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+ year-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'.

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REPLY to Alan on Jan 23 and Blog-Reference

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

You are simply one of the many retarded economists who have 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 that 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

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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

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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 the MMT policy is on distribution. Because of the macroeconomic Profit Law, it holds that 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

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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 humongous 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 its 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, and 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

MMT’s virtue-signaling distracts from failure/fraud

Comment on Bill Mitchell on ‘Why progressive values align more closely with our basic needs’

Blog-Reference

Bill Mitchell sets the frame: “One of the angles that will be delved into is the way in which neoliberal narratives and constructs have permeated individual consciousness. Yes, sounds a bit psychological doesn’t it?”

Yes, economists love to dwell upon Human Nature/motives/behavior/action since Adam Smith/Karl Marx. Bill Mitchell remembers: “When I was a student … and studying the works of Marx in depth, I was continually confronted with the claim that socialism is against human nature, which apparently is competitive and dog-eat-dog in form.”

The scientific incompetence of economists consists of the fact that it is beyond their means to realize that NO way leads from the understanding of Human Nature/motives/behavior/ action to the understanding of how the economic system works. The point to grasp is that economics is NOT a science of behavior but a systems science. #1

Economics, though, has defined itself as a social science. The result is nothing less than complete scientific failure. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent, and all got the foundational economic concept ― profit ― wrong. In other words, there is NO such thing as scientifically valid economics. MMT fits into this pattern.

MMT is three things: theory, policy, activism. These three elements are constantly mixed in the public debate, and this guarantees never-ending confusion.

The fact is that MMT theory is provably false, i.e., materially/formally inconsistent. #2 MMTers do not get the objective structural relations of the monetary economy right. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople.

Whether all MMTers understand it or not does NOT matter. What matters are the economic consequences of MMT policy. And these are disastrous with regard to distribution. Socially, the effects are the exact opposite of what MMTers claim. In a word, MMT policy benefits the one-percenters and NOT the ninety-nine-percenters.

Either MMTers do not understand their own theory and mislead the general public unwittingly, or they purposefully push the agenda of the one-percenters and deliberately deceive the general public. #3, #4, #5 Bill Mitchell falls into the latter category.

Egmont Kakarot-Handtke


#1 Economics is NOT about Human Nature but the economic system
#2 For the full-spectrum refutation of MMT, see cross-references MMT
#3 MMT: From science to agenda-pushing to story-telling to fraud
#4 MMTers are NOT Friends-of-the-People
#5 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

MMT: How to get out of the infinite meta-communication loop

Comment on Brian Romanchuk on ‘MMT In The Newsflow Again’

Blog-Reference and Blog-Reference

Brian Romanchuk observes some communicative delirium: “There have been a number of attempts to ‘explain’ MMT by various American conservatives. As one might expect, those attempts have been pathetic; …” and then heads towards a solution: “There are two angles of attack to this debate.
1. Are MMT policy proposals radical?
2. Is it a radical approach to economic theory?”

This, though, means nothing else than a continuation of the communicative delirium. The point is to get out of meta-communication about MMT and to ask the scientifically relevant question: Is MMT true or false? with truth well-defined as material and formal consistency. Who cares about whether MMT is “radical”?

The scientist’s goal is to definitively settle a given question: “That the settlement of opinion is the sole end of inquiry is a very important proposition.” (Peirce) The blatherer’s goal, on the other hand, is simply to blather on in all eternity. After all, professional windbags, journalists, propagandists, soapbox economists, and trolls seek, like anybody else, long-term employment in a decently paid job.

There is 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.

Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. This also holds for MMT. MMT is refuted on all counts. #1 Scientifically, MMT is dead and buried; however, it still has substantial talk-show qualities. #2

Brian Romanchuk brushes off the shallow pseudo-explanations provided by “various American conservatives”: “Modern Monetary Theory is part of a long line of post-Keynesian economics; if you want to understand the theory, there’s a lot of reading to do.”

True. Indeed, there is not only a lot of reading to do for MMTers but ― even more important ― of thinking. What MMTers do not understand to this day is that post-Keynesian economics is scientifically dead since Keynes. Keynes got macroeconomics wrong, and post-Keynesians, including MMTers, have not spotted the blunder. #3

The blunder is baked into the MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0. This equation proves that MMTers are too stupid for the elementary mathematics that underlies macroeconomic accounting.#4

Brian Romanchuk eventually stumbles upon the crucial point: “… my Twitter feed has been filled with condescending comments from mainstream economists who state that MMT has no empirical aspects to it. Firstly, if one does not read the literature, one will not find empirical work. Secondly, how much empirical work can we expect from theory in the first place?”

Good question. What, first of all, has to be done empirically is to decide between the false MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 and the axiomatically correct equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0. And this will settle the matter once and for all. The MMT equation will be empirically falsified ― after it has already been logically falsified ― and with it the whole verbal superstructure of MMT blather/fraud.

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT, see cross-references MMT
#2 The economist as stand-up comedian
#3 Why Post Keynesianism Is Not Yet a Science
#4 Wikipedia and the promotion of economists’ idiotism (II)

Related 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'The page where Stephanie Kelton gets macroeconomics wrong'.

Ontological uncertainty is NOT the problem but economists’ ontological stupidity

Comment on Lars Syll on ‘Paul Krugman ― a methodological critique’

Blog-Reference

When economists are asked why they have achieved little or nothing of scientific value in the last 200+ years, they answer that their subject matter is characterized by idiosyncratic difficulties, i.e. uncertainty and complexity. Here is the classical answer: “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort’.” (Bagehot, 1885) #1

The simple fact of the matter, though, is that economists are scientifically incompetent. One good example is Keynes.#2, #3 Keynes is known as the discoverer of economic uncertainty and its disastrous implications for the sheer possibility of economic theory.

What is uncertainty? “In his 1937 article entitled ‘The General Theory of Employment,’ Keynes, responding to critics of the general theory, offered the following definition of uncertainty: By ‘uncertain’ knowledge, let me explain, I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty. . . . Or . . . the expectation of life is only slightly uncertain. Even the weather is only moderately uncertain. The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence. . . . About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.” (Ferrari-Filho et al.)

Trivially true, indeed, except for the fact that ontological uncertainty is taken as a methodological excuse for the overall failure of economics: “One thing that’s missing from Krugman’s treatment of economics is the explicit recognition of what Keynes and before him Frank Knight, emphasized: the persistent presence of enormous uncertainty in the economy … Why is uncertainty so important? Because the more of it there is in the economy the less scope for successful maximizing and the more unstable are the equilibria the economy exhibits, if it exhibits any at all …” (Rosenberg, see Intro)

What economists overlook is that most of economic uncertainty is produced by the historically evolved bad design of the economy. Since Adam Smith, the economy is supposed to be a self-regulating system that produces optimal outcomes if not interfered with. Fact is, though, that the opposite is provably true. #4 As a result, it can be said that ontological economic uncertainty is, in most cases, the direct product of economists’ ontological stupidity.

Let us give one example.

As the analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Yw in each period, the price is given by P=W/R. The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R.

What is needed for a start is two things: (i) a central bank which creates money on its balance sheet in the form of deposits, and (ii) a legal system which declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Yw per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e., if C=Yw. Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. For the case of a balanced budget, the idealized transaction sequence of deposits/overdrafts at the central bank over the course of one period is shown under the label of Graphic AXEC98

The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. Money is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an accommodative role and simply supports the autonomous market transactions between the household and the business sector. The economy NEVER runs out of money. If employment L is doubled, the average stock of transaction money doubles. In a fiat money economy, growth is not hampered by a lack of a transaction medium.

The price is determined by the wage rate and productivity. Both vary over time unpredictably. Now, if one wants absolute price stability in the elementary production-consumption economy from beginning to eternity, one has to apply the simple rule: change of wage rate = change of productivity. That’s all. Productivity may be influenced by unpredictable weather conditions or external shocks; this uncertainty is compensated for by changes in the wage rate so that the market price P remains absolutely constant. Needless to emphasize that this also eliminates the problem of destabilizing price expectations.

The task of economists is NOT to senselessly repeat Keynes’ silly mantra ‘We simply do not know’, but to figure out how uncertainty can be eliminated from the economic system.

Do not expect that proven imbeciles like Paul Krugman or Lars Syll will ever figure out anything.

Egmont Kakarot-Handtke


#1 Failed economics: The losers’ long list of lame excuses
#2 Forget Keynes
#3 Cross-references Failed/Fake Scientists
#4 Proof of the inherent instability of the market economy

Related 'Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It' and 'Trust in economics as a science?' and 'Is Lars Syll’s stupidity really infinite?' and 'Cryptoeconomics ― the best of Lars Syll’s spam folder' and 'What is dead certain in an uncertain world: economists’ abysmal incompetence' and 'Uncertainty: ‘Whereof one cannot speak, thereof one must be silent’' and 'The scientific self-elimination of Heterodoxy' and 'Econogenics: economists pose a hazard to their fellow citizens'.

MMT: From science to agenda-pushing to story-telling to fraud

Comment on Ben Hunt on ‘Modern Monetary Theory (Or, How I Learned To Stop Worrying & Love The National Debt)’

Blog-Reference

There is 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.

Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). 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 economic concept ― profit ― wrong. In other words, there is NO such thing as scientifically valid economics.

This also holds for MMT. MMT is refuted on all counts. #1

Scientifically, MMT is dead and buried; however, it still has some use-value in the political Circus Maximus, where nobody ever cared for scientific validity and where useful idiots are in strong demand. #2

Accordingly, Ben Hunt does not waste a split-second on a scientific refutation of MMT but psychoanalyses: ”Modern Monetary Theory ― which is neither modern nor a theory ― is a post hoc rationalization of political expediency and power-expanding action. It makes us feel better about all the bad stuff we’ve done with money and debt for the political efficacy of Team Elite.”

With this, the whole issue is outside of science and in the bottomless swamp of politics. This swamp is the habitat of brain-dead blathers, agenda-pushers, entertainers, storytellers, propagandists, media trolls, and fraudsters.

Ben Hunt’s main arguments against MMT are: “MMT is the theoretical justification for the economic policies of Trump and his Wall Street fellow travelers alike, who want nothing more than to keep the market punchbowl in place and well-spiked with pure grain ZIRP alcohol forever and ever, amen. MMT is the theoretical justification for the economic policies of every potential Democratic presidential candidate in 2020. Because with MMT, you CAN have it all. You can pay for wars without end. You can pay for universal single-payer healthcare. You can pay for everyone to go to college. You can pay for a universal basic income.”

The political sovereign can, as a matter of principle, have any combination of war, healthcare, education, basic income, interest payments for existing debt, and easy money, given the production potential of the country. This is the very definition of sovereignty. The crucial question is: does all this happen (i) with a balanced budget or (ii) with deficit-spending/money-creation?

The pivotal trait of MMTers is that they abhor budget-balancing over any time span and promote permanent deficit-spending/money-creation. This translates into an ever-increasing public debt and the interest thereon.

The lethal negative effect of permanent deficit-spending/money-creation, though, is on distribution.#3 According to the macroeconomic Profit Law [Q≡Yd+(I−S)+(G−T)+(X−M) → Q≡(G−T)], it holds Public Deficit = Private Profit, and this means that MMT policy ultimately benefits the one-percenters and not the ninety-nine-percenters. To pay for social benefits with deficit-spending/money-creation is simply a political fraud.#4 Permanent deficit-spending is a permanent free lunch for the Oligarchy.#5

Ben Hunt, with his silly blather about Dr. Strangelove, Edward III, and Lysenko, obviously misses the full implications of MMT.#6

Economics is not a science, but a political agenda pushing. MMT, too, is NOT a valid theory but a political fraud for the benefit of the one-percenters. #7

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 The end of political economics
#3 MMT, money creation, stealth taxation, and redistribution
#4 MMT: Not a joke but a fraud
#5 MMT: A free lunch for the Oligarchy
#6 Deficit-spending, public debt, and macroeconomic profit/loss
#7 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

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REPLY to Andrew Anderson on Jan 19

You say: “Suppose the population of a country is increasing but the money supply does not grow at least proportionally? Then wages and prices, to the extent they utilize labor, can be expected to fall forever as more and more workers must compete for a fixed money supply.”

That is not correct for a fiat money system.

As the analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Yw in each period, the price is given by P=W/R (1). The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R.

What is needed for a start is two things: (i) a central bank which creates money on its balance sheet in the form of deposits, and (ii) a legal system which declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Yw per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e., if C=Yw. Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income.

For the case of a balanced budget C=Yw, the idealized transaction sequence of deposits/overdrafts of the household sector at the central bank over the course of one period is shown under the label Graphic. #1 

The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. Money is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an accommodative role and simply supports the autonomous market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=κYw, with κ determined by the transaction pattern. In other words, the average stock of money M is determined by the autonomous transactions of the household and business sector and created out of nothing by the central bank. The economy NEVER runs out of money.

The transaction equation reads M=κPRL (2) in the case of budget balancing and market clearing. If employment L is doubled, the average stock of transaction money M doubles. In a fiat money economy, growth is NOT hampered by a lack of the transaction medium.

As long as the central bank finances the wage bill Yw=WL with money creation out of nothing, and with wage rate W and productivity R fixed, the price P does not move one iota according to (1). The average quantity of money M increases/decreases according to (2), but there is no inflation/deflation. The creation of fiat money for the payment of wages is the correct way of bringing money into the economy.  MMT deficit-spending is the incorrect way.

There is neither government spending nor taxation needed to get the elementary production-consumption economy going and growing.


#1 AXEC98 Idealized transaction pattern

MMT: Not a joke but a fraud

Comment on Michael R. Strain on ‘Modern Monetary Theory’ Is a Joke That’s Not Funny’

Blog-Reference and Blog-Reference

Michael R. Strain opens the argument: “First, let’s start with the confusion over what it is. The answer seems to depend on which advocate of MMT is being asked. It is sometimes a theory of money. MMT is also being discussed in the context of a political program to justify huge increases in social spending. Finally, there is its role as a prescription for macroeconomic policy. … Even as just an economic theory, it is not settled or fully developed. … The bedrock observation of MMT is correct: Any government that issues its own currency can always pay its bills.”

What is specific to MMT is the claim that almost all economic/social problems can and should be solved by deficit-spending/money-creation. MMT is advertised as a potent medicine that benefits the ninety-nine-percenters and that has no serious short- or long-term negative side effects. MMT claims further that orthodox economics is provably false and that orthodox policy is counterproductive.

MMT is three things: theory, policy, activism. These three elements are constantly mixed in the public debate and this guarantees inconclusive blather in all eternity which keeps soapbox economists, journalists, agenda pushers, propagandists, social media trolls, and the rest of the Circus Maximus employed and fed.

MMT theory is provably false, i.e. materially/formally inconsistent. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern for consistency, truth, or scientific validity.

The lethal negative effect of permanent deficit-spending/money-creation is NOT on inflation but on distribution.#1 According to the macroeconomic Profit Law [Q=Yd+(I−S)+(G−T)+(X−M) → Q=(G−T)], it holds Public Deficit = Private Profit and this means that MMT policy benefits the one-percenters and not the ninety-nine-percenters.

Expressed as a parable. The MMTer resembles a person who prints counterfeit money, say a million, and distributes it with great fanfare among the poor of the town. The media praise her as a fine example of social responsibility and charity. The economic effect of the matter, though, is that the workers are the real benefactors who unwittingly are made to share their real income with the poor. The redistribution of output is effected by barely noticeable price hikes. In the end, the counterfeit money ends up as profit of the business sector as a whole.

The undeniable charm of MMT policy is that apparently there are only winners. Fact is, though, that MMT is proto-scientific garbage and political fraud#2 and that, at the end of the day, the ninety-nine-percenters hold the bag.#3, #4

As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt of WeThePeople.

Egmont Kakarot-Handtke


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#3 MMT = proto-scientific garbage + deception of the 99-percenters
#4 Deficit-spending, public debt, and macroeconomic profit/loss

Related 'Warren Mosler: scientific dilettante and political fraudster' and 'How MMT makes everybody happy' and 'MMT is NOT bold policy but spineless fraud'. For the full-spectrum refutation of MMT see cross-references MMT.

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REPLY to Bob Roddis on Jan 18

You ask: “Do I have that right?”

No, you don’t get anything right. Bad Austrian karma.

Imagine for a start an elementary production-consumption economy with a balanced household sector budget in the initial period, i.e. C=Yw.#1

Now, if the government runs a deficit in period 1, total expenditures are C+G, the market-clearing price rises (no inflation), and the business sector makes a profit Q=G. Taxes are zero, i.e. T=0.

The banking system consists alone of the central bank. So, profit takes the form of deposits at the CB. The business sector’s deposits are equal to the government’s overdrafts. For a start, there is no interest on deposits/overdrafts.

If the government decides to issue bonds in order to consolidate their overdrafts at the central bank and the business sector buys these bonds then both overdrafts and deposits go again to zero. Money = deposits at the CB vanishes. The business sector now holds interest-bearing bonds. The government has to tax the household sector in order to pay interest to the bondholders.

The government’s debt took first the form of overdrafts and then the form of bonds (liabilities). The business sector’s profit took first the form of deposits and then the form of bonds (assets).


#1 Deficit-spending, public debt, and macroeconomic profit/loss

Warren Mosler: scientific dilettante and political fraudster

Comment on Tom Hickey on ‘Brendan Greeley ― America has never worried about financing its priorities’

Blog-Reference

Tom Hickey features Stephanie Kelton and Warren Mosler as the two major MMT spokespersons.

Stephanie Kelton has been refuted elsewhere.#1 Here, Tom Hickey’s summary of Warren Mosler’s arguments is taken as a checklist for the detailed final refutation.

“1. The currency itself is a state monopoly.” Half-true. The central bank (in a closed economy) is the institution tasked with the creation/destruction of money according to the needs of the household sector, the business sector, and the government sector. The specifics of the task and the rights/obligations are defined by the Legitimate Sovereign.

“2. The ‘money story’ begins with a state desiring to provision itself.” False. The money story begins with the elementary production-consumption economy with the household sector receiving money wages from the business sector and the households spending their wage income by buying stuff from the business sector. Money is created out of nothing and completely destroyed in the process. There is no such thing as a fixed stock of money.#2, #3

“3. Taxation by design functions to create sellers of goods and services (unemployment) seeking the state’s currency in exchange to avoid tax penalties.” False. A Zero-Tax Economy is feasible.#4

“4. The state (or its agents) is the single supplier of that which it demands as payment of taxes.” False. The definition of central bank money as a general discharge of liabilities includes tax liabilities. As a generalized IOU central bank money discharges, first of all, the wage claims of workers against the firms that comprise the business sector.

“5. Therefore the state, from inception, necessarily spends first, after which tax payments are made …” False. The sequence, i.e. G before T vs T before T is NOT decisive. The crucial point is the balance, i.e. G greater T = deficit vs T greater G = surplus, in a period of a given length. The central bank finances G by money creation and gets T back and destroys the money. If T=G, the budget is balanced, otherwise not. If G is greater than T, the business sector makes a profit, otherwise, it makes a loss. This follows from the macroeconomic Profit Law.#5 It is completely irrelevant for profit/loss in a given period whether the government spends first and taxes later or the other way round.

“6. The public debt is nothing more than the funds spend by the state that have yet to be used for tax payment, …” True. Public debt is a tax liability of the household sector that is rolled over for an indefinite time. This liability generates interest income for the Oligarchy, which is taxed from WeThePeople for an indefinite time. When the accumulated deferred taxes (= public debt) are eventually paid, the economy faces a crisis because profit turns into loss.#5 In sum: The macroeconomic Profit Law Q≡(G−T)+(I−S)+Yd implies Public Deficit = Private Profit. So, private financial wealth grows in lockstep with public debt. WeThePeople owes the public debt, and the Oligarchy owns it.

Note well that Warren Mosler never mentions the word profit and the negative distributional effects of deficit-spending/money-creation on WeThePeople.#6

MMT’s Warren Mosler is a stupid/corrupt political agenda pusher.#7, #8

Egmont Kakarot-Handtke


#1 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#2 The ultimate ― analytical ― origin of money
#3 The creation and value of money and near-monies
#4 The Third Way: Towards the Happy Zero-Tax Economy
#5 Deficit-spending, public debt, and macroeconomic profit/loss
#6 MMT sucks
#7 MMT: The one deadly error/fraud of Warren Mosler
#8 MMT, Warren Mosler, and the little helpers from Wall Street and Academia

Related 'Proof of MMT's inconsistency' and 'Criminals and the monetary order' and 'The counterfeiter never runs out of money' and 'Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople' and 'MMT’s true program'.

For more on Warren Mosler see AXECquery.

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