July 14, 2012

A Qualified Critique of Popular MMT Soundbites

"With Great Power" (of making fiat currency unlimitedly) "comes Great Responsibility" (of creating it against POSITIVE VALUE)
-- Uncle Ben in "The Spiderman"

I just posted a critique of Modern Macroeconomic Theory showing the hazards in using it in any significant measure. The key points are:



Even as money may not have much significance for the Government that can create it at will (i.e. does not have any need to "earn money before it can spend it"), it does have to forever ensure that households do have to EARN money to spend it or save it up. An Economy needs people to attach meaning to, and their ability to hold on to, money - to incent them to work / produce value for others for it. If they can simply be handed money out to keep the economy going and growing, and any amount can be taxed off their earnings for the cause of 'inflation control', who would want to work for it?

Under MMT, the retirees are on the mercy of the Government, economic conditions of the time, and what suits overall Government economic policy, when they retire. The money they themselves had been saving up all the while they were working could get taxed away before they retired - on the need of withdrawing money from the economy “to curb inflation” caused by prior period of too much having gotten created.

It is not practical to assume that Government will simply be able to tax the excess money back as needed.

Potential Economic actors cannot be GIVEN (handed out) money for doing nothing (except some modest survival payments), or worse, for doing things that rob value from other people. New Government money can, however, be added into the economy (and/or this spending be covered by some practicable tax reorganization and/or cuts in value-robbing Govt areas) to create public value adding jobs such as delivering education (in all its aspects including music, drama, arts and literature) with low students/teacher ratios and delivering usable infrastructure.

MMT is a long way off from being a whole and complete perspective-set to drive policy - until then it can only sparingly cast a shadow over it, as it already does.

The full comment is below and should also be accessible here (awaiting moderation by site administrator):

Whereas it is true that a Gov sovereign over the currency its economy uses won't technically ever go bankrupt, that it does not need to either tax or borrow in order to spend, the downstream tenets of MMT wrt running an economy on this seductive truth have some gargantuan problems:

1. "The Gov can always just tax back extra currency circulating to curb inflation when it strikes...or sell Gov securities to do this purge" - Once you earn the money, it's not easy for the Gov to suddenly tell someone, "Hey! we are seeing too much inflation - so now we will tax you at 60% and not 30% anymore." If it gets as simple as that, you will see a fall in economic activity. Economy needs people to attach meaning and their ability to hold on to money. At best you can let some of it's value chip away due to inflation and tinker little bit with tax rates when increasing them. If you actually are able to sell to the people MMT - that money does not mean anything, you will kill the economy, and not be able to even apply MMT sparingly.

If the Central Bank is going to sell Gov securities instead to curb inflation, first off, you're already back to giving money meaning - i.e. I get to keep the money I saved in a safe haven called Treasury secruties. If there's a lot of money Gov wants to mop up from the economy, it'll have to offer higher interest rates on the securities it is tring to sell forth.

2. the MMT World of ~'money as points that Gov can dilute or withdraw at will upon need to do so' is totally insensitive to the societal aim of people having the opportunity to retire with dignity on the money that they themselves saved up. MMT will pay retirees based on the need of the overall economy at that hour - to keep growth.inflation on target, and might have taxed away what the guy had saved up because there were bouts of inflation in periods prior to his retirement.

3. Whereas it is true that Gov does not have any need to "earn money before it can spend it", it has to forever ensure that households have to EARN money to spend it or save it up - they cannot be GIVEN (handed out) money for doing nothing (except some modest survival payments), or worse, for doing things that rob value from other people. e.g. the extensive taxation bureaucracy and litigation machinery exists to administer the complex tax code that makes life difficult for people. THAT is no good way to expand the economy and embed jobs. New Government money can, however, be added into the economy (and/or this spending be covered by some practicable tax reorganization and/or cuts in value-robbing Govt areas) to create public value adding jobs such as delivering education (in all its aspects including music, drama, arts and literature) with low students/teacher ratios and delivering usable infrastructure.

I believe MMT is a long way off from being a whole and complete perspective-set to drive policy - until then it can only sparingly cast a shadow over it, as it already does: Neither the US nor EU nations would have deficit levels that they are at if hard-money policies ("Gov has to earn or tax before it can spend") were firmly in control.

33 comments:

  1. It's amazing to pay a quick visit this website and reading the views of all friends regarding this piece of writing, while I am also keen of getting familiarity.

    Feel free to visit my page ... city ville

    ReplyDelete
  2. Its like you read my mind! You appear to know so much about this, like you
    wrote the book in it or something. I think that you could do
    with a few pics to drive the message home a bit, but other than that, this is fantastic blog.
    An excellent read. I'll certainly be back.

    My web page cityville hack

    ReplyDelete
  3. This is a topic which is near to my heart... Take care! Where are your contact details though?



    my blog post :: Car Town Facebookcar town cheats 2013

    ReplyDelete
  4. We're a group of volunteers and opening a new scheme in our community. Your website offered us with valuable info to work on. You have done an impressive job and our entire community will be thankful to you.

    Also visit my webpage ... farmville.Com exclusive

    ReplyDelete
  5. Hi to every single one, it's genuinely a nice for me to go to see this website, it includes important Information.

    my blog :: farmvilla auto bot

    ReplyDelete
  6. I like the helpful information you supply to your articles.
    I'll bookmark your blog and test again right here regularly. I am quite sure I will learn many new stuff proper right here! Best of luck for the following!

    Feel free to visit my website - farming simulator 2012

    ReplyDelete
  7. Hi there mates, nice paragraph and pleasant urging commented at this place, I am really enjoying by these.



    Check out my homepage ... premium minecraft account free

    ReplyDelete
  8. Excellent weblog here! Additionally your website lots up fast!

    What host are you the usage of? Can I get your associate
    hyperlink for your host? I want my website loaded up as fast as yours lol

    My blog post MineCraft Premium Generator

    ReplyDelete
  9. Hello mates, its enormous paragraph on the topic of cultureand completely explained, keep it up
    all the time.

    my web-site :: sharecash premium account login

    ReplyDelete
  10. We're a group of volunteers and opening a new scheme in our community. Your web site provided us with valuable info to work on. You have done an impressive job and our whole community will be thankful to you.

    My web site - sharecash.org download

    ReplyDelete
  11. Hello, i feel that i saw you visited my web site thus i came to return the
    want?.I am attempting to find things to enhance my
    web site!I suppose its good enough to use a few of your ideas!
    !

    My blog; http://www.cedarfinance.com/

    ReplyDelete
  12. If some one wants to be updated with newest technologies then he must be go
    to see this website and be up to date all the time.

    Review my page - CityVille Airport hack cheat

    ReplyDelete
  13. I got this web page from my pal who shared with me on the topic of this web page and at the moment this time I am browsing this website and reading very informative posts here.


    Check out my page ... ville hack

    ReplyDelete
  14. I’m not that much of a internet reader to be honest but your blogs really nice, keep it up!
    I'll go ahead and bookmark your website to come back in the future. All the best

    Also visit my web blog: Linkbucks bot

    ReplyDelete
  15. Dead pent written content , appreciate it for selective information .


    my weblog - redeem psn codes

    ReplyDelete
  16. Hi, i believe that i saw you visited my site so i came
    to return the favor?.I am attempting to to find things to improve my website!
    I assume its ok to use a few of your concepts!!

    My page; dragon on dragonvale

    ReplyDelete
  17. Hi there to all, how is all, I think every one is getting more from
    this website, and your views are good in favor of new people.


    Feel free to visit my blog; downloader for FileIce

    ReplyDelete
  18. Hi there! This blog post couldn’t be written any
    better! Reading through this article reminds me of my previous roommate!

    He constantly kept talking about this. I am going to send this
    information to him. Fairly certain he will have a good read.
    Many thanks for sharing!

    Take a look at my site ... free sex games

    ReplyDelete
  19. I really appreciate this post. I have been looking everywhere for this!
    Thank goodness I found it on Bing. You have made my day!
    Thanks again!

    Look at my web site; how to hack a twitter account

    ReplyDelete
  20. We stumbled over here different website and thought I may as well
    check things out. I like what I see so now i'm following you. Look forward to looking at your web page again.

    my web site :: make easy money

    ReplyDelete
  21. AnonymousMay 01, 2013

    Hello would you mind stating which blog platform you're working with? I'm
    planning to start my own blog in the near future but I'm having a difficult time making a decision between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your layout seems different then most blogs and I'm looking
    for something unique. P.S My apologies for getting off-topic but
    I had to ask!

    Feel free to surf to my homepage: Ptc Sites

    ReplyDelete
  22. AnonymousMay 02, 2013

    Very interesting details you have noted , thankyou for putting up.
    "Death is Nature's expert advice to get plenty of Life." by Johann Wolfgang
    von Goethe.

    Also visit my webpage - twitter password

    ReplyDelete
  23. AnonymousMay 10, 2013

    It's very effortless to find out any topic on web as compared to textbooks, as I found this piece of writing at this web page.

    Have a look at my homepage - miscrits locations

    ReplyDelete
  24. AnonymousMay 11, 2013

    I really like what you guys are usually up too.
    Such clever work and reporting! Keep up the good works
    guys I've included you guys to my personal blogroll.

    My website: bux neo

    ReplyDelete
  25. AnonymousMay 13, 2013

    I am sure this piece of writing has touched all the internet visitors, its
    really really nice paragraph on building up new web site.



    my weblog - Best CastleVille Cheat and Hack Tools

    ReplyDelete
  26. AnonymousMay 18, 2013

    Your style is very unique in comparison to other folks
    I have read stuff from. Thanks for posting when you've got the opportunity, Guess I will just bookmark this blog.

    Look into my page; password cracker

    ReplyDelete
  27. AnonymousMay 18, 2013

    You're so cool! I do not believe I've read through a single thing like this
    before. So great to discover someone with some genuine thoughts on this topic.
    Really.. many thanks for starting this up. This site
    is something that is required on the internet, someone with a bit of originality!


    Feel free to surf to my weblog :: Hack Into Twitter User Accounts To Get Data Back

    ReplyDelete
  28. AnonymousMay 20, 2013

    hi!,I love your writing so much! percentage we keep in touch extra about your post on AOL?
    I require a specialist on this house to solve my problem.
    Maybe that's you! Having a look ahead to look you.

    Here is my page :: giftcode

    ReplyDelete
  29. AnonymousMay 20, 2013

    Hi there to every one, for the reason that I am actually keen of reading this
    webpage's post to be updated on a regular basis. It includes nice data.

    my website: crack passwords

    ReplyDelete
  30. AnonymousJune 03, 2013

    I don't drop a great deal of responses, however i did some searching and wound up here "A Qualified Critique of Popular MMT Soundbites". And I do have 2 questions for you if you don't mind.
    Is it simply me or does it give the impression like a few of the remarks appear as if they
    are written by brain dead individuals? :-P And, if you
    are writing at additional online social sites, I'd like to keep up with everything fresh you have to post. Would you make a list of every one of your social sites like your linkedin profile, Facebook page or twitter feed?

    Have a look at my web blog ... Psn Code

    ReplyDelete
  31. AnonymousJune 07, 2013

    Hi there, I found your web site by means of Google while looking for a
    comparable matter, your site got here up, it seems good.
    I've bookmarked it in my google bookmarks.
    Hello there, simply turned into alert to your weblog thru Google, and found that it is truly informative. I'm going to watch out
    for brussels. I will be grateful when you proceed this in future.

    A lot of people will probably be benefited out of your writing.
    Cheers!

    My homepage; angry birds for pc ()

    ReplyDelete
  32. AnonymousJune 07, 2013

    Excellent post. Keep writing such kind of info on your
    blog. Im really impressed by it.
    Hi there, You've performed an incredible job. I will definitely digg it and for my part suggest to my friends. I'm confident they'll be benefited from this site.

    Also visit my blog ... Free TV Series Online

    ReplyDelete