Tag Archives: MMT

This article explains the ISLM view of MMT in some detail without being overly wonkish for general accessibility. While it is sympathetic to MMT, it is still wrong, but instructively so. Assumptions die hard.Notice the assumptions about the effect of changes in "money supply" based on money supply being settlement balances in the payments system ("bank reserves balances", abbreviated as "rb").The effect of such changes in conventional economics is based upon assuming that changes in the...

I was sent two papers by Thomas Palley the other day. I have known him for decades. He continually disappoints. He has become one of those self-styled Post Keynesians who are trying to destroy the credibility of Modern Monetary Theory (MMT) for reasons that are not entirely clear although I know things I won’t write here. He thinks that if he drops a reference to Michał Kalecki, the Polish Marxist economist, into a paper, it qualifies one as being Post Keynesian. But, the reality is that...

SummaryThe US budget deficit is $147 billion in March 2019; this is a net add to private domestic sector income. Dollars added to the economy by the federal government allow the private sector to post a $147 billion surplus and add to its stock of net financial assets. Private credit growth was again flat and added less than $1.8 billion to the money supply. A big drop from the January contribution of over $70B. Further, income flows from the national government impact investment markets...

Most of the financial "professionals" writing on (against) MMT are clueless about both MMT and also the basics of finance in institutional arrangments. They think that the world is still on the gold standard, for example, likely because they strongly believe that it ought to be. But beyond that, also clueless about how the accounting works at the macro level. A very few do understand MMT, however. Paul McCulley of Pimco and James Montier of GMO, for example. Here is another voice to...

The main lesson I want to draw from this post is (excluding being autarkic/poor or being in a monetary union):  If a country wants to maintain a fixed exchange rate, the country must accumulate a lot of foreign reserves to be sovereign (or maybe some capital controls?)  If a country wants to have floating exchange rates, it must convince its trading partners (or its trading partners’ trading partners) to hold its national currency as foreign reserves. losinterestMonetary Sovereignty...

See my comment there.Lars P. Syll’s BlogDoes MMT — really — ignore expectations?Lars P. Syll | Professor, Malmo University

Much of the critique that Palley delivers was also waged against Abba Lerner’s ‘functional finance’ approach — on which much of MMT is based — back in the 1940s and 1950s. Even if some of today’s ‘Keynesian’ economists do not understand Lerner, there once was one who certainly did: I recently read an interesting article on deficit budgeting … His argument is impeccable. John Maynard Keynes (CW XXVII:320) Lars P. Syll’s BlogThomas Palley claims MMT fails to provide plausible...

Thoughtful reflection on historical precedent. These observations are particularly useful because they point to an intellectually rigorous way in which debates over the wisdom of the Green New Deal and the usefulness of MMT might be resolved: by examining more carefully the political and economic history of the 1970s. Was the high inflation of that decade a consequence of excessive money growth, engineered by the Fed to relieve budgetary pressures—the source of the “anguish” in Burns’...

By William K. Black April 11, 2019     Bloomington, MN Part 7b of the MMT Series Part 7a is available here. Blair, Brexit, and Friedman Show the Need for MMT Insights Part One: The MMT Critique of Orthodox Microfoundations Orthodox ‘modern macro’ is based on ‘microfoundations’ that implicitly assume that firms profit-maximize, that there are no negative externalities, that there is no market power, and that there is no control fraud or predation. In sum, they assume out of existence...

By William K. Black April 11, 2019     Bloomington, MN Part 7a of the MMT Series Tom Friedman’s April 2, 2019 column concluded “The United Kingdom Has Gone Mad.” To which, the only possible response is – ‘you just noticed?’ The UK went ‘mad’ 22 years ago when Parliament elected the odious Tony Blair Prime Minister. I think many Tory policies were mad long before that date, but the Labour Party opposed them. The entire UK did not go ‘mad’ until Blair created “New Labour” and adopted Tory...