June 11, 2019

MMT: A new myth for WeThePeople

Comment on Bill Mitchell on ‘Seize the Means of Production of Currency ― Part 1’

Blog-Reference and Blog-Reference

Bill Mitchell accuses the former British Labour Party advisor James Meadway and indirectly the current Labour leadership of incompetence/foul play: “In doing so, Meadway demonstrates that he has not grasped (or refuses to grasp) the subtleties of MMT. In a political sense, his arguments repeat those that Chancellor Dennis Healey used when he lied to the British people in the mid-1970s about the Government running out of money. These falsehoods eased the path for Margaret Thatcher, created the space within Labour for the highly damaging Blairite years, and constrain the current British Labour leadership’s conception of what is possible in terms of economic policy formation.”

Bill Mitchell contrasts stupid/corrupt Labour policy with the superior scientific approach of MMT: “At the outset, it is important to note that MMT should not been seen as a regime that you ‘apply’ or ‘switch to’ or ‘introduce’. Rather, it is a lens which allows us to see the true (intrinsic) workings of the fiat monetary system.”

MMT pursues the noble goals of (i) myth-busting, and (ii), improving democracy: “An MMT understanding means that statements such as the ‘government cannot provide better services because it will run out of money’ are immediately known to be false. Such an understanding will change the questions we ask of our politicians and the range of acceptable answers that they will be able to give. In this sense, an MMT understanding enhances the quality of our democracies. MMT is agnostic about policy, bar its preference for an employment buffer rather than an unemployment buffer to discipline inflation.”

This, in a nutshell, is the MMT myth. The fact is that MMT theory is scientifically refuted on all counts#1 and MMT policy is actually NOT for the benefit of WeThePeople but for the benefit of the Oligarchy.#2

The core claims of MMT are provably false:

1. “It [the government] creates a demand for its otherwise worthless currency by requiring all tax liabilities to be extinguished in that currency.” FALSE! TRUE: The currency is created by the Central Bank as a means of transaction. The creation and value of money does NOT depend on the taxing power of the State.#3, #4

2. “The government spends its currency into existence through the purchase of goods and services from the non-government sector (so-called government spending) which provides the non-sector with the funds necessary to pay its tax obligations.” FALSE! TRUE: Spending on current output with newly created money is analogous to the spending of the counterfeiter.#5 The Central Bank’s creation of fiat money for the payment of the wage bill is the correct way of bringing money into the economy.

3. “The consequence of this logical ordering of events (spending to fund taxation) is that currency-issuing governments do not have to ‘fund’ their spending and can never run out of currency.” FALSE because of 1. and 2. TRUE: Unlimited spending is possible because of the government’s unlimited overdrafts at the Central Bank. Overdrafts are public debt that may be consolidated through bond issuance or not. Interest on the public debt redistributes income from WeThePeople to the Oligarchy as long as the debt is rolled over.

4. “In general, MMT uses the sectoral balances (or flow of funds) approach, which tells us that the government sector’s deficit (surplus) is always equal to the non-government sector’s surplus (deficit).” Indeed, but the MMT sectoral balances equation, i.e. (I−S)+(G−T)+(X−M)=0, is provably false. Because of this, the whole analytical superstructure of MMT is scientifically worthless.

As a result, Bill Mitchell’s policy conclusion is false: “… it follows that the only way private debt ― and the power of financial institutions over society ― can be brought under control without driving the economy into recession is for the government to run persistent and substantial fiscal deficits.”

Persistent and substantial fiscal deficits are persistent and substantial free lunches for the Oligarchy.#6 MMT policy guidance is, contrary to the social/environmental optic, ultimately to the detriment of WeThePeople and Democracy. MMTers are not competent scientists but useful idiots for the Oligarchy.

Egmont Kakarot-Handtke

#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 MMT: A Trojan Horse for Labour courtesy of the Oligarchy
#3 The creation and value of money and near-monies
#4 MMT: fundamentally false
#5 How counterfeiters save America with an extra profit and make WeThePeople pay for it
#6 For MMT = For the Oligarchy

Related 'Controlled demolition of MMT ― an exercise in elementary logic' and 'Against the mainstream! Against MMT!' and 'How to pay for the war and to be bamboozled by economists' and 'Stephanie Kelton sells children into debt slavery'.