Blog-Reference and Blog-Reference
Randall Wray reports: “Godley taught us about stock-flow consistency and he insisted that all mainstream macroeconomics is incoherent.”
This, of course, is true. MMT’s critique and refutation of mainstream macro and monetary theory are justified in all dimensions. Mainstream economics is dead, however, this does not imply that MMT macro is coherent. Just the opposite: MMT macroeconomics is provably false.
The theory of money has to be embedded in a consistent macroeconomic framework or in what Keynes called the ‘monetary theory of production’. MMT gives a historical account of how money came into existence as a creation of the state. This historical account is not false but methodologically it is NO substitute for the theory of money, just as the history of the burning of Rome, London, and San Francisco is no substitute for the theory of thermodynamics.#1
Randall Wray claims: “What we do is Macroeconomics. There is no coherent alternative to MMT.” He summarizes under the 9th bullet point: “The government’s debt is our financial asset. This follows from the sectoral balances approach of Wynne Godley. We have to get our macro accounting correct. Minsky always used to tell students: go home and do the balance sheets because what you are saying is nonsense.”
Unfortunately, MMT’s macroeconomic accounting is provably false.#2, #3, #4 And this makes nonsense of all the rest what they are saying.#5 In particular, it is just a silly slogan that ‘taxes drive money’, the fact is that deficits/surpluses = dissaving/saving = changes of public/private debt drive money.#6, #7
In his 10-bullet-point summary of what MMT is all about, Randall Wray forgets completely to mention that because of the macroeconomic Profit Law Public Deficit = Private Profit, which follows from the axiomatically correct sectoral balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0#8, MMT policy boils down to agenda-pushing and money-making for the Oligarchy.
#1 A historical misunderstanding
#2 Rectification of MMT macro accounting
#3 Wikipedia and the promotion of economists’ idiotism (II)
#4 For the full-spectrum refutation of MMT see cross-references MMT
#5 MMT is dead
#6 The ultimate ― analytical ― origin of money
#7 Money and time
#8 MMT and the single most stupid physicist
Related 'Mission impossible: economists join WeThePeople'.