January 22, 2019

What is wrong with MMT? and What is wrong with Brad DeLong?

Comment on Brad DeLong on ‘By Popular Demand: What Is “Modern Monetary Theory”?’

Blog-Reference and Blog-Reference

Brad DeLong defines macroeconomic common sense: “We do not like high unemployment. We do not like excessive inflation. Thus the government should make it its first priority to use its tools of economic management so that we do not experience either.” and asks “So what can go wrong with MMT?”

Like all economic common non-sensers, Brad DeLong forgets to mention distribution. What is missing in his list is: We do not like an extremely skewed distribution of income and financial wealth.

In his post, the word profit does not appear once. MMTers, too, desperately avoid mentioning profit. Mere coincidence?

In a nutshell, the lethal defect of MMT policy guidance is that according to the macroeconomic Profit Law it holds Public Deficit = Private Profit or in common-sense terms: permanent MMT deficit-spending/money-creation is a permanent free lunch for the one-percenters.#1

Keynes got macroeconomic profit wrong 80+ years ago,#2 but neither Post-Keynesians,  nor Anti-Keynesians, nor MMTers, nor Brad DeLong spotted the blunder to this day.

There is NO such thing as scientifically valid economics. It holds: false economic theory makes bad economic policy. Scientifically incompetent economists are the ultimate cause of unemployment, distributional implosion, financial collapse, and disaster. MMT is only the latest example of a 200+ years old fatal tradition.

Egmont Kakarot-Handtke

#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 How Keynes got macro wrong and Allais got it right

Related 'MMT and the magical profit disappearance' and 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'Profit, income, and the Humpty Dumpty Fallacy' and 'Down with idiocy!' and 'False economic theory makes bad economic policy'.


REPLY to Alan on Jan 23 and Blog-Reference

Yous say: “I’m not ready to ditch Keynes based on this effort.”

You are simply one of the many retarded economists who has not realized that Keynes messed up macro.

Keynes’ scientific incompetence can be exactly located in the GT: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

“His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

So, the economist Keynes NEVER understood profit. Because of this, all I=S/IS-LM models and the rest of Keynesianism and Post-Keynesianism including MMT are false.#1

Keynes’ premise income = value of output is false. From the correct macroeconomic axioms follows:
(1) Q=−S in the elementary production-consumption economy,
(2) Q=I−S in the elementary investment economy,
(3) Q=Yd+I−S in the investment economy with profit distribution,
(4) Q=Yd+I−S+(G−T)+(X−M) in the general case with government in an open economy.

From (3) follows Allais’ correct equation Qre=I−S.

From (4) follows the correct sectoral balances equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which contrasts with the false MMT equation (I−S)+(G−T)+(X−M)=0.#2, #3

From (4) follows Public Deficit = Private Profit. And this tells one that MMT is a program for the permanent self-alimentation of the Oligarchy.

Macroeconomics is provably false from Keynes onward to MMT. The representative economist has not realized anything to this day because he is too stupid for the elementary mathematics that underlies macroeconomics.

Scientific incompetence is the reason why economics is after 200+ years still at the proto-scientific level.

#1 For more details see cross-references Refutation of I=S
#2 Rectification of MMT macro accounting
#3 Wikipedia and the promotion of economists’ idiotism

REPLY to mulp on Jan 24

Yes, Friedman was an economics blatherer and political fraudster. He is now buried at the Flat-Earth-Cemetery together with the rest of failed/fake scientists. What about looking after the living and very busy fraudsters of present-day academia?

MMTers like Stephanie Kelton let profit disappear before your very eyes#1 and you don’t understand anything but conjure up the ghost of Mad Milton. What is wrong with you?

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

REPLY to Jared on Jan 26

Inflation is NOT the problem of MMT deficit-spending/money-creation. This is simple-minded Quantity Theory nonsense. Deficit spending causes a one-time price hike. Growing public debt is compatible with a stable price level.#1

The government can deficit-spend by simply increasing its overdrafts at the Central Bank and not consolidating this debt by issuing interest-bearing bonds. And the CB can at any time monetize bonds in circulation. So, as a matter of principle, the bond market is not a serious obstacle to MMT policy.

The government can spend without taxing. A stable Zero-Tax Economy is feasible in principle.#2

The lethal effect of MMT policy is on distribution. Because of the macroeconomic Profit Law, it holds Public Deficit = Private Profit. So MMT policy is first of all a free lunch for the Oligarchy. MMT’s social policy measures are paid for in real terms by WeThePeople themselves through stealth taxation.#3 To pay for social benefits with deficit-spending/ money-creation is simply a political fraud.

Brad DeLong as the representative economist has NEVER understood what profit is and because of this, he does not understand that MMT is a program for the permanent self-alimentation of the Oligarchy. As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt.

Politically speaking, MMT policy is a suicide program for US democracy. The thing is, that economists are part of it.

#1 MMT and the inflation-red-herring
#2 The Third Way: Towards the happy Zero-Tax Economy
#3 MMT, money creation, stealth taxation, and redistribution

REPLY to Jared on Jan 28 and Blog-Reference on Jan 30

You say: “This is the real threat that MMT represents to the oligarchy.”

MMT represents NO threat to the oligarchy because MMTers are the agents of the Oligarchy. This follows from the fact that MMT policy guidance boils down to deficit-spending/money-creation. Now, the macroeconomic Profit Law tells everyone that Public Deficit = Private Profit and from this follows as a rule of thumb that the financial wealth of the Oligarchy grows in lockstep with the public debt. In other words, the fabulous wealth of the Oligarchy is the counterpart of humungous public debt ($21.5 trillion). To remove all obstacles to the further growth of public debt is the mission of MMTers.#1, #2, #3, #4

Now, everybody is entitled to use any medium between the soapbox and the blogosphere and to communicate any imaginable BS. In the political sphere, anything goes. However, this does not apply to the scientific sphere. While the currency in the political sphere is opinion, the currency in the scientific sphere is knowledge and both cannot coexist. This is known for 2300+ years: “There cannot be both opinion and knowledge of the same thing at the same time.” (Aristotle)

The political sphere and the scientific sphere have to be kept apart because politics always and everywhere corrupts science. This happened to economics. According to the scientific criteria of material and formal consistency, MMT is refuted on all counts.#5 However, MMT is not expelled from the sciences but allowed to use academia as a forum for pushing their political agenda.

The problem with Brad DeLong is that he is either too stupid to realize that MMT is proto-scientific garbage or he is part of the general political corruption of economics.

To say of MMT, or, for that matter, of Walrasianism, Keynesianism, Marxianism, Austrianism that it poses a threat to the oligarchy is a blatant misinterpretation of the history of economic thought since Adam Smith.

#1 Stephanie Kelton on how to become fabulously wealthy
#2 MMT: The fusion of Wall Street and Academia
#3 Very busy these days: Wall Street’s agents
#4 MMT and the promotion of Wall Street's idea of social policy
#5 For the full-spectrum refutation of MMT see cross-references MMT