Monetary Sovereignty and Mark Blyth’s critique of MMT — Peter May

And there is indeed a ‘current account constraint’ – if you are a small open economy you need things you can sell in order to get the stuff you don’t have.

MMT really applies, as many others suggest, uniquely to the US as it issues the world’s reserve currency.

If you are not the US and your Sovereign Currency is weak, it will drive import inflation so it really means that your currency is not properly sovereign.

MMT does recognize this constraint by treating it with more nuance.

MMT's basic framework includes the priority or primacy of real resources over government finances for all countries including those that issue their own currency and don't undertake obligations is other currencies.

MMT acknowledges that a country must either be able to produce is own real resources, which implies having the required natural resources and well as the industrial power, technology, etc. that go into production. This necessitates having ample factors that not all countries enjoy and probably every country including the US is exposed to in some way. 

If a country does not have the means of production for self-sufficiency or cannot acquire financial resources from exports, then it will have to either pay for imports by issuance, which may have an effect on the exchange rate, which in turn may affect the inflation rate.

This implies that any country, even through "monetarily sovereign," is constrained by real resources limitations that may the general prices level.

While a monetarily sovereign country can issue all the currency in wants to infinity, there are consequences based on availability of real resources that boil down to an inflation constraint. This includes the exchange rate, hence imported inflation.

There is also the issue of jobs. To the degree that imports are real benefits they also export jobs through labor embedded in imports. MMT addresses that through economic policy and specifically through an MMT JG as a universal job guarantee that also acts as a price anchor.

In other words, it's complicated (highly nuanced).

Progressive Pulse
Monetary Sovereignty and Mark Blyth’s critique of MMT

Peter May

There are other factors involved including geopolitical. From the time of Adam Smith, economics has focused on trade. The objective of economics in the colonial world was for the periphery (colonies) to send natural resources and agricultural produce to the core (colonialist countries) where technology was reserved and industry was developed for producing finished goods. Finished consumer goods were exported by to the colonies to be paid in specie, while capital goods exportation was restricted.

This condition still exists to a degree as the following post shows. China has the needed USD reserves to purchase goods and services from the US but is restricted from doing so in some important cases where the US desires to continue the previous system by protecting the core through keeping the periphery weak. But China can play that game too since it is no longer a colony even though it is not yet considered to be a developed economy. Trade suffers as a consequence, affecting the global economy.

• China introduced new guidelines to replace Intel, AMD chips and Microsoft Windows in government computers with domestic alternatives.
• The move is part of China's "xinchuang" strategy to achieve technological independence and reduce reliance on foreign technology.
• Analysts predict faster adoption of domestic server processors compared to PCs due to a less complex software ecosystem.

Oilprice

Chip War Escalates as China Bans Intel, AMD Chips in Government Computers

ZeroHedge