Sunday, February 17, 2019

About Bill Gates' Attack On Modern Monetary Theory

How insane is MMT?

Even Bill Gates, who is not known for his soundness in economics, just attacked MMT---and with good reason.

Modern Monetary Theory is at its core the view that economic growth can be achieved by money printing and that therefore government deficit spending is generally not a big problem. It is also a naked money printing version of Keynesianism and the idea that government spending somehow magically boosts the economy---but it also includes a heavy dose of socialism.

Top MMT advocate Stephanie Kelton, professor of economics at Stony Brook University, an economic advisor to Bernie Sanders' 2016 presidential campaign, former chief economist for the Democrats on U.S. Senate Budget Committee and, get this, Bloomberg opinion contributor, has written as co-author, with Andres Bernal, and Greg Carlock, about the MMT view and, simultaneously, touched on support for Alexandria Ocasio-Cortez's off-the-wall Green New Deal:

Here they diss concerns about government deficit spending:
Democrats and Republicans alike, who will ask the same tired questions: "How will we pay for it [the Green New Deal?” “What about the deficit and debt?” “Won’t it hurt our economy?”...

We can’t afford to let deficit politics stand in the way of an ambitious Green New Deal...
Here is where they introduce a dose of monetary Keynesianism:
A Green New Deal will actually help the economy by stimulating productivity, job growth and consumer spending, as government spending has often done...
Here is where they go socialist:
To save the planet and fix historical inequities, however, we must change the way we approach the federal budget. We must give up our obsession with trying to “pay for” everything with new revenue or spending cuts.

Are taxes an important part of an aggressive climate plan? Sure. Taxes can shape incentives and help change behaviors within the private sector. Taxes should be raised to break up concentrations of wealth and income, and to punish polluters for the cost and consequences of their actions. In a period without federal leadership on the climate crisis, this is how many state and local governments are considering carbon pricing. That’s useful ― not because we “need to pay for it” but to end polluters’ harmful behavior.
And here's the money printing part:
The federal government can spend money on public priorities without raising revenue, and it won’t wreck the nation’s economy to do so. That may sound radical, but it’s not. It’s how the U.S. economy has been functioning for nearly half a century. That’s the power of the public purse. 
As a monopoly supplier of U.S. currency with full financial sovereignty, the federal government is not like a household or even a business. When Congress authorizes spending, it sets off a sequence of actions. Federal agencies, such as the Department of Defense or Department of Energy, enter into contracts and begin spending. As the checks go out, the government’s bank ― the Federal Reserve ― clears the payments by crediting the seller’s bank account with digital dollars. In other words, Congress can pass any budget it chooses, and our government already pays for everything by creating new money...
The U.S. government can never run out of dollars, but humanity can run out of limited global resources...Once we understand that money is a legal and social tool, no longer beholden to the false scarcity of the gold standard, we can focus on what matters most: the best use of natural and human resources to meet current social needs and to sustainably increase our productive capacity to improve living standards for future generations.
They argue this money printing can go on because:
As long as government spending doesn’t cap out the full productive capacity of the economy ― what economists call “full employment” ― it won’t spin prices out of control. Inflation isn’t triggered by the amount of money the government creates but by the availability of biophysical resources that money tries to go out and buy ― like land, trees, water, minerals and human labor.
In other words, they also reject basic supply and demand economics. They seem to ignore the tendency for upward pressure on prices that is caused by newly printed money, by holding the idea that somehow markets don't clear. That is  they hold the Keynesian denial of basic market clearing supply and demand economics. This notion has been completely demolished by Austrian school economists (in particular, see Austrian School Business Cycle Theory by Murray N. Rothbard).

Bottom line: MMT is "The Whole Enchilada Economics." It encapsulates Keynesianism, socialism and Gideon Gono thinking.



  1. I can't figure out if MMTers actually believe that unending money-printing won't hurt economic productivity, or if they simply believe that money-printing is a more practical way to achieve their political objectives than direct taxation or borrowing, the economy be damned.

  2. It seems to me that the entirety of the MMT proposal is one giant Cantillon Effect. They present it (implicitly) as the end of scarcity. However, the purported "free stuff" comes from the loss of purchasing power stolen from the general public by funny money emissions.

    Here is a purported serious and "professional" MMT explanation of why the national debt does not matter. Somehow, they dance around the fact that the creditors of that debt expect to be paid in money that can purchase goods and services worth approximately the amount of money they paid for their bond plus a little interest. But that bond purchase money has already been spent on welfare payments and bombs.

    I suppose it's not a mystery that MMTers do not understand where wealth come from and they certainly haven't the slightest understanding of the socialist calculation problem, false prices arising from Keynesian policy or the ABCT.

    It is my impression that libertarians love to pile on AOC and attack each and every silly thing she says endlessly. They do not seem very interested in MMT. Myself, I thoroughly enjoy smacking around both AOC and MMT.

    Finally, an argument I love and libertarians do not seem to like is my submission that Keynesian and "progressive" policies are the primary promoters of suburban sprawl and overbuilding. Now that Detroit is 85% black, no one wants their kids to go to Detroit public schools. People keep moving and moving farther and farther out into McMansions in former corn fields to keep their kids safe while funny money loans fund the sprawl. "Progressives" are silent when I harangue them on this issue. Just by stating a few sentences and you will have smacked them around on almost a half dozen of their policies and neuroses. It's fun. Everyone is free to use it without attribution.

  3. Madam Kelton:

    This is super unfortunate coming from the @DCCC Communications Director.
    There is no debt emergency. National debt is nothing more than the dollars our government spent but didn't tax back, allowing them to be saved as U.S. Treasuries.

    But but but, you still have to pay back the bondholder plus interest and the money has all been spent on bombs and welfare.

  4. I think the following are serious admissions or clarifications of MMT from Tom Hickey, Mike Norman’s primary blogger/expert on MMT:

    “This was a major point made by Keynes that MMT economists agree with: INVESTMENT CAUSES SAVING. IT IS NOT THE CASE THAT SAVING CAUSES INVESTMENT. In a market-based capitalist society, production is chiefly the outcome of investment, with government acting in the background to provide a fertile field on which to plant, so to speak.


    According Keynes, whom the MMT economists follow in this respect, there is no tendency to long-run equilibrium. OPTIMAL PERFORMANCE WITH MINIMAL WASTE OF REAL RESOURCES HAS TO BE ACHIEVED AND MAINTAINED.”

    How is it possible that savings follow investment? If you have no savings, you cannot invest.

  5. The assertion, "It’s how the U.S. economy has been functioning for nearly half a century", is a leftist version of American exceptionalism. The authors fail to observe that, over the same time period, the dollar has been functioning as the global fiat reserve currency, thus shielding American businesses from the increased costs of having to settle their import/export accounts in a non-dollar currency while the Federal Reserve is engaged in pervasive monetary inflation.

    They must assume the dollar will continue its role as the world's reserve currency into perpetuity. They do not account for the devastating domestic consequences should this status change, nor do they consider the effect their policy recommendations might have on hastening the dollar's demise.

    1. Absolutely right Chris but no one wants to discuss coherently how as we speak the dollar as the world reserve is being compromised very methodically by the rest of the world! Nor do they want to know what happens when inflation strikes almost overnight in a hollowed out economic landscape where only the 1% has the personal fiscal reserves to withstand the end of the reserve status.

      Yes I know that matching dollar velocity in exchange is met by no one now. But they also dont want to acknowledge the cooperative fragmentation of reserve currency market either.

      Though many would laugh ... you can no longer laugh at the sovereign holding of gold as a currency backer especially in a drawing rights basket.

      No ... no one wants to look at all that and see how grim it truly is and will continue to be until that fateful day