Tuesday, May 21, 2019

Richard Murphy — Growth, MMT and the Green New Deal

Richard Murphy has been working on the New Green Deal over the last decade. In the second half of this post he provides an outline that is very useful in thinking about it.

Tax Research
Growth, MMT and the Green New Deal

Richard Murphy

1 comment:

AXEC / E.K-H said...

MMT and the Green New Deal: Where is the snag? (II)
Comment on Richard Murphy on ‘Growth, MMT and the Green New Deal’

Strictly speaking, environmental protection is an issue for physicists, chemists, and other scientists. Economists are not scientists because they do not know to this day how the monetary economy works. This does not stop these abysmally incompetent folks to utter their irrelevant opinion on every issue between heaven and earth.

Richard Murphy claims to have synthesized MMT and GND: “This one takes an explanation because it has become very closely associated with the Green New Deal, which is again at least in part my fault.”

Unfortunately, he gets the economics part in the synthesis badly wrong. In more detail:

1. “Fundamentally it [MMT] suggests that since we came off the gold standard all money is ‘fiat’ currency It’s a promise to pay and nothing more. The promise backed by the power of the state to tax.” FALSE: The creation and value of money does NOT depend on the taxing power of the State.#1, #2 ,#3, #4

2. “But the state does not need tax to spend. All spending is effectively settled with money created by banks on demand from a customer. It is not paid for out of a stock of savings. And in the case of a government it is not paid for out of tax received.” FALSE: Spending on current output with newly created money is analogous to the spending of the counterfeiter.#5

3. “Instead gov’t spending is paid for by the government asking its bank ― the Bank of England ― to make payment for it. This is exactly akin to the fact that banks do not lend out customer funds: rather they make the funds they lend by a process of double entry book-keeping and bank deposits are the result of that process, and not where it starts.” FALSE: Money is a generalized IOU. Government deposits and overdrafts are produced simultaneously. The government spending is ‘financed’ by overdrafts at the central bank which have to be eventually repaid.#6

4. “The result is that a government with its own central bank and currency can never run short of money ― because it can instruct that it be made at will. And it can never go bankrupt if it borrows solely in its own currency because it can always create the funds to make payment. But of course it cannot print money at will ― because inflation will result.” FALSE: This is the good old Quantity Theory Fallacy. Continuous deficit spending and growing public debt does NOT cause inflation.#7

5. “So action has to be taken to keep inflation under control ― and that is the real purpose of tax in MMT.” FALSE because of 4.

6. “Its secondary purposes are to Ratify the value of money; Redistribute income and weatlh; Reprice market failure; Reorganise the economy; Raise representation in a democracy.” FALSE: Because of the macroeconomic Profit Law it holds Public Deficit = Private Profit and this means that the lethal effect of MMT policy is on distribution and that it secures ― intentionally or unintentionally does not matter ― the self-alimentation of the Oligarchy. Nothing could be more anti-democratic than MMT policy.

The claim of MMTers that a Green New Deal can be realized at any time by deficit spending is misleading at best. Technically, of course, there is no problem. However, as a matter of principle, any New Green Deal can be realized with a balanced budget. But in the MMT scheme of things, a balanced budget is something for the Swabian Hausfrau and permanent deficit spending is the prerogative and duty of a Sovereign State.

The point is that MMTers are not so much interested in how the government’s budget is allocated but that the government runs a deficit because it is the deficit as such that produces the macroeconomic profit for the Oligarchy.#8

MMT is NOT science but political agenda pushing in a social/environmental bluff package. MMT and GND together are the dream team for deceiving WeThePeople for the benefit of the Oligarchy.#9

Egmont Kakarot-Handtke