Monday, March 29, 2021

Care to comment?

Torin Hunter emails:

Care to comment?

I was wondering if you might be willing to comment on this article on your blog.  Your comments may help a lot of Austrians to clarify their thinking.  Do you agree with what he says and if not, why not?   Thank you very much...

RW response:

There is hardly anything in the author's perspective that fits with my view.

I see differences with my view in even the minutiae of his understanding of the mechanics of how money is created.

I don't know what he means by a "test" of MMT. MMTers almost always support money printing out of thin air. Such money printing distorts the economy and sets up all kinds of potential blowback from accelerating price inflation to the boom-bust business cycle. That is the essential point.

You don't need any test to understand this.

Beyond that, it really doesn't pay to discuss the technicalities. MMTers and other technocrats like the author of the essay will just take you on a never-ending roller coaster ride.

My view aligns with Hoppe's perspective, get it down to basics:

I cover my full "get it down to basics" in Problems With Modern Monetary Theory: A Comment on Stephanie Kelton’s "The Deficit Myth".

As for price inflation, I am certainly not in the camp that necessarily expects hyperinflation.

I have consistently said that 3.0% price inflation is in the bag, that 5.0% price inflation is extremely likely and that, depending on Fed actions, within 18 months we could see price inflation in the 10% range. 


  1. You give up too easily here RW. Let me play the Devil's advocate for a moment. A "test" of the MMT probably means..."let's see what happens when we increase the public debt sharply and flood the economy with new money. Traditional theory suggests significant inflation and higher interest rates. Let's see if, with significant unemployed or underemployed resources, whether than happens or not." If it does, then MMT will have "failed" the test; if not, MMT proponents will argue that they have been right all along.

    Now as Austrians we know that all of this is nonsense...although it does have some simple, common sense appeal to policy makers and non-Austrians. We know that that there will be inflationary distortions in specific sectors that get the money first; we know that there will be micro-economic distortions in capital markets that set up future mal-investments and make recession inevitable. We know this and a whole complex of other things. But the MMT people have not the slightest interest in any of this. The entire purpose of the exercise is to rationalize massive government spending that advances the progressive agenda of an ever-expanding crony-capitalist system. The long run? Who cares, for as Keynes said.....

  2. For what it is worth, this newer argument, from the same source, is better written:

    From where I stand there seems to be a whole lot of "velocity" going on. But, to quote Rothbard, "Velocity is not an independently defined variable."

  3. I find the transitory discussion of inflation hilarious as so few want to talk about the longer view that shows the endemic nature of current everyman - who isnt oligarchy - inflation. Not as it relates to the monetary swamp view but how it relates to the economic forces behind buying power.

    When viewed on the macro scale inflation has been here a long time as an engineered reset to impoverish the 90% thus exerting ever greater control.

    When thinking how a reserve currency master stroke that WAS the dollar has been mindfully destroyed alongside "real" capitalism in the current monopolistic era how can you NOT come to a clear decision that it is all by design. the consumer is now easily expendable.

  4. I love Hoppe's big-picture simplification. One might follow that up with "How is it NOT harmful to have an increase in claims of ownership on already-existing production?---i.e. more dollars chasing the same amount of resources--?"