Tuesday, January 13, 2015

Wray on MMT

Modern Monetary Theory is a concept that makes me a tad nervous because I find that most monetary ideas have been around for at least a century and likely more.  In fact, it is pretty damn hard to top the monetary ideas of Lincoln and his Greenbacks, or for that matter, Peter Cooper and the Greenback Party of the 1870s.

But since MMT seems to be the preferred description of the current monetary position of progressives, I am trying to get myself up to speed.  First up is a positive explanation of MMT by L. Randall Wray of U Missouri Kansas City followed by a really thoughtful discussion of progressive monetary ideas by Bill Mitchell.  All I can say is that if this is what they are calling MMT, it is certainly something that would have made old Peter Cooper happy.

Is It Time for MMT To Become Mainstream to Save Us from the Second Global Financial Crisis of the Millennium?

L. Randall Wray · January 10th, 2015

Some of you will remember that MMT got its first huge mainstream exposure through a Washington Post article written by Dylan Matthews.

He’s just written another excellent story, this time about Stephanie Kelton going to Washington.

Finally, there might be an alternative to the deficit hawk and timid deficit dove lovefest!

As Dylan says: “For years, the main disagreement between Democratic and Republican budget negotiators was about how to balance the budget — what to cut, what to tax, how fast to implement it — but not whether to balance it. Even most liberal economists agree that, in the medium-run, it’s better to have less government debt rather than more. Kelton denies that premise. She thinks that, in many cases, government surpluses are actively destructive and balancing the budget is very dangerous. For example, Kelton thinks the Clinton surpluses are nothing to brag about and they actually inflicted economic damage lasting over a decade.”

Yep, there’s no daylight between a Bush or a Clinton.

Isn’t it pretty funny that if the mainstream Dems get their way, we will get a Bush or a Clinton this time around (again!). Yep, it will be a legacy hire either way, and it makes no difference which one wins–both will do their damnest to limit budget deficits even as the economy falls into the second Global Financial Crisis of this millennium.

There’s now a choice, folks. Just Say No!


  1. Yes and no. With regards to fiat money, MMT is on the same page as Henry Charles Carey and the Populists/Progressives of the old days.

    However, in some other respects, MMT is conservative. For example, MMT is militantly pro-free trade.

    MMT opposes transfer payments and instead advocates a minimum wage Job Guarantee. Their JG seems to be an ivory tower idea, they don't seem to have any specific plans on how to make it work in the real world.

    I consider myself a ally of MMT but I don't agree with them 100%. They have an ivory tower slant -- Bill Mitchell being a perfect example -- where they think they know what is best for the working class even though they are not of the working class.

    1. I suppose being pro free trade is what makes MMT "modern.' Thanks for the heads-up. I was wondering how it stacked up against the giants of the 19th century.

    2. Be careful with Lynch as he has been known to distort MMT at will. MMT favors a job guarantee at a living wage, not a minimum wage, but whatever wage it is set at by definition becomes the minimum wage--hence his confusion. Sometimes specific job guarantee proposals have been made at just a bit above the going minimum wage, but that's an initial wage only and also generally done because going with a living wage off the bat isn't politically feasible at the moment unfortunately. As ABram noted, we aren't against income guaratees if they are coupled with job guarantees and have noted that many times. And we believe any job guarantee should be supplemented with a generous benefits package--healthcare, retirement contribution, vacation time, etc. We've written about this literally dozens of times in publications and blogs, so again Lynch is quite deliberately distorting.

    3. Another example--"MMT is militantly pro free trade." Just completely wrong. In the hundreds of publications and blogs, I doubt Lynch could site one time where an MMT economist was unconditionally pro-free trade. There aren't any.

  2. Contrary to the above posters assertions, many MMTers have actively argued against few trade agreements like NAFTA and the TPP. And, while arguing that a job guarantee would be more beneficial than a simple income guarantee, it doesn't argue that an income guarantee would be ineffective.

    1. Thanks for the comments. I have been interested in monetary policy since I was fourteen when an organizer for the NFO explained the credit theory of banking. Funny. I am still explaining this to folks. Without knowing a lot about the people of MMT, it would not surprise me that they have a wide assortment of political positions. Thanks for bringing me up to speed.

    2. So as not to just make assertions. Here's some articles that back up my claims.

      Bill Black speaking out against TPP.

      Randy Wray on Job Guarantee vs. Income Guarantee.
      Money quote to support my position: "BIG IS COMPATIBLE WITH THE JG/ELR. We can have both. What we object to is the BIG claim that “we don’t need no stinking jobs” or that BIG makes work somehow obsolete. Our position is this: once the JG/ELR program is in place, we can add a form of BIG."