I had a lot of fun recording this podcast a couple of weeks ago:
Out today! MMT Podcast ep 61
The Treasury is Choosing Death@PatriciaNPino and Christian talk to @RichardJMurphy about monetary operations, tax justice, Jane Austen (yes, really) and the UK government’s standoff with the NHS regarding finances.https://t.co/N7HBA4YCno pic.twitter.com/1A4YnGfgq8
— MMT Podcast (Christian Reilly) (@MMTpodcast) July 29, 2020
The link in the tweet is live.
But I should warn you that some MMT purists are upset by my language in this podcast. It's not that I swear a lot, because I am not inclined to do so. Instead that's because I talk about borrowing, and redistribution and tax as having a positive role.
So let's for the record say why I sometimes use that language still, and in particular use 'debt' and 'borrowing'.
My concern is to advance progressive economics with the aim of building a better economy in which all can prosper. People have been taught that this is not possible. They are told that an order based on growing inequality is what we must have. And what they are told are certain myths to support this view. The curse of the national debt that arises from government borrowing is one of those myths.
I do not agree with that curse. Indeed, I go so far as to say there is no such thing as the national debt, but only national savings. But I do argue for their continuation - because they serve a valuable role in the economy that is positive and not negative.
But just flipping that one issue is hard enough for people to take in.
I know a great many people who find the whole spend and tax, rather than tax and spend, dynamic really hard to get their head around.
And as for the fact that money can be created without asset backing, even though this is a fact it remains for many an almost repugnant idea, even though we know it liberates the economy to deliver full employment.
So when writing and talking I recognise that there have to be points that people can still latch on to which they think they know. Invert all language and change all ideas at the same time and the result is total confusion, incomprehension and an inability on people's part to hear the message because there is nothing in it that they can link to that they think they already know.
So, on occasion I use language people know and think they understand, even if I think that there are better terms available. That's because unless we work to take people with us they won't even start the process.
So please feel free to criticise from a position of MMT purity if you wish. I am more interested in change. And I can tell you, change is much the more important issue.
Whilst if you also think that MMT is not about facilitating redistribution then please think again. It sure as heck is. And it should be. Of course I am aware that if we want to tax to create economic space within an economy for reallocation of productive capacity Then taxing wealth that is unproductive does not do that. But whoever said that was the sole purpose of tax? Would the MMT critics on this issue please appreciate that the world is a big place and there are multiple objectives to achieve in an economy, not all of which relate to delivery of a pure form of MMT? Please see the bigger picture.
Rant over.....
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I am looking for the bigger puncture. But I see only a car with four flat wheels
Edited!
I appreciate you are choosing not to overwhelm your audience and you’re not alone in the MMT community thinking that way. I well remember Bill Mitchell saying pretty much the same thing about overuse of unfamiliar terminology.
However I must admit I’m one of the purists regarding the term ‘borrowing’. The reason why this term is so dangerous is it immediately triggers the ‘household’ metaphor in peoples minds. Moreover, unlike the term ‘debt’, which has the distinct advantage that its factually correct (government has to be in debt, otherwise the private sector would have no asset), the usage of the term ‘borrowing’ is a complete myth.
Myths should always be called out (as Stephanie does in the very title of her book). Indeed a previous post by yourself rightly praises the inspiring work of climate scientist John Cook (who also happens to be a psychologist) regarding how, in his case, to bust climate denier myths.
As Cook says, “The golden rule of debunking…is to fight sticky myths with even stickier facts….if you debunk misinformation…try to lead with a sticky fact. Before you mention the myth, warn people that you’re about to mention a myth. Then explain the fallacy that the myth uses to distort the facts.”.
https://www.taxresearch.org.uk/Blog/2018/06/21/debunking-myths/
In principle I do not disagree
Having done this for a long time I know I can only change so many things at once before people really do completely lose the plot
So I compromise
Remember, most people finding MMT find it very confusing – not because it’s hard, but because it turns what they have been told to think upside down
And that’s nor something people like
Appreciate it’s no easy task having to get across the entirety of MMT in the form of an ‘elevator pitch’.
I must admit when I first read Mosler’s 7DIF paper I gave up because it made no sense. It was another 2 years down the line before I went back to it again and then I had my own ‘lightbulb’ moment.
Just trying to get my head round MMT. Some questions:
1) Is the ‘national debt’ the total historical supply of sterling issued by the Bank of England minus taxes etc reclaimed over the same period?
2) Can this ‘debt’ be reduced by any other means than by reclamation by the Bank of England?
3) If not, is all this sterling still ‘out there’?
4) If so is it a fair question to ask where this sterling represented by the national dept currently resides?
Hope you can help!
1) Yes
2) Yes – tax does it
3) The Sterling is out there – and remember banks make sterling too
4) That’s too big a question for a Friday night – effectively it’s the money supply
Thanks very much, Richard. I wasn’t aware that banks make sterling. I thought it was only the Bank of England/government. How can they do this? (Sorry I’m pestering you!) Andrew
I think you need to read The Deficit Myth by Stephanie Kelton
I admit I have not got time on a day committed to the things to address this
Others might….try this https://gimms.org.uk/mmtbasics/
Andrew,
All private banks are doing is creating IOUs. It so happens these are denominated in £s. These are NOT ‘government’ £s (which everyone accepts), but are, for example, ‘Barclays’ £’s. That is they are only accepted by Barclays itself. But that’s OK since Barclays is so big it has many customers that can transact with each other using ‘Barclays’ £’s. Other private banks wont accept those pounds, but will accept ‘government’ £s for inter-bank transactions. Which is when those bank reserve accounts at the BoE come in handy.
Btw when you take out a loan, you too are creating £s….’Andrew’ £s! aka a bank loan agreement
Agreed
Vertical and horizontal currency is worth looking at in this context
Hi Richard
Straying a little off topic but I saw this quote from Bill Mitchell in a post “The fact is that once you go down the UBI route you are diluting the inflation anchor provided by the Job Guarantee — which is a central proposition within MMT, and, is one of the features, that sets it apart from mainstream macroeconomics.
And once you dilute the inflation anchor, then you are effectively back in a NAIRU world where unemployment is used as a policy tool to discipline any inflationary processes.
You cannot have it both ways as an MMTer.
If you support a UBI then you should not hold yourself out as a proponent of MMT.”
Bill is certainly a purist when it comes to the Job Guarantee! This seems to conflict with the general proposition in MMT that if you put money into the economy, for whatever reason, then you can use taxation to offset any inflationary tendency so why assume in this one specific case you are using unemployment instead. The statements about the Job Guarantee that I have seen also ignore the vast and expensive state bureaucracy that would have to be set up to handle the employment of possibly millions, paying them, managing health and safety, dealing with disputes and ensuring entitlements.
I may have missed it, but if not one of your videos discussing UBI and the Job Guarantee might be helpful.
regards
Mike
I note Stephanie Kelton has said she is open to a UBI
I am not convinced I am
I am convinced by more generous benefits
I am not sure how they fit with Bill
But generally, I think this language from Bill is deeply unhelpful to MMT. It’s not a religion or a belief system. It’s a description of how things work and it’s pretty flexible, whilst also suggesting better or worse choices.
Hi Richard,
I appreciate what you’re saying, but I worry that persisting in using certain terms keeps the public trapped in their incorrect thinking, thus hampering their ability to see new possibilities.
I see the words “borrowing” and “debt” as harmful because of the imagery of burden that they bring to the mind. Being in debt has long been seen as shameful by so many. Having to borrow for things other than buying your own home is still seen as a failure, as irresponsible.
I would rather people say bond sales and then say that this is what is commonly called “borrowing” (the quotation marks being important here). Replacing national debt with national savings is good, but again, where it needs explanation, quotation marks are a good tool to show that “debt” is not an accurate term, and use of the wiggly fingers quotation marks in visual presentations, and tone of voice in audio ones can help too.
I also use our FAQ item as a quick explanation https://gimms.org.uk/faq/doesnt-the-government-have-to-borrow-when-it-spends-more-than-it-taxes/
Thank you for linking to our MMT basics page, Richard. I hope you’re well 🙂
Thanks Claire
I frequently use the terms co-called debt or borrowing now to highlight this issue
But I still think we have to be careful to take people with us…
Maybe it needs some very short videos….
Thanks to Stephen Ferguson for reply to my query about sterling supply from banks. I’m working my way through The Deficit Myth (shouldn’t that be The Deficit Deceit?) but hadn’t seen anything about banks supplying sterling. I assumed all their sterling was borrowed from the BofE. Are there inflation/employment restraints on bank supply?
I think Stephanie discusses it as horizontal and vertical money
Cheers Andrew,
Private bank £s are merely an IOU for BoE £s. That is they are not actual BoE £s. And, apart from paper cash, BoE £s only ever exist within accounts at the BoE itself. So when you login and see £s in our accounts within your private bank, you’re not looking at BoE £s. That’s not to say they aren’t worth as much, they are. Just like when someone scribbles an IOU for £5 on a scrap of paper, its still worth £5.
And, just to confuse things a little further, the BoE £s themselves are actually also just an IOU. Except this time the IOU is a promise to accept the IOU in payment of tax (or as payment to purchase of a UK government bond).
But let’s not pretend banks do not create money when lending – because they do
Even if only within a BoE backed structure
Horizontal and vertical? It gets more interesting all the time. I’ll get back to Stephanie. Thanks so much – and for all the other work you do. Andrew