Tag Archives: Modern Monetary Theory

The Fiscal Summit Counter-Narrative: Part Two, Defining Fiscal Sustainability

By Joe Firestone

One of the most irritating things about the deficit hawk/austerity literature, is that it uses the ideas of “fiscal sustainability” and “fiscal responsibility” in an ideological way, without ever really analyzing or explaining these labels. It’s almost as if the austerians know that if they clearly and directly stated what they meant by these terms, and how their meanings were actually related to the ideas of “sustainability” and “responsibility”, then flaws in their whole ideological and policy framework would be very clear to everyone else.

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Fiscal Summit Counter-Narrative: Part One

By Joe Firestone

Well, it’s Springtime in DC. Time for the Peter G. Peterson Foundation’s annual event. The Fiscal Summit, to be held on May 15, better named the Fiscal Cesspool of distortions, half-truths and lies, is a propaganda extravaganza designed to maintain and strengthen the Washington and national elite consensuses on the existence of a debt crisis, the long-term ravages of entitlement spending on America’s fiscal well-being, and the need for long-term deficit reductions plans to combat this truly phantom menace. The purpose of maintaining that consensus is to keep an impenetrable screen of fantasy intact in order to justify policies of economic austerity. that have been impoverishing people and transferring financial and real wealth to the globalizing elite comprised of the 1% or far less of the population, depending on which nation one is talking about.

The 2010 Fiscal Summit

The first “Fiscal Summit” was held in Washington, DC on April 28, 2010. It was lavishly funded by the Peter G. Peterson Foundation, and included many “big names” associated with “fiscal sustainability” and “fiscal responsibility,” including Bill Clinton, who appeared along with personalities from Peterson’s stable of deficit hawks such as David Walker, Alice Rivlin. Robert Rubin, Alan Simpson, Erskine Bowles, and Paul Ryan. Its purpose was to spread the deficit hawk message of Peter G. Peterson, including various myths of the world-wide austerity movement: Continue reading

The (Semantic) Problem with MMT: An Exercise in Framing

By J.D. ALT

My wife is no longer speaking to me. She got angry—hysterically angry—over MMT. This caught me off guard. I could not understand it. She was on the verge of throwing her wine glass across the patio. She banged the glass table where we sat with her fist, which alarmed me. This began as a quiet, after-dinner conversation pursuing her casual inquiry about how my Monopolis Monopoly Post had been received.

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Playing Monopolis Monopoly: An inquiry into why we are making ourselves so miserable

By J. D. Alt

Why does it seem like there isn’t enough money to pay for the things we really need? The headlines are filled with stories about our nation’s “debt problem” and dire warnings about our impending “bankruptcy.” As an architect who fills his waking hours thinking up all kinds of wonderful things we could be building, I’m alarmed by the idea there isn’t enough money to pay for any of them. Before wasting more time dreaming, I had to find out: Is it really true? Are we really too poor to put America back to work making and building the things we need to maintain a prosperous nation?

Searching for an answer, I discovered a small (but growing) group of economists (see here, here, here, here, here, here) who represent an emerging school of thought known as “modern monetary theory” (MMT). These men and women are valiantly trying to make us all understand a paradigm shift that occurred some forty years ago, when the world abandoned the gold standard. Their key insight shocked me: A sovereign government is never revenue constrained when it is the Monopoly issuer of its own pure fiat currency; it has all the money that’s needed to put its citizens to work building anything—and providing any service—that is desired by the public (provided the real resources are available). Even more remarkable, sovereign “deficits” in the fiat currency are just the accounting record of the surpluses that have been injected into the private economy. Eliminating the sovereign currency deficit by imposing austerity will not make the economy healthier; it will, in effect, bankrupt the citizens!

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Quantitative Easing and Commodity Prices: An MMT Approach

By Payam Sharifi
The author is currently pursuing his Ph.D. in Economics and Public Administration at the University of Missouri – Kansas City

One of the most common observations I make as I frequent the comments section of MMT blogs are the arguments in objection to it.  When one mentions “keystrokes”, these posters immediately think of Weimar Germany and machines printing money and throwing them out into the streets (via helicopter or otherwise).  After these commentators understand (through the help of other posters) that MMT notes that inflation is the only possible constraint to the issuer of a sovereign currency, they typically have their “gotcha” moment.  Quantitative Easing (QE), they note, has been responsible for higher commodity prices and hence, MMT’ers are a bunch of crazy fanatics who want to turn the nation and the world into Weimar (or Zimbabwe).  The even larger implication is that enacting goals for the public purpose is not something the government should be involved with.  The view that QE is responsible for higher commodity prices is not entirely without merit, but not for reasons typically ascribed to it.  By understanding the institutional aspects that MMT describes, one will understand not only the real transmission mechanism but also some other problems and solutions associated with higher energy prices.  This post makes an outline of these issues.

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National Affairs: Eurozone Faces Financial Assault

Click here to catch Marshall Auerback’s latest analysis of the ongoing crisis in the Eurozone.

Developing Nations

By Dan Kervick

Matt Yglesias has described three popular contemporary political approaches to the challenge of maintaining our national commitment to “providing health care services to the elderly, the disabled, and the poor and also to bolstering the general incomes of elderly people.”  One is Congressman Paul Ryan’s approach of reducing the level of the future commitment in order to bring it in line with “historic norms about the level of taxation.”  The second is the liberal approach of preserving our existing level of commitment into the future, even if that means raising taxes in the aggregate.  The third is “the hazy Obama/Simpson-Bowlesish center that wants to raise taxes and cut programs.”

Perhaps this short list characterizes the main political answers reasonably well, if the main political question is how to tame the budget, and shrink or control the deficit.  But I would like to point out that all three answers have something in common:  Not a single one of these approaches, as usually presented, contains any call for the national government to engage seriously in what one might call “investing in our future”.  All three of them reflect the defeatist mindsets of different camps of worn out oldsters, each promoting a different way of giving up, making do, or just hanging on.  They are all pathologies of the dismal “No, we can’t!” era in which we now live.

The promoters of these three variations on the theme of austere, hard news pessimism no doubt fancy themselves realists and responsible grownups.  But they are nothing of the sort.  They are burned-out casualties of neoliberalism, afflicted with dead imaginations or ideological blinders, who have forgotten what it means to grow a country and build a society.  We need to move beyond their miserable and dismal trilemma.  If the die-hard adherents of these schools of thought want to mope around the shuffleboard courts at the End of History Home for Final Surrender, let them.  But it’s time for the rest of us to reject all three approaches and reignite our history.

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MMP Blog 48: IS THE JOB GUARANTEE NECESSARY?

By L. Randall Wray

Over the past 11 months, or so, we have examined Modern Money Theory. This is the proper paradigm for analyzing all modern countries that use their own currency.

Some have wondered whether we can separate MMT from the Job Guarantee (JG): can one accept MMT while rejecting the JG?

To be honest, I find this to be a rather strange question. We have a modern theory of Bubonic Plague. Until medical science developed a theory of disease that can be caused by microbes too small to be seen with the naked eye, all sorts of explanations of the cause of the Plague were offered. The most popular was “bad air”. The preventative measures offered (quarantine of affected individuals, evacuation of cities, burning of the property of the deceased), and improvement of public sanitation actually were quite effective—indeed, in the richer countries the plague was almost banished even before the “germ” theory of disease was ever developed. (To be sure, there were false starts—such as killing cats, that had helped keep rats in check!)

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MMP Blog #47: The JG / ELR and Real World Experience

By L. Randall Wray

There have been many job creation programs implemented around the world, some of which were narrowly targeted while others were broad-based. The American New Deal included several moderately inclusive programs such as the Civilian Conservation Corp and the Works Progress Administration. Sweden developed broad based employment programs that virtually guaranteed access to jobs.

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Simon Johnson and James Kwak’s White House Burning: Progressives in the Grip of “Hard Money” Ideology

By Michael Hoexter

Michael Hoexter is an energy efficiency and renewable energy policy analyst and marketing professional located in the San Francisco Bay Area.  He is concerned that flaws in economic thinking are derailing effective policy action on climate and energy challenges.

Currently, on the world political stage, there is little discussion of an alternative progressive framework for economics that would significantly counteract the push towards fiscal austerity.  One hears now and again protests about the damage already done and yet to be done by fiscal austerity, but the public in general has little knowledge of a comprehensive alternative framework. There are signs that the Modern Monetary Theory (MMT) view is reaching a wider audience, but it is probably the case that even most well informed political insiders remain in the dark.  The public at large is exposed in both media and policy circles to two flavors of the same neoliberal economics that sees no positive leadership role or well-thought-out supporting role for government in the economy.  In the upcoming US Presidential election, the American public must choose between two candidates, superficially different, but who offer in practice weaker and stronger versions of the same approach to governing. The lack of a perceived alternative engenders apathy and cynicism in many.

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