In 2017 when a nurse pointed out that her wages had not increased for several years, then-prime minister Theresa May quipped: “There is no magic money tree.” Well, maybe Mrs May was wrong. I believe there is a magic money tree and it is coming to western economies very soon. I am talking about MMT. And strangely, MMT doesn’t stand for “magic money tree”; it’s Modern Monetary Theory....
The question, "Can we trust politicians," is really a question about the viability of democracy. The answer of the liberal faction is, yes. The response of the conservative faction is a resounding, no. Safeguards are required to protect from the excesses of democracy, e.g., descent into "rabble rule."
So after the economic/financial issues are settled, the political questions emerge. This boils down to different worldviews with different value systems and ideologies.
The Telegraph is a Tory paper.
So MMT is flawed, not by economics but by human nature. They say central bankers should take away the punch bowl just as the party gets going. While we may trust central bankers to do so, I haven’t been to a party yet where the party goers themselves elected to remove the punch bowl.
Democracy needs grownup supervision, you see.
The Telegraph (Registration required)
The magic money does exist - but can we trust politicians to use it?
Paddy Dear | co-founder of Tetragon, a closed-end investment company where he serves on the board of directors and investment committee
The magic money does exist - but can we trust politicians to use it?
Paddy Dear | co-founder of Tetragon, a closed-end investment company where he serves on the board of directors and investment committee
Very poor Telegraph article. The basic flaw in it is the assumption that MMT claims the size of othe deficit should be controlled by politicians alone. MMT claims nothing of the sort: for example a system under which some sort of committee of economists (like the Office of Budget Responsibility in the UK) decided the size of the deficit would be perfectly compatible with MMT.
ReplyDeleteIndeed I actually regard MMT’s vagueness on who should decide the size of the deficit a weakness in MMT. In contrast, Positive Money are more specific on the latter point: they claim that decision should be taken by some sort of committee of economists, perhaps based at the central bank.