This is one of the worst hit pieces I have ever run across. Loaded with ridiculous strawman arguments, making claims MMT never made. A display of sheer ignorance and dogma. The authors clearly never read any of the MMT academic papers or literature. This should be a total embarrassment for the Richmond Fed or an indictment of how wedded they are to a deeply ignorant and inapplicable dogma.
Starts off with this ridiculous statement
During the past 25 years, low interest rates and highly expansionary monetary policy with little apparent inflation have created the illusion that a government can simply print money to fund exorbitant deficit spending with no repercussions. This core tenet of so-called "modern monetary theory" ignores the fact that deficit spending is constrained in the long run by a government's ability to satisfy creditors.
Satisfy creditors? "Exorbitant spending." They even start off talking about monetary policy when MMT spends little time on that, and in fact has stated how that's ineffective. MMT deals with fiscal policy space of a currency issuer.
Even invokes the completely idiotic comparisons to Weimer Germany and Zimbabwe.
...economic history is awash with disastrous attempts to finance government spending and debt simply by printing money. These examples range from currency debasement in the Middle Ages to the hyperinflations of the 1900s (for instance, Germany in 1923, Hungary in 1946 and Zimbabwe in the 2000s). All of these examples demonstrate that MMT-flavored policies are, at the very least, poor solutions to fiscal problems.
Really, really, stupid.
There's a lot more misrepresentation, ignorance, and just plain garbage in the paper.
Read it here.
29 comments:
Surprised they didn't include "We all know that eventually, as a socialist, you run out of other people’s money." What a let down!
No mention of MMTers devouring small infants.
MMT says that deficits don't matter. Oh, wait.
DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS MATTER DEFICITS...
—Stephanie Kelton on Twitter
Chris McArdle tweets in response:
... so... you're saying... deficits matter?
These dudes might have a connection to that libertarian Dave Brat guy from down there…
A lot gets dismissed as strawmen by ignoring the arguments and responding with platitudes by MMT. Congress is passing record budgets with expected 50-70% dwficits into a real resource constrained economy. I've been watching avidly for MMT solutions to these complaints about a lack of fiscal response from MMT when it comes to constraints. This is the #1 complaint about MMT. The Fed should not have to raise rates if congress and MMT intelligentsia had supply side solutions. Mosler called for easing restrictions on trade, specifically Canadian lumber last Summer. That was a start. Generally though, our syatem is already MMT in action minus a JG. Clearly congress does NOT take real resource inflation into account as well as they should. It would be nice if MMT didn't dismiss the criticism and instead addressed the concerns in good faith.
Well they do support this 3.5T infrastructure thing and there are no infrastructure workers….
iow they always say “the question is not do we have the money but do we have the real resources and the workers….”
We manifestly don’t have either…. Yet they are still cheering this 3.5T thing on…
https://thehill.com/opinion/international/571206-us-supply-chain-shortages-and-the-consequences-of-globalization-run
“ It’s been a dizzying summer for the nation. Wildfires, floods and power outages have hit while Americans are trying to dig out from the impact of the COVID-19 pandemic. Complicating things are shortages of everything from lumber and steel to consumer goods and automobiles. These supply chain disruptions are the unfortunate result of America’s over-reliance on a complex global web of imports.”
Yeah let’s spend 3.5T into this situation…. Good idea!
These supply chain disruptions are the unfortunate result of America’s over-reliance on a complex global web of imports.
Triffin Dilemma...
The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies. This dilemma was identified in the 1960s by Belgian-American economist Robert Triffin, who pointed out that the country whose currency, being the global reserve currency, foreign nations wish to hold, must be willing to supply the world with an extra supply of its currency to fulfil world demand for these foreign exchange reserves, leading to a trade deficit. —Wikipedia
Same idea from Charles Hugh Smith:
Any nation seeking to issue a reserve currency must export its currency in size by running large, permanent trade deficits (or an equivalent mechanism for exporting currency in size).
More nonsense from the same article.
But it also puts domestic workers in competition with low-wage overseas labor.
First, what matters is not labor costs, but unit labor costs which is a function of productivity. Second, trade is based on comparative advantage, not absolute advantage. As Tim Worstall would say, we've known this since David Ricardo, and you'd think it would have sunk in by now.
Cloth and wine...
Though she [i.e., Portugal] could make the cloth with the labor of 90 men, she would import it from a country where it required the labor of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth.
And yet more nonsense from the same article.
Meanwhile, stock markets and Wall Street banks have earned massive profits as a direct result of globalization and growing import dependence, even though Main Street America has suffered the loss of more than five million manufacturing jobs...
A study by Ball State University showed that 87% of job losses in manufacturing were due to automation, not offshoring. But why let truth get in the way of a good story.
What does any of that have to do with advocating for the creation of a demand increase thru massive fiscal spending when there are both manifest labor and material shortages?
"Congress is passing record budgets with expected 50-70% dwficits into a real resource constrained economy"
If there are 50 to 70% deficits then those savings are the 'voluntary tax' that offsets the fiscal spend.
See Japan for details.
The Fed 'raising rates' is just them managing the unemployed buffer stock as they are expected to. It won't be as effective as a Job Guarantee but that's how the current inflation management strategy works.
If it doesn't work, then MMT would suggest replacing it with a Job Guarantee. That will then bring prices under control because "what about the jobs" whining from firms can be ignored and they can be left to go bust.
Always remember semi-inflation is resource reallocation. It's how it is supposed to work.
@Ryan Harris
Lumber prices corrected without Mosler's tariff cuts. But yeah, all of the Trump tariffs should be eliminated.
Resource constrained? 8.4 mln people unemployed. Capacity use, 76%. Commodities? Yeah, maybe in some areas. But show me.
"Platitudes?" Give me a break. These people are morons.
There is an absolute limit to the growth of public debt
Comment on Mike Norman on ‘Absolutely idiotic hit piece on MMT by 3 clowns at the Richmond Fed’
“This core tenet of so-called ‘modern monetary theory’ ignores the fact that deficit spending is constrained in the long run by a government's ability to satisfy creditors.”
Except that it is not the government that satisfies creditors but WeThePeople. For the public debt holds We-The-People-Owes-It and Oligarchy-Owns-It. This cash cow produces interest for the Oligarchy which is taxed from WeThePeople in all eternity. So, deficit-spending/money-creation is a always and everywhere a bad deal for WeThePeople.
The absolute limit for the growth of public debt is given by: total interest on public debt = total wage income of WeThePeople.#1 Practically, the limit is reached much earlier.
The 3-sector Profit Law Q≡(G−T)+(I−S)+Yd implies Public Deficit = Private Profit. If tax T goes to the minimum, profit Q goes to the maximum. With their advocacy for deficit-spending/money-creation, MMTers are the profit maximizers for the Oligarchy.
In this capacity they shred everyone who says that public debt has an absolute upper limit even the folks at the central bank who support since their founding the growth of the public debt ― which, by the way, has always been their real job.
So, actually, the central bank clowns and the MMT clowns both push the agenda of the Oligarchy.#2
Egmont Kakarot-Handtke
#1 From the debt economy to the gift economy: how America is brainwashed to love budget deficits
https://axecorg.blogspot.com/2020/12/from-debt-economy-to-gift-economy-how.html
#2 Deficit cheerleaders ― the Oligarchy’s useful idiots
https://axecorg.blogspot.com/2019/08/deficit-cheerleaders-oligarchys-useful.html
Demand in this situation will create its own supply. We are not fundamentally missing any resources that could not be provisioned through targeted public spending.
“ We are not fundamentally missing any resources”
Semiconductors?
So Dems are going to pass this big big 3.5T thing and magically Toyota isgiung to call everyone back 5 weeks early?
How can you have a “job guarantee” when nobody can go to work due to shutdowns?
“ It would be nice if MMT didn't dismiss the criticism and instead addressed the concerns in good faith.”
They are all partisan Democrats so they will agree with whatever Democrats come up with….
"How can you have a “job guarantee” when nobody can go to work due to shutdowns?"
Shutdown can be work. You are being asked to do something for money.
At that point the only distinguishing feature from the normal unemployment buffer is that you can choose to do it.
Meanwhile, corporate profits are at a record with "nobody" working.
#DearIdiots
#LearnEconomics
“Meanwhile, corporate profits are at a record with ‘nobody’ working.” (Mike Norman)
What a surprise!
Not really. COV is a godsend for the Oligarchy. The 3-sector Profit Law Q≡(G−T)+(I−S)+Yd implies Public Deficit = PrivateProfit. Therefore, the policy of increased deficit-spending/money-creation (= growing public debt) produces a profit explosion.
MMT works just fine (for the Oligarchy)
https://axecorg.blogspot.com/2020/12/mmt-works-just-fine.html
Egmont Kakarot-Handtke
Matt Franko,
What does any of that have to do with...
Nothing really. It's just that if you quote a nonsense article, I feel that I have to call you out on it.
As for the 3.5T in spending, even though it's over ten years, it will be inflationary because of those supply chain issues. Worse yet, Biden wants to tax the rich, which is of course nonsense because the purpose of taxation is to release resources (thanks to Neil Wilson for that).
Rich people have a low marginal propensity to consume, which means they don't reduce their spending when you tax them. If you want to release resources, you have to tax the middle class. Otherwise, all taxes gets you is money, which the government has no need of.
As an aside, we're getting inflation even without the spending, again, due to those supply issues. The spending just makes it worse.
This quote from Peter Zeihan:
Modern manufacturing is a logistical marvel that taps hundreds of facilities in dozens of countries, but that system is based on frictionless international trade. Break just a few links and the entire network collapses. A modern car has about 2000 parts. If you are missing ten, you’ve got a large paperweight.
Further to my comment, and on the subject of the quote from Peter Zeihan,
To understand why the $450 billion semiconductor industry has lurched into crisis, a helpful place to start is a one-dollar part called a display driver.
Hundreds of different kinds of chips make up the global silicon industry, with the flashiest ones from Qualcomm Inc. and Intel Corp. going for $100 apiece to more than $1,000. Those run powerful computers or the shiny smartphone in your pocket. A display driver chip is mundane by contrast: Its sole purpose is to convey basic instructions for illuminating the screen on your phone, monitor or navigation system.
The trouble for the chip industry -- and increasingly companies beyond tech, like automakers -- is that there aren’t enough display drivers to go around. Firms that make them can’t keep up with surging demand so prices are spiking. That’s contributing to short supplies and increasing costs for liquid crystal display panels, essential components for making televisions and laptops, as well as cars, airplanes and high-end refrigerators.
“It’s not like you can just make do. If you have everything else, but you don’t have a display driver, then you can’t build your product,” says Stacy Rasgon, who covers the semiconductor industry for Sanford C. Bernstein.
Why Shortages of a $1 Chip Sparked Crisis in Global Economy
Ryan Harris: “It would be nice if MMT didn't dismiss the criticism and instead addressed the concerns in good faith.”
You’re right. It would also be nice if more people recognized the likely, literally, hundreds of times these exact criticisms have been explicitly and directly addressed over the years, not to mention the even more thorough treatments to be found throughout the academic literature..
Lemme try that again:
The academic literature:
https://activistmmt.org/scholarship
That resource link should be coded into the MNE homepage/sidebar.
#MMT
#BadScienceBadPolicyBadPeople
“It would also be nice if more people recognized the likely, literally, hundreds of times these exact criticisms have been explicitly and directly addressed over the years, not to mention the even more thorough treatments to be found throughout the academic literature..” (Activist #MMT)
It is NOT true that “criticisms have been explicitly and directly addressed” by MMTers. The opposite is true. MMTers ignore refutation#1 and systematically suppress it.#2
The MMT macrofoundations are provably false. Because of this, the whole analytical superstructure is false. Because of this, MMT policy guidance has NO sound scientific foundations. It is just brain dead agenda pushing for the advantage of the Oligarchy and disadvantage of WeThePeople.
Egmont Kakarot-Handtke
#1 MMT is refuted ― end of story
https://axecorg.blogspot.com/2021/04/occasional-tweets-210404b-mmt-is.html
#2 For more about #EconBlocker see AXECquery
https://axecorg.blogspot.com/search?q=%23EconBlocker
Egmont writes in the linked article:
MMTers are stupid or corrupt or both
And yet, here he is, spending his time with people who he considers to be either stupid, or corrupt, or both.
The cognitive dissonance is strong with this one.
As an aside, he does think deeply on these issues, so I'll grant him that. For that reason, I do read some of his articles. For example, just the other day, he was saying that Keynes didn't understand the difference between profit and investment. So I dug up my literature on Kalecki who reminded me that profit and investment are one and the same thing. So, a false dichotomy. But then I Google "Egmont Kalecki" and I get this:
What is wrong with heterodox economics? Kalecki’s profit theory as an example
So, I'm not getting very far here. But then another Google search and I find that Egmont has posted on this blog before by Tom Hickey. Here's a link:
Egmont Kakarot-Handtke — The final implosion of MMT
When I have some time, I'm going to read that and the 84 comments. It should be interesting.
#LearnEconomics
Kalecki, too, got macroeconomic #Profit wrong.
For all about Egmont and Kalecki see AXECquery.
https://axecorg.blogspot.com/search?q=Kalecki
Yes, doing #Economics these days means dealing with people who are either stupid, or corrupt, or both. After all, economics is a failed science.
Egmont Kakarot-Handtke
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