alloneword wrote:I went over this same point with a Marxist tag team
right here on RI about 12 years ago
Great post, thanks. In that old thread, you wrote,
Since every dollar/pound that exists is 'created' by debt that bears interest, there can logically never be enough 'money' to repay the debt, since only the principal sum was ever created - the 'money' to repay the principal plus interest does not exist.
However, a key tenet of MMT informs us that those dollars can be created
without debt. That's critical to any response to critics who compare government 'deficit' spending to "credit card" spending (
"eventually somebody has to pay that bill!!"... BZZZT wrong.)
I used to repeat that same quoted sentence, and it's a fascinating way to look at money, but it turns out to be another excuse to constrain federal spending on the public good.
Anyway, thanks for posting this rebuttal from the MMT crowd — I'm sending it to the person who first sent me Henwood's piece as evidence that MMT is a lot of hooey that will send us spiraling into hyperinflation yada yada....
alloneword wrote:I'm grateful, really, as he led me to this rebuttle:
Modern Monetary Theory (MMT)—A Response to Henwood
Posted May 02, 2019 by Nathan Tankus, Rohan Grey, Scott Ferguson, and Raúl Carrillo
The essay is little more than a inchoate mix of old MMT criticisms that have been responded to ad infinitum, plus some unique historical cherry-picking. Because unraveling every “Henwoodism” would require a book, we are not going to reply to each specific point.
Instead, we will focus on what matters—the politics of full employment in the Green New Deal era. We think it’s important and instructive for the left to see just how badly Henwood gets it wrong. For us, there are three critical problems:
First, Henwood is ignorant as to the deeper connections between central banking operations and class struggle.
Second, this leads Henwood to miss the structural role of government debt within capitalism.
Finally, and most importantly, Henwood is dead wrong on the contemporary politics of public finance and taxation.
Early in his screed, Henwood asserts that “[r]eserve accounting is important if you’re a financial economist or a central banker, but it’s of limited relevance to anyone concerned with big-picture economic questions.” MMT advocates, of course, think otherwise. In fact, it would be surprising if central banking had little to do with the “big picture economic questions.” Henwood’s contention that focusing on central banking means ignoring class struggle is circular; he simply ignores MMT analysis demonstrating that such understanding strengthens the cause. [levyinstitute.org].
The shallowness of Henwood’s critique is especially clear when he painfully misinterprets Kalecki’s “Political Aspects of Full Employment” [equitablegrowth.org]. In full concert with MMT, the essay literally begins with Kalecki describing how the government pays for the services by crediting bank accounts, but also drains reserves by selling bonds. Furthermore, Kalecki argues that the central bank can control key interest rates, no matter the amount of deficit spending. Now, contrast Kalecki’s analysis with Henwood...
<snip>
Some favorite snips:
In addition to missing the mark on central banking in general, he betrays ignorance of the many fundamental functions of safe government securities within capitalism—another analytical mistake that undermines his political conclusions. U.S. Treasury bonds will be issued regardless of their putative role in public finance.
Selling treasury securities is not tantamount to placing the U.S. State in the thrall of the investor class. Persistent deficit spending is not a “few steps down the road to Weimar”, as Henwood contends. If we truly want to end the wealthy’s free lunch, the answer is not austerity or—shudder—“sound finance.” It’s euthanizing the rentiers. It’s lowering Treasury Bond interest rates and pursuing a permanent zero interest rate policy [neweconomicperspectives.org]. One would expect a Marxist to understand how this policy prescription threatens the status quo.
For Henwood, the left’s role is merely to argue extra hard for corporations and the wealthy to pay their “fair share” of taxes. This amounts to a more boisterous version of Hillary Clinton’s politics.
It is no coincidence that Thatcher went to great lengths to manufacture a conventional wisdom that “there is no such thing as public money, only taxpayer money”. Weaponizing taxpayer identity has been fundamental to the rise of neoliberalism, generally, and it played a big part in getting Trump elected, specifically [thenation.com].
For over 40 years, Republicans have controlled the conventional wisdom around budgets, successfully using the “taxpayer money” myth and to force Democrats to cut social spending.
MMT demonstrates that the rich are a troublesome barrier to a better world, but we need not rely on their money [stitcher.com]. Of course, exposing neoliberal lies about the constitution of public finance is obviously not sufficient for achieving leftist aims, but it is necessary.
The threat that MMT—and especially leftist deployment of MMT—poses to the status quo is becoming more apparent everyday.
Deconstructing monetary and fiscal policy isn’t skirting the administrative and political challenges of implementing the Job Guarantee or the Green New Deal; it’s denying the foundational neoliberal myth that justifies why those programs shouldn’t be seriously considered in the first place. Henwood argues that showing the “system can’t pay” is politically useful. We argue that showing the system can obviously pay, but won’t pay, is infinitely more powerful in demonstrating why the status quo must go.
Professor Kelton remains an economic advisor to Senator Bernie Sanders.
to pass and administer the policies we all desire deeply, we think the left must embrace MMT. In doing so, we’ll finally bury “sound finance” (including ‘socialist’ sound finance) and, with it, the rest of the neoliberal order.