I posted this on Twitter this morning, in response to the usual supposedly left-of-centre anti-MMT crowd who think it their job to point out that the left must be beholden to markets by whom Labour seems to have been captured. Their attacks have been aimed at both me and Andy Verity:
Supposedly left-of-centre economists are queueing up to prove their pro-City credentials on Twitter right now, making implicitly clear that they have no idea how to tackle the crises we face and must instead bow to the City and accept austerity and homelessness.
Nothing surprises me about this. If you accept that bond markets must be obeyed, as they do, of course they think they must jump to the City's tune.
They accept the rule of the bond market because they refuse to accept QE cancels government debt, when it undoubtedly does, and that this puts government money creation in the economic driving seat.
Instead, they buy the Treasury line that QE is just temporary bond holding by the state, which is nonsense, the world over. As a result, these people will blow in the wind the markets generate, even if that means austerity.
My fear is that these people have the ear of Labour, who seem to already share these views. Their lack of willing to think outside the conventions of neoliberal economics, to which they subscribe, will as surely condemn us to austerity as the Tories do.
If anyone thinks I am going to live with this madness any more than I was willing to live with the madness of Tufton Street, then they are seriously mistaken. Austerity from Labour will be no better than Tory austerity.
If austerity is what these people will deliver (even if they say that's not their aim) I will oppose it because we do not need it. The left has to do much better than this, as does Labour. If they don't millions will suffer.
And I promise, we can do much better than this.
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Agreed.
It is a now a matter for me of economic self defence for every citizen being hurt by these market lies as well as totally stupid and incoherent Government who by now should have gone already.
Why the Tories are still here is beyond me. Except that it isn’t, of course.
But to then run into the arms of another austerity loving/ market bowing bunch of cod Labour numpties would be a tragedy too much to bear.
We need targeted QE.
Also, tax rises particularity aimed at the upper echelons of society if only to be seen to be ‘balancing the books’ (and on the utilities of course) and shut up the markets (who would then start bleating about taxes but so what?). It’s also time to tax the source of the panic – the market itself – with some transaction taxes etc, etc.
The balancing act of investing and destroying Government money must also be part of any relief package to help those with mortgages.
Invest in society – but tax those who are under taxed and can pay and instead of using the chaos to destroy the NHS, lets use it to curb carbon and save the planet.
That would be some very basic starting points for me.
I agree. The Independent is one of the few newspapers (I don’t class the Mail, Torygraphy etc as newspapers, Times has a pay-wall & is in any case a Murdoch mouthpiece) that allows below the line comment to most articles (Guardian does not). Artilces on the subject of bonds, markets and gov funding, show a class of commentator in the BTL that knows nothing, they are utterly clueless.
If this is reflective of the Uk as a whole, then (deep breath) one can understand a little bit (empahsis on “little”) why Labour is not making the MMT case. That said, they have never attempted to make the case. Furthermore, the MMT case is moderately complex, it does not lend itself to soundbites it requires explanations (when you are explaining you are losing?) and in theory MMT has losers (financial markets – where gov is no longer beholden to them – “Good God man – we can’t have that” etc etc).
The problem with Labour is that with Dodds they have a gamekeeper – when what they need is a poacher (I speak as an ex-DNO-engineer/gamekeeper – turned poacher – which is much more fun!). Rooseveldt used a bunch of poachers to reform US financial markets in the 1930s – one of them was called Kennedy – oddly.
It’s Reeves now…
I am writing a bond thread now…..
I saw your Twitter argument with James Meadway. As far as I could tell the difference is that he says he is against austerity, not in favour of balanced budgets, and disagrees with the analogy that a government is like a household, and thinks that you are accusing him of having opposite beliefs, whereas you are not accusing him of being in favour of austerity but rather being in favour of policies that would effectively force austerity whether he believed in it or not, and he appeared to not understand this.
I think a lot of the people you are talking about don’t actually understand the point you are making – they think they are against austerity and so would not implement it, and they think you are accusing them of believing in austerity when they have very clearly stated they are not and so think you are talking rubbish, but they are missing the subtlety of your point. I think they not only don’t understand your point but can’t actually see that it exists, like it’s invisible, so they get bothered by something they think you are saying instead and don’t actually engage with the argument you are making, because it is invisible to them – like they don’t so much disagree with it but can’t actually see its existence, because it doesn’t fit in with their mental framework of various views on how the economy works.
I think when John McDonnell was shadow chancellor with his beliefs that MMT is wrong and QE is not a valid method of funding government spending, that he could get more revenue from taxing the well off, and his rule of balancing current spending and borrowing a lot to invest, his view was that he would get creative and find a way to spend what was necessary, and bend his rules quite far to do so, and he wouldn’t be prevented from doing so even if he felt the bond market must not be spooked, so maybe it would be helpful if you could offer some clarification as to what mechanisms would come from the anti-MMT framework that would be so powerful as to prevent someone like that from spending the necessary amount against their wishes and strong core beliefs. How could someone who had such strong anti-austerity beliefs and policies still be forced to end up giving us austerity?
They could read MMT
Instead they make up what they think iTunes
Or in Meadway’s case dismiss it because ‘it has an under-developed theory of class’ whennitniscan explanation of how money actually works
So actually I think they are just dedicated to perpetuation of economics as they’d like it to be – and so fail the left, very badly
The worst of it is, is over the confluence over taxation.
The Left want to punish the rich for just being rich (the class argument because of the exploitation argument I imagine) whereas the MMT argument is that what gets put in must be taken out otherwise you get inflation, and it is a good idea to tax higher there, since income and expenditure and investment (for loans) at the higher income bracket does create inflation itself.
What we have now in operation is the false notion of low taxes for the rich which can contribute to inflation, so public spending has to be cut because of that. What is obvious I hope this time is that this Tory government has totally cocked it all up and now they are going to make us pay for it!! Hopefully this is now the dagger in their heart. We did not need tax cuts – we needed real fiat money in the right place.
What I like about MMT is that MMT sees money as a continuous flow – with many streams, brooks and inlets – its distributive effects. The Neo-liberal ideas about tax and expenditure just cut off the flow of money leaving it pooled and quite often in those parts of society that already have enough money as a resource.
Here’s a question. If the government can buy bonds, which it obviously can because that is what the BoE has just done, why can’t it buy up all the bonds held by foreign investors? It could then replace government borrowing by money creation. The bond market would cease to have any influence over policy and the government would have full control over its currency. Is there any reason why this cannot be done?
Why would it want to? They hold them to facilitate trade
The answer to your question is why would a foreign investor want a load of British money if it cant use that money to buy British financial products, ie British government bonds. The UK government can try to buy these but how do you intend to force foreign investors to sell to the British government. What the British government is effectively doing is flooding the foreign exchange market with a load of British money. It would surely depreciate the value of the pound.
Another way of reading the blog is: “people need to see things they way they are – not the way in which they are taught”. In turn I was struck by a sentence in this article:
https://www.theguardian.com/commentisfree/2022/oct/17/economy-crisis-tories-britain-brexit-johnson-truss-us
Extract:
“Suddenly, the new government (Truss & Co) was shredding the Tories’ reputation for fiscal prudence and sound economic management.”
It was difficult not to start sniggering at this point. Having read this blog for more than 10 years, one thing that is apparent: Tory propaganda wrt fiscal rectitude is just that – propaganda. That the writer swallows this idea (& promotes it in the G’ ) shows that he was entirely suited to be a former editor at Newsweek and Bloomberg – since he was a “safe pair of hands” and, given the article, continues to be so. That there is no below the line comment shows that the Guardian is happy to allow such nonsense to be written & to be unchallenged. & by extension “safe pairs of hands” are pervasive in global media.
Years ago, Andrew Marr interviewed Chomsky – (https://www.youtube.com/watch?v=lLcpcytUnWU) who remarked that Marr would not be in the position he was if he held views at variance to the main stream (cue Marr discomforted as he forced to look into a mirror that reflected back to him what he actually is – rather than what he thinks he is). Most of the mainstream commentators such as Stryker McGuire gave up thinking and questioning years ago, they now parrot “conventional wisdom” (hat tip JK Galbraith) & if they did not, their daft articles would never be published.
We are in an interesting situation where reality (regarding money, society and governance) and discussions about it can be found in a blog (& the comments below it) as opposed to mainstream media.
Chomsky was right on that
Your story about Marr and Chomsky is an excellent example of how the right exert power over the whole of the UK media on the basis of what most of us understand as career prospects. As most of the UK media is owned by right-wing billionaires all Journalists self-censor in order not to offend their current or prospective employers.
It leads to all sorts of myths and untruths gaining currency.
One that fascinates me is the origins of the 1976 IMF crisis that at the time, within less than a year, was generally accepted as having been caused by the Treasury giving the Labour government a completely incorrect and disastrous set of trade figures but, has since become a foundation myth of Thatcherism demonstrating that the post-war consensus had failed.
At the time the only argument was whether it was a conspiracy or a cock-up.
In Denis Healey’s autobiography he was still understandably very angry.
I see. The bond market is not in itself a problem. Presumably, without it, you would have no have no way of offering a savings facility for pension funds and the like. I suppose then, from an MMT perspective, you use money creation alongside a bond market? You can guarantee any bonds you have sold because you can always create the money. And you can fund public investment directly if needed. Tax is then used to take out excess money from the economy. Have I got it?
Sort of
More coming on this..