Thursday, March 21, 2019

Peter Coy - A Beginner’s Guide to MMT

Another excellent article about MMT.

The reason the government doesn’t need to sell treasury securities, or levy taxes, to spend money is that the central bank, under the control of the treasury, can pay for everything by conjuring up electronic money. In MMT’s ideal world there would still be taxes, but their main purpose, aside from lessening inequality, would be as “offsets” to keep inflation under control. Taxes would drain just enough money from consumers and businesses so total spending in the economy won’t be excessive.

It’s tempting to view MMT’s conception of fiscal policy as essentially similar to that of the mainstream—“Hey, they believe in taxes, too!”—but that’s not quite right. MMTers hold that inflation isn’t primarily the result of excessively strong growth. They blame much of it on businesses’ excessive pricing power. So before trying to choke off growth to kill inflation, they would try to break up monopolies and stop banks from making too many loans.

“The more actively we regulate big business for public purpose, the tighter the full employment we can achieve,” three MMTers wrote in a letter to the Financial Times’ Alphaville column that was published on March 1.



Ralph Musgrave said...

Complete bullshit. I’ve been reading stuff by Warren Mosler and Bill Mitchell for ten years and I don’t remember them saying anything much about “breaking up monopolies and “stopping banks making too many loans””.

As the authors of the Bloomberg article admit, they got the idea about monopolies and banks from a Financial Times article, which itself was not representative of MMT thinking.

Morover, it’s pretty obvious that we need to control monopolies and cartels as best we can whether we adopt MMT or not. Ergo controlling monopolies and cartels has nothing specifically to do with MMT.

Brian Romanchuk said...

Ralph, Mosler has written a lot about bank regulation; it’s just scattered around. And if the FT article was by MMTers, then that’s MMT thinking, whether you like it ir not. There’s entire MMT conferences, and those conferences do not consist of people parroting what Mitchell and Mosler wrote.