I think this may be a more accurate rendition of what I posted : ",,,when an economy is operating below full employment the direct economic cost of putting unemployed resources to work is zero!"
Powell Trashed MMT, But Wall Street Sees Room for U.S. to Try It
- Thread starter piezoe
- Start date
Banjo just posted this brilliant piece under a new thread called "MMT isn't helping" in this same forum. It's long but very worthwhile reading. So nice to see the MMT folks finally getting some attention they have long deserved. Here's the link:
https://www.jacobinmag.com/2019/02/modern-monetary-theory-isnt-helping
great article!
The MMT discussion is too America-centric. "American Exceptionalism." Most countries don't produce the currencies used in international trade or as bank reserves. Most of them peg their currencies to the dollar or euro. Most of them have a history of debt defaults that keep them from achieving economic development. I don't see anything magic or eternal about the U.S. always having the currency of international exchange. And when we no longer do, through economic indiscipline, through being the fat cats that the lean cats out-compete, we will find out what it's like to be an Argentina. Or, more likely, we will experience some extreme and prolonged discomfort that no one can imagine now because we are in such uncharted territory. MMT is another layer of complexity to hide indiscipline and waste. All MMTheorists have the statist mindset. They think the state is an efficient spender but it's not. And that is by no means the only argument against MMT.
There is a certain largesse, both required and expected, when dealing with long-standing trading partners when your currency is the reserve currency. I sense that we are losing sight of that and to an alarming degree . Current U.S. Policy in regard to trusted trading partners seems to be more antagonistic than cooperative. That attitude puts the reserve status of our currency at risk.
I haven't noticed anything that would suggest to me that proponents of MMT " ...think the state is an efficient spender..." Rather it seems to me that they are convinced the State is an inefficient, and illogical spender. They argue that the State could spend differently with much better results.
One of the blogs I try to read regularly, but often find I have fallen behind, is Bill Mitchells' blog. Here is a link to the first of two articles of his that take on the many critics of MMT directly. http://bilbo.economicoutlook.net/blog/?p=34200 this link will take you to part two, and many other interesting discussions.
I don't know what your background is, so I'll just mention, in case you are new to MMT, that the ideal jumping off place for those who do want to understand what the MMT economists are telling us would be L. Randall Wray's book, "Understanding Modern Money". Of course this was published in 1998 and there has been some revision in MMT thinking since, but I still can't think of a better starting place for anyone who really wants to understand fiat money and the inner workings of the Treasury and Central Bank. I can't recommend this book too highly. Moslers short, more recent book, is perhaps an easier read but has not nearly the detail of Wray's.
Last edited:
And how does MMT fare under such a regime? What happens if the USD is no longer the reserve currency, which people are estimating will happen in the next 20 years?
If you read Dalio's debt crisis book, he goes through a play-by-play of what happened during the 2008-2009 crisis. In his retelling, more or less, the "issue" was that the Fed was limited in what it could do legally. In my understanding, all aspects of MMT except for legally unrestrained printing is already de facto practice.
The thing that worries me about MMT as a fledgling active trader is that if the constraint is removed and MMT is actually implemented, there will be very little volatility in the markets (edit: until the USD is no longer the reserve currency - which will happen).
"implemented"? I suppose, that is like saying, "if the second law of thermodynamics is actually implemented." But on second thought I don't think that's a good analogy. The MM part of MMT is a recognition that how things actually work is not how we perceive them to work, and includes a detailed explanation of how fiat money, Treasury and banking practice work in reality. That part I suppose is already "implemented," to use your word. Then the T part is where all the discussion and interest lies.
Last edited:
Exactly. The only thing the MMT people need to orgasm simultaneously is unrestrained money creation.