What I like About MMT

     In the last few days we've had our ups and downs but I'm willing at this point to go out on a limb and say that I like the framework. This is far from saying it's ultimately "right." The best analogy is that it enables you to view the world through another kind of monetary "map" as a topological one enables you to see things differently. What I like about it is it's descriptive potential.

    It has given me some food for thought. My real focus has been in having the best understanding and conception of the monetary world as I can. Many of my current concerns are spoken to well with MMT-Modern Monetary Theory.

    An example of the kind of stuff that I'm interested in right now is about the Clinton budget surpluses of the 90s

   http://diaryofarepublicanhater.blogspot.com/2011/12/joseph-stiglitz-on-roaring-nineties.html

   I was interested in perusing the MMT literature to see that many-notably Scott Fullwiler, Stephanie Kelton, etc-have written about the Clinton surplus. This subject interests me as I always took the surpluses as a point of pride-see we are the fiscally disciplined ones, you are the real spendthrifts-but have now come to think that liberal Democrats have allowed that to appeal to our vanity not realizing that the GOP has pulled a fast one. So now during Republican Administrations "deficits don't matter" but during Democrat Administrations they "matter again."  Part of why Obama focused on deficits during the summer was the Clinton legacy.


   This matters right now as we hear how the government can't do any funding of anything until the deficit is tames ignoring that we are in a recession and when we get out of it a large chunk of the deficit will automatically be cut, that clearly the bond market is not concerned about our debt. Then there's the MMT idea that in a fiat money system like ours neither the bond market or the Chinese, etc have any power to "discipline us" anyway.

  Modern Monetary Theory ((MMT) or "Chartalism" goes back to G.F. Knapp in 1895 which studies the monetary system under a fiat currency.

   http://en.wikipedia.org/wiki/Chartalism

   MMT " views money as a "creature of the state". Chartalism is the belief that money or "the unit of account" is determined by a Sovereign government or other governing authority. This contrasts with mainstream views of money as having arisen by people spontaneously agreeing to use precious metals as a medium of exchange."

    http://mmtwiki.org/wiki/Chartalism_and_the_state_theory_of_money

    Keynes himself was interested in it when he wrote his "Treatise on Money" in 1930.

    http://en.wikipedia.org/wiki/Chartalism

    It seems that since the Nixon Shock it really has come into its own as the currency now has no relation to the price fluctuations of any movements of specific commodities.

    There are many good sites but I think Pragmatic Capitalism with Culleen Roche is very user friendly. While many of the MMTers feel like others willfully misunderstand their views I think that likely a lot of it is not wilful-some very well may be. Some of it is because you have to really go out of your way to understand it but from what I have seen so far the payoff seems worth it.

    For example, see Cullen's discussion of Austrian's dismissing MMT after having some interest in them. The interest is because "Austrians and MMTers have more in common than one might presume.   The most glaring similarity is with regards to the Fed and the government’s role in the financialization of our economy and what I have described as “cannibalistic capitalism”.  MMTers and Austrians would both agree that the Fed’s role in the marketplace is an example of government overstepping its boundaries.  We would also agree that the government must be very precise in the ways in which it intervenes in the private sector.  As I often say, government is a tool utilized by the private sector FOR the private sector.  If government is used in abusive, corruptive, or other ways that become detrimental to the prosperity of the private sector then the citizens of that nation should very seriously reconsider its existence. "

    However, ultimately, Roche concludes that: "Austrian economics is dominated by political rhetoric and scare tactics that are utilized to push a political agenda and not a rational view of the world in which we live."

     "In a recent story on Mises.org, one prominent Austrian takes a swing at MMT.  In the opening paragraphs of the piece, Robert Murphy says:

     “After my admittedly brief exploration, I have concluded that the MMT worldview doesn’t live up to its promises. However, as an Austrian economist I know how annoying it is when “big guns” in the economics profession reject my own position as nonsense without even taking the time to spell out what is supposedly wrong with the Misesian approach.”

     With this Culleen says: "Unfortunately, Mr. Murphy’s “brief exploration” proves that he did not take the time to fully appreciate or understand the MMT position.  I can speak from personal experience with regards to this “exploration” process.  MMT can be extraordinarily complex when confronted by someone with a classic economics education.  Therefore, a “brief exploration” is almost certain to lead to the sorts of mischaracterizations that are seen within the Murphy piece."

     http://pragcap.com/the-austrians-are-intrigued

     I certainly am no fan of the Austrians as I see them as very much part of the problem-they are inflation phobes. For my part I'm not all that anti-government, I think in truth there are things government does better than the market some things it doesn't do as well but any kind of libertarian view-as the Austrains are-is unrealistic.

    In any case, it is true that it takes a little time to get up to speed with the MMT. I do think the payoffs are worth it. I do think that the proponents should understand that everyday people come to conclusions without extensive reading and MMT is in some ways unusual in requiring a little more background-to win people over in my humble opinion I wouldn't presume to quickly that someone is trying to misunderstand though I certainly agree with Culleen's criticism of the Austrians.

   As I said in my post I linked up there Stiglitz is someone who can give us guidance right now as he was there for the Clinton Administration and is very circumspect-as has been Robert Reich in his "Locked in the Cabinet" about both the real achievements but also the failings of the Clinton team. Stiglitz also admits that Clinton to an extent was lucky, that as all Presidents he played the hand he was dealt. Compared with Obama, for instance, he was very lucky.

   For me as a liberal Democrat this is very important as he is very helpful in judging what to make of the Clinton legacy-there are positives and negatives. In some ways Clinton did liquidate the welfare state in a way that Reagan had been unable to do. At the time though I thought "ending welfare as we know it was a good idea-it would be the best of both worlds and all worlds.

   Clinton was wrong about this but I think he genuinely was mistaken rather than that he truly wanted to take the rug out from beneath needy Americans. He thought he was simply ending welfare as we know it-as I did-but in truth he merely ended welfare.

   Still Stiglitz does show some real Clinton achievements like when he killed a Republican bill by Connie Mack in Florida that would have taken away the dual mandate at the Fed explicitly committing it to inflation alone.