It is my Friday lay day and I am quite distracted with other commitments. But at the London presentation a few weeks ago, I mentioned that I would scrap central banks and consolidate their functions within a division of what we now think of as Treasury departments (or Finance Ministries). Whenever you say that there is a ridiculous response from those who claim to know something about banking along the lines of either, it would cause hyperinflation or that the politicians cannot be trusted. Both arguments are as I say – ridiculous. There are some things that central banks do that are necessary, for example, maintain financial stability through the integrity of the payments system. They also, depending on the nation, manage foreign reserves although that function is unnecessary if exchange rates float. Yes (flame suit on) I know less developed countries face exchange rate volatility and have to import food to survive. Which brings me to the point. The first part of scrapping central banks is to eliminate their ideological/political function. They are bastions of conservative mythology – pick whichever one you like – expanding the money supply is inflationary, ‘printing money’ is inflationary, politician meddling in monetary policy is inflationary, financial markets will desert a country that does not have an independent central bank, etc ad nausea. Politicians also use the so-called independence of the central banks as a way of deflecting policy responsibility for mass unemployment. Modern Monetary Theory (MMT) does not advocated doing away with the functions that are legitimately performed within the current central banks. It would stream-line some and make other functions redundant, but what it would do away with is this incessant cycle of ideology that emanates from these institutions.

One of the small things I noticed (and enjoyed) in Europe in the last few weeks is the speed of the Internet connections available. Even if one takes the so-called ‘low speed’ option at the hotel (invariably free), the connectivity speeds were far superior to anything I have available in Australia. That matters when large datasets are involved. We often wait minutes for datasets to download here from say the Australian Bureau of Statistics. Watching streaming video is often a case of getting it started, pausing it, and waiting an hour or more for the download to occur so that you can watch it without interruption. Australia is very backward in this regard and the reasons that we are set to become even more disadvantaged are the same reasons that the economy are heading towards recession – a neo-liberal fetish against government spending and an ideological blindness to innovation.

At the London event last week, I indicated that governments should not issue any public debt as the benefits of doing so are small relative to the large opportunity costs. The Modern Monetary Theory (MMT) position is that there is no particular necessity to match public deficits with debt-issuance for a currency-issuing government and deficits should be accompanied by monetary operations which we now call Overt Monetary Financing (OMF). Surprisingly there was some arguments by audience members that governments should continue to issue debt, largely, as I understand them, to provide a safe haven for workers to save for the future. So the idea is that we maintain the elaborate machinery that is associated with the public debt issuance just to provide a risk free asset that workers can use to park their hard-earned savings in. It is a strange argument given the massive opportunity costs associated with debt issuance. A far simpler solution is to exploit the currency-issuing capacity of the government to guarantee a publicly-owned National Saving Fund. No debt would be required.

Today, is the official launch of my new book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – in Maastricht, which is an appropriate geographic location given the book proposes to dismantle the Eurozone. It just happens to be the place (Maastricht University), where we established CofFEE-Europe (a sister centre to my research centre in Australia). There are two excellent guest speakers (see below) and I am very grateful that they agreed to accept the invitations. The upshot is that I haven’t all that much time today. Over the next few days I will address some points that were raised in question time or at the reception (aka cup of tea and cakes) after the event in London last Thursday evening. There is still work to be done if the progressive side of politics is to fully understand Modern Monetary Theory (MMT) and the implications of it for policy development and choice.

I am currently working on an introductory chapter to a collection I have prepared for my publisher (Edward Elgar) which describes the evolution of Modern Monetary Theory (MMT). The task might appear to be straightforward but in fact is rather vexed. There is considerable dispute as to where the roots lie. A specific debate is the importance of the work of John Maynard Keynes. Many Post Keynesians, almost by definition, believe that Keynes was a central figure in the development of what we now call Post Keynesian economics, although that ‘school of thought’ evades precise identification and is certainly anything but homogenous. There are MMT proponents, who while sympathetic with much of Post Keynesian theory, disagree on key propositions – specifically relating to debt and deficits (as an example). But then they also point to Keynes’ work as seminal in the development of MMT. My own view is that many of the important insights in Keynes were already sketched out in some detail in Marx. Further, the work of the Polish economist Michał Kalecki was much deeper in insight than the work of his contemporary, Keynes. But for me the real sticking point against Keynes was his view that fiscal deficits should be balanced over the business cycle and that would allow governments to pay back debt incurred in the deficit years. That view has crippled progressive thought ever since and is antithetical to MMT. The debate also has resonance with the current leadership struggle within the British Labour Party about fiscal deficits and the claims by the ‘socialist’ candidate, Jeremy Corbyn that he will “balance the budget” when unemployment is low so as to avoid inflation. This view derives from the adoption by progressives of Keynes’ views, whether they know that or not. It is a mistaken view and retards progressive policy development.