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Quick Video: MMT (Patreon)

Published:
2020-12-21 13:33:28
Imported:
2026-06
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Content

Hey everyone! I've been wondering what I should do for my patrons and I was thinking of writing, but then I realised videos would be more appropriate. So this is the first in a series of semi-scripted, lightly edited videos where I just talk with my logo in the background. The first one is about Modern Monetary Theory, which I've been asked about the most since I started my channel. I hope it's helpful for people, let me know your thoughts in the comments.

Have a great Christmas everyone!

Sources and Further Reading

Macroeconomics , Mitchell, William, L. Randall Wray and Martin Watts

The Deficit Myth, Stephanie Kelton

Josh’s tweet:

https://twitter.com/JWMason1/status/1335803455215120384

Josh’ in-depth article:

https://www.ineteconomics.org/perspectives/blog/mainstream-macroeconomics-and-modern-monetary-theory-what-really-divides-them

Jo's Tweet:

https://twitter.com/JoMicheII/status/1091424535151292417

Jo’s review of the MMT textbook

https://www.researchgate.net/publication/335883216_Book_Review_Mitchell_William_L_Randall_Wray_and_Martin_Watts_Macroeconomics

Alberto Bisin’s review of The Deficit Myth:

https://s18798.pcdn.co/albertobisin/wp-content/uploads/sites/16384/2020/10/KeltonByBisin.pdf

Nathan’s substack (recommended):

https://nathantankus.substack.com/

Files

Previews only

MMT

Quick video with some loosely structured thoughts on MMT, for patrons only. Sources and Further Reading Macroeconomics , Mitchell, William, L. Randall Wray and Martin Watts The Deficit Myth, Stephanie Kelton Josh’s tweet: https://twitter.com/JWMason1/status/1335803455215120384 Josh’ in-depth article: https://www.ineteconomics.org/perspectives/blog/mainstream-macroeconomics-and-modern-monetary-theory-what-really-divides-them Jo’s review of the MMT textbook https://www.researchgate.net/publication/335883216_Book_Review_Mitchell_William_L_Randall_Wray_and_Martin_Watts_Macroeconomics Alberto Bisin’s review of The Deficit Myth: https://s18798.pcdn.co/albertobisin/wp-content/uploads/sites/16384/2020/10/KeltonByBisin.pdf Nathan’s substack (recommended): https://nathantankus.substack.com/

Comments

Federico Malerba

Great video, and thanks for the further resources you gave. I went into Josh's article as well and one question I keep not finding an answer to is what the purpose of government debt is when you operate from the point of view of MMT? I mean, my understanding is that according to MMT the government can never have an accounting problem (i.e. not being able to service its debt), whilst the only things it needs to be careful about are: 1) How much money it is putting into the economy relative to the output and its possible increase 2) How many taxes are levied to keep demand for money at a steady level 3) Which sectors of the economy are receiving this money (The three points above are just a more fleshed out version of "Beware of inflation") So if the central bank is in any case going to cover the state's spending at the government's request, what is the point of asking for money to private sector? Why not have all public debt in the hands of the central bank? And if all public debt is in the hands of the central bank, what is the purpose of keeping it in the books? Should we not just worry about how much money is in circulation and maybe instead of debt think about the variation in the amount of money that is in the economy?

Unlearning Economics
>>53080226

MMT does prompt the question "what if the central bank just spent money?" and leading proponents do argue that the public debt is useless. As you will see one of the argument for public debt is that it provides a safe asset for the financial system, including pensions, but MMTers would say that this is just an unnecessary middleman and those could be provided directly through the state. The deeper point, though, is that all money is a kind of debt (just look at a bank note!), and debt can also serve as money, depending on how 'liquid' the debt is. Cash is just the most liquid form of debt. There is no way of avoiding a web of currency obligations as every asset created must have a corresponding liability. The real question is what these should look like, and when and whether we could just cancel them. To return to the main question, can the central bank just cancel the debt it is owed by the government? The anwer is yes! http://bilbo.economicoutlook.net/blog/?p=31715

Hywel

Thanks for putting this video together, I've been following your work as well as MMT for a while now so I subscribed to hear your take! I have a few questions/comments if that's ok: 1. (3:06) I'm curious why you make a distinction between Tankus and other MMTers? 2. (5:02) Saying that taxes fund spending by freeing up resources for the government sounds a little strange to me outside of a scenario of direct competition between the government and other buyers (such as a war economy), it suggests that the government would typically be unable to engage in spending without the taxation. I see what you're saying but it seems to distort the power dynamics somewhat? In the hypothetical case of competitive bidding for resources between the state and everyone else, doesn't the currency issuer always win? As I understand it the MMT narrative on taxation is about clarifying the strength of the state. The fact that taxation and spending are operationally distinct makes it clear that the government is not reliant on rich people's money in order to pursue its goals. Compare this to the mainstream story depicting a weak government that must 'borrow' from investors to spend. The rhetorical shift is significant, though I appreciate that this is less interesting from an academic standpoint than from a political one. With that said I fully agree with you at (6:20) that something ambitious and resource intensive like a GND would not be feasible without increased taxation. 3. (7:58) Taxes have several potential purposes according to MMT, one of them is controlling inflation. A lot of people go from there to assuming MMT economists favour taxation as the primary tool for inflation management but that's not the case. From the FT piece on inflation by Fullwiler/Grey/Tankus: "When MMT says that a major role of taxes is to help offset demand rather than generate revenue, we are recognising that taxes are a critical part of a whole suite of potential demand offsets, which also includes things like tightening financial and credit regulations to reduce bank lending, market finance, speculation and fraud." 4. (8:28) I believe the 97% figure is arrived at by excluding bonds from M4/broad money, whereas MMTers would include bonds bringing that figure down a lot. I don't know what the actual ratio would then be for bank credit/government spending in the UK, I recall someone estimating that banks would still have created over half the money in circulation but nowhere near 97%. 5. (9:20) 'Currency' in MMT terms refers to high-powered money. Like you I'm not keen on intra-heterodox twitter arguments, but I should point out that there was a response to Mason's review of TDM on these points both in the thread you linked and in this article: https://lpeproject.org/blog/the-deficit-myth-banking-between-the-lines/. For what it's worth Kelton insists she was careful to distinguish between currency and other forms of money in the book. 6. (10:30) The formulation I'm familiar with is that the private sector can only NET save if the government runs a deficit (leaving aside the external sector). The claim is that the government is the only entity that can create net new financial assets in the private sector without a corresponding liability in the private sector. In practice I see this as significant in arguments about austerity and private debt by clarifying the position of currency issuer vs currency user, again perhaps from an academic perspective it's not as significant.

Tom
>>53927393

+1 to the curiosity around the distinction points of Tankus. And thank you for point/question 2. I had assumed this too at first that being able to outbid should allow for easy monopsony but I’m wondering if the worry that the added income flowing to the seller when the government tries to compete without diminishing their competitors could unduly “distort” the economy and draw unproductive extra labor and resources to the industry or just provides higher pay to consuming workers (assuming it doesn’t get completely captured by capital). But I would think that’s a very weak argument since a broad general tax on all income would not diminish their industry specific competitors all that much I would think.