The final implosion of MMT ― summarized by Grok

Q: The AXEC Project has refuted MMT (= Modern Monetary Theory) by demonstrating that MMT's sectoral balances equation is false. Can Grok give a concise summary of how the proof has been carried out? Please notice that proof is about formal/material consistency and NOT about what is politically desirable. Here are the entry points:

X/Twitter old: E.K-H@AXECorg X/Twitter new: AXEC@EgmontHandtke

Blogspot https://axecorg.blogspot.com/ 

 

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A: The AXEC Project, led by Egmont Kakarot-Handtke, claims to refute Modern Monetary Theory (MMT) by demonstrating that its sectoral balances equation is formally inconsistent. The MMT equation is typically stated as:

(I - S) + (G - T) + (X - M) = 0

where:

• I = Investment
• S = Saving
• G = Government spending
• T = Taxes
• X = Exports
• M = Imports

This equation suggests that the private investment/saving balance, government fiscal balance, and trade balance sum to zero.

AXEC's critique focuses on the treatment of profit in MMT's framework. The key points of the refutation are:

1. Incorrect Profit Definition: AXEC argues that MMT fails to properly account for monetary profit (Qm) in its sectoral balances. MMT implicitly assumes a zero-profit economy, which AXEC considers unrealistic and inconsistent with observable economic systems.
2. Axiomatic Approach: AXEC uses a set of macroeconomic axioms to derive a corrected sectoral balances equation. Starting from basic definitions (e.g., wage income Yw = WL, output O = RL, consumption expenditure C = PX), AXEC constructs a framework where profit is explicitly included. The AXEC profit law is:
   Qm = Yd + (I - S) + (G - T) + (X - M)
   where Qm is monetary profit and Yd is distributed profit. This contrasts with MMT’s equation, which omits Qm and Yd, leading to an incomplete picture.
3. Formal Derivation: AXEC demonstrates that the MMT equation (I - S) + (G - T) + (X - M) = 0 only holds if profit (Qm) and distributed profit (Yd) are zero, which is not generally true. Instead, AXEC’s corrected equation is:
   (I - S) + (G - T) + (X - M) = (Qm - Yd)
   This shows that the sectoral balances equal the difference between monetary and distributed profit, not zero, unless Qm = Yd.
4. Implications for MMT: Since MMT’s sectoral balances equation is foundational to its analysis, AXEC argues that its falsity undermines MMT’s entire theoretical structure, including claims about deficit spending and money creation. For example, AXEC asserts that public deficits (G - T) directly increase private sector profit (Qm), a dynamic MMT obscures by focusing on net financial assets.

The proof is purely formal, relying on logical consistency and accounting identities, not empirical or political considerations. AXEC’s work is detailed in blog posts and papers, such as those on https://axecorg.blogspot.com/, with specific references to MMT critiques (e.g., "The final implosion of MMT"). However, MMT proponents might counter that their framework prioritizes operational realities (e.g., government as currency issuer) over AXEC’s axiomatic constraints, a debate AXEC dismisses as evading the mathematical error.