I don't put up criticism of MMT unless it is informed and Otmar Issing at least knows the basics. His response is predictable since he is a well-known financial conservative even in Germany, which is the the contemporary bastion of the Treasury view. He still thinks that monetary policy administered by an independent central bank works, in spite of the facts.
His argument against MMT? Currency debasement.
Project SyndicateThe MMT Myth
Otmar Issing, President of the Center for Financial Studies at Goethe University, Frankfurt and former chief economist and member of the board of the European Central Bank.
See also
Is currency debasement going to be the new meme?
Too embarrassed to ask: what is a deficit?
9 comments:
This is funny you have the MMT dialogics saying the Monetarists are dispensing myth and here is the other dialogic guy saying that no it is MMT which is dispensing the myth...
textbook methodology fail 101...
This is funny you have the MMT dialogics saying the Monetarists are dispensing myth and here is the other dialogic guy saying that no it is MMT which is dispensing the myth... textbook methodology fail 101...
Actually, speech is divided into logic (rational argument based on evidence) and rhetoric (persuasion). Figurative speech belongs to rhetoric. When seen, it is a tell that the user is trying to persuade by playing on emotion, logical fallacies, and cognitive-affective bias, rather than argue on rational grounds. Most informal logical fallacies are also devices used for persuasion. This even has a name, "sophistry."
What do you have as the figurative language here Tom? “myth”?
I say that “myth” here is figurative...
What do you have as the figurative language here Tom? “myth”? I say that “myth” here is figurative.
Yes. Both Stephanie and Otmar Issing are using it rhetorically for persuasion purposes. But Stephanie is correct in the analysis and Otmar is not, based on what Stephanie said about MMT in her book. Currency debasement is not a necessary outcome of replacing monetary policy with fiscal, nor is even a likelihood if a government actually followed MMT macro analysis and policy.
Some use of rhetoric along with logic is OK as long as its stays within the bounds of logic. Using rhetoric to avoid logic is sophistry.
I've just left a fairly long comment at that Project Syndicate site which I've reproduced below.
Otmar Issing doesn’t know much about this subject. First he claims the basics of MMT go back to Abba Lerner in the 1940s. Actually Keynes (in a letter to Roosevelt) in the early 1930s argued that simply creating money and spending it was a way out of a recession. And going back much further, in Ancient Rome, the escaped a credit crunch by raiding the Treasury and spending money freely.
Next, Otman Issing seems to suggest (para starting “Recognising this problem…”) that if the job of raising taxes so as to curb inflation is left to politicians, those politicians will inevitably fall for the temptation of abstaining from raising taxes so as make themselves popular with voters.
Well we all know there have been examples thru history of politicians behaving in that irresponsible way, but actually the evidence seems to be that when politicians DO CONTROL the printing press (i.e. when central banks are not independent), there is no obvious tendency for inflation to rise. Scroll down to first chart here:
http://bilbo.economicoutlook.net/blog/?p=9922
Moreover, it would be perfectly feasible to have an MMT system where politicians DO NOT decide the size of the deficit: e.g. the decision on the size of the deficit could be left to the central bank, a system long advocated by Positive Money and endorsed by Ben Bernanke.
Moreover Issing is quite wrong to say “MMT, however, would revoke the central bank’s control over the printing press, and put that power in the hands of the government.” Actually MMTers are not specific on exactly WHO controls the press: something they certainly ought to clarify.
Next, Otmar Issing says “Even if the politics did work, serious questions would remain. For example, at precisely what rate of inflation should money start to be collected through higher taxes?”
Well – er – what’s wrong with the existing 2% inflation target? In case anyone is interested, it took me about one millisecond to come up with that answer.
I reckon that having an article published by Project Syndicate is a sure sign that you’ve joined the merry band of economic illiterates and incompetents at the top of the economics profession. I mean Kenneth Rogoff and Lawrence Summers have had loads of articles published by Project Syndicate....:-)
The "currency [fiat] debasement" problem is fixed by increasing DEMAND for fiat and the way to do that is to allow everyone to use fiat in account form and by abolishing all other privileges for banks too.
Rogoff never recovered from the Excel error... which was a scientific error...
“ But Stephanie is correct in the analysis”
I doubt that.... probably a book of just more declarative statements and correlation... same as Issing ...
Is currency debasement going to be the new meme? Tom Hickey
I sure hope so since it should force the MMT gang from their pro-bank-deposit-based-economy position to a pro-fiat-based-economy position.
Not that a weaker dollar is necessarily bad in itself if produced ethically ...
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