Real Progressives LIVE with L Randall Wray - MMT and Debunking AMI: Positive Money

Real Progressives LIVE with L Randall Wray - MMT and Debunking AMI: Positive Money

Clint Balinger — Endogenous money, MMT, Positive Money, & financial reform

Among the Post-Keynesian groups concerned with understanding and fixing problems that lead to the 2007/8 Global Financial Crisis (GFC) and other ongoing economic problems there are different areas of focus by circuit theorists, Modern Monetary Theory (MMT), Steve Keen’s approach to private debt, and other Post-Keynesians. (MMT, while often with a focus on other aspects of the economy [as L. Randall Wray writes, leading from neo-Chartalist and functional finance insights to fiscal policy] is nevertheless firmly grounded in endogenous money theory). Despite these various approaches having important disagreements and areas of interest all are grounded in reality & therefore their discussions on policy options are coherent and useful, unlike orthodox policy discussions. 

There is another perhaps small but dedicated and often visible group of reformers that focus on the monetary system. Broadly these are the various groups that want to change the monetary system such as The American Monetary Institute (AMI), Positive Money (PM), economists associated with the New Chicago Plan and others. Their relation with the Post-Keynesian groups mentioned above is somewhat complicated, and the key reason involves endogenous money. Before continuing, it helps to divide these diverse money reforming groups into two broad categories:

Clint Balinger
Endogenous money, MMT, Positive Money, & financial reform

The Postiive Money Solution same as AMI solution — a government committee.

Firstly, we need to take the power to create money away from the banks and return it to a democratic, accountable and transparent process.

 History has shown that when banks have the power to create money, they create too much in the good times, causing financial crises, and too little in the bad times, making recessions and unemployment even worse.

They put most of the money that they create into house price bubbles and financial speculation, and only a small amount into businesses outside the financial sector. We simply don’t think that we can trust banks, who are hardwired to chase short-term profits, with something as powerful as the ability to create money.

And it’s not enough to regulate them; regulators have repeatedly failed to keep banks under control. There’s no reason why they should get it right this time around.

But we can’t trust politicians with the keys to the printing press any more than we can trust the big banks.

Instead, we need a new committee that decides whether and when to create new money.

This committee would need to be accountable to Parliament and sheltered from vested interests.

They would ensure the right amount of money is created – not enough to cause bubbles and a financial crisis, but not so little that it causes a recession.

Positive Money

Could these 3 simple changes to banking fix the economy? [Transcript]

See also the AMI-Kuchinch bill, HR2990, Sec. 302, ESTABLISHMENT OF THE UNITED STATES MONETARY AUTHORITY, Sec. 302, Establishment Of The United States Monetary Authority

Joseph Huber — Modern Money Theory and New Currency Theory — A comparative discussion, including an assessment of their relevance to monetary reform

Abstract This paper discusses Modern Money Theory (MMT) from the perspective of a New Currency Theory (NCT) as represented by proponents of monetary reform. In the paradigmatic framework of currency teachings versus banking teachings, MMT, in contrast to its self-image as a chartal theory of money, represents banking theory much more than currency teaching. Its understanding of fractional reserve banking and monetary sovereignty is misleadingly incomplete. Thus, NCT’s analyses appear to be a more adequate foundation for modern sovereign money.

Another economist pontificating about the monetary system based on "fractional reserve banking."


real-world economics review, issue no. 66 

Modern Money Theory and New Currency Theory — A comparative discussion, including an assessment of their relevance to monetary reform
Joseph Huber, Martin Luther University, Germany

See also Warren Molser, AMI report

AMI keeps hitting new lows

AMI weighs in on MMT – negatively

Thus MMT fails to address the source of economic instability and the driver of the social and environmental degradation we see all around us. It proposes putting an ambulance at the bottom of the cliff whenever there’s a crash, instead of preventing them happening.

This error comes from the mis-definition of money as debt. The mis-definition of money as debt is incompatible with the Chartal (legal) nature of money that MMT espouses, and history shows us that it is also incompatible with MMT’s stated goals of full employment and price stability. Therefore, MMT has to treat money as money: a necessary medium of exchange – without associated debt – if it wants our money system to reflect reality.

Treating money as money is a pre-requisite for any realistic and sustainable solution. Only then can we enjoy the benefits of technology without endless toil and resource use. When economics is founded on reality, not theory, we’ll all be better off.

American Monetary Institute
AMI’s Evaluation of “Modern Monetary Theory” (MMT)
AMI Research, with Steven Walsh; and assistance by Stephen Zarlenga
(h/t Roger Erickson via email)

As Brad DeLong often says, "the department of huh?"

Kucinich loses primary

AMI loses the proponent of its monetary reform proposal in Congress.

Read it at The Huffington Post
Marcy Kaptur Beats Dennis Kucinich In Ohio 9th District Primary

by Amanda Terkel and Ryan Grim