Going beyond No-Idea economics

Comment on Noah Smith on ‘Japan Buries Our Most-Cherished Economic Ideas’

Blog-Reference and Blog-Reference on Aug 6

Noah Smith summarizes: “So Japan’s experience underscores one central, disturbing truth: Economists really have no idea how inflation works. It is simply a mystery.” and “In Japan, nothing of the sort has happened ― wages and prices show little sign of rising despite the disappearance of unemployment. So much for the Phillips Curve.”

The fact is that economics is a failed science because economists are scientifically incompetent. NO mystery here.

The fact that the Phillips curve now seems to be flat only tells one that it has been misspecified all along. Thanks to the scientific incompetence of economists, this remained undetected since Samuelson/Solow messed things up. The methodological blunder consists of interpreting the Phillips curve as a behavioral relationship. What has to be done is to formulate the Phillips Curve as a structural-systemic relationship. #1 This relationship consists of measurable variables and is therefore readily testable.

The correct relationship covers the familiar arguments about how effective demand and deficit spending affect employment. Secondly, the so-called factor cost ratio shows how the price mechanism affects employment.

The correct systemic Phillips curve tells one that, in the given situation, the only way for Japan to maintain full employment and to turn deflation around is to engineer an increase in the average wage rate.

Egmont Kakarot-Handtke


#1 Putting economic policy on scientific foundations

MMT and some economic essentials

Comment on Peter Cooper on ‘Short & Simple 13 ― Private Credit Creation’

Blog-Reference

Peter Cooper argues: “The key for now is just to understand that our capacity to make purchases comes from two original sources ― government spending and private credit creation.”

This is absurd. Our capacity to make purchases comes from two sources ― our INCOME and credit creation. These two cases have been dealt with already in Economists: just too stupid for counting and Money and time.

So, there are three cases in a consumption economy without government activity, (i) household sector spending C is equal to wage income Yw, or (ii), spending C is greater than wage income Yw, or (iii), spending C is less than wage income Yw. Case (ii) produces a monetary profit for the business sector.

When government is added with pure deficit spending, e.g. spending G is positive and taxes T are zero, then this case is perfectly identical to private deficit spending (ii), i.e. C+G is greater than wage income Yw. It holds as an unassailable economic law: deficit spending (private or public does not matter) produces a monetary profit for the business sector. This is where the buck stops at the end of the period.

The key, for now, is just to understand that MMT is a free-lunch program for the one-percenters.*

Egmont Kakarot-Handtke

* For the comprehensive overview and the point-by-point refutation of MMT see cross-references MMT

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COMMENT on Tom Hickey, André, Ralph Musgrave on Aug 5

Peter Cooper argues: “The key for now is just to understand that our capacity to make purchases comes from two original sources ― government spending and private credit creation.”

In order to discuss this assertion it is imperative to keep focus, that is, to deal with the minimum number of actors. In this case, this is the household sector, the business sector, the banking sector, and the government sector. Everybody understands that these actors are AGGREGATES which have eventually to be DIFFERENTIATED. So, the banking sector consists of the central bank and private banks and near- and quasi- and ‘non’-banks and so on ad infinitum.

Now, the main blunder of incompetent economists consists in the Fallacy of Insufficient Abstraction, that is, the analysis does not remain focused on the small number of ― abstract/aggregated ― actors but regularly gets lost in the woods of IRRELEVANT details.#1
• Tom Hickey reminds us that there is also private non-bank credit.
• André reminds us that not all private bank deposits are created through loans.
• Ralph Musgrave reminds us that private bank deposits is not the same as central bank deposits/notes which is money in the proper sense.
• Tom Hickey reminds us that there is also credit within the business sector, i.e. vendor credit.

Then comes the inevitable grand finale of every economics discussion and the whole issue is drowned in semantics: “’Money’ is one of those weasel words that are ambiguous enough to mean what the user wants to mean.” (Hickey) NO! Money as the generally to be accepted means of transaction is defined by law. The fact that people accept also near-monies as means of transaction does NOT alter the definition of money.

What is the result of the whole confused MMT-crowd blather? Everybody has lost sight of the obvious fact that Peter Coopers’s assertion, “our capacity to make purchases comes from two original sources ― government spending and private credit creation” is false. Get this: Our capacity to make purchases comes from two sources ― our INCOME and credit creation.#2

Egmont Kakarot-Handtke

#1 See parallel thread
#2 For the focused point-by-point refutation of MMT see cross-references MMT

Putting economic policy on scientific foundations

Comment on Chris Dillow on ‘Fiscal policy with a flat Phillips curve’

Blog-Reference

Chris Dillow says: “It’s widely agreed that the Phillips Curve is flat, that low unemployment is not stoking up wage inflation ― though perhaps this has been true for longer than thought.” Perhaps it never has been true.

The fact that the Phillips Curve now seems to be flat only tells one that it has been misspecified all along. Thanks to the scientific incompetence of economists, this remained undetected since Samuelson/Solow messed things up. The methodological blunder consists of interpreting the Phillips Curve as a behavioral relationship. What has to be done is to formulate the Phillips Curve as a structural-systemic relationship.

To make matters short here, the elementary version of the correct systemic Phillips Curve is shown under the label Graphic. #1, #2 This relationship consists of measurable variables and is therefore identical to the observed Phillips Curve.

The correct relationship covers the familiar arguments about how effective demand affects employment. Secondly, the ratio rhoF embodies the macroeconomic price mechanism. It works such that overall employment L INCREASES if the average wage rate W INCREASES relative to the average price P and productivity R, and vice versa. This is the opposite of what microfounded employment theory teaches.

The correct systemic Phillips Curve tells one that in the given situation, the most urgent policy measure is to set an increase in the average wage rate in motion. Otherwise, the economy gets trapped in a spiral of rising unemployment and deflation.

Egmont Kakarot-Handtke


#1 Graphic AXEC36 Structural-systemic Phillips Curve

#2 For the derivation, see Sec. 5 to 7 of the working paper Keynes’s Employment Function and the Gratuitous Phillips Curve Disaster.


Related 'Forget Friedman, forget Keynes' and 'The minimum wage debate: a showpiece of economists’ hereditary idiocy' and 'The role of labor and business in a well-organized society' and 'Macrofounded labor market theory' and 'Rethinking the Phillips Curve' and 'Attention: there are THREE types of inflation' and 'Toward a non-Neanderthal employment policy' and 'NAIRU ― letting one more nonentity go' and 'Going beyond No-Idea economics' and 'A la recherche de l'inflation perdue'

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LINKS on Aug 7

Going beyond No-Idea economics
Comment on Noah Smith on ‘Japan Buries Our Most-Cherished Economic Ideas’

A la recherche de l'inflation perdue
Comment on David Andolfatto on ‘Where’s the inflation?’

#Economics #FailedScience #FakeScience #PhillipsCurve

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LINK on Aug 27

Note on Michael Dotsey, Shigeru Fujita, and Tom Stark on ‘Do Phillips Curves Conditionally Help to Forecast Inflation?’

The working paper concludes: “We find no evidence for relying on the Phillips Curve during normal times, such as those currently facing the U.S. economy.”

This is due to the fact that the Phillips Curve is misspecified since Samuelson/Solow. For the correct specification, see Putting economic policy on scientific foundations.

Economics, philosophy, and mathematics

Comment on Robert Paul Wolff on ‘Mathematics in economics’

Blog-Reference

The ancient Greeks started science with the distinction between doxa (= opinion) and episteme (= knowledge). Scientific knowledge is well-defined by material and formal consistency.

Economics is a failed science, that is, there is NO knowledge that satisfies scientific criteria. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit wrong.

In the beginning, there was Political Economy. J. S. Mill defined it clearly as a social science: “The fundamental problem, therefore, of the social science, is to find the laws according to which any state of society produces the state which succeeds it and takes it place.” Or, a bit more specific with regard to economics: “The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object.”

Economics started as a hodgepodge of sociology, history, folk psychology, and folk philosophy, which came under the heading of utilitarianism.

Classical Political Economy was carried one step further with methodological individualism: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” (Arrow)

Orthodox economics is built upon the Walrasian axioms which are verbally given as follows: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

These axioms and the analytical superstructure have been given a mathematical form by Debreu, Arrow, McKenzie.

The representative economist has not realized it but methodologically the Walrasian premises are forever unacceptable. It should be pretty obvious that the axiomatic core contains three NONENTITIES: (i) constrained optimization HC2, (ii) rational expectations HC4, (iii) equilibrium HC5. Every theory/model that contains a nonentity is a priory false. The lethal methodological blunder of economics is NOT mathiness but the NONENTITIES in the premises.

What is missing among economists is a proper understanding of what science is all about. Aristotle gave a working definition 2000+ years ago: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” When the premises are NONENTITIES this is cargo cult science and produces nothing but pathetic blather.

The mathiness problem of economists does not consist in the application of advanced mathematics but in the incapacity to apply the straightforward arithmetic of accounting. The fact is that economists are since Adam Smith too stupid to put 2 and 2 together.#1

The fact is also that the subject matter of economics is ill-defined since the founding fathers. Economics is NOT a social science but a systems science.#2

Egmont Kakarot-Handtke


#1 Economists: just too stupid for counting
#2 For more details see The myth of economics knowledge

For details of the big picture see cross-references Math/Mathiness and Accounting and Incompetence

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REPLY to Écrasez L'infâme on Aug 4

You say: “Marx had already developed Ricardo and Smith in ways that the establishment of the time found threatening, yet found difficult to argue against.”

Marx was a philosopher, sociologist, soapbox economist, and agenda pusher but NOT a scientist. He never understood what profit is. See Profit for Marxists.

The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are at the SAME proto-scientific level, i.e. axiomatically false, materially/formally inconsistent, and all got profit wrong.

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REPLY to JKH on Aug 6

You say: “And I would say that the GT of Keynes is replete with the power of accounting logic as the required fundamental framing.”

The fact is that Keynes got the accounting logic wrong. The formal core of the General Theory is given with: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

This syllogism is conceptually and logically defective because Keynes did not come to grips with profit: “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.)

Because profit is ill-defined the whole theoretical superstructure of Keynesianism is false, in particular, all I=S and IS-LM models.

Let this sink in: Keynes had NO idea of the fundamental concepts of economics, viz. profit and income.#1 After-Keynesians did not spot the foundational blunder to this day.#2

You say: “Interestingly, Keynes was a mathematician before (in effect) he was an economist.”

I doubt this. Keynes was a lifelong agenda pusher and not of the stuff mathematicians are made of: “I consider that Keynes had no real grasp of formal economic theorizing (and also disliked it), and that he consequently left many gaping holes in his theory.” (Hahn)

As a soapbox economist, Keynes never rose above common sense: “In the early thirties he [Keynes] confessed to Roy Harrod that he was ‘returning to an age-long tradition of common sense’.” (Coates) No one who has tasted mathematics ever returns to common sense.

Keynes was a fake scientist. In a fake science, this is not a disadvantage.


#1 How Keynes got macro wrong and Allais got it right
#2 Economists: just too stupid for counting

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ADDENDUM on Aug 7

Philosophy: From Plato’s Academy to Trump’s Academy
Comment on Robert Paul Wolff on ‘A comment on the comments’

You ask: “How could the manifestly brilliant men [mostly] in the discipline of academic economics have missed a truth that struck me as virtually self-evident?”

If you were a philosopher you would know that, first of all, there is NO such thing as self-evidence. That the sun goes up is self-evident but turns out to be an optical illusion. The very least a self-declared philosopher should have taken notice of is Plato’s cave metaphor which clearly says that what you call self-evident are only the shadows of reality on the cave wall.#1

Being utterly ignorant of the problem of epistemology, your brain-dead explanation for the failure of profit theory consists in simply imputing a motive: “It is difficult to get a man to understand something when his salary depends upon his not understanding it!”

For the genuine philosopher, this is NOT an answer to the original question of what profit is. Obviously, you do not know it either. Are you also paid to not understand it?

The aim of the philosophical discourse ― in contradistinction to sitcom gossip ― is to advance knowledge: “Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.” (Schumpeter).#2

Take notice that Marx’s profit theory, which you find self-evident, is provably false.#3 You have simply not done your philosophical homework which is to pierce through the appearances and not to be content with flimsy self-evidence. All philosophers, except those from Trump Academy, of course, know: “But all science would be superfluous, if the appearance, the form, and the nature of things were wholly identical.” (Marx)


#1 Economics, Plato’s Cave and the Silver Blaze Case
#2 Schumpeter’s two axioms of discourse
#3 Profit for Marxists

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REPLY to F Lengyel on Aug 7

You say: “There are some philosophers who believe that philosophy has a more modest aim than the advancement of knowledge: that of therapeutics.”

Yes, philosophy has been re-branded recently by the Trump Academy and is now essentially a wellness program on par with Yoga or Neurotics Anonymous. This is, indeed, a far cry from Plato’s Academy where only the mathematically and mentally fit were allowed to enter.

What is a bit curious, though, is that the therapeutic philosopher occasionally forgets his modest aim and engages in a discussion about profit theory which is far beyond his modest intellectual means. To recall, after 200+ years “A satisfactory theory of profits is still elusive.” (Desai, Palgrave Dictionary) This includes Marx’s profit theory, which the therapeutic philosopher finds self-evident. This is self-debunking.

You criticize my working paper: “If, as you waste no opportunity to point out, you wish to enlighten dunderheads, you might have included illustrative examples.”

This is a misunderstanding. My philosophy is similar to Socrates’ who famously said: I know that you know nothing. This is better than the other way round and therefore I have no reason to enlighten anyone.

Milton Friedman, fake scientist

Comment on John B. Taylor on ‘Still Learning From Milton Friedman: Version 3.0’*

Blog-Reference

John B. Taylor argues: “In that same year Milton Friedman published Capitalism and Freedom (1962) giving the competing view. He argued that ‘the available evidence . . . casts grave doubt on the possibility of producing any fine adjustments in economic activity by fine adjustments in monetary policy — at least in the present state of knowledge . . . There are thus serious limitations to the possibility of a discretionary monetary policy and much danger that such a policy may make matters worse rather than better’.”

There are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Political economics has produced NOTHING of scientific value in the last 200+ years. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational concept of the subject matter ― profit ― wrong. The pluralism of provably false theories is the very definition of a proto-science or what Feynman called cargo cult science.

The lack of true theory has grave consequences: since Adam Smith, economic policy guidance has had NO sound scientific foundation. The general public always sees and discusses the policy proposals of economists but never the underlying theory, therefore it fails to see that there is a total disconnect between the two. The economists’ proposals do not follow from a valid theory because there is none.

Friedman, clearly, was a lifelong political agenda pusher and utterly incompetent scientist. Monetarism is plain proto-scientific garbage.

“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)

Friedman never understood how the profit- and price mechanism works. He never rose above the level of soapbox economics. He will never be accepted in the community of scientists. Politicians still appreciate him as a useful idiot.

Egmont Kakarot-Handtke


* Economics One

Related 'Forget Friedman, forget Keynes' and 'Friedman and the cluelessness of fake scientists' and 'Will economics ever become a science?' and 'Economics: 200+ years of scientific incompetence and fraud' and 'Fact of life: your econ prof is scientifically incompetent' and 'Your economics is refuted on all counts: here is the real thing'. For details of the big picture see cross-references Incompetence and cross-references Failed/Fake Scientists and cross-references Political Economics/Stupidity/Corruption.

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INET Oct 7, 2021, Nancy MacLean, Milton Friedman's Collusion with Segregationists

nsfwcorp Oct 25, 2021,  Mark Ames, When Congress Busted Milton Friedman (and Libertarianism Was Created By Big Business Lobbyists)

What is MMT? (I)

Comment on Nick Johnson on ‘Michael Hudson on Modern Monetary Theory’

Blog-Reference and Blog-Reference

The soundbites of MMT go roughly as follows:

• Money is a legal creation, not a commodity like gold or silver. It is a special form of an IOU. A currency-issuing government’s IOU is the currency.
• Creating money costs the central bank virtually nothing (likewise for banks creating their own electronic credit).
• It is ‘the state’ that defines a unit of account (e.g. dollar)
• Ultimately, ‘the state’ ensures the acceptance of money by imposing taxes that can only be paid in that unit of account.
• It is ‘the state’ that spends or lends the currency into existence. This is sometimes summarized as ‘taxes drive money’.

These arguments are either half-true or false.

(i) An IOU economy can ― as a matter of principle ― be established by the business sector. This includes the definition of the unit of account.

(ii) A money economy is different from an IOU economy in that the general acceptance of the means of transaction is established and enforced by law. This is the crucial point where ‘the state’ participates in the creation of the monetary order.

(iii) Only a central bank is needed for the ongoing creation and destruction of money which takes the elementary form of deposits/overdrafts on the central bank’s balance sheet. Money comes into the economy through the autonomous transactions between the business and the household sector. It is ‘the economy’ that determines the quantity of money.

(iv) As a matter of principle, ‘the economy’ never runs out of money because the central bank can create it out of nothing. The crucial point is whether new money comes into the economy as (a) additional wage income, or (b), additional nominal demand. Option (a) is the neutral way, and option (b) affects the overall profit of the business sector and as consequence the income distribution.

(v) ‘Taxes drive money’ is just a silly slogan because it does NOT matter whether taxes T come first and government expenditures G come later or vice versa. As long as G = T in a given period, there are only short-run fluctuations in the quantity of money during that period. It is only deficits, i.e. G greater than T, or surpluses, i.e. G less than T, that drive money.

(vi) There is NO difference at all between the household sector and the government sector: it is deficits/surpluses = dissaving/saving = CHANGE OF DEBT that drives money.

(vii) By defining the institution Central Bank ‘the State’ can determine that the financing of the government deficit is unlimited and interest-free. This has NOTHING to do with the origin or the nature of money.

(viii) Credit and money are produced like any other product. Roughly speaking, the ‘price’ (average interest rate on the asset side minus average interest rate on the liability side) times the average amount of the central bank’s balance sheet must cover the costs (wages, depreciation of hard- and software, and so on) of producing transaction money and credit. It is a myth that the production of money or loans costs virtually nothing. The interest rate difference must be positive otherwise the banking system (central bank plus commercial banks) cannot break even.

(ix) The assertion: “The government’s budget deficit is (by definition) the private sector’s surplus” is false. The government’s budget deficit is the household sector’s surplus (= saving) or the business sector’s surplus (= profit) or a combination of the two. In the case of a balanced budget of the household sector, the government’s budget deficit is equal to the business sector’s profit.

(x) The MMT narrative has no scientific content whatsoever.#1 Ultimately, MMT is a free-lunch program for the one-percenters.

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT

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REPLY to Calgacus on Jul 3

The question is, What is MMT? And the answer is, it is proto-scientific garbage.

To recall. Scientific knowledge is embodied in true theory. The true theory is the humanly best mental representation of reality. Truth is well-defined by material and formal consistency: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

MMT does NOT satisfy the criteria of material/formal consistency. In fact, most of it is brain-dead political blather. People like this storytelling stuff but it is garbage nonetheless.

You try to refute me with this argument: “Seriously wrong. Factually and logically wrong. A money economy is a type of ‘IOU’ (credit) economy. Money is credit and nothing but credit. Always and everywhere.” Yes, so what? This is exactly what I said about the logical origin of money: “In the next step, the firm pays the monthly wages with a standardized IOU and declares that this conveniently denominated title will be unconditionally accepted at the firm’s store. The employees accept that the IOUs discharge their wage claim against the firm.”#1

How money was introduced historically is a question for historians NOT for economists. The question for economists is to explain how the monetary economy works. The theory of money is a building block of the overarching ‘monetary theory of production’ (Keynes). MMT has NO theory of how the monetary economy works, i.e. MMTers have no idea how the price- and profit mechanism works.

You say: “The MMT meaning of that slogan is that taxation drives the demand for money. So deficits, money-creation could not drive (the demand for) money in this meaning.” The demand for money originates from the necessity of the business sector to pay the workers in an accepted means of transaction and from the necessity of the household sector to have an accepted means of transaction to buy stuff.#2 The general acceptance is established by law and not by the necessity to pay taxes.

You say: “Fully developed mathematical theories tend to have no scientific content ― it is all form, all in the definitions, all trivialities.” Obviously, you do not understand the role of mathematics in science: “But it was a second and more important quality that struck readers of the Principia. At the head of Book I stand the famous Axioms, or the Laws of motion: ... For readers of that day, it was this deductive, mathematical aspect that was the great achievement.” (Truesdell). Only a moron can say that Newton’s theory had no scientific content and that his axioms were trivialities. It is the Walrasian axioms (maximization-and-equilibrium) and MMT storytelling that has no scientific content.

MMT is dead as a scientific theory#3. It has no truth-value, only some political use-value among mentally retarded Young Turks.


#1 The ultimate ― analytical ― origin of money
#2 Exchange in the Monetary Economy
#3 For the full-spectrum refutation of MMT see cross-references MMT

MMT is dead

Comment on Peter Cooper on ‘Short & Simple 12 ― Government Money’

Blog-Reference

Peter Cooper argues: “We saw that to establish a currency, government needs to do three things: 1. Define a unit of account (e.g. dollar). 2. Impose taxes that can only be paid in that unit of account. 3. Spend or lend the currency into existence. The most basic purpose of taxation is to create a demand for the currency. Economists sometimes summarize this as ‘taxes drive money’. … A currency-issuing government’s IOU is the currency. Like any issuer of an IOU, government promises to accept its IOU back again in fulfillment of obligations to it.”

Every single plank of this argument has been refuted.

(i) An IOU economy can, as a matter of principle, be established by the business sector. This includes the definition of the unit of account. #1 Every issuer of an IOU can define the unit of account.

(ii) A money economy is different from an IOU economy in that the general acceptance of the means of transaction is established and enforced by law. #1 This is the crucial point where ‘the state’ participates in the creation of the monetary order.

(iii) Only a Central Bank is needed for the ongoing creation and destruction of money, which takes the elementary form of deposits/overdrafts on the Central Bank’s balance sheet. Money comes into the economy through the autonomous transactions between the business and the household sector. It is ‘the economy’ that determines the quantity of money.

(iv) As a matter of principle, the economy never runs out of money because the Central Bank can create it out of nothing. The crucial point is whether new money comes into the economy as (a) additional wage income, or (b) as additional nominal demand. Option (a) is the neutral way because the real side and the monetary side are synchronous. #2 Option (b) affects the overall profit of the business sector and consequently the income distribution. #3

(v) ‘Taxes drive money’ is just a silly slogan because it does NOT matter whether taxes T come first and government expenditures G come later or vice versa. As long as G = T in a given period, there are only short-run fluctuations of the quantity of money during that period. It is only deficits, i.e., G greater than T, or surpluses, i.e., G less than T, that drive money.

(vi) There is NO difference at all between the household sector and the government sector: it is deficits/surpluses = dissaving/saving = change of debt that drives money.

(vii) By defining the institution of the Central Bank, the State can determine that the financing of the government deficit is unlimited and interest-free. This has NOTHING to do with the origin or the nature of money. The MMT narrative has NO scientific content whatsoever. #4

Egmont Kakarot-Handtke


#1 The ultimate ― analytical ― origin of money
#2 Money and time
#3 Keynesianism as ultimate profit machine
#4 For the comprehensive overview and the full-spectrum refutation of MMT, see cross-references MMT.*

Related 'The final implosion of MMT' and 'Basics of monetary theory: the two monies' and 'Down with idiocy!'.

* Graphic AXEC122c