December 13, 2018

MMT: The fusion of Wall Street and Academia

Comment on Bill Mitchell on ‘When two original MMT developers get together to discuss their work’

Blog-Reference and Blog-Reference

Bill Mitchell summarizes: “Last week, Warren Mosler and I had one of our regular catchups and we discussed at length the state of play in Modern Monetary Theory (MMT). We are quite protective of it. We mused about how we started out on this Project and where it has gone. As old stagers do when they get together. We also reflected and compared notes on what the state of MMT is now, given the increasing visibility of the ideas in the mainstream media all around the world and the proliferation of social media activists who have chosen to identify and promote our ideas. There were aspects of that development that we identified as being of concern for us and other aspects which we considered to be a cause for optimism (celebration is too strong a word).”

In other words, the two MMT chief propagandists congratulated themselves and laid down the 2019 communication strategy for the foot soldiers a.k.a social media activists “who have chosen to identify and promote our ideas”. Unfortunately, these activists a.k.a trolls/operatives/shills/salespeople, impair the reputation of MMT because they “use the term MMT as a slogan rather than relating to it as a coherent and body of academic work in economic theory and practice that has been meticulously developed over more than 25 years.”

In order to restore reputation and credibility and to raise the low standards of social media communication,#1, and #2 Bill Mitchell took it upon himself to lay down the joint list of essential talking points of MMT propaganda.

What appears to be a bit strange at first glance is that Bill Mitchell and Warren Mosler do not address once the lethal critique of MMT, that is, that MMT’s policy of deficit-spending/money-creation is nothing but a free lunch for the Oligarchy. The word profit does not appear at all in the whole article. As the old quip says: Economics without profit is like Hamlet without the Prince of Denmark.

So, Bill Mitchell’s (Academia) and Warren Mosler’s (Wall Street) joint propaganda directive talks about everything between heaven and earth except MMT’s real political agenda, that is, money-making for the Oligarchy.#3 Obviously, it is intended as a user manual for disinformation and political fraud.

Accordingly, the basic principles of MMT, as laid down by the Oligarchy’s spokespersons do not deal with how the monetary economy works but with how the state works.

Basic Principle 1: “The state, from inception, as the sole supplier of the funds needed to pay taxes or buy the debt issued by the state, must necessarily impose tax liabilities on the non-government sector before it can spend.”

This is NOT correct. A monetary economy with zero taxes is a real possibility.#4, #5, #6 So, the whole MMT “money story” breaks down already in the first sentence.

There is no need to waste time with the rest of the story.#7

MMT is simply poor science. “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) MMTers do NOT have the true theory.

This is the fact of the matter. The axiomatically correct macroeconomic Profit Law reads Qm≡Yd+(I−Sm)+(G−T)+(X−M). With regard to the government’s budget, it boils down to Public Deficit = Private Profit, i.e. (G−T)≡Qm. This piece of pure economic analysis translates into the scientific insight that MMT’s foundational sectoral balances equation is false, and into the political insight that MMT’s policy of deficit-spending/money-creation is nothing but a free lunch for the Oligarchy. In other words, “progressive” MMT policy is a political fraud.#8

The fraud is exactly located in this assertion: “In accounting terms, the government’s deficit (surplus) is exactly equal at all times to the non-government sector’s surplus (deficit).”#9

MMT is a refuted economic theory and its proponents are either stupid or corrupt or both. Bill Mitchell’s and Warren Mosler’s joint propaganda directive is the incontrovertible proof.

The general public a.k.a. WeThePeople is accustomed to the idea that the state is in the hands of the Oligarchy but upholds the idea of the independence, objectivity, and impartiality of science. Economics never has been a science but what Feynman called a cargo cult science. It is NOT a coincidence that both Adam Smith’s Wealth of Nations and the United States Declaration of Independence were published in 1776. Together they constitute the birth certificate of the US Oligarchy.

MMT stands firmly in this tradition. Its scientific content is zero, and its scientific ethics is zero.#10

Egmont Kakarot-Handtke

#1 You are fighting for life? On all fronts? MMT can save you! Or maybe not?
#2 The Kelton-Fraud
#3 MMT: A free lunch for the Oligarchy
#4 The Third Way: Towards the happy zero-tax economy
#5 The ultimate ― analytical ― origin of money
#6 Nick Rowe’s soapbubbling about money
#7 For the full-spectrum refutation of MMT see cross-references MMT
#8 Economics: A pointless left-right wrestling show
#9 MMT and the magical profit disappearance
#10 MMT: Time to say goodbye

Related 'MMT, Warren Mosler, and the little helpers from Wall Street and Academia' and 'Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople' and 'MMT and the promotion of Wall Street's idea of social policy' and 'MMT: The one deadly error/fraud of Warren Mosler' and 'Cryptoeconomics ― the best of Bill Mitchell’s spam folder'. For details of the big picture see cross-references Scientific Incompetence.

REPLY to Joe on Dec 14

You say: “Imo, Principle 3 should be principle 1, as the sectoral balances is the most important economic principle, by far. It’s the basis of every single economic transaction, monetary or barter, ever done. I gained what you lost and you gained what I lost. We may decide we’re both better off but nevertheless, the zero-sum nature of it remains. This principle alone rules out much of mainstream economic thought, especially in the European continental context. Everyone can’t be in surplus simultaneously.”

Mathematically true: Everyone can’t be in surplus simultaneously.

MMTers, though, got the math wrong. The blunder is exactly located in this assertion: “In accounting terms, the government’s deficit (surplus) is exactly equal at all times to the non-government sector’s surplus (deficit).”

The axiomatically correct 3-sector relation reads (G−T)≡Qm+Sm,#1 i.e. the government’s deficit (surplus) is exactly equal at all times to the SUM of the business sector’s surplus (deficit) and the household sector’s surplus (deficit).

The business sector’s surplus Qm is called profit and the household sector’s surplus Sm is called saving. The business sector’s deficit is called loss and the household sector’s deficit is called dissaving. All combinations of the business sector’s profit/loss and the household sector’s saving/dissaving that is equal to (G−T) are possible.

The blunder of Principle 3 invalidates the WHOLE of MMT. The two storytellers Bill Mitchell and Warren Mosler are too stupid for the elementary mathematics that underlies macroeconomic accounting.#2 Needless to emphasize that the “social media activists who have chosen to identify and promote” their ideas understand even less. They are brain-dead agenda pushers as the posts of S400 and Clint Ballinger clearly demonstrate.

#1 Causally speaking it reads Qm⇐(G−T)−Sm but this is not the point at the moment. The point is that one has 3 sectors (government, business, household) and NOT 2 (government, “non-government”). The inadmissible collapsing of the business sector and household sector to the “non-government” sector makes profit disappear. This operation, the Humpty Dumpty Fallacy, is absolutely disqualifying for an academic economist.
#2 Wikipedia and the promotion of economists’ idiotism

REPLY to Kaivey on Dec 14

You say: “Egmont says they when the government deficit spends it creates inflation …”

No, I prove the exact opposite: deficit spending per se does NOT cause inflation.#1

#1 MMT and the inflation-red-herring

REPLY to Kaivey on Dec 15

You say: “… when the government deficit spends … the rich capture the money, but they capture most of people’s money in the end anyway. If people borrow from the banks, they capture this money as well when they buy goods and services. ”

The answer is in the mathematical truth: Everyone can’t be in surplus simultaneously.

So, if the balance of the government sector (G−T) is zero, and the balance of the household sector Sm is zero, the business sector as a whole cannot make any profit, i.e. Qm=0. This follows from the macroeconomic Profit Law Qm≡(G−T)−Sm.

So, “the rich” can capture NOTHING, i.e. cannot be in surplus, if the other sectors together are not in deficit. Profit for the economy as a whole does NOT depend on greediness or grabbiness or profit maximization or other psychological/behavioral factors but alone on the macroeconomic balances.

While it is true that one firm can increase profit by increasing productivity or lowering wages, this does NOT hold for the economy as a whole. This is the Fallacy of Composition.

“WeThePeople” can effortlessly prevent “the rich” from “capturing” profit by setting the sectoral balances right.#1 With deficit-spending/money-creation, though, MMTers do the exact OPPOSITE.

#1 How the 99 percent can bring overall profit of the 1 percent legally down to zero in 2017