Government

MMT it’s the solution to all our problems

Thanks to a reader and his comments on this blog for making me think more about modern monetary theory or MMT. Something I heard about but ignored.

According to Stephanie Kelton, a professor of public policy and economics at Stony Brook University, the U.S. government can always afford a new program in financial terms because it can issue currency without taxing or borrowing.

Given this theory you can see why the American left may be on board. Sen Sanders and Rep AOC are fans because it allows them to use the word “free.”

Budgets, debt, deficits, treasury bills, taxes are all irrelevant under MMT and as you may guess, if you don’t need to worry about any of that, all your wants and desires can be fulfilled and no responsibility necessary. Kelton’s theory is we have no money, it’s all the governments.

Kelton was and may still be an advisor to Sanders.

What better way to further an appealing social agenda of government provided just about everything from guaranteed income and jobs to free college and health care then to develop a theory that places no limits on paying for… anything.

If you keep printing money, what about inflation? Not a problem according to Kelton, but if it becomes so, government just taxes the population to curb spending.

Fortunately many more conventional economists on not on board, notably Paul Krugman.

MMT has been suggested as the way to forgive all student loans, all $1.5 trillion. Just print money to do the job without regard to how or why the loans were acquired, no questions asked, no responsibility required.

It would appear first you develop or buy into an ideology and then you develop an economic theory to make it work or appear to do so.

What a deal!

Categories: Government, Politics

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5 replies »

  1. You are correct on the “ideology” characterization here. But I would note that MMT is not the ideology itself. It is merely a “pseudo-economic” supporting element of the actual ideology.

    If you’re interested, you might want to watch for discussions/publications referencing what is called the “Nordic model”. It’s Wikipedia page may be a good place to begin.

    While many influential economists may not particularly support the MMT construct, quite a few economists ARE enamored of the “Nordic model” – Paul Krugman especially. He’s been advocating for it, or something equivalent to it, for the U.S. for a very long time.

    Oh, and just as an aside, Bernie Sanders is definitely enamored of the “Nordic model”! It is precisely that “model” that he intends to “impose” here. The MMT thing, by the way, is just the “next step after the ‘Nordic model'” in his mind.

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    • Seems to me the key factors in that model are the size and homogeneous nature of the populations and their history as a country. A 20% + VAT helps too, but as we all know from Sanders tweets, everything they provide is “free.”

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  2. Once again modern liberalism/demo-socialism has shown its economic idiocy. 1 year = the time it’ll take for us to go not only bankrupt, but to descend into civil war and the attending chaos and true human tragedy.

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    • I concur completely with your observation that the key factors are the cultural homogeneity and their history. But even so, I’m not at all convinced that the “Nordic model” is even destined to survive all that long anyway. A quick “story” might help explain why I have that opinion …

      I had the great good fortune to be stationed in England from 1977 – 1979. (USAF) It was a marvelous experience for me, by the way. But the time frame is relevant. The UK had just voted to join the European Union (EU) in mid-1973, and one of the most prominent, every-day artifacts of that was, of course, the EU imposed Value Added Tax (VAT – 8%) – effectively a “sales tax” imposed on nearly everything. The Brits basically accepted it then, more or less as “reasonable membership dues”.

      The UK also had a very burdensome Income tax structure that had been imposed to support not only the National Health Care, National Education, and various other government “systems”, AND an extraordinarily generous Welfare system. Bottom tax bracket: 35% and top bracket 90%, if memory serves. This UK “system” had evolved in the aftermath of World War II, and was, in all respects, precisely within this “Nordic model” paradigm. It was, in all respects, the epitome of the welfare state.

      But before I left in 1979, I got to witness, firsthand, the Brits reject the whole shebang, kick Labour out and hire Maggy Thatcher as their new Prime Minister. Hands-down one of the most remarkable events I’d ever even heard of, let alone watched unfold in person. And it wasn’t just a routine “change of command – but nothing else” election event as so many of ours seem to be. It was a complete, dynamic change of the entire “paradigm” of their government. Truly remarkable.

      After USAF service, I worked for a defense contractor and spent a good deal of time working with several NATO countries/governments. That afforded me the opportunity to go back to the UK several times and check with some of the Brits I’d gotten to know earlier, and ask them how they were doing with their “new” government AND their new economic/social system. The overwhelming response I got was positive – a certain degree of “cautious optimism” even from the “doubters”. But in no case did anyone express any regrets, nor did I hear anyone indicate they “wanted to go back”. Basically, no one wanted to “re-do” the “Nordic model” in England.

      Zoom forward to today. Now it’s Brexit making the news. By a small majority, the Brits have voted to extricate themselves from the EU. But more accurately and specifically, they’ve voted to extricate themselves from what the EU has morphed into since 1973. Suffice to say, most Brits – those most adamant to leave the EU – have seen it change from the mere “free trade zone” specification as it was in 1973, into a “Nordic model”, writ large. And by the way, the current British VAT has concurrently zoomed from the original 7-8% to the current level I understand to be 18%. The Brits threw off their very own “Nordic model” welfare state construct back in 1979. And they’re not liking the EU “Nordic model” welfare state they’ve seen evolve and that they’ve been increasingly tasked to fund.

      But the “Bernie Sanders” types who basically orchestrated that “metamorphosis” of the original EU construct into the “Nordic model” it emulates today, are scared to death of Brexit. As Margaret Thatcher said, “Socialism is a wonderful thing, right up until the Socialists run out of other people’s money to spend.”

      One other thing.

      It’s not just my personal experiences that “inform” my perspectives. There is a marvelous documentary video series you might find interesting – unfortunately, IF you can find it. It used to be on Netflix, but they’ve dropped it. In any event, if you can find it, it’s well worth watching if you have some interest in post-1900 European history, with extra emphasis on UK evolutions during that period.

      There are 4 titles:
      “Armistice”
      “Long Shadows”
      “WWII-The Man of Steel” – On Stalin and Churchhill’s relationships with Stalin
      “WWII-Hitler’s Soft Underbelly” – An examination of Churchill’s motivations and strategies

      They are all (very well) done by David Reynolds, a Professor of History at Cambridge.

      I highly recommend them to anyone interested in this stuff. If I find an easy way to get to them again, I’ll post the location here.

      (My apologies to all for the length of my comment here.)

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  3. How about I just keep printing checks and handing them out? Isn’t that the same thing? Paper with no backing whatsoever. At some point, people will start trading in a currency that believe in and trust. It could be gold, food, or illegal drugs.

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