin air.
Q. If the Fed is continually paying off the “national debt,” then why does the “national debt” keep growing?
A. Because the amount of money deposited in Fed savings accounts keeps growing. The minimum amount you could deposit used to be $1,000. Now it is $100.
Konrad,
No disrespect, but we don't actually need to go into that level of detail to get the point across. If someone wants to go there, thats fine, getting into the details further explains the MMT position. But the birdseye view is sufficient for most public discussions.
Interestingly, we don't even need MMT to see that the national debt never gets paid down. Just look at the data. Seriously, look up the last 150 years of deficit spending. It goes up and up and up over time, except for rare and short lived surpluses. What MMT offers is a explanation for why it never gets paid down.
Bob Roddis, what "money" system(s) do you propose and why? (I imagine there are links to Austrian sites but a nice couple of paragraphs of plain English would be perhaps interesting)
Knorad: So, the federal debt can "easily" be paid off with more money dilution since an unlimited amount of dollars can always be conjured out of nothing and used to pay it off.
Conjuring money out of thin air to pay off the debt just increases the debt, so it could never be paid off. If it was paid off the economy would be collapsed to to a shortage of currency, as the historical result of government surpluses shows.
I'm picturing an endless stream of clowns in Roddis costumes piling out of (and back into) the same VW Beetle.
That would make an amusing video.
Set to the theme from "The Banana Splits" (a kid's show 1968-70).
https://www.youtube.com/watch?v=CQTq88Ie5sU
More Loanable Funds Model nonsense. U.S. government 'borrowing' does not compete with a finite pool of loanable funds, and therefore cannot crowd out private investment.
1. Austrian analysis understands that most funds lent by U.S. banks are not anyone's savings and are created out of nothing.
2. Nevertheless, if someone's actual savings are used to buy treasury bonds, those savings cannot be in two places at the same time, investing in a private company.
If you want to argue that U.S. government deficit spending competes for real resources, driving up their cost, that's an empirical question which is time and place and resource specific. Let's see it demonstrated.
You know it's true. Assuming a scenario where the government spends money into existence A) The resources were sold to the government for a higher price than any private person offered or the sale would not have happened; and B) The resources can't be in two places at the same time.
Further, you cannot measure the road not taken.
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