By J.D. ALT
theme and illustrations of this essay are from the new book “Paying Ourselves to Save the
might seem, as we observe the U.S. government “instantly” generating $2
trillion new dollars for direct payments and grants to people and businesses,
that the coronavirus pandemic has shed a new light on the authenticity (and
necessity) of modern money theory (MMT). But that light, if it is being shed at
all, is illuminating instead the dramatic limitations of the “standard money
theory” we insist on applying to the exigencies of an unfolding modern society
(including, but not limited to, how to deal with pandemics).
By J.D. ALT
ironic that, at this moment, when the truthfulness and utility of modern money
theory (MMT) is being publicly realized—(and even potentially implemented!)—that its singular vulnerability
must emerge as a real concern: hyper-inflation.
most recent thing I’ve written—Paying Ourselves to Save the
Planet—addresses the issue of
hyper-inflation as follows:
The last two and a half months I’ve been at work on a new book. As it evolved, I found I was approaching MMT from a new direction—one which made an explanation of MMT much less counter-intuitive and, perhaps, less controversial. The approach is relatively simple and straight-forward: follow what I began calling “standard money theory” step by step until one reaches a perspective that has, almost seamlessly, become “modern money theory.”
In the first part of this series, we explained why MMT should be seen as a political problem rather than just an educational one. In this concluding part, we will discuss where MMT promotion is most likely to fail or have good chances of success. First, consider some poor prospects.
All readers of NEP know how Social Security works and it seems like a natural for MMT. But is it? Wall Street sees the program as a leak from what should be their profitable money flow. For years, the former investment banker and secretary of commerce under Ronald Reagan, Pete Peterson, kept forecasting its failure. George W. Bush tried to fix the leak by privatizing it. Arguing the virtues of MMT for Social Security is a sure way to stir up Wall Street bees that are quiet at the moment.
By Thornton Parker
The way a problem is seen can determine how or even if it gets solved. When the French engineer, Ferdinand de Lesseps, was picked to build the Panama Canal, he saw it as another excavation problem as his Suez Canal had been. But Egypt was flat and Panama had a mountain.
When the United States took over the job, John Stevens, who was put in charge, saw it as a railroad problem. The biggest task was to move ninety-six million cubic yards of rock and earth, as fast as the fifteen giant steam shovels cut them out of the mountain, from the Pacific side of Panama to the Atlantic side for building a dam and raising a lake that would be part of the canal.
By L. Randall Wray
This blog is based on the testimony I provided to the US
House of Representatives. My written statement will be published in the
Congressional Record (a version is also at the Levy Economics Institute: http://www.levyinstitute.org/publications/statement-of-senior-scholar-l-randall-wray-to-the-house-budget-committee.
The full statement was co-authored with Yeva Nersisyan.
I will argue that the Federal Government’s deficit and debt
are not so scary as we are led to believe.
Neither the deficit nor the debt ratio is on an
unsustainable path. In some sense, chronic deficits and a rising debt ratio are
They are not due to out of control spending—now or in the
future. They serve a useful public purpose. In any case they are largely
outside the control of Congress.
[ed. This was part Randy’s Talk at ICAPE.]
By L. Randall Wray
First I’ll clearly state what MMT is and then outline four
paths that lead to MMT’s conclusions: history, logic, theory and practice.
What is MMT? It provides an analysis of fiscal and monetary
policy that is applicable to national governments with sovereign currencies.
There are four requirements that identify a sovereign
currency: the national government
a) chooses a money of account;
b) imposes obligations (taxes, fees, fines, tribute, tithes) in the money of account;
c) issues a currency denominated in the money of account, and
accepts hat currency in payment; and
d) if the National government issues other obligations, these
are also payable in the national government’s own currency.
By J.D. ALT
With the essential collapse of the U.N. Framework Convention on Climate Change in Madrid (“Climate meeting goals go unmet” Washington Post, 12-16-19) we now approach the first day of 2020 with much less to celebrate, much more to fear, and much more to accomplish. Here’s a little parable for the coming New Decade: Continue reading
Inflation & Consumption
By J.D. ALT
Let’s quickly recap: I outlined, in PART 3, an argument that modern society has evolved in ways that necessitates a dramatic increase in public enterprise—yet, at the same time, we’ve doubled down on an old-world narrative about “money” that makes it mathematically impossible to meet that need. In PARTS 1 & 2 we reconfirmed a “modern money” perspective by simply observing the actual operations of the Federal Reserve—and reconfirmed, as well, how this new perspective holds out the opportunity to actually confront, through the efforts of public enterprise, the new challenges modern society faces.
It was my intention, at this point, to focus on the unfolding reality that climate change will soon prove to be the most dramatic challenge modern society is facing—and will be the challenge that necessitates, by far, the greatest need for goods and services produced by public enterprise. More to the point, climate change will generate the greatest need—by far—for implementing and managing a “modern money” perspective in America’s economy. While I still intend to pursue this argument, comments addressed to PART 3 have led me to change sequence: I realize now it will be ineffective (and perhaps futile) to discuss the extraordinary level of public spending that climate-change will necessitate without, first, attempting to address two related issues: (1) the stridently insistent warnings about “inflation,” and (2) the conundrum of the necessity for increased “consumption.”
L. Randall Wray will be providing testimony for Congress on November 20 at 10 am. The topic is the government debt and deficits. His full statement will be available at 10:30AM at the Levy Institute. His goal is to explain a) why we needn’t fear sovereign government deficits and debt; b) why in some important sense, deficits and rising debt are “normal”; c) the deficit is in any case largely outside the control of Congress; d) deficits and rising debt ratios will not lead to government insolvency or bankruptcy; e) all government payments can be made on time, unless f) Congress forces a default (due to the debt ceiling it imposes). The statement will provide a lot of new data related to these topics.
The link to the webcast is: https://budget.house.gov/legislation/hearings/reexamining-economic-costs-debt