A Beginner’s Guide to MMT

Warren Mosler is one of the advisers to our company for over a year now. I had a lot of discussions with him about these kinds of things and I originally reached out to him because we are building a crypto currency platform to allow any community, from a casino or festival, to a city or even a country, to issue its own currency. We are still looking for some Economists with other views to balance out MTA.

So, I can tell you that Warren Mosler at least is formulating the theory a bit differently. He starts with the fact, or the claim, that taxes are the primary driver of demand for a Fiat currency. I argued with him about this point. Economists with other views to balance out MMT.

So, I can tell you that warren Mosler at least is formulating the theory a bit differently. He starts with the fact, or the claim, that taxes are the primary driver of demand for a Fiat currency. I argued with him about this point. But if you except it, then it follows that taxes create a scramble by many participants in the local economy to obtain enough money to pay those taxes. Then the government prints the very money that everyone is scrambling to obtain. Warren Mosler concludes by saying that the government is not constrained in how much debt it can take on because a dollar and a treasury bond for a dollar are just two different types of accounts that exactly balance each other. To me this is ignoring everything outside the system. It’s like saying a bank can leverage its reserves as much as it wants because every loan it gives are just assets and liabilities on different sides of the ledger. MMT always acknowledges inflation matters, but it seems to be lip service.

I have come to describe the macroeconomics of the USA very simply:

1. Every country fights to protect its exports because that’s what lets its citizens import everything they need. Russia will fight to export natural gas. And so on.

2. After Bretton Woods, our chief export is not even Music and IP, it’s DOLLARS. We print them, and for decades everyone arouns the world produced goods and services for us, in exchange for dollars.

3. Our dollars and treasuries are used as reserves by banks. Also we engage in petrodollar warfare. We used to buy oil from Saudis, and now we sell weapons to them for the same money we gave them. And so on.

4. The USA is unique in its immunity to inflation and printing. Most countries cannot sustain such high debt to GDP ratios without their treasuries becoming devalued. USA treasuries may eventually face competition from China etc. but we still have a lot of demand for our export, by the world banks and consumers.

5. Being able to print your own currency and run your own monetary policy is essentially the power to impose a flat tax on your local economic activity. When PIIGS countries had their own currencies, they could finance public parks etc. When they joined the Eurozone, they lost a lot of that power and their public infra got bought by German banks. Greece, the “originator” of DEMO KRATIA (power of the people) lost power to foreign capitalists. People and jobs emigrated, capital flight ensued. This also happens in the USA on a city level (Detroit) and state level (Illinois and Puerto Rico).

6. Conclusion: Having your own money supply allows you many chances to print your way out of debt, and also run monetary policy. That always leads to stronger local communities vs the foreign capitalists. But doing too much causes capital flight and an increase in money velocity, ie devaluation of your local currency from an outside perspective.

7. MMT correctly advocates, like Keynsians, issuing money to pay for infrastructure and Universal Health Insurance / Food / Basic Income. Because it can lead to more real economic activity. It’s like a startup that spends correctly on the things tht make it grow and provide a return on investment. More coins chase more goods and services so there is no inflation. In fact, it attracts real capital to the community. But if there is malinvestment and bad bets, too many of those cause inflation.

8. Inflation isn’t just redistributing from the lenders to the borrowers. It also makes the wage earners who aren’t immediately investing their currency into something else the losers. It makes a hot potato hotter and hurts those who don’t have great wealth management.

Based on the names that you supplied, I'm guessing that you assume that MMT is a left-wing idea. I think the bigger reason to pay attention to it is because it has support on both sides of the American political spectrum. Read The Macro Tourist's post [1] for a pragmatic trader's take on the matter. He also suggests that Trump is already an implicit proponent of MMT, what with his increased spending and decreased tax revenue.

[1] https://www.themacrotourist.com/posts/2019/01/23/mmt/

Let me tell you a secret, Congress ALREADY runs the economy. They just ACT like they don't. Notice they had no issue implementing tax cuts (increasing money supply) AND increasing military spending (increasing money supply). They act like they don't because otherwise, people might wonder "Hmm, if they can do that for the rich, and they can do that for the military, maybe, just maybe they can do that for me!". And then people might get strange ideas like, maybe we can afford universal health care, maybe we can have a system oriented towards their needs.

So Congress doesn't want the people to know they already control the economy, because otherwise, people might want them to do the job they elected them to do.

>The survey of economists that the article poo-poos includes the comment by one economist that a government can print to pay its own debts exactly once (because people loaning to the government figure it out quickly).

The government can pay its own debts as many times as it wants.

It can also dial the interest rate up and down virtually at will through QE or raising interest rates.

It actually makes less sense to think of government debt as debt and makes more sense to think of it mainly as a publicly run savings account.

The government can also push private sector loan interest rates up or down at will through the setting of the base rate.

But FTA: MMT rejects the modern consensus that economies should be steered primarily by the raising and lowering of interest rates. MMTers believe that the natural rate of interest in a world of fiat money is zero and that pegging it higher is a giveaway to the investor class.

So according to the article, MMT actually holds that interest rates are held too high under conventional monetary policy.