Friday , March 29 2024
Home / Mike Norman Economics / Bill Mitchell – Why the financial markets are seeking an MMT understanding – Part 2

Bill Mitchell – Why the financial markets are seeking an MMT understanding – Part 2

Summary:
There was an article in the Project Syndicate (July 1, 2019) – Does Japan Vindicate Modern Monetary Theory? – written by a Yale economics professor and advisor to Shinzo Abe, that reveals the extent to which the mainstream is becoming paranoid and is failing to understand what MMT is about. I won’t deal with it in detail because it is not my brief today. But it aims to disabuse readers of the notion that “Japan … [is] … proof that the approach works.”The approach he refers to is MMT. Basic flaw. MMT is not an approach. These commentators haven’t even reached the first place in understanding what our work is about. Mainstream economists have crudely characterised or framed MMT within their own conceptual structure (typically the so-called ‘government budget constraint’ (GBC) framework)

Topics:
Mike Norman considers the following as important: , , , ,

This could be interesting, too:

Steve Roth writes MMT and the Wealth of Nations, Revisited

Matias Vernengo writes On central bank independence, and Brazilian monetary policy

Michael Hudson writes International Trade and MMT with Keen, Hudson

Matias Vernengo writes Modern Money Theory in the Tropics: A Reply to Agustin Mario

There was an article in the Project Syndicate (July 1, 2019) – Does Japan Vindicate Modern Monetary Theory? – written by a Yale economics professor and advisor to Shinzo Abe, that reveals the extent to which the mainstream is becoming paranoid and is failing to understand what MMT is about.
I won’t deal with it in detail because it is not my brief today. But it aims to disabuse readers of the notion that “Japan … [is] … proof that the approach works.”
The approach he refers to is MMT.
Basic flaw. MMT is not an approach. These commentators haven’t even reached the first place in understanding what our work is about.
Mainstream economists have crudely characterised or framed MMT within their own conceptual structure (typically the so-called ‘government budget constraint’ (GBC) framework) and imputed their own language when discussing MMT.
The Project Syndicate author is no exception.
He thinks MMT is about “excessive deficit-financed spending” which “lacks any safeguard”.

He says:

Policymakers who recklessly implement MMT may find, like the sorcerer’s apprentice, that once the policies are set in motion, they will be difficult to stop.

One cannot “implement MMT” – recklessly or otherwise.
One can understand it and use its insights to craft policy interventions that accord with one’s value system (ideology).
MMT is not policy, or even about policy. It informs policy by putting the approach to policy on a correct monetary, financial, and economic foundation instead of an incorrect one, as is currently the case.

This is a longish post but not wonkish at all. It is one of Bill's most important posts for a basic understanding of the "MMT framework" (lens) versus the "flawed GBC framework" of the mainstream.

Note: "GBC" signfies "government budget constraint."

Bill Mitchell – billy blog
Why the financial markets are seeking an MMT understanding – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

Leave a Reply

Your email address will not be published. Required fields are marked *