Saturday, November 28, 2020

Jude Murdoch and Steven Hail argue modern monetary theory offers desperately needed clear thinking and fresh ideas for our society and our democracy

What is modern monetary theory?

Modern monetary theory (MMT) is a lens for properly understanding how the government funds its spending in a country that controls its own currency. MMT accurately describes how money, debt, and taxes actually work in our modern economies. Yet MMT is often badly misunderstood and misrepresented, so let’s expand on what it means.

At its heart, MMT shines a light on two core truths about a government that issues its own currency, known as ‘fiat’ currency. These truths aren’t theories or suggestions about how we should or could run our economies. They don’t belong to either the political left or right. They simply describe what happens in the real world, right now. And they apply to our government as the issuer of the New Zealand dollar.
Jude Murdoch and Steven Hail argue modern monetary theory offers desperately needed clear thinking and fresh ideas for our society and our democracy
Jude Murdoch and Steven Hail


Unknown said...

Once you've researched the history of commodity based money you'll understand why the word "modern" in MMT is a deliberate joke!

Matt Franko said...

“ and private banks do not and cannot lend out reserves directly.”

They have done this all the time..., Banks with excess than minimum reserve balances lend reserves to other banks who possess less than minimum required reserve balances in order for those banks to be able to meet minimum required balances of the Reserve Requirement Ratio ie Reserve Asset Balances/Deposit Liabilities...

The people saying “banks lend out the reserves!” are not qualified in Accounting science and are making the cognitive error of reifying the Accounting abstractions... they think the abstractions are real and they can therefore be “lend out!”...

Mike Norman said...

"They have done this all the time."

Yes, but it changes nothing with respect to the amount of system reserves whereas lending creates new reserves.

Tom Hickey said...

There may be some confusion on this. Reserves balances (rb) exist on the books of the cb in the payments system. Banks lend rb to each other overnight to meet the reserve requirement (rr) if one is imposed.

Banks don't and cannot lend rb to those that are not members of the cb and have accounts at the cb. That includes all commercial lending.

There are two sets of books. Rb are in banks' deposit accounts at the cb in the payments system as a bank asset and cb liability. There is another set of books at each bank for commercial accounts. Deposits in those accounts are bank liabilities and customer assets.

When a customer writes a check on a deposit account and it is cleared in the payments system, then the bank's rb balance is marked down at the cb and the bank marks down the customers deposit account. The bank loses an asset and cancels a liability. Another bank gets the rb and marks up the appropriate customer account. The level of rb at the cb stays the same. The rb as a cb liability just shifts to another bank.

The only way that reserves get to bank customers is through cash withdrawal at the window. The bank orders up FRB notes to meed customer demand and exchanges rb for them in the payments system. They are counted as rb as long as they are vault cash and become cash in circulation, increasing M1, when they pass through the window.

One of the reasons for confusion is that many don't understand the accounting takes place on two interfacing sets of books, 1) the payments system book at the cb for settlement and interbank overnight lending and 2) the banks' books in the commercial banking system.

The two systems are linked by commercial banks having accounts at the cb. The rb are settlement balances in these accounts and they are not used for commercial lending or spending directly into the economy. They are used to settle transactions in the payments system among banks and for transactions between government and member banks.

MMT economist Eric Tymoigne goes through this in his intro to money and banking.

It's also available at Scribd.

Matt Franko said...

It’s highly abstract Tom and these unqualified untrained incompetent rubes who probably never even took Accounting 101 who keep going all around the place all the time saying “banks lend out the reserves!” need to be called out on this...

It’s a very significant cognitive deficiency in these people.., they shouldn’t be allowed anywhere near public finance... I would ban these people or disappear them pronto..

Andrew Anderson said...

There may be some confusion on this. Tom Hickey

Oh, What a twisted web we weave,
when first we practice to deceive!
Walter Scott

Oh, what a twisted mess we make
when first we dare to fractionate!
"Thou shall not steal",
a simple rule,
but much too simple
for complex fools.

Andrew Anderson said...

Btw Tom, it cannot be said that you don't understand our corrupt system so there's one excuse you can't use for supporting it anyway.

Andrew Anderson said...

or disappear them pronto.. Franko

Murderer much?

Matt Franko said...


AXEC / E.K-H said...

Clear thinking in economics: hahaha!
Comment on Tom Hickey on ‘Jude Murdoch and Steven Hail argue modern monetary theory offers desperately needed clear thinking and fresh ideas for our society and our democracy’

Well, economists need, first of all, clear thinking about how the economy works. To figure out how society or democracy works is NOT their business. Dabbling in sociology and political science is known as economics imperialism.#1

Economics imperialism has always been a bad joke because economists have not gotten the foundational concepts of their own discipline straight to this very day.#2, #3 In the interdisciplinary exchange, they have nothing of scientific value to offer.

Clear thinking is not the economists’ forte. MMTers are NO exception. Their foundational sectoral balances equation is false proving that MMTers are too stupid for the elementary algebra that underlies macroeconomics.#4, #5, #6

Because the foundational concepts are ill-defined the analytical superstructure is scientifically worthless and because of this, economic policy guidance NEVER has had sound scientific foundations.#7 So, what economists in general, and MMTers in particular, are actually doing is brain-dead political agenda pushing.#8

Needless to emphasize that economists do not meet the high ethical standards of science. Steven Hail is an #EconBlocker like most MMTers.#9 EconBlockers violate the AEA Code of Professional Conduct.#10

Clear thinking arrives with inescapable logic at the conclusion: bury all this proto-scientific garbage and its authors at the darkest corner of the Flat-Earth-Cemetery.

Egmont Kakarot-Handtke

#1 Economists: Jacks-of-all-trades ― except economics

#2 Economists’ foundational conceptual blunder

#3 You know you are in the political Circus Maximus when economists talk about Democracy/Liberty/Freedom

#4 Wikipedia, economics, scientific knowledge, or political agenda pushing?

#5 How the intelligent non-economist can refute every economist hands down

#6 MMT is refuted on all counts

#7 Cross-references Political Economics/Stupidity/Corruption

#8 Links on MMT-Progressives push Wall Street’s agenda

#9 Economists/MMTers: agenda pushers, distractors, blockers, muters, censors
Economists/MMTers: agenda pushers, distractors, blockers, muters, censors

#10 Code of Conduct

AXEC / E.K-H said...


#9 Economists/MMTers: agenda pushers, distractors, blockers, muters, censors