One of the shifts I have observed in the last year or so in the way that Modern Monetary Theory (MMT) is being discussed in the public domain and the type of speaking invitations I am receiving is a growing interest from large financial market entities, who have not bought into the visceral, knee-jerk attacks from the populist academic type economists (Krugman, Summers, Rogoff, and all the rest that have jumped on their bandwagon). I spoke at a few workshops some years ago where economists from the large investment banks were the main audience and it was clear that they, in the main, appreciated what MMT was about. It is clear the characters that have to deal with putting funds at stake are keen to understand how the monetary system actually operates rather than how the mainstream macroeconomists pretend it operates – a pretense that advances particular ideological interests. What is also coming out more clearly is that the response from the mainstream is revealing a dissonance that they cannot seem to manage in any coherent way. We have seen statements from mainstream macroeconomists dismissing MMT as just ‘printing money’ and proposing Zimbabwe-like disasters. Others claim that they knew MMT all along and so there is nothing new. Others claim that all the insights that MMT holds out come down to whether one things monetary policy is less or more effective as a counter stabilisation told than fiscal policy. All statements attempt to simplify our work down to the level of irrelevance or downright crazy. Other interventions, such as the recent statements from the Bank of Japan Governor border on the surreal – ‘we are not doing MMT’ – well one doesn’t ‘do MMT’ anyway. But an MMT understanding provides a remarkably accurate depiction of what has been going down in Japan for nearly 3 decades – a depiction that the mainstream macroeconomists is incapable of providing. It seems that now, the financial markets are starting to get this point and seeking more engagement with MMT (if my invitations are anything to go by). This engagement is not without issues though. This is Part 1 in a two-part series discussing this topic. Part 2 will come tomorrow.
This coming Thursday, I am in Sydney talking with a large investment funds firm about MMT....
Stephanie Kelton has been speaking to financial advisors in the US for years. And probably many finance people realize that Goldman chief economist Jan Haztius introduced Wynne Godley's stock-flow consistent accounting approach to economic and financial analysis long ago. As Bill points out, academic economists may be able to ignore results but finance professionals can't. Look for MMT breakthroughs in the mainstream to emerge from finance rather than academic economics. The academic economists will likely be the last to get it and some of them never will.
Why the financial markets are seeking an MMT understanding – Part 1Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
MMT and the woes of useful political idiots
ReplyDeleteComment on Bill Mitchell on ‘Why the financial markets are seeking an MMT understanding’
“One of the shifts I have observed in the last year or so in the way that Modern Monetary Theory (MMT) is being discussed in the public domain and the type of speaking invitations I am receiving is a growing interest from large financial market entities, who have not bought into the visceral, knee-jerk attacks from the populist academic type economists (Krugman, Summers, Rogoff, and all the rest that have jumped on their bandwagon).”
First of all, academic economists like Krugman, Summers, Rogoff, et tutti quanti are failed/fake scientists and cannot be taken seriously. Fighting these folks and mainstream economics as a whole delay only their burial at the Flat-Earth-Cemetery.#1
Mainstream economics is cargo cult science and the representative economists is not a scientist but a political agenda pusher. The pivotal issue of science is the truth/falsity of the theory in question, the pivotal issue of agenda-pushing is how effective the propaganda is and how the number of followers can be increased. Success is measured in likes and has no relation whatsoever to scientific content but depends alone on the political narrative.
MMT’s critique of mainstream economics is fully justified. The claim of MMTers that their approach is superior is justified. The reason is that MMT is macrofounded while mainstream economics is microfounded which is the lethal methodological defect. Unfortunately, from all this does NOT follow that MMT is scientifically true, i.e. materially/formally consistent, and it does NOT follow that MMT policy is, as claimed, for the benefit of WeThePeople.#2 MMT policy is clearly for the benefit of the Oligarchy. So, what holds for loudspeakers of the mainstream holds also for Bill Mitchell and other loudspeakers of MMT: economists are either stupid or corrupt or both.
There cannot be the slightest doubt that the policy of deficit-spending/money-creation benefits the Oligarchy because it increases macroeconomic profit according to the Profit Law which entails Public Deficit = Private Profit. Thus the Oligarchy’s financial wealth and public debt (currently $22 trillion) grow in lockstep.
Bill Mitchell’s core message is: “… we will learn how to understand how fiscal deficits impact on the non-government sector and expand the net financial assets in that sector and how fiscal surpluses do exactly the opposite.” What Bill Mitchell does not explain is that alone the financial assets of the Oligarchy are expanded and that WeThePeople are left with an expanding public debt that will eventually cause insoluble problems.#3
MMT is a communicative success among big money: “In September, I will be talking with some of the largest investment funds in Europe and Britain (and the Globe). I know some of my American MMT colleagues are doing similar presentations.”
This poses a slight problem because Bill Mitchell has to dispell the impression that he and other MMTers are in bed with the Oligarchy. How does he get around that?
See part 2
Part 2
ReplyDelete“I think there is something to be said for people of influence being educated in a sound MMT understanding ― which is not to say I support the sort of influence they exert. However, on the other hand, I realise their motivation is not purely benign ― a thirst for knowledge etc. These entities are about profit making and will seek out anything that helps them achieve those goals. So for me, as an educator, the challenge is avoiding becoming another paid consultant in that process. I want them to understand our work but I don’t want to be part of their profit-making process. It is not an easy task. … But I see an advantage in fostering dissonance within the mainstream economics profession ― to expose the myths that are pumped out by the dominant paradigm in my profession, which undoubtedly leads to poor policy outcomes that damage the well-being of so many people.”
So, everyone can see that those mainstreamers are the bad guys and MMTers are the good guys: “We immediately perceive that the ideas that mainstream economics pump out that our governments are financially constrained are false and if this new awareness becomes the norm, then our democracies become enriched ― politicians have to defend their positions more transparently and their ideologies (who they want to transfer riches to) become more exposed and obvious.”
What is indeed obvious is that the MMT policy of deficit-spending/money-creation transfers riches to the Oligarchy and that the chief propagandist Bill Mitchell tells WeThePeople that this enriches democracy. That is after he has educated the intellectual slackers of Wall Street first: “An MMT understanding does not lead to conclusions that deficits from currency-issuing, national government do not matter. This is one of those popularised myths that the attackers are propagating because they think it will finish MMT off forever. The smartest operators in the financial markets are those who know otherwise. Only the less educated financial market players have bought the spin from the mainstream economists that ranges from deficits are typically not desirable to they should be avoided at all costs. Financial market operators should never be joining lobbies that proclaim the deficits are bad and should be avoided. Quite the contrary.”
The contrary is Public Deficit = Private Profit.
Egmont Kakarot-Handtke
#1 For details of the big picture see cross-references Failed/Fake Scientists
http://axecorg.blogspot.com/2015/11/failedfake-scientists-cross-references.html
#2 For the full-spectrum refutation of MMT see cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#3 How to pay for the war and to be bamboozled by economists
https://axecorg.blogspot.com/2019/05/how-to-pay-for-war-and-to-be-bamboozled.html
"academic economists may be able to ignore results but finance professionals can't"
ReplyDeleteWell, finance professionals can ignore results too.
For example, there is a trade called "the Widowmaker trade": shorting Japanese bonds. Many famous hedge fund managers have been falling pray of that trade for the past 30 years, and they don't seem to be learning.
Maybe they learned that you shouldn't do it, but even if that is the case, they cannot tell why. Most (99%?) of traders still believe that a bond market crash in Japan has to happen.