Modern Monetary Theory (MMT)

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There is a great seminar going on at Columbia called Modern Money and Public Purpose. Lectures and discussions from lots of great MMT people and the archive is online:

http://www.modernmoneyandpublicpurpose.com/archives.html

If you only have time for one lecture, I recommend Jan Kregel, Seminar 4, start video at 0:24:15. Excelent lecture about the role of government.

higginscrocs's picture
higginscrocs
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Oct. 18, 2011 8:06 pm

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For those of you trying to find the blog post to which Thom referred today Modern Monetary Theory vs the Fiscal Cliff, here is the link: http://www.dailykos.com/story/2012/11/25/1164553/-Modern-Monetary-Theory... . If you are interested in the follow-up blog post to that, Platinum Coin Seigniorage = Policy Space, that link is here: http://www.dailykos.com/story/2013/01/14/1178773/-Platinum-Coin-Seignora... .

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Arliss
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Feb. 11, 2013 5:43 pm

Thanks for the the links! They debunk the myths I've been trying to debunk for years. Free university level lectures are a bonanza for the internet and those interested in them.

Government could solve unemployment within a month...no inflation, no insolvency, no austerity.... merely by reclaiming monetary sovereignty.

It can merely create and spend money into existence to buy up unsold productivity...unemployed labor, unsold materials, unsold products, unused factory capacity. It could rebuild the nation's infrastructure and add to it...high speed rail, mass transit, conversion to renewable energies....WITHOUT CRUSHING DEBT AND DEFICIT CONSTRAINTS.

The only losers would be banksters and the Wall St. Casino....the perpetuators of the monetary myth

Whenever government has a surplus under the current monetary system....it's followed by a Depression.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

Production must precede consumption. Government cannot magically create goods by printing numbers on a piece of paper and spending it. Where does the new money gets it's value?

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LysanderSpooner
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Jul. 31, 2007 4:01 pm

LysanderSpooner - No one is saying the gov is creating goods. The US gov can magically create money. Here is a useful video that simply explains where money comes from:

http://www.youtube.com/watch?feature=player_embedded&v=o-PXRkJxV3A

New money value is essentially created by the Fed backing and supplying reserves. We are no longer on the gold standard, therefore 'value' becomes more abstractly understood.

higginscrocs's picture
higginscrocs
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Oct. 18, 2011 8:06 pm

C'mon LS, the point is putting unproductive assets into productivity. How "production precedes consumption" has little to do with how meeting a demand for a product or service works. To get the business established, investors have to know that there is a need and buyers, not just those who cannot afford to meet their needs. This is where you seem not to understand money.

Demand drives production, and ending unemployment is a great way to bring "certainty" to business owners and investors because it brings a whole lot more certainty to the average worker and family about their ability to plan and pay for their own needs and desires. Money is the energy the system needs, and the public sector state has a primary responsibility to see that Commerce serves all instead of becoming the financial ration system for basic human needs. Owning the bank is a primary need for a democratic Commons and society.

Poly has done another excellent job of presenting the facts of the case in clear and concise form. Read and learn.

drc2
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Apr. 26, 2012 12:15 pm
Quote LysanderSpooner:

Production must precede consumption. Government cannot magically create goods by printing numbers on a piece of paper and spending it. Where does the new money gets it's value?

Actually, Lysander, production facililities have to exist before producton.. Government can issue a purchase order so the facility will produce the goods for consumption the same as any retailer or private business does.

No purchase orders....no production. Companies don't produce goods to sit in a warehouse.When they don't have customers, they cease production.

Government fills the role of any other customer. It should probably use its authority to simply create/spend money and send purchase orders to manufacturers for high speed rail, public transit, new bridges and green technologies instead of bemoaning an inability to indebt itself further to banks. It needn't indebt itself.

The only restriction is, government can't spend money to buy more than productive facilities can produce. .It can only spend idle capacity into production. If a steel mill is operating at half capacity, government can place an order for steel for bridges to use the idle capacity. The steel is consumed in the bridge-building. Unemployed labor is hired to produce the steel and build the bridge.Cost to government is zero. It can simply create the money out of thin air to utilize idle capacity. Sovereign nations have that ability should they chose to use it. It's a political choice to either by-pass banksters and financiers...or not.

Obama indicated he was going to pull another $4 trillion out of the economy to balance the budget. That's pretty much following the way of Greece. We needn't do that. There is work to be done and idle production capacity to do it with. 25% of U.S. labor and production facilities are idle. TRILLIONS that government can simply create/spend to utilize...without debt..

Economics has learned a few things over the past 100 years. Probably policy makers and economists stuck in the past, busily proclaiming myths, should catch up before we go the way of Greece.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

Where do the capital assets come from to get production going? From savings. No savings, no capital goods. No capital goods, no increase in production.

Money isn't wealth. Wealth doesn't come from a printing press.

Any new money created steals values from the existing stock of money. And that hurts the poor and middle class. And you so-called progressives claim to support the little guy. What a joke!

LysanderSpooner's picture
LysanderSpooner
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Jul. 31, 2007 4:01 pm
Quote LysanderSpooner:

Production must precede consumption. Government cannot magically create goods by printing numbers on a piece of paper and spending it. Where does the new money gets it's value?

Where does old debt get it's value? New money can pay for old consumption. That's how you eleviate most debt. If you buy and consume $100 dollars worth of groceries on your credit card the comsumption has already occured but you will have to pay off the credit card debt with future money. The devil in the detail is that you pay off that debt with money produced through labor as where the money that was lent to you in the first place was never produced through labor by anyone. It never truly existed. It only existed in cyberspace until you pay it off with real labor backed money. Somebody's getting shafted and it isn't the bank.

Bush_Wacker's picture
Bush_Wacker
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Jun. 25, 2011 7:53 am

@Spooner - New investment capital is created by banks when they make loans. Banks don't loan from savings - they create that money when they make loans in our current fractional reserve system.

So, to begin to return to the topic of the OP - (Modern Monetary Theory) Dr. Steven Keen's analysis on the February 13th Thom Hartmann Radio Program (livestream) shows that the banks have created well over $38,000,000,000,000 of money as debt. At over two-and-a-half times the public debt (which was ostensibly spent on public needs like defense, transportation, etc.), all of that private bank credit currency money has been created as private value under private control and that seems to be a much larger theft. Considering that the fiat currency made by the Fed (controlled by banksters) passes almost exclusively into the hands of the big banks, (as in the ongoing trillion-a-year QE3), perhaps it is fair to say almost our entire monetary system is based on theft of money - private acquisition and control of the common medium of exchange - all occurring at the point of its creation. And the big, bad actors are all private corporations.

Back to the OP ... more references on Modern Monetary Theory are available ...

The New Economic Perspectives website has lots of info: from a primer on Modern Monetary Theory to a current story on Ecuador that demonstrates the powerful success of President Correa's policies as well as a comparison of CA and TX. Correa's policies are strikingly similar to those which Thom and Progressive Modern Monetary Theory espouse.

Seven Deadly Innocent Frauds by Warren Mosler. There are many other references and proposals on his site.

The related idea of squelching ALL debt and deficit concerns through Platinum Coin Seignorage - an application of MMT that was my introduction to the theory. This simple, novel, constitutional and legal idea allows President Obama to end austerity tomorrow. Championed by blogger letsgetitdone on FireDogLake and correntewire. He has issued a series of blogs on both sites (Jan-Feb 2013) that covers all the contingencies - none of which prevent PCS as a permanent solution to debt and deficit Austeria (austerity hysteria from the Austrian school).

MMT makes this entirely possible:

The 12 Word Platform

1. Medicare for All
2. End the Wars
3. Tax the Rich
4. A Jobs Guarantee

LeMoyne's picture
LeMoyne
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Jul. 31, 2007 4:01 pm

People are terrified of the platinium coin idea. Convinced it will lead to inflation.

What they never seem to grasp is, inflation is always followed by monetary policy as a means to maintain enough currency to keep up with the prices.....so people can eat. Monetary policy doesn't cause inflation...it's a reaction to it.

Government can create and spend as much as it wants...limited only by the productive capacity of the nation. It can spend enough to keep factories/labor operating at 100% capacity...not 110%. It needn't borrow to do that.

Borrowing is a political choice....not one of economic necessity.

By-passing banksters and financiers and simply creating/spending money to maintain full economic functioning would also be a political choice. One that makes economic sense. Banksters would scream "doomsday" from the rooftops if government reclaimed sovereignty over its own currency.

Constitutionally, government can do that. The last Pres. to do so was Abe Lincoln. Of course, he wasn't bought/sold by finance. Even FDR wouldn't go so far as to sell out his own class. Honest Abe didn't have that consideration.

If Lincoln were Pres. today, he wouldn't think twice about issuing platinum coins and telling banksters to go to hell. The times call for it.

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 4:01 pm

Here is an example of how fiat money works in producing wealth. My analysis: Fiat money is a token that changes hands to make transactions more convenient than barter.

Initial state of the economy: Idle capacity, available workers , available resources both inside and outside the nation.

Final state: workers employed for many years, resources processed both inside and outside the nation. All workers paid, the bridge or dam or whatever built. USA has a new resource.

Money spent: project funded by fiat money has made prosperity possible and everybody gained including exporters to USA.

Who lost? Nobody. National debt is also fiat money that USA owes to itself and has to do nothing to pay it back. It is simply a record of all transactions.

In this example it is seen clearly that money is not wealth but measures it. You can't do any of this in the Sahara desert because resources are scarce. You can do things if there are resources and humans willing to work. The nation should fund all infrastructure because the nation will be stronger.

All deficits end up as national wealth. In fact, see data

http://pshakkottai.wordpress.com/2012/07/31/cumulative-deficit-vs-household-net-worth/

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pshakkottai
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Jul. 11, 2011 11:27 am

True for money users but not money creators. If you had a mint in your basement would the same thing apply?

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pshakkottai
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Jul. 11, 2011 11:27 am

The private banks create our money now. Have they done a good job? NO.

Is there a crushing debt burden with the monetary system such as it is under the Fed? YES.

Time to go back to a soveriegn money system with no interevention of the private banking cartel known as the Fed.

hans nel
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Jul. 31, 2007 4:01 pm

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