Category Archives: L. Randall Wray

MMT 101: Response to the Critics Part 3

Posted on December 3, 2013 by | 43 comments

Adding the domestic private sector

By Eric Tymoigne and L. Randall Wray

[Part I] [Part II] [Part III] [Part IV] [Part V] [Part VI]

In the previous installment, we focused mostly on the government side of the circuit. In this piece, we study the interaction between the government and nongovernment sectors while retaining the consolidation hypothesis.

For the purposes of the analysis, we will think of the nongovernment sector as equivalent to the domestic private sector, however, the analysis could just as well include state and local (nonsovereign) levels of government as well as the foreign sector in the nongovernment sector.

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MMT 101: Response to the Critics Part 2

Posted on December 2, 2013 by | 51 comments

The Simplest Case: The Circuit with a Consolidated Government

By  Eric Tymoigne and L. Randall Wray

[Part I] [Part II] [Part III] [Part IV] [Part V] [Part VI]

MMT is frequently criticized for consolidating the treasury and the central bank. (Palley 2012; JKH 2012a, 2012b; Lavoie 2013; Fiebiger 2012a, 2012b; Rochon and Vernango 2003; Gnos and Rochon 2002). They note that this hypothesis does not describe the current institutional framework of developed countries, and claim it pushes MMT into unnecessary strong logical claims. In this post, we will address these issues by tackling problems surrounding the nature of money and the role of taxes, and by beginning to deal with the consolidation argument.

The theory of the circuit discussed in Part 1 is a good starting point. Like all theories, it simplifies the existing economic system in order to draw causalities from logical reasoning. From the circuit theory, one can better understand Keynes’s point that spending is what makes saving possible (Keynes 1939), and the importance of distinguishing financing (initial finance) from funding (final finance). Parguez (2002) and Bougrine and Seccareccia (2002) have shown how the circuit theory can be extended to include the state, and reached similar conclusions to MMT.

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MMT 101: A Reply to Critics Part 1

Posted on December 1, 2013 by | 35 comments

By  Eric Tymoigne and L. Randall Wray

[Part I] [Part II] [Part III] [Part IV] [Part V] [Part VI]

This is Part 1 of a six part series in which we deal with critics of MMT. As readers of this blog know, our critics continually raise the same old tired critiques of MMT. They scapegoat MMT by attributing to us claims we’ve never made. They take our words out of context to build up a strawman that they attempt to destroy. No matter how many times we respond to a particular critique, another critic tries to use it again. Warren Mosler used to use the analogy of the “Bop a Gopher” game at the arcades: you bop one and another pops up.

While we know that it’s a Sisyphean task to disabuse the critics of their cherished and wrong-headed arguments, we thought it would be useful for those who come to MMT with less prejudice to have at hand responses to five categories of critiques. Today we will provide an introduction to the series. Each of the next five posts will deal with one of the critiques. We’ll also append a list of the references used for this entire series.

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Bow down to the Bubble: Larry Summerian Endorses Bubbleonian Madness and Paul Krugman Embraces the Hansenian Stagnation Thesis*

Posted on November 21, 2013 by | 74 comments

By L. Randall Wray

{*Sorry, I couldn’t resist. As many of NEP’s readers know, Michael Hudson has long advanced the argument that America’s policymakers have purposely created Bubbleonia—NOT to generate growth but rather to enrich the thieves at the top. And many of you are familiar with the work of Geoffrey Ingham—a fellow Chartalist traveler—who has focused on J.M. Keynes’s “Babylonian madness”, the period after Keynes had discovered the writings of A.Mitchell Innes that led him to explore the origins of money in Babylonia. Hudson is also a scholar of that period. Alvin Hansen reintroduced the thesis of secular stagnation, giving it a Keynesian flavor.}

Larry Summers has made a big splash by (finally) recognizing that the US has had a series of financial bubbles. (See here.)  Duh! Who wudduv thought? The Reagan years were just a bubble, driven by thrift excesses. The Clinton years were just a bubble, driven by dot-com excesses. And the most recent real estate boom and bust was just a bubble, driven by Wall Street’s thieving Investment Banks. Bubbles-R-US. It’s all we’ve got going on.

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The Circular Logic Behind Scott Sumner’s Claim That the Fed’s Policy is Contractionary

Posted on November 17, 2013 by | 29 comments

By L. Randall Wray

OK, I’m flabbergasted.

I came across, and commented on, a piece by Scott Sumner a few days ago. (DID SCOTT SUMNER FIND MMT’S ACHILLES’ HEEL? ) He claimed he had proof MMT is wrong: if the Fed doubles the base then ipso facto nominal GDP must double and ipso facto MMT is wrong. Well, the Fed tripled the base and nominal GDP didn’t budge. In any case, even if that had worked, it is not evidence against MMT. All Sumner did was to string together a series of non-sequiturs.

Sumner’s also behind an inane proposal that the Fed ought to use its demonstrated impotence to target nominal GDP. Right. I wish the Chairman would reduce the earth’s wobble instead.

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What If China Dumps US Treasury Bonds? Paul Krugman inches toward MMT

Posted on November 12, 2013 by | 35 comments

By L. Randall Wray

Our deficit hysterians love to raise the specter of China. Supposedly Uncle Sam is at the mercy of the Chinese, who have a stranglehold on the supply of dollars necessary to keep the US government above water. If the Chinese suddenly decided to stop lending those scare dollars, Uncle Sam would be forced to default.

Can anyone, please, explain to me how the sovereign issuer of the US dollar—Uncle Sam—could ever run out of his supply of dollars? Please, give me one coherent explanation of how that could happen.

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Randy Wray and Stephanie Kelton Present at Fields Institute

Posted on November 5, 2013 by | 7 comments

Randy Wray and Stephanie Kelton presented at Fields Institute at University of Toronto in conjunction with INET. The conference was Mathematics for New Economic Thinking. The presentation links below will take you to Field’s site where slides appear side by side with the video. Below the links to the videos are links to view and download PDF versions of the slides as well.

Randy Wray’s presentation, “The Nature of Money: A Series of Debits and Credits” can be viewed here.

Stephanie’s presentation, “Fiscal Space and Financial Stability: A Differential Analysis” can be viewed here.

Randy’s slides are available here.

Stephanie’s slides are available here.

 

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DID SCOTT SUMNER FIND MMT’S ACHILLES’ HEEL?*

Posted on November 4, 2013 by | 63 comments

By L. Randall Wray

*The title of this post was inspired from a post by Mike Sax.

First an admission. I’m not really a blogger. I occasionally write pieces that somehow find their way onto blogs, but I rarely read or respond to blogs. I have no idea who is who in the blogosphere. For example, I do not know someone named Scott Sumner, who is apparently a Very Important Person in blogoland.

I note that he’s associated with the proposal that the Fed target nominal GDP. When I first heard about this, I thought it was a joke. Yeah, right, might as well have the Fed target the Earth’s Wobble. Gee, I’d really like the Fed to stabilize the tilt, to achieve San Diego’s invariantly moderate climate in upstate NY where I spend much of my time!

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Money For Nothing: A Panel Discussion by Black, Kelton and Wray

Posted on October 23, 2013 by | 23 comments
Cross posted from EconoMonitor: Great Leap Forward
On the evening of October 21, 2013, there was a preview screening of the film “Money for Nothing” at the University of Missouri-Kansas City (UMKC). After the film, there was a panel discussion about the film with the filmmaker, Jim Bruce, and UMKC professors Dr. Stephanie Kelton, chair of the UMKC department of economics, economics professor Dr L. Randall Wray, and Dr. William Black, former financial regulator and associate professor of law and economics.

There is a little noise from handling the recorder in the first couple minutes of the recording, but then it settles down to decent audio. Here is the link for the panel discussion:

https://soundcloud.com/tellsomebodyradio/money-for-nothing-panel

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MINSKY DOES RIO: Notes from a Conference

Posted on October 14, 2013 by | 4 comments

By L. Randall Wray

I recently returned from conference in Brazil jointly sponsored by the Levy Economics Institute, the Ford Foundation, and the Brazilian research group MINDS. It is part of a bigger project to take Hyman P. Minsky global. In my view, Minsky was hands-down the greatest economist of the second half of the twentieth century and he deserves the attention he’s getting. Watch for an upcoming film by Monty Python’s Terry Jones that will feature Minsky and his work. Minsky will even make an appearance—or, more accurately, a bigger-than-life Minsky puppet will be in the film. (Steve Keen and I were also interviewed.)

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