We live in an era of “fake facts”. This means no one should ever believe the writer of an attack piece's claims about what the theory being attacked is really saying. It is easy for the writer to lie to you. He has a reason to lie to you. So, he often does lie to you. The only way to combat this is to find out for yourself what the theory is really saying. In this case the theory being attacked is MMT = Modern Monetary Theory.
We are now seeing a bunch of attack pieces aimed at MMT. The method used is pretty standard. It is to --- create a straw-man image of what MMT says and then show that that policy would be 'crazy'. They often quote mainstream economists as authorities on economics. Sometimes they even quote dead authorities who lived when the gold standard was in full force. They ignore the *fact* that MMT is specifically for nations that are *not* on the gold standard or any stand-in for it [which the euro is]. The US can become another Greece only if it joins the eurozone and gives up the dollar.
If you want to mobilize real resources to fight ACC with an GND program, then you really need to check out MMT and not believe the propaganda campaign being thrown at it.
This rather long blog piece says it better than I can. It starts out tlking about the US Senate proposed resolution to label MMT crazy and moves on to address other such attacks on MMT.
US Congress hypocrites lose the plot
The way in which Modern Monetary Theory (MMT) has become politicised and misrepresented is quite something. The critics have all fallen into the same pattern. They rehearse a few statements that they claim represents what MMT is about, and, which they know will shock people who read and/or listen to them to conclude that the proponents of MMT understandings are crazy. A whole host of wannabees are now jumping on the bandwagon. And last week, 5 Republican Senators in the US Congress tabled a bill which claims it is “the duty of the Senate to condemn Modern Monetary Theory and recognizing that the implementation of Modern Monetary Theory would lead to higher deficits and higher inflation”. For a start, these goons haven’t even cottoned on to the fact that one cannot implement Modern Monetary Theory (MMT) – they are surrounded by it, every day of their lives. But then if they had got that far, they would have also realised that the rest of their argument in the draft legislation is equally ridiculous. We are making progress though – and the more they come out of the woodwork the better. So far not a blow has stuck.
I will return to this theme in a later blog post.
The next issue I want to traverse in this regard is to clearly distinguish between core MMT and opinions that MMT proponents might have about various policy options.
One issue I want to clarify in that context is the claim that MMT advocate bond issuance. The core body of work certainly doesn’t. What that body of work does is note that bond issuance is unnecessary and teases out the implications of not issuing debt.
Those implications are quite different to what the mainstream claim in the GBC framework.
And, to put a finer point on it, the core body of work suggests that a central bank running a zero interest rate policy is desirable, which means that any bond issuance that would allow central banks to conduct liquidity management operations (OMOs) to hit a positive interest rate would be unnecessary.
Of course, we also know that a central bank can still hit a positive rate with excess reserves by simply offering a competitive support rate.
Anyway, all that for another day.
Now I have to deal with very wet and bleak Edinburgh.
That is enough for today!