MMT and Political Neutrality

     As I've mentioned in recent posts I've kind of gotten sucked in a little with this whole MMT thing-Modern Monetary Theory. Some find the MMTers snarky and pretentious-I find them ok since we've broken the ice-but in any case it does seem that the MMT framework enables you to understand the monetary world in a radically different way.

   
   It's not necessarily easy to start with, it requires more patience than many ideas and theories but the more you come to get its basic premises the more profit you begin to see. Yesterday Cullen Roch at Pragmatic Capitalism had a piece on the politics of MMT. His basic point is that the real value of MMT is it's descriptive ability- the prescriptive side is not the main event.

   http://pragcap.com/the-politics-of-mmt/comment-page-1#comment-90526

   It does seem to me that is true, that's exactly what the benefit is-it's descriptive ability. He argues that people of considerably different political persuasions can take to MMT and that he would call himself a fiscal conservative. Judging by the comments in the post that would seem true. He and Scott Fullwiler even got into a disagreement of the efficacy of a "government jobs program."

   For my part I'm a Keynesian liberal and it seems Cullen is right that it doesn't demand that you must be Left, Right, or Center but I do find it comparatively efficacious for my political perspective as well. The MMT framework admits the role of government, it admits that it has a legitimate role at all. The libertarian view on the other hand-I define libertarian here as the belief that there is a more or less Manichean struggle between the forces of good-private enterprise-and evil-the government. And the goal is more or less to drown it in Norquist's bath tub.

   There is some difference-some libertarians(in this interpretation "conservative" and "libertarian" is a distinction without a difference) think there is a (very) limited role for government. Friedman admitted that there are certain things that the government even does better than the private sector though these things are comparatively few and he no doubt would treat any claim about a particular function being better handled by the government with due suspicion. Some go all the way like the recent funny piece at Naked Capitalism about the libertarian society of the future based on the vision of Hermann Hoppe.

   Hoppe is a radical in that the one area that perhaps most libertarians would conceded government control-military defense-he denies arguing that this would be handled much better by fee for service insurance companies. You would get as much military defense as you pay presumably. He claims that military defense is the last place you would want government to control-as this the basis of its ability to coerce.

   The immediate problem-far from the only one, I consider this idea absurd on its face but hilarious for its involuntary satire-is that military defense is a social good-for you to be adequately protected from say a terrorist attack your nonpaying neighbor would have to reap some of the same benefits, to assure that they don't you could not be adequately protected-it is beyond the ability of even Hoppe's insurance companies to relegate the effects of an Act of God to only those who fail to pay them a fee. No matter how much you pay for insurance against rain it will rain on your house as much as your nonpaying neighbor. If you pay for insurance againt the world being destroyed by an asteroid and your neighbor doesn't if one does indeed destroy the world you are just as history as your neighbor.

   Compared to various libertarian frameworks, MMT assumes the reality, that like it or not the government has a role in a society and economy. Indeed while MMT does see the government role as acting to benefit the private sector it also recognizes the government-under a fiat money system-as the currency monopolist. What this means is that the private sector to get started requires the government in some sense to turn on its motor.

   The government is a very curious entity as MMT shows us-it is like the God of Kant or Hegel, like the philosopher-king deity of German Idealism creates/thinks/posits the Idea, the government in a fiat money system creates/issues/posits money. Yet it has no need of money itself. The government is the monopoly creator of money but the government itself has no money.

  It doesn't need it-if you give the government $5 it takes that money and destroys it. The effect of you giving it $5 is that you are $5 poorer with a reduction of your ability to pay in the future but the government is no richer. The government  cannot be "poor" it is never short of money, but then it has no money-in a sense it can't be rich either, the terms "rich" and "poor' only apply to the private sector of private businesses and individuals. That's if you pay in cash-if you pay by check the government cashes the $5 at your bank, receives cash, and then destroys it.

  But in this case the bank is now $5 richer and has $5 more to lend out in loans into circulation. If you pay the government in cash then your money is debited but there is no corresponding credit on the government's side. If you pay by check there is a corresponding credit but this to the bank the check is drawn on.

  The government therefor issues currency for the private sector to build up. It needs the private sector to sell it goods and services.

   Speaking of Hoppe it is in this vein interesting that he has this theory where he compares monarchy to democracy. Not to give away the punch line but democracy comes up short. Not that he is ultimately a monarchist-for him monarchy was already a step down the slippery slope to democracy; no the optimum political arrangement for Hoppe was pre-monarchical feudalism.

   http://diaryofarepublicanhater.blogspot.com/2011/12/what-is-libertarian-paradise.html

   For Hoppe's piece where democracy loses to monarchy see his "Political Economy of Monarchy and Democracy http://www.lewrockwell.com/hoppe/hoppe23.1.html

   According to Hoppe's political economy there are two kinds of governments-there is "public government ownership" and "private government ownership."

   Democracy is public government ownership, monarchy is [private government ownership. In his view, a monarch essentially will be more "restrained" int its exploitation of the economy as compared to a democracy as the monarch as king for life will take more of a long term view. Hoppe sees the King as basically using the government solely for his own personal consumption.

  If he levies a tax then most of this money presumably either goes to his own private consumption or his own private savings. In today's terms if there were a King and you sent him $100,000 maybe he'd take $50,000 and by a new car and the remainder would go into his own bank account.

  This it seems to me could not be a more different view than MMT where regardless of the form of government-even if formally a absolute monarchy-the government as such has no need for money and taxes are not put into the government's bank account-even if headed by a King(presuming a fiat money system)-in many ways the King was always a formality anyway on matters of economics it seems to me. He had much less power than he thought. Hoppe may prefer a King as the King feeds his illusion of economic personalism.