Tuesday, June 15, 2010

Modern Monetary What??

My friend K is in love. He sent me a link to a post on Modern Monetary Theory, something about "nine myths about the deficit." I couldn't read it. I got maybe two paragraphs in. It was all wishes and bad argument. Sheesh! Don't people know that bad argument is bad? But my friend is in love. So I said I'd take another crack at it.

I googled the phrase modern monetary theory mmt. Got a screenful of results. Here, check 'em out:

1. Modern Monetary Theory, MMT, and The Full Employment Theory ...
Posted by politicalpartypooper on May 10, 2010

Modern Monetary Theory (MMT). Chartalism.


The theory is based on the idea that it is governments that create money instead of people’s goods, skills, and services.

In such a system, fiat money is created by government spending and then taxation is employed to reclaim the money...

ENOUGH. First of all, it is government that creates money. "People’s goods, skills, and services" is output, and skills, and output. Neither output not skill is money. Neither creates money. Money is the stuff that's generally accepted in exchange for goods and skills and services. But the money thus exchanged is already existing -- existing, that is, unless it's just been newly created by the government.

How did this guy get to be first in the search results??? Off with his head.

2. MMT (Modern Monetary Theory), the budget, and unemployment policy ...
Mon, 04/26/2010 - 9:36pm — lambert

One of the perspectives of the MMT way of thinking about budgeting is that in the United States the dollar is public money, since in a state whose currency is sovereign (like ours, but unlike the EU countries), money is created by the state (Article I, Section 8). Since the state exists to "promote the general Welfare" (preamble), and not to provide the banksters with the lifestyle to which they have become accustomed, why not use the state's money for the public purpose of ensuring full -- 100% -- employment?

The banksters?? And why is this guy explaining state-sovereign-currency? The EU nations are like the "states" in our "United States." Our states don't have their own money, either. Isn't it obvious? But this is all irrelevant.

Q: Why not use the state's money to put everyone to work?

A: Because of the consequences: the value of the dollar, inflation and all that. Perhaps Number Two here could make a good argument that prices wouldn't go thru the roof. But I'm not waitin' to see if he gets around to it.

3. Give The People What They'll Like, Already: Not “Stupid Hooverism ...
Tue, 01/26/2010 - 2:43am — letsgetitdone

For the Democrats in Congress, winning in November isn't rocket science; it's about having the will to pursue survival ruthlessly.

STOP. We're trying to think about an economic harrumph here, modern monetary harrumph. So how come the topic is I Hope My Party Wins ?

4. billy blog » Blog Archive » A modern monetary theory lullaby
In recent comments on my blog concern was expressed about continuous deficits. I consider these concerns reflect a misunderstanding of the role deficits play in a modern monetary system. Specifically, it still appears that the absolute size of the deficit is some indicator of good and bad ...

I should note at the outset that these simple teaching models are only designed to reinforce the stock-flow relations at the sectoral level and show the inevitable relationships that follow from the national accounts when discretionary action is taken by, say, the government to cut back its deficit.

STOP. This guy has potential, if I have the patience to disentangle phrases like "these simple teaching models are only designed to reinforce the stock-flow relations at the sectoral level and show the inevitable relationships that follow."

Maybe tomorrow.

5. 3spoken: A primer on Modern Monetary Theory (MMT)
Friday, 16 April 2010
Modern Monetary Theory (MMT) is an attempt to explain how 'money' comes about in a way that is different to classical economic theory. If true it shows that the way the government runs the financial part of the economy is inefficient and that we actually have much more flexibility to get us out of the current recession than we are using. Scary stuff.

Oh I like it... except he uses different to where I would use different from. Other than that, this one's not bad. Lots of links to look at, too.

6. Links on Modern Monetary Theory (MMT) « EconProph
March 20, 2010
Filed under: Banking & Money — Jim Luke @ 11:51 am

Hyperinflation is not just more inflation. Additional conditions are needed to go from inflation to hyperinflation.

Wrong focus.

7. Modern Monetary Theory - An Overview | The Agonist
In my recent travels around the internet, I happened across the blogs of Bill Mitchell and Warren Mosler, which discuss Modern Monetary Theory (MMT). MMT is a macroeconomic theory which tries to explain the operation, structure, and behavior of national economies (as all macroeconomic theories do). This puts it in the same league as Keynesianism and Monetarism...

But MMT has fascinated me, because it claims both of these schools of thought are fundamentally in error. If its proponents are correct, then the way that we currently think about the national economy is very wrong, often backwards, and extremely harmful to our own well-being. We have been systematically under-investing in the economy and in our human capital since at least the 1970s. Why do I say the 1970s? Because that’s when we switched from the gold standard to a fiat currency, and that switch subtly changed the nature of our government’s relationship to the economy.

Enough. This isn't bad, actually. But I gave him a lot of space here, and all we got is teaser. He's got the melody, but not the words.

8. Modern Monetary Theory (mmt) group - The Mule Stable

Full name
Modern Monetary Theory

Looking at the macroeconomic implications of fiat money. AKA chartalism, money mechanics or dynamics.

chartalism mmd mmm

This is "a user group" where "members share short messages." Mmm.

9. Modern Monetary Theory: Market Discipline for Fiscal Imprudence ...
May 18, 2010
Let’s talk about bond market vigilantes and the term structure of interest rates in a fiat currency system. That’s a mouthful, but I’ll explain what I mean.

Bootstrapping the yield curve

When I was in business school, we learned about bootstrapping the yield curve. Basically, long-term interest rates can be expressed as a series of short-term interest rates, such that if you know long-term rates, you can calculate expected future short-term interest rates. This is important because it tells you what people believe the Federal Reserve is likely to do with interest rates in the future.

For example, say you know the 5-year rate by looking at the current on-the-run 5-year interest rate on Bloomberg. Then, all you need to calculate all the expected future expected 3-month rates are quotes on U.S. zero-coupon bonds known as Treasury STRIPS. They are quoted in the Wall Street Journal daily.

Nah, I don't have the time for this. Sorry, Nine.

10. Tenets of Modern Monetary Theory/Post Keynesianism - Economics ...
For those of you who overlook announcements, please accept our invitation to this year's party at ARIA. Click here for details

Yeh, okay.


Well, that's the top ten of 34,200 hits returned by Google. Enough, I think. So what did you learn about Modern Monetary Theory? Not so much?

Me too.


Nicolai Hähnle said...

I came across your post while searching for somebody who tries an honest and serious debunking of Modern Monetary Theory. I just wasted a few minutes of my life, thank you very much.

Seriously, your post has nothing of value to say. If you can offer a sound argument of where MMT is wrong, I would appreciate it.

I myself have come across it only recently and am somewhat suspicious, because it sounds too good to be true. However, on my pretty long search, the only people I read speaking out against MMT do not have *any* argument to offer. So: can you provide a link to an actual argument against MMT (and an honest one, please don't insult my intelligence, I don't need more of the same smoke and mirrors)? I'd really appreciate it.

The Arthurian said...

Hello, Nicolai.

Sorry about the minutes, I can't give you a refund.

Like you, I only came across MMT recently. Like you, I was looking for some information on MMT. Like you, I found little, and put little time into what I did find.

They strike me as inflationists. And the lack of an argument that looks at events before 2007 is a big weakness, in my view. Maybe they have such arguments, but I couldn't find any.

Did you try Mises? You could waste hours there!

When you want original economic thought, come back here.