If you can’t explain something, try an abbreviation. The latest in economics is MMT — Modern Monetary Theory or, in other words, a magic money tree. It’s a simple idea. It costs almost nothing to print money: the cost of printing banknotes is negligible compared with their face value, and even lower when the Bank of England creates money electronically through its so-called ‘quantitative easing’ programme (QE). That money could be given to the public — either directly or indirectly via the government — to enable people to spend more, so raising output and employment. We are all better off.

Why didn’t we think of this before? Well, of course we did. From Roman emperors through Henry VIII and the Weimar Republic to present-day Zimbabwe and Venezuela, rulers have shown all those clever central bankers struggling to get inflation up to their 2 per cent target how to do it. Unfortunately, they didn’t stop at 2 per cent but ended up in hyperinflations in which prices doubled in a day — equivalent to annual percentage inflation in the many trillions. Needless to say, in such situations the economy tends to collapse. As my wife says when I praise the quality of a bottle of wine and suggest some more, ‘Moderation in all things’.

The problem with the simple idea of MMT is that it belies the context to which it is applied. To be brutally honest, MMT is neither modern, nor monetary, nor a theory.

It is not modern because the ability to print paper (or, today, electronic) money has always raised the question of when to stop. And governments have always used deficit financing to support their wish to spend.

It is not monetary because the relevant questions concern fiscal policy: how should governments finance their deficits and what are the limits to those deficits? If deficits can always be financed by the printing of money by a compliant central bank, then we are in a world of ‘fiscal dominance’, to use the modern jargon. Inflation is then determined by government spending decisions. It was precisely to convince financial markets of the opposite that led to the independence of the Bank of England.

And it is not a theory because the appropriate size of the government budget deficit and how much money to print depend entirely upon the context of the decision. There is no general theory that says printing money or running a government budget deficit is always either good or bad. MMT advocates are correct in saying that the national budget of a country that can print its own currency is different in nature from the budget of a household (as Keynes pointed out in 1936 and others before him). But it does not follow that there is a magic money tree. If the government spends more and finances that by borrowing, the additional debt is a liability of the public sector. If the spending is financed by money printing, that too is a liability of the public sector and can be used, for example, to pay taxes. The smoke and mirrors of MMT violates the only iron law of economics — double entry bookkeeping: for every asset there is a corresponding liability.

To come down from high theory to the terrain of practical considerations, the real weakness of MMT is that it adds nothing to the existing toolbox of policy-makers. The Bank of England already prints money. The government already runs a (very large) budget deficit. MMT is not a new policy tool but simply an encouragement for them to go further. Whether that makes sense depends entirely upon the context in which that advice is given.

https://www.spectator.co.uk/article/the-ideological-bankruptcy-of-modern-monetary-theory/


MMT  - magic money tree - is a load of cobblers.

Chalmers on the loss of the QLD by-election: "We are aware of the pressures on people".... but we can't do much because ....we have to attend to budget repair .....

ie, the usual neoliberal mainstream garbage which will rapidly destroy Albo's still high ratings, as the economy deteriorates under Bullock's mainstream management.


Meanwhile, Dutton is hoping to confuse future voters (with short memories) with his laughgable and preposterous claim he will fix Labor's "cost of living" crisis.   

The trick is to separate the voters into "lifters " and "leaners" , and then sit back and let mindless hyperpartsanship get him back into office.....

Hence he referred to the by-election results as "the springboard" to office.

Frank wrote on Jul 16^th, 2023 at 11:15am:


Not much of a start - 'playing the name', not the content.

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Nothing magic about the currency-issuing power which resides in the public sector, to create 'debt-free' government money via the nation's treasury and reserve bank; or the money creation power which resides in the private banking sector, to create 'debt money' (interest-bearing  money) for use by private sector players including you and me.

The thing to know is money is created out of nothing, in either (or both) sectors.

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Indeed it is; it only requires knowing how money is created out of nothing as described above. 

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Two problems.

1. 'Government money' cannot, and should not EVER be "given to the public"- inflation will be the obvious result.
Free government money is only EVER created to fund specified public social policy, depending on whether the necessary resources are available for purchase by the government - again, to avoid inflation.

2. So 'free government money' WON'T enable people to spend more, it  WILL enable the government to spend more, provided the resources  (including labour) are available for purchase by the governement.  Spot the difference?

3. Certainly we are all better off if the government is released from artificial debt and deficit constraints. 

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All cases of government trying to buy resources which aren't available, or because government revenue has fallen as a result of a collapse in export revenues  - oil, in Venezuela's case, which meant Chavez could no-longer finance his  socilaist policies, beause the nation's imports and exports were priced in US dollars.

(That's why China and Russia, and India and  UAE have by-passesd the dollar in some trades:

"India has signed an agreement with the United Arab Emirates that will allow it to settle trade in rupees instead of dollars, boosting India's efforts to cut transaction costs by eliminating dollar conversions." and avoid the risk of US dollar exchange rate changes.

In short, if there is a collapse in the nation's  domestic supply (Weimar, Zimbabwe), or money received from exports (Venezuelan oil), free government money alone will not be able to fix the problem.

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To be honest, the author of the article knows nothing about MMT.

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Outlined above, not by taxing  or borrowing from the private sector, which itself often mis-allocates resources  in the search for private profits, in the 'invisible hand' free market.

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As should be the case: government via the electorate's choices, not by the 'independent' central bank with its one (monetary) tool ie,  setting interest rates to control inflation. Free government money as explained above makes the term  "deficit" meaningless; the only "deficit" a currency-issuing government faces is a resources deficit. 

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Correct, but also private sector spending decisions, inflation potentially arises from BOTH public and private spending.

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Private sector speculators usurping the role of government.  Insanity. In fact the BofJ has relieved many bond speculators of their money, given its unlimited capacity to defend the yen (so long as the economy remains productive). ...

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Context is important, but there is no fix for GIGO.

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Correct again, but the rest is GIGO again, already addressed above.

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You will learn that the public sector's deficit is the private sector's surplus.

https://profstevekeen.substack.com/p/money-from-nothing?utm_source=post-email-ti...

News report: Philip Lowe (in India at an international finance meeting) says:

"Productivity must be increased, it's not because of a lack of good ideas, it's all about politics".


"Please explain".....? I wonder if we poor sods are worthy of an explanation; either the news carrier or Lowe himself are treating us with utter comtempt.

Sally McManus, Secretary of the Australian Council of Trade Unions, is questioning Bullock's stated aim to increase unemployment in Oz.

These orthodox central-banking ogres have to be pulled up.

Edit: just noticed the report of the same news item, from 'Sky News Australia'.

Needless to say, the full extent of their report was the same as above, ie, zero explanation of how Lowe thinks governments should "increase productivity".

Frank....could you have a look at these links please?

https://en.m.wikipedia.org/wiki/Steve_Keen

👆 This link will direct you here 👇

https://en.m.wikipedia.org/wiki/TNL_(political_party)

Bottom line : MMT = left wing ideology and it’s currently being pushed by the TEALS.

Frank wrote on Jul 18^th, 2023 at 11:12am:


😳

Dear God .... Keen is a qualified academic AND an absolute dumbarse too 😂🤣😆

Economics professor Steve Keen will walk more than 200km from Canberra to the top of Mt Kosciuszko for losing a bet that house prices would fall 40 per cent.



Sh1t a brick! What a tosser!

Meantime those of us who jumped in during 2020 and invested in the non bogan areas of Sydney and bought detached houses on land made an absolute killing! We’ve tripled our property portfolios net worth AND even now our properties are still climbing... and that’s within the context of a global recession ffs!

OMG thank you very much Frank for revealing the dumbarse’s tosspottery! I can’t wait for NotSoGreat to come back online now 😂🤣😆

Topic is here NotSoGreat 👇

Lisa Jones wrote on Jul 18^th, 2023 at 11:18am: