It was put to me this morning that arguing for MMT is like being a ram who wants to punch a hole in a dam...
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
https://www.youtube-nocookie.com/embed/E1DCxpMz8aU
As with previous attempts to dambust it will take more than MMT alone.
By the way I read CP Snow “Science and Government ” for the first time recently.
It both enlightens about the conduct of the second world war (and the misplaced faith in airpower) and the need for scientists /experts in government.
It warns of the euphoria of secrecy and the euphoria of gadgets and of the need to develop foresight.
A very good short read which may help.
CP Snow, beloved of Flanders and Swann…
The work of Christine Desan I believe very much helps to clarify and augment MMT. Here are her key concepts and papers which best do this:-
Human societies require a means to mobilise resources that also manages to maintain a money based value for those resources for as long as possible during mobilisation.
Necessarily a mutual money creation process therefore evolved based on collective and lawful consent that creates money from nowhere and retires most of it back there mainly by taxation.
What the money creation process is not is magical or metaphorical. It is not a Libertarian’s market fundamentalist one in which money like leaves miraculously spring into existence on a magic money tree and can only be harvested by private individuals who are then coerced by government against their will to hand some of them over.
Here are Christine Desan’s key papers that make the above clear:-
“The Monetary Structure of Economic Activity”
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3557233
“Money as a Legal Institution”
https://modernmoneynetwork.org/sites/default/files/biblio/Money%20as%20a%20Legal%20Institution.pdf
“The Power of Paradigms in Histories of Economic Development”
https://justmoney.org/c-desan-the-power-of-paradigms-in-histories-of-economic-development/
Fascinating papers, thank you. And great analogy with the dam.
Is enough being done to distribute these concepts into the national curriculum? The industrial revolution was one of the few aspects of history I was taught at school 20 years ago and there was no mention of credit at all. Looking back I think the “facts” we were taught were largely irrelevant. They say the best way to educate someone is via their daughter. Translating these papers into educational material appropriate for teenagers would be worthwhile to educate not only the next generation, but also the wider public?
John Kaye when asked about MMT on radio 4 ‘doesnt the BoE belong to the govt?’ this evening seemed to accept the ‘debt’ will never be repaid.
It was fun
It is a very good metaphor Andrew.
A controlling faction builds a dam.
Preventing a vital commodity water, from being utilised by its herd.
It directs this communal resource to its ‘special glamour projects’ ie. crossrail, shard, hs2, high rise crap.
It then charges/rations the water to its herd by loyalty to the notion that the dam is necessary.
Engineering social status (who is poor or rich) to suit itself.
Regulatory capture of a democratic ‘the people’ resource.
The height of the head water over the natural flow represents ass-et hyperinflation. Londinium.
Its, forgive me, ‘Scotch mist’ that tax pays for things.
CDOs hold 500 times(?) gambling money than all the natural resource on planet.
Of course it will be difficult! MMT represents the biggest threat to this government. So they will first ignore, then ridicule, and lastly oppose MMT tooth and nail because they realise that it destroys their totally false ‘affordability’ criterion by which they justify cruel underfunding where it suits their political ideology (NHS, social care etc) whilst also being their most powerful and successful election tool for attacking ‘profligate’ opposition policies. They know MMT is correct, and that the Bank of England is indeed a Magic Money Tree, because they use it all the time to finance their ideologically approved spending (bank bail-out, HS2, furlough etc). Their wicked deception to a largely ignorant audience that ‘it has to be paid’ for by underfunding essential services as we saw in 2010 and will doubtless follow their furlough policy, is then readily accepted.
It is utterly depressing to see not only the general public but politicians, the media and the academic world, all accepting and promoting the government’s lies about its finance, even whilst they see the consequences – money flowing freely upwards to the favoured classes and devastation caused to the ‘unworthy’ underclasses. Do they never ask themselves where the money that generates tax must have come from in the first place?
What is needed is a vigorous, relentless campaign of education to explain simply, for it is simple, the reality of money supply and to dismantle the framework of lies about it that has been carefully constructed by the government and spoon-fed to a gullible public. It will indeed be hard. As Mark Twain said, “It’s easier to fool people than to convince them that they have been fooled!”
But it can be done, and if that other calculated obstacle to democracy, FPTP (and its camouflaged equivalent, AV) can also be consigned to history, a truly decent society might emerge.
From thread by Paul Mason this morning on Twitter.
7/ For clarity, though MMT is BS as a theory, its short term conclusions for a monetary sovereign are correct (with a caveat): borrow, invest, create money but take direction and ownership over strategic parts of private sector and boost wage share (+ shrink the profit share)…
Mason has fallen far
The trouble with Marxists us they want to see a class struggle in everything
MMT goes deeper, so they can’t see its use
The amount of new money that can be created is a function of population size. ? ???
Londinium trickles down the minimum it can get away to the regions, which it has done since roman times.
Hence my endless repetition of londinium, to remind people where the control attitudes originate. Its a classical eton mess.
It then spends the rest on propaganda projects to bolster it reputation as a ‘world leader’. House price and ass-et press inflation.
#newmoney must come the under control of the people and not londinium.
New money is always a government creation at the end of the day
And there is no way round that
“New money is always a government creation at the end of the day. And there is no way round that.”
I hesitate to respond, because I do not really disagree, and I do not want to make a major issue of this, but I think Felix Martin may nevertheless demur, and there is something to consider: for example Martin’s reference to the Irish Bank closure (1970), which revealed in the public response the resourceful ingenuity of society to operate its own system, ‘in extremis’: [Martin, ‘Money: the unauthorised biography’, (2104); pp.20-25].
I am a great believer in the real test of experience. Martin of course also suggests, following Ingham I think: “Money is a technology of government – ideally of self-government – and banks are its bureaucracy” (Martin, Ch.16, p.272), which may look paradoxical, but I think there is more to it. By self-government Martin is, I think, looking beyond institutional government itself to the functioning, self-developing (evolving), democratic (a critical assumption here for Martin), social polity beneath; which instantiates the social and moral enterprise which the existence of money nourishes. Government is the medium that alone can deliver that great social enterprise, in all knowable or known circumstances. At the same time only sovereign government money, and not private money “enjoys the same extent of itsmarkets, the same capacity to coerce demand for its liabilities, or the same psychological association with confidence in society” (Martin, Ch.7, p.114); but I believe he is looking beyond government itself to the society beyond as the essence of the matter. I think he is right, not least because this argument crucially rejects the proposition that only ‘private’ money/banking (even if unstable) represents the real expression of liberty. It does not.
@ John S Warren
Money has to be built around “choices”. For example, here are two main ones:-
The balancing aspects of The Golden Rule. Sometimes I only want to be bothered with my own interests. Another time particularly when my country’s under threat (GFC, pandemic, etc.) I want a collective response.
To maintain the value of money for the longest possible time a choice needs to be made by the nation’s designated authority to use deflation or inflation tools.
In other words money has to function cybernetically just as living creatures do from cells upwards. Indeed the way money functions is simply an extending of this process. It cannot be “chance contingent” it has to be “choice contingent” :-
https://www.researchgate.net/publication/223903491_Self-Organization_vs_Self-Ordering_events_in_life-origin_models
Well, I used the term ‘evolve’ (a term you have also used); but evolution does not mean ‘choices’ are made, and we know that because it is not predictable; what is seen to be socially workable is seized upon; it is passively not creatively rational. I totally accept that this process must work best in all known circumstances when operated by Government (although as we can see Governments can blunder disastrously), but that does not mean even Government can predict what will work best (but they do have huge operational advantages that no other individuals or institutions can attempt to match).
Martin suggests that John Locke had the right idea about the politics, but the wrong one about the ‘money standard’; while John Law had the right idea about the ‘monetary standard’ and the wrong idea about the politics (Martin, Ch.16, p.268). I think that is not only a lesson about the 17th/early 18thcentury history of money, but as a principle of knowledge, still applies. This is because monetary economics is not a physical science, but a moral science (Keynes); it doesn’t do predictions, and effectiveness is a function rather of stochastic method; the test of trial and error (Adam Smith, notably was a moral philosopher, who often relied on what Dugald Stewart termed ‘conjectural history’).
Perhaps this thought may seem mischevious (light-heartedly, I promise); but I wonder if it crossed your mind that your proposition of ‘self-ordering’ phenomena seems to me to be drifting very close to Hayek’s idea of ‘spontaneous order’, which he almost certainly picked up from the disticively evolutionary thinking of the Scottish Enlightenment literati!
Ouch….
Does anyone here remember Mrs Thatcher comparing the running of the economy with the humble housewife managing the home budget back in the 70’s? That’s the kind of mentality you are up against. I think the creation, role and use of money in society is as much a psychological game as it is about economics.
Agreed
Thatcher was preying on ignorance a favourite pastime of politicians in the UK!
Sorry.
Thatcher, proof Napoleon was correct about the english. 🙂
The amount of new money that can be created is a function of population size. ? ???
A plot of money created annually against population size.
It is sort of proof that the #newmoney is best democratically shared out to get the best economic bang from it.
Rather than where we are now.
Falsely piled up in londinium causing ass-et inflation. Which bleeds into the rest of the country and other to false investments overseas.
?
I have little idea what you are trying to say
Nor am I convinced it is adding to debate
One aspect of most Western governments since 2008, is their pension for NOT fully disclosing what steps under any known policy they have taken.
In the US one investigative pair of journalist (Pam & Russ Martens) reveals a darker and more devious set of actions taken, by (now obese) banks/investment firms. Simply reading a number of researched articles in their newsletter ‘Wall Street on Parade’; focuses the depth of disinformation, usually based a generalized theory (such as QE), which is then referred to over and over again.
A perfect example is the truer figure being discussed on a ‘need to know’ basis, in guessing the amount of outstanding derivatives, globally. The total should require new adjectives, to describe the shocking amount (anywhere from 238 to 600 trillion dollars in contract value) last mentioned. Now compare these figures to the entire world’s GDP, and one begins to see the abysmal state we could find ourselves, if deleveraging is not slowly done.
Which is why debating monetary theory in terms with what is actually happening behind closed boardroom doors, is akin to giving reality to a Hollywood movie set.
I have to admit that I did not follow your argument
But the rescue requires knowing what you can do with currency creation as the GFC showed and the current pandemic illustrates. Your penchant appears somewhat alarmist if accurate!