Modern Monetary Theory: Thoughts/Critiques?

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Is There No Alternative's picture
Is There No Alt...
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Mar 11 2019 20:55
Modern Monetary Theory: Thoughts/Critiques?

With the social democratic turn in advanced capitalist economies, many self-described socialists are increasingly calling for changes to macroeconomic policy inspired by Modern Monetary Theory (MMT). The policies include things like removing the issuance of money from the Fed to the Treasury, then printing trillions and trillions of dollars, and then establishing a Job Guarantee. What opinions/critiques (Marxian or otherwise) do people here have of MMT and its potential policy implications?

ajjohnstone
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Mar 12 2019 00:40

The SPGB has discussed MMT

Forum thread
https://www.worldsocialism.org/spgb/forum/topic/mmt-new-theory-old-illus...

Mike Harman
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Mar 12 2019 12:10

It seems like another 'radical Keynesian' attempt to save capitalism. Having said that it's generally worth knowing what that lot are up to. I haven't been able to summon the energy to actually read the proposals though.

How much is it different from redirecting existing quantitative easing away from banks to state purchasing or 'helicopter money'?

Inflation is historically low in both the US and UK, as are wage levels, including public sector wage levels. So in the current state of things there is probably quite a lot of slack that people could get away with if they tried it before you get to hyper-inflation or whatever other scaremongering about it the right wing is up to. Also countries are quite keen to have currency devalued because it also devalues the national debt and helps exports iirc.

The questions for me are:
1. Do the social democrats proposing this stuff have any chance of it actually being put into practice?
2. If it does happen, does it delay a particular crisis in a particular way, create pressure somewhere else etc?
3. What is the purpose of this? Is it just to get people to vote Democrat like everything else? If their argument is simply for increased social spending, why rely on an obscure economic theory vs. say redirecting money away from the military, police, prisons?

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spacious
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Mar 12 2019 14:14

Michael Roberts has some recent blog posts on MMT (yet to read but looking good):

part 1: https://thenextrecession.wordpress.com/2019/01/28/modern-monetary-theory...

part 2: https://thenextrecession.wordpress.com/2019/02/03/mmt-2-the-tricks-of-ci...

part 3: https://thenextrecession.wordpress.com/2019/02/05/mmt-3-a-backstop-to-ca...

Is There No Alternative's picture
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Mar 13 2019 03:35

Hey Mike, I initially though that the new fiscal policy proposals in the US around healthcare, education, and climate change could just be funded by redirecting funds from the military and the penal system. However the proposed programs are costed at several tens of trillions of dollars and if funds were redirected from the Pentagon, police, prisons, etc. they would still only end up covering a fraction of the cost to public expenditure, hence the rapid emergence of discourse around MMT as a means of covering the cost.

And while I agree that the US has some slack on this considering the current patterns of deflation despite ZIRPs, I’m not sure if they can afford tens of trillions more in slack. That’s unless the US wants to transform into some Sovietised autarky, due to the simultaneous currency devaluation/inflation on imports which would be incurred, which is where the Jobs Guarantee proposal comes in as a necessary adjunct.