Humans are susceptible to a few characteristics. We blame and scapegoat. We reify theories and we set up competing social constructs to explain reality — my reality is better than your reality.
There are a few humans who examine facts and use science, mathematics and research to explain reality.
Unfortunately it seems those who rely on facts and actual accounting data are scarce amongst the economists who often are competing to put forward and market their preferred social construct of reality.
This article and others by Jim (and other MMT folks) are good efforts to critique the conventional wisdom — another way of describing social constructs.
Yes. But you might find it of interest to note that those who write of social constructs often identify money as the first social construct mentioned.
Like everything else there are positive and negative feedback loops to social constructs. They can be seen as dysfunctional but also helpful. Would cryptocurrency be a negative feedback loop to money.
Another useful piece but I still have a question. We hear that interest on the national debt is becoming a bigger and bigger burden and percentage of total spending. What would MMT say about that piece?
Neither the debt nor the interest on the debt is a burden for governments that issue their own currency. The number on the spreadsheet goes up - but those numbers can continue to go up forever and it still would't be a problem for currency issuing governments. If the debt is in your own currency - which you issue - it isn't a problem. If the debt was in someone else's currency it would be a problem - because you would have to find or borrow the currency to pay it off.
However, in a jurisdiction where the law requires that government balances its overdraft at the Central Bank by issuing an equivalent amount in bonds, the debt does have undesirable consequences in that the interest paid on it exacerbates wealth inequality. Those that can afford to buy bonds get paid for passively holding them rather than for 'doing work' like the rest of us.
This also invites the question: When government first spends a new pound or dollar into the economy to purchase a good or service, that pound / dollar ends up in the bank account of the person that sold the good / service. The bank then uses this money to buy the bond that cancels the overdraft of the issuing government. Does this not then mean that the MMT statement that 'government deficits equals private sector savings' is false? or are the bonds held by institutions considered to be those 'private sector savings' rather than, or perhaps 'as well as' the asset of institutional savers? Even if the answer to the latter is 'yes', that still means that the 'liquid money' in the economy, i.e. current account money, cash-in-hand and unsettled private balances must come from another source, and that other source can only be from private sector bank-loans.
Hi Kevin, You are right about who get free money from the government, , i.e., welfare for the wealthy – as those are the people who recieve the interest on government bonds: although of course this system is also providing income for retirement funds - which is a wider group of people. In relation to government spending: when reserves are credited at the bank level - those reserves stay in the banks reserve account at the CB - but a matching deposit is created for the customer. The customer is in the private sector - as is their money.
I believe that Clara Mattai has found the answer to Orthodox economics and how it was constructed to protect capitalists from a successful peasant revolution after the successful Russian Revolution. Great read.
Clara Mattai has been a guest on the Macro N Cheese podcast. Episode 198 – The Trinity of Austerity with Clara Mattei – Real Progressives https://share.google/a73oJovYErxPCWHXE
Humans are susceptible to a few characteristics. We blame and scapegoat. We reify theories and we set up competing social constructs to explain reality — my reality is better than your reality.
There are a few humans who examine facts and use science, mathematics and research to explain reality.
Unfortunately it seems those who rely on facts and actual accounting data are scarce amongst the economists who often are competing to put forward and market their preferred social construct of reality.
This article and others by Jim (and other MMT folks) are good efforts to critique the conventional wisdom — another way of describing social constructs.
That’s for sure Herb. There is one area in which mainstream economist show their creativity, and that is in their criticism of MMT.
Yes. But you might find it of interest to note that those who write of social constructs often identify money as the first social construct mentioned.
Like everything else there are positive and negative feedback loops to social constructs. They can be seen as dysfunctional but also helpful. Would cryptocurrency be a negative feedback loop to money.
Originally, I was going to say Austrian economics, but then I realised you said 'criticism from mainstream economists'.
Another useful piece but I still have a question. We hear that interest on the national debt is becoming a bigger and bigger burden and percentage of total spending. What would MMT say about that piece?
Hi Cylvia, Thanks for your comment.
Neither the debt nor the interest on the debt is a burden for governments that issue their own currency. The number on the spreadsheet goes up - but those numbers can continue to go up forever and it still would't be a problem for currency issuing governments. If the debt is in your own currency - which you issue - it isn't a problem. If the debt was in someone else's currency it would be a problem - because you would have to find or borrow the currency to pay it off.
Here's an article by Stephanie Kelton discussing how the media uses big numbers to scare people, when of course, it doesn't matter a jot how big the debt number is - when you issue your own currency. https://stephaniekelton.substack.com/p/the-debt-scolds-are-back-for-now
However, in a jurisdiction where the law requires that government balances its overdraft at the Central Bank by issuing an equivalent amount in bonds, the debt does have undesirable consequences in that the interest paid on it exacerbates wealth inequality. Those that can afford to buy bonds get paid for passively holding them rather than for 'doing work' like the rest of us.
This also invites the question: When government first spends a new pound or dollar into the economy to purchase a good or service, that pound / dollar ends up in the bank account of the person that sold the good / service. The bank then uses this money to buy the bond that cancels the overdraft of the issuing government. Does this not then mean that the MMT statement that 'government deficits equals private sector savings' is false? or are the bonds held by institutions considered to be those 'private sector savings' rather than, or perhaps 'as well as' the asset of institutional savers? Even if the answer to the latter is 'yes', that still means that the 'liquid money' in the economy, i.e. current account money, cash-in-hand and unsettled private balances must come from another source, and that other source can only be from private sector bank-loans.
Hi Kevin, You are right about who get free money from the government, , i.e., welfare for the wealthy – as those are the people who recieve the interest on government bonds: although of course this system is also providing income for retirement funds - which is a wider group of people. In relation to government spending: when reserves are credited at the bank level - those reserves stay in the banks reserve account at the CB - but a matching deposit is created for the customer. The customer is in the private sector - as is their money.
If I may, Jim? Feel free to have me remove this is you think it is inappropriate. G'day Cylvia, please see no. 12 here - https://darrenquinn.substack.com/p/15-things-wrong-about-mmt and this MMT in a nutshell post - https://darrenquinn.substack.com/p/modern-money-in-a-nutshell-2
I believe that Clara Mattai has found the answer to Orthodox economics and how it was constructed to protect capitalists from a successful peasant revolution after the successful Russian Revolution. Great read.
The Capital Order a book by Clara E Mattei - Bookshop.org US https://share.google/rCGOgMta5vEEBIHvA
Thanks for the 'heads up' Mark.
Clara Mattai has been a guest on the Macro N Cheese podcast. Episode 198 – The Trinity of Austerity with Clara Mattei – Real Progressives https://share.google/a73oJovYErxPCWHXE
Thanks Mark.
You may also like the Code of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor.
Thanks Darren.