Washington establishment freaks out as Modern Monetary Theory gains currency

The main issue I have with the MMT community is that their currency-stabilization plan is for the political branches to adjust taxation to remove money from circulation (destroying it) instead of for the monetary authority to raise and lower interest rates, effectively adjusting the rate of money generation (bearing in mind partial reserve banking.)

This is something that the political branches are, by observation, loathe to do and when they do it they’re very slow. Over the decades I’ve done enough control system design to know that putting delay into a control loop is not good for its stability.


The way I interpret it is, interest rates are the fast, fine control knob and taxes are the semi-autonomous (since they scale automatically), slow, gross control knob.


This might work in parts of the economy where the inputs are highly fungible.

What happens when you try to apply MMT to green energy, and it runs up against a limited supply of silicon and rare earths?

What happens when you try to apply MMT to health care, and it runs up against a limited supply of doctors and nurses?

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If we run short of silicon, we have far greater problems than monetary system management!


Silicon is 28% of the earth’s crust.


North America has an abundance of rare earth minerals, they are just more expensive (generally) to obtain than in countries with extremely low labor rates and little to no regulation.

The problem isn’t absolute scarcity, it’s money.

Likewise, the “supply” of doctors and nurses is a case of artificial scarcity. If you need more (we do!), train more.


MMT is already at work in health care. It’s called Medicare. Just because it is currently structured as a trust fund doesn’t mean MMT ain’t at work.

MMT is already at work in energy. It was called the Tennessee Valley Authority.

MMT is already at work in biomedical sciences. It was the Human Genome Project, the Cancer Moonshot, and California Institute for Regenerative Medicine (CIRM).

There’s lots of other examples out there.

Edit: just found the CIRM impact analysis. Here’s a brief summary of the project. ~15 years ago California voters approved a ballot measure to do a tiny increase on tax and fund $3B in R&D in stem cell medicine after the Bush administration had banned a lot of it 3 years earlier. CIRM was then formed by the state government and went on to administer a cleverly-staggered series of grant sprees, where at first they were funding infrastructure-creation proposals but later shut that down and moved on to funding development-stage proposals. Over 15 years, the ~$2.7B invested without taking equity or ownership stakes in IP has returned $16B to the economy, created 88k scientific jobs, and set up the best advanced cell and gene therapy manufacturing and testing infrastructure in the world. And these are just the early impacts. They will keep growing over time because they have led to the founding and success of multiple companies, academic research groups, and infrastructural resources that enable this kind of research to succeed.


I must admit I’ve never really been able to think through all the implications of what the MMT theorists are saying. Something just seems a bit off with it which I can’t put a finger on.

It seems to be saying exactly the same thing as Keynes does in the face of a depression, but that this state of affairs would continue during growth as well?

I’d like to know how it accounts for real issues in economic history, and how it differs from our standard interpretation of these events. Also, I’d really like someone knowledgeable in economics, like Piketty or Stiglitz to do a proper explainer for the layman.


In some sense, all resources on Earth are limited (except, perhaps, sunlight)

Apply resources to grow more of them.

(‘grow’ = attract, train, retain)(‘resources’=teachers, money, etc)


Almost every “deep insight” I’ve encountered, in any field, seems to involve some kind of foreground/background reversal where shifting your perspective on what counts as an object suddenly makes the dynamics clear. Correct or not, I find MMT attractive in part because it seems to have that kind of structure in regards to money.

To the question above about debt: not an economist, but I would think debt is also a way of taking money out of certification while promising to replace it in the future. It also obligates more actors to support the continuation of your economic system long term


Ok, so pay no attention to the https://www.usdebtclock.org/ That’s great and all but one question. If there’s all this money they can just create, why do I have to pay so much in tax?


You mean we’re not a spherical consumers in a vacuum?


I’m a perfect consumer - no resistance to shopping!


I’d be happy to engage with this idea if you come back with an argument made in better faith than that.


The bond market is enormous compared to equity markets.

Treasury bonds act in two ways; they act as a safe haven for global markets as the U.S. dollar is the world reserve currency (think of a clearing desk for equities. An enormous amount of global transactions are “cleared” through the use of dollars or dollar based bonds). The world runs on dollars and treasuries to complete global transactions and to hold in different nation’s central banks to insure their own currency viability (this isn’t patriotic drivel nor condemnation. It just is what exists).

Another use for bonds is that they are a very safe way to park large amounts of money at interest. If there was no bond market, equity, real estate, and art markets would be overwhelmed and a crazy boom/bust cycle for these trading vehicles would be guaranteed.


Generally when people talk about MMT they reference the American economy. But America is a bit of an exception. Being the largest economy and controlling the world’s reserve currency distorts things a bit. This can sometimes make “conventional” economic theory a little wonky. Like, America can get away with things a small country can’t.

So, does MMT work for, say Latvia or Guyana?



Not sure about BB a few years ago, but pretty much the entire right wing was predicting massive inflation due to quantitative easing, because OBAMA.


SUSB woot!


A great example of this is the UK under Tory governments. They try to reduce their deficit by reducing their income…


Bernie would be doing everyone a favor by explaining in a common sense way how economic things work. For far too long, exploiters and their apologists have been defining everything economic for the public – for the benefit of the exploiters. That needs to change, b/c we are no longer their sheep to shear.