I wrote a piece that might have upset some supposed modern monetary theory (MMT) supporters yesterday, making clear by doing so that I thought they had no idea what they were talking about.
I got this mail last night from one of those who can justifiably be thought to be a founder of modern monetary theory. He said this:
I won't name him / which one he is. I do not have his permission to do so. But it would seem that I got everything right.
Critics, please note.
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And I wholeheartedly agree with that.
It’s not a theory. It’s a fact. Money is sovereign.
The theory comes in how you apply it – including tax – the theory is only in its operation in my view.
The modus operandi is to deny, deny, deny that money is a state power. That’s why free marketeers like bitcoin, which should be obvious.
That is also why allowing private individuals and corporations to amass huge quantities of money is unwise.
I’m not Keen to know. I can guess.
Feel free to delete this
He was not a founder of MMT
LOL My first guess was Keen because of the Aussie tone to the short note (though this may simply reflect my lived family bias attached to sentences ending in “mate”), but Richard’s right – he’s not a founder.
Hi Richard; I liked the phrase used in your ‘leftie nitpickers’ post yesterday:- macroeconomics management. Should all we true believers be striving to redefine the acronym ‘MMT’ as Macroeconomics Management Theory? Bit of a mouthful, so needs shortening!
Btw, today I happened to pass by the Mitchell Library in my beatiful home city of Glasgow. My previous visit there was in May 2019 to hear a talk by a Professor of Economics who spoke eloquently about Modern Monetary Theory in the context of Scottish Independence. Unfortunately, he concluded his presentation by lambasting the European Union… and not just it’s currency. As he had spoken in a strong Australian accent throughout, I felt obliged to ask him when was the last time that Queensland had gone to war with New South Wales. Flumoxed, his prevaricating answer indicated little understanding that the latter half of the 20th century was lived in peace by most Europeans… thanks to the ECSC and succeeding iterations. Contrast that with previous centuries; the world cannot be viewed solely through the lens of Economics.
That was Bill Mitchell.
Good on theory, not on politics, where he is wildly out of touch with reality.
When it comes to politics of the euro, Mario Draghi has far more expertise than someone like Bill Mitchell or Friedrich Hayek or Joseph Stiglitz. In the 1960s someone could argue that there was no political impulse for a common currency or an economic integration. That is not true of the 2010s. And economists across the world were slow to understand the political dynamics within Europe. European political system does not fit a national or international view of economics which were prevalent of the 20th century. These are out dated world views. Europe has to be understood as “European Political Economy”.
Oh dear, Bill. You really have got that very wrong. The euro is a basket case and was predictably so before its introduction precisely because fixed exchange rates always exploit weaker nations. Draghi was right only in that he was happy about that.
An oldie but goldie from Wynne Godley, Maastricht and all that
“If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalisation, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation. ”
More
https://www.lrb.co.uk/the-paper/v14/n19/wynne-godley/maastricht-and-all-that
Discussion is always the best option.
Bill was always clear that government spending/money creation, should not exceed the productive capacity of the state, and to do so would result in inflation. But that requires someone to read beyond the surface to understand how ‘MMT’ works, and many choose not to do so, and therefore only have a superficial understanding. I watched your video, and could understand where you were coming from. I’m particularly interested in your suggestion that there is little slack in the economy. Does this means there is a constraint to how much spending Reaves could inject into the economy by resourcing public services better? (Not that I expect her to do so) I’d kind of assumed that if the spending had been increased the resources (labour/materials) would be there to deliver that. More resources would mean better pay and more posts, which in theory would stimulate the economy and increase GDP. If not then it could be inflationary.
They think productivity solves that problem.
I think there is slack. I qualified my comment on that.
Dear Dr. Murphy,
Your recent video on why Trump and Musk want to crash the US economy and your ability to explain causes of inflation are vital knowledge, as you know, at this time.
Would you kindly consider speaking at a demonstration in Washington DC on March 14th. It will be at the iconic Lincoln Memorial where Rev. Martin Luther King gave his “I have A Dream” speech in March of 1963.
As planning time is limited please connect with me at your earliest convenience.
Thank you for considering this request.
Sincerely,
William
I am sorry – I am not available. I hope it goes well.
See Tim Watkin’s latest, Mr. Murphy.
https://consciousnessofsheep.co.uk/2025/02/24/that-time-a-sovereign-state-went-bankrupt/
That is complete nonsense and shows a total lack of understanding of MMT. What is more, no one tries MMT. It is a description of what is going on right now. That’s why the article makes no sense, at all.
I didn’t say I agreed with the essay!
I know
Well it was a very very good post and I’m sure a lot of people will be very keen to read it again. Mate!
I’m going to a local Labour meeting this evening, where Labour’s “Strategy for Growth” will be explained to me. My understanding is that genuine growth would mean that in real terms more people had more money to spend. Where is that extra money supposed to come from? Surely the Government will have to “print” it? Will this not be completely incompatible with the Reeves “Fiscal Rules”? If my thinking is absurd, please tell me.
Find out
I cannot guess what they’re saying – because nothing they do seems to add up