Have we met before?

Modern monetary theory is gaining traction. But can it knock out free market capitalism?

“What we are saying is that when there is a lack of spending in the economy, when there is already a lot of precarious employment or people who are underemployed, and when nobody in the medium term is forecasting any significant inflation, then under those circumstances the appropriate thing for the government to do is to stop talking about balancing its budget,” he says.

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19 Responses to Have we met before?

  1. stackja

    Keynes again. Hasn’t worked in the past. Trying something again expecting a different result?

  2. Bruce of Newcastle

    Printing money has worked in 0 countries long term.
    MMT seems to say that if everyone does it it will be OK.
    That’s like saying if everyone does socialism that will be OK too.
    Zoo animals should fear the worst.

  3. rich

    ah “if only we had the right scholar kings running the economy” argument.

    They seem to forget Say’s Law and where value actually comes from: hint it doesn’t come from money!

  4. Ubique

    Didn’t work in Zimbabwe.

    An estimated 815,000 acres of forest are being chopped down each year in Zimbabwe as its desperate people resort to firewood to cope with poverty, blackouts and a scarcity of fuel.
    Conservationists warn that Zimbabwe could be reduced to a desert in a generation if the rate of deforestation goes unchecked. The country has been in the grip of power cuts, which sometimes last 19 hours, for six months.
    The price of cooking gas has increased by 600 per cent. For many struggling families, firewood and charcoal have become the only source of energy – and selling it their only means to survive with unemployment at 90 per cent.

  5. Colonel Crispin Berka

    Okay, but aside from complaining about MMT being the wrong solution to the problem, what is the right solution?
    Saying that people just aren’t spending money is crap. They are spending money, but important expenses such as rent or mortgages have become a larger slice of the spending pie, crowding out a myriad of discretionary options. Or do you think that is not a problem?

    There should be an intermediate solution to such problems other than the extreme one of breaking contracts and downsizing.

  6. Gowest

    The ABC sure know how to shoot themselves in the foot when they write an article….
    “Apparently the heart of the free-market model is the mantra of smaller government, less taxation, and less regulation. SURE!
    Over the decades this has led to:
    larger government, higher net taxation, and much much more regulation. In other words MMT is already in place and failing you blind deaf and dumb ##$%s
    Another ABC article written for public servants; by public servants – we are the government and we are here to help you…
    Either get fired or TAKE a pay cut – problem solved!

  7. mrwashout

    Colonel – reducing the burden of taxation would be a good start. Reduce the size of the government sector and allow the private sector to grow. Cap public spending growth, reduce the regulatory state. i.e. allow the free market to work.

  8. Mother Lode

    When the ABC talks about remuneration they like to compare themselves to the private sector. They claim the money they pay their talking heads is (and should be) comparable to what is paid by the private networks – although which egregiously pig-ignorant doctrinaire mediocrities in the private networks they are basing their calculations upon is anyone’s guess.

    But when it comes to accountability and responsibility they suddenly morph into a government department – needing to be funded by tax payers to whatever amount they can devise and refusing to bend to the will of politicians or tainted by commercial interest.

    The ABC contains two kind of people. People whose talent has died – they may possess the anatomical form of talent but the life force that animated it has departed. If they are lucky their failing trajectory will send them within the black hole like gravitational field of the ABC. The others are the stunted botched creatures who never had talent. But when was the last time someone talented came out of the ABC.

    Like I say. A black hole.

  9. Peter Greagg

    Follow the Orange Man’s plan – cut taxes, cut regulation, lower energy prices etc.

  10. John A

    Colonel Crispin Berka #3249799, posted on December 2, 2019 at 11:59 am

    Okay, but aside from complaining about MMT being the wrong solution to the problem, what is the right solution?

    As Mrwashout said, the only workable solution is for the government to get out of the bl…y way!

    That means:
    a) cutting back severely: maximum Federal annual spending of 15% of GDP and even that should reduce over time to 10%.
    b) getting their hands off the economic levers
    c) stop the RBA lender of last resort facility and require banks to maintaiin a reserve ratio of 100% of accessible deposits (maturing investments plus on call monies)
    d) end this stupid negative interest rates talk
    e) sell off all GBEs, starting with the ABC and all others which compete with private sector equivalents (eg. Medibank)
    f) further cutbacks in welfare and education (privatise all education, including the ha-ha universities)
    f) as a last resort cut off their hands so they can’t pick our pockets any more (it’s OK they won’t object as it’s part of sharia, right?)

  11. Bruce of Newcastle

    Okay, but aside from complaining about MMT being the wrong solution to the problem, what is the right solution?

    Deregulation.
    Lower taxes.

    Too many laws unnecessarily cause problems, lead to corruption: Debroy (15 Nov)

    A large number of laws unnecessarily cause problems and lead to corruption, therefore there is a need to curb excessive legislature, Chairman of Prime Minister Economic Advisory Council Bibek Debroy said on Friday.

    Talking about his stint at the Niti Aayog, he said earlier the Planning Commission used to determine everything for the country.

    “There is a great planning commission mindset in the minds of legislators in India because the tendency is that whatever be the problem, a piece of legislation will solve it,” Debroy said while delivering ‘The Nani Palkhivala Memorial Lecture’.

    Invoking the quote ‘the more the number of laws, the more the corruption’, he said “What we need to do systematically is to curb this tendency to excessively legislate.

    They would know: “licence raj” is an Indian term.

  12. rich

    Okay, but aside from complaining about MMT being the wrong solution to the problem, what is the right solution?

    “What is the right solution” assumes, in my mind, that it is possible to legislate utopia. And ultimately legislation is just an opinion with a gun.

  13. Mark M

    Moral-free banks interested in climate markets?

    This is my surprised face …

    Harnessing blockchain to foster climate markets under the Paris agreement
    https://blogs.worldbank.org/climatechange/harnessing-blockchain-foster-climate-markets-under-paris-agreement?CID=CCG_TT_climatechange_EN_EXT

  14. Pyrmonter

    Coming soon to a university not so far from you:

    https://economics.adelaide.edu.au/events/list/2020/01/the-deficit-myth-modern-monetary-theory-and-the-birth-of-the-peoples-economy

    Not quite sure what even Adelaide – which used to have one or two fairly eminent ‘Post-‘ Keynesians – is doing entertaining someone whose ideas could be summarized, generously, as ‘TED-talk Keynes’, and rather less generously as (a) Seigniorage and (b) the fiscal theory of the price level.

  15. Pyrmonter

    @ Peter Greagg

    Orange Man is also keen to (a) impose tariffs (selective taxes on the use of foreign goods, that divert domestic production away from its most valuable uses) and (b) undermine the independence of the Fed.

  16. anonandon

    Followers of Keynes would have more credibility if they ever advocated for a balanced budget. Keynes advocated running a surplus in good times but that never seems to happen. We have had over a decade of deficits and it has blown out to $700 billion or so (not including business, state and household debt). If not now, when?

  17. Old Lefty

    anonandnon has it exactly right. The wierd Gordon Brown in the UK was running a huge deficit in 2005, at the height of a boom, and blathering on about balancing the budget over the cycle.

  18. Old Lefty

    A former senior public servant told me of an conversation with Malcolm Fraser when Fraser was PM. Fraser wanted to issue a paper on ‘reducing the size and functions of government’. An official asked if the title shouldn’t read ‘functions and size’; after all, isn’t the size of government a consequence of what politicians want it to do? Fraser didn’t say a word; he just gave a sarcastic fake smile.

  19. 2dogs

    The only redeeming feature of MMT is its requirement that a government must have its own currency to implement it.

    So all the Euroland countries must depart from the Euro to try it.

    Hence, it possibly a great way to get rid of the EU entirely.

    After they then try MMT they will end up with an episode of hyperinflation, but killing the EU in the process would have been worth it.

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