The most important element in understanding how an economy works is to begin from its resource base, its existing infrastructure, its labour force and its entrepreneurs. Then mix in the laws and regulations, along with the personal beliefs of the population about the market economy. If you get just the right combination of all of that, you will get rising prosperity.
Also needed is a system of credit creation and a mechanism for supplying a medium of exchange, but that comes last of all. You have to get the real side of the economy in place and then you can worry about ensuring that the supply of money grows more or less in sync with the number of transactions taking place.
So into this comes Modern Monetary Theory, the realm of cranks of such a spectacular level of ignorance that it is quite astonishing to see these people in action. Warren Buffett Hates It. AOC Is for It. A Beginner’s Guide to Modern Monetary Theory.
This state of confusion isn’t good because Modern Monetary Theory, once confined to blogs and a handful of colleges including the University of Missouri at Kansas City, suddenly matters. In the U.S., the left wing of the Democratic Party is citing MMT to make the case for massive federal government spending on a Green New Deal to wean the U.S. off fossil fuels and fund Medicare for All. It’s virtually certain that MMT will be dragged into the debates of the 2020 presidential race. So the time is right for a semi-deep dive into Modern Monetary Theory—what it is, where it comes from, its pros and its cons.
Are we immune from all this? You better hope so. From the AFR today: Bernie Sanders’ senior adviser has a message for Morrison.
The 2020 US presidential candidate Bernie Sanders’ senior economic adviser, Stephanie Kelton, is urging the Morrison government to ditch its surplus, spend money on climate change and prepare for central bank obsolescence.
Touring Australia as the University of Adelaide’s Geoff Harcourt Visiting Professor, Professor Kelton told The Australian Financial Review people had become less concerned about deficits and that the government should rev up spending through the use of the controversial Modern Monetary Theory.
Bernie Sanders’ economic adviser Stephanie Kelton says the Morrison government should ditch its surplus and spend money on climate change.
“The number that gets churned out of the budget at the end of the fiscal year, is essentially, unimportant,” Professor Kelton said, “Every deficit is good for someone.”
“There’s untapped potential in the Australian economy in the form of idle capacity, especially labour, that the government can afford to run its fiscal policy more ambitiously to make more judicious use of the available resources.
“I would argue that there’s clear evidence that you’re not doing that here in Australia.”
MMT really stands for Magic Pudding Monetary Theory. They are just thieves who will rob you by inflating faster than the rest of us can keep up with their spending. And because they are the government, they will get to spend it first.
My thanks to Spartacus for forwarding these articles.