Framing Modern Monetary Theory

This Post Has 11 Comments

1. On the Canadian blog-site Progressive Economics Forum, I have tried to use the concept of high-value coin seigniorage to introduce some MMT concepts.
   ___________________________________________________________________________________
   Introduction by Keith Newman, formerly Director of Research for the Communications, Energy and Paperworkers Union of Canada:

   The trillion dollar coin solution for the US debt ceiling fiasco was developed by a Modern Monetary Theory (MMT) blogger in 2010 and gained considerable notoriety after a number of prominent economists supported the idea, notably Paul Krugman, who pointed out that “money is a social contrivance and convenience…”. A short time later the idea was explicitly rejected by President Obama and the Department of the Treasury.

   Larry Kazdan has written the piece that follows on issuing such a coin for Canada. While that solution for our country may seem a little drastic, the continuing issuance of Government of Canada bonds provides conservatives in all parties the ability to use intuitively appealing language regarding the non-existent “debt burden” and the supposed need to “balance the budget”. The unfortunate result is inadequate day care, senior care, coverage for pharmaceuticals, public transportation, environmental protection, etc. Yet, if it chose to do so, our federal government could mobilise our vast natural resources, manufacturing capacity, know-how, and unemployed workers to provide us with these things we so desperately need.

   A Trillion Dollar Coin for Canada?
   http://www.progressive-economics.ca/2013/12/04/a-trillion-dollar-coin-for-canada/

2. Larry, it’s good to know there are some other Canadian adherents of MMT.
   The list of problems we have, as a result of national debt falsehoods ingrained in the national psyche, is quite large.
   Stealth neo liberal style approaches on existing public institutions such as health care and education top my list of concerns. I agree that it is not just the Conservative party; there is good evidence of participation by the three most elected parties at both federal and provincial levels in policy that increasingly outsources work from the public sector in favor of P3’s which tend to gradually develop more private character as time goes on. Initially this occurred on the premise that the provincial government service providers must save tax payers dollars, which is true due to lack of sufficient federal transfers; however, the direction toward nurturing P3’s at the Provincial level originated at the federal level with 3 party support.
   Public sector labor really has no idea how to combat the decimation of their ranks that occurs due to this kind of activity because, there is no maneuvering room left if they have internalized the current debt narratives themselves. They simply lash out ineffectively at the wrong people.
   Honestly, I have trouble accepting that all of the parties are completely ignorant about monetary system realities, especially when some of us have referred to the MMT literature in correspondence with our members of federal and provincial parliament, and at least one of our former prime ministers has been spotted at a lecture by a post Keynesian supporter of MMT debt narratives. The debt and deficit just get used as fodder for mindless political banter as the ships continue to sink.

   There is much to be done and little of substance is happening on movement toward real issues with unemployment, underemployment, environmental concerns and redeveloping our infrastructure, all of which cannot really progress until we can all get past the wrong thinking.

3. Suggested before:

   Government Deficit = Private Savings

   Do these sound different?

   Is the Government Deficit too large?

   Are Private Savings too large?

4. This . . . is . . . AWESOME! To ‘potentiate’ language, or create possibility where before there was no alternative! Yes, economic poetics. I could discipline myself, given guidance, to speak ‘possibility’ into a seemingly impossible debate. It seems as a discipline one could apply a circular hermeneutics, or a development of prophetic language, in the sense of Gadamer and Ricouer, to rescue hopeless economics from its own hell?

5. SteveK9, you are perfectly correct. Until the economic, political and business world understand these very simple concepts, there can be no intelligent debate about debt, debt ceilings and related nonsense.

6. Articles like this are terrifying:

   http://www.abc.net.au/news/2013-12-06/llewellyn-smith-qantas/5139360

7. bill, speaking of videos, if memory serves me correctly,
   you were a participant in an event for the Modern Money Network
   (http://www.modernmoneynetwork.org/) last spring, i believe. they
   said they would upload a video of it to their youtube channel, but
   they never did. is that video out there somewhere where we can see
   it? thanks for all you’ve done!!

8. Dear Yuu Kim (at 2013/12/12 at 4:26)

   I was a participant but I have no knowledge of whether the video of the proceedings is available. Perhaps you should contact the Modern Money Network for further information.

   I am sorry I cannot help you.

   best wishes
   bill

9. In relation to the effect on the human mind of the words “spending” and “investing” there is an interesting passage in volume 2 of Capital (ch.19, section II.4):

   The labourer sells his commodity — labor-power — to the capitalist; the money with which the capitalist buys it is from his point of view money invested for the production of suplus-value, hence money-capital; it is not spent but advanced. (This is the real meaning of “advance” — the avance of the physiocrats — no matter where the capitalist gets the money. Every value which the capitalist pays out for the purposes of the productive process is advanced from his point of view, regardless of whether this takes place before or post festum; it is advanced to the process of production itself.) The same takes place here as in every other sale of commodities: The seller gives away a use-value (in this case his labour-power) and receives its value (realises its price) in money; the buyer gives away his money and receives in return the commodity itself — in this case labour-power.

   Evidently the capitalists, at least according to Marx, didn’t like to think of themselves as spending, just as the public apparently doesn’t like the idea of the government spending.

   In the case of government consumption and investment expenditure, the government could be said to advance its money and receive in return a good or service.

   Taking the analogy a step further, just as the advanced wages paid to workers return (in large part, at least) to capitalists as a class when workers spend on consumption items, government advances return to the government through tax payments. A budget deficit could be viewed as net advances. The advances assist the non-government to reach its potential. There should be sufficient advances to enable net saving by the non-government when this fiscal choice better supports the intentions of the non-government.

10. Nice comment, Peter. “Advance” is a key concept for understanding the cycle from the perspective of firms and government. Why don’t you immortalize it in a post at heteconomist.com? MMT points out that currency can only be obtained for taxes/saving if it “advanced” (lent) or spent by the monetary authority, now usually the CB. But spending is also an advance since what is spent is taxed back unless the monetary authority makes space for net saving through policy choice, e.g., planned deficits or unplanned deficits through automatic stabilization. In this sense, the fiscal deficit and accumulated debt constitute an advance to non-government. But unlike lending, the fiscal advance does not come at the cost of interest but with the reward of interest for net saving.

11. Hi Bill

    I’ve been pointed at your blog by another Scottish Green Party member, and have watched the presentation with interest. I would like to download the slides that you used on the day, do you have those in a pdf or powerpoint format that I could read at home please?

    Many thanks, Claire