Saturday, August 29, 2020

Steve Keen’s lightbulb moment on modern monetary theory — Richard Murphy

But there has been an issue: Steve did not 'get' MMT and its argument that spending creates the money to pay tax and fund what is called government borrowing, but which is actually the redepositing of the excess of government spending over taxes raised back with the government for safekeeping. And that obstacle meant that we could never quite agree.
And then he read The Deficit Myth by Stephanie Kelton, which is also essential reading. And he did some double-entry book-keeping to build a Minsky inspired model of the economy, which is available to sponsors of his blog. And the result is that he now gets that what Stephanie says, and what I've been saying for some time, is right: i.e. that the deficit creates money.
Money is not needed to fund the deficit. The deficit makes the money to pay for itself.The bonds just tidy up the private sector, and bank, balance sheets and let it be pretended that the government is not lending itself money when that is what it actually, and inevitably, is doing via its own central bank...
Amazing that it took reading The Deficit Myth for Steve to realize this elementary institutional fact.

Tax Research UK
Steve Keen’s lightbulb moment on modern monetary theory
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum


Ralph Musgrave said...

So in a nutshell, all these fantastically clever household name economists, Ann Pettifor, Frances Coppola, Steve Keen and Richard Murphy are five or ten years behind regular readers and commentators at Mike Norman Economics.

Hope I got that right....:-)

Joe said...

Weird, I'm almost positive (but apparently am incorrect) that I've heard Keen say deficits create money, for years now.

NeilW said...

I wonder how long it will take before Richard and Steve realise that money is really just a record of time.

Matt Franko said...

“ what Stephanie says, and what I've been saying for some time, is right: i.e. that the deficit creates money.”

I certainly haven’t read that book but I highly doubt she wrote “the deficit creates money!”....

She probably wrote “the deficit is savings” or something to that effect...

“creates money!” Is a Monetarist phrasing...

NeilW said...

She says

"the government's own deficit supplies the dollars that are needed to purchase the bonds".

AXEC / E.K-H said...

MMT: fraudsters united
Comment on Richard Murphy on ‘Steve Keen’s lightbulb moment on modern monetary theory’*

Richard Murphy, Steve Keen, and Stephanie have been individually refuted some time ago.#1, #2, #3

According to Richard Murphy, the big MMT lightbulb consists of “the deficit creates money”. This is not quite correct because the public deficit creates counterfeit currency.#4 And because of the Profit Law ⇒ Public Deficit = Private Profit this mode of money creation is NOT neutral with regard to distribution but a massive free lunch for the Oligarchy.

Needless to emphasize that distribution is not an issue for the MMT sales team that poses as progressive friends of WeThePeople.

These are the facts:
• MMT policy is NOT in the interest of the WeThePeople.
• MMT policy amounts to an abuse of the fiat money system.
• The profit effect of MMT money-creation/deficit-spending strengthens the Oligarchy.
• Politically, MMT is a fraud and scientifically it is garbage.#5

Axiomatic macroeconomics tells one that late capitalism can only survive with ever-increasing public deficit-spending. COVID has made this clear to even the dullest person as deficit-spending explodes around the world. This is why Steve Keen jumped on the MMT bandwagon. His Minsky model now confirms Stephanie Kelton’s new sales brochure. What a happy coincidence!

Egmont Kakarot-Handtke

* Tax Research UK

#1 MMT: Richard Murphy’s battle-for-money hoax

#2 Where advanced Heterodoxy — represented by Steve Keen — took the wrong turn

#3 The Kelton-Fraud

#4 The counterfeit currency printers

#5 For the full-spectrum refutation of MMT see cross-references

hoonose said...

The rich are bound to get richer as over time they accumulate most of the new money created. But much of that money flows first to 'we the people' for instance as stimulus. And then 'we the people' benefit first hand in being able to buy more due to that stimulus.

IMO the greatest way to positively affect the lives of 'we the people' would be through new moneys directed towards subsidizing their HC.

Matt Franko said...

Not ideal phrasing Neil... borderline Monetarist..