Ok, I tried this once before and now it looks like another thread has taken off where my last one was left.
What I'm looking for is a formal, thorough, critique of MMT from an Austrian perspective.
Please do not post unless you understand MMT, meaning you have read something like the explanations by Cullen Roche and Warren Mosler.
A decent critique has been done at Seeking Alpha, but it fails by over criticizing in some areas and not going into much of the Austrian concepts I am interested in hearing about, like interest rates and the production structure.
If you know of an article, or are willing to provide your own insight I would very much appreciate it.
warrenmosler:Right, exactly my point with regards to the state's currency! the state, or its designated agents, has exclusive control of both 'nominal' supply and 'nominal' demand.
the state, or its designated agents, has exclusive control of both 'nominal' supply and 'nominal' demand.
I said supply, not demand. You're assuming too much. It's the foundation of your "theories" but that's what we generally reject. You place too little understanding on the role of money in a market economy and too much on taxation and bookkeeping. Or at least those are the charges as I understand them. I'll be honest, there are dozens of guys like you with pet economic and political theories that come here to discuss, promote or defend them.
At the end of the day, I haven't seen anything remotely interesting, particularly from the Amerophiles, those folks obsessed with the American monetary system to the exclusion of all others. Economic laws are not country or time period specific.
so you are saying funds to pay US dollar taxes to the US govt can come from somewhere other than the US govt itself (or its designated agents)?
if so, please give an example, thanks.
Warren, what I am saying is in my post. The people who obsess about the USG and its tax and currency system are missing the big picture.
I've read your post, thanks.
Please give me an example of dollar used to pay taxes originating from anywhere other than US govt spending and/or lending.
That's the essense of monopoly- single supplier of something.
The big picture includes the rules and regulations imposed by govt.
The US dollar is one of those 'rules and regulations imposed by govt' type of thing that matters a lot.
Here is something interesting. This is a blog entry from a MMT economist:
Lerner outlined three fundamental rules of functional finance in his 1941 (and later 1951) works. 1. The government shall maintain a reasonable level of demand at all times. If there is too little spending and, thus, excessive unemployment, the government shall reduce taxes or increase its own spending. If there is too much spending, the government shall prevent inflation by reducing its own expenditures or by increasing taxes. 2. By borrowing money when it wishes to raise the rate of interest, and by lending money or repaying debt when it wishes to lower the rate of interest, the government shall maintain that rate of interest that induces the optimum amount of investment. 3. If either of the first two rules conflicts with the principles of ‘sound finance’, balancing the budget, or limiting the national debt, so much the worse for these principles. The government press shall print any money that may be needed to carry out rules 1 and 2.
Lerner outlined three fundamental rules of functional finance in his 1941 (and later 1951) works.
1. The government shall maintain a reasonable level of demand at all times. If there is too little spending and, thus, excessive unemployment, the government shall reduce taxes or increase its own spending. If there is too much spending, the government shall prevent inflation by reducing its own expenditures or by increasing taxes.
2. By borrowing money when it wishes to raise the rate of interest, and by lending money or repaying debt when it wishes to lower the rate of interest, the government shall maintain that rate of interest that induces the optimum amount of investment.
3. If either of the first two rules conflicts with the principles of ‘sound finance’, balancing the budget, or limiting the national debt, so much the worse for these principles. The government press shall print any money that may be needed to carry out rules 1 and 2.
That is some funny stuff.
What is functional finance when the state forces you to use their money, follow their regs and pay their extortion (taxes) at the barrel of a gun?
This stuff is just as crank as public choice.
Not sure if anyone has raised this point yet...
Correct me if I am wrong, but my understanding is that MMT posits that if all the debt were to be paid off there would be no more FRN's in circulation, not the first time I have heard this. I am thinking that this idea is wrong.
Today we have fully fiat money backed by nothing. But in the not too distant past the FRN was tied to gold. I am thinking that if all debt were to be paid off that their would still be some number of FRN circulating and what is left in circulation would be representative of the sound money that used to be at the base of the total money supply...
depends on what you mean by paying off the debt.
when tsy secs mature the fed debits the holder's securities account and credits his reserve account.
so cumulative deficit spending then 'rests' as only reserve balances at the fed and cash in circulation.
there is no operational imperative to issue more tsy secs, which would mean debiting fed reserve accounts and crediting fed securities accounts.
However, if by paying off the debt you mean running a budget surplus until the cumulative deficits are back to 0, that's an entirely different matter.
And that last part you discuss simply doesn't apply. Either the currency is legally convertible at the Fed or it isn't.
not sure what 'crank' means here but it's real
the state does indeed use a gun to provision itself.
that is, the currency is a public monopoly and taxation is highly/entirely coersive
www.moslereconomics.com
lerner didn't ever understand the monetary operations thing, so his interest rate control bit isn't quite right.
see ny fed chairman Ruml (1940's) for something similar from someone who did indeed understand actual monetary operations.
i have some of ruml's writings on my website
My reply was to this:
"The legal characteristics of various types of money are entirely unessential for economic theory."
No they are not. I can issue money and if It's not enforced by some kind of law you are not going to accept It as a payment. Do you want to try? I will buy your house with my promissory note and that's a final payment!!!
Legal characteristics of fiat money are not unessential. Even if It is privately created credit money It is the laws that matter. Money is a legal entity any way, subject to rules and regulations even if It is not government money and even if It is not a promise to pay that government money. Just those rules might be created by private contract then.
For my point of view this sounds a bit like a semantics discussion. Austrians say that the gov:
1: Either taxes people to have money to spend it (neutral on price inflation)
2: Borrows to tax people later for it (also neutral to price inflation)
3: Prints money (mostly disguised as borrowing to deceive the people, not neutral to price level) to spend money
Mr Mosler is saying that, given the current monetary system the government could technically suspend taxing entirely, and can still spend its money because the FED can provide it with the "funds" necessary by bookkeeping, or in common terminology money printing. But if it does not tax anything, then this would be of course highly price inflationary. If it "withdraws" (taxes) the same amount it is causing enough deflation to offset the inflationary effects of its spending. (Although this might have no overall price inflationary effect it still shifts income and the price- and capital-structure etc.). Hence he could technically describe taxing as deflationary and government spending as inflationary. And since fiat money is not tangible and government has the monopoly, it really doesn't make a difference if the gov really spends the $100 note taxed, or if it scraps it and creates a new one.
-> Making the government the overall scorekeeper.
But this has no effects on any economic law. The government in fact is keeping the charade with taxing and borrowing up to deceive the people. Trust in the USD would shrink drastically worldwide if they would really communicate/handle it as Mr Mosler is describing it, making it quite possible that it is not accepted at all anymore! And then the scorekeeper lost his power and his notes might not be able to provide him with real goods and services any more. This finally is not a table top game the players cannot escape.
This is what the followers of Gesell do not realize. In fact their dream is already realized. Government can spend whenever it wants and needs. It does not really suffer any restrictions on its nominal spending. But it tries to use printing as the last option because it has certain side effects.
Hope I got it right..
"But this has no effects on any economic law. The government in fact is keeping the charade with taxing and borrowing up to deceive the people. Trust in the USD would shrink drastically worldwide if they would really communicate/handle it as Mr Mosler is describing it, making it quite possible that it is not accepted at all anymore! And then the scorekeeper lost his power and his notes might not be able to provide him with real goods and services any more. This finally is not a table top game the players cannot escape.
Hope I got it right.."
I don't understand you "is not accepted anymore". You are not paying your taxes anymore? You'll end up like Schiff senior. What do you mean? That people don't want to save anymore? The scorekeeper cannot lose Its power as long It has the ability to tax the economy.
Kristjan,
You don't know what happens when people lose their trust in a currency?
I know what happens when people lose their trust in the currency but this is not the point here.
((The legal characteristics of various types of money are entirely unessential for economic theory)))
I don't understand the point of this statement. Are you trying to say that Soviet Union rubles were the same as US dollars? Legal framework doesn't matter right?