MMT: Not a joke but a fraud

Comment on Michael R. Strain on ‘Modern Monetary Theory’ Is a Joke That’s Not Funny’

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Michael R. Strain opens the argument: “First, let’s start with the confusion over what it is. The answer seems to depend on which advocate of MMT is being asked. It is sometimes a theory of money. MMT is also being discussed in the context of a political program to justify huge increases in social spending. Finally, there is its role as a prescription for macroeconomic policy. … Even as just an economic theory, it is not settled or fully developed. … The bedrock observation of MMT is correct: Any government that issues its own currency can always pay its bills.”

What is specific to MMT is the claim that almost all economic/social problems can and should be solved by deficit-spending/money-creation. MMT is advertised as a potent medicine that benefits the ninety-nine-percenters and that has no serious short- or long-term negative side effects. MMT claims further that orthodox economics is provably false and that orthodox policy is counterproductive.

MMT is three things: theory, policy, activism. These three elements are constantly mixed in the public debate and this guarantees inconclusive blather in all eternity which keeps soapbox economists, journalists, agenda pushers, propagandists, social media trolls, and the rest of the Circus Maximus employed and fed.

MMT theory is provably false, i.e. materially/formally inconsistent. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern for consistency, truth, or scientific validity.

The lethal negative effect of permanent deficit-spending/money-creation is NOT on inflation but on distribution.#1 According to the macroeconomic Profit Law, it holds Public Deficit = Private Profit and this means that MMT policy benefits the one-percenters and not the ninety-nine-percenters.

Expressed as a parable. The MMTer resembles a person who prints counterfeit money, say a million, and distributes it with great fanfare among the poor of the town. The media praise her as a fine example of social responsibility and charity. The economic effect of the matter, though, is that the workers are the real benefactors who unwittingly are made to share their real income with the poor. The redistribution of output is effected by barely noticeable price hikes. In the end, the counterfeit money ends up as profit of the business sector as a whole.

The undeniable charm of MMT policy is that apparently there are only winners. Fact is, though, that MMT is proto-scientific garbage and political fraud#2 and that, at the end of the day, the ninety-nine-percenters hold the bag.#3, #4

As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt.

Egmont Kakarot-Handtke


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#3 MMT = proto-scientific junk + deception of the 99-percenters
#4 Deficit-spending, public debt, and macroeconomic profit/loss

Related 'Warren Mosler: scientific dilettante and political fraudster' and 'How MMT makes everybody happy' and 'MMT is NOT bold policy but spineless fraud'. For the full-spectrum refutation of MMT see cross-references MMT.

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REPLY to Bob Roddis on Jan 18

You ask: “Do I have that right?”

No, you don’t get anything right. Bad Austrian karma.

Imagine for a start an elementary production-consumption economy with a balanced household sector budget in the initial period, i.e. C=Yw.#1

Now, if the government runs a deficit in period 1, total expenditures are C+G, the market clearing price rises, and the business sector makes a profit Q=G. Taxes are zero, i.e. T=0.

The banking system consists alone of the central bank. So, profit takes the form of deposits at the CB. The business sector’s deposits are equal to the government’s overdrafts. For a start, there is no interest on deposits/overdrafts.

If the government decides to issue bonds in order to consolidate their overdrafts at the central bank and the business sector buys these bonds then both overdrafts and deposits go again to zero. Money = deposits at the CB vanishes. The business sector now holds interest-bearing bonds. The government has to tax the household sector in order to pay interest to the bondholders.

The government’s debt took first the form of overdrafts and then the form of bonds (liabilities). The business sector’s profit took first the form of deposits and then the form of bonds (assets).


#1 Deficit-spending, public debt, and macroeconomic profit/loss

Warren Mosler: scientific dilettante and political fraudster

Comment on Tom Hickey on ‘Brendan Greeley ― America has never worried about financing its priorities’

Blog-Reference

Tom Hickey features Stephanie Kelton and Warren Mosler as the two major MMT spokespersons.

Stephanie Kelton has been refuted elsewhere.#1 Here, Tom Hickey’s summary of Warren Mosler’s arguments is taken as a check-list for the detailed final refutation.

“1. The currency itself is a state monopoly.” Half-true. The central bank (in a closed economy) is the institution tasked with the creation/destruction of money according to the needs of the household sector, the business sector, and the government sector. The specifics of the task and the rights/obligations are defined by the Legitimate Sovereign.

“2. The ‘money story’ begins with a state desiring to provision itself.” False. The money story begins with the elementary production-consumption economy with the household sector receiving money wages from the business sector and the households spending their wage income by buying stuff from the business sector. Money is created out of nothing and completely destroyed in the process. There is no such thing as a fixed stock of money.#2, #3

“3. Taxation by design functions to create sellers of goods and services (unemployment) seeking the state’s currency in exchange to avoid tax penalties.” False. A Zero-Tax Economy is feasible.#4

“4. The state (or its agents) is the single supplier of that which it demands as payment of taxes.” False. The definition of central bank money as a general discharge of liabilities includes tax liabilities. As a generalized IOU central bank money discharges, first of all, the wage claims of workers against the firms that comprise the business sector.

“5. Therefore the state, from inception, necessarily spends first, after which tax payments are made …” False. The sequence, i.e. G before T vs T before T is NOT decisive. The crucial point is the balance, i.e. G greater T = deficit vs T greater G = surplus, in a period of given length. The central bank finances G by money creation and gets T back and destroys the money. If T=G, the budget is balanced, otherwise not. If G is greater than T, the business sector makes a profit, otherwise it makes a loss. This follows from the macroeconomic Profit Law.#5 It is completely irrelevant for profit/loss in a given period whether the government spends first and taxes later or the other way round.

“6. The public debt is nothing more than the funds spend by the state that have yet to be used for tax payment, …” True. Public debt is a tax liability of the household sector which is rolled over for an indefinite time. This liability generates interest income for the Oligarchy which is taxed from WeThePeople for an indefinite time. When the accumulated deferred taxes (= public debt) are eventually paid, the economy faces a crisis because profit turns into loss.#5

Note well that Warren Mosler never mentions the word profit and the negative distributional effects of deficit-spending/money-creation on WeThePeople.#6

MMT’s Warren Mosler is a stupid/corrupt political agenda pusher.#7, #8

Egmont Kakarot-Handtke


#1 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#2 The ultimate ― analytical ― origin of money
#3 The creation and value of money and near-monies
#4 The Third Way: Towards the happy Zero-Tax Economy
#5 Deficit-spending, public debt, and macroeconomic profit/loss
#6 MMT sucks
#7 MMT: The one deadly error/fraud of Warren Mosler
#8 MMT, Warren Mosler, and the little helpers from Wall Street and Academia

False economic theory makes bad economic policy

Comment on Mish Shedlock on ‘Yet Another Fed Study Concludes Phillip’s Curve is Nonsense’

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Mish Shedlock summarizes: “Proponents of the Phillips Curve keep looking for ways in which it works. Yet, another study concludes it doesn’t. The Phillips Curve, an economic model developed by A. W. Phillips purports that inflation and unemployment have a stable and inverse relationship. This has been a fundamental guiding economic theory used by the Fed for decades to set interest rates. Various studies have proven the theory is bogus, yet proponents keep believing.”

The Phillips Curve (better: bastard Phillips Curve) is the centerpiece of standard employment theory. Economists get employment theory wrong for 200+ years. The Phillips Curve has always been the highly visible landmark of economists’ scientific incompetence.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

The materially/formally inconsistent Phillips Curve has to be replaced by the correct macroeconomic Employment Law. For details see

• NAIRU, wage-led growth, and Samuelson’s Dyscalculia
• Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
• NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
• Full employment, the Phillips Curve, and the end of Gaganomics

Egmont Kakarot-Handtke

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REPLY to Stuki on Jan 16

Economists claim to do science from Adam Smith/Karl Marx onward to the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. Fact is, though, that economics is a failed/fake science or what Feynman called a cargo cult science.

The problem does NOT lie in the subject matter but in the fact that economics is a science without scientists. Economics has been hijacked early on by political agenda pushers. These stupid/corrupt folks have produced NOTHING of scientific value in the last 200+ years. They do not understand to this day the elementary mathematics that underlies macroeconomic accounting.#1

Economists can always explain why they are still at the proto-scientific level. You, too, repeat merely worn-out slogans from the long list of lame excuses.#2

The scientific incompetence of economists consists of the fact that it is beyond their means to realize that NO way leads from the understanding of Human Nature/motives/behavior/ action to the understanding of how the economic system works. What makes things worse is that there is NO scientifically valid knowledge of Human Nature/motives/behavior/ action, to begin with.#3

What has to be done is (i) to get rid of all stupid/corrupt agenda pushers, (ii) to execute the Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.


#1 DrainTheScientificSwamp
#2 Failed economics: The losers’ long list of lame excuses
#3 Economics is NOT about Human Nature but the economic system

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REPLY to Bob Roddis on Jan 18

You say: “I want money that maintains its value over the years.”

Economic theory can show you the way but, of course, neither Austrianism nor MMT.

Let us start with the simplest possible economic configuration. The elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market clearing X=O and budget balancing C=Yw in each period, the price is given by P=W/R (1), i.e. the market clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand.

The price is determined by the wage rate, which takes the role of the nominal anchor, and the productivity. From (1) follows W/P=R (2), i.e. the real wage is equal to productivity. Productivity determines the real value of money.

If one wants absolute price stability in the elementary production-consumption economy from beginning to eternity one has to apply the simple rule: change of wage rate = change of productivity.

Needless to emphasize that things become a bit more complex if investment, saving, government, and foreign trade is added. This, though, does NOT alter the core rule that the wage rate has to move synchronously with the productivity.

A fiat money system with perfect price stability is possible. Austrians have been too stupid to figure this out.

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REPLY to Bob Roddis on Jan 18

You say: “However, for a particular sale, cost is irrelevant to the subjective valuation of the ultimate buyer. ”

Oh no, the Austrian value theory. Take notice that the derivation of the market clearing price above relates to the economy as a whole and NOT to a particular sale. The argument is based on objective-systemic macroeconomic axioms and not on silly Austrian individualistic subjectivism.

The macroeconomic profit Q≡C−Yw in the elementary production-consumption is zero because of the condition of budget balancing. This is fully compatible with, for example, the film industry making a huge profit and the rest of the economy making a loss of equal magnitude.

Macroeconomic profit, too, is an objectively given and well-defined magnitude. It does not come of wishful thinking or individual necessity but from dissaving, i.e. C greater Yw. Microeconomics in all variants is known by now as a methodological failure.

Get it, Austrianism is dead since its inception. The fact that it still appeals to brain-dead blatherers has to be taken as supporting evidence.

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REPLY to Bob Roddis on Jan18

The Austrian core assertion is that laissez-faire would result in a stable economy with overall optimal outcomes. This assertion has never been proved. The provable fact of the matter is that the market economy is inherently unstable.#1

So, the very premise of Austrian economics is false and because of this, the whole verbal superstructure is false. Austrian economics is scientifically worthless and Austrians’ vacuous blather is only good for political agenda pushing.

You say: “There is no such thing as the ‘macro economy’.” You are a casualty of the methodological blunder called Fallacy of Insufficient Abstraction. Macroeconomic profit, for example, is measurable with the precision of two decimal places. Austrians cannot tell to this day what profit is.

It is macroeconomics that is objective. Microeconomics, on the other hand, has never been anything else than psychological/behavioral blather and pointless motive speculation.#2 Austrianism is a case in point.


#1 Proof of the inherent instability of the market economy
#2 The economist as second-guesser, mind reader, and folk psychologist

Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

Comment on Z. Byron Wolf on ‘Debt? What debt? At $22 trillion, here’s the argument the national debt doesn’t matter’*

Blog-Reference

Stephanie Kelton argues: “When the government spends more than it collects in the form of taxes (and other payments), we label it ‘deficit spending.’ But that’s only part of the story. To complete the picture, suppose the government spends $100 into the economy but only taxes $90 back out. The result is a surplus equal to $10 that shows up somewhere in the non-government part of the economy. In other words, the government’s ‘red ink’ becomes our ‘black ink.’ Their deficits are our financial surpluses. So where does the ‘debt’ come into play? Whenever the government runs a deficit, it sells government bonds called U.S. Treasuries. This is usually referred to as ‘borrowing,’ but that’s actually misleading. What’s really happening is that the government is allowing people to trade in their dollars for a bond that pays some interest. A pretty good deal if you happen to be lucky enough to hold some of that $22 trillion.”

Indeed. The government’s ‘red ink’ becomes our ‘black ink.’ We are the lucky ones, WeThePeople, right? Wrong!

Macroeconomics gives one this balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0 which reduces to Q=(G−T) which says that macroeconomic profit Q (= black ink) is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment.

Stephanie Kelton’s provably false MMT balances equation reads (X−M)+(G−T)+(I−S)=0, which reduces to S=(G−T) which says “a surplus S shows up somewhere in the non-government part of the economy” (= black ink) which is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment.

Note that the business sector’s profit Q becomes “a surplus somewhere in the non-government part of the economy” S. This is a clear case of obfuscation.

In other words, the government’s ‘red ink’ becomes our their ‘black ink’ i.e. our = WeThePeople has to be corrected to their = WeTheOligarchy.#1, #2

MMT’s Stephanie Kelton is a political fraudster.#3

Egmont Kakarot-Handtke


* CNNpolitics

#1 MMT and the single most stupid physicist
#2 Down with idiocy!
#3 The Kelton-Fraud

Related 'Why the MMT benefactors of humanity never talk about profit' and 'Stephanie and Noah ― economics at the intellectual zero lower bound' and 'Profit, income, and the Humpty Dumpty Fallacy' and 'MMT and the magical profit disappearance'. For the full-spectrum refutation of MMT see cross-references MMT.

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COMMENT on peterc on Ivan Horrocks — Job guarantee programmes: back to the future? on Jan 15

MMT is three things: theory, policy, activism.

The theory is provably false. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern about consistency, truth, or scientific validity.

MMT activists, like all political agenda pushers, give a shit on theory/science/truth but on occasion put on the cloak of science in order to enhance respectability/credibility/ authority. Academic MMTers are not different from the rest of economists who claim to do science since Adam Smith/Karl Marx but only push a political agenda and deceive the general public with a fake Nobel.

In sum, MMT is bad theory, MMT is bad policy, MMTers are bad people. MMT is not much different from Walrasianism, Keynesianism, Marxianism, and Austrianism.

MMT is NOT bold policy but spineless fraud

Comment on Pavlina Tcherneva on ‘Tcherneva, Sawicky and Kaboub on MMT and policy’

Blog-Reference

“There is nothing more crippling to a bold policy agenda than the myth that the government can run out of money. This myth is behind every But how will you pay for it? objection to proposals such as a Green New Deal and Medicare for All. New House Majority Leader Nancy Pelosi (D-Calif.) has even proposed instituting self-defeating PAYGO (pay as you go) rules, which would require all new government spending to be matched with increased revenue, wrongly prioritizing the balancing of the budget over the well-being of the public.”

Imagine PAYGO is institutionalized, does this prevent bold social policy? Not at all! Under PAYGO conditions, a Green New Deal and Medicare for All can be financed by a reduction of military spending and higher taxes for the rich. This, of course, is anathema among MMTers. Why? Because MMTers are fake Progressives.

MMT is about permanent deficit spending and this doctrine comes under the headline of Functional Finance. Now, macroeconomics tells one that Public Deficit = Private Profit and from this follows that permanent deficit spending amounts to a permanent free lunch for the one-percenters. The social benefits that can be achieved with deficit spending are paid for in real terms through stealth taxation by the ninety-nine-percenters themselves.

Self-styled MMT Progressives use the Green New Deal and Medicare for All as a pretext for public deficit-spending/money-creation that ultimately benefits the one-percenters. Because they are agenda-pushers for the Oligarchy, MMTers never answer the question How will you pay for it? with cutting military spending and taxes for the rich. The boldness of Progressives ends exactly where the Oligarchy loses their sense of humor.

To pay for social benefits with deficit-spending/money-creation is simply a political fraud.

Egmont Kakarot-Handtke

Debunking idiots does not prove that MMT is valid

Comment on Chris Beck on ‘Modern Monetary Theory Renders a Critic Incoherent’

Blog-Reference

Yes, there is a lot of idiotic critique of MMT and MMTers can easily debunk it. These lowlife economics wrestling performances are part of Circus Maximus entertainment and distract from the three crucial points, i.e. MMT is bad theory, MMT is bad policy, MMTers are bad people.

(i) “‘MMT promises an end to austerity with the ability to pay for any social policy, infrastructure investment or deficit cancellation without the need to raise taxes. It sounds too good to be true ― and guess what, it is.’ ‘Except that it is true. The U.S. government, which can produce dollars with a few keystrokes, doesn’t need tax revenue to pay for anything.’”

This is technically true, just as it is technically true for any ordinary counterfeiter. Fact is, though, that it is a fraud to bring money at the demand side into the economy. The correct way is to finance the wage bill.#1, #2

(ii) “Under MMT, government deficits are seen as surpluses for the citizens. In fact, the amount of the deficit matches private savings to the penny.”

This is the core of MMT’s scientific failure/fraud. The MMT balances equation reads (I−S)+(G−T)+(X−M)=0, the correct equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0 and it boils down to Public Deficit = Private Profit, i.e. (G−T)=Q, in other words, “the amount of the deficit matches” ― NOT private SAVING but private PROFIT ― “to the penny”.

Because the foundational sectoral balances equation is false the whole analytical superstructure of MMT is false. Because the critics of MMT are also too stupid for the elementary mathematics of macroeconomic accounting, they do not spot the lethal defect.

The lethal defect of MMT is Profit Theory and Distribution Theory. MMT policy guidance has NO sound scientific foundations. It is brain-dead agenda pushing.

(iii) “… if a government can spend what it wants there is no restriction on unhinged leaders spending in a way that kills the planet.” This is NOT a fault of MMT. In fact, governments have found this out long ago and this is how wars have always been financed. This is why Kant ruled deficit-spending out back in 1795 in his essay Perpetual Peace.

(iv) “… MMT explicitly states that it’s taxation that gives the dollar much of its value by creating demand for it. People need dollars to pay their taxes. Therefore, MMT could never be used to justify replacing taxation, just as capitalism couldn’t be used to justify the government owning the means of production.”

This is pure MMT nonsense. The value of money does NOT come from taxation.#3 A Zero-Tax Economy is feasible.#4 In fact, it is the logical limiting case of MMT. Remember “The U.S. government … doesn’t need tax revenue to pay for anything.”?

MMTers simply do not understand the implications of the basic tenets of their theory. Their good luck is that their critics are even more stupid.

Egmont Kakarot-Handtke


#1 The MMT-Yawner: Government is not a household
#2 MMT Progressives: The knife in the back of WeThePeople
#3 The creation and value of money and near-monies
#4 The Third Way: Towards the happy Zero-Tax Economy

Deficit-spending, public debt, and macroeconomic profit/loss

Comment on Simon Wren-Lewis on ‘Should we worry about temporarily raising government debt?’

Blog-Reference

The curious thing about Simon Wren-Lewis’ argument is that it does not contain the word profit. It goes without saying that this omission makes the whole argument worthless.

Simon Wren-Lewis’ argument is based on the underlying standard model. This model is provably false and therefore has to be rectified first.#1

As the correct analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market clearing X=O and budget balancing C=Yw, the price is given by P=W/R, i.e. the market clearing price is equal to unit wage costs. This translates into W/P=R, i.e. the real wage is equal to the productivity.

Profit for the economy as a whole is defined as Q≡C−Yw and saving as S≡Yw−C. It always holds Q+S=0 or Q=−S, i.e. the business sector’s profit is equal to the household sector’s dissaving, or, the business sector’s loss is equal to the household sector’s saving.

(i) Now, if the government runs a deficit in period 1, total expenditures are C+G, the market clearing price rises, and the business sector makes a profit Q=G. The output O is redistributed between the household and the government sector. This amounts to taxation in real terms which is effected by the price increase.

(ii) The banking system consists alone of the central bank. So, profit takes the form of deposits at the CB. The business sector’s deposits are equal to the government’s overdrafts. For a start, there is no interest on deposits/overdrafts.

There is no longer deficit spending. The price returns to its original level.

This intermediary time lasts from period 2 to t−1 and the government’s debt is simply rolled over. If employment and/or productivity increases, the economy grows.

(iii) In period t, the debt is redeemed. The government taxes the household sector, total expenditures reduce to C−T with T=G, the market clearing price falls, and the business sector makes a loss of −G. After the government’s repayment, both overdrafts and deposits at the CB are again zero.

As a result, the grandchildren are hit by taxes T but get the whole output O. The business sector’s loss in period t is equal to its profit in t=1. The real taxation happened in t=1, but nominal taxation is deferred to period t.

If the interest rate on overdrafts is, for simplicity, equal to the interest rate on deposits, the government sector taxes the household sector and the interest payments go to the business sector respectively the firms’ owners a.k.a one-percenters.

The taxation/redistribution over the indefinite intermediary time and the final taxation and redemption in period t could be avoided by immediate nominal taxation in period t=1. Immediate taxation settles ALL issues of intertemporal redistribution and is, from the perspective of the ninety-nine-percenters, preferable to deficit spending and deferred taxation.

From the government’s perspective, stealth taxation through deficit spending is preferable because nominal taxation vanishes behind the time horizon. From the business sector’s perspective, profits now and losses behind the time horizon are also preferable.

So, let the next administration worry about permanently growing public debt.#2

Egmont Kakarot-Handtke


#1 On the saying “We owe the debt to ourselves”
#2 Keynes, Lerner, MMT, Trump and exploding profit

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