It is often claimed that Mahatma Ghandi said:
- First, they ignore you
- Then they laugh at you
- Then they attack you
- Then you win.
No one can be sure Ghandi did say that. In any case, I prefer the Schopenhauer version:
- First, it appears laughable;
- Second, it is fought against;
- Third, it is considered self-evident.
And Tony Benn's is pretty good as well:
- First, they ignore you.
- Then they say you're mad.
- Then dangerous.
- Then there's a pause, and then you can't find anyone who disagrees with you.
So, where are we with MMT?
- No one is ignoring us now.
- And the laughing stage is definitely over.
- The mad/dangerous/attacking/fighting stage seems to be in full swing.
I'm looking forward to the next bit, when:
- No one disagrees with modern monetary theory.
- They do, in fact, say they believed in it all along.
- And they use it, because it is self-evident.
Are we going to get there? I think so.
Why am I so confident? Three reasons:
- This process is underway.
- The direction of travel is as predicted: the conclusion is inescapable.
- And you are helping that happen by talking about it.
And for the last, I offer my thanks.
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I have been reading about the condition of this country before the Second World War. The history tells a story of a country addled by underinvestment and ill preparedness for anything including a war of aggression against it. The parallels with today are ominous.
I feel like a victim of history; if I was religious I would be looking at Job and wondering how I could possibly escape fate or some sort of plan already made for me by others.
It all feels like a well trodden path into a trap.
Your words are comforting.
Keep going. Get a walk.
At most times in history there have been enormous threats. Some have happened but there have always been people to give us hope and take us on.
From where I am I can see North Petherton church tower. It has ‘seen’ the War of the Roses’, Reformation, The Civil War and Republic, the Monmouth Rebels marched by it to their doom at Westonzoyland ten miles away.
Also the Agricultural and Industrial Revolutions, the rise and fall of Empire, wars against Napoleon , the Kaiser, Hitler and the Cold War. Plus Boris !
And we are still here.
Take heart old chap.
🙂
Sterling work as ever Richard, keep it up!
Before coming across your blog, it always baffled me how money works in a sovereign economy such as here in the UK. And the continuous din from most politicians and so-called economists that “there is no such thing as a Magic Money Tree” (MMT by another name?) is plainly false as evidenced by the BoE’s own admissions.
As Paul Krugman has stated, everything is political.
Thanks
Most economists have no idea what money is.
Very few are ever taught about it.
Ans accountants never are.
As Stephanie Kelton might have rephrased her quip “Nobody believes there’s a Magic Money Tree yet most people unthinkingly believe money grows on the rich. Go figure!”
🙂
I’m certainly not looking forward to the next expected financial crash, I work in the construction industry, we always get hit hard in a crash, but might the next market meltdown be an opportunity for MMT. The government will no doubt bail out various sectors, and that can be the point at which people like you point out that they are “printing money”, and this can be done at any time. People are already on the edge, another recession could be revolution inducing. Labour, the Tories, Reform will look to make us pay for the recovery. People will be desperate for an alternative.
We need to be ready to supply it.
It is self evidently the correct way of describing how a fiat money system works, with the creation of money by government spending and bank lending, and the destruction of money by taxation and loan repayment.
Anyone who says different has to explain why every central bank thinks it is correct.
“As far as the creation of money as a unit of account and medium of exchange is concerned the majority of politicians and voters believe there’s no such thing as a Magic Money Tree yet it must come from somewhere so they tacitly and unaccountably lapse into the Libertarian idea this money only grows on the rich. Such contradictory and irrational belief cannot last!”
MMT will eventually win. Why?
Because it tells the truth about money and truth always wins in the end.
” it is considered self-evident.”
The question remains, how long this takes and how many more people have to suffer before this happens.
The cracks are beginning to appear so lets hope this will be soon.
l
I still don’t understand the role of tax in MMT.
Only this week you expressed uncertainty as to whether it was possible to increase inflation by expanding government spending using the printing press with a reasonable inference being that tax doesn’t have a role to play.
I’m pretty sure that it does and that you also that you cannot decrease consumption taxes to tackle inflation.
I have written about it many times – perhaps most especially in the full Taxing Wealth Report – available from the PDF Download Shop.
OK Grahame, I will take you at your word and try to help you on your journey of understanding tax in the context of MMT.
You know how a steam engine works right? It essentially just boils water and builds up enough steam pressure to not only move the engine but also pull a train.
But what if it has built up so much steam either standing or when working and the pressure build up threatens to blow the boiler?
Well, then you need the safety valve that simply opens and allows the excess steam to safely blow off and take away the threat of destruction, cooling down the loco, reducing pressure.
That is what tax can be in an MMT system; a safety valve for inflation, as money is printed into the economy. No fireman would light up a steam engine without a working safety valve on the loco Grahame. No chancellor should let money into the economy without balancing that with taxes. Credit or base money.
Currently you could say that taxes are too high and there is not enough money in the economy which is rather like releasing the safety valve on a steam engine before it has enough pressure to actually get working. What we need is both: money like steam in a steam engine being injected and ejected at the same time, creating a flow of money which is the real economy, you, me and everyone else, in motion.
Mull that over a while and see how you get on. And then think about tax, why even though it is thought of so negatively, it has such a potentially key and useful role.
And if you do not use tax as the safety valve, then you might have to use austerity or low wages, or meagre benefits, poor public services instead. What would you rather have?
Very good….
I might borrow that
Yippee!
I know times are stormy and murky, but it is good to see a harbour light.
Modern Monetary Theory has its advocates in the Green Party’s Economy Policy working Group, including me and others I could name.
But I am not in direct contact with all active members of the PWG and cannot say whether it is the majority view.
But nether MMT nor its principles were committed to in the Green Party’s 2024 general election Manifesto.
Zack Polanski may have at least a basic grasp of MMT, but his explicit rejection of the household analogy is consisting with a more conservative Keynesian economic viewpoint and he must be cautious because MMT is not formal Green Party policy.
The lack of the formal adoption of a progressive interpretation of MMT by the Green Party (GPEW), which would explicitly commit to ongoing judicious budget deficits, not necessarily fully covered by government borrowing from commercial banks, is but one of the existing weaknesses in the Green Party program as a progressive entity – the lack of substantive policy on finance and banking is another.
It is to be hoped that these shortcomings and lacuna in policy can be quickly rectified so that Green Party activists and its leadership can familiarise themselves with a coherent progressive narrative comprising exclusively practical policies with a view to confidently articulating it in authentic engagement with the electorate.
Once that alternative narrative is effectively articulated, it may well produce a surprising groundswell of support amongst the electorate which has hitherto for almost forty-five years been presented with a united front of neoliberalist parties constantly perpetuating the myth that “There Is No Alternative”.
That was never true, and the British public may sense this. There must be reasonable grounds for optimism that the progressive alternative can find favour with rational citizens. And all true believers in democracy must believe that, regardless of the legions of the ignorant, there is nevertheless a rational majority that can prevail, if only a coherent progressive alternative is both articulated and heard.
Thanks
There may be a glimmer of hope with the demise of neoliberalism. luther King had a dream, Mandela defeated apartied….
..
Over the last couple of decades the regular denials about the existence of a “Magic Money Tree” (issued from Tufton Street), are almost outnumbered by the visits ruling parties make to the National Magic Money Forest (located in the digital vaults of Threadneedle Street) to harvest money for their pet projects (bailing out banks, financing genocide, subsidising international mega-corporations, financing Covid furlough, building – empty unstaffed – Nightingale hospitals – but not in Gaza-, doing dodgy PPE deals with cronies, subsidising tax reliefs for the better off etc etc).
But at last, it has been noticed. They look, and are as guilty as sin. Even Fiona Bruce is getting worried.
KUTGW!