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With all politeness, this is questionable at best. First, anyone suggesting that the Keynesians "don't understand where money comes from" or are "wedded to [id

With all politeness, this is questionable at best. First, anyone suggesting that the Keynesians "don't understand where money comes from" or are "wedded to [ideas they] got from an Econ 101 textbook" has an awful lot of explaining to do. Heterodoxy is fine, assuming that the orthodoxy is idiotic (rather than, say, ideologically blinded) is not. If you're going to brand Krugman (and by extension Stiglitz, and Solow, and a dozen other Nobel winners) as grossly wrong on basic monetary policy, you probably need a better reason than "he never thought about it". But more importantly, Modern Monetary Theory doesn't free anyone from the rule that rapid currency creation produces rapid inflation. Wray is absolutely right that "banks don't operate like households", but there isn't a Keynesian that would disagree. He's also right that money can be created separately from bond sales, but again, no one sensible would disagree. Governments can (and at times should) create money, which a household can't do. But that's utterly different than saying that they can create money to cover arbitrary costs without consequence. "Unaffordable" isn't literally, immediately true - any government with its own currency can print enough money to pay off any debt valued in that currency. But there are real consequences in terms of inflation, which is why rapid money creation is generally reserved for moments when more inflation is desired. Servicing large, perpetual expenses with new money is the canonical example of bad monetary policy; funding a UBI on deficit spending violates the basic standards of even the most strident monetarists. If MMT wants to break out of the conventional currency-inflation curves, it needs to define new ones. Otherwise, it will cover a $1,000,000/year UBI just as well as a $10,000/year income, and we've got a reduction to the absurd.

RobertoG 10y ago
Well, the true is that most economic textbooks are wrong about, for instance, how banks and money creation works. This is a fact. If you don't believe me, go to your favourite orthodox textbook and read the relevant chapters and then read this from the Bank of England (that is what MMT have always said): http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf http://www.bankofengland.co.uk/publications/Documents/quarte... Nobody is saying that inflation is not real, what MMT is saying is that public deficits are arbitrary. In fact, in a way, what MMT says, precisely, is that inflation is the only limit. The funny thing is that you are not, I think, disagreeing with me, because your answer is about inflation, not about public debt. We hear politicians and economists talking about the big problem of public debt and the policies they want to implement to solve it, and it doesn't make sense. I hope you keep them to the same standard that you keep the MMT people.
- Bartweiss 10y ago
  Thanks for the reply, I actually understand way better where you're coming from now. Wray's piece threw me a bit, but I can see what you're objecting to. Apparently I got lucky with my basic econ education and didn't get these ideas pushed too strongly. I didn't actually know "intermediaries re-lending deposits" was taught as anything more than a way to explain banks to children. The reserve requirement theory I did learn, and had never seen deconstructed clearly. I knew that the reserve rate didn't determine money supply, but realizing that central banks offered reserve loans clears up why it's not a problem. Very simply, it looks like I underestimated how badly this is often taught. All of which is to say, it appears we do agree. Inflation and the consequences of negative interest rates are the only problems with ongoing money creation. I have mixed reactions to MMT, but I'm absolutely disdainful of "erase the debt now!" fear-mongering. With still-minimal inflation and foreign bond interest paying more than American debt costs, there's really no cause for concern.

RobertoG 10y ago

Well, the true is that most economic textbooks are wrong about, for instance, how banks and money creation works. This is a fact. If you don't believe me, go to your favourite orthodox textbook and read the relevant chapters and then read this from the Bank of England (that is what MMT have always said): http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf http://www.bankofengland.co.uk/publications/Documents/quarte... Nobody is saying that inflation is not real, what MMT is saying is that public deficits are arbitrary. In fact, in a way, what MMT says, precisely, is that inflation is the only limit. The funny thing is that you are not, I think, disagreeing with me, because your answer is about inflation, not about public debt. We hear politicians and economists talking about the big problem of public debt and the policies they want to implement to solve it, and it doesn't make sense. I hope you keep them to the same standard that you keep the MMT people.

Bartweiss 10y ago
Thanks for the reply, I actually understand way better where you're coming from now. Wray's piece threw me a bit, but I can see what you're objecting to. Apparently I got lucky with my basic econ education and didn't get these ideas pushed too strongly. I didn't actually know "intermediaries re-lending deposits" was taught as anything more than a way to explain banks to children. The reserve requirement theory I did learn, and had never seen deconstructed clearly. I knew that the reserve rate didn't determine money supply, but realizing that central banks offered reserve loans clears up why it's not a problem. Very simply, it looks like I underestimated how badly this is often taught. All of which is to say, it appears we do agree. Inflation and the consequences of negative interest rates are the only problems with ongoing money creation. I have mixed reactions to MMT, but I'm absolutely disdainful of "erase the debt now!" fear-mongering. With still-minimal inflation and foreign bond interest paying more than American debt costs, there's really no cause for concern.